[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
IMPLEMENTING COST ACCOUNTING AT THE DEPARTMENT OF VETERANS AFFAIRS AND 
                        THE DEPARTMENT OF LABOR

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

                                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

                               __________

                           SEPTEMBER 21, 2005

                               __________

                           Serial No. 109-84

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform


                                 ______

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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)
JEAN SCHMIDT, Ohio

                    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
                          Erin Phillips, Clerk
            Adam Bordes, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on September 21, 2005...............................     1
Statement of:
    Martin, Robert, Director, Financial Management and Assurance, 
      U.S. Government Accountability Office; Samuel Mok, Chief 
      Financial Officer, U.S. Department of Labor; and Tim S. 
      McClain, General Counsel and Acting Chief Management 
      Officer, U.S. Department of Veterans Affairs, accompanied 
      by Ed Murray, VA Deputy Chief Financial Officer; Jimmy 
      Norris, Chief Financial Officer, U.S. Department of 
      Veterans Affairs; James Bohmbach, Chief Financial Officer, 
      Veterans Benefits Administration; and Dan Tucker, Chief 
      Financial Officer, National Cemetery Administration........     2
        Martin, Robert...........................................     2
        McClain, Tim S...........................................    28
        Mok, Samuel..............................................    15
Letters, statements, etc., submitted for the record by:
    Martin, Robert, Director, Financial Management and Assurance, 
      U.S. Government Accountability Office, prepared statement 
      of.........................................................     5
    McClain, Tim S., General Counsel and Acting Chief Management 
      Officer, U.S. Department of Veterans Affairs, prepared 
      statement of...............................................    30
    Mok, Samuel, Chief Financial Officer, U.S. Department of 
      Labor, prepared statement of...............................    17


IMPLEMENTING COST ACCOUNTING AT THE DEPARTMENT OF VETERANS AFFAIRS AND 
                        THE DEPARTMENT OF LABOR

                              ----------                              


                     WEDNESDAY, SEPTEMBER 21, 2005

                  House of Representatives,
Subcommittee on Government Management, Finance, and 
                                    Accountability,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:40 p.m., in 
room 2247, Rayburn House Office Building, Hon. Todd Russell 
Platts (chairman of the subcommittee) presiding.
    Present: Representatives Platts and Duncan.
    Staff present: Mike Hettinger, staff director; Dan Daly, 
Tabetha Mueller, and Jessica Friedman, professional staff 
members; Erin Phillips, clerk; Adam Bordes, minority 
professional staff member; and Jean Gosa, minority assistant 
clerk.
    Mr. Platts. This hearing of the Government Reform 
Subcommittee on Government Management, Finance, and 
Accountability will come to order.
    Mr. Towns will be joining us here shortly, and we believe 
we have about an hour window before the next series of votes. 
So we are going to see if we can get as far as we can on our 
testimony and Q and A, and hopefully, those votes will be 
pushed off long enough that we don't have to have our witnesses 
here waiting while we run through a series of votes.
    In order to manage effectively, we need reliable 
information on the true cost of Federal programs. In our 
current budget environment, this information takes on added 
importance as agencies try to accomplish their missions with 
fewer resources. As a Nation at war, and now recovering from 
one natural disaster, and a new hurricane threatening our 
shorelines, being responsible and efficient with our taxpayer 
funds is all the more critical. With timely and accurate cost 
information, managers can make sound decisions on a day to day 
basis, and policymakers can prioritize scarce resources more 
effectively.
    The subcommittee has asked the Government Accountability 
Office to conduct a series of case studies to determine the 
extent to which Federal agencies develop and use cost 
information. In its first study, GAO looked at the Department 
of Veterans Affairs and the Department of Labor. The results of 
this case study were released on September 2nd.
    We are pleased to have the author of the GAO report, Mr. 
Robert Martin, here with us today. Mr. Martin, we thank you for 
your work on this first study, and we look forward to 
subsequent work on the other agencies and also your testimony 
with us today.
    We are also joined by officials from the two Federal 
agencies that were part of this initial case study: The 
Honorable Sam Mok, Chief Financial Officer of the Department of 
Labor; and the Honorable Tim McClain, General Counsel and 
Acting Chief Management Officer of the Department of Veterans 
Affairs.
    On behalf of the subcommittee, again, we thank each of you 
for being here with us. We will look forward to your testimony 
and then to the opportunity to have Q and A with you. I think 
what we will do is go into testimony. We do appreciate the 
written testimonies you have provided the subcommittee. If we 
can try to limit our opening statements to about 5 minutes 
each, and try to get into a good exchange with each of you, 
that would probably be most helpful. When Mr. Towns arrives, if 
he has an opening statement, we will proceed to his testimony 
or statement between our witnesses.
    If I could ask each of our witnesses to stand and be sworn 
in. It is a practice of the subcommittee. Any staff that will 
be advising you as part of your testimony here today, if they 
would also take the oath.
    [Witnesses sworn.]
    Mr. Platts. Thank you. You may be seated. The clerk will 
note that all witnesses and staff participating have affirmed 
the oath.
    We will proceed to our opening statements. Mr. Martin, I 
believe we will begin with you in an overview of the case study 
that you completed.

STATEMENTS OF ROBERT MARTIN, DIRECTOR, FINANCIAL MANAGEMENT AND 
 ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; SAMUEL MOK, 
 CHIEF FINANCIAL OFFICER, U.S. DEPARTMENT OF LABOR; AND TIM S. 
 MCCLAIN, GENERAL COUNSEL AND ACTING CHIEF MANAGEMENT OFFICER, 
U.S. DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY ED MURRAY, 
    VA DEPUTY CHIEF FINANCIAL OFFICER; JIMMY NORRIS, CHIEF 
 FINANCIAL OFFICER, U.S. DEPARTMENT OF VETERANS AFFAIRS; JAMES 
     BOHMBACH, CHIEF FINANCIAL OFFICER, VETERANS BENEFITS 
   ADMINISTRATION; AND DAN TUCKER, CHIEF FINANCIAL OFFICER, 
                NATIONAL CEMETERY ADMINISTRATION

