[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
IMPROVING INTERNAL CONTROLS: A REVIEW OF CHANGES TO OMB CIRCULAR A-123
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
FINANCE, AND ACCOUNTABILITY
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
FEBRUARY 16, 2005
__________
Serial No. 109-16
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
U.S. GOVERNMENT PRINTING OFFICE
20-879 WASHINGTON : 2005
_____________________________________________________________________________
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
GINNY BROWN-WAITE, Florida C.A. DUTCH RUPPERSBERGER, Maryland
JON C. PORTER, Nevada BRIAN HIGGINS, New York
KENNY MARCHANT, Texas ELEANOR HOLMES NORTON, District of
LYNN A. WESTMORELAND, Georgia Columbia
PATRICK T. McHENRY, North Carolina ------
CHARLES W. DENT, Pennsylvania BERNARD SANDERS, Vermont
VIRGINIA FOXX, North Carolina (Independent)
------ ------
Melissa Wojciak, Staff Director
David Marin, Deputy Staff Director
Rob Borden, Parliamentarian
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Government Management, Finance, and Accountability
TODD RUSSELL PLATTS, Pennsylvania, Chairman
VIRGINIA FOXX, North Carolina EDOLPHUS TOWNS, New York
TOM DAVIS, Virginia MAJOR R. OWENS, New York
GIL GUTKNECHT, Minnesota PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York
JOHN J. DUNCAN, Jr., Tennessee
Ex Officio
HENRY A. WAXMAN, California
Mike Hettinger, Staff Director
Tabetha Mueller, Professional Staff Member
Nathaniel Berry, Clerk
Adam Bordes, Minority Professional Staff Member
C O N T E N T S
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Page
Hearing held on February 16, 2005................................ 1
Statement of:
Higgins, John P., Jr., Inspector General of the Department of
Education.................................................. 29
Steinhoff, Jeffrey C., Managing Director, Financial
Management and Assurance, U.S. Government Accountability
Office..................................................... 38
Wolff, Otto J., Chief Financial Officer and Assistant
Secretary for Administration, U.S. Department of Commerce;
Christopher B. Burnham, Acting Under Secretary for
Management, Assistant Secretary for Resource Management and
Chief Financial Officer, U.S. Department of State; John P.
Higgins, Jr., Inspector General, U.S. Department of
Education; and Jeffrey C. Steinhoff, Managing Director of
Financial Management and Assurance, U.S. Government
Accountability Office...................................... 4
Burnham, Christopher B................................... 12
Wolff, Otto J............................................ 4
Letters, statements, etc., submitted for the record by:
Burnham, Christopher B., Acting Under Secretary for
Management, Assistant Secretary for Resource Management and
Chief Financial Officer, U.S. Department of State, prepared
statement of............................................... 14
Higgins, John P., Jr., Inspector General of the Department of
Education, prepared statement of........................... 32
Steinhoff, Jeffrey C., Managing Director, Financial
Management and Assurance, U.S. Government Accountability
Office, prepared statement of.............................. 41
Wolff, Otto J., Chief Financial Officer and Assistant
Secretary for Administration, U.S. Department of Commerce,
prepared statement of...................................... 7
IMPROVING INTERNAL CONTROLS: A REVIEW OF CHANGES TO OMB CIRCULAR A-123
----------
WEDNESDAY, FEBRUARY 16, 2005
House of Representatives,
Subcommittee on Government Management, Finance, and
Accountability,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 2 p.m., in
room 2247, Rayburn House Office Building, Hon. Todd Russell
Platts (chairman of the committee) presiding.
Present: Representatives Platts, Foxx, Towns, and Maloney.
Staff present: Mike Hettinger, staff director; Dan Daly,
counsel; Tabetha Mueller, professional staff member; Jessica
Friedman, legislative assistant; Nathaniel Berry, clerk; Adam
Bordes, minority professional staff member; and Jean Gosa,
minority assistant clerk.
Mr. Platts. A quorum being present, this hearing of the
Government Reform Subcommittee on Government Management,
Finance and Accountability will come to order.
When accounting scandals shook the U.S. economy earlier
this decade, Congress responded by placing stringent new
accounting requirements on publicly traded companies. The
legislation known as Sarbanes-Oxley put responsibility for
financial information squarely in the hands of managers. To
ensure that investors could rely on financial reports,
Sarbanes-Oxley required companies to document the safeguards
they have in place to prevent errors or fraud, commonly known
as internal controls.
Internal controls are the checks and balances that help
managers detect and prevent problems. They can be as simple as
computer passwords or having a manager sign off on a time sheet
or as complex as installing software to track spending and
detect spikes that signal trouble. Internal controls provide a
foundation for accountability, and while they are important in
the private sector, sound internal controls are imperative in
Government. Public trust depends on nothing less.
Glaring internal control problems in the Federal Government
have made headlines recently from the Office of Management and
Budget's reporting of $45 billion in mistaken payments
throughout Government to soldiers being paid incorrectly while
serving in harm's way. When audits revealed egregious internal
control problems at the Department of Homeland Security, this
subcommittee proposed and enacted legislation to require the
Department to take responsibility for improving internal
controls and to have an auditor attest to those improvements.
In light of this legislation and the standards for the
private sector under Sarbanes-Oxley, OMB reexamined controls
for Federal agencies. I want to applaud this administration for
this forward looking action and for employing a collaborative
approach using information gleaned from a committee of agency
chief financial officers and inspector generals and working
with the Government Accountability Office.
As a result of this collaboration, the new guidance was
issued in December of last year. Like Sarbanes-Oxley and the
requirements at DHS, the revised guidance puts responsibility
on agency management and clearly defines the steps that need to
be taken and documented to ensure that internal controls are
sound. This hearing will look at what prompted these changes
and how they will impact agency management.
We are pleased to have a distinguished panel of witnesses
with us here today who have played an instrumental role in
developing these new guidelines. We have the Honorable Otto
Wolff, CFO and Assistant Secretary for Administration at the
Department of Commerce and a member of the CFO Council; the
Honorable Chris Burnham, Acting Under Secretary for Management,
Assistant Secretary for Resource Management and CFO at the U.S.
Department of State and a member of the CFO Council; and the
Honorable Jack Higgins, Inspector General at the U.S.
Department of Education and a member of the President's Council
on Integrity and Efficiency.
Mr. Jeff Steinhoff, Managing Director of Financial
Management and Assurance at the U.S. Government Accountability
Office, also joins these administration witnesses. We are
grateful for your appearance here today and know you've done a
lot of legwork leading up to this hearing and look forward to
hearing your testimonies as well.
I would now like to recognize our ranking member, the
gentleman from New York, Mr. Towns, for the purpose of an
opening statement.
Mr. Towns. Thank you very much, Mr. Chairman. Let me thank
you for holding this hearing on OMB's recent amendments to its
guidance on agency internal controls.
Following last week's insightful hearing on the state of
our Government's financial position, I believe it is timely for
our subcommittee to address the issue of internal controls as
they relate to improving efficiency and accountability
throughout the Federal Government. The need for adequate
internal controls in governing the financial and operational
components of our agencies has never been greater as the burden
of both Federal budget deficits and improper payments diminish
the success of many programs. Such concepts are not foreign to
us, as recent private sector accounting scandals have forced
Congress to reexamine issues of accountability and transparency
in the name of protecting consumers and investors.
From this perspective, it is only logical to pursue
policies that make the Federal Government more accountable to
Congress and taxpayers, just as the private sector must be more
accountable to its shareholders and consumers. Today we are
reviewing what appears to be the first step in the process as
we hear from our panel about recent amendments made to Circular
A-123. In conformity with the Federal Managers Financial
Integrity Act, the new guidelines bring clarity to areas of
confusion in defining what are effective management practices
for assessing internal controls for all agencies. This will
ensure uniformity throughout agencies as they seek to establish
an internal control structure that adequately meets appropriate
levels of risk and program complexity.
In addition, the changes spell out requirements for
agencies to report on and address deficiencies in their
internal control structure. This is an improvement over
previous practices, and will allow OMB to require an external
opinion on agency internal controls when warranted. Our
committee is well familiar with this practice, thanks to
legislation enacted last session that was authored by the
chairman of the subcommittee, my good friend, Congressman
Platts from Pennsylvania, which required an independent review
for internal control practices at the Department of Homeland
Security.
With many agencies now in the process of implementing new
financial management systems, I believe these requirements are
timely and necessary. As I have said before, our failure to
adequately implement appropriate business practices will have
an adverse impact on operations for programs that so many of my
constituents depend on for their well-being. Hopefully, the
aforementioned changes will ensure that all of our agency
programs will be efficient and effective.
Thanks again, Mr. Chairman, for holding this hearing, and
on that note, I yield back.
Mr. Platts. Thank you, Mr. Towns.
We will proceed to our testimonies. If we could ask all of
our witnesses to stand and take the oath. Any individuals who
will be advising you as part of your testimony today should
also stand and raise their right hand as well.
[Witnesses sworn.]
Mr. Platts. Thank you. Please be seated. The clerk will
note that all witnesses affirmed the oath. Again, we appreciate
the written testimony you have submitted. As I say to my kids,
it is my homework that I bring home with me in my daily
commute, and it allows me to be better prepared for our good
dialog here today.
