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


 
  GUARDING AGAINST WASTE, FRAUD, AND ABUSE IN POST-KATRINA RELIEF AND 
             RECOVERY: THE PLANS OF THE INSPECTORS GENERAL

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

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 28, 2005

                               __________

                           Serial No. 109-51

                               __________

      Printed for the use of the Committee on Energy and Commerce


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

                               __________


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                    ------------------------------  
                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

RALPH M. HALL, Texas                 JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida             Ranking Member
  Vice Chairman                      HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky               SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia             BART GORDON, Tennessee
BARBARA CUBIN, Wyoming               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
HEATHER WILSON, New Mexico           BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING,       ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman           GENE GREEN, Texas
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania        JIM DAVIS, Florida
MARY BONO, California                JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  HILDA L. SOLIS, California
LEE TERRY, Nebraska                  CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey            JAY INSLEE, Washington
MIKE ROGERS, Michigan                TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho          MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee

                      Bud Albright, Staff Director

        David Cavicke, Deputy Staff Director and General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

              Subcommittee on Oversight and Investigations

                    ED WHITFIELD, Kentucky, Chairman

CLIFF STEARNS, Florida               BART STUPAK, Michigan
CHARLES W. ``CHIP'' PICKERING,         Ranking Member
Mississippi                          DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire       JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  JAY INSLEE, Washington
MIKE FERGUSON, New Jersey            TAMMY BALDWIN, Wisconsin
MICHAEL C. BURGESS, Texas            HENRY A. WAXMAN, California
MARSHA BLACKBURN, Tennessee          JOHN D. DINGELL, Michigan,
JOE BARTON, Texas,                     (Ex Officio)
  (Ex Officio)

                                  (ii)
?



                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Feaster, H. Walker, III, Inspector General, Federal 
      Communications Commission..................................    40
    Frazier, Johnnie E., Inspector General, U.S. Department of 
      Commerce...................................................    35
    Friedman, Gregory H., Inspector General, U.S. Department of 
      Energy, and Vice Chair of the President's Council on 
      Integrity and Efficiency...................................    16
    Gimble, Thomas F., Acting Inspector General, Department of 
      Defense....................................................    23
    Rabkin, Norman J., Managing Director, Homeland Security and 
      Justice Issues, U.S. Government Accountability Office......     9
    Skinner, Richard L., Inspector General, U.S. Department of 
      Homeland Security, and Chair, PCIE/ECIE Homeland Security 
      Roundtable.................................................    19
    Tinsley, Nikki L., Inspector General, Environmental 
      Protection Agency..........................................    32
    Vengrin, Joseph E., Deputy Inspector General for Audits, and 
      Michael E. Little, Deputy Inspector General for 
      Investigations, U.S. Department of Health and Human 
      Services...................................................    27

                                 (iii)

  


  GUARDING AGAINST WASTE, FRAUD, AND ABUSE IN POST-KATRINA RELIEF AND 
             RECOVERY: THE PLANS OF THE INSPECTORS GENERAL

                              ----------                              


                     WEDNESDAY, SEPTEMBER 28, 2005

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:10 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Ed 
Whitfield (chairman) presiding.
    Members present: Representatives Whitfield, Pickering, 
Walden, Burgess, Blackburn, Stupak, Schakowsky, Inslee, and 
Waxman.
    Staff present: Mark Paoletta, chief counsel; Anthony Cooke, 
majority counsel; Peter Spencer, professional staff; Jonathan 
Pettibon, legislative clerk; Chris Knauer, minority 
professional staff; and Chris Treanor, assistant.
    Mr. Whitfield. Good morning, and I want to bring this 
hearing to order this morning.
    The subject of our Oversight and Investigations hearing is 
guarding against waste, fraud, and abuse in post-Katrina relief 
and recovery, and the plans of the Inspectors General, and we 
have a number of them here today. I would also like to make the 
comment that it came up rather sudden, but there is a markup of 
Energy and Commerce taking place as we sit here this morning, 
on refinery capacity, and an energy bill relating to some 
refinery issues, so we may be called periodically to go down 
for votes in the committee, which is two floors down, and of 
course, we will always have events going on on the House floor, 
but we genuinely appreciate all of you witnesses being with us 
this morning, and we will do everything that we possibly can to 
expedite this hearing. We certainly consider it to be an 
important hearing, and one of many that we will be having. And 
so with that, I will give my opening statement, and then, I 
will recognize Mr. Inslee for his opening statement.
    Today, the subcommittee will examine an area that really 
involves a lot of tension. We want to protect the taxpayers. As 
you know, the Congress has appropriated $62.3 billion in post-
Katrina aid. We want to make sure that the taxpayers are 
protected, and that we minimize waste, fraud, and abuse. At the 
same time, it is essential that this money be delivered in a 
timely manner to expedite the recovery process for individuals 
and projects in affected areas. As I said, Congress has already 
appropriated more than $60 billion in disaster funding. These 
funds, dispersed principally through the Department of Homeland 
Security, along with other Federal spending, will provide much-
needed support in recovery. The size of this Federal support is 
unprecedented, dwarfing any other single disaster request. In 
point of fact, Katrina now accounts for fully 40 percent of all 
funds that have been authorized for the Disaster Relief Fund 
over the past 30 years.
    The size of this post-Katrina funding is matched by the 
scope and complexity of the task of recovery assistance. This 
task, while still unfolding, will entail the resources and 
activity of scores of programs across the government. Many of 
these involve issues that come under this committee's 
jurisdiction, such as public health, energy, environmental, 
telecommunications, and economic policies.
    With this increased size and complexity also comes 
increased opportunity for problems. As is necessary for such 
emergency relief and recovery, regulations are waived, contract 
requirements loosened, safeguards to ensure careful spending 
are lifted to speed relief. Today's hearing will help the 
subcommittee take measure of efforts to address the threats of 
waste, fraud, and abuse. The hearing will also help us 
understand how the agency watchdogs, the Inspectors General, 
are policing areas and programs that may require close tracking 
as resources are shifted to address recovery.
    What has been the past experience with disaster relief? 
Where have agency efforts and assistance been inefficient and 
wasteful? With increased funds and program activity, there 
easily can be areas of overlap and duplication, as well as 
calls for work in the name of relief that, in fact, may not be 
so urgent.
    Let me note at the outset that this hearing is just the 
beginning of our oversight of recovery issues. The facts we 
gather today will provide necessary initial guidance. As we 
move forward on this front, we will rely on regular feedback 
from the Inspectors General. The Inspectors General perform a 
critical function in agency and program oversight, and are 
essential for informing Congressional oversight.
    With this in mind, I would like to request that each of the 
Inspectors General before us today provide directly to us, to 
the committee, in 3 months, a progress report of what you are 
finding, so that we can more effectively ensure with you that 
money gets to the right people and projects.
    Today, we will hear from a number of Inspectors General or 
their deputies from the Department of Homeland Security, which 
is managing the disaster relief, the Department of Defense, 
which, at this point is responsible for a large, or share of 
the spending, as well as from agencies within the committee's 
core jurisdiction, to gather information on their plans and the 
issues that they will confront in this rebuilding effort. We 
will also hear from the Government Accountability Office, 
another key player in the oversight community, which will 
provide testimony on larger issues raised concerning disaster 
response, coordination, and planning.
    I would like to thank all of the witnesses for taking the 
time to attend this morning on such short notice and amidst all 
of the burdens of the relief effort. Let me extend a special 
welcome to Richard Skinner, the Inspector General for the 
Department of Homeland Security. You have been heading up the 
main coordinating effort among the various IGs working on 
disaster relief auditing plans, and I look forward to your 
contribution to the discussion today.
    There are a lot of topics for us to examine this morning, 
and so I will now turn to my good colleague and friend, Mr. 
Inslee, the ranking member, for this hearing, and for his 
opening statement.
    Mr. Inslee. Thank you, Mr. Chairman. A very important 
matter, obviously, I know Americans are very concerned about 
the propriety and how we assure that these tax dollars are 
spent wisely.
    It is very unfortunate that we are going to be short-handed 
today because we could not reschedule the markup on the energy 
bill that is being heard, but we are going to do the best we 
can, and we will have as many folks as we can hear today.
    I just wanted to make one personal note that is somewhat 
associated with this issue, and that is to note for Americans, 
while we are talking about how to ensure the proper expenditure 
of their taxes, I want to note the incredible gratitude and 
appreciation of those folks who now are in extremis from these 
two hurricanes. And the reason I say that, the reason I know 
that is I went to down to the Houston Astrodome on Labor Day to 
join about 10,000 Texans who are volunteering--I am from the 
State of Washington--to help folks in the Houston Astrodome, 
and I met these family that had, obviously, just shortly have 
been removed from the Super Dome in New Orleans, and the 
message I wanted people to know from those folks is those folks 
are the most resilient, gracious, dignified under pressure, and 
most importantly, appreciative of what other Americans are 
doing for them right now, and I think they would want to spread 
that message around the country of how grateful folks whom we 
are we helping in some way, including these Federal dollars 
that we hope to use in an efficient--because we do have about 
200 letters from my constituents to them, and they were just so 
touched, and I think it is important for us to realize how 
appreciative these folks, who are still scattered across the 
country, are to the largesse and heartfelt wishes of all 
Americans.
    But it is important that we do this job right, as well, for 
the taxpayers, and that is why I am glad we are having this 
hearing today. The plight of many Americans from this region is 
really akin to the displacement, once described by Steinbeck 
about the mass movement of people during the Great Depression, 
and perhaps, we should look at it on that dimension. And as we 
move forward to help restore these communities--New Orleans, 
Biloxi, Gulfport, Port Arthur, Grand Isle, Cameron, Slidell, to 
name just a few--we have got to help to restore the Nation as a 
whole, and we have got to make sure that this aid is properly 
stewarded, and these precious tax dollars.
    Now, Mr. Chairman, I have a great concern in the days to 
come, we are going to be hearing stories about exotic, 
unnecessary, grossly overpriced purchases of goods and services 
under the guise of provided hurricane relief and recovery. We 
are already seeing articles to that extent. We see in the New 
York Times that 80 percent of the $1.5 billion of contracts 
awarded by FEMA just in the first week were awarded without any 
bidding whatsoever, and there are some concerns about the 
contractors to whom these were rewarded. I think we need to ask 
hard questions why we couldn't have a 15-minute bidding 
process, even in an emergency situation on this situation when 
we have seen political connections come into question about 
these kind of contracts. We need to ask those hard questions.
    And we see issues of this cruise ship situation, where--and 
this is interesting, when I was in Houston, I was in a control 
post, and there were real serious questions being asked whether 
it made sense to rent these cruise ships, because people were 
not going to get on them. Questions were already being raised 
on Labor Day about this subject. But we see this cruise ship 
deal that taxpayers are paying $21,475 a week when you can 7-
day Western Caribbean cruise for $599. We were asked some 
pretty hard questions about that situation as well. These are 
just two examples. We have heard of services paid for by the 
Government that have been substantially overpriced.
    It has been a month since Katrina hit, almost. To date, 
billions have been appropriated; billions more will be needed. 
And we need to have an aggressive accounting in that regard. 
Today, we have got a very distinguished panel of Inspectors 
General, and they will explain from each of their respective 
roles how we need to manage these funds; yet--and with my full 
respect for the work that we are both trying to do--it does not 
appear that a single Inspector General is in full charge of 
seeing that these moneys are wisely spent. Moreover, it does 
not appear that there exists a single place in the Federal 
Government where Katrina-related funds are being managed, 
recorded, and evaluated for their effectiveness.
    At a minimum, Mr. Chairman, I believe we need to know the 
following: No. 1, in the short term, who is directing this 
recovery effort from the 30,000-foot perspective, and who at 
the Federal level is sorting out the priorities for the 
billions of dollars in recovery money for the immediate cleanup 
and recovery work? Is this effort centralized, so that 
instances of contracts that are wasteful, duplicative in 
nature, or even working at cross-purposes, to where the 
contracts can be spotted? We can cite the one example we have 
already talked about on this cruise ship. Is it economical to 
continue this contract to house workers and evacuees? And who 
already knows the answer to that question?
    And second, is there a long-term, strategic plan for 
rebuilding the Gulf Coast? Are we going to let four different 
Governors and countless mayors and other politicians spend 
money as they see fit, as they deem fit? Mr. Chairman, before 
hundreds of millions of dollars are expended, it is essential 
that the Congress and this administration develop a strategic 
plan that not only represents the goals of this effort, but a 
roadmap of how we are going to get there and why. The public 
needs to know how their money will be spent, for what purposes 
and that is being spent without political favor. And frankly, 
we have already seen concerns about that that replicate some of 
concerns regarding the contracting process in Iraq. Hard 
questions need to be asked.
    The citizens of the Gulf Coast need to know that the 
rebuilding of their communities is a primary goal of all this 
spending, and I can guarantee you that the CEO or CFO of any 
private company would not begin such a massive project without 
how certain money will be expended and what it will achieve. I 
fear that 2 years from now, billions will have spent on 
lucrative but unnecessary contracts, services, and other items, 
but the recovery of the many communities affected by these 
storms will not have been realized. Mr. Chairman, having a 
strategic roadmap of what we are trying to do, and how we will 
do it is perhaps the most important financial control we can 
put in place to protect previous taxpayer dollars. To date, we 
have no such plan.
    Question No. 3: is there a central repository where all 
recovery dollars can be tracked, so that the public can 
actually see how its money is being spent? It is critical to 
maintain the support of the American people in this effort. 
That is a very important point that we can't let stories like 
this diminish the political will to achieve this purpose, to 
help these folks in these desperate plights. And this will 
require immediate transparency in a publicly accessible data 
base.
    While I believe that each agency or department will be able 
to consolidate and track funds related to their own missions, 
there must be a central repository to consolidate the related 
expenditures across all such agencies, so that duplication, 
waste, or conflicting contracts can be identified and 
eliminated. These contracts should not only be trackable, but 
there should be enough sufficient detail to describe what they 
are, why they are needed, and what they are intended to 
accomplish.
    Fourth question: even if there is a strategic spending 
plan, is there a plan to make sure the money is being well 
spent and accomplishes the plan? The American people are being 
asked to dig very deep. These are significant sums of taxpayer 
money, and this hurricane recovery, we may give $200 billion. 
It is critical that we protect these funds from fraud, waste, 
and abuse. As I have indicated, that there are already 
questions about noncompetitive bidding, work being given to 
nonlocal firms, which slows down the local economic recovery, 
and there are many more contracts to be issued. Mr. Chairman, I 
do not see in place an adequate, fully detailed structure to 
prevent these abuses, which we have already seen, from 
continuing to be replicated. And frankly, we still, after 3 
years, have not solved our contracting problems overseas. We do 
not want to see that replicated domestically.
    Question No. 5: finally, Mr. Chairman, these Inspectors 
Generals also need to look at what didn't work in their own 
agencies during this catastrophe. The Department of Homeland 
Security published a massive National Response Plan in December 
of last year to establish ``a comprehensive national all-
hazards approach to domestic incident management across a 
spectrum of activities including prevention, preparedness, 
response, and recovery.'' It incorporated the ``best practices 
and procedures'' from various incident management disciplines, 
and one of its purposes was to provide a proactive and 
integrated Federal response to catastrophic events.
    We have had a catastrophic event. There was no proactive, 
integrated Federal response. Mr. Brown, the former head of 
FEMA, spent most of his testimony yesterday blaming the 
Democratic Governor of Louisiana for all of the problems, even 
though, as the New York Times documented yesterday, over 200 
people died in Republican Mississippi, mostly because they did 
not evacuate. This should not be a partisan-sniping session. We 
need to know what good was this plan if it doesn't work. And I 
just want to express--I know all Americans of both parties are 
concerned about multiple failures on multiple government 
levels. But speaking as a Federal official, when we tried to 
get the active duty of the U.S. military into New Orleans to 
rescue these people on rooftops, and when I called FEMA myself, 
early in the week of this hurricane, when it was obvious that 
the only resource on the planet Earth that could rescue these 
people were the active-duty military personnel of the United 
States Army and Marines and Navy, all we got was we are 
thinking about it. And 48 hours passed until there was really 
any decision to use the active-duty military personnel of this 
country.
    And speaking as a person who was watching these people on 
these rooftops, as a Federal official, calling repeatedly to 
the highest officials in FEMA that we could get a hold of, and 
the United States military, to have no response for 48 hours 
was a massive tragedy. And if you had gone down to the 
Astrodome like I have done, and you have seen these people--and 
still couldn't get it on Labor Day, just to tell you one little 
story of how difficult this was. On Labor Day, the second 
Monday, I tried to get someone to rescue an 80-year-old woman. 
We couldn't get that job done with the entire forces of the 
United States, the most powerful nation on Earth.
    We have some questions we have to ask. I will try to be 
brief here, Mr. Chair. You have been most gracious. I shall try 
to wrap up there. I want to thank the witnesses for their 
efforts. I look forward to their testimony, and I look forward 
to a great bipartisan effort to try to assure for our 
taxpayers, on our mission of saving these evacuees, we 
accomplish our mission of being careful with taxpayer dollars 
as well.
    Thank you, Mr. Chairman.
    Mr. Whitfield. Thank you, Mr. Inslee, and once again, I 
want to welcome the witnesses. We want you to know how much we 
appreciate your being here. We know that you have a difficult 
task ahead of you, and we do look forward to your testimony.
    [Additional statements submitted for the record follow:]

Prepared Statement of Hon. Cliff Stearns, a Representative in Congress 
                       from the State of Florida

    Thank you, Mr. Chairman, for holding this hearing on guarding 
against waste, fraud and abuse in post-Katrina relief and recovery.
    There is no doubt that we need ongoing and thorough oversight and 
accountability of this admittedly huge and difficult process.
    We owe that much to our constituents, who are footing the bill for 
relief and recovery.
    We have already spent over $62 billion, according to some estimates 
Congress will appropriate over $200 billion. This is approximately 
$2,000 per U.S. household. Another way to look at it is, we can give 
each of the 500,000 families who were adversely affected by Katrina 
about $400,000. Even in today's housing market, that buys a pretty nice 
home.
    We want to get relief to those Americans who have been truly hurt 
by Katrina. But what we have had here in some respects is a taxpayer-
funded shopping spree, in which $2,000 debit cards have been handed out 
to tens of thousands of alleged victims of Katrina. This is surely not 
the best way to ensure good stewardship of our constituents' tax 
dollars.
    Although I am sure these debit cards have helped in many cases, 
there still have been several reports that some people have spent this 
government-issued money at strip clubs and other disreputable 
establishments.
    In another example, an upscale store reported selling two 
monographed luxury handbags for $800 each to women using these cards.
    We will undoubtedly hear of more examples of waste, fraud and abuse 
in the weeks and months to come.
    There are also billions of dollars worth of federal contracts that 
were awarded in the aftermath of Katrina, because of time restraints 
caused by the disaster, via a streamlined process.
    Although I understand it is sometimes necessary to waive certain 
safeguards in order to respond in a prompt fashion to help those in 
need, this only further proves that that we need to provide even more 
oversight to ensure that waste, fraud and abuse are kept to a minimum.
    Last week, an investigative report by the Orlando Sun-Sentinel 
revealed that, in a recent five-year span, FEMA spent $330 million 
taxpayer dollars on communities that were not adversely affected by 
natural disasters. Money was allocated needlessly by the federal 
government, and in many cases, individuals did their best to scam the 
government:
    ``From California to the Carolinas, Florida to Michigan--FEMA 
assistance is called free, easy money and scamming schemes are openly 
discussed.''
    Mr. Chairman, people who intentionally defraud FEMA are taking 
money away from those who are truly in need. And FEMA is obligated to 
ensure that taxpayer dollars go only to those people who suffered 
legitimate losses.
    I am still trying to get FEMA to fully reimburse counties in my 
district from last year's hurricane season. It is extremely frustrating 
to read how much money has been wasted or stolen in recent years, while 
my own constituents are forced to eat the bill for last year's 
hurricane season.
    We must step up Congressional oversight of disaster relief and 
recovery. It's vital that we do so for Katrina, and for whatever 
natural disasters will inevitably come in the future. This hearing is a 
good first step in making FEMA and other federal agencies involved in 
disaster relief and recovery more responsible and accountable.
    I look forward to the testimony of the witnesses we have here 
today, especially the inspector generals' plans for oversight and 
auditing of disaster relief and recovery funds.