                   STATEMENT OF ROBERT MARTIN

    Mr. Martin. Thank you, Mr. Chairman.
    Mr. Chairman, I am pleased to be here today to talk about 
managerial cost accounting at the Departments of Labor and 
Veterans Affairs. As you know, this topic is all about 
promoting efficiency and the best use of limited resources. 
Managerial cost accounting involves answering a very simple 
question: How much is it costing us to do something? This 
involves analyzing financial and non-financial data to 
determine what it is costing us to achieve performance goals, 
to deliver programs, and to pursue other activities.
    Mr. Platts. Mr. Martin, the mic is on, but pull it a little 
closer to you, and direct it at you. Yes, that is great. Thank 
you. I could hear it, but I am not sure if anyone behind you 
could.
    Mr. Martin. Is that better?
    Mr. Platts. Thank you.
    Mr. Martin. Reliable data, both financial and non-
financial, are critical, because if one is wrong, then the 
resulting analysis can be wrong. And in light of this 
subcommittee's interest in promoting the use of cost accounting 
across the Government, as you mentioned previously, you have 
asked us to look at two things in the Departments: How are they 
generating cost information, and how they are using it.
    I do have a written statement that I would like to submit 
for the record, but I will take about 5 minutes to recap our 
work. I will start with the Department of Labor and then talk 
about Veterans Affairs.
    The Department of Labor, with leadership from the Chief 
Financial Officer and the Secretary, has implemented a 
department-wide system. Virtually all of its components built 
models that have been customized to meet their respective 
business needs. The system uses financial information that 
comes from the core accounting system. Non-financial 
information such as the number of hours worked on a project, or 
the number of people trained, that kind of thing comes from a 
variety of other sources.
    We do believe the controls over this non-financial data 
need some further attention to ensure data reliability. In its 
2004 performance plan, the Labor Department identified data 
validation as a challenge. In addition, the Inspector General 
recently reported high error rates in performance data reported 
by grantees. The IG also raised concerns about the use of this 
data for decisionmaking. Labor officials have agreed and 
acknowledged the importance of this data and have told us that 
they are implementing additional measures to address this 
issue.
    The Department of Veterans Affairs, as I will discuss now, 
has taken a different approach. The VA does not have a 
department-wide system. They have instead chosen to delegate 
the responsibility to the component administrations. We 
reviewed the two largest components, which together account for 
over 95 percent of VA's budget. We found that one was 
implementing managerial cost accounting, and one was not.
    At the Veterans Health Administration [VHA], they have a 
system in place that uses data from nearly 50 feeder sources. 
However, auditors have raised concerns about data reliability. 
For example, about a year ago the Inspector General reported 
that most of the legacy systems at the Bay Pines Medical Center 
contained inaccurate data. The IG further stated that this 
might be a systemic problem across VHA. In addition, VHA's 
financial statement auditor found that cost data from an old 
system that was no longer being maintained, and thus contained 
errors, was being used for a variety of cost analysis purposes.
    At VA's other large component, the Veterans Benefits 
Administration, we found that no system was in place and 
operating. We were told that in March 2003 they had stopped 
using the system that they had once been using. It was an 
activity-based costing system. They stopped using it because 
there was a loss of key personnel, and also one of the 
methodologies they used for allocating indirect costs lacked 
credibility with some of their managers. So they stopped using 
the system.
    In closing, Mr. Chairman, I just want to emphasize that 
departmental leadership is required to implement managerial 
cost accounting. The leaders really need to focus on promoting 
the benefits of doing so, monitoring the implementation, and 
also establishing a system of controls that will ensure that 
the data used are reliable. This is true regardless of whether 
a department chooses a department-wide approach or chooses to 
delegate the responsibility to the components.
    This concludes my statement. I would be happy to take 
questions at the appropriate time.
    [The prepared statement of Mr. Martin follows:]

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    Mr. Platts. Thank you, Mr. Martin.
    Mr. Mok.

                    STATEMENT OF SAMUEL MOK

    Mr. Mok. Mr. Chairman, thank you for the opportunity to 
testify on behalf of the U.S. Department of Labor concerning 
our efforts to implement managerial cost accounting.
    It is an honor to speak with you this afternoon regarding 
this very significant financial management tool. The 
availability of timely, accurate, and useful information is 
essential to any well-managed, effective organization. 
Managerial cost accounting provides program managers and 
decisionmakers an indispensable tool for enhancing program 
performance. It improves accountability and transparency for 
how well tax dollars are being spent.
    To implement and, more importantly, sustain the use of 
managerial cost accounting across the U.S. Department of Labor, 
my office developed a strategic plan and instituted a 
managerial cost accounting system which we named Cost Analysis 
Manager [CAM]. This system provides cost information to 
managers at all levels to support program evaluation, 
decisionmaking, and cost effectiveness.
    We began by providing Labor Department program managers 
with cost information that had immediate value for improving 
their programs. Today, we have begun to use managerial cost 
accounting for budget formulation, justification, resource 
allocation, and determining best practices across similar 
programs or regions.
    Through CAM, examples of agencies using managerial cost 
accounting are numerous. For example, in one of our enforcement 
agencies, CAM results showed inspection costs were higher than 
normal in one region as compared to a national norm. Initially, 
the higher costs were attributed to a greater travel cost in 
that region. However, analysis revealed the travel cost for the 
region was actually in line with the national average. The 
actual reason for higher inspection costs was due to a longer 
time spent preparing investigative reports in that region as 
compared to the national norm.
    One of our agencies used CAM to monitor the effectiveness 
of projects supporting better jobs for women across the 
country. This usage enabled better allocation of resources to 
new or existing projects. Another agency used CAM for 
performance-based allocation of discretionary funds. Regions 
exhibiting better performance received more resources to 
continue their excellent work.
    A key factor in ensuring CAM's ongoing success at the U.S. 
Department of Labor has been the leadership of Department of 
Labor Secretary, Elaine L. Chao. Secretary Chao has a deep 
appreciation for effective financial management and sound 
fiscal integrity. Her understanding and support of managerial 
cost accounting have been crucial to our efforts to make 
managerial cost accounting a lasting legacy that will benefit 
the Department and American taxpayers for years to come.
    In conclusion, the implementation of managerial cost 
accounting is a continuous journey of gaining experience rather 
than a race for the finish line. Success in implementation 
takes strong, sustained commitment from senior management. As 
leaders, we must demonstrate to managers that this tool is 
designed to meet their needs and not just another silver 
bullet.
    I will be happy to answer any of your questions, sir.
    [The prepared statement of Mr. Mok follows:]

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    Mr. Platts. Thank you, Mr. Mok.
    Mr. McClain.