With your oral testimonies here today, if we can try to
stay roughly in that 8 minute range in summarizing your written
statements as best you see fit to do, then we will get into
questions. Secretary Wolff, we are going to begin with you,
please.
STATEMENTS OF OTTO J. WOLFF, CHIEF FINANCIAL OFFICER AND
ASSISTANT SECRETARY FOR ADMINISTRATION, U.S. DEPARTMENT OF
COMMERCE; CHRISTOPHER B. BURNHAM, ACTING UNDER SECRETARY FOR
MANAGEMENT, ASSISTANT SECRETARY FOR RESOURCE MANAGEMENT AND
CHIEF FINANCIAL OFFICER, U.S. DEPARTMENT OF STATE; JOHN P.
HIGGINS, JR., INSPECTOR GENERAL, U.S. DEPARTMENT OF EDUCATION;
AND JEFFREY C. STEINHOFF, MANAGING DIRECTOR OF FINANCIAL
MANAGEMENT AND ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
STATEMENT OF OTTO J. WOLFF
Mr. Wolff. Mr. Chairman, Mr. Towns, thank you for the
opportunity to appear before you today to discuss how my
colleagues in the Federal financial management and audit
communities have come together in concert with the Office of
Management and Budget to strengthen the internal control
requirements over financial reporting within the Federal
Government.
As a result of our efforts, we have substantially improved
the accountability and oversight of internal controls in all
the Federal departments and agencies. These changes were the
result of the administration taking a proactive and
collaborative approach to improving financial management in the
Federal Government and a direct result of President Bush's
insistence on accountability at all levels of this
administration. They are embodied in the revised OMB Circular
A-123, Management's Responsibility for Internal Controls, which
was signed in December by OMB Director Bolten. The revised
circular will help managers assure proper controls are in
place, documented and tested.
These changes will also strengthen the existing internal
control assessment process in a cost effective manner.
Additionally, these improvements will further support the goals
of the President's management agenda by promoting a foundation
of good controls from which timely and reliable financial
information can be developed.
We are all too aware of highly publicized corporate
failures and accounting scandals in recent years which reveal
the lack of accountability and proper controls over financial
reporting in publicly held companies, prompting the passage of
the Sarbanes-Oxley Act of 2002. This legislation included for
the first time ever the requirement that publicly held firms
undertake significant efforts to provide assurance on the
effectiveness of their financial reporting processes and to
obtain audit opinion on internal controls, in addition to the
traditional financial statement audits.
With the passage of Sarbanes-Oxley and the Department of
Homeland Security Financial Accountability Act of 2004, the
executive branch took the opportunity of reexamining our A-123
requirements. Linda Springer, back in November 2003, initiated
a joint committee of both the CFOs and the IG community, the
PCIE, to survey Federal agencies and identify differences in
how current requirements are being implemented, to review
requirements of publicly traded companies as laid out by
Sarbanes-Oxley and to report on how these requirements may or
may not apply to the Federal Government. The joint committee
first examined the fundamental differences between the public
and private sectors. Federal entities operate in environments
steeped in regulation, policies and procedures intended to
ensure that all fiscal and budgetary actions are legal and
comply with regulation and standard accounting practice.
Because the goals and motivation of Federal entities differ
fundamentally from our private sector counterparts, they are
much less vulnerable to the risk of manipulation of financial
reporting to achieve personal gain. Also, the actions of
Federal entities are open to public scrutiny and subject to
multiple levels of oversight by the Congress, OMB, the
Government Accountability Office and the independent inspectors
general.
Unlike the private sector, the actions of the Federal
entities are subject to a myriad of laws and regulations
designed specifically to promote prudence and accountability.
The list is long, the FMFIA, the FISMA, the Inspector General
Act, the Chief Financial Officers Act, the Government
Management Reform Act, the FFMIA, Improper Payments Act and
others.
At the center of these requirements is the FMFIA, which
establishes the overall internal control requirements. The act
encompasses controls and programs, operational and
administrative areas and accounting and financial management.
It also requires the agency head to evaluate and report on the
controls and financial systems that protect the integrity of
Federal programs.
The joint committee reviewed the existing internal control
requirements in A-123, and recommended OMB strengthen its
guidance for assessing the effectiveness of internal controls.
We developed a revised A-123, which would adopt the standards
of the internal controls commonly used by private sector and
developed by the COSO and published in its document. These
standards were adopted previously by the GAO in its Green Book.
Key points of definition of the financial audit were included
in its amendments. As you can see, we did not reinvent the
wheel amending A-123, we adopted private sector standards that
were tailored to be more specific and responsive to the Federal
environment.
The most significant change to Circular A-123 is the
requirement for agency management to follow a more
comprehensive and coordinated approach when assessing the
effectiveness of internal control over financial reporting, and
to document its assessment. Management must identify tests of
documents and internal control effectiveness. A-123 defines the
scope of reporting to include financial statements, significant
other financial reports and compliance with laws and
regulations that pertain to financial reporting.
The outcome of the assessment process requires a separate
assurance statement from management to be included in the
agency's performance and accountability report on the
effectiveness of internal controls and financial reporting. The
circular also provides for OMB to require an agency to have an
internal control opinion level audit if that agency fails to
meet expectations regarding correction of its internal control
deficiencies.
The CFO Council plans to develop an implementation guide
for A-123 which will complement the policy document and provide
a more hands-on approach to the assessment of internal
controls. And we will be sponsoring training for our Federal
agencies to meet the new requirements.
In addition, the internal control improvements are being
tracked through the quarterly scorecard process for improved
financial performance initiative of the President's management
agenda. This initiative emphasizes the need for effective
internal control and getting to a green score on the score card
requires that agencies eliminate all material control
weaknesses. Ultimately, the goal is to assure managers are
making more timely and informed decisions on operations and
costs at both program and agency levels.
Yet this objective cannot be achieved without a foundation
of effective internal controls from which financial information
can routinely be generated and used for management decisions. I
am pleased to report that Commerce just attained green status
for improved financial performance in the first quarter of the
current fiscal year. We are proud of our success and that of
our seven other sister agencies who have also achieved green
status.
The efforts involved at Cabinet level agencies to overcome
obstacles to obtain clean audit opinions, to integrate
financial management systems, and to eliminate material
weaknesses cannot be overstated. With a higher bar now set by
A-123 we realize that the implementation will require a serious
and focused effort.
As part of the joint committee's review, agencies were
polled to better understand the costs associated with
conducting internal control assessments and audits.
Unfortunately, the majority of agencies did not have sufficient
experience with the process envisioned in the revised A-123 to
be able to estimate the costs with any degree of certainty.
Other agencies who have been performing the internal controls
work for so long lacked solid data on costs because it is hard
to identify separately. We will continue to work with the
agencies to identify more specific cost data and we will let
you know.
In closing, I would like to acknowledge the excellent
collaboration and support in addressing this issue on the part
of the PCIE, OMB and the whole CFO community. We received
helpful suggestions as well, sir, from your committee staff and
the GAO in our discussions with them. The approach presented
here should be a model for how we can work together to ensure
that Federal programs operate effectively and efficiently as
possible. It is incumbent upon all of us to keep the Federal
financial community focused on its stewardship responsibility.
Thank you again, Mr. Chairman, for the opportunity to
appear before you today. I would of course be happy to answer
any questions you may have.
[The prepared statement of Mr. Wolff follows:]
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Mr. Platts. Thank you, Secretary Wolff.
Secretary Burnham.
STATEMENT OF CHRISTOPHER B. BURNHAM
Mr. Burnham. Mr. Chairman, thank you very much, Mr. Towns.
It's called editing on the go here, so we don't repeat too
much.
I would request on behalf of all of us that our full
written statements might appear in the record, Mr. Chairman.
Mr. Platts. Without objection.
Mr. Burnham. Thank you.
It is a great honor and opportunity to be here. This is a
terribly important event. Although it is not always looked upon
as the sexiest thing within our agencies, particularly at the
State Department, nevertheless it is a terribly important
aspect of how we run and conduct ourselves as stewards of the
public trust.
I am here today not only as Chief Financial Officer of the
State Department, but also as a member of the CFO Council. The
CFO Council and Department of State fully support the revisions
to Circular A-123. We commend this subcommittee for its efforts
to promote and strengthen internal controls.
Sarbanes-Oxley was a necessary reaction to the heinous
abuses of certain members of the corporate community and the
need to restore broad investor confidence. No less important is
the need to build taxpayer confidence in how their money is
spent in Washington. The President's management agenda is the
premier effort to accomplish this. Circular A-123 is and will
be an essential part of that effort.
Under the direction of OMB in 2003 the CFO Council and the
PCIE formed a joint committee, as my colleague Otto Wolff has
said. The recommendations resulting from this joint effort
formed the basis of the policy changes that we have seen today
in A-123. The CFO Council also plans to work to develop an
implementation and training guide, as my colleague also
mentioned.
Mr. Chairman, I believe this Joint committee effort between
the PCIE and the CFO Council is an excellent example of how
both these communities, as well as the IG community, have
worked together to advance the public good. We are grateful to
our colleagues in the IG community for their professionalism
and their dedication and their help in this effort.