                                 ______
                                 
  Prepared Statement of Hon. Michael C. Burgess, a Representative in 
                    Congress from the State of Texas

    Mr. Chairman, thank you for having this important hearing today. 
While many have called for an extensive investigation into the 
aftermath of Hurricane Katrina, I feel that this committee should have 
the primary oversight investigatory powers over this complicated 
situation. Not only does this committee have both subpoena power and a 
history of bipartisanship, this committee's jurisdiction will be 
significantly affected in coming months as the rebuilding and 
revitalization effort continues with programs related to public health, 
environmental cleanup, telecommunications, and economic development. 
Mr. Chairman, thank you for your leadership into this matter.
    Never before has our country been faced with the challenges, and 
perhaps opportunities, due to a natural disaster of this size and 
proportion. My prayers continue to go out to the victims of Hurricane 
Katrina, and I firmly believe that our great nation has shown in the 
past that it can come together during times of great crisis; we will 
continue to rise to that challenge again now. But we must do this in a 
way that ensures we have accountability, not delinquency. We cannot let 
the needs of our citizens in the Gulf Coast Region be compromised by 
inefficient bureaucratic delay.
    I share my colleagues' deep concern with regards to the 
coordinating relief and recovery efforts at the federal, state, and 
local level. Today, I hope this committee is able to learn of the 
current oversight initiatives being undertaken at the represented 
agencies before us. Hurricane Katrina taught us all that we need a 
better system in place when responding to catastrophic events. As a 
physician, I am particularly interested in hearing from the 
representatives from the Department of Health and Human Services. I'm 
still waiting for answers to basic questions such as why help was 
turned away. I look forward to the opportunity to discuss this with you 
in further detail, and to also learn of anticipated regulatory changes 
needed to help ensure that our public health system isn't endangered.
    Again, Mr. Chairman, I thank you for this crucial hearing in which 
we can address some of these essential concerns regarding post-Katrina 
relief and recovery.

                                 ______
                                 
 Prepared Statement of Hon. Bart Stupak, a Representative in Congress 
                       from the State of Michigan

    Thank you Mr. Chairman for having this very important hearing.
    Today's hearing is a very important hearing. The American taxpayers 
have been asked to contribute more than $62 billion so far, and it is 
expected that when all is said and done, we will be asked to contribute 
$200 billion towards the relief effort and rebuilding of the Gulf 
Coast. It is our duty and obligation to help our fellow Americans get 
back on their feet.
    As Congress moves forward in this effort, it is also out duty and 
obligation to ensure that those billions of dollars are spent wisely 
and not wasted on duplicative or fraudulent expenditures. Likewise, we 
have an obligation to ensure that the no-bid contracts that are entered 
into are not gauging the American Taxpayers. We have seen several 
examples of how these no-bid or quick bid contracts are being given to 
friends of the Bush Administration, former GOP Chair turned lobbyist, 
turned Governor Haley Barbour, and former FEMA Director Joe Albaugh.
    One glaring example of these contracts listed in a recent New York 
Times article is a debris removal contract given to a company called 
AshBritt who is a former client of Governor Barbour's lobbying firm. 
AshBritt is receiving roughly $15 per cubic yard PLUS other costs for 
disposal of the material in landfills. The article goes on to tell how 
in a few Mississippi communities they found their own contractors to do 
the job for considerably less and their fees include disposal costs.
    Another issue I am concerned about is the protection of whistle 
blowers who come forward with their concerns about fraud, waste or 
abuse. The Army Corps of Engineers has demoted or fired several whistle 
blowers recently after they expressed concern about no-bid contracts. 
We cannot allow these people who are trying to save taxpayer dollars to 
be harassed, intimidated or punished by their higher-ups. People need 
to be encouraged to report such activities.
    Mr. Chairman, we need to set up a central clearinghouse with one 
person in charge of all Inspectors General. This clearinghouse should 
be accessible to the public and should include detailed information 
about how the monies are being spent. In addition, we need to have a 
detailed plan for reconstruction before any monies are doled out. In 
any business, you need a detailed business plan that shows you have a 
well thought out process by which you will proceed before you can 
obtain a loan from a bank. We should expect nothing less from our 
government officials in their reconstruction efforts.
    Lastly, Mr. Chairman, I would like to ask these Inspectors General 
what their thoughts are about extending the statute of limitations by 
which we can go after fraud, waste and abuse. I have been informed by 
federal officials that quite often, they do not discover fraud until 
many years after it has occurred. The officials I spoke with wanted us 
to extend the statute of limitations to 15 or 20 years, so as they 
discover the fraud, they can still pursue the offenders. Certainly with 
a disaster the magnitude of Hurricane Katrin, the I.G.'s will not be 
able to catch the fraud immediately. We will be discovering instances 
several years down the line and I feel that we should give the I.G.'s 
the ability to investigate such instances.
    Thank you again, Mr. Chairman, for holding this important hearing. 
I am disappointed that it is conflicting with the Energy Bill mark-up 
going on downstairs, because I know that many more of our members on 
this side of the aisle would have liked to give this hearing their 
undivided attention rather than having to pop in and out of the two 
hearings.

    Mr. Whitfield. First of all, I am going to introduce the 
names of everyone that is here testifying today, and then, 
according to our procedures, because this is an Investigation 
and Oversight hearing, I will ask that you be sworn in for your 
testimony this morning.
    Our first witness today will be Mr. Norman Rabkin, who is 
the Managing Director of Homeland Security and Justice Issues. 
We appreciate your being here. The Honorable Gregory H. 
Friedman, Inspector General with the U.S. Department of 
Energy--I am sorry. Mr. Rabkin, you are with the GAO. The 
Honorable Richard Skinner, Inspector General of the Department 
of Homeland Security, Office of Inspector General; the 
Honorable Thomas Gimble, Acting Inspector General of the U.S. 
Department of Defense; Mr. Joseph Vengrin, the Deputy Inspector 
General, Audits; and Mr. Michael Little, Deputy Inspector 
General, Investigations, with the U.S. Department of Health and 
Human Services; the Honorable Nikki Tinsley, Inspector General, 
Environmental Protection Agency; the Honorable Johnnie Frazier, 
Inspector General, U.S. Department of Commerce; and the 
Honorable H. Walker Feaster, Inspector General at the Federal 
Communications Commission.
    So once again, I want to thank all of you for being here. 
As I mentioned, this is an investigative hearing, and when 
doing so we do have the practice of taking testimony under 
oath. Do any of you object to testifying under oath this 
morning?
    The Chair would also advise you that under the rules of the 
House, and certainly, the rules of this committee, you are 
entitled to be advised by counsel. Do any of you desire to be 
advised by counsel during your testimony today?
    In that case, if you would, please rise and raise your 
right hand, I will swear you in.
    [Witnesses sworn.]
    Mr. Whitfield. Okay. All of you are now under oath, and we 
look forward to your testimony, and Mr. Rabkin, if you will, 
begin with your 5-minute opening statement.

  TESTIMONY OF NORMAN J. RABKIN, MANAGING DIRECTOR, HOMELAND 
  SECURITY AND JUSTICE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY 
OFFICE; GREGORY H. FRIEDMAN, INSPECTOR GENERAL, U.S. DEPARTMENT 
    OF ENERGY, AND VICE CHAIR OF THE PRESIDENT'S COUNCIL ON 
    INTEGRITY AND EFFICIENCY; RICHARD L. SKINNER, INSPECTOR 
GENERAL, U.S. DEPARTMENT OF HOMELAND SECURITY, AND CHAIR, PCIE/
  ECIE HOMELAND SECURITY ROUNDTABLE; THOMAS F. GIMBLE, ACTING 
 INSPECTOR GENERAL, DEPARTMENT OF DEFENSE; JOSEPH E. VENGRIN, 
  DEPUTY INSPECTOR GENERAL FOR AUDITS, AND MICHAEL E. LITTLE, 
DEPUTY INSPECTOR GENERAL FOR INVESTIGATIONS, U.S. DEPARTMENT OF 
HEALTH AND HUMAN SERVICES; NIKKI L. TINSLEY, INSPECTOR GENERAL, 
ENVIRONMENTAL PROTECTION AGENCY; JOHNNIE E. FRAZIER, INSPECTOR 
  GENERAL, U.S. DEPARTMENT OF COMMERCE; AND H. WALKER FEASTER 
   III, INSPECTOR GENERAL, FEDERAL COMMUNICATIONS COMMISSION

    Mr. Rabkin. Thank you, Mr. Chairman. I am pleased to be 
here today to discuss the plans for the oversight of the 
Nation's response to Hurricane Katrina.
    All of us at the U.S. Government Accountability Office, as 
all Americans, were saddened by the destruction that Hurricane 
Katrina caused throughout the Gulf Coast. One of the many roles 
of government is to provide for its citizens at a time when 
they are most in need. Although the role of auditors pales when 
compared to those providing rescue, relief, and recovery, we 
have our place in ensuring that Federal dollars are being 
properly accounted for and are being spent wisely.
    GAO has a long history of providing the Congress with 
detailed and strategic analyses of issues related to the 
government's response to disasters. For example, after 
Hurricane Andrew devastated portions of South Florida in 1992, 
we provided strategic insights into needed improvements in the 
Nation's response to catastrophic disasters. Since the 
terrorist attacks of September 11, 2001, we have been helping 
the Congress assess the Federal actions to improve the 
country's ability to respond to disasters, through both 
strategic evaluations, as well as targeted reviews of specific 
programs.
    The question of how the accountability community should 
participate in these efforts has been on the Comptroller 
General's mind and agenda for the past month. He has had 
extensive discussions with his colleagues in the Federal 
Inspector General community, as well as with State and local 
auditors. He has also met with leaders of the House and Senate 
committees engaged in oversight activities. As a result of 
these consultations, GAO and the Federal IGs have developed 
complementary roles. As you will hear, the Inspectors General 
of the various departments plan to conduct detailed work on 
fraud, waste, and abuse in individual programs and Federal 
agencies. GAO plans to support the Congress through analysis 
and evaluation of the various issues related to how the Federal 
agencies involved in Katrina activities performed and 
coordinated with each other, and with State and local 
governments and the private sector.
    I would like to briefly discuss some of the lessons our 
past work in areas under this committee's jurisdiction have 
provided and some of the work we are planning to do with 
Hurricane Katrina activities. Regarding healthcare issues, we 
reported about 18 months ago that no State was fully prepared 
to respond to the surge caused by large numbers of patients 
that would seek service during a public health emergency. Some 
of our future Katrina-related work will involve assessing 
whether various Federal, state, and local preparedness plans 
were adequate for dealing with the health consequences of this 
hurricane.
    Regarding energy issues, one of my GAO colleagues testified 
last week about gasoline price trends and included comments on 
the likely effects of Hurricane Katrina. We plan to conduct 
further evaluations of determinants of gasoline prices, and the 
viability of the Strategic Petroleum Reserves to respond to 
disruptions like Hurricane Katrina. In the environmental area, 
we have reported on how environmental resources can be affected 
by both prevention of and recovery from natural disasters. We 
plan further work on how EPA and other governmental agencies 
are conducting water, soil, and air quality testing to 
determine when it is safe for residents to return to flooded 
areas.
    Recognizing how important communications among emergency 
personnel are in any disaster, we have reported on challenges 
in developing interoperable communications for first 
responders. We will focus attention in coming months to 
determine the extent to which emergency units responding to 
Hurricane Katrina were able to communicate with each other when 
they needed to.
    Mr. Chairman, we believe this work, when coupled with our 
work on all of the other emergency support functions 
contemplated under the National Response Plan, as well as the 
results of the work of the IGs and the rest of the 
accountability community, will enable us to comment on how well 
the National Response Plan was designed and implemented, and to 
offer suggestions for improving it.
    Mr. Chairman, this concludes my statement. I will be 
pleased to answer your questions.
    [The prepared statement of Norman J. Rabkin follows:]

  Prepared Statement of Norman J. Rabkin, Managing Director, Homeland 
                      Security and Justice Issues

    Mr. Chairman and Members of the Subcommittee: I am pleased to be 
here today to discuss oversight of the nation's response to Hurricane 
Katrina. As Comptroller General Walker has stated, while the Inspectors 
General of the various departments plan to conduct detailed work on 
fraud, waste, and abuse in individual programs in federal agencies, GAO 
plans to provide support to Congress through analysis and evaluation of 
the various issues related to coordination among different federal 
agencies, and between these federal agencies and the state, local, and 
private sectors. The Comptroller General has also stated that GAO will 
be involved in reviewing the overall funding for and use of Katrina-
related funding by various federal agencies. In addition, GAO has 
conducted several related reviews in the past--including reviews of 
federal actions following Hurricane Andrew in 1992--that will be 
helpful in evaluating the nation's response to Hurricane Katrina.
    Before I begin my detailed comments, I want to say that, as you 
know, all of us at the U.S. Government Accountability Office, as all 
Americans, were saddened by the destruction that Hurricane Katrina 
caused throughout the Gulf Coast in Louisiana, Mississippi, and Alabama 
on August 29, 2005, and the ensuing days. One of the many roles of 
government is to provide for its citizens at a time when they are most 
in need. Because of Hurricane Katrina, it is clear that strengthening 
the nation's emergency response efforts is at the top of the national 
agenda. While this testimony is a dispassionate and analytical 
discussion of some of the challenges faced by the nation, we recognize 
the terrible costs of Hurricane Katrina in human terms and our hearts 
go out to the victims and their families.
    Hurricane Katrina will have an enormous impact on people and the 
economy of the Gulf Coast as well as the United States. The hurricane 
affected over a half million people located within approximately 90,000 
square miles spanning Louisiana, Mississippi, and Alabama, and has 
resulted in one of the largest natural disaster relief and recovery 
operations in United States history. Many of the sectors affected by 
the hurricane are within the jurisdiction of the Committee on Energy 
and Commerce. In terms of public health, standing water and high 
temperatures have created a breeding ground for disease, and public 
health advisories have warned about the spread of disease in the 
affected areas. The medical needs of evacuees will be an additional 
challenge; many evacuees are without medical records and at risk of 
losing their medical coverage. Hurricane Katrina also resulted in 
environmental challenges, such as water and sediment contamination from 
toxic materials released into the floodwaters. In addition, our 
nation's energy infrastructure was hard hit. The Department of Energy 
reported that 21 refineries in affected states were either shut down or 
operating at reduced capacity in the aftermath of the hurricane. 
Damaged transmission lines left as many as 2.3 million customers 
without electricity. The hurricane also disrupted commerce. According 
to the Department of Commerce, the ports damaged by Hurricane Katrina 
accounted for 4.5 percent of total exports of goods from the United 
States last year, and 5.4 percent of total U.S. imports. Finally, in 
terms of telecommunications, the Federal Communications Commission 
reported that Hurricane Katrina knocked out radio and television 
stations, more than 3 million customer phone lines, and more than a 
thousand cell phone sites.
    In my statement today I will highlight some of GAO's previous work 
on challenges faced by government preparedness, response, and recovery 
programs, many of which are directly related to this committee's 
jurisdiction. For future work, GAO will continue to provide this 
committee and Congress with independent analysis and evaluations, and 
coordinate our efforts with the accountability community to ensure 
appropriate oversight of federal programs and spending. As provided for 
in our congressional protocols, we plan to conduct Katrina-related work 
under the Comptroller General's statutory authority since it is an 
issue of interest to the entire Congress and numerous committees in 
both houses.
    My statement is based upon our extensive work spanning a wide 
variety of topics over a number of years. Much of this work was done 
relatively recently in the aftermath of the terrorist attacks of 
September 11, 2001, and the subsequent creation of the Department of 
Homeland Security in March 2003. In all, we have published over 120 
reports on disaster preparedness and response, and other issues raised 
by Katrina, which are useful in moving forward in addressing problems 
encountered with the nation's response to the hurricane. At the end of 
this statement is a comprehensive list of our related products.

                                SUMMARY

    Our past work has noted needed improvements in government programs 
related to preparing for, responding to, and recovering from natural 
disasters such as Hurricane Katrina. Many of these challenges relate to 
programs under the jurisdiction of the Energy and Commerce Committee. 
For example, health care providers have not always been adequately 
prepared for catastrophic events. The health care community has been 
addressing some of these challenges, such as those involving 
coordination efforts and communications systems, more readily than 
others, such as infrastructure and workforce issues, which are more 
resource-intensive. Our work on energy issues has described some of the 
consequences of hurricanes on petroleum markets--such as rapid gasoline 
price increases. Our environmental work has indicated that the loss of 
wetlands has increased the severity of damage from hurricanes, and that 
cleanup of contaminated sites takes a tremendous amount of coordination 
and funding. Finally, our work on telecommunications issues has found 
that first responders are challenged by a lack of interoperable 
emergency communications. In these areas, among others, we have made a 
number of recommendations, many of which are still pending completion.

  PAST GAO WORK HAS HIGHLIGHTED NEEDED IMPROVEMENTS IN MANY PROGRAMS 
            RELATED TO PREPAREDNESS, RESPONSE, AND RECOVERY

    There are a host of challenges to government programs related to 
Hurricane Katrina and other natural disasters in terms of preparedness, 
response, and recovery. Our work on preparedness--programs to prevent 
disasters or prepare to respond in advance--has identified needed 
improvements in a number of areas, including balancing efforts to 
prepare for terrorism with efforts related to natural disasters and all 
hazards; planning preparedness efforts and setting goals and measures; 
providing training, exercises, evaluations, and lessons learned to 
first responders; providing flood control and protection; improving 
public health preparedness; and providing federal grants to state and 
local governments. Similarly, our work on response to disasters has 
identified a number of problems. These relate to federal, state and 
local roles in coordinating the response; the role of the military, to 
include the National Guard; and the medical and public health response 
capabilities. Furthermore, our work on recovery--programs to help 
communities and victims get back to normal--has also identified 
challenges related to federal assistance to recovery areas, private 
nongovernment assistance efforts, and lessons from overseas recovery 
programs. In many of these areas we have made a number of 
recommendations, some of which have still not been implemented. Below 
are some examples of our previous and planned work related to the 
jurisdiction of this committee regarding preparedness, response, and 
recovery issues related to health care, energy, the environment, and 
telecommunications.

Health Care Issues
    Hurricane Katrina raised a number of health care concerns, and the 
preparedness of health care providers, their response capabilities, and 
health care agency and hospital capacity are all important in a major 
disaster. The National Strategy for Homeland Security had a specific 
initiative to prepare health care providers for catastrophic events, 
such as major terrorist attacks.1 However, in April 2003, we 
reported that many local areas and their supporting agencies may not 
have been adequately prepared to respond to such an event.2 
Specifically, while many state and local officials reported varying 
levels of preparedness to respond to a bioterrorist attack, they 
reported that challenges existed because of deficiencies in capacity, 
communication, and coordination elements essential to preparedness and 
response. These included workforce shortages, inadequacies in disease 
surveillance and laboratory systems, and a lack of regional 
coordination and compatible communications systems. Some of these 
challenges, such as those involving coordination efforts and 
communications systems, were being addressed more readily, whereas 
others, such as infrastructure and workforce issues, were more 
resource-intensive. Generally, we found that cities with more 
experience in dealing with public health emergencies were generally 
better prepared for a major disaster (such as a bioterrorist attack) 
than other cities, although challenges remain in every city. Almost a 
year later, in February 2004, we reported that although states had 
further developed many important aspects of public health preparedness, 
no state was fully prepared to respond to a major public health 
threat.3 Specifically, states had improved their disease 
surveillance systems, laboratory capacity, communications capacity, and 
workforce needed to respond to public health threats, but gaps in each 
remained. Moreover, regional planning among states was lacking, and 
many states lacked surge capacity--the capacity to evaluate, diagnose, 
and treat the large numbers of patients that would present during a 
public health emergency.
---------------------------------------------------------------------------
    \1\ See the National Strategy for Homeland Security, the White 
House, July 2002.
    \2\ See GAO, Bioterrorism: Preparedness Varied Across State and 
Local Jurisdictions, GAO-03-373 (Washingon, D.C.: Apr. 7, 2003).
    \3\ See GAO, Public Health Preparedness: Response Capacity 
Improving, but Much Remains to Be Accomplished, GAO-04-458T, 
(Washington, D.C.: February 12, 2004).
---------------------------------------------------------------------------
    In terms of health care agencies and hospital capacities, we also 
found major deficiencies. In May 2003 we testified that while the 
efforts of public health agencies and health care organizations to 
increase their preparedness for major public health threats have 
increased, significant challenges remained.4 Specifically, 
we found most emergency departments across the country lacked the 
capacity to respond to large-scale infectious disease outbreaks. For 
example, although most hospitals across the country reported 
participating in basic planning activities for large-scale infectious 
disease outbreaks, few had acquired the medical equipment resources--
such as ventilators--that would be required in such an event. Further, 
because most emergency departments already routinely experienced some 
degree of overcrowding, they may not be able to handle the sudden 
influx of patients that would occur during a large-scale infectious 
disease outbreak. Regarding hospital capacity, in August 2003 we 
reported that the medical equipment available for response to certain 
incidents (e.g., as a biological terrorist incident) varied greatly 
among hospitals.5 Additionally, many hospitals reported that 
they did not have the capacity to respond to the large increase in the 
number of patients that would be likely to result from incidents with 
mass casualties.
---------------------------------------------------------------------------
    \4\ See GAO, SARS Outbreak: Improvements to Public Health Capacity 
Are Needed for Responding to Bioterrorism and Emerging Infectious 
Diseases, GAO-03-769T (Washington, D.C.: May 7, 2003).
    \5\ See GAO, Hospital Preparedness: Most Urban Hospitals Have 
Emergency Plans but Lack Certain Capacities for Bioterrorism Response, 
GAO-03-924 (Washington, D.C.: Aug. 6, 2003).
---------------------------------------------------------------------------
    In our April 2003 report on preparedness, we made a number of 
recommendations to help state and local jurisdictions better prepare 
for a bioterrorist attack and to develop a mechanism for sharing 
solutions between jurisdictions. In response to this report, the 
Departments of Health and Human Services and Homeland Security 
concurred with GAO's recommendations.