                  STATEMENT OF TIM S. MCCLAIN

    Mr. McClain. Mr. Chairman, good afternoon. Thank you for 
the invitation to testify on behalf of the Department of 
Veterans Affairs concerning the requirements of managerial cost 
accounting. First, I would like to ask that my full written 
statement be made a part of the record.
    Mr. Platts. Without objection, it will.
    Mr. McClain. Thank you, sir. Accompanying me today are Mr. 
Ed Murray, the VA Deputy CFO; Mr. Jimmy Norris, the CFO for the 
Veterans Health Administration; Mr. James Bohmbach, CFO for 
Veterans Benefits Administration; and Mr. Dan Tucker, CFO for 
the National Cemetery Administration.
    My staff has worked with VA's three administrations to 
comply with the Federal Accounting Standards and Federal 
Financial Management Systems requirements. This hearing and the 
GAO report have given VA the opportunity to review its 
managerial cost accounting system and has spurred senior 
management to review VA's current practices. In response to the 
comments in the GAO report, VA has initiated a broad review of 
available software and MCA programs to ensure VA systems 
provide the most accurate and reliable cost data to senior 
management.
    VA has been involved in managerial cost accounting since 
the subject was first considered by the Federal Accounting 
Standards Advisory Board. VA does not have a department-level 
cost accounting system.
    Due to the broad differences in size, mission, and need, 
the three VA administrations were directed in the 1990's to 
establish independent cost accounting systems to meet the 
specialized requirements of their individual organizations. 
VHA, the largest administration in the Department, uses the 
Decision Support System while the National Cemetery 
Administration uses Activity Based Costing.
    MCA is not the sole source for making management decisions 
but is used in conjunction with other factors in determining 
how resources are utilized. The review by GAO has given VA 
senior management the opportunity to evaluate VA's current MCA 
structure, and we are actively pursuing state-of-the-art 
solutions. While VA currently does not have a central 
repository for its accounting data, it does consolidate costs 
for the three administrations and staff offices in a statement 
of net costs along 10 business lines.
    VA takes our financial management and stewardship 
responsibilities seriously. Over the past several years, our 
clear focus has been to maintain an unqualified audit opinion, 
which we have retained since 1999, and substantially reduce 
VA's auditor-identified material weaknesses and reportable 
conditions. From 2001 to 2004, VA has reduced material 
weaknesses and reportable conditions from 11 to 4, a reduction 
of 60 percent.
    However, VA realizes that more needs to be done in MCA, and 
we have initiated a review, and we will explore all 
opportunities for a department-wide MCA system. A centralized 
MCA system would improve the accessibility and availability of 
cost accounting data and enhance managerial decisionmaking 
throughout VA.
    Mr. Chairman, this concludes my statement. I will be glad 
to answer any questions.
    [The prepared statement of Mr. McClain follows:]