For all Federal agencies implementing the revised Circular,
it provides a valuable opportunity to reassess the
effectiveness of our overall internal control structure. The
level of effort required depends on, in large part, the degree
to which an agency fully implements the previous version of
Circular A-123, which was written in 1995. Today the
implementation of FMFIA varies amongst Federal agencies. Some
have rigorous FMFIA programs that allow their agency heads to
provide unqualified annual assurances about their controls,
while others do not. These mixed results will directly impact
the level of effort and resources required to successfully
implement the overall internal control requirements of the
revised Circular across the Federal Government.
Some agencies, such as the State Department, will only need
to modify slightly their existing management control programs.
Others will need to overhaul their programs, particularly in
the document and management control area. It is too soon to
reasonably determine the impact across the agencies of
implementing Appendix A. Since the requirement of Appendix A is
more rigorous and prescriptive than the preexisting
requirements, it is uncertain how many agencies would meet the
new requirement today.
Most agencies, including mine, will need to expand
documentation and enhance assessments of internal controls over
financial reporting. While we can and will learn from the
private sector experience implementing Section 404 of Sarbanes-
Oxley, it will take additional time to understand the impact of
implementing Appendix A in the Federal agencies.
If I can, Mr. Chairman, let me just highlight a few things
that State has done as an example of what you have in the
executive branch and how we are dedicated to meeting these
goals. Over the last 4 years, we are down from 10 weaknesses to
zero. This gave the Secretary, in this case Secretary Powell 2
years ago, the first opportunity to issue a clean assurance
statement.
The President's management agenda score card, something we
all now live and perhaps die by, were double green, in both
improved financial management as well as budget and performance
integration. The President's quality award, the Malcolm
Baldridge Award of Government, and I might also add, a fine
Connecticut resident, the State Department won this year, one
of seven agencies to win, recognizing our efforts to integrate
the performance assessment rating to the PART system that OMB
runs.
As many agencies did, we were able to meet the accelerated
reporting timeframe that OMB mandated of November 15th. This
has led to huge reforms within the CFO community and has helped
us and will continue to help us not only to get to green but
also to meet the particulars of Circular A-123.
We have a clean, timely financial opinion for the 8th year
in a row, Mr. Chairman. And finally, our annual report, our
performance and accountability report, has won the CEAR award,
the Certificate of Excellence in Accountability Reporting for 4
years in a row. I might also add that compared with financial
reports, annual reports in the private sector, 2 years ago we
were fourth in the Nation, and this last year we were first in
all of Government.
None of the successes would have been possible without a
sound management control structure that permeates our entire
organization. That starts from the top down. I met with
Secretary Rice this morning. She emphasized again her support
of this effort and the effort of what you're trying to lead,
Mr. Chairman. We stand fully behind this effort and ready to
implement in any way necessary, as I might add, does the CFO
community.
With that sir, I will be happy to answer any questions from
you or of the committee.
[The prepared statement of Mr. Burnham follows:]
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Mr. Platts. Thank you, Secretary Burnham.
Before we move on, I do want to recognize our vice
chairwoman for the subcommittee, the gentlelady from North
Carolina Ms. Foxx has joined us. Thanks for being with us.
Inspector General Higgins.
STATEMENT OF JOHN P. HIGGINS, JR., INSPECTOR GENERAL OF THE
DEPARTMENT OF EDUCATION
Mr. Higgins. Mr. Chairman and members of the subcommittee,
on behalf of the President's Council on Integrity and
Efficiency, thank you for the opportunity to discuss our
perspectives on the changes made to OMB Circular A-123,
Management's Responsibility for Internal Control. I would also
like to thank the committee for its dedication to the goal of
improving financial management Government-wide, as well as its
interest in legislation that would enhance the independence of
the Inspectors General.
The Federal Managers Financial Integrity Act of 1982 and
OMB's implementing guidance contained in A-123 defined
management's responsibility for internal control in Federal
agencies, and are the center of the existing Federal
requirements to improve internal control. Other significant
legislation passed since the passage of the Integrity Act
continued to highlight the importance of efficient and
effective internal controls.
My testimony will focus on four points: first, the
importance of effective internal controls; second, how the
audit community can coordinate its efforts with those of agency
management; third, our perspectives on how the recent changes
to A-123 may affect Federal financial management in general;
and fourth, our views on future legislative action on Federal
financial management.
Internal control is important because it is the first line
of defense in safeguarding assets and preventing and detecting
errors and fraud. Effective internal controls help ensure
accountability for resources, achievement of organizational
objectives and availability of improved information for
external reporting and internal management decisions.
In short, internal control is a key factor in helping
agencies achieve effective and efficient operations, reliable
financial reporting and compliance with applicable laws and
regulations. It is a fundamental and statutory responsibility
of management to institute effective internal controls, assess
them periodically and make course corrections as needed. Events
of high profile fraud and mismanagement in the private sector
and the Federal Government's own financial reporting problems
have resulted in the increased focus on management's
responsibility for internal control and dispelled the myth that
internal control is but a mere academic exercise or it is of
interest only to auditors and accountants.
We must realize, however, that having effective internal
control is not a guarantee that agencies will achieve the
objectives of internal control. Effective internal control is
designed to provide reasonable, not absolute, assurance of
achieving those objectives. Establishment of specific controls
is subject to cost benefit considerations, availability of
resources to implement the controls, and any limitations or
restrictions imposed by legislation. Effective internal
controls also may be overridden by management and circumvented
through collusion.
My second point is how the audit community and agency
management coordinate on internal control issues. This occurs
at both the agency and Government-wide levels. There is ongoing
coordination between agencies and their OIGs that can be
helpful to agencies as they work to implement new guidance.
Coordination between the audit community and agency management
on internal control matters is inherent in the OIG's mission.
The resolution of audit fundings provides a primary avenue for
OIGs and agency management to discuss control assessments and
propose corrective actions.
At the Government-wide level, the type of cooperation that
occurred between the CFO Council and the PCIE on the revisions
to A-123 is not uncommon. The audit community, under the PCIE,
periodically works with the CFO Council on internal control and
management issues. An example is the joint CFO Council and PCIE
Working Group on Improper Payments. This collaborative work
group's mission is to facilitate the reduction of improper
payments throughout the Federal Government.
These ongoing efforts to address internal control issues
are a natural outgrowth of the responsibilities and
relationships that OIGs have with their agencies. While the
work of the OIGs can be helpful to agencies as management makes
its own assessments, it cannot replace management's own
assessment efforts, which is contemplated under the new
guidance. In addition, the OIG must guard against consulting
type arrangements that might impair our independence for
performing future audits.
Third, I would like to turn our attention to major changes
in A-123 and their potential impact on Federal financial
management. In the past, the implementation of the Integrity
Act has been inconsistent. The impact of the recent changes to
A-123 depends on how aggressively an agency assessed its
controls under the old guidance and how it will implement the
new guidance.
The most significant change is the new requirement for
management to assess and document internal control over
financial reporting and to provide a corresponding assurance
statement annually that asserts the effectiveness of internal
control over financial reporting.
Another significant change is the more specific and
strengthened requirement for management to have a clear,
organized strategy with well-defined documentation processes
that contain an audit trail, verifiable results, and specify
document retention periods. This would enable someone not
connected with the procedures to understand the assessment
process. The documentation standard pertains to all internal
control assessments management performs, not just those related
to controls over financial reporting.
Another significant change is OMB's inclusion of the
provision requiring an opinion on internal controls over
financial reporting, if an agency continually misses agreed
upon deadlines for correcting material weaknesses. This was a
prudent, cost-effective way to provide flexibility to address
serious, longstanding problems without forcing a one size fits
all approach Government-wide.
In the end, the effectiveness of the Integrity Act depends
on management's commitment to the intent of the legislation and
implementing guidance. If aggressively implemented in a cost-
effective manner, the resulting improvements to internal
control should assist Government program managers in achieving
desired results through effective stewardship of public
resources.
Finally, let me turn to my fourth point on future
legislative action. Effective internal controls and financial
management are core concerns of the PCIE community. We
appreciate the opportunity to communicate with you and the CFO
Council on these issues today. As your subcommittee moves
forward to consolidate laws affecting these areas, we in the IG
community welcome the opportunity to continue the dialog and
provide assistance. The reassessment of financial management
requirements of Federal agencies should be conducted in a
cautious and deliberate manner, carefully considering the costs
and the anticipated benefits of the changes.
This concludes my statement, and I would be happy to answer
any questions.
[The prepared statement of Mr. Higgins follows:]
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Mr. Platts. Thank you. Mr. Steinhoff.
STATEMENT OF JEFFREY C. STEINHOFF, MANAGING DIRECTOR, FINANCIAL
MANAGEMENT AND ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Steinhoff. Mr. Chairman, members of the subcommittee,
I'm very pleased to be here today to talk about internal
control and OMB's recent changes to Circular A-123. Internal
control gets to the heart of accountability. The subcommittee's
focus on this topic is very timely and most important. Your
continuing leadership has been a catalyst to the broad
accountability improvements we see across the Government today.
The Congress has long recognized the importance of internal
control. Over five decades ago, the Budget and Accounting Act
of 1950 placed the responsibility for internal control squarely
on the shoulders of management. Management was told that they
were responsible for maintaining sound systems of internal
control. That was made very, very clear.