 We plan future work related to Hurricane Katrina regarding public 
        health and health services, including mental health services 
        issues. Specifically, we plan to conduct evaluations of 
        evacuation plans for inpatient and long-term care health 
        facilities; federal, state, and local preparedness plans for 
        dealing with the health consequences of natural and man-made 
        disasters; and provision of mental health services for evacuees 
        and first responders.

Energy Issues
    The wide-ranging effects of Hurricane Katrina on gasoline prices 
nationwide are a stark reminder of the interconnectedness of our 
petroleum markets and reveal the vulnerability of these markets to 
disruptions, natural or otherwise.6 These markets have 
become stressed over time, in part because of a proliferation of 
special gasoline blends that have raised costs and affected operations 
at refineries, pipelines, and storage terminals.7 As we 
noted in our recent testimony on energy markets, Hurricane Katrina did 
tremendous damage to, among other things, electricity transmission 
lines, and oil producing, refining, and pipeline 
facilities.8 Because the Gulf Coast refining region is a net 
exporter of petroleum products to all other regions of the country, 
retail gasoline prices in many parts of the nation rose dramatically. A 
variety of factors determine how gasoline prices vary across different 
locations and over time. For example, gasoline prices may be affected 
by unexpected refinery outages or accidents that significantly disrupt 
the delivery of gasoline supply. Future gasoline prices will reflect 
the world supply and demand balance and will continue to be an 
important factor affecting the American consumer for the foreseeable 
future. The impact of gasoline prices is felt in virtually every sector 
of the U.S. economy. Some of our more significant open recommendations 
are that (1) the Environmental Protection Agency (EPA), with the 
Department of Energy (DOE) and others, develop a plan to balance the 
environmental benefits of using special fuels with the impacts these 
fuels have on the gasoline supply infrastructure, and (2) if warranted, 
EPA work with other agencies to identify what statutory or other 
changes are required to implement this plan. EPA declined to comment on 
our recommendations and did not signify agreement or disagreement with 
them.
---------------------------------------------------------------------------
    \6\ For a primer on gasoline prices, see GAO, Motor Fuels: 
Understanding the Factors That Influence the Retail Price of Gasoline, 
GAO-05-525SP, Washington, D.C.: May 2, 2005).
    \7\ See GAO, Gasoline Markets: Special Gasoline Blends Reduce 
Emissions and Improve Air Quality, but Complicate Supply and Contribute 
to Higher Prices, GAO-05-421 (Washington, D.C.: June 17, 2005).
    \8\ See GAO, Energy Markets: Gasoline Price Trends, GAO-05-1047T 
(Washington, D.C.: Sept. 21, 2005).

 We plan future work on energy issues in order to better understand 
        the vulnerability of the nation's energy infrastructure to 
        natural or manmade disasters. Specifically, we plan to conduct 
        evaluations of determinants of gasoline prices in particular, 
        and the petroleum industry more generally. Included will be 
        evaluations of world oil reserves; security of maritime 
        facilities for handling and transporting petroleum, natural 
        gas, and petroleum products; viability of the Strategic 
        Petroleum Reserve to respond to disruptions such as Hurricane 
        Katrina; and impacts of the potential disruption of Venezuelan 
        oil imports.

Environmental Issues
    Hurricane Katrina resulted in significant impacts on Gulf Coast 
environmental resources. The condition of environmental resources has 
an important role in both the prevention and of recovery from natural 
disasters. In the area of prevention, the U.S. Army Corps of Engineers 
has responsibility for constructing hurricane prevention and flood 
control projects throughout the country. The Lake Pontchartrain and 
Vicinity Hurricane Protection Project was one such project that was 
authorized by Congress in 1965 to provide hurricane protection to New 
Orleans from a fast-moving Category 3 hurricane.9 Similarly, 
wetlands, once regarded as unimportant areas to be filled or drained 
for agricultural or development activities, are now recognized for the 
variety of important functions that they perform, including providing 
flood control by slowing down and absorbing excess water during storms; 
maintaining water quality by filtering out pollutants before they enter 
streams, lakes, and oceans; and protecting coastal and upland areas 
from erosion.10 Moreover, it has been suggested that 
wetlands act as a speed bump, slowing down storms almost as dry land 
does. The Fish and Wildlife Service reports that more than half of the 
221 million acres of wetlands that existed during colonial times in 
what is now the contiguous United States have been lost. There is no 
reliable set of wetland acreage estimates to be used to evaluate the 
progress made in achieving the goal of ``no net loss'' of the remaining 
wetlands. In the area of recovery, Hurricane Katrina poses an enormous 
challenge in terms of the cleanup of hazardous materials in the area. 
Industrial discharges, sewage, gas and oil from gas stations, household 
hazardous materials, pesticides, and chemicals contaminated the 
floodwaters. The long-term effects of these hazardous materials, the 
level of effort and coordination needed and the cost of decontamination 
and cleanup will take some time to determine.
---------------------------------------------------------------------------
    \9\ See GAO, Army Corps of Engineers: Lake Ponchartrain and 
Vicinity Hurricane Protection Project, GAO-05-1050T, (Washington, D.C.: 
Sept. 28, 2005).
    \10\ See GAO, Wetlands Overview: Problems With Acreage Data 
Persist, GAO/RECED-98-150, (Washington, D.C.: July 1, 1998).
---------------------------------------------------------------------------
    In situations where such contamination exits, EPA serves as the 
lead agency for the cleanup of hazardous materials, including oil and 
gasoline. EPA emergency response personnel are working in partnership 
with FEMA and state and local agencies to help assess the damage, test 
health and environmental conditions, and coordinate cleanup from 
Hurricane Katrina. They are conducting water, air, and sediment 
testing, assessing drinking water and wastewater facilities, examining 
superfund and other hazardous waste sites affected by the storms, 
issuing environmental waivers, and providing public advisories 
regarding drinking water and the potential for hazardous debris in 
homes and buildings.

 We plan future work on environmental issues, such as evaluations of 
        how EPA and other federal, state, and local agencies conduct 
        water, soil, and air quality testing to determine when it will 
        be safe for residents to return to New Orleans. We also plan to 
        evaluate efforts to treat hazardous materials during the 
        cleanup efforts and restore drinking water and wastewater 
        facilities. We also plan to review the Army Corps of Engineers 
        efforts to repair the integrity of the hurricane protection 
        structures in the New Orleans area and assess issues relating 
        to wetland losses.

Telecommunications Issues
    Hurricane Katrina knocked out a wide variety of communications 
infrastructure and communication among emergency personnel is important 
in any disaster. The National Strategy for Homeland Security called for 
seamless communications among all first responders and public health 
entities. However, in our August and November 2003 reports, we noted 
that insufficient collaboration among federal, state, and local 
governments had created a challenge for sharing public health 
information and developing interoperable communications for first 
responders.11 For example, states and cities had implemented 
many initiatives to improve information sharing, but these initiatives 
had not been well coordinated and risked creating partnerships that 
limited access to information and created duplicative efforts. Another 
challenge involved the lack of effective, collaborative, 
interdisciplinary, and intergovernmental planning for interoperable 
communications. For instance, the federal and state governments lacked 
a coordinated grant review process to ensure that funds were used for 
communications projects that complemented one another and added to 
overall statewide and national interoperability capacity.12 
Moreover, we testified in April 2004 that the Wireless Public Safety 
Interoperable Communications Program, or SAFECOM, had made very limited 
progress in achieving communications interoperability among all 
entities at all levels of government and had not achieved the level of 
collaboration necessary.13 Finally, in our October 2003 
report on public health preparedness, we reported that challenges 
existed in ensuring communication among responders and with the 
public.14 For example, during the anthrax incidents of 2001, 
local officials identified communication among responders and with the 
public as a challenge, both in terms of having the necessary 
communication channels and in terms of making the necessary information 
available for distribution.
---------------------------------------------------------------------------
    \11\ See GAO, Homeland Security: Efforts to Improve Information 
Sharing Need to Be Strengthened, GAO-03-760, (Washington, D.C.: Aug. 
27, 2003); and Homeland Security: Challenges in Achieving Interoperable 
Communications for First Responders, GAO-04-231T (Washington, D.C.: 
Nov. 6, 2003).
    \12\ See GAO, Homeland Security Federal leadership and 
Intergovernmental Cooperation Required to Achieve First Responder 
Interoperable Communications, GAO-04-740 (Washington, D.C.: July 20, 
2004).
    \13\ See GAO, Project SAFECOM: Key Cross-Agency Emergency 
Communications Effort Requires Stronger Collaboration, GAO-04-494 
(Washington, D.C.: Apr.16, 2004).
    \14\ See GAO, Bioterrorism: Public Health Response to Anthrax 
Incidents of 2001, GAO-04-152 (Washington, D.C.: Oct. 15, 2003).
---------------------------------------------------------------------------
    We made a number of recommendations that DHS, in conjunction with 
other federal agencies, complete a database on communication 
frequencies, determine the status of wireless public safety 
communications nationwide, tie grant funding to statewide 
interoperability plans, and review the interoperability functions of 
SAFECOM. DHS has agreed to take some, but not all, of the corrective 
actions we recommended.

                        CONCLUDING OBSERVATIONS

    We have issued a number of reports relevant to evaluating Hurricane 
Katrina. In addition, the accountability community--including the IGs 
and GAO--has an active future agenda for evaluating the nation's 
response to the hurricane. Congress has recently passed legislation 
that provided $15 million for the DHS IG to audit and investigate 
Hurricane Katrina response and recovery activities.15 The 
DHS IG has developed a plan for oversight of the funds being spent 
directly by DHS components and the IGs of the 12 other departments and 
agencies that account for almost all of the remainder of the funds 
appropriated thus far. The primary objective of the IG plan is to 
ensure accountability, primarily through ongoing audit and 
investigative efforts designed to identify and address waste, fraud, 
and abuse. Each IG will be issuing an individual report to ensure that 
the affected people, organizations, and governments receive the full 
benefit of the funds being spent and to be spent on disaster response 
and recovery programs. The DHS IG will coordinate the work of the 
respective IGs through regular meetings, and the overall account of 
funds will be coordinated with us through regular meetings with our 
senior officials.
---------------------------------------------------------------------------
    \15\ Second Emergency Supplemental Appropriations Act to Meet 
Immediate Needs Arising from the Consequences of Hurricane Katrina, 
2005, Pub. L. 109-62, 119 Stat. 190, 191 (2005).
---------------------------------------------------------------------------
    As the IGs focus on fraud, waste, and abuse, GAO can provide 
Congress with more strategic evaluations on such issues as coordination 
among various agencies and state and local government and the private 
sector. Some of our past strategic work included reports in the wake of 
Hurricane Andrew in 1992 16 and the terrorist attacks of 
September 11, 2001.17 Other strategic-level reports have 
covered such topics as barriers to interagency coordination, 
18 issues related to continuity of operations planning for 
essential government services, 19 and DHS's efforts to 
enhance first responders' all-hazards capabilities.20 Many 
of our past reports, which provide a firm foundation for doing Katrina-
related work, contain recommendations to improve top-level 
coordination. While several changes have occurred in terms of the 
government's structure and process for emergency preparedness and 
response, the extent to which many of our earlier recommendations have 
been fully implemented remains unclear.
---------------------------------------------------------------------------
    \16\ See GAO, Disaster Management: Improving the Nation's Response 
to Catastrophic Disasters, GAO/RCED-93-186 (Washington, D.C.: July 23, 
1993).
    \17\ See GAO, Combating Terrorism: Selected Challenges and Related 
Recommendations, GAO-01-822 (Washington, D.C.: Sept. 20, 2001).
    \18\ See GAO, Managing for Results: Barriers to Interagency 
Coordination, GAO/GGD-00-106 (Washington, D.C.: Mar. 29, 2000).
    \19\ See GAO, Continuity of Operations: Improved Planning Needed to 
Ensure Delivery of Essential Government Services GAO 04-160 
(Washington, D.C.: Feb. 27, 2004).
    \20\ See GAO, Homeland Security: DHS's Efforts to Enhance First 
Responders' All-Hazards Capabilities Continue to Evolve, GAO-05-652 
(Washington, D.C.: July 11, 2005).
---------------------------------------------------------------------------
    In closing, we will continue to work with the accountability 
community and have already reached out to the relevant congressional 
committees, federal IGs, and state and local auditors in the affected 
states to coordinate our efforts, avoid unnecessary duplication, and 
most effectively utilize our resources. Comptroller General Walker has 
been personally and extensively involved in this effort and he plans to 
continue to be heavily involved.
    Mr. Chairman, this concludes my statement. I would be pleased to 
respond to any questions that you or other members of the subcommittee 
may have at this time.

    Mr. Whitfield. Thank you very much, Mr. Rabkin. At this 
time, we will recognize Mr. Friedman for his opening statement.

                TESTIMONY OF GREGORY H. FRIEDMAN

    Mr. Friedman. Good morning, Mr. Chairman and members of the 
subcommittee. As the Department of Energy's Inspector General, 
and as Vice Chair of the President's Council on Integrity and 
Efficiency, I am pleased to be here today at your request to 
discuss Inspector General plans to guard against waste, fraud, 
and abuse in the hurricane relief and recovery efforts.
    The impact that Katrina and Rita have had on the citizens 
and businesses in the Gulf States and other communities has 
been nothing short of catastrophic. The goal of the Inspector 
General community is to aid in the efforts to ensure that funds 
appropriated for hurricane relief are spent for their intended 
purpose: that is, to assist the affected citizens and 
businesses in recovering from his tragedy.
    Several months ago, in my role as Vice Chair of the 
President's Council on Integrity and Efficiency, I established 
a special working group to address homeland security issues. I 
asked Rick Skinner, who is sitting to my left, the Inspector 
General of the Department of Homeland Security, to head the 
group. On August 29, 2005, a major challenge for this working 
group became evident with the devastation associated with 
Hurricane Katrina. The IG community mobilized, and is providing 
on-the-ground, proactive support in overseeing the billions of 
dollars appropriated for relief. The working group has 
implemented a comprehensive, community-wide program, which 
identifies specific risks and control weaknesses of various 
programs and operations. In carrying out the plan, the IG 
community is reviewing the award and administration of 
contracts and grants, operating an OIG hurricane relief and 
reconstruction hotline, and aggressively addressing allegations 
of wrongdoing.
    In addition to the working group, within days of Katrina, 
many in the IG community volunteered to assist with relief 
activities. Further, PCIE members, in efforts related to the 
specific missions of their own agencies, are aggressively 
working audit and investigative issues arising from Katrina, 
and now, from Hurricane Rita. The massive Federal hurricane aid 
package may attract those who are inclined to abuse the system 
and defraud the U.S. taxpayers.
    Based on my experience, Mr. Chairman, prevention is the key 
to minimizing fraud and misuse. Thus, it is vitally important 
that agency management establish effective controls and 
procedures for expenditures relating to hurricane relief. We 
are working with each agency to identify the extra safeguards 
which are needed to deal effectively with the increased risk 
environment, and then, we will be determining if they have 
achieved any success.
    These challenges primarily reside with agency senior 
management, including those responsible for agency budget, 
planning, procurement, and program management functions. The 
Inspectors General play a critical role in the process of 
identifying vulnerabilities in government programs and 
operations, recommending needed management improvements, and 
bringing to justice those attempting to defraud the Federal 
Government. In working toward these goals, specifically as they 
relate to hurricane relief, we are collaborating with auditors 
and law enforcement agencies at all levels of government to 
achieve common objectives.
    Regarding my role and responsibilities within the 
Department of Energy, the Department has a significant role to 
play in disaster relief relating to the restoration of damaged 
energy systems as part of the National Response Plan which was 
alluded to earlier, Emergency Support Function 12, which is the 
``Energy Annex.'' My office has implemented an audit plan to 
review this effort. Consistent with the Energy Annex, we are in 
the process of examining the Department of Energy's actions 
related to collecting, assessing, and providing information on 
energy supply, demand, and prices, and identifying supporting 
resources needed to restore energy systems.
    In addition, the Department has begun to make oil available 
from the Strategic Petroleum Reserve, which contains 
approximately 695 million barrels of oil, and serves as the 
Nation's first line of defense against an interruption of 
petroleum supplies. We have initiated an audit of the Strategic 
Petroleum Reserve sales and exchange program which was 
designed, in the current environment, to ensure that refineries 
have the petroleum they need to keep gasoline, diesel fuel and 
other petroleum products flowing to American consumers. Other 
audits, inspections, and investigative efforts will be 
undertaken as needed.
    In conclusion, let me emphasize that the Federal Inspector 
General community is committed to doing its utmost to ensure 
that the national interests and those of Katrina's victims are 
well served.
    Mr. Chairman and members of the subcommittee, this 
concludes my statement, and I would be pleased to answer any 
questions that you might have.
    [The prepared statement of Gregory H. Friedman follows:]

  Prepared Statement of Gregory H. Friedman, Inspector General, U.S. 
                          Department of Energy

    Good morning Mr. Chairman and members of the Subcommittee. As the 
Department of Energy's Inspector General and as Vice Chair of the 
President's Council on Integrity and Efficiency, I am pleased to be 
here today at your request to discuss Inspector General plans to guard 
against waste, fraud and abuse in the post-Katrina relief and recovery 
efforts. The impact Katrina has had on the citizens and businesses in 
the Gulf States and in other communities has been nothing short of 
catastrophic. The goal of the Inspector General community is to aid in 
the effort to ensure that funds appropriated for Hurricane Katrina 
relief efforts are spent properly and effectively. It is imperative 
that the $63 billion appropriated for the immediate relief effort, as 
well as all future special and other direct funding, is used for its 
intended purpose; that is, to assist the affected citizens and 
businesses in recovering from this tragedy.
    Several months ago, in my role as Vice Chair of the President's 
Council on Integrity and Efficiency, I established a special working 
group to address homeland security audit and investigative issues. This 
working group's efforts impact programs and operations at nearly every 
Federal agency. I asked Rick Skinner, the Inspector General of the 
Department of Homeland Security, to head the group. On August 29, 2005, 
a major challenge for this working group became evident with the 
devastation associated with Hurricane Katrina. Under Rick's leadership, 
the IG community has mobilized, and is providing on-the-ground, 
proactive support in overseeing the billions of dollars appropriated 
for Katrina relief. The working group has implemented a comprehensive 
community-wide plan which identifies specific risks and control 
weaknesses of various programs and operations. In carrying out the 
plan, the IG community is reviewing the award and administration of 
contracts and grants; operating a Katrina OIG Hotline; and, 
aggressively addressing allegations of wrongdoing.
    In addition to the working group, within days of Hurricane Katrina, 
many IG special agents, auditors, and inspectors volunteered to assist 
with relief activities. Further, PCIE members, in efforts related to 
the specific missions of their own agencies, are aggressively working 
audit and investigative issues arising from Katrina.
    As has been widely recognized, the massive Federal Katrina aid 
package may attract those inclined to abuse the system and defraud the 
U.S. taxpayers. Based on my experience, prevention is the key to 
minimizing fraud and misuse. Thus, it is important that agency 
management establish effective controls and procedures for expenditures 
relating to hurricane relief. We are working with each agency to foster 
a culture of accountability and responsibility. These challenges 
primarily reside with agency senior management, including those 
responsible for agency budget, planning, procurement and program 
management functions.
    The Inspectors General play a critical role in the process of 
identifying vulnerabilities in government programs and operations; 
recommending needed management improvements; and, bringing to justice 
those attempting to defraud the Federal Government. In working toward 
these goals, specifically as they relate to Katrina, we are 
collaborating with auditors and law enforcement agencies at all levels 
of government to achieve common objectives.
    Regarding the Department of Energy, the Department has a 
significant role to play in disaster relief relating to the restoration 
of damaged energy systems as a part of the National Response Plan, 
Emergency Support Function 12. My office has implemented an audit plan 
to review this effort. Consistent with Emergency Support Function 12, 
we are in the process of examining the Department's actions related to:

 Collecting, assessing, and providing information on energy supply, 
        demand and prices; and,
 Identifying supporting resources needed to restore energy systems.
    In addition, the Department has announced actions to make oil 
available from the Strategic Petroleum Reserve, which contains 
approximately 695 million barrels of oil and serves as the Nation's 
first line of defense against an interruption of petroleum supplies. We 
have initiated an audit of the Strategic Petroleum Reserve sales and 
exchange program which was designed, in the current environment, to 
ensure that refineries have the petroleum they need to keep gasoline 
and diesel fuel flowing to American consumers. Other audits, 
inspections and investigative efforts will be undertaken as needed.
    In my role as Vice Chair of the President's Council on Integrity 
and Efficiency, let me emphasize that the Federal Inspector General 
community is committed to doing its utmost to ensure that the national 
interests and those of Katrina's victims are well-served.
    Mr. Chairman and members of the Subcommittee, this concludes my 
statement. I will be pleased to answer any questions.