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    Mr. Platts. Thank you, Mr. McClain.
    We are joined by the gentleman from Tennessee, Mr. Duncan. 
We appreciate your being with us. We will go into questions. 
Again, we appreciate your testimonies and all of your service 
to our fellow citizens, both the GAO, Department of Labor, and 
Veterans Administration.
    As one who has not worn the uniform of our Armed Forces, I 
am especially grateful for the assistance and guidance given 
our veterans through the VA because I just think our veterans, 
if there is a group of Americans worthy of our fellow citizens 
looking out for, it is our veterans. So the work of you and 
your staff is much appreciated in doing right by those who have 
worn the uniform of our Armed Forces.
    I guess we will start with some specific examples of 
managerial cost accounting. Mr. Martin, if you want to start 
and give us some examples that, in your review of the two 
Departments, you want to highlight as good examples of the 
benefits of MCA, and that we can put some specifics with what 
we are talking about.
    Mr. Martin. I would be happy to, Mr. Chairman. I think what 
managerial cost accounting does for you is enable you to get a 
look at both cost and performance or output information at the 
same time. A lot of people tend to look at one or the other, 
but this brings both together, and it allows you to do what I 
think both of the other gentlemen referred to, which is make 
resource allocation decisions. You can direct your resources to 
programs that are efficient and effective, and therefore, you 
can deliver more services for your constituents.
    We did see examples of resource allocation decisions, 
budget formulation, and budget justification, that kind of 
thing. We saw at VHA they analyzed costs across different 
hospitals to look at how they were doing things. Within the 
Department of Labor, they were looking at the training programs 
and the cost of delivering those at different locations, and 
unit cost, per person cost, that kind of thing. So we did see 
some good examples.
    Mr. Platts. That information at more the micro-level in 
evaluating specific training programs and how effective they 
are with the dollars spent, did you see that transfer all the 
way through the policymakers up to the Secretary level in how 
that information was shared through the Departments?
    Mr. Martin. Well, certainly, at the Department of Labor, I 
think it is clear that is more of a department-wide initiative 
they have ongoing, and there has been more Secretarial 
involvement. And it has just been made a priority. So I would 
say yes, that Department did some of that.
    Mr. Platts. You referenced the budget preparations, not 
just the preparations but in what is submitted to Congress. I 
don't serve on the Appropriations or Budget Committees, but is 
there a good use of the managerial cost accounting data in 
making the case then to Congress as part of the appropriations 
requests when those budgets are submitted?
    Mr. Martin. Well, I think the process is more mature than 
the data at this point. I mean, even at Labor, they have some 
data issues that they acknowledge and are addressing. So I 
think that as they get better and better data, then the budget 
formulation will be more accurate because what managerial cost 
accounting does is enable you to see what your costs have been 
with some precision over years, what the trend is, and you can 
then better predict what you need in the future.
    Mr. Platts. Mr. Mok and Mr. McClain, we will start at a 
similar place, if you want to highlight what you think would be 
one of the best examples of where managerial cost accounting 
has benefited your Department in the provision of services in a 
very efficient, effective, responsible manner.
    Mr. Mok. At the U.S. Department of Labor, as Mr. Martin 
said, we have used managerial cost accounting rather 
extensively. We have trained 250 managers and senior staff on 
the use of the managerial cost accounting, and we have also 
briefed senior executives on an individual basis.
    The knowledge base is expanding every day. I would like to 
see it much bigger, but it will take a little time. The 
managerial cost accounting allows us to understand the true 
full cost of delivering services. It also allows us to 
understand the cost drivers of how some of these program costs 
are derived.
    One of the examples I would like to share with you is in 
one particular case, an agency was noticing that investigative 
costs in a particular region were very high. So when they 
started analyzing that, the regional administrator surmised 
that one of the reasons the cost was high was because of the 
new staff, the learning curve. For the following fiscal year 
when they did the analysis, it validated that assumption, 
because the cost went down once they learned how to do the 
investigative report faster.
    Another example was a performance-based allocation method 
used by another agency to allocate a portion of the 
discretionary budget based on efficiency and measurement of 
success which, to us, is important because it is better use of 
tax dollars. Another example is a particular agency in of the 
Labor Department that use data as budget justification for 
resource allocation rather extensively, and this resulted in a 
much better budget presentation. So we have many examples of 
success in that category.
    Mr. Platts. Mr. McClain.
    Mr. McClain. Mr. Chairman, thank you. As the GAO report 
pointed out, there were two administrations that used the 
managerial cost accounting system in VA. The largest of those, 
which takes up the vast majority of our resources and our 
employees, is the Veterans Health Administration, and they use 
the Decision Support System. That system does have a feed of 
over 50 inputs and is used at the medical center level and at 
what we call the VISN level.
    Now VISNs are Veteran Integrated Service Networks. 
Essentially, they are areas, and we have 22 of those VISNs 
around the United States. We have a VISN Director who also 
monitors budget needs, resources, and such. And so, the 
Decision Support System is used by the Medical Center Director 
and by the VISN Director who has many medical centers under his 
or her responsibility.
    Also, the VA has what is known as a VERA allocation. Now, 
the VERA allocation is a Veterans Equitable Resource 
Allocation, and it is essentially a fund that VA keeps back and 
distributes as we see the workload across the United States. 
And so, as the workload comes to us, then we are able to 
provide funds as to where the veterans are and where they come 
to us for service. That Decision Support System is used 
directly in determining what the VIRA allocation will be.
    Also, our National Cemetery Administration has an 
accounting system which is an activity-based system, which they 
are able to determine the unit costs for all of their cemetery 
services. And everything that they do in our 120 national 
cemeteries from a managerial aspect is run through this 
activity-based accounting system.
    Mr. Platts. A quick followup, then I want to yield to my 
colleague, Mr. Duncan, on the use of the process in the 
allocation of resources so that where the veterans are, you 
have the dollars to meet the services that are going to be 
provided, or other examples within the Department.
    Is there a broad ability, when we look at the requirements 
for managerial cost accounting and the accounting standards of 
the Federal Government and how it applies to each of your 
Departments, to say by doing this, by fulfilling these 
requirements, X dollars were saved or X dollars were better 
spent over the course of the past year?
    I imagine that it is hard to put a dollar amount in total 
because it is more about are you providing the service in the 
best way you can versus actually saving dollars, but is there 
an ability to do that? Because one of the things we are looking 
at as a committee, and I talked about it in Orlando, is this 
comprehensive review of what we require of all our Departments 
and agencies and what makes sense today, and part of that is a 
cost benefit analysis in what we are requiring. Is there a gain 
back to government and ultimately to the people? Is it too 
difficult to actually put dollar values because of the way this 
information is used?
    Mr. Mok. If you talk about payback, there is payback in two 