In 1982, when faced with a series of major internal control
breakdowns, the Congress responded with the Federal Managers'
Financial Integrity Act. In many respects, this action by the
Congress put us two decades ahead of the private sector, which
is now in some cases grappling for the first time with
documenting controls and doing some of the things that Federal
agencies have been doing for many years.
This straightforward, two-page law reaffirms that sound
internal control is a fundamental responsibility of management,
and requires that agency heads sign their name on the dotted
line each year as to whether their internal control systems
meet the requirements established by the Comptroller General.
This is where Circular A-123 comes in. It represents OMB's
guidance for assessing and reporting on internal control under
the act.
In short, we support the recent changes to A-123 and view
them as a welcome step forward. We applaud the efforts of the
administration to what I call revitalize this important act.
I want to spend a few minutes highlighting what I think
will be six issues critical to effectively implementing these
changes, and in doing so speaking to some of the lessons
learned from the early years of FMFIA. First, we support OMB's
plans to provide further implementation guidance. These
materials should demand an appropriate rigor to whatever
assessment and reporting process management adopts. Management
should have flexibility to do what makes sense in their
environment.
But at the same time, whatever guidance is issued, everyone
must make sure that this does not become a paperwork exercise.
In the initial years of FMFIA, agencies almost drowned in
paper. Sometimes it seemed that the assessment and reporting
process had become the end game. That's why in 1995, OMB
relaxed the assessment and reporting requirements. But the
pendulum, I think, swung too far then and you saw very mixed
implementation of the act. That required the recent
recalibration or the changes to Circular A-123, to put this
important accountability component fully back on the radar
screen. So again, as I mentioned before, this is very, very
welcome and very, very timely.
Second, while the revised Circular focuses on internal
control over financial reporting, which is very appropriate,
agencies must also remain vigilant to the broader range of
internal controls that cover program operations, which are
exemplified by the 25 areas on GAO's high risk list and are
clearly the focus of FMFIA.
Third, there will need to be strong support for managers
throughout an agency, both because of the broader nature of
FMFIA, about which I just spoke, but also because the CFO
typically does not control all the systems and processes needed
for financial reporting. For example, at DOD about 80 percent
of the information needed for financial reporting comes from
non-financial systems, such as logistics, procurement, or
personnel systems. These systems are not under the purview of
the Comptroller.
Fourth, assessments will have to be risk-based, and the
appropriate balance reached between the costs and benefits of
controls. In focusing on controls, you need to have the right
controls at the right time and the right place, and to guard
against both under and over control. I'm speaking not only
about having cost-effective processes for assessment but
assuring cost-effective controls as well. Because while the
Government certainly has serious weaknesses in areas where
controls must be strengthened, I think there are many
opportunities to streamline and simplify controls as well.
Fifth, management testing of controls in operation will be
important to knowing what is working well and what is not. The
auditor can be a help here; but this job is a basic ongoing
management responsibility and should not be just shifted to the
auditor. This is something you've got to be doing day to day,
every day.
Sixth, management has to be held accountable for doing the
right thing. If there are serious internal control breakdowns
and it is determined that management has not been vigilant in
implementing FMFIA and following the concepts that are in the
OMB circular, there should be some consequence for this. People
do react and do act if they see there are incentives and
disincentives. I think that was oftentimes lacking in the past.
Annual oversight hearings, combined with linkage to the
appropriations process for agencies that are not doing the job,
and are valuable tools. And I don't mean that just because an
agency has a weakness, that they are not doing the job. They
might have inherited some deeply rooted problems they are still
working on. So one must make both a qualitative and
quantitative decision there. But oversight hearings and the
appropriations process are two ways that Congress can make its
voice heard and hold managers accountable.
Let me touch on one final matter: auditor opinions on
internal control over financial reporting, a concept we have
long supported and continue to support. At GAO we practice what
we preach. Not only do we render opinions of internal control
over financial reporting for the entities that we audit, the
Bureau of the Public Debt, IRS, the FDIC, and soon to be SEC,
but we also have our independent auditor render an opinion on
our internal control over financial reporting.
We believe that the joint GAO-PCIE financial audit manual
holds the key to getting this important job done at a
reasonable cost. We look forward to working with the CFOs and
the IGs as they conduct the mandated cost benefit study. We
want to do this right, and to roll it out in a way that makes
sense. I think it should not be a matter of ``if'' this is
ultimately done. It's ``when'' it's done and if it's done in a
way that adds value.
Also as he discussed with you last week in his testimony on
the audit of the 2004 consolidated financial statements of the
U.S. Government, the Comptroller General has been discussing
this issue with the JFMIP principals.
Mr. Chairman, this concludes my summary remarks. I want to
again thank you and the members of the subcommittee for your
important leadership. I would be pleased to answer any
questions that you may have.
[The prepared statement of Mr. Steinhoff follows:]
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Mr. Platts. Thank you, Mr. Steinhoff.
Before we continue, I would like to recognize that we have
been joined by the gentlelady from New York, Mrs. Maloney.
Thank you.
We will go right into questions, and we will do 5 minutes
or so for each Member and have various rounds. Mr. Steinhoff, I
want to first comment on your work and sitting here with two
CFOs, and as one who played an integral role in the CFO Act
back in 1990, and now partnering with our CFOs and our IGs in
this collaborative effort, what important work it is. Your
comment about the A-123 Circular revision revitalizing FMFIA
is, a very important note. And that's really what this
subcommittee, through our work on the DHS bill last session and
now continuing with our oversight responsibilities on the
Circular, is seeking to do.
Mr. Steinhoff. Mr. Chairman, I would like to add another
point to that. When you mentioned the CFO Act, at the time of
FMFIA, agencies really weren't in the same position as they are
today. You didn't have, for the most part, what I would call
professional CFOs. And you have a much different set of
dynamics today. You have that act and that structure in place
to carry a lot of this out.
Mr. Platts. That evolution, 50 years ago, when as you
referenced the legislation back in 1950 and now through to this
day, combined with everything in between, has put, I believe,
the Federal Government in a great position to really work hard
at truly getting its financial house in order. And that's what
each of you is seeking to do in your individual agencies or in
a collaborative effort as members of the PCIE or CFO Council
and with GAO. So we're delighted to have your efforts out there
and have you here today.
What I thought, maybe for each of our CFOs and IGs, if all
or one of you would want to give, just in laymen's terms, an
example of an internal control in your department, just to kind
of set the stage for what we are talking about, the kinds of
things that should be occurring to protect taxpayer funds in
each of your departments.
Mr. Wolff. I'd be happy to try and answer that, Mr.
Chairman. I think internal controls come at all levels, at the
macro level and a micro level. Where we start in our department
is leadership at the top. We have a new Secretary of our
Department, Carlos Guittierez, who was previously the head of
Kellogg Corp. He turned that corporation around, and he has
been here a week. He had his first meeting with the senior
staff early this weekend. One of the first things he emphasized
was accountability, by his managers sitting around the table,
by his senior staff and throughout the organization.
It starts at the top. It's our responsibility to inculcate
the culture from the top all the way down to the bottom.
Concurrent with that, I meet with the CFOs in all our bureaus
on a monthly basis. So those are the macro kinds of controls.
The other kinds of things, the reviews you do of travel reports
and those kinds of things. Those would be examples of micro
level of internal controls.
Mr. Platts. OK. Mr. Burnham.
Mr. Burnham. Thank you, Mr. Chairman.
Like the Department of Commerce, we have a new Secretary as
well. I think it is indicative of her, of the emphasis she
places on management, that her first briefing while she was
going through the confirmation process was from the management
bureaus of the State Department and the Under Secretary for
Management. So clearly, we have top down support and focus on
this effort. We have a best practice that is held up by OMB as
a best practice. It's also at the macro level. And of course,
we know that it flows downhill, so it has to start there.
We have a management control steering committee. This is
the most important thing that agencies can implement. This is
chaired by me as the Assistant Secretary and Chief Financial
Officer. It also consists of nine other assistant secretaries
and the IG as a non-voting member. This is the group that comes
together on a regular basis to determine whether or not we have
material weaknesses, reportable conditions. We receive a report
from the auditor.
Government is a hybrid. We have no board of directors. You
are our board of directors. But yet, unlike a board of
directors, we don't have an audit committee. We do have an IG,
but we do not have yet an internal audit capability, but we
certainly plan to as part of our process of seeking and
attaining an outside audit of our internal controls.
But it starts there at that senior level committee that is
going to provide the top down guidance, the macro guidance,
that's going to go all the way down.
Let me just also mention too at the micro level. It's
supervisory oversight as well, and you mentioned one of these
in your example. But it's also peer review, peer review in
terms of making sure that it doesn't always have to be a
supervisor, it can also be a colleagues in a voucher examiner
capacity also doing a peer review on someone else. These are
the kinds of things we have to do at the State Department.
Mr. Platts. Thank you.
Before I yield to the ranking member, we are going to get
into the A-123 Circular. One aspect of that implementation is
with the CFO Council developing a training program or guidance
for the effective implementation. Could you give us an update
where that process is and what kind of timeframe we're looking
at to have that information, that assistance out there, so that
all the departments and agencies can go forward in a positive
way with the new Circular?
Mr. Burnham. We are fleshing that out right now, Mr.
Chairman. We anticipate that we will be able to, that OMB will
be able to issue guidance on that some time in the spring,
that's as close as I can get it right now, sir.