    Mr. Whitfield. And thank you, Mr. Friedman. At this time, 
we will recognize Mr. Skinner for his opening statement.

                 TESTIMONY OF RICHARD L. SKINNER

    Mr. Skinner. Mr. Chairman, thank you for the opportunity to 
be here today.
    I would like to summarize briefly a couple points that I 
made in my prepared statement, which I have submitted for the 
record, and that is the OIG community's oversight initiatives 
and my office's oversight efforts. First, concerning the OIG 
community oversight. Through the PCIE Homeland Security 
Roundtable, which I chair, the inspector general community has 
been working together to coordinate our respective oversight 
efforts from the beginning. Collectively, we have prepared 
plans to provide oversight of 99 percent of the $63 billion 
appropriated to date for Katrina relief efforts.
    As with all Presidentially declared disasters, FEMA 
coordinates the Federal Government's relief efforts. To this 
end, they administer some of the funds directly, but the bulk 
of the funds are distributed to other Federal agencies through 
mission assignments, or through State agencies through grants. 
As of September 21, FEMA has made grants to Katrina-affected 
states totaling about $4 billion, and mission assignments 
totaling about $7 billion, over $6 billion of which went to the 
Department of Defense.
    The overriding objectives of the OIG plans are to ensure 
accountability, promote efficiencies, and to detect and prevent 
fraud, waste, and abuse. Insofar as the bulk of the funds 
obligated to date have been or will be spent for contractor 
support, the OIG's current plans will naturally focus on 
contract management. This includes performing internal control 
assessments of procurement systems, monitoring contract 
transactions, and reviewing the award and management of all 
major contracts, particularly no-bid or limited competition 
contracts.
    In this regard, the OIGs will be looking at the evidence to 
support the no-bid decision, the criteria used to select one 
contractor over another, the reasonableness of the costs 
associated with the service or product to be delivered, the 
qualifications of the contractors selected, and the support for 
the payments made to the contractor. Also, using data mining 
techniques, the OIGs will be reviewing the use of the expanded 
micro-purchase authority on a real-time basis.
    Notwithstanding our best efforts to prevent problems 
through an aggressive oversight program, history has shown that 
there are some who will try to beat the system through 
fraudulent means. The OIGs will be working closely with the 
newly established Hurricane Fraud Taskforce, which is chaired 
by the Assistant Attorney General of the Criminal Division. The 
Taskforce is designed to investigate and prosecute disaster-
related crimes, such as contractor fraud, government benefit 
fraud, and insurance fraud. It will track referrals of 
potential cases and complaints, coordinate with law enforcement 
agencies to initiate investigations, match referrals with the 
appropriate U.S. Attorney's offices, and ensure timely and 
effective prosecution of cases. In this regard, an OIG 
Hurricane Relief Hotline has been established and will be 
widely publicized to allow for the effective screening and 
followup of allegations of fraud, waste, and abuse. To date, 
the OIGs have committed a total of over 300 auditors, 
investigators, and inspectors to this combined effort.
    Now, with respect to my office's oversight initiatives. 
Based on my experiences as a Deputy Inspector General at FEMA, 
I recognize that a disaster of this magnitude will require a 
long-term commitment of resources. Accordingly, to ensure that 
we remain focused, not just on short-term response initiatives 
or operations, but also on long-term recovery initiatives, 
which could require our involvement for the next 3, 5, or even 
10 years to come, I have created an Office of Katrina Oversight 
within the OIG, to focus solely on Hurricane Katrina relief 
operations. I just recently hired an Assistant Inspector 
General with very extensive FEMA and OIG experience to manage 
this effort on a full-time basis. My office has already 
assigned 60 auditors, investigators, and inspectors, and will 
be hiring over 30 more over the next 3 months. We are prepared 
to add resources, providing funding is made available, as the 
need arises. We have had personnel monitoring FEMA 
headquarters' operations since day one, September 1, and 
currently have auditors assigned to the joint field offices in 
Baton Rouge, Louisiana, Montgomery Alabama, and Jackson, 
Mississippi.
    In addition to the oversight activities that I have already 
discussed, we will provide oversight of FEMA's individual 
assistance program and, in coordination with HUD's OIG, provide 
oversight of FEMA's temporary housing program; monitor and, as 
necessary, audit public assistance and mitigation projects 
approved by the State and FEMA; continue to monitor FEMA's 
assignments of responsibilities under mission assignments; and 
coordinate our work with the work of the other OIGs and the 
GAO, to ensure that there are no major gaps in oversight and 
conversely, to mitigate the potential for duplication of 
effort.
    And finally, we will be working very closely with our 
counterparts at the State and local level, to leverage against 
our efforts. Already, for example, Louisiana's Legislative 
Auditor and Inspector General, have dedicated 36 auditors to 
review transactions flowing through the State's Office of 
Emergency Preparedness. We intend to do this in Mississippi, 
Alabama and Texas as well. Finally, we have initiated a review 
that will focus on FEMA's preparedness for and response to the 
devastation caused by Hurricane Katrina. This review will be 
done in close coordination with GAO, of course.
    In conclusion, I would like to say that, collectively, the 
OIG community is uniquely qualified and positioned to provide 
the most timely and effective oversight of Hurricane Katrina 
operations. You can be sure that the OIG community stands 
united in its efforts to ensure that taxpayers' dollars are 
spent wisely, today, and in the years to come, as the 
communities and victims in the Gulf region begin to get back to 
normal.
    Mr. Chairman, that concludes my statement. I will be happy 
to answer any questions.
    [The prepared statement of Richard L. Skinner follows:]

   Prepared Statement of Richard L. Skinner, Inspector General, U.S. 
                    Department of Homeland Security

    Good morning Mr. Chairman and Members of the Subcommittee. Thank 
you for the opportunity to be here today to discuss the plans of the 
Inspectors General to guard against waste, fraud, and abuse in post-
Katrina relief and recovery.

              OVERVIEW OF OIG HURRICANE KATRINA OVERSIGHT

    On August 29, 2005, Hurricane Katrina hit the Gulf Coast states of 
Louisiana, Mississippi, Alabama, and Florida with Category IV winds and 
torrential rains. By September 9, 2005, Congress had passed legislation 
that provided over $63 billion to the Department of Homeland Security 
(DHS) for disaster relief, including $15 million for the DHS Office of 
Inspector General (OIG) to oversee the management and expenditure of 
those funds. Although the Federal Emergency Management Agency (FEMA) is 
responsible for coordinating response and recovery efforts, it will 
take the combined efforts of many federal, state, and local government 
entities to restore the Gulf Coast. Therefore, the oversight task 
encompasses more the just the DHS OIG. The circumstances created by 
Hurricane Katrina provided an unprecedented opportunity for fraud and 
mismanagement, and some estimate that the cost to recover from the 
storm and rebuild the affected areas could reach $200 billion and more.
    In addition to its own activities related to Hurricane Katrina, 
FEMA tasked other federal departments and agencies through Mission 
Assignments. As of September 13, 2005, FEMA had made mission 
assignments totaling just over $7 billion, over $6 billion of which 
went to the Department of Defense (DOD) and the Army Corps of 
Engineers. Departments use mission assignment funds to award contracts 
or provide direct support for response efforts. In addition, some 
departments and agencies, including DOD, received direct appropriations 
for Hurricane Katrina activities. We expect more disaster relief funds 
and direct appropriations for Katrina relief in the weeks and months 
ahead.
    To answer the call for oversight in the face of this unprecedented 
disaster, my office and other Inspectors General have been working 
together to coordinate our efforts from the beginning. We are 
collectively focused on our departments' and agencies' response and 
recovery efforts and the related disaster assistance spending. The 
overriding objective of the OIGs' plan is to ensure accountability and 
preventing problems before they occur. Our plans focus heavily on 
prevention, including reviewing internal controls; monitoring and 
advising department officials on contracts, grants and purchase 
transactions before they are approved; and meeting with applicants, 
contractors and grantees to advise them of the requirements and assess 
their capability to account for the funds. The plans also encompass an 
aggressive and ongoing audit and investigative effort designed to 
ensure that disaster relief funds are being spent wisely and to 
identify waste, fraud, and abuse as early as possible.
    The OIGs are currently coordinating through regular meetings of the 
President's Council on Integrity and Efficiency (PCIE) Homeland 
Security Round Table, and the overall effort will be coordinated with 
the Government Accountability Office (GAO) through regular meetings 
with GAO senior officials.

Plan Coordination
    DHS OIG has developed a plan for oversight of the funds to be spent 
directly by DHS components. The OIGs of the departments and agencies 
who account for the vast majority of the initial FEMA mission 
assignment allocations have also developed plans for the oversight of 
their respective agency's Katrina spending. To date, the OIGs, 
collectively, have committed a total of over 300 auditors, 
investigators, and inspectors to this combined effort. For example, DHS 
OIG has already assigned 60 auditors, investigators, and inspectors, 
and will be hiring over 30 more over the next three months. Over the 
next several months, the total DHS OIG staff assigned to this effort 
will double as we aggressively hire additional auditors under limited 
term appointments.
    Many of DHS OIG's personnel are already on the ground at FEMA 
Headquarters and at the Joint Field Offices (JFO) in Louisiana, 
Mississippi, and Alabama. In addition, we will be leveraging the OIGs' 
efforts with those of the state and local audit organizations in the 
three states. Already, Louisiana's Legislative Auditor and Inspector 
General have dedicated 36 auditors to review transactions flowing 
through the state's Office of Emergency Preparedness.
    The other OIGs and the GAO also plan to have personnel on site as 
necessary to conduct their oversight and investigative activities and 
these efforts will be closely coordinated. For example, the DOD OIG, 
the Army Audit Agency, the Naval Audit Service, the Air Force Audit 
Agency, the Defense Contract Audit Agency, and the defense criminal 
investigative organizations will employ a cadre of well over 100 
auditors, investigators, and inspectors who will provide immediate 
oversight of DOD contracts, grants, and operations related to Hurricane 
Katrina relief efforts.
    I do not believe that additional authorities are needed to allow 
appropriate coordination of these efforts. However, it is clear that 
additional resources will be needed and I will be preparing appropriate 
requests for supplemental appropriations.

DHS OIG Activities
    Within days of Katrina's landfall, the DHS OIG had a presence 
onsite at FEMA Headquarters to monitor operations. We quickly increased 
this staffing level so that we could have a larger presence and monitor 
operations at FEMA's Emergency Operations Center on a near-continuous 
basis. Through this presence, we stay current on all disaster relief 
operations and provide on-the-spot advice on internal controls and 
precedent setting decisions. Auditors also closely monitor FEMA's 
assignment of responsibilities and funding to other federal 
organizations under mission assignments. This effort will be 
coordinated with the respective agency OIG reviews and will continue 
through project execution to identify questionable activities early, 
and thus decrease the risk of misspending while ensuring compliance 
with federal laws and regulations.
    During the past week, we established offices with auditors and 
investigators at the Joint Field Offices (JFO) in Baton Rouge, 
Louisiana; Montgomery, Alabama; and Jackson, Mississippi. The auditors 
will provide advice and perform proactive procedures related to the 
JFOs' internal activities to ensure the appropriate control and use of 
FEMA funds. The emphasis will be to provide a visible OIG presence to 
prevent misspending on questionable contracts and grants. In 
particular, the auditors will perform the following functions:

 Oversee contract activities as requirements and awards are developed.
 Participate in FEMA applicant briefings and kickoff meetings.
 Provide advice on applicants' accounting systems and sub-grant 
        administrative policies, procedures, and practices.
 Oversee FEMA property management to ensure that property and 
        equipment acquired for use at the JFOs are safeguarded against 
        loss and pilferage.
 Perform audits, as necessary, of contracts and grants awarded by 
        FEMA.
    The investigators will coordinate with the respective federal, 
state, and local law enforcement agencies and prosecutors as part of 
their ``fraud awareness'' initiatives. They will also handle 
allegations received through a single, OIG-wide, Katrina ``Hotline.''
    Further, I have just selected an Assistant Inspector General for 
Katrina Oversight with extensive FEMA and OIG experience to manage the 
overall effort on a full time basis.

Auditing Contracting and Procurement Activities
    We plan to maintain proactive and aggressive audit oversight of 
contracting activities resulting from Hurricane Katrina. Our objectives 
will be to determine the extent: (1) federal acquisition regulations 
are being adhered to, (2) effective contracting practices are being 
used on these procurements, and (3) the expenditures are necessary and 
reasonable. Auditors will review the award and administration of all 
major contracts, including those made in the first two weeks, and each 
department's implementation of expanded micro purchase authority to 
ensure that appropriate federal acquisition regulations and guidelines 
are being adhered to, and expenditures are necessary and reasonable. 
Data mining techniques will provide continuous oversight of purchase 
card transactions to identify spending anomalies for further review.

Monitoring Financial Controls
    Financial statement auditors will provide oversight of their 
agency's control environment, financial and operational processes, and 
the effectiveness of internal controls to identify financial reporting 
issues early. Under this effort, where material, auditors will 
identify, document, and test key internal controls for operating 
effectiveness.

Monitoring Public Assistance Projects and other Grants
    DHS OIG auditors will closely monitor FEMA's Individuals and 
Households Program (IHP) and Temporary Housing Program, as well as 
FEMA's approval of Public Assistance projects. Reviews will start early 
in project execution and remain ongoing to identify questionable 
activities early, prevent misspending, and ensure compliance with 
federal laws and FEMA regulations. We will be leveraging our resources 
by working in partnership with state and local audit organizations. 
Other OIGs overseeing grant operations will follow similar procedures. 
For example, DOJ OIG will be reviewing $5 million in grants to be 
awarded by the Office of Justice programs.

Review of FEMA's Disaster Management Activities in Response to Katrina
    DHS OIG has initiated an assessment of FEMA's performance as it 
conducted its disaster management responsibilities in response to 
Hurricane Katrina. It will encompass three of the four major phases of 
disaster management--Preparedness, Response, and Recovery (with more 
focus and emphasis being placed upon Preparedness and Response)--as 
well as some Emergency Support Functions within the National Response 
Plan for which FEMA is the primary agency: Emergency Management; Mass 
Care, Housing, and Human Services; Urban Search and Rescue; Long-term 
Community Recovery and Mitigation; and External Affairs. We will 
coordinate our review with GAO to avoid duplication to the extent 
possible.

Monitoring the ``Katrina'' HOTLINE
    While each of the OIGs has its own HOTLINE for receiving 
allegations of waste, fraud, and abuse, a single Katrina HOTLINE will 
be established and widely publicized to avoid confusion and allow for 
effective screening and follow-up.

Reporting OIG Progress and Results
    Each OIG will be reporting their progress to me biweekly, and my 
office, in turn, will provide consolidated biweekly status reports to 
key Administration officials and Congressional committees. Each IG will 
also be issuing individual reports as weaknesses or problem areas 
needing attention are identified. ``Flash reports'' will be prepared 
and distributed by each OIG when issues and problems that need 
attention are identified, and more extensive audit and inspection 
reports will be issued as completed.
    DHS OIG will prepare regular status reports on the consolidated OIG 
efforts (initially every two weeks) to key administration and 
congressional officials. Briefings will be provided as and when 
requested.
    I believe that, collectively, the Inspectors General are uniquely 
qualified and positioned to provide the most timely and effective 
oversight of Hurricane Katrina activities, and to ensure that the 
affected people receive the full benefit of the funds to be spent on 
the recovery.
    Mr. Chairman, that concludes my prepared statement. I would be 
happy to answer any questions you or the Members may have.

    Mr. Whitfield. Thank you, Mr. Skinner. At this time, Mr. 
Thomas Gimble, with the U.S. Department of Defense, for his 
opening statement.