ways. As you know, our system, our cost model at the Labor 
Department is about 1 year old. We went live here in the last 
fiscal year. So it is still in a maturing stage. We do not look 
at this system as a pure payback, but as a mechanism. We look 
at it as how to maximize our resources, so that we have better 
accountability and more transparency through the process.
    I also personally believe that because of better 
information coming out of the system, we will have better 
information, and therefore can provide better service and 
better results. And through that, we will get a reduction in 
waste and mismanagement. As our system matures, I am very 
confident that we will start being able to measure the actual 
cost savings, because if our managerial cost accounting cannot 
measure cost savings, we have a problem.
    Mr. Platts. Do you want to add anything, Mr. McClain?
    Mr. McClain. No, I would like to say what he said. 
[Laughter.]
    At VA, we do not have a specific number that we could 
attach to our managerial cost accounting systems. We do track 
what we call management efficiencies, which is a conglomeration 
of management actions which we feel have saved money for the 
taxpayer.
    Mr. Platts. OK. Mr. Duncan.
    Mr. Duncan. Well, thank you very much, Mr. Chairman. I know 
it is not the most exciting thing in the world to talk about 
managerial cost accounting and subjects like we are discussing 
here today, but I want to commend you for continuing to look 
into ways to make the Federal Government more accountable, more 
efficient, more economical, because I know people's eyes glaze 
over when you talk about a national debt of almost $8 trillion 
now that in a few months will be $9 trillion because that is 
where we have raised the debt limit to.
    We are getting into a very dangerous situation. It is not 
going to be 2038, or 2043, or some year way off in the future 
when we are not going to be able to pay all these veterans' 
benefits, or Civil Service pensions, or Social Security 
pensions, or Medicare, or Medicaid, or some of these other 
things. I think that we all need to desperately work together 
to try to make the Federal Government more economical and more 
efficient. I know one columnist for Scripps Howard recently 
said that we are heading into a financial tsunami, is the way 
she put it, a financial tsunami, when the baby boomers start 
retiring.
    Now, in this report, and I am sorry I didn't get to hear 
the testimony. I have been in other meetings. But it looks like 
the Department of Labor came out pretty good. It says the 
Department of Labor has implemented a department-wide MCA 
system with 15 of its 18 component agencies. And it says while 
DOL has various controls in place over financial data, GAO 
found that controls over non-financial data need further 
attention to ensure reliability. DOL officials are taking 
additional steps to address those issues. So it sounds like 
progress is being made there.
    The question I have, though, comes in the next part of the 
report. I assume that what we are aiming at here is that this 
managerial cost accounting system is the best way to go. But it 
says that the Veterans Benefits Administration had discontinued 
use of its MCA system in 2003 because of system credibility and 
personnel issues. I am wondering what problems came up.
    I serve on three committees and seven subcommittees. In 
addition, I read about all these other things and try to keep 
up with them. Whenever any department or agency of the Federal 
Government messes up, or gets in a scandal, or has a problem 
they always say one of two things, or maybe both. No. 1, they 
always say they are underfunded. No. 2, they say their computer 
system is obsolete or their computers can't talk to each other. 
Those are the two things.
    Well, the computers that the Federal Government has are far 
better and far more advanced than those found in the business 
world, because we are told that computers are obsolete the day 
that they are taken out of the box. So everybody can always say 
their computer system is behind the times. But what do we need 
to do here?
    I know the Veterans Administration is not underfunded 
because they have gotten a $3 billion or $4 billion increase 
every year since I have been here, and this is my 17th year 
here. When I first came, the appropriations were down to $28 
billion or $29 billion. Now we are up to about $67 billion, and 
that is fine. I am not criticizing that, but I am just saying 
that I don't think there is any underfunding there.
    I am not an accountant. So I assumed something that maybe I 
shouldn't have assumed. Is this managerial cost accounting the 
way to go, and if so, why did the Veterans Benefits 
Administration discontinue use of the MCA system? Was something 
better done?
    Mr. McClain. Congressman Duncan, I am from the VA, and I 
think I can attempt to answer that question. I will not give 
you either of those excuses. There was no funding problem that 
entered into that decision, nor was it particularly a computer 
problem. It was a situational problem, however, and the 
situational problem was simply that the expertise that was 
resident for that particular activity-based accounting system 
retired and left the administration, left the Veterans Benefits 
Administration.
    And it was, I will have to say, a lack of oversight in 
senior management that allowed it to lapse and not require it 
to startup immediately again. It is currently being restaffed 
and restarted, and there will be a managerial cost accounting 
system in VBA. So the answer to your first question really is 
yes, I believe the managerial cost accounting system is a 
benefit and is the way to go, and all three administrations in 
the VA will have theirs.
    Mr. Duncan. All right. OK. Thank you very much, Mr. 
Chairman.
    Mr. Platts. Thank you, Mr. Duncan. Let me pick up there in 
the comparison of the Department of Labor both in the approach 
of what is already in place with managerial cost accounting and 
also the manner in which it has been put in place, department-
wide versus component-specific, with the Department of Labor 
having it department-wide and Veterans Affairs being component-
specific.
    Mr. Martin, in your review of the two, obviously you found 
differences in the two Departments' evaluations. Is there a 
recommendation that you want to expand on as to one approach or 
the other based on what you found on these two Departments?
    Mr. Martin. I think that either approach can work. You can 
either have a department-wide system, or you can delegate 
responsibility. But I think in either case, you are going to 
have to have Department level leadership that focuses on making 
sure it gets implemented, monitoring it, and setting up the 
proper system of controls and oversight. So I think either 
approach can work.
    Mr. Platts. It seems like that leadership issue at the top 
levels is especially important. With Secretary Chao, we have 
seen that, the Department of Labor taking a very hands-on 
approach. And that is something that you would identify as one 
of the keys to the success of the Department of Labor's 
experience?
    Mr. Martin. Yes, absolutely.
    Mr. Platts. At the VA, Mr. McClain, taking that component-
specific, and you have just talked about where you are heading. 
My first question would be in the decision to focus on the 
material weaknesses and internal controls, especially 
specifically on internal controls, I strongly believe in that 
foundation place. Unless you have those good internal controls, 
whatever you are doing beyond that is going to probably be 
challenged to have good results because of the data not being 
verifiable.
    But the law, when that decision was made, was still that 
you were to be engaged in managerial cost accounting under the 
CFO Act, the FFMIA, and various regs. It seems to me the 
decision to step back with one of the components was contrary 
to the legal requirements on the Department at the time. Do you 
interpret that differently, or just that you made a decision 
that maybe didn't fully comply with the legal requirements 
regarding managerial cost accounting, but you just had to do 
what you had to do to start at a foundation level?
    Mr. McClain. I think it would probably be the latter, Mr. 
Chairman. Certainly, there was no conscious decision to violate 
the law or ignore the law. We are well aware of it, and we 