And we have established a separate subcommittee of the CFO
Council that is dealing exclusively with this issue, the
Sarbanes-Oxley, with A-123 issues.
Mr. Platts. When you flesh that out and you have some of
your training programs for your managers, will that training be
cross-agency, cross-department, to allow that give and take as
the CFO Council does at the senior level, or will it be more
within each department or agency?
Mr. Burnham. No, as a matter of fact, I also chair the Best
Practices of the CFO Council. Just yesterday we had our monthly
meeting, in fact, this was brought up. We plan to have a couple
of different ways, not only in terms of written guidance, in
terms of training sessions across agency, inter-agency, not
just for CFOs, but also for our colleagues within the
community.
We also are looking at building a panel so that during our
regular monthly meeting we would bring a panel of outside
experts that would come in and tell us how they have
implemented this in the corporate world. We are also seeking a
panel, sir, of public policy experts, those of you who visit
this on a daily basis. You, perhaps Congressman Oxley and
others, sir, we would love to have come before the Council and
give us your impression.
Finally, we are looking to do a retreat. We get bombarded
with e-mails for all kinds of retreats. I'm sure you do as
well. We can go to Harvard, we can go to all these kinds of
places for 3, 4, 5 days, they cost thousands of dollars. We're
looking actually to build possibly in conjunction with the
Association of Government Accountants a retreat where from the
assistant secretary level and below we can send numerous
people, come there and really have an intense two, three in-
depth training session on this.
Mr. Platts. I commend your efforts in chairing the Best
Practices subcommittee in that learning, benefiting from each
other. That's great.
Mr. Towns.
Mr. Towns. Thank you very much, Mr. Chairman.
Mr. Steinhoff, let me start with you. How can an agency
like NASA, with the vast majority of the budget being allocated
to private contractors and vendors, ever improve their internal
control functions without streamlining their procurement
activities? Have issues concerning the lack of control over
property, plant and equipment been addressed by the agency?
Mr. Steinhoff. Congressman Towns, those are areas on GAO's
high risk list. NASA procurement and that whole array you were
just speaking about are high risk areas. NASA faces contract
management challenges. They face challenges in the financial
management as well. NASA has had problems bringing up financial
systems that operate effectively and is trying to grapple with
those now.
You are really putting your finger on some high risk areas,
that really affect the ability of NASA to carry out its
mission, because NASA is dependent on the contract community.
And when contracting, procurement, and all that oversight is a
high risk area, it makes it difficult. My understanding is that
at one time NASA built the platforms and all that itself. It
had most of the scientific community. Today, as you stated,
they are largely dependent on contractors. So getting on top of
contract management is very, very important.
Mr. Towns. Thank you.
I am not going to be able to stay throughout, so let me ask
this question just in case the chairman doesn't ask it, let me
ask it. Since the enactment of Chairman Platts' legislation
that requires an independent opinion of DHS' internal controls,
can you update us on any progress the agency may have made for
developing and implementing improvements to their internal
control structure? Have the efforts of DHS been hampered
because of the distinct nature of its legacy agencies, or are
they similar to internal control deficiencies at other Federal
departments?
Mr. Steinhoff. I have some knowledge on this. DHS is
another area on our high risk list. Certainly when you put a
new department together, 1 day they don't exist, the next day
they do, and you throw together a bunch of groups, that makes
it hard. Many of those units that were merged into DHS had
internal control issues coming in. Some had serious control
problems coming in. So you had to face having to be up and
running from day one without a clear infrastructure at the
department level. Again, our high risk designation focuses on
that problem.
With respect to what they are doing to really address the
mandate that the chairman had placed in the DHS bill, I can't
speak to the progress they have made today, other than the fact
that they had a conference, the Comptroller General spoke at
it, and they made a presentation on their plans for
implementing FMFIA and OMB Circular A-123.
It seemed to me they had a good grasp for how to approach
this. It seemed to me they were involving all the entities, all
the activities. They had various levels of steering committees
that involved their various components, and involved people at
sufficiently high levels that things should in fact be
achieved. So they seemed earnest, they seemed to want to
proceed ahead, they seemed to want to get on top of their
problems.
But they do face what anyone would say are high risk
challenges. It would be again very challenging for them.
Mr. Towns. Thank you very much.
Secretary Burnham, it recently came to our attention that
billions of dollars allocated by Congress toward the
international efforts in Iraq and elsewhere are unaccounted
for. While I understand that your agency's mission is distinct
from that of DOD can you offer us any assurance that our
appropriations in support of our international efforts within
the State Department are being well managed and controlled? Are
there any allocation discrepancies within your agency that we
should be made aware of?
Mr. Burnham. Mr. Towns, thank you for that question. Let me
address just post-turnover, when Ambassador Negroponte arrived
in Baghdad. Let me just say that most of the programs that we
are implementing through foreign assistance programs and
through the Iraqi Relief and Reconstruction Fund are being
executed by either DOD, which I will not comment on, although I
have complete faith in, and USAID. USAID has a legacy of
exceptional controls that they place through their
comptroller's office, through independent audits, not just only
in Iraq, but in every country where AID operates. They have
very strong oversight programs. I have complete faith in what
AID is doing, particularly under the leadership of
Administrator Andrew Natsios.
So, sir, if you would accept my assurance that I have full
faith as an American taxpayer in what we're doing there and
what our State Department is doing there, and what AID is doing
there, then if you'll accept that, sir, I'll leave it at that.
Mr. Towns. Thank you very much. We're going to have to go
into recess, Jim had to leave to vote, and I must leave to go
somewhere. We will just have a 5-minute recess.
[Recess.]
Mr. Platts. We will reconvene the hearing. My apologies for
the delay. Unfortunately, I may need to run out again. We have
a markup in the Education Committee downstairs. I'm getting my
exercise today. Hopefully the next vote will be a little while
before they call it.
I want to continue on a number of issues here. One
important aspect of the A-123 Circular, is not requiring every
department and agency to have an audit opinion on their
internal controls, as we are doing with DHS. We are going to
look at the cost benefit of doing that in a broader sense. As
written, it gives OMB that discretion. I would like each of
you, if you could touch on what type of threshold you envision
for when OMB should invoke that discretion and require an
audit. Is it a dollar amount, is it a persistent number of
years? What in your opinion would warrant an audit opinion on
the internal controls?
Mr. Wolff. I suppose I should let the Government
Accountability Office go first on this one, sir, but I will
take a stab at it. It seems to me you can't put a dollar
threshold on implementing this provision of A-123. I think it
is more a subjective call on how an agency is doing. Are they
properly identifying their internal controls? Are they carrying
out the plans that they have set in place to correct those
internal controls, and are they doing it in a timely way?
I think that is the bottom line on the call at OMB. You
can't just set a dollar threshold, because what might be
material at the Department of Defense may not be in one of our
sub-bureaus, for example. There is a great debate going on at
each agency right now about this materiality issue. It is one
that is fairly well parochialized because of the difference in
programs across Government.
That's the short answer, I think, sir, to what you are
asking.
Mr. Burnham. Mr. Chairman, stewardship has no price. I
think we all agree on that in the room. It doesn't mean that we
spend a nickel to account for a nickel. But it does mean that
we have to eventually get to a point where we have required
audits of our internal controls.
For the State Department, that means $4.5 million is our
best guess at this point, 2 to 3 years. It has to do with
testing. It has to do with documentation. And finally, it has
to do with building what we call a senior review committee,
otherwise known in the outside world as an internal audit
capability. We want to be very respectful of our IG, but the
reality is that we should all have an internal audit capability
or internal senior review committee.
When those three things are well on their way, when using
the balance score card, OMB can say that most agencies are at
yellow, if not green for progress, yellow for status, then I
think it's time for OMB or the Congress to act. I don't think
it's 2 years, but I think certainly within the next 5, sir.
Mr. Platts. Thank you.
Mr. Higgins. I think that one of the things you have to
take into consideration initially is the cost benefit of this
opinion. Certainly it would be a concern from my perspective if
you had repeat findings that continued year after year without
being corrected.
But I do think the first thing you have to do is look at
the cost benefit of this, how much it is going to cost you and
what you are going to get out of it.
Mr. Steinhoff. A couple of thoughts on this, since we have
been pretty vocal for many years on this matter. Not only do we
do it, but really in a strict technical sense, we're not
required to follow FMFIA. The law doesn't really apply to GAO
per se. But we follow that law.
I agree with what Mr. Burnham said. I think the agency has
to see where they are on this. I believe it can be done in a
cost-effective manner. It should be a by-product of doing a
financial audit using the joint GAO/PCIE Financial Audit
Manual, which I think has taken us to the level that we are
doing first rate financial audits. I would put the Federal
financial audits ahead of what was being done in the private
sector in terms of quality. It gives the auditor the ability to
render an opinion on controls. We do it right now by following
the GAO/PCIE methodology.
I think you have to look at the value in terms of that,
it's an independent set of eyes. When agencies were first
required to prepare financial statements, there was a lot of
the same thinking that it was not cost effective to audit the
financial statements you know, let's just send in the reports.
So what an audit opinion provides is a second, independent set
of eyes. And it is providing an assurance.