                  TESTIMONY OF THOMAS F. GIMBLE

    Mr. Gimble. Mr. Chairman, thank you for the opportunity to 
appear before you today to address the DoD audit and 
investigative oversight efforts regarding the Hurricane Katrina 
relief and recovery. The DoD and the Army Corps of Engineers 
were provided direct appropriations and FEMA mission 
assignments for recovery, repair, and protection of shorelines 
of the affected Gulf States. We are working in close 
coordination with all Inspectors General through the PCIE 
Homeland Security Roundtable to ensure effective utilization of 
DoD oversight resources in the relief and recovery efforts.
    Specifically for DoD, the DoD Office of Inspector General, 
the Army Audit Agency, the Naval Audit Service, the Air Force 
Audit Agency, the Defense Contract Audit Agency, and the 
Defense criminal investigative organizations will employ a 
cadre of auditors, investigators, and inspectors to provide 
immediate and professional oversight of all DoD contracts, 
grants, and operations related to the hurricane relief and 
recovery efforts. To fulfill our statutory obligation/oversight 
responsibilities, we either have started or plan to start the 
following efforts. Our oversight effort will be on a real-time 
basis and provide immediate feedback as new issues are 
identified.
    The DoD Office of Inspector General is initially planning 
work in five specific audit areas regarding the relief and 
recovery efforts: contract support and administration, 
increased purchase card limits, use of DoD resources and 
readiness and logistics support, contingency plans for 
information technology systems, and the accounting and 
oversight of obligations and expenditures. The audit of the DoD 
contract support for hurricane relief will review the award and 
administration of DoD contracts used in the recovery effort. 
The audit of the expanded micro-purchase authority will focus 
on the reasonableness and appropriateness of expenditures and 
the early identification of questionable spending issues, and 
determine whether DoD policies and procedures need to be 
changed regarding the Hurricane Katrina-related efforts.
    Third, we will review the use of military forces and DoD 
civilian personnel supporting the relief efforts, and determine 
the impacts on readiness and logistic support. We will also 
review the contingency operations and associated plans for 
information technology resources affected by Hurricane Katrina. 
The Office of Inspector General will also determine whether the 
DoD obligations and expenditures related to construction 
efforts are timely and efficiently executed in accordance with 
the applicable laws and regulations.
    The Army Audit Agency is in the process of providing audit 
oversight of funds that the Army received for support provided 
by active Army and Army National Guard units, as well as the 
Corps of Engineers. The overall objective is to determine 
whether the Army appropriately is using the funds it is 
receiving for the Hurricane Katrina relief and recovery 
efforts. They have met with the Corps of Engineers to initiate 
this effort, and in addition, the Assistant Secretary of the 
Army Financial Management and Comptroller has requested audit 
support with the financial accounting and reporting of the 
relief funds.
    The Naval Audit Service has been tasked by senior Navy 
management to provide audit oversight of the Navy and Marine 
Corps roles in the recovery effort. The Naval Audit Service 
plans audits on cash accountability, purchase cards, contracts, 
reimbursable arrangements, as well as financial accounting and 
reporting. In addition, the Naval Audit Service will provide 
independent and objective advice and oversight concerning 
relief for Navy and Marine Corps families affected by the 
hurricane.
    The Undersecretary of Defense (Comptroller) designated the 
Assistant Secretary of the Air Force (Financial Management and 
Comptroller) as the as the Financial Manager for Joint Task 
Force Katrina. The Air Force Audit Agency has been tasked with 
auditing the financial management activities related to the 
relief operations. These auditors will review the Air Force 
procedures for receiving and disbursing funds in support of the 
relief operations, as well as tracking and requesting of FEMA 
reimbursements.
    The Defense Contract Audit Agency has been requested by the 
Army Corps of Engineers Internal Review Team to provide 
contract and audit financial advisory services to the Corps of 
Engineers in support of the relief and reconstruction 
contracting activities. Currently, 14 DCAA auditors are in the 
Louisiana and Mississippi area providing contract audit 
assistance on Corps of Engineer contracts regarding debris 
removal and temporary roofing missions. Coordination is 
underway to identify contract audit requirements related to the 
Corps of Engineers relief and recovery missions. DCAA is also 
examining potential contract costs and pricing issues directly 
related to the hurricane, such as the loss of equipment and 
facilities, equitable adjustment claims, loss of in-process 
work, and loss of accounting records.
    The Defense Criminal Investigative Service has 43 agents in 
its Southeast Field Office who are prepared to assist in the 
investigation of fraud, abuse, corruption, and other crimes 
associated with the use of the DoD funds for the relief effort. 
DCIS could augment that force with resources from five other 
field offices, if the investigations warrant. Some of the 
initial activities which have already begun include 
coordinating with DoD procurement agencies, such as the Corps 
of Engineers, the Defense Logistics Agency, and the Defense 
Contract Management Agency, and the FEMA Office of Inspector 
General; partnering with various Federal, state, and local law 
enforcement agencies, relative to Joint Task Force Katrina; and 
also, conducting fraud awareness briefings to DoD contractors 
and procurement officials.
    The Army Criminal Investigative Command, the Navy Criminal 
Investigative Service, and the Air Force Office of Special 
Investigations have been performing missions in support of law 
enforcement, military personnel, and the overall Force 
Protection of DoD military and civilian personnel involved in 
the relief efforts. Additionally, the Army Criminal 
Investigative Command is performing general crimes 
investigations relating to the recovery efforts.
    The DoD Hotline is supporting the Department of Homeland 
Security and other agencies by standing up a Hurricane Fraud 
Hotline which will log, relay, and track incoming complaints 
and allegations of wrongdoing.
    This concludes my oral statement, and I would be happy to 
answer any questions.
    [The prepared statement of Thomas F. Gimble follows:]

   Prepared Statement of Thomas F. Gimble, Acting Inspector General, 
                         Department of Defense

    Mr. Chairman and Members of the House Energy and Commerce 
Subcommittee on Oversight and Investigations: Thank you for the 
opportunity to appear before the committee today to address the DoD 
audit and investigative oversight efforts regarding the Hurricane 
Katrina relief and recovery. The DoD and Army Corps of Engineers were 
provided direct appropriations and Federal Emergency Management Agency 
(FEMA) mission assignments for recovery, repairs, and protection of 
shorelines in the affected Gulf States. We are working in close 
coordination with all Inspectors General through the PCIE Homeland 
Security Roundtable on Hurricane Katrina to ensure effective 
utilization of DoD oversight resources in the relief and recovery 
efforts. Specifically for DoD, the DoD Office of Inspector General, the 
Army Audit Agency, the Naval Audit Service, the Air Force Audit Agency, 
the Defense Contract Audit Agency, and the Defense criminal 
investigative organizations will employ a cadre of auditors, 
investigators, and inspectors who will provide immediate and 
professional oversight of DoD contracts, grants, and operations related 
to Hurricane Katrina relief and recovery efforts. To fulfill our 
statutory oversight responsibilities, we have either started or plan to 
start the following efforts. Our oversight effort for Hurricane Katrina 
relief and recovery will be on a ``real-time'' basis and provide 
immediate feedback as issues are identified.

               DOD OFFICE OF INSPECTOR GENERAL--AUDITING

    The DoD Office of Inspector General is initially planning five 
specific audit areas regarding the Hurricane Katrina relief and 
recovery efforts--contract support and administration, increased 
purchase card limits, use of DoD resources in readiness and logistics 
support, contingency of information technology systems, and the 
accounting and oversight of obligations and expenditures. The ``Audit 
of DoD Contract Support for the Hurricane Katrina Recovery Effort'' 
will review the award and administration of DoD contracts used for the 
Hurricane Katrina recovery effort. The ``Audit of Expanded Micro-
Purchase Authority for Purchase Card Transactions Related to Hurricane 
Katrina'' will focus on the reasonableness and appropriateness of 
expenditures and the early identification of questionable spending 
issues and determine whether DoD policies and procedures need to be 
changed regarding the Hurricane Katrina related effort. Thirdly, we 
will conduct an ``Audit of the Use of DoD Resources Supporting the 
Hurricane Katrina Disaster'' and determine the impact on readiness and 
logistics support. Additionally, we will perform an ``Audit of the 
Effects of Hurricane Katrina on DoD Information Technology Resources in 
Affected Areas.'' Lastly, the DoD Office of Inspector General will 
conduct an ``Audit of Accounting and Oversight of Obligations and 
Expenditures related to the Department of Defense Hurricane Katrina 
Reconstruction Effort'' to determine whether DoD obligations and 
expenditures related to the construction effort are timely and 
efficiently executed and in accordance with applicable laws and 
regulations.

                           ARMY AUDIT AGENCY

    The U.S. Army Audit Agency is in the process of providing audit 
oversight of the funds the U.S. Army received for support provided by 
Active Army and Army National Guard units and the U.S. Army Corps of 
Engineers. The overall objective is to determine whether the Army 
appropriately used funds it received for Hurricane Katrina relief and 
recovery efforts. They met with the Corps of Engineers to initiate this 
effort. In addition, the Assistant Secretary of the Army (Financial 
Management and Comptroller) has requested audit support with the 
financial accounting and reporting of the Hurricane Katrina relief 
funds.

                          NAVAL AUDIT SERVICE

    The Naval Audit Service has been tasked by senior Navy management 
to provide audit oversight of the Navy and Marine Corps roles in the 
recovery effort. The Naval Audit Service plans audits on cash 
accountability, purchase cards, contracts, reimbursable arrangements, 
as well as financial accounting and reporting. In addition, the Naval 
Audit Service will provide independent, objective advice and oversight 
concerning relief for Navy and Marine Corps families.

                         AIR FORCE AUDIT AGENCY

    The Undersecretary of Defense (Comptroller) assigned the Office of 
the Assistant Secretary of the Air Force (Financial Management and 
Comptroller) as the Financial Manager for Joint Task Force Katrina. The 
Air Force Audit Agency has been tasked with auditing the financial 
management activities related to the Hurricane Katrina relief 
operations. Auditors will review the Air Force procedures for receiving 
and disbursing funds in support of Hurricane Katrina relief operations 
and the tracking and requesting of FEMA reimbursements.

                     DEFENSE CONTRACT AUDIT AGENCY

    The Defense Contract Audit Agency has been requested by the Army 
Corps of Engineers Internal Review Team to provide contract audit and 
financial advisory services to the Corps of Engineers in support of the 
relief and reconstruction contracting activities. Fourteen Defense 
Contract Audit Agency auditors are currently in Louisiana and 
Mississippi providing contract audit assistance on Corps of Engineers 
contracts regarding debris removal and temporary roofing missions. 
Coordination is underway to identify other contract audit requirements 
relating to Army Corps of Engineers relief and recovery missions. 
Defense Contract Audit Agency is also examining potential contract cost 
and pricing issues directly related to Hurricane Katrina such as loss 
of equipment and facilities, equitable adjustment claims, loss of in-
process items, and loss of accounting records.

                CRIMINAL INVESTIGATIVE SERVICES EFFORTS

    The Defense Criminal Investigative Service has 43 agents in its 
Southeast Field Office who are prepared to assist in investigation of 
fraud, abuse, corruption, and other crimes associated with the use of 
DoD funds designated for Hurricane Katrina relief and recovery efforts. 
The Defense Criminal Investigative Service could augment that force 
with resources from five other field offices if the volume and 
complexity of investigations warrants. Initial activities, some of 
which have already begun, include coordinating with the DoD procurement 
agencies (i.e., the U.S. Army Corps of Engineers, the Defense Logistics 
agency, and the Defense Contract Management Agency) and the FEMA Office 
of Inspector General, partnering with various Federal, state, and local 
law enforcement agencies relative to the Joint Task Force Katrina, and 
conducting fraud awareness briefings to DoD contractors and procurement 
officials.
    The Army Criminal Investigative Command, the Navy Criminal 
Investigative Service, and the Air Force Office of Special 
Investigations have been performing missions in support of law 
enforcement and military personnel and the overall Force Protection of 
DoD military and civilian personnel involved in the relief efforts. 
Additionally, the Army Criminal Investigative Command is performing 
general crimes investigations.
    In addition, DoD Hotline is supporting Department of Homeland 
Security and other agencies by standing up a Hurricane Fraud Hotline 
which will log, relay, and track incoming complaints and allegations of 
wrongdoing.

    Mr. Whitfield. Thank you, Mr. Gimble. Now, it is my 
understanding that from the Department of Health and Human 
Services, that Mr. Vengrin and Mr. Little will give a joint 
opening statement.
    Mr. Vengrin. Yes.
    Mr. Whitfield. And so I would assume, Mr. Vengrin, you will 
begin, then.
    Mr. Vengrin. Yes.
    Mr. Whitfield. Joseph Vengrin.
    Mr. Vengrin. That is correct, Mr. Chairman. Thank you.
    Mr. Whitfield. Okay.

      TESTIMONY OF JOSEPH E. VENGRIN AND MICHAEL E. LITTLE

    Mr. Vengrin. I am here today to describe the initial 
activities of that the HHS OIG Office of Audit Services, in 
guarding against fraud, waste, and abuse in the post-hurricane 
relief and recovery efforts. Mr. Little will present the 
investigative response.
    We share your concern, and the concerns of all Americans 
for the thousands of children and families affected by the 
recent hurricane. To be responsive, necessary relief services 
must be provided quickly and effectively. In that regard, HHS 
has announced a number of relief steps, including a relaxation 
in controls to make health and human services available to 
hurricane victims without the usual documentation requirements.
    Unfortunately, the difficult circumstances created by 
Katrina provides an enormous opportunity for fraud, waste, and 
abuse. To curb those intent on gaming the system and to 
safeguard taxpayer dollars, we are continuously updating our 
post-hurricane work plans. The audit efforts are a major 
challenge and are further complicated by the state of change in 
waiving certain programmatic requirements, the delivery of 
service, the need for expedited contract activities, and the 
long-term nature of the Federal response.
    This morning, I will describe how we plan to meet those 
challenges; specifically, I will explain our oversight planning 
process, and our coordination effort with other agencies. In 
our oversight planning process, we are particularly committed 
to ensuring that funds are used for authorized transactions 
that comply with procurement standards, and the goods and 
services are properly delivered.
    Immediately following Katrina, OIG established a Hurricane 
Relief Working Group comprised of senior managers from the OIG 
offices. Under the direction of this group, OIG is reviewing 
proposed program changes to identify potential vulnerabilities 
for fraud, waste, and abuse that require increased scrutiny. 
For each major HHS program and activity, OIG is assessing 
initial risks associated with the relaxation of the internal 
controls over expedited payments. We are considering the 
complexity and magnitude of the program or activity, the extent 
of changes in the control environment, and the materiality of 
funds exposed to the increased risk. Based on these risk 
assessments, we are developing specific work plans, focused on 
the most vulnerable programs and activities.
    In implementing our work plan, we will test the 
effectiveness of the internal controls within the Department, 
at State governments, contractors, grantees, and health service 
providers. We will focus on compliance with procurement 
standards, pricing guidelines, and other Federal requirements. 
We will also search for aberrant patterns of payments to 
contractors and health service providers, and perform detailed 
tests of selected transactions.
    Our program evaluation and inspection work plan is on a 
similar track. We are identifying issues to gauge the 
effectiveness of the HHS response. Potential areas include 
evaluating evacuation planning for institutions such as 
hospitals, and for foster care children. As we develop and 
execute our hurricane relief work plan projects, we are 
coordinating with several organizations. GAO and OIG are both 
committed to conducting oversight work in a non-duplicative 
manner. Additionally, as a member of the PCIE's Homeland 
Security Roundtable, we have actively participated in the 
coordination of the government-wide OIG hurricane response.
    I will now turn to Mr. Little to present the investigative 
response.
    Mr. Little. Good morning.
    I am very proud of the response of the HHS OIG in the 
aftermath of Hurricane Katrina, and would like to briefly 
describe some of the steps that our office took to provide 
immediate support. Secretary Levitt declared a public health 
emergency for the Gulf Coast states as a result of Hurricane 
Katrina, and sent HHS employees to provide immediate medical 
assistance to the survivors and evacuees. In order to ensure 
the safety of HHS personnel and equipment in the impact area, 
Secretary Levitt asked the Inspector General to provide 
security assessments of the facilities being set up, as well as 
to provide security to HHS personnel.
    On September 2, I sent out an email message to all criminal 
investigators in OIG. Within the first 24 hours, we had 
received over 60 volunteers. By September 8, two 11 person 
teams were deployed to Mississippi and Louisiana. The OIG teams 
provided physical security assessments for the mobile medical 
sites, and performed 120 protective service missions for HHS 
personnel deployed in the New Orleans area.
    The destruction of Hurricane Katrina has resulted in a 
number of allegations relating to the deaths of patients in 
healthcare facilities in the New Orleans area. We have been 
informed of over 20 incidents in which healthcare providers 
abandoned or possibly engaged in other activity resulting in 
the deaths of Medicare or Medicaid beneficiaries. We are 
conducting investigations of those allegations, along with our 
Federal and State partners, to ascertain if criminal laws were 
violated, and appropriate actions will be taken at the 
conclusion of our investigations.
    Mr. Vengrin. Mr. Chairman, the approach that Mike and I 
have outlined involves continuous evaluation and modification, 
as required, to ensure that OIG accomplishes its mission of 
protecting the integrity of HHS programs. We believe that our 
results will provide the subcommittee and other decisionmakers 
with important information on accountability for Federal 
response dollars.
    Thank you for the opportunity to testify. We welcome your 
questions.
    [The prepared statement of Joseph E. Vengrin and Michael E. 
Little follows:]

 Prepared Statement of Joseph E. Vengrin, Deputy Inspector General for 
  Audit Services and Michael E. Little, Deputy Inspector General for 
        Investigations, Department of Health and Human Services

    Chairman Whitfield and members of the Subcommittee, I am Joseph 
Vengrin, Deputy Inspector General for Audit Services. Accompanying me 
is Michael Little, Deputy Inspector General for Investigations.
    We are appearing before you today to describe the initial 
activities of the Office of Inspector General (OIG) of the U.S. 
Department of Health and Human Services (HHS) to guard against fraud, 
waste, and abuse in the post-Katrina relief and recovery efforts.
    We share your concern, and the concern of all Americans, for the 
thousands of children and families affected by the recent hurricanes. 
The loss of life, property, and livelihoods is tremendous. To be 
responsive, necessary relief services must be provided to victims 
expeditiously and effectively. It is vital that funds and services be 
appropriately directed to ensure that people in the affected areas have 
their immediate needs met and recover as soon as possible. At the same 
time, we must work to ensure that funds spent on this endeavor are not 
mismanaged or used fraudulently, which would deprive people of the 
intended benefit.
    HHS has announced a number of steps in response to Katrina. These 
steps include a relaxation in controls to make needed health and human 
services accessible under these very difficult circumstances. This 
flexibility is intended to permit hurricane victims to receive benefits 
and services without the usual documentation requirements. Services 
with immediate new flexibilities include Medicaid, Temporary Assistance 
for Needy Families (TANF), child care, foster care assistance, mental 
health services, and substance abuse treatment services. In another 
announced step, HHS continues to furnish health care providers and 
medical supplies to the Gulf area.
    Unfortunately, the difficult circumstances created by Katrina 
provide an enormous opportunity for fraud, waste, and abuse. The sheer 
magnitude of these disasters and the still-evolving costs of the relief 
efforts present challenges. As we continue our work planning efforts, 
we must also consider the current state of flux in waiving certain 
programmatic requirements in the delivery of departmental services, the 
need for increased and expedited contracting activities, and the long-
term nature of the Federal response. OIG's work plan will be 
continuously updated to reflect changes in the Department's response.
    This morning we will describe OIG's oversight planning process, 
particularly as it relates to auditing; some of our initial activities 
on the investigative oversight and enforcement front; and finally, HHS/
OIG's coordination with other agencies.

                    OIG'S OVERSIGHT PLANNING PROCESS

    With the destruction of infrastructures, systems, and communities 
and the dislocation of populations caused by Hurricane Katrina, OIG is 
particularly committed to ensuring that funds are used for valid and 
authorized transactions that comply with appropriate procurement 
standards, that goods and services are procured and delivered 
correctly, and that problems are prevented rather than identified after 
the fact.
    Immediately following the hurricane, OIG established an OIG-wide 
Hurricane Relief Working Group, which is addressing issues as they 
arise in the aftermath of Hurricane Katrina. The group comprises senior 
managers from our Offices of Audit Services, Investigations, Evaluation 
and Inspections, Counsel, and Management and Policy. This group is 
focusing OIG resources to address both immediate and longer term needs. 
Under the direction of this group, OIG is reviewing proposed program 
changes to identify potential vulnerabilities for fraud, waste, and 
abuse that require increased scrutiny. Detailed below are some of OIG's 
specific actions to date in response to Katrina.

Risk Assessment
    For each major program and activity identified by the Department, 
OIG is assessing the initial risks associated with relaxing internal 
controls over expedited payments. The assessments are covering such 
programs as Medicare, Medicaid, and TANF; the activities of the Centers 
for Disease Control and Prevention (CDC); and funds transferred from 
the Federal Emergency Management Agency. We are considering factors 
such as the complexity and magnitude of the program or activity and the 
extent of changes in the control environment. As part of this process, 
we are considering the materiality of funds exposed to increased risk 
and any implemented mitigating controls.

Special Work Plans
    Using the results of these risk assessments, we are developing 
special work plans, focusing our audit and inspection efforts on the 
most vulnerable programs and activities.
    In implementing our audit work plan, we will use standard audit 
procedures to test the effectiveness of internal controls both within 
the Department and at State governments, contractors, grantees, and 
health service providers. The audits will occur as the relief effort 
continues and will collectively provide ongoing testing and monitoring 
of the programs. Where appropriate, our audits will determine whether 
contract and grant awards, as well as payments to health service 
providers, comply with procurement standards, pricing guidelines, and 
other Federal requirements. Selectively, we will audit costs incurred 
and determine whether goods and services were delivered to the intended 
recipients. Using advanced audit techniques as necessary, including 
data mining capabilities, we will search for aberrant patterns of 
payments to contractors and health service providers.
    In conducting audits such as these, OIG will examine the 
organizational structures associated with the disaster response to 
determine whether clear lines of authority and communication and 
appropriate oversight have been established. We will review recent 
legislation and the status of proposed statutory and regulatory changes 
for program administration and eligibility. In a high-risk environment 
such as this, we will particularly focus on changes in existing 
internal controls and the impact of those changes on the risk of fraud, 
waste, and abuse.
    If audits identify potentially fraudulent acts, our Offices of 
Investigations and Counsel will consult with the Department of Justice 
to determine whether and what enforcement actions are warranted. We 
will also rely on our existing fraud hotline. We anticipate that the 
hotline is capable of receiving and processing all allegations of 
fraud, waste, and abuse that may be received.
    In addition to initiating audit activities and relying on our 
hotline, we are developing a program evaluation and inspection work 
plan. A body of work completed subsequent to September 11, 2001, which 
examines preparedness for responding to public health disasters, will 
facilitate OIG's ability to conduct reviews of disaster response 
relative to Katrina. OIG is identifying issues to gauge the 
effectiveness of the HHS response. Potential areas include evaluating 
evacuation planning for institutions such as hospitals and nursing 
homes and for children in foster care.