intend to be fully in compliance with the law. The Veterans 
Benefits Administration will be gearing up a managerial cost 
accounting system this year in fiscal year 2006, and they will 
be on board as quickly as we can get them up.
    Mr. Platts. The approach is still to take a component-
specific, though, not a department-wide plan, right?
    Mr. McClain. The first step is getting all administrations 
on board with an MCA program. The second step is a review. Now, 
when the decision was made historically, I understand that the 
different administrations do their own, that was at a time, as 
Congressman Duncan said, things changed, computers changed, 
software changed. There wasn't anything out there that we saw 
that could handle a Department of our size.
    We want to take another look now, because software has come 
in leaps and bounds, and now there are much better programs, 
much faster computers. And so, we want to take a good survey of 
the field to see what is out there that could possibly handle a 
$67 billion budget.
    Mr. Platts. Is there a timeframe for that review and making 
those decisions?
    Mr. McClain. The Secretary has set no timeframe although 
personally I would like to see it done within 6 months.
    Mr. Platts. Mr. Mok, as far as at the Department of Labor, 
can you share, first in the decision to do it on a department-
wide approach rather than component-specific, and now after 
this first year, your thoughts on that decision and how it is 
working?
    Mr. Mok. From our experience at the Department of Labor, we 
started this project in the late 1990's, and we started 
typically like other Federal agencies with small pilots that 
did not yield a whole lot of success. Then in 2002, shortly 
after I arrived there, I looked at the situation, and we 
decided we would take a lesson from Detroit. We want to have a 
common approach and yet allow all the different agencies to do 
their own thing.
    As you know, the Department of Labor is a conglomerate. We 
have many operating divisions with different cultures, 
different needs, and different management approaches. So what 
we did we built a common chassis and allowed each agency to 
build an SUV, a truck, a sedan, but at the same time we have a 
lot of standardized components, such as the drive train. So 
that way, we can talk to each other, at the same time we have 
some control and also minimize costs. Because with managerial 
cost accounting, if it is not cost controlled, then it is not 
managerial cost accounting.
    Mr. Platts. How about on the internal control aspect, 
especially on the non-financial, one of the issues identified 
that was a weakness, and where you stand on trying to correct 
that weakness?
    Mr. Mok. Yes, GAO's report indicated that our non-financial 
data needed to be validated in a more systemic and a formal 
manner. We do not disagree with that. We feel comfortable with 
the process so far. We acknowledge, absolutely, there is plenty 
of room for improvement. However, we are comfortable with our 
data at this point, because all these non-financial data at 
different levels are reviewed.
    For example, labor distribution, they have time cards; they 
have different levels of checks. We acknowledge, however, the 
GAO finding that we should and we can go about it in a more 
systemic and a formal manner, which we intend to, and we are 
committed to do that.
    Mr. Platts. Is part of that one of the things highlighted 
in Mr. Martin's report, the lack of a post-implementation 
review, and that would give you some good data to know what you 
thought was going to be the case, and to how it would play out, 
and to what actually happened? Is that something you are 
reconsidering or addressing in a different fashion?
    Mr. Mok. We have never opposed a post-implementation review 
at the Labor Department. Under the leadership of Secretary 
Elaine L. Chao, she is, as you know a Harvard MBA, so she 
really knows a lot about management, we have a very methodical 
method toward a lot of projects and management issues. One of 
which we use extensively is something called a Technical Review 
Board. Technical Review Board managers always take projects and 
look at a standardization of approach.
    The Technical Review Board consists of key members 
throughout the whole Department in the management team. And one 
of the requirements of the Technical Review Board is any time 
when a new system is operational, 6 to 9 months after that, we 
would do a post-implementation review. So when GAO came in, 
absolutely, we had not done a formal post-implementation 
review. But I believe, if I remember correctly, when GAO came 
in and reviewed the project, it was about 6 to 7 months after 
we went live.
    In the meantime, we have been using users groups. We have 
informal meetings. We have executive briefings of lessons 
learned, shared best practices. So we have a modified form of 
post-implementation, not as formal as GAO would like to see. We 
agree it is a good methodology. We intend to do that, but our 
time line basically calls for it after 6 to 9 months of full 
implementation. Our Technical Review Board has procedures in 
place to do what we call a post-implementation review. So the 
short answer is yes, we do it.
    Mr. Platts. Mr. Martin, that would really get to what you 
ultimately would like to see, right?
    Mr. Martin. Yes, it would. Yes.
    Mr. Mok. And you have our assurance that is something that 
we plan to do.
    Mr. Platts. Great. The issue of internal controls and the 
importance of that, whether it be the financial data or the 
non-financial, is an issue that is beyond just managerial cost 
accounting. But when we passed legislation last year and tried 
to help the Department of Homeland Security get its arms around 
its many material weaknesses that it inherited from the 22 
different agencies that came together as that new Department, 
one of the requirements in the legislation we passed was an 
internal control audit to get that baseline of their internal 
controls to then build on, instead of playing catch-up and not 
getting to where the Department of Defense is 40 years down the 
road. It is tough to go back and do it all over.
    With both of your Departments, is that something that going 
to that extent would be worth the investment, the cost? 
Obviously, they are different sized Departments, and what it 
would involve, and the cost of each. But your opinion on that 
type of approach, I would be interested in.
    Mr. Mok. VA is a lot bigger. So I will defer to someone 
else.
    Mr. McClain. Thank you. Mr. Chairman, that is certainly an 
excellent suggestion. We have quite a few programs going on 
right now that are addressing internal controls, in particular 
the requirement that we be in compliance with A123. So we are 
actually in the process right now of trying to assure that we 
have the internal controls in place so that we can meet the 
certification requirements of A123.
    Mr. Platts. But not to the extent of actually doing as part 
of your audit, having an audit opinion on your internal 
controls, right?
    Mr. McClain. That is correct.
    Mr. Platts. I know at DHS, the estimate, because they are 
required in the coming year to do that, and $4 million is what 
they are estimating the cost of that. Given some of the 
breakdowns in internal controls that we have seen with that 
Department, we think it will be money well spent because of the 
possible savings, but that is going to, again, vary by 
department.
    Now, I know at the Department of Labor, you led the charge 
on the quarterly reporting regarding internal controls and the 
importance of that. As far as going to the level of an actual 
audit, is that something you think worthy of the expenditure of 
those funds?
    Mr. Mok. We always support a higher, enhanced process of 
internal control, and we always support strengthening the 
control process because we believe that investment up front is 
a lot more than spending money to fix the damage afterwards. At 
our Department, we believe that we may be one, if not the 
first, Department to ask senior managers to provide quarterly 
certifications to the Secretary.
    And these certifications are very important, because I 
personally meet with all the assistant secretaries on a one-on-
one every quarter. And if a particular Assistant Secretary 
fails to find time to meet with me, I inform the Secretary, and 
that person will get a call from the Secretary.