If you look at SSA, which I really think is the role model,
they voluntarily prepared financial statements and had them
audited in the mid-1980's. They took their lumps long before
there was any glimmer that this thing was ever going to become
law. And they are now one of the first to be up front and get
an opinion on controls. I believe this year was the first year
they got a clean opinion on controls because they were able to
get past the computer security hurdle, which is a difficult
hurdle. That's a tough hurdle, even if you get by it once.
SSA should be most proud of the fact that on their own
volition they have had that tone at the top and have pushed
ahead, as Mr. Burnham explained was his goal at State, and have
voluntarily done so. But I think it is really a cost of doing
business in Government. I think we can do it in a cost-
effective manner. I think it can add value. If management does
have the kind of internal control program in place that is
envisioned in A-123, it makes the auditor's job a lot easier,
because management has tested its controls. Management has a
basis for its assurance, and management can say to you that
yes, we do meet the standard and this is what we base that on.
If you have an entity that has lots and lots of problems
and they can't provide that assurance, I could see the
auditor's job being very easy, they don't have assurance. It
shouldn't cost the auditor anything. Take DOD, I could give
that opinion in just the time it would take me to write it up.
So I think moving through in an orderly manner, whether
it's 2, 3, 4, 5 years, it would differ by agency, makes a lot
of sense.
Mr. Platts. Secretary Burnham, your statement was that you
envision State being at that point in 2 to 3 years, right?
Mr. Burnham. Yes. I would anticipate regardless that we
will have an internal audit of our internal controls within the
next 2 to 3 years. I think as I said, it will cost $4 million
to $5 million to get there because of the three steps that we
have to take. Then I think beyond that it's fairly de minimis.
It's perhaps a 25 to 50 percent increase in our overall
independent outside audit, which right now stands just below $1
million.
Mr. Platts. Secretary Wolff.
Mr. Wolff. May I just add, Mr. Chairman, the comments of my
friends, notwithstanding, I don't think we can underestimate
the cost. I think we run the risk of underestimating the true
costs of the audit part of this provision. There is no question
in my mind that the exercise is beneficial. No one is arguing
that.
But when you do audits of the Social Security
Administration's internal controls, it is quite different, they
are a single focus agency. As important as they are, it's a
single focus. They pay folks checks.
When you have an agency as diverse as ours, where you've
got everything from counting all the people in the country
every 10 years with 500,000 employees to running weather
satellites to controlling radio spectrum, the costs start going
up considerably. That, coupled with the open source news
reports in the Wall Street Journal, the Financial Times and
others in which the cost of the additional burden in the
private sector ranges anywhere upward to 100 percent over
current audit costs, we need to very closely look at that
before we start mandating these things absent additional
funding from the Congress.
Mr. Platts. Secretary Wolff, is it fair to say, though,
that given the complexity of Commerce or State or Education
that because you are not single focused, really, as Social
Security is, it's all the more important that we ensure that
your internal controls are up to the challenge before you? It
would make the argument why you should be doing them because of
the complexity of your mission.
Mr. Wolff. Sir, we are already hard at work documenting our
internal controls. I am not arguing with that. I think it is a
very worthwhile exercise.
As far as annual audit opinions, though, of the
management's assertions and internal controls, it's quite a
different story. I think we need to look at it very closely.
This interagency review that's being undertaken jointly with
the PCIE and the CFO Council will hopefully lead us to a
satisfactory conclusion.
Mr. Platts. Actually, you led into my next question, which
was, under my DHS legislation, the requirement for this joint
study, cost benefit study, I was wondering, between CFOs and
our Inspector General where we are in that review, that study,
at this point. Are we still kind of early on?
Mr. Wolff. Yes, sir, pretty early on.
Mr. Platts. OK. Great.
Mr. Burnham. Mr. Chairman, can I just add one thing to my
colleague, Secretary Wolff? He did bring up a very important
point. From my own legislation days, I know how objectionable
we found it when we had to vote on something which was an
unfunded mandate. The importance, of course, of understanding
that, finding $4.5 million in the State Department budget, is
going to be a difficult task. So unless we do have support
across the board, both from our own colleagues as well as from
the Congress, it is going to be very tough to implement this.
So we certainly would urge you, sir, to work with the
appropriators in full support.
Mr. Platts. That leads nicely into the next question I
have, but I have to run downstairs and put a vote in. I
apologize, but if you are patient, I will be right back and we
will continue the dialog. We stand in recess for a few minutes.
[Recess.]
Mr. Platts. The subcommittee will reconvene.
The Federal Managers Financial Integrity Act, having been
in place for 23 years now, an aspect of that was to focus on
the internal controls. Is it that what we are requiring now is
so much greater that we have this infrastructure buildup, that
we need to expend these dollars to get up to where we can do
internal audits or is it that over those 20 years there wasn't
the level of focus and commitment on internal controls as
Congress intended when FMFIA was passed that we're now kind of
all on the same page, finally, with the new Circular and really
making the investment?
Mr. Wolff. Sir, I think Mr. Steinhoff touched on that a
little bit in his testimony. Back in the 1980's, there was a
great deal of attention, as you probably know, given to
internal controls. It became as he said, a paper intensive
process. The documentation of the process became an end unto
itself.
So the internal control weaknesses remained while the
process was fine. So that's what led the administration, back
in 1995, apparently, to make the judgment that they should back
off on the requirement for the reporting part of it. I think
the pendulum, as he said, did swing too much the other way and
now we're back, and with a different focus. The documentation
requirement is there, but it's more an inculcation of the
culture rather than a paper process. So there's a huge
difference.
Mr. Platts. Maybe we can explore in that difference,
because a big part of the audit is compliance with all the laws
and regulations of each department and agency. Would it be
logical to require your Department's auditor to get an opinion
on compliance with FMFIA and how would that opinion differ from
an actual opinion on your internal controls?
Mr. Steinhoff. Yes, FMFIA requires management to have an
evaluation process that meets the guidelines that are
established by OMB. If you are going to give an opinion on
that, you would basically say whether or not management was
assessing its controls in some orderly manner that made sense,
was in a position to put its assurance statement together, and
had in fact rendered the report that the law required it to
render. You wouldn't, though, be giving an opinion on the
controls themselves. You would be giving an opinion on the
process they followed.
Going back, and I apologize for being back here a minute
late.
Mr. Platts. I was quick.
Mr. Steinhoff. You were very quick. In looking at the 1982
act, you really had such a steep learning curve that agencies
didn't know what to do. But they had to immediately be doing
something. There was this tremendous cry for a lot of specific
guidance. So what you had was in-depth guidance that would be
used by an auditor to do a vulnerability assessment or internal
control review, massive training and a lot of very specific
things.
It really drove people to just generate lots of paper to be
trying to comply with a very rigorous evaluation process for
which they did not understand the principles undergirding it.
You had entities that might have 30,000 or 40,000 assessable
units and each unit would apply an assessment guide. Then they
would roll it up at all these levels. It just became a blizzard
of paper.
My job for about 10 years was overseeing all this. It got
worse and worse as people became more sophisticated in the
process. It really took hold. They worked very hard. I would
give them an A for effort. But we ended up with too much paper,
and finally that pendulum swung and OMB basically said, forget
the whole thing. I think it fell off the radar screen around
1995. Now it's back on, which I think is very positive.
Mr. Platts. Secretary Burnham, did you have something you
wanted to say?
Mr. Burnham. No, I just, while you left the room, I got
into a little bit of hot water with my colleagues. They said I
was jumping the gun.
Mr. Platts. On the 2 to 3 years? [Laughter.]
Mr. Burnham. They didn't use the word showboat, but--
[laughter]--we have a great team at State that was there long
before I got there. But we have priorities. Our No. 1 priority
is building a global financial platform and integrating six
legacy data bases into one legacy data base and building that
across 171 different countries and 150 different currencies.
That's our premier goal, building a global financial management
system.
Getting an independent audit of our internal controls is
something we certainly want to do, certainly want to work
toward, whether or not in a scarce resource environment like
the one we're heading toward, and with the responsibility that
you and other members of this committee and Congress hold to
get the deficit cut in half for the next few years and then
eliminated.
If we can do all of this, these are certainly things we
want to do. So that's certainly the direction we're trying to
head.
Mr. Platts. With all due respect, I know at least one or
more of your fellow witnesses here are military veterans as
well. I think that's the can-do attitude of the Marine in you
coming out, that we're just going to get it done. And that's a
good thing.
I think the point you just made about the scarce resource
environment in which we're in is all the more why making sure
we get it right on internal controls needs to be a priority. We
talked last week with the Comptroller General about the $45
billion, OMB's estimate, best possible, which doesn't include
all departments and agencies, of the improper payments. As we
get ready in January 2006 to begin the new Medicare
prescription drug plan that is going to cost somewhere in the
$50 billion or $60 billion a year range, we can fix our
internal controls, especially at DOD and some of the larger
agencies, Medicare itself. It goes a long way to paying that
commitment on prescription drugs without new money, but just
with the money we have, but better accounting and use of it.
So even in scarce resources, I know it's going to be
challenging to come up with these dollars for the additional
cost. But it's all the more why we need to do it. But your
message is still well heard. I have said many times, I'm not an
appropriator. All of us wish we were. If I could wear my
oversight hat and my appropriation hat, it would be a perfect
match, although that would not be a good internal control
probably. [Laughter.]