                INVESTIGATIVE OVERSIGHT AND ENFORCEMENT

    In addition to assessing current and future audit and inspection 
requirements, OIG has provided onsite support and investigative 
oversight and enforcement for the Katrina response. OIG's agents are 
providing this onsite support in response to the Secretary's request.
    Following is a brief chronology of OIG's interaction with the 
Department to provide immediate support and investigative oversight and 
enforcement.

 As Hurricane Katrina approached landfall, the Secretary stressed to 
        departmental officials that this was HHS's moment to be truly 
        about health and human services, in the humanitarian sense. 
        During these discussions, the Inspector General was asked to 
        provide security to HHS's onsite operations and any other 
        services that he deemed necessary. Accordingly, OIG assessed 
        the types of assistance it could initially provide.
 On September 2, OIG requested volunteers from among its criminal 
        investigators nationwide. Within 24 hours, over 60 special 
        agents had volunteered to go to the Gulf States area to assist 
        in the hurricane relief efforts. For these agents to perform 
        onsite security activities in this unusual context, a Special 
        Deputation by the U.S. Marshals Service was necessary.
 By September 8, the first 2 teams of 11 OIG agents were deployed to 
        Louisiana and Mississippi. The initial need for OIG agents was 
        to provide security assessments for the mobile medical care 
        sites established by the Department and staffed by HHS 
        employees. If the site was not secure, OIG agents secured the 
        area and reported to the U.S. Public Health Service (USPHS) 
        Commissioned Corps Admiral (the individual the HHS Secretary 
        had placed in charge of a consolidated HHS hurricane response), 
        requesting assistance to properly secure the facility if 
        necessary before moving on to evaluate the next facility.
 By September 14, the team in Mississippi had performed security 
        assessments at several hospital sites being established in 
        Waveland and Meridian. The team had also provided personal 
        security to HHS staff who performed outreach in the community 
        to ensure that those in need knew of and took advantage of the 
        health care services available to them. At the request of the 
        USPHS Admiral on site, the OIG team also conducted a physical 
        security survey of three hotels where HHS staff were lodged.
 To date, OIG has provided protection for three visits to the region 
        by the Secretary.
 After securing all HHS operational sites in Louisiana as well, 
        including Kindred Hospital in New Orleans, which became an 
        operational center, this team performed personal security of 
        CDC personnel who were going into communities to collect water 
        and dust samples from the flood-affected areas and perform 
        outreach activities. Several protection operations occurred 
        daily, all of which were coordinated with the Admiral's staff.
 On September 21, OIG special agents assisted in the safe evacuation 
        of HHS medical officials and scientists operating out of New 
        Orleans to avoid danger from approaching Hurricane Rita.
    The impact of Hurricane Katrina has resulted in a number of 
allegations relating to deaths of patients under questionable 
circumstances at several health care facilities throughout the New 
Orleans area. We have been informed of over 20 instances within the 
past weeks in which health care providers abandoned or possibly engaged 
in activity resulting in the deaths of Medicare/Medicaid beneficiaries. 
We have initiated investigations in which we are working with 
appropriate Federal and State partners to determine if Federal or State 
violations have occurred. This will be no small task, as the 
individuals who need to be interviewed are now scattered across the 
country.
    To date, over 120 of OIG's agents have volunteered to assist with 
the disaster response. This activity is being funded from OIG's 
discretionary appropriation.
    The duration of OIG agents' onsite presence is unknown at this 
point, but we will continue to support the relief effort. We are 
carefully controlling these deployments of agents due to the obvious 
drain on normal investigative workloads. Because of the massive Federal 
dollars needed to rebuild the New Orleans health and human services 
infrastructure, we expect a very high potential for waste, fraud, and 
abuse.

                 OIG'S COORDINATION WITH OTHER AGENCIES

Government Accountability Office
    OIG has met with the Government Accountability Office to discuss 
ways to maximize our effectiveness by coordinating Katrina-related work 
projects that may overlap. Both offices are committed to conducting 
oversight work in a complementary, nonduplicative manner.

Department of Justice
    OIG will meet within the next week with its Department of Justice 
colleagues to discuss the role OIG can play in civil fraud legal 
matters relating to Katrina.

President's Council on Integrity and Efficiency
    As a member of the President's Council on Integrity and Efficiency, 
Homeland Security Roundtable, HHS OIG has been actively participating 
in the coordinated Inspectors General response to Hurricane Katrina. As 
part of that response, our office provided a plan to the Inspector 
General of the Department of Homeland Security outlining activities to 
ensure the integrity of response dollars spent by HHS. Our office will 
continue to play an active role in the OIG community-wide response to 
the hurricane.

State Auditors and Independent Public Accounting Firms
    OIG will coordinate its efforts in affected States with the offices 
of the State auditors and with Independent Public Accounting firms, 
which perform audits of non-Federal recipients of HHS funds. This 
coordination could increase audit coverage of Katrina relief and 
recovery efforts.

                               CONCLUSION

    The approach outlined here forms the basis for a comprehensive 
program of testing, monitoring, and investigative oversight of programs 
placed at increased risk as a result of Hurricane Katrina. We are 
focusing the appropriate level of resources on the Department's 
programs with the greatest risk of fraud and abuse. The approach 
involves continuous evaluation and modification, as required, to ensure 
that OIG accomplishes its mission of protecting the integrity of the 
Department's programs and the health and welfare of the beneficiaries 
of those programs. We believe that our results will provide the 
Subcommittee and other decisionmakers with important information on 
accountability for Federal response dollars.
    Thank you for this opportunity to testify. Your questions are 
welcome.

    Mr. Whitfield. Thank both of you, and at this time, I will 
recognize Nikki Tinsley, with the Environmental Protection 
Agency.

                  TESTIMONY OF NIKKI L. TINSLEY

    Ms. Tinsley. Good morning, Mr. Chairman. I am pleased to be 
here to discuss Katrina-related work of the Environmental 
Protection Agency Office of Inspector General.
    Like the rest of the country, I watched in horror as 
Katrina devastated the lives of residents in Louisiana, 
Mississippi, Alabama, and Florida, and wreaked havoc on the 
environment on an unprecedented scale. While EPA has not 
received any direct appropriation in either the emergency 
supplementals, it has received $136 million from the Federal 
Emergency Management Agency and about $3 million from the Army 
Corps of Engineers. More than half of this money is passed 
through to the Coast Guard.
    Our office has auditors, program evaluators, and 
investigators who have already begun reviewing contracts and 
operations related to EPA's hurricane response efforts. Our 
current work includes monitoring EPA operations, internal 
controls, expanded micro-purchase authority, and EPA's disaster 
management activities. An overarching objective of all our 
efforts is to work with EPA to prevent or minimize problems, 
and to advise EPA on the potential ramifications of its 
precedent setting decisions as emergency response and recovery 
activities continue.
    We will look at whether EPA provided high quality and 
timely information to Gulf State residents and others about the 
safety of their drinking water, addressing issues including 
whether potential sources of waterborne diseases caused by 
contaminated drinking water are identified and contained, and 
whether EPA's protocols, including the lessons learned from the 
World Trade Center, and the responsibilities delineated in the 
National Response Plan, reduced citizen exposure to 
contaminated water.
    We will look at whether EPA provided accurate and timely 
data to the public and others about the health and 
environmental risks of hazardous material spills and sediment 
contamination, addressing issues including how EPA determined 
the nature, magnitude, and impact of oil and hazardous material 
spills and sediment contamination, and how EPA distinguished 
between hazardous and non-hazardous hurricane debris and waste, 
and if those distinctions were applied consistently across the 
Gulf Coast region.
    Because the EPA's work crosses Federal, state, and local 
jurisdictions, we use existing partnerships with Federal, 
state, and local audit and investigative organizations to 
coordinate and ensure adequate, cost-effective oversight.
    Finally, I want to tell you about an effort our office is 
leading that looks at ways to improve grant accountability. 
Rick Skinner mentioned that much of the Katrina recovery effort 
will be funded through grants to states, to local governments, 
and to others. With the input and assistance of over 20 
Federal, state, and local audit organizations, our office has 
developed a Guide to Grant Accountability that will provide 
leaders at all levels of government with proven practices to 
ensure that grant expenditures produce the products and 
services envisioned when the grants are awarded. We expect to 
issue this guide next month. The guide will be useful. It will 
be a useful and timely tool for those involved in the Katrina 
response and rebuilding efforts.
    As the Gulf States begin to rebuild, my office, in 
partnership with my colleagues at GAO and in the Inspector 
General community, is committed to ensuring that Katrina funds 
are properly managed and spent.
    This concludes my oral comments, and I would be happy to 
respond to any questions.
    [The prepared statement of Nikki L. Tinsley follows:]

    Prepared Statement of Nikki L. Tinsley, Inspector General, U.S. 
                    Environmental Protection Agency

    Good morning Mr. Chairman and Members of the Subcommittee. I am 
pleased to be here today to discuss the current and planned work of the 
Environmental Protection Agency (EPA) Office of Inspector General (OIG) 
to detect and guard against fraud, waste, and abuse during post-
Hurricane Katrina response and rebuilding efforts. Like the rest of the 
country, I watched in horror as Katrina devastated the lives of 
residents in Louisiana, Mississippi, Alabama, and Florida, and wreaked 
havoc on the environment on an unprecedented scale, the impact of which 
is still to be determined. Some estimate that the final cost for the 
response and rebuilding effort in the affected areas could reach $200 
billion. The final figure may be even higher given the damage caused by 
Hurricane Rita in Texas and Louisiana this past weekend. As these Gulf 
States begin to rebuild, the EPA-OIG, in partnership with my colleagues 
in the Inspector General community, is committed to ensuring that 
Katrina funds are properly managed and spent, and that fraud and abuse 
are deterred and detected.

                       EPA KATRINA RELIEF FUNDING

    Congress has enacted two emergency supplemental appropriations 
providing over $63 billion for Katrina relief. Those funds have been 
appropriated to the Department of Homeland Security (DHS) and the 
Department of Defense. While EPA has not received any direct 
appropriation in either spending measure, it has received $135.1 
million in mission assignments from the Federal Emergency Management 
Agency (FEMA). FEMA has authorized EPA to perform relief and recovery 
work such as providing technical assistance, conducting environmental 
assessments and removal and disposal activities so long as costs do not 
exceed this amount. EPA has also received $3 million from the U.S. Army 
Corps of Engineers. Of this $138.1 million, $67.3 million is a direct 
pass-through to the Coast Guard. To date, EPA has obligated $57.1 
million, with $41.3 million going to the Coast Guard.

          OIG OVERSIGHT PLAN OF EPA'S KATRINA RESPONSE EFFORTS

    The OIG has auditors, program evaluators, and investigators who can 
provide immediate and continuing oversight of contracts, grants, and 
governmental operations related to EPA's Hurricane Katrina response 
efforts. Our current work includes monitoring the following areas: EPA 
operations; internal controls; contracts, grants, and expanded micro-
purchase authority; and EPA's disaster management activities in 
response to Katrina. These are the areas we believe need aggressive 
oversight immediately so that steps can be taken to address 
vulnerabilities before they might lead to fraud, waste, or abuse.
    As part of our initial oversight effort, the OIG intends to devote 
approximately five investigators, eight program evaluators, and six 
auditors to provide Katrina oversight, as well as two Information 
Technology Specialists for data mining. We will use existing hotline 
capabilities to handle all complaints of fraud, waste, and abuse 
involving EPA funds. We will also use existing partnerships established 
through the U.S. Comptroller General's Domestic Working Group, the 
President's Council on Integrity and Efficiency's (PCIE) Homeland 
Security Roundtable, and the Intergovernmental Audit Forum to 
coordinate and ensure adequate, cost-effective audit coverage. We also 
have an existing interagency agreement with the Defense Contract Audit 
Agency that we can use to provide additional financial audit coverage 
of contractors.
    Beyond these immediate activities, our plan provides for continuing 
oversight of EPA response efforts. Within six months, we intend to 
complete reviews of whether EPA provided accurate and timely data to 
the public along with Federal, State, and local decision makers 
regarding the safety of drinking water and waste water and on the 
health and environmental risks of Superfund sites, hazardous material 
spills, sediment contamination, and other hurricane debris. Finally, we 
plan to issue a guide on promising practices developed by Federal, 
State, and local agencies to improve grant accountability through the 
Domestic Working Group chaired by the U.S. Comptroller General. Our 
plan is detailed below.

Overseeing EPA Operations
    We will monitor EPA operations to stay current on all disaster 
response operations and provide advice as necessary. Our objective in 
this effort is to help EPA design and implement internal controls and 
advise EPA on the potential ramifications of its precedent-setting 
decisions as emergency response and recovery activities continue.
    We have deployed an advance team of Special Agents to evaluate the 
conditions on the ground in Mississippi and Louisiana. This team will 
coordinate with FEMA and to assess housing and facilities to support 
another team to be deployed in the near future. We are organizing a 
second team to serve as backup support with a secondary emergency 
response capability to Galveston and Houston, Texas. A third group of 
agents are on standby, preparing equipment for deployment. These EPA-
OIG investigators will coordinate and monitor EPA contracting activity, 
liaison directly with EPA On-Scene Coordinators and contract personnel, 
and coordinate with Federal, State, and local law enforcement. OIG 
investigators will handle criminal allegations developed through field 
activity, liaison, and on-site observation, as well as allegations 
received as a part of the Department of Justice task force, our OIG 
hotline, or other means.

Monitoring Controls
    Effective internal controls are vital to safeguarding funds and 
operations. We will review contracting and other controls to ensure 
that transactions are properly authorized and documented; funds are 
properly accounted for; property and equipment is safeguarded against 
loss; questionable activities, including activities not in support of 
mission requirements, are identified; timely and accurate analyses of 
samples by laboratories are conducted; misspending is prevented or 
minimized; and Federal laws and regulations are followed.

Reviewing Contracts, Grants, and Expanded Micro-Purchase Authority
    We will review contract and grant award administration, along with 
EPA's expanded micro-purchase authority to ensure that Federal 
acquisition regulations are adhered to. Expenditures will be reviewed 
on a real-time basis to ensure they are necessary and reasonable. This 
is critical given that the purchase card threshold has been raised from 
$2,500 to $250,000 for Katrina-related expenditures, and that the 
requirement for competitive bids on Katrina-related contracts has been 
eliminated. Data mining techniques will provide continuous oversight of 
purchase card transactions to identify spending anomalies for further 
review. OIG efforts in these areas will be focused on preventing or 
minimizing problems.
    We have expanded our work on EPA's financial statements to include 
EPA's activity related to the Katrina response effort. Our audit work 
will include tests of EPA's internal controls for identifying and 
charging costs for Katrina response. We will also test disbursement, 
obligation, and payroll transactions related to Katrina response for 
the month of September 2005, which is the end of the financial audit 
period. These tests will include statistical sampling of transactions, 
analytical reviews, and overall account analysis of activity.
    EPA has set up new codes in its accounting system to record Katrina 
response transactions. We will analyze the costs charged to those codes 
to see if they appear reasonable in relation to the nature and types of 
costs. When we identify questionable transactions or trends, we will 
follow up with EPA to make recommendations to strengthen controls. 
While our current work will primarily address activity in September 
2005, it will provide a basis for continuing analysis of Katrina 
activity for fiscal 2006.

Evaluating EPA's Disaster Management Activities in Response to 
        Hurricane Katrina
    We will evaluate the effectiveness of EPA's role in protecting the 
health of citizens, responders, volunteers, and the environment under 
the National Response Plan (NRP) and statutes governing EPA operations, 
including the Comprehensive Environmental Response, Compensation, and 
Liability Act; the Resource Conservation and Recovery Act; the Clean 
Water Act; the Safe Drinking Water Act; and the Clean Air Act. We will 
also evaluate any subsequent modifications or waivers to these plans 
and statutes. Specifically, we will look at whether EPA provided high-
quality and timely information to Gulf State residents and others about 
the safety of their drinking water. Among the issues we will be 
addressing are whether potential sources of waterborne diseases caused 
by contaminated drinking water are identified and contained; and 
whether EPA's protocols, including those lessons learned from the World 
Trade Center and the responsibilities as delineated in the NRP, reduce 
citizen exposure to contaminated drinking water. We will look at 
whether EPA provided accurate and timely data to the public and others 
about the health and environmental risks of hazardous material spills, 
Superfund sites, and sediment contamination in the affected regions. 
Among the questions we will ask are how EPA determined the nature, 
magnitude, and impact of oil and hazardous material spills and sediment 
contamination; and how EPA made distinctions between hazardous and non-
hazardous hurricane debris and waste, and if those distinctions were 
applied consistently across the Gulf Coast region.

Developing a Guide on Grant Accountability
    On behalf of the U.S. Comptroller General's Domestic Working Group, 
the OIG is leading an effort to look at ways to improve grant 
accountability so that the billions spent in Federal grants each year 
are properly used and the desired results achieved. With the input and 
assistance of over 20 Federal, State, and local audit agencies, the end 
product will be a guide to grant accountability that will provide 
Government leaders at all levels with ideas to ensure that grant 
expenditures produce the products and services envisioned when they are 
awarded. We expect to issue this guide in October. The guide can be a 
useful and timely tool for those Government agencies involved in the 
Katrina response and rebuilding efforts.

 COORDINATION WITH THE PRESIDENT'S COUNCIL ON INTEGRITY AND EFFICIENCY

    We will also be working closely with the President's Council on 
Integrity and Efficiency Homeland Security Roundtable, chaired by the 
DHS Inspector General. This group is composed of Inspectors General 
from the 12 other departments and agencies that have been issued the 
largest mission assignment allocations from FEMA. We will continue to 
assist the Roundtable by providing information about EPA's use and 
management of its funds whenever called upon.

                               CONCLUSION

    As EPA assists in the response and rebuilding efforts in the months 
ahead, the OIG will work to ensure that funds are guarded against 
fraud, waste, and abuse without impeding the progress of those efforts. 
I believe the OIG has developed an excellent oversight plan, but given 
the fluidity of the situation in the Gulf States, we will reassess our 
plan and make any necessary adjustments as events unfold. This 
concludes my written statement. I would gladly answer any questions the 
Subcommittee may have at this time.

    Mr. Whitfield. Thank you, Ms. Tinsley. At this time, we 
will recognize Johnnie Frazier, with the Department of 
Commerce.