    When we sit down, it is at least half an hour. I remind the 
Assistant Secretary of their fiduciary responsibility under the 
law on the importance of internal control. I explain to them 
the current requirement on internal control and also give them 
a chance to talk about problems and how to identify problems 
early, so that we don't wait until the end of the year.
    And at the same time, we help them answer three questions 
when something happens. The three questions I always remind 
every assistant secretary they need to answer are: when 
something happens, what did you know, when did you know, and 
should you have known. The first two questions are easy to 
answer. The third question will get a lot of people in trouble, 
and we try to keep them out of trouble. So that is, we believe, 
a good investment.
    Mr. Platts. Good approach.
    Mr. Mok. Thank you.
    Mr. Platts. For all of us.
    Mr. Mok. Thank you.
    Mr. Platts. How about the relationship of Congress with 
your Departments and the various requirements? We are looking 
at the reform of statutes and how to streamline them. Is there 
something that is missing from a statutory standpoint that 
would help you when it comes to managerial cost accounting, 
anything that would give you additional leverage or authority?
    Mr. McClain. Nothing that I am aware of, sir.
    Mr. Mok. I think we have many very good statutes already in 
place. I think we need to do a better job together to enforce, 
enhance, and implement some of these statutes. I am not sure if 
you can legislate behavior. I think a lot of this better 
Government has to come from the culture of the organization. 
And I believe that the leadership sets the tone.
    I believe that in our Department Secretary Chao has set a 
very excellent atmosphere and has given her unyielding support 
in that respect. As you may recall, she inherited United Way 
after a big financial scandal. So she is extremely sensitive 
and very, very appreciative of the importance of fiscal 
integrity and good financial management. And I am very blessed 
to have the opportunity to serve in that Department under her.
    Mr. Platts. That is something the report highlights, the 
importance of that senior leadership. I would gather from your 
comment that having it at the Secretary level is critically 
important to the success of managerial cost accounting, not 
just at the CFO level, or the CMO, but that it is clear to 
everybody within that Department that this is a priority.
    Mr. Mok. I agree 100 percent. The CFO alone cannot do it. 
Without the unyielding support and the commitment from the 
Cabinet Secretary, I do not think we would be able to 
accomplish as much in managerial cost accounting as we have 
today. We still have room to grow. We still have improvements 
to make. But we got to where we are because of the support from 
Secretary Chao.
    Mr. Platts. Mr. McClain, would you like to add anything?
    Mr. McClain. No, sir.
    Mr. Platts. OK. The other aspect of Congress' role is not 
just statutes but is money, and part of the report seemed to 
identify that the lack of funding may have played a role. Mr. 
Duncan is not here to hear me say this, but it may have played 
a role in the approach you took and the focus on managerial 
cost accounting across the Department. Is that a problem with 
dollars that are specifically provided by Congress for this 
aspect of the Department's administrative work?
    Mr. McClain. In today's VA budget, no, sir. It is not. That 
is not the problem.
    Mr. Platts. OK, great. On the other hand, Mr. Mok, the 
Department of Labor seems to be on a great track and has 
already had some important successes. How do you see 
maintaining that from a finance standpoint, that you have the 
resources to continue to implement and move forward?
    Mr. Mok. We have been funding this initiative with existing 
resources. However, if Congress would like to give us more 
money, we will always put it to very good use. [Laughter.]
    Mr. Platts. As a non-appropriator, I say sure. [Laughter.]
    I will commit my appropriator friends to just that. They 
may have something else to say about it. I think one of the 
challenges for Congress is that to save money, we do need in 
certain instances to spend money, whether it be on internal 
control audits or just having the manpower to effectively do 
managerial cost accounting and to make sure of your internal 
controls. In challenging financial times, we sometimes maybe 
forget that, that we are hurting the Federal Treasury because 
saving money up front means it is going to cost us more down 
the road.
    And that is something as a subcommittee, we try to make 
that case to leadership and administration appropriators that, 
in some instances, spending more money actually will end up 
being a savings. So we will continue to press that message.
    On a specific issue, Mr. McClain, I don't think you will be 
surprised at my questions regarding the shortfall at the end of 
this current year that seemed to come out of the blue with the 
Department of Veterans Administration. If you want to summarize 
what happened and how managerial cost accounting played a role, 
either because we didn't do a good job, and that played a role, 
and why we had this shortage come up on a quick notice, or how 
could it have been prevented if we had done a better job.
    Mr. McClain. Mr. Chairman, no, it is no surprise that 
question may come up. The supplemental and indeed the amendment 
for 2006 has been the subject of several hearings already in 
the House and the Senate. Rather than kind of rehash what was 
said at those, I will try and concentrate on the managerial 
cost accounting aspect of this.
    There were a lot of reasons why this occurred, and probably 
the greatest of the reasons is that more veterans came to us 
than we projected. Now, there are a lot of reasons why, and No. 
1, that more veterans came, and No. 2, that our projections 
were not accurate as to who might come to us for care. I am 
talking mostly health care here, because that is the largest 
part of our budget. Probably the main reason is that the model 
that we used for projecting for who might come to us used data 
that was over 2 years old, about 2\1/2\ years old, by design. 
That is the way that the model was designed.
    And a confluence of events, one being that the VA is a very 
good health care system. In fact, according to JAHCO, we are 
the No. 1 system in the United States right now. So we are just 
getting more people coming to us for care. We are getting more 
people coming to us for the pharmaceutical benefit and for a 
lot of other things that VA has for our veterans.
    The other thing is that managerial cost accounting, for the 
most part, is a look back, or in other words, what did it cost 
us to provide a particular service. In some cases, then, that 
look back can help you to project in the future how much it is 
going to cost to provide services in the future.
    So really, the problem came up about mid-year in fiscal 
year 2005. It was about March that it came up. So it was a 
workload problem for the most part. In other words, more 
veterans came to us for more services.
    So it was not only an increase in utilization, the number 
of veterans is up; the veterans who are in the system used the 
system more often; and the services that they were requiring 
were more costly than we had predicted because we are getting 
into an older population. Our veterans who come to us for 
health care have an average age of, I think, 68.
    So as you get older, I don't think it is any secret, you 
require more services, and more tests, and more expensive 
services. And as we testified at the House Veterans Affairs 
Committee, the model needs to be adjusted so that we can pick 
those things up much quicker than at a 2-year or 2\1/2\ year 
interval.
    Mr. Platts. One quick specific question on that average 
age, is that dropping, that veterans are coming earlier?
    Mr. McClain. That is a good question.
    Mr. Norris. I am not sure I know the answer to that right 
now, but I think overall, it has remained fairly constant over 
time. It is rational to assume that with the advent of the OIF/
OEF veterans coming back and availing themselves to services, 
that one would expect that perhaps that would drop some.
    Mr. Platts. Also because of the escalating cost of health 
care for everybody that veterans who maybe wouldn't have come 