So I need somebody watching me.
I want to actually take up where I got off track here. With
FMFIA, from the management attestation requirement there, is
that in your opinion, both from the Department and GAO, fulfill
the new Circular requirement of attestation on your internal
controls, if you do go through what's required under FMFIA?
Mr. Steinhoff. Yes.
Mr. Platts. So is there a belief that we need to do
anything from a statutory standpoint with the act itself to
strengthen it, to kind of dovetail with what OMB has done
through the administrative process?
Mr. Steinhoff. No, because the act envisioned that OMB
would issue the guidance and would lay out how to assess and
report.
Mr. Platts. So to maintain that discretion?
Mr. Steinhoff. Yes.
Mr. Platts. OK. I'm always an optimist, that when we lay
out our plans we are going to move forward and achieve them and
strive to our best ability to do so. But given that 20 year
history, Mr. Steinhoff, you have recounted it well in your
testimony, both written and here today, of FMFIA from 1982
through the 1980's and mid-1990's and basically kind of like,
it's not working. Well intended, but we didn't get the results.
Why would you believe that we should be more optimistic
this time, that we are really going to get it right and do what
we're all setting out to do, and wy shouldn't we be? Is there a
reason we should not be optimistic?
Mr. Higgins. I think 20 years ago there was a lack of
appreciation for the importance of internal control. Since that
time, there has been a lot of emphasis given to financial
reporting, financial statement audits. There is a better
understanding of the need for that. Plus, we have had some
terrible situations in the private sector that brings it to
everybody's mind.
I think the revisions to the new A-123 would do a lot. It
lays out management's responsibility, it gives specific
guidance into what they should do for the financial statement
part of the reporting. So I think that we should wait and see.
Mr. Platts. Kind of the silver lining in some of the bad
occurrences of ENRON and WorldCom is that it's raised the level
of scrutiny and the priority of this issue?
Mr. Higgins. Absolutely. I mean, in my department alone,
there has been a tremendous amount of improvement in the last 4
or 5 years. The Student Financial Aid Office just got taken off
the high risk list.
Mr. Steinhoff. And I think in looking at it, there were
some very positive by-products of FMFIA in the early years. It
did drive internal control down to the lowest level. There were
literally thousands and thousands of small control tweaks at
those lower levels. And agencies did a lot, some maintained it,
some perhaps did not. But they did a lot to document their
underlying systems. There has been a lot done with the passage
of the CFO Act to document the underlying accounting systems
and those operations, which really is a great jump start to
revitalize FMFIA.
So I think in some respects, as I mentioned before, we are
ahead of the private sector going in. We have some tremendous
challenges. We have a different level of accountability, and
our accountability is much more visual to the average person
when they don't get their benefit check or the Government does
something wrong. But I think there is that appreciation. I also
believe you have a different type of manager in Government
today and you have a set of, a cadre of highly qualified CFOs,
which you did not have back in 1982. That was kind of an
afterthought that was added to someone's title, and they really
didn't focus on internal control.
Mr. Platts. I share that belief as well, in the CFO Act.
It's one of the reasons we pushed for Senate confirmation of
the DHS CFO, was to ensure we didn't regress. We have
established a high standard for our CFOs, and to ensure that
scrutiny does occur, because we do want that mind set that's
changed to continue and not go the other way.
Mr. Wolff. Sir, I fully concur with what my colleagues have
said. Certainly the financial environment today is
substantially different in many ways from the way it was back
in the 1980's. I was around back in those days, too. It is a
totally different way of doing things. There is far more
emphasis on doing things the way the private sector does them
and lifting best practices from the private sector and applying
them appropriately in Government.
But probably more important than that is, for reasons I'm
not quite certain I understand, the folks that are doing all
the hard work on this internal controls review and
documentation are seeing the value of doing it. So you are
institutionalizing something that is essential to begin with. I
think that is going to be the key to the success of this, that
people are actually seeing the benefit of what they are doing.
Mr. Platts. I think when I caught my breath I remembered
the question I wanted to followup with when we were talking
about the cost of doing it. This kind of relates to Secretary
Wolff, the value of doing it.
Now at State, Secretary Burnham, you're looking at, say,
$4.5 million extra to get your Department in place to do the
internal audit and move forward from there, which is going to
be out of, in essence, your portion of State's money that you
are given. Is there any discussions, dialog at the senior level
in State, or Commerce or Education, that there is an incentive
to do it? I'll give you an example, with Homeland Security.
Last year, as we were pushing for my legislation, there was a
report about within the Transportation Security Administration,
I forget how many tens of millions of dollars of overruns
regarding, I think it was screening equipment or something,
because of lack of good internal controls.
So even if they had spent $10 million in making sure their
internal controls were up to par, they would have come out way
ahead as a Department whole. But to the IG or financial
management sector of DHS, they spent more money. In other
words, if by doing this audit you are able to identify savings
that those savings accrue to your office within the Department
to help pay for the cost, are there any discussions of that
nature?
Mr. Burnham. We do have discussions of that nature,
although I think long term, the State Department is going to
get savings from other areas, such as the 21st century
technology platform, such as fulfilling the President's vision
of competitive sourcing, the PMA agenda item on competitive
sourcing. I think this is going to be far more beneficial to
the State Department and to the American taxpayer, at least in
our case.
And as of now, I would certainly say we are going to have
to find the money to get us to a level of testing and
documentation. Although I would not say that the goal of
getting to a place where we can receive and be comfortable that
we are going to receive a clean opinion on an independent audit
of our internal controls is anything different from what we had
planned to do before Circular A-123 Appendix A. In other words,
I think that, as my colleagues today have outlined, it's a new
environment than it was 20 years ago. It's a new environment
than it was 4 years ago. And reflecting that, we have changed
our focus and are trying to grow with it.
Mr. Platts. And with the suggestion in my question about
sharing of the benefits, there is a little bit of caution
there, because there would be a little bit of a gotcha, if one
part of State finds wrongdoing by another part, you get the
benefit of that savings, which could create some internal
battles or tension. But it's something that when we are looking
to how to pay for this renewed effort, there are going to be
benefits reaped.
The example my staff shared with me in my memory is, the
total contract was $18 million, and the question here of which
$9 million was not able to be accounted for by the Department.
And originally it was only a $4 million score to begin with. So
it escalated dramatically and then couldn't be accounted for in
the end, half of what that escalation was. So obviously it
would have been a Department-wide benefit to having better
controls in place. So something to perhaps look at as you are
looking for money. Because you rightfully acknowledge it's
going to be hard getting additional dollars from Congress,
given the fiscal challenges we are facing as a Nation.
Mr. Burnham. Mr. Chairman, I believe you are referring to
the Iraqi money, not the IRRF money.
Mr. Platts. This is in TSA here, stateside.
Mr. Burnham. OK.
Mr. Platts. Yes, not within State, but within Homeland
Security.
Mr. Higgins. From the IG's perspective, the community
certainly thinks this is like apple pie. But the highest people
in the Department of Education clearly recognize that we bring
back through our recommendations and work more than we cost the
Government. But these unfunded mandates are killing us. In my
office alone, in 1996, we were at 368 people. Today we are at
285. That's almost an 80 person FTE reduction because of the
cost of the financial statement audit, and the cost of doing
business. So we're getting fewer people and more
responsibility. So it is a concern of the IG community.
Mr. Platts. As we demand more, we give you less.
Mr. Higgins. Well, you actually give us more, but it
doesn't cover the bill. It's sort of like my home budget.
[Laughter.]
Mr. Wolff. May I comment, Mr. Chairman?
Mr. Platts. Yes, Secretary Wolff.
Mr. Wolff. I would just like to make sure that my record is
clear here. I strongly support this review. We are eating
internally in each of our bureaus the costs of doing the
reviews and the documentation. My concern is that the annual
audit opinions are going to increase costs considerably. That's
quite different from doing the work that we are doing under A-
123. We are going to be doing the work, and monitoring the
progress. The IG is going to be watching what we are doing as
are GAO and your committee and a host of other folks.
It's rendering the audit opinion by one of the big four
where we run the risk of giving them a blank check, quite
frankly.
Mr. Platts. Point well made. It is something that we need
to be smart about how we do this and not create a new problem
as we try to fix an old one.
Mr. Steinhoff. Mr. Chairman, I would say that I agree that
the process has to be well managed and expectations should be
well managed. It has to be done in a very smart manner. That's
why we see some kind of phased approach to opinions on internal
control, when it makes sense for an agency.
I want to add another perspective on control which I think
benefits from really exploring one's controls. In some areas,
frankly, there's too much control. I'll give you an example. We
did a review a few years ago where we benchmarked what were the
travel policies for best practice companies. And they would
have anywhere from 8 to 15 pages of rules. They would enforce
those rules. If you broke the rule, you were no longer employed
there.
We compared that to DOD; we worked with DOD on this in a
collaborative effort. They had 1,357 pages of travel rules at
that time. They were accounting for every nickel and dime. They
had to have people there to help people fill out the vouchers.
And they went through a major process to streamline and knock
out pages and pages of rules. There were unnecessary controls.
Probably every time something went wrong over 50 years, they
added another requirement. They went through and they just
simplified it. They got some legislation and no longer do you
have to have a cab receipt for $5. You have to trust the person
if it's less than $75.00, and just change the whole
accountability approach.