                 TESTIMONY OF JOHNNIE E. FRAZIER

    Mr. Frazier. Good morning, Mr. Chairman. Thank you for the 
opportunity to appear before the subcommittee today.
    The Department of Commerce is a diverse organization, 
capable of bringing a broad array of scientific and economic 
resources to bear, both before and during times of need. As 
Americans and the world watched just about every move 
associated with the government's post-Katrina relief and 
recovery efforts, and demand real-time oversight, two key 
points emerge. First, the Federal Government faces an 
unprecedented challenge that demands unprecedented and flexible 
solutions. And second, the bureaucratic flexibility and large 
infusions of resources that may accompany the rebuilding effort 
inherently increase the potential for fraud, waste, and abuse. 
Thus, vigilant oversight of agency efforts by the Inspectors 
General, working cooperatively and collaboratively, and quite 
candidly, smartly, is critical to helping prevent and detect 
unauthorized activities and expenditures.
    I believe that the Inspectors General are well positioned 
to help in this regard. We know our agencies well, the good, 
the bad, and the ugly. Each year, for example, Inspectors 
General identify the top management challenges facing their 
agencies, and hence, are aware of their agencies' strengths, 
and more importantly, their weaknesses. Each year, the IG 
community compiles and reviews this information to reveal any 
trends that may be facing our government. Across all agencies 
and departments, the areas of procurement, financial, and 
grants management, and information technology security have 
consistently been cited as very vulnerable to fraud, waste, and 
abuse. Not surprisingly, these are some of the key areas and 
means by which government agencies will deliver and manage 
their relief efforts. These trends, combined with the Federal 
Government's need to respond quickly to the urgent economic 
recovery of the Gulf region highlight the importance of 
stringent, and again, real-time oversight by the Inspectors 
General.
    The Department of Commerce plays a critical role in 
rebuilding and safeguarding economic infrastructure, and 
assisting in business recovery. For example, everyone knows of 
NOAA's critical weather forecasting and other responsibilities, 
but our Economic Development Administration, and the National 
Institutes of Standards and Technology, the Bureau of Industry 
and Security, and others are also playing important roles in 
the Gulf region.
    In the important category of lessons learned, I will note 
that my office has overseen activities related to hurricane 
relief and recovery before, including EDA's administration of 
grant programs to fund infrastructure and business development. 
In September 1998, we issued a report on the evaluation of 
EDA's handling of Hurricane Andrew assistance program. I have 
recently shared that report with senior EDA and departmental 
officials, reminding them that after that hurricane hit, EDA 
did a good job of quickly selecting and funding projects; 
however, there were serious problems with some projects that 
were late in starting, and extremely slow in being completed.
    These projects also tied up millions of dollars that should 
have been put to better use for other disaster recovery 
purposes. Our key findings in that report, and clearly lessons 
learned relevant to Katrina-related recovery effort, are that 
Commerce and other Federal agencies that will use grants as a 
form of financial assistance need to very forcefully focus 
immediate rebuilding efforts on vital infrastructure and 
commercial concern, enforce standard monitoring principles, for 
example, insist on the status reports, stay involved, and 
provide consistent, ongoing oversight both onsite and from 
agency headquarters, and quickly rehabilitate or terminate 
projects that are failing to meet milestones, and transfer 
those funds to other disaster recovery purposes.
    In the interests of time, let me conclude by telling you 
that we are already working with a wide array of people in the 
Department, the IG community, and others to actively monitor 
Commerce programs. We also understand the importance of 
enhancing public trust as we determine whether appropriate 
management controls and procedures are in place. And we will 
work to resolve any weaknesses we identify, so that Congress 
and the American public can have increased confidence that 
taxpayers dollars are being spent as intended.
    Thank you.
    [The prepared statement of Johnnie E. Frazier follows:]

   Prepared Statement of Johnnie E. Frazier, Inspector General, U.S. 
                         Department of Commerce

    Chairman Whitfield, Congressman Stupak, and Members of the 
Subcommittee: Thank you for the opportunity to appear before the 
subcommittee today on the plans of the inspectors general to guard 
against waste, fraud, and abuse in post-Katrina relief and recovery.
    The Department of Commerce is a diverse organization, capable of 
bringing a broad array of scientific and economic resources to bear 
both before and during times of need. It was, for example, reassuring 
that the Department's National Weather Service's early forecasts of the 
location and intensity of Hurricane Katrina saved lives. Now, Commerce 
agencies' roles in relief and recovery are crucial in helping rebuild 
damaged ports and transportation infrastructure and in hastening the 
return of economic vitality to the Gulf region.
    The President's National Response Plan relies on the Department to 
provide direct support to the Department of Homeland Security (DHS) in 
preparing for, responding to, and recovering from major natural 
disasters: from tracking and providing advance warning of hurricanes 
and other weather-related phenomena to assessing structural damage and 
costs, from administering developmental and financial assistance to 
prioritizing the procurement of goods from the private sector to meet 
critical needs.
    As Americans and the world watch just about every move associated 
with the government's post-Katrina relief and recovery efforts, two key 
points emerge: (1) the federal government faces an unprecedented 
challenge that demands unprecedented and flexible solutions; and (2) 
the bureaucratic flexibilities and large infusions of resources that 
may accompany the rebuilding effort inherently increase the potential 
for fraud, waste, and abuse. Thus, vigilant oversight of agency efforts 
by the inspectors general, working cooperatively and collaboratively, 
is crucial to helping prevent and detect unauthorized activities and 
expenditures.
    Each year inspectors general identify the top management challenges 
facing their agencies. The President's Council on Integrity and 
Efficiency compiles and reviews this information to reveal any trends 
that may be facing our government. Across all agencies and departments, 
the areas of procurement, financial and grants management, and 
information technology security have been consistently cited as areas 
vulnerable to waste, fraud, and abuse. These trends combined with the 
federal government's need to respond quickly to the urgent economic 
recovery needs of the Gulf region highlight the importance of stringent 
oversight by inspectors general.
    My statement will briefly summarize the Department's different 
roles and responsibilities in responding to emergencies, including some 
specifics on recovery actions in the aftermath of Katrina, findings 
from our relevant evaluation of post-Hurricane Andrew recovery efforts 
and their implications for Katrina, and my office's oversight role in 
helping prevent and detect unauthorized activities in the aftermath of 
Hurricane Katrina.

             COMMERCE'S EMERGENCY RESPONSE ROLE IS DIVERSE

    The Department plays a critical role in rebuilding and safeguarding 
economic infrastructure and assisting business recovery, and has thus 
been mobilizing resources to help the Gulf region recover. The National 
Oceanic and Atmospheric Administration (NOAA) tracks and forecasts 
weather and provide advance warning about the potential severity and 
impact of natural occurrences on the United States. I have been 
encouraged by Congress's positive assessments of the National Weather 
Service's work in tracking Katrina and providing information before and 
after the hurricane made landfall. These timely predictions undoubtedly 
saved lives. Through the years, I have personally met with many of 
these talented and committed professionals, who are passionate about 
making accurate predictions to help victims prepare for and recover 
from weather events.
    But NOAA plays a much broader role in economic recovery post-
Hurricane Katrina: surveying ports and waterways via aircraft and 
satellite imagery to assess damage and assist vessel movement, helping 
federal and state agencies mitigate environmental hazards, and 
conducting salvage operations. In addition, stewardship of our 
ecosystems is critical during emergencies, and NOAA is assessing the 
hurricane's impacts on habitat and fisheries in the Gulf while at the 
same time reviewing options to ease regulatory burdens on commercial 
and recreational fisherman. To date, NOAA has received over $2 million 
from DHS for recovery efforts.
    The Economic Development Administration (EDA) works in partnership 
with state and local government, regional economic development 
districts, and other entities to help communities address problems 
associated with long-term economic deterioration as well as recent, 
severe economic dislocations such as those the Gulf region is 
undergoing. EDA administers a diverse range of grants programs and 
funds infrastructure and business development to induce private 
investment in the types of business activities that contribute to long-
term economic stability and growth. These programs are key elements in 
comprehensive economic recovery and have great potential to assist in 
the current situation.
    The National Institute of Standards and Technology (NIST) is at the 
forefront of the U.S. government's efforts to develop and promote 
measurement, standards, and technology to enhance productivity, 
facilitate trade, improve quality of life, and bolster national 
security. As part of the federal government's National Response Plan, 
NIST, for example, is working with the Federal Emergency Management 
Agency (FEMA) to assess structural damage in the Gulf area. Through the 
Hollings Manufacturing Extension Program, NIST also plans to review the 
impact of the hurricane on small manufacturers in those areas affected 
by the storm.
    The Bureau of Industry and Security (BIS) must assure the timely 
availability of industrial resources to meet emergency preparedness 
requirements under the Defense Priorities and Allocations System 
Program (DPAS). DPAS allows the Department to prioritize the delivery 
of critical resources from commercial sources to ensure that federal 
and private sector entities can support recovery operations during 
emergency situations. BIS is using DPAS authority to assist with 
critical infrastructure restoration projects related to the Gulf's 
recovery. In addition, FEMA has been delegated authority to use BIS' 
DPAS regulations to place priority contracts for materials, services, 
and facilities in support of Hurricane Katrina recovery operations, 
including rescue, medical, health and sanitation services; essential 
debris clearance; and immediate repair or restoration of damaged vital 
facilities.
    The Bureau of Economic Analysis (BEA) produces economic accounts 
statistics that enable government and business decision-makers, 
researchers, and the American public to follow and understand the state 
of the nation's economy. These accounts impact critical decisions 
affecting monetary policy, tax and budget projections, and business 
investment plans. Natural disasters like Hurricane Katrina have two 
major economic effects: destruction of property and disruption of the 
flow of production, income, and spending. BEA will be estimating 
hurricane costs as part of the 3rd quarter gross domestic product and 
other indicators for August and September.
    The International Trade Administration (ITA), working in 
conjunction with DHS, the White House, and other agencies, has launched 
a Hurricane Relief Call Center to match community needs with private 
sector donations or saleable goods. Through access to DHS' National 
Emergency Resource Center database and information received directly 
from the business community, the Department aims to put donors and 
those in need in direct contact within 24 hours of a match. In 
addition, ITA recently worked with other agencies to allow U.S. apparel 
importers to release goods embargoed under China textile safeguard 
actions for the purpose of providing aid to Katrina victims.
    The Office of the Secretary has made the combined efforts of 
Commerce bureaus in responding to Katrina a top priority. The Secretary 
is holding weekly executive-level meetings during which each bureau 
head must report on Katrina activities and related expenditures. To its 
credit, the Department's Offices of Budget, Acquisition Management, and 
Financial Management immediately began working to implement appropriate 
internal controls and special project codes for capturing and reporting 
costs related to Katrina. The Department has advised that controls and 
processes are now in place to track and monitor its Katrina-related 
program activities, and its integrated financial management system 
allows for detailed reporting of obligations and expenditures.

             ACCOUNTABILITY, OVERSIGHT, AND LESSONS LEARNED

    The rebirth of the Gulf region relies first and foremost on the 
recovery of businesses and reconstruction of vital infrastructure. This 
process will require an influx of resources and a possible loosening of 
ordinary requirements [I don't understand what you mean by ``ordinary 
requirements''] to expedite the delivery of assistance to communities. 
Huge infusions of dollars, coupled with more flexible rules, create an 
environment ripe for possible fraud, waste, and abuse. Thus, the 
oversight role of the inspectors general, working cooperatively and 
collaboratively, is crucial to preventing and detecting unauthorized 
activities during recovery efforts.
    My office has overseen activities related to hurricane relief and 
recovery before. In September 1998, we issued a report on our 
evaluation of EDA's handling of its Hurricane Andrew assistance 
program. In particular, we examined EDA's process for selecting 
projects and its management and monitoring of the projects funded. We 
focused on issues related to the completion of these projects and, more 
important, on lessons learned from those activities. These findings 
provide valuable insight and guidance to direct EDA's actions in 
response to Hurricane Katrina.
    Before I discuss specific issues in that report, I'd like to note 
that in 1992, Congress appropriated about a billion dollars to various 
federal agencies under the Dire Emergency Supplemental Appropriations 
Act, including $80 million to EDA to provide disaster relief 
assistance. When we look at the more than $60 billion already 
appropriated for Hurricane Katrina relief, coupled with the likelihood 
of yet more funds being needed for Hurricane Rita relief and 
rebuilding, any lessons learned from our earlier report and the ongoing 
vigilance of inspectors general will be critical.
    Much of the billion-dollar emergency appropriation for Hurricane 
Andrew was aimed at addressing the immediate needs of protecting life 
and property and providing food, shelter and other basic services. But 
Congress intended that the EDA monies fund projects for longer-term 
economic recovery and growth. Just as with the recent appropriations 
for Hurricane Katrina, few restrictions were placed on EDA's use of the 
disaster funds and the agency was instructed to ``use all existing 
administrative flexibility to waive local match requirements and to 
expedite the delivery of assistance to communities.'' To further 
expedite EDA grant-making, Congress appropriated $5 million to 
supplement the agency's operating budget.
    Between 1992 and 1995, EDA received Hurricane Andrew relief 
proposals requesting a total of more than $130 million, and the agency 
funded 28 projects totaling $50.9 million. EDA did a good job of 
quickly selecting the projects, and for the most part, chose projects 
that were both sound in concept and appeared responsive to the economic 
recovery needs of the area. However, there were serious problems with 9 
projects that were late in starting and slow in being completed. These 
projects also tied up millions of dollars that could have been put to 
better use for other disaster recovery purposes.
    The delayed construction projects had two common traits--purpose 
and location. Specifically, all but three were located outside the 
direct path of the hurricane and all nine were designed to mitigate or 
accommodate the out-migration of businesses or enhance or encourage 
tourism in areas affected by the storm, as opposed to repairing or 
replacing storm-damaged buildings and infrastructure. In contrast, all 
of the projects that were finished on time were located within the 20-
mile path of the hurricane and were more traditional repair-and-replace 
public works projects. The location and purpose of the delayed projects 
made them less urgent than the others and therefore more vulnerable in 
part because they lacked sufficient local impetus to proceed on their 
own. These findings are key when we look at the scope of the area 
affected by Hurricane Katrina and the competing requests for 
assistance.
    Our report highlighted a number of management issues that have 
relevance for current recovery efforts and can help ensure that 
taxpayer dollars spent on today's disasters go to the intended 
recipients; are used effectively, efficiently, and in a timely manner; 
and thus accelerate economic recovery. It is critical that agencies do 
not overlook the need to give close attention to shortcomings in 
project oversight in light of the monumental rebuilding effort required 
post-Hurricane Katrina. Officials must follow basic procedures to 
monitor projects, such as obtaining routine performance reports that 
notify the agency about delays and the reasons for them. For example, 
EDA requires grantees to submit quarterly status reports before 
receiving disbursements in order to protect the government's financial 
interest. These reports are the early warning system for advising the 
agency of a project in trouble. If officials recognize the symptoms of 
problem projects early on, they can promptly act to fix them, where 
possible, or terminate the award and redeploy the remaining funds. In 
addition, monitoring projects onsite is critical so that officials gain 
first-hand knowledge and can provide direct oversight of how funds are 
being expended.

       PLANS FOR PREVENTING AND DETECTING UNAUTHORIZED ACTIVITIES

    In the aftermath of as devastating an event as hurricane Katrina, 
there is a distinct tension between the desire to aid affected 
businesses, communities, and individuals as quickly as possible and the 
need to ensure that sufficient controls are in place to prevent 
desperately needed funds from being wasted. Inspectors general play a 
critical role in ensuring that federal funds designated for recovery 
are used wisely. To that end, my office has been working closely with 
Department of Commerce and DHS officials to identify all funds being 
spent by Commerce on Katrina-related activities.
    I mentioned earlier that the Department has established internal 
controls to identify and monitor Katrina funding and expenditures. We 
plan to assess these financial and procurement controls before dollars 
are spent, and the Department's Chief Financial Officer has agreed to 
work closely with my office to monitor the effectiveness of these 
controls on a continuing basis.
    Once expenditures are identified, my office will determine which 
ones are funding repair of Commerce buildings and equipment in the Gulf 
region and which are providing economic assistance to businesses, 
communities, and individuals affected by Katrina. We will evaluate how 
effectively these projects are progressing and whether they are in fact 
targeting the most critical needs.
    At this point we have paid particular attention to the Department's 
decision to utilize procurement flexibilities made available in the 
aftermath of Katrina. The Department recently raised the spending 
ceiling for NOAA purchase card users to $15,000 for Katrina-related 
expenditures. In light of the well-publicized history of problems with 
federal employees' use of purchase cards and the related lessons 
learned, we know the importance of closely monitoring individual users 
for these cards. Likewise, the Department raised the simplified 
acquisition threshold from $100,000 to $250,000 post-Katrina, which 
again increases risks for fraud and misuse--problems we have noted in 
prior audits of this procurement method. We will actively monitor 
transactions impacted by these changes to ensure that only authorized 
personnel are involved, government funds are being used appropriately, 
and purchases clearly comply with applicable requirements.
    With regard to economic assistance provided by Commerce bureaus 
such as EDA, we plan to monitor any instances where traditional 
financial assistance terms and conditions are bypassed. While we 
recognize the need for flexibility in the current environment, 
deviating from normal procedures governing such awards increases the 
risk of fraud, waste, and abuse. It is critical that appropriate 
controls are in place.
    Similarly, while appropriate contract oversight is always 
important, given the procurement flexibilities the Department will be 
able to exercise, aggressive monitoring is essential. While we will not 
be able to audit all Katrina-related contracts and grants, my office 
will determine which activities seem most at risk and will focus our 
audit efforts on those projects.

                               CONCLUSION

    The Department of Commerce plays a critical role in preparing for, 
responding to, and recovering from natural disasters such as Hurricane 
Katrina, and thus in promoting the economic well-being of the nation. 
The immense public support to aid victims and rebuild the Gulf region 
through large infusions of resources and expedited regulatory processes 
increases risks that taxpayer dollars will be misused. My office, in 
coordination with DHS and other agencies, will vigilantly oversee 
departmental programs, determine whether appropriate management 
controls and procedures are in place, and work to resolve any 
weaknesses we identify so that Congress can have confidence that tax 
dollars are spent as intended.

    Mr. Whitfield. And thank you, Mr. Frazier, and at this 
time, I will recognize Mr. Feaster--which agency is Mr. Feaster 
with? The FCC. Thank you.

               TESTIMONY OF H. WALKER FEASTER III

    Mr. Feaster. Thank you, Mr. Chairman. Mr. Chairman and 
members of the subcommittee, I appreciate the opportunity to 
come before you today to discuss the FCC's plans for 
participation in Hurricane Katrina rebuilding activities and 
our plans to provide oversight of these activities.
    The FCC has announced it will be using four existing 
support mechanisms of the Universal Service Fund to provide 
$211 million to Katrina recovery assistance, as follows.
    The Low Income program will be used for evacuees and 
persons in affected areas without telephone service wireless 
handsets and a package of 300 minutes. The fund will also be 
used to provide support for reconnecting consumers as the area 
is rebuilt. The FCC has estimated this will amount to $51 
million.
    The Rural Health Care program will allow public and for-
profit healthcare providers to apply for assistance with the 
cost of telecommunications services under relaxed participation 
requirements. The FCC has estimated this will amount to $28 
million.
    The E-rate program will be used to reconnect schools and 
libraries in the affected areas to telecommunication and 
network services. The FCC estimates a range from $96 million to 
$132 million in E-rate funds for the 600 schools and libraries 
hit by the hurricane.
    The High Cost program will allow greater flexibility for 
telephone carriers to use high cost funds to prioritize 
facilities affected by Katrina.
    I applaud the Commission's effort in the post-Katrina 
recovery, and I am supportive of all the agency has done to 
assist. However, I am mindful that in my role as Inspector 
General, I am responsible for ensuring that the relief efforts 
do not present unacceptable risks to the agency and the 
taxpayer's dollar. I would like to discuss my plans for 
oversight of the Katrina-related efforts.
    The myriad of rule waivers and special temporary 
authorities the Commission has granted has only a small impact 
on audits conducted by my office. Our primary audit role in 
these functions is to ensure that adequate internal controls 
are in place and operating effectively to ensure regulatory 
compliance, and that financial cost accumulation and reporting 
are current, accurate, and complete. My financial statement 
audits for 2005 and 2006 are the best tools I have to make this 
assessment.
    We have testified before this committee on three occasions 
on the special risks this program carries and my concerns about 
the Universal Service Fund. I will discuss the four parts of 
the USF, our efforts to provide oversight of the fund, and new 
concerns as a result of the Hurricane Katrina efforts.
    The E-rate program has expended $10 billion since its 
inception in 1998. We have identified specific concerns about 
the E-rate program that will have a direct impact on the 
disaster assistance funding. These programmatic weaknesses will 
be compounded by the confusion of overworked school and library 
administrators trying to rebuild shattered information systems 
under less than ideal circumstances. Additionally, I fear these 
rule waivers or exemptions will be taken advantage of by 
unscrupulous E-rate service providers that Federal criminal 
investigations have turned up time and time again.
    Our auditors will incorporate appropriate steps in the 
audit programs currently in use to ensure the Katrina rule 
waivers are considered in audit planning and fieldwork. On a 
less positive note, I do not have the resources that approach 
being adequate to provide effective oversight of the E-rate 
program. However, we will continue to work in close 
coordination with USAC internal auditors, independent auditors 
under contract to USAC, and other Federal auditors conducting 
E-rate audits.
    Another large USF program is the High Cost program. The 
program provides support to telecommunications carriers to 
ensure that consumers in all regions of the United States have 
access to, and pay rates for telecommunications services that 
are reasonable. This program has averaged over $2.5 billion in 
annual expenditures, and my office is aware of what we need to 
expand in the area; however, we do not have the resources to 
establish an effective oversight program.
    The Low Income program assists eligible lower income 
consumers to establish and maintain telephone service by 
discounting services provided. To the best of my knowledge, 
this support mechanism has not been used in the past to provide 
wireless handsets and free minutes of service in the past. I am 
not yet fully briefed on how the Commission intends to 
implement the intended hurricane relief, and I will give 
careful consideration as to what sort of oversight to bring to 
this unique solution. I anticipate, at a minimum, I will direct 
my staff to perform an audit of how eligibility for this help 
is determined and verified, and measures the Commission has 
taken.
    I would like to make an observation about the overall risk 
to the USF as presented by the Katrina devastation. Since the 
inception of the E-rate program in 1998, over $184 million has 
been expended in Louisiana, and over $79 in New Orleans alone. 
As well as E-rate funds, the High Cost program has expended 
$550 million in the State of Louisiana since 1998. Rebuilding 
the shattered infrastructure is critical. Financial needs are 
huge and risk of misspent funds must be taken into account. 
This risk is certain to be impacted by errors on the part of 
public and private participants who are overworked and 
stressed. Further, you can be sure this level of funding will 
attract the less honest service providers to the area who might 
hope to take advantage of additional funds being expended.
    This concludes my testimony. I will be happy to answer any 
questions.
    [The prepared statement of H. Walker Feaster III follows:]

Prepared Statement of H. Walker Feaster III, Inspector General, Federal 
                       Communications Commission

    Mr. Chairman and Members of the Subcommittee, I appreciate the 
opportunity to come before you today to discuss the FCC's plans for 
participation in Hurricane Katrina rebuilding activities and our plans 
to provide oversight of these activities. Since the majority of the 
actual funds used by the FCC in the recovery efforts will come from the 
Universal Service Fund (USF), I will place emphasis on the plans to use 
the USF in the rebuilding efforts. However, I will also discuss other 
FCC efforts and discuss the overall risks that I believe we must 
consider in our oversight of Katrina-related activities.