into the system at all because their own health care was 
covering it, but are finding they are struggling more to pay 
the bill, they are accessing the system.
    I use my father as an example who has now passed on 4 years 
ago, but he never did access the VA health care. He was in the 
process of doing it at the time he passed away. Because he was 
in his early 70's, and even though he had retirement health 
care----
    Mr. McClain. Right.
    Mr. Platts [continuing]. He was starting to have more out-
of-pocket costs in addition within that coverage. So he said, 
well, it is a benefit I really never intended to use, but given 
what is happening.
    So my thought is, given the whole environment out there 
with all of our citizens, including the veterans, that you are 
going to continue to see more accessing, earlier rather than 
later. That being the case, and what you already found this 
year, your model, I assume, is being adjusted or has been 
adjusted to reflect that you are likely to continue to see that 
trend?
    Mr. McClain. Yes, sir.
    Mr. Platts. I think from a congressional standpoint, we 
want to provide whatever the need is. We have programs 
available for good reason. These are men and women who have 
served our Nation, and when they come, we just need to find the 
means to provide the assistance. Your Department, I think, has 
worked hard to do that. In Congress, we need to stand ready to 
ensure you have what you need in those resources.
    I have tried to run through these questions in a number of 
different areas and shortcut in a number of areas, because the 
series of votes that we are about to start between several 
amendments, 10 minute debate on recommittal, 15 minute 
recommittal, final passage, my guess it is going to be at least 
an hour. So we are going to conclude here shortly before I go 
so that you don't have to wait here. I am sorry in the sense 
that I may be rushing through some of these areas that I was 
planning on expanding on a little further.
    Actually, I had a followup question on the specific, and it 
just went out the window. If it comes back to me, I will 
followup with you.
    Actually, it was specifically on VA. It was on the response 
to the report. In the response back to GAO, you seemed to take 
exception to some of the findings in the report regarding the 
reliability of the data. The report was saying that you needed 
to look at the reliability of the data you were using closer, 
and you seemed to take a little bit of an exception to that 
finding of the report. Your IG's report seems to correlate with 
what Mr. Martin's finding found.
    I was wondering if you could explain further why you took 
exception, or what it was that you disagreed with regarding the 
reliability of data that you were referring to?
    Mr. McClain. Well, Mr. Chairman, I think that is a fair 
question, and we did disagree just on the level where I believe 
the GAO report said that we didn't have certain training, we 
didn't have certain people in place, we didn't have certain 
controls, reliable data.
    Mr. Platts. But that is more of a systemic problem is what 
I think their finding or thought was.
    Mr. McClain. Right, and I believe we do have reliable data. 
I mean we try and scrub the data. We try and double check it 
and cleanse the data. And from a day to day operational point 
of view, where a senior manager could rely, or a front line 
manager could rely on the data, I believe that it is reliable 
for business purposes and for business decisions.
    Can it be better? Absolutely. Do we need to do more? Yes, 
and we will continue to work toward ensuring that we have the 
absolute best data that we can. But we have been doing this for 
quite a while and realizing that, after what happened this 
year, it is kind of difficult to make the statement, but 
actually, we have done pretty well in the past 5 or 6 years on 
hitting our projections and making the proper decisions of 
placing assets where they should be.
    Mr. Platts. Mr. Martin, in the exchange since your report 
and the feedback from the Department, where do you think the 
Department is, or specifics that you would encourage the 
Department to further look at to ensure the reliability?
    Mr. Martin. I like what I am hearing about the management 
commitment and leadership commitment, obviously, some very good 
plans there, I think, and intentions.
    I think maybe the data issue is indicated by the problems 
they had with the model, that was that data was 2\1/2\ years 
old. It illustrates some of the problems you can have if you 
aren't really active in making sure you have the best available 
data. It can cause you to make some bad estimates. And that is 
all we are trying to say, is that should be strengthened, and 
it should be looked at in the materiality of the data and the 
accuracy of it.
    Mr. Platts. Is some of that, such as maybe the time 
sensitivity of the data, the 2-year old data versus using 1 
year, that type of concern?
    Mr. Martin. Right. Exactly.
    Mr. Platts. Mr. Martin, in wrapping up, before I run over 
for these votes, your general thoughts that, as we look ahead 
to the next series, what is most important that we take out of 
your review of these two Departments, nicely with two different 
approaches regarding managerial cost accounting, department-
wide versus entity-specific? Anything you want to make sure we 
take with us?
    Mr. Martin. Sure. I think the key is leadership, and the 
leadership needs to focus on promoting the benefits of doing 
this, and not just focus on it as a cost-cutting tool, but 
illustrate that this is a way to deliver more services to our 
constituents. And that gets your program people excited about 
it because they can do more, get more bang for their buck.
    When you draw people in that are not just your typical 
financial shop people, instead of pushing it out, you create a 
pull from the agency managers. You need leadership that 
promotes the benefits, and that monitors the implementation, 
and then sets up the sound system of controls and a process to 
make sure it all works. So that would be, I think, the lesson 
learned at this point.
    Mr. Platts. Thank you.
    Mr. Mok, Mr. McClain, is there anything that you would like 
to add, that you want to make sure of as we go forward as a 
subcommittee?
    Mr. Mok. I agree with Mr. Martin 100 percent. Our approach 
is basically, I would offer as an acronym to echo what he said, 
LOVE, L-O-V-E. LOVE stands for leadership at the top; O is 
ownership for the stakeholders; V is bringing value to the 
table for the stakeholders; and E is implement efficiently and 
effectively. And I think that is how we managed to get the 
program to where we are today, but good leadership also.
    Mr. Platts. Well, love is always a good thing to share and 
spread. [Laughter.]
    Mr. McClain, anything? Hard to follow.
    Mr. McClain. I need an acronym, and I don't have one. 
[Laughter.]
    No sir, I don't have anything.
    Mr. Platts. Well, we appreciate your participation here 
today. Our intent as a subcommittee is to try to work as part 
of the same team with those of our colleagues in the 
Departments or GAO, that the end result is we are all just 
trying to ensure that the Federal Government is as efficiently 
and well run and provides the services to our citizens that 
they need.
    Especially in the times we are in, and as we recover from 
Katrina, and the recovery and rebuilding effort that is now 
underway, managerial cost accounting is something that really 
can play an important role. As we say, we have a lot of money, 
it is not an unlimited sum. What we can put into this effort? 
How can we best use it, and what is the best return for the 
investment to those in need?
    As a subcommittee, we appreciate the case studies of your 
two Departments, because that gives us some initial data as we 
go forward with GAO and some other reviews. Again, besides your 
testimony here today, just day in and day out, your work and 
leadership in your Departments, Mr. Martin at GAO, we are 
grateful for your service and glad to be part of the same team 
with you. Thank you.
    We will keep the record open for 2 weeks for any additional 
information that needs to be shared. Otherwise, this hearing 
stands adjourned.
    [Whereupon, at 3:45 p.m., the subcommittee was adjourned.]

                                 
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