We did another review where we found horrendous controls
over property, but at the same time, we found millions of
accounting transactions that Defense was processing, thinking
they were providing more accountability. Those accounting
transactions actually were dropping the items from visibility.
So there was a tremendous expense to process all those
transactions. And those transactions were worsening control.
So when someone gets down there and starts kicking the
tires, and gets down there in the weeds, I think they will find
as a by-product there are ways to streamline and simplify.
Agencies should be allowed to look at things in a cost
beneficial manner, not spend $1.10 to save $1.
Mr. Platts. That's something that, this committee, we share
that perspective, with those 1,357 pages of travel rules, they
probably had about 100 different systems to monitor compliance
with them, too, given the number of systems over there at DOD.
Mr. Steinhoff. Yes.
Mr. Platts. But that point is something that, will be
something we are going to pursue as a committee on the
financial management laws, is that we have added over the last
20 plus years numerous laws. And part of our efforts, we have
stated as a subcommittee this session, is to try to streamline
all those laws to make them more efficient, that you can
comply, as our Federal financial managers out there, a little
easier on the financial management community to know that you
are in full compliance with what Congress is expecting of you.
So as we said last week, and will say again today, we will
be looking for great insights from CFO Council, from the PCIE,
from GAO as we move forward in that streamlining process.
I want to just maybe touch on one last issue here from the
auditing process. Inspector General Higgins, we had your
colleague, the CFO at Education, here last week, we talked
about the continuous auditing process, and how, because of
Sarbanes-Oxley and the private sector more of a year-round
engagement rather than end of the year run, or sprint, I would
be interested in each of your Department's perspective. My
understanding is at Education that is kind of more the norm,
where you are starting in February or so, leading up to the end
of the year, rather than waiting for the last couple of months.
Where is Commerce, State? I want to make sure I'm accurate
with Education. And then Jeff, from a broad perspective, your
familiarity with others. What is the norm out there now and is
this a good idea that we see in the private sector, that it is
more a year-round process, hand in hand with your auditors?
Mr. Wolff. We are getting close to having a year-round
auditor presence. They left in December and they are going to
be back next week for their in-brief for the current fiscal
year. I think it's beneficial. I think it's beneficial to have
them there, quite frankly. The earlier they start, the easier
it is to get all the problems that they may encounter out of
the way by the end of the year.
So that's where we are, and I anticipate that we will be
eventually getting them regular office space.
Mr. Burnham. Similar to State, thanks to the leadership of
OMB that required quarterly statements, of course. We now are
around the clock, around the year producing the kinds of
financials that are necessary to achieve OMB's requirement. By
the way, that's also part of the PMA. So just getting to green
in fulfilling the President's vision is also part of that.
Our own audit started last month. We will continue to press
on to November 15th of this calendar year.
Mr. Platts. OK. Thank you.
Mr. Higgins. You are correct about Education. I do think it
is a benefit. I mean, as issues come up during the year, they
are there and they know about them in advance. So they are able
to give more information while it is going on. I think it is a
benefit.
Mr. Steinhoff. I think it is the norm for large entities.
These are large entities, when you talk about the CFO Act
agencies. That's the norm. It's got benefits on both sides.
This is a real key to audit quality. This morning I
participated in a forum that the Public Company Accounting
Oversight Board held where there was lots of talk that the key
to a good audit of a private sector corporation, publicly
traded company, is the auditor's knowledge of the business. If
you're auditing Proctor and Gamble, you have to understand the
business. You have to understand their competitors. You have to
be looking at things in that context and have a complete
understanding of the business and how they operate.
To successfully audit these large Federal entities, you
have to have an understanding of the Federal Government, of the
Federal environment and of the missions and programs and
operations of that Department. So having auditors there full
time year-round, is very beneficial to the auditor. For the
financial audits that we conduct, we are there year-round. We
never leave IRS. That's a huge, complex operation. We are there
12 months a year.
Also, we work very hard to have continuity on that audit.
We don't put a new bunch of people on every year, when we
rotate someone off, we bring them along and we have experienced
people doing that work. They have to understand those
processes, how those systems work over there, the complexity of
the tax systems. Year-round is the only way to go. Small
entity, that's a different story. You can come in and out.
Mr. Platts. The fact that we are more and more the norm
being year-round I think is another reflection of that change
in mind set and focus on these issues. I have had the benefit,
as a new subcommittee chairman, last term, coming in following
Steve Horn, who really took his responsibilities very seriously
for this subcommittee's oversight role and focusing on
financial management. And I came into the Congress in 2000 with
a President who has made good management a cornerstone of his
administration through the President's management agenda, which
I'm trying to help keep pushing the ball in the right direction
down the field as a newer chairman.
One last thing, and for our two CFOs, kind of a little bit
off the issue of internal controls. But it's just a structural
question, and I think Secretary Burnham, you mentioned earlier
internally your work with CFOs of different offices, programs
within the Department that you work with that are specific to
one part of the Department. I was curious, within both your
Departments structurally your oversight of those subordinate
CFOs from a hiring review standpoint relates to another agency
we are looking at and how you in the end are the one who is
going to be responsible for the entire Department's
information. But what really direct interaction do you have or
oversight do you have of those subordinate CFOs?
Mr. Wolff. Yes, sir, I can't speak for Secretary Burnham,
but I will say that at the Commerce Department, I personally
interview each major bureau CFO before he or she is hired. My
statutory deputy CFO also interviews them. My statutory deputy,
Jim Taylor, who is sitting behind me here, also has 25 percent
of their performance evaluations each performance cycle, in
consultation with me.
Mr. Platts. Great.
Mr. Burnham. I believe it was Secretary Wolff who mentioned
that he had the CFOs in other parts of the Department of
Commerce. We don't have CFOs, actually, elsewhere. I have a
deputy CFO. But what we do have is financial management
officers at our posts overseas. These are incredible men and
women, the quality of these individuals, many of them certified
public accountants that are now coming in, many of them in
second careers that have come in from the private sector who
want to join the Department, who want to go overseas and are
fulfilling the role of Chief Financial Officer of an embassy.
Some of these embassies are absolutely enormous. In Cairo, we
have over 3,000 individuals, in Berlin, certainly Baghdad is
also going to be quite large.
So just because we don't call them a CFO does not mean that
they are not. It is that individual embassy's assurance
statement that Ambassador must submit to my office annually.
That is the backbone of the Secretary's assurance statement and
part of our overall review and existing internal control
process, leading of course not only to mine, to the Secretary,
but ultimately to the Secretary as reported in the Performance
and Accountability report.
Mr. Platts. You don't have the same direct interaction on
the interview process and review, given the number of posts out
there, it sounds, as at Commerce?
Mr. Burnham. Because of the uniqueness of the State
Department, they are Foreign Service officers, thus they go
through the hiring process of the Foreign Service. Then they do
not report to me, they report to the Ambassador, who is the
chief executive officer, and as we know, the chief American in
country, except when the President visits.
Mr. Platts. OK. Inspector General Higgins, are you familiar
with that structural oversight within Education? I didn't think
to ask Mr. Martin last week.
Mr. Higgins. Actually, he was just here a little while ago.
Jack reports directly to the Under Secretary or Deputy
Secretary in the Department. I think that's the appropriate
line of reporting.
Mr. Platts. As far as other subordinate CFOs, you're not
sure what----
Mr. Higgins. There are no other--well, there is a CFO at
FSA--the PBO, at the Department of Education--but she reports
to the COO of FSA. But there is a reporting relationship down
at the CFO level to Jack's office. It's not real clear,
actually.
Mr. Platts. OK. Something I think that as we look at
promoting greater internal controls, including in the
management standpoint, because ultimately as we say, at
Commerce you are responsible for those final or overall
department financial management and having input, reviews and
hiring input to who is running those operations at the
subordinate level is, I think, very important.
Mr. Wolff. Yes, sir. I just want to make sure I clarify, my
colleague mentioned the PBO over there. We also have a PBO,
which is the Patent and Trademark Office. I do not have 25
percent of their performance evaluation, nor do I interview
their selectees for their financial positions over there, by
law.
Mr. Platts. OK. Thank you.
I think we touched on the issues we wanted to cover. I want
to thank you again for your patience with me running in and
out. As we go forward, we touched on two very important issues
that both the Council and the President's PCIE and CFO Council
are going to play a role in that implementation of the new
Circular and in that cost benefit, that joint study. We will
look forward, as a subcommittee, working with all of you on
that, as well as with GAO on this issue.
I want to commend each of you for your efforts. I said as
we had a staff briefing in anticipation of today's hearing, one
of the things, in reading your bios and your experience and the
successor efforts at your respective departments or at GAO is,
we want you to kind of finish that 2 or 3 year focus at State,
do your work, and then we want to move you en masse over to
DOD. [Laughter.]
We're going to put you to the next challenge. Because that
certainly is, as we heard last week, ultimately for the Federal
Government as a whole, we can do great work, but eventually we
have to take on that 600 pound gorilla that's sitting out
there. You are getting great experience and doing great work
that we want to at some point have benefit that Department as
well.
So thank you for your testimony and your time today. We
will keep the record open for 2 weeks for any additional
information and submissions that you may have. This hearing
stands adjourned.
[Whereupon, the subcommittee was adjourned.]