            FCC USE OF THE USF IN KATRINA REBUILDING SUPPORT

    The Commission took the unprecedented step of holding an Open 
Meeting in Atlanta, Georgia on September 15, 2005. At this meeting, the 
Commission announced that it would use $211 million of funds from the 
USF to assist recovery efforts in the disaster area. The FCC will use 
the four existing support mechanisms of the USF to provide this 
assistance, as follows:

 The Low Income program will be used to provide evacuees and persons 
        in the affected areas still without telephone service wireless 
        handsets and a package of 300 minutes. This fund will also be 
        used to provide support for reconnecting consumers as the area 
        is rebuilt. The FCC has estimated this will amount to $51 
        million of Low Income support.
 The Rural Health Care program will allow public and for-profit health 
        care providers to apply for assistance with the cost of 
        telecommunications services under relaxed participation 
        requirements. The FCC has estimated this will amount to $28 
        million of Rural Health Care support.
 The Schools and Libraries program (or E-rate) will be used to 
        reconnect schools and libraries in the affected areas to 
        telecommunication and network services. Using a variety of 
        program rule waivers, the FCC will be able to authorize an 
        amount estimated to range from $96 million to $132 million in 
        E-rate funds for the 600 schools and libraries hit by the 
        hurricane.
 The High Cost program will allow greater flexibility for telephone 
        carriers to use high cost funds to prioritize facilities 
        affected by Katrina.

                  OTHER REBUILDING SUPPORT BY THE FCC

    The Commission has also announced the creation of a new Bureau--the 
Public Safety/Homeland Security Bureau. This Bureau will be comprised 
of existing functions currently in other FCC bureaus and offices and 
will have responsibility for the FCC's public safety, national 
security, disaster management programs.
    Additionally, the Commission has undertaken several actions that 
allow the telecommunications industry regulatory flexibility in 
rebuilding efforts. Through the issuance of temporary rule waivers and 
special temporary authorities, the FCC is assisting in re-establishing 
emergency communications, providing assistance and relief to television 
and radio stations in getting back on the air, extending regulatory fee 
payments, extending filing due dates for licensees, and performing a 
host of activities to contribute to the recovery efforts. The FCC is 
coordinating with the Federal Emergency Management Agency and the 
National Communications System, as well as state and local governments 
and organizations to communicate the FCC's flexibility in eligibility 
standards and processes to aid in the Hurricane Katrina relief efforts.

          AUDIT OVERSIGHT OF THE FCC'S KATRINA-RELATED EFFORTS

    I applaud the Commission's efforts to be a positive force in the 
post-Katrina recovery, and I am supportive of all that this agency can 
do to assist. However, I am mindful that in my role as Inspector 
general, I am responsible for ensuring that these relief efforts do not 
present unacceptable risks to the agency and the taxpayer's dollar. I 
would like to discuss my plans for oversight of the FCC's Katrina-
related efforts.
    The myriad of rule waivers and special temporary authorities the 
Commission is granting has only a small impact on audits conducted by 
my office. I have not received any indication from agency management 
that, insofar as appropriated funding goes, any additional costs or 
requests for budgetary resources are contemplated for Katrina-related 
efforts. The primary cost to the FCC appears to be in terms of 
personnel costs such as overtime and travel. Our primary audit role in 
these functions is to ensure that adequate internal controls are in 
place and operating effectively to ensure regulatory compliance and 
that financial cost accumulation and reporting are current, accurate 
and complete. While the reorganization and formulation of a new bureau 
carries a higher level of risk, our concerns are the same--are the 
financial and operational controls in place to ensure that the agency's 
programs and functions are operating in an effective and efficient 
manner and in compliance with applicable laws and regulations. My 
financial statement audits for FY 2005 and 2006 are the best tools I 
have available to make this assessment. My staff is coordinating with 
our contracted independent public auditors to ensure that testing under 
our financial statement audit will address any concerns.

                OIG OVERSIGHT OF THE USF KATRINA FUNDING

    The FCC's financial contribution to the recovery is via the USF. In 
regards to the USF, this Subcommittee is aware of the special risks 
this program carries and my concerns about the fund. We have testified 
before this Subcommittee on three occasions, as well as other House and 
Senate committees, about concerns regarding the E-rate program, one of 
the two large USF mechanisms. I will summarize the four parts of the 
USF, our efforts to provide oversight of the fund, and new concerns as 
a result of the Hurricane Katrina efforts.
    The FCC has issued an Order on September 21, 2005, that details 
several rule waivers for USF recipients in the hurricane-affected area. 
This Order allows State Commissions, carriers, and program 
beneficiaries to postpone filing certain USF forms, payments and data 
for a period of up to one hundred and fifty (150) days. At this time I 
have not been advised as to whether these waivers represent all of the 
actions needed to implement the Commission's USF Katrina relief or if 
more rule waivers will be forthcoming.
    Due to materiality and our assessment of audit risk, we have 
focused much of our attention on the USF mechanism for funding 
telecommunications and information services for schools and libraries, 
also known as the ``Schools and Libraries Program'' or the ``E-rate'' 
program. The E-rate program has expended $10 billion since its 
inception in 1998. Our involvement in E-rate audits and investigations 
has highlighted numerous concerns with this program. The Commission has 
announced that they will distribute additional funds in the hurricane 
affected areas by setting all schools and libraries in the disaster 
area at the 90% level of support, which is the highest level of support 
available under the program. They will open a new 2005 funding window 
for schools and libraries in the affected areas to request new or 
additional support, and they will allow schools and libraries serving 
evacuees to amend their 2005 funding to account for increased student 
populations.
    We have specific concerns about the E-rate program that will have a 
direct impact the disaster assistance funding. For example, we have 
cited a lack of clarity in the program's rules as being a catalyst for 
both inadvertent errors and deliberate waste and abuse. We have also 
described weaknesses in the competitive procurement requirements used 
to purchase E-rate goods and services and the ineffective use of 
purchased goods and services. These kinds of programmatic weaknesses 
will be compounded by the confusion of overworked school and library 
administrators trying to rebuild shattered information systems under 
less than ideal circumstances. Additionally, I fear these rule waivers 
or exemptions will be taken advantage of by unscrupulous E-rate service 
providers that federal criminal investigations have turned up time and 
again.
    Fortunately, we have an aggressive audit plan for E-rate 
beneficiary compliance in place, and our auditors will incorporate 
appropriate steps in the audit work programs currently in use to ensure 
the Katrina rule waivers are considered in audit planning and 
fieldwork. On a less positive note, I do not have resources that 
approach being adequate to provide effective oversight of the E-rate 
program. However, we have worked and will continue to work in close 
coordination with USAC internal auditors, independent auditors under 
contract to USAC, and other federal auditors conducting E-rate audits 
under interagency memoranda of understanding. We will ensure that the 
special risks that the FCC's proposed rules bring are addressed in the 
conduct of future audits.
    Because we have focused our limited resources on the E-rate 
program, we have not been able to devote a great deal of attention to 
the other USF mechanisms. The other large USF program is the High Cost 
program. This program provides support to telecommunication carriers to 
ensure that consumers in all regions of the United States have access 
to and pay rates for telecommunications services that are reasonably 
comparable to those services provided and rates paid in urban areas. 
This program has averaged over $2.5 billion in annual expenditures and 
my office is aware that we need to expand our oversight in this area. 
However, we have not had the resources to establish an effective 
oversight program. In the breakdown of the $211 million of Katrina 
relief there does not appear to be additional funds contemplated for 
High Cost and I believe that the primary effect of the Katrina support 
will be the redistribution of existing support. At the present, we are 
assessing risks in the High Cost program in anticipation of being able 
to institute an audit program in the future and will ensure our plans 
to address any considerations brought by the Katrina relief.
    I find the proposed Low Income Katrina-related support very 
interesting. The Low Income program assists eligible low-income 
consumers to establish and maintain telephone service by discounting 
services provided by local telephone companies. The USF reimburses the 
telephone companies for the discounts under the Low Income program. 
This program provided $759 million in support in 2004 and is considered 
to be of lower audit risk than the E-rate or High Cost programs. To the 
best of my knowledge, this support mechanism has not been used in the 
past to provide wireless handsets and free minutes of service in the 
past. I am not yet fully briefed on how the Commission intends to 
implement the intended hurricane relief, and I will give careful 
consideration as to what sort of oversight to bring to this unique 
solution. I anticipate that, at a minimum, I will direct my staff to 
perform an audit of how eligibility for this help is determined and 
verified and measures the Commission has taken to ensure the products 
provided are in the hands of the people who need the help.
    The Rural Health Care program is the smallest USF program, having 
disbursed $38 million since 1999. The FCC's proposed $28 million of 
disaster assistance to emergency health care providers in the affected 
region will represent a dramatic increase in Rural Health Care 
expenditures. This is being accomplished by increasing the discount 
rate, which is the portion of costs covered by the support mechanism to 
50% for qualified providers in the affected areas and for health care 
providers providing assistance to disaster victims nationwide. 
Additionally, the FCC will allow health care providers to file new or 
amended applications for funds in the current year. We are still 
assessing the requirement for oversight represented by the additional 
disaster relief funds.
    I would like to make an observation about the overall risk to the 
USF as represented by the Katrina devastation. The Commission is making 
a commendable effort to provide extra relief to the area in the form of 
rule waivers and temporary exemptions. However, this effort pales in 
consideration of the tremendous loss in the networking and 
telecommunications capability in the schools, libraries and homes of 
Louisiana, Mississippi, and other devastated areas. Since the inception 
of the E-rate program in 1998, over $184 million has been expended in 
Louisiana, and over $79 million in New Orleans alone. As well as E-rate 
funds, the High Cost program has expended $555million in the state of 
Louisiana since 1998. Rebuilding the shattered infrastructure is 
critical. While the FCC's authorization of additional funding will go a 
long way in restoring these services for the citizens affected by 
Hurricane Katrina, the area will require a higher level of support for 
years before it reaches a level of technological capability that it had 
before the hurricane. The financial needs will be huge and the risk of 
misspent funds must be taken into account. This risk is certain ti be 
impacted by errors on the part of public and private participants who 
are overworked and stressed. Further, you can be sure this level of 
funding will attract the less honest service providers to the area who 
might hope to take advantage of the additional funds being expended 
under relaxed rules.

                               CONCLUSION

    The Office of Inspector General has been and remains committed to 
meeting our responsibility for providing effective independent 
oversight of the USF. My office will dedicate as much of our resources 
as possible to ensure that the extra measure of support provided by the 
Commission is utilized in a manner that best benefits the people whose 
lives have been so horribly uprooted by Hurricane Katrina.
    Thank you. I will be happy to answer any of your questions.

    Mr. Whitfield. Mr. Feaster, thank you, and thank all of you 
for your opening statements. I want to welcome all of the 
members of the Oversight and Investigations Subcommittee. As I 
explained before they arrived, we do have a markup going on 
downstairs on an energy bill relating to refineries, and so 
they are displaying great enthusiasm by being in both places at 
once, so I want to thank all of you for joining us.
    I notice that since 1974, there has been a total of $83, 
$84 billion appropriated for the Disaster Relief Fund in all 
those years, and as a result of Katrina, Congress has 
appropriated $62.3 billion just for Katrina, so that takes up 
the vast amount of money that has gone through the Disaster 
Relief Fund. Now, in his opening statement, Mr. Inslee made a 
comment, and I may not get this exactly correct, but he raised 
the question, is anyone really in control here? Does anyone 
have ultimate responsibility in the coordinating of this effort 
of oversight and investigation, of watching to prevent waste, 
fraud, and abuse?
    And Mr. Skinner, I would ask you the question. Is that 
valid criticism to say there is no one central place that has 
authority to really be in control of this effort?
    Mr. Skinner. No, I don't believe it is a valid criticism. 
Quite frankly, I think the OIG community, collectively, is well 
equipped to provide that oversight by working through the PCIE 
Roundtable for Homeland Security, which I chair. I think we 
have mechanisms in place to coordinate those activities, so 
that we can work together to ensure that there are no gaps in 
oversight, and also, to ensure that there is no duplication or 
unnecessary expense in providing oversight of those funds.
    Mr. Whitfield. And is that through the President's Council 
of Integrity, is there----
    Mr. Skinner. Yes, sir. Yes, Mr. Chairman.
    Mr. Whitfield. [continuing] the coordination takes place? 
And do all of the Inspectors General have representatives that 
attend the meetings of that group?
    Mr. Skinner. Yes, we do. Currently, we have approximately 
13 members participating with regards to Katrina operations 
alone. Like I said earlier, with those 13 IGs, we can provide 
oversight for approximately 99 percent of all the funds that 
have been appropriated to date with regards to Katrina 
operations.
    Mr. Whitfield. Now, of the $62.3 billion that have been 
appropriated, how much has been spent so far?
    Mr. Skinner. Approximately about $18 to $19, or $20--it 
changes daily. We are spending money at a rapid pace, but 
approximately $18 to $19 billion has, in fact, been obligated, 
and the outlays are in and around the $4 billion range, that 
is, where the bills have come in, and we have paid bills 
against those obligations.
    Mr. Whitfield. Do you serve as the Chairman of the 
President's Council of Integrity?
    Mr. Skinner. No, Mr. Chairman. That is Greg Friedman, who 
is to my right, who has asked me to take the lead on or to set 
up a Roundtable for Homeland Security initiatives.
    Mr. Whitfield. Okay.
    Mr. Skinner. From that Roundtable, we have brought together 
those individuals that have oversight or have involvement in 
disaster operations.
    Mr. Whitfield. So Mr. Friedman, you serve as the Chairman, 
then.
    Mr. Friedman. Let me just clarify, if I can. There is a 
President's Council on Integrity and Efficiency, which is the 
Presidentially appointed, Senate-confirmed Council, and I am 
the Vice Chair of that Council. The Chair, is by virtue of the 
Executive Order which established us, the Deputy Director of 
OMB. There is an Executive Council on Integrity and Efficiency, 
and we work hand in glove together. Those are the agency-
appointed Inspectors General. In total there are 57 IGs within 
the Federal IG community.
    Mr. Whitfield. Now, Mr. Skinner mentioned the amount of 
money that has already been obligated, which is a quickly 
changing figure, but how do you actually go about tracking that 
on a daily basis?
    Mr. Friedman. Well, as Chair of the PCIE Homeland Security 
Roundtable, let me ask Mr. Skinner to address that question, if 
you don't mind.
    Mr. Skinner. Those funds are being currently tracked 
through FEMA's accounting systems. We have people embedded over 
there at FEMA, at their FEMA headquarters, where we monitor 
those expenditures, and we obtain daily reports as to the 
progress that we are making with regards to our financial 
activities.
    Mr. Whitfield. Now, we hear a lot of criticism about 
awarding contracts without competitive bidding. What is the 
rationale for that, and is some of the criticism valid?
    Mr. Skinner. It may or may not be. That is something that 
we are giving a sense of high priority to. The basis for these 
no-bid contracts is essentially to protect property, save 
lives, things of that nature, in an emergency environment. That 
is, if we had obtained competition, we run the risk of reducing 
our ability, or reducing the government's ability to respond in 
a timely manner to protect property and save lives. What that 
we are doing, collectively, in the OIG community, in the DHS 
OIG, is stepping back and looking at all of the no-bid, and 
even those limited competition contracts. The questions that we 
are going to be asking, as I said in my statement, is there 
evidence to support the need for a no-bid contract? We want to 
look at the criteria that you use to select a particular 
vendor. We want to look at the qualifications of that vendor. 
We want to look at the value, the pricing, of those no-bid 
contracts, to ensure that they are reasonable and fair. And 
then, as the bills come in, we also want to take a very close 
look to ensure that the product or services being delivered 
has, in fact, been delivered as promised.
    Mr. Whitfield. I noticed in a recent New York Times article 
you had mentioned that you were apprehensive about these kinds 
of contracts, and it is easy to be--you can find a lot of 
things wrong with it--but when you are trying to respond in a 
timely fashion, and quickly, in emergencies, you do have this 
tension between the possibility of making a lot of mistakes and 
spending money incorrectly, versus the need to act speedily, so 
you are trying to balance it out, I am sure.
    Mr. Skinner. That is correct. That is why I am not willing 
to make a blanket statement that all no-bid, or limited 
competition contracts are bad. In many circumstances, I have 
been involved with FEMA disaster operations since 1991, and I 
know, oftentimes, that that is the only alternative we have 
available to us, we the Federal Government, to get support and 
services to the people in a timely manner. But nonetheless, 
that said, by using no-bid contracts, we do increase our 
vulnerability for waste. And that is what we want to take a 
very, very close look at.
    Mr. Whitfield. Now, in May of this year, your office 
completed an audit of certain FEMA programs as related to 
Hurricane Frances in the Miami-Dade County area, and in there, 
you talked about some real problem areas, and I would just like 
to walk you through several of your findings, and ask you to 
tell us what has changed, from your perspective, to make 
certain that Katrina funds don't meet a similar fate, 
recognizing that by the nature of the disaster, mistakes are 
going to be made, but trying to minimize them.
    One of the things you point out was that no provisions 
existed for inspectors to recuse themselves from inspections 
that may present possible conflicts of interest.
    Mr. Skinner. That is correct, and FEMA has advised us that 
they have tightened those controls, but we have not yet 
validated them. In fact, that is what we will be doing, 
retesting those controls, as we walk through Katrina and Rita 
operations.
    Mr. Whitfield. Okay.
    Mr. Skinner. We have embedded people at the National 
Service Processing Center within FEMA. We have embedded people 
at the Disaster Finance Center. And we will be looking to see 
if those controls have, in fact, been put in place. And their 
response to our report was just issued this past spring or 
summer, I believe. FEMA recognized, yes, we do need to tighten 
our controls, and yes, we intend to tighten our controls. Have 
they, in fact, been tightened? Our current oversight will 
validate that.
    Mr. Whitfield. So that is one area, we don't have a 
conclusive answer on that.
    Mr. Skinner. No, we don't, at this point.
    Mr. Whitfield. All right. No. 2, FEMA designated Miami-Dade 
eligible for individual assistance programs without a proper 
preliminary damage assessment.
    Mr. Skinner. That is correct. It is my understanding from 
Katrina that has, in fact, been corrected. It was very obvious, 
in many of the counties and communities, that there was 
wholesale devastation, and therefore, just a flyover will 
demonstrate that a declaration was supportable in those 
outlying counties, as we go north in Mississippi, Alabama. I 
believe in Alabama, we only declared four counties as a result 
of the changed procedures, and the same holds true in Texas and 
Louisiana. They did do preliminary damage assessments to 
validate whether those outside of harm's way were, in fact, 
entitled to be included in the declaration.
    Mr. Whitfield. I would like to ask--my time is running out. 
Mr. Frazier, I want to ask you a question. I notice in your 
testimony you referred to, back in Hurricane Andrew, that EDA 
received requests for $130 million for various projects, that 
the agency funded 28 projects for a total of $50 million. But 
then, you pointed out that there were serious problems with 
nine out of 28 of those projects. They were slow in getting 
started. They were slow in being completed, and it sounded like 
those nine out of 28 projects really did not--you were not 
satisfied with the results of those projects at all. Would you 
elaborate on that for me?
    Mr. Frazier. Yes, Mr. Chairman. Definitely, we were very 
disappointed, because one of the things that we concluded was 
that those funds could have been redeployed. One of the 
problems that we saw was that it is not good enough just to put 
the money out there. EDA did a great job of getting the money 
out there, but then, you have to put people there to make sure 
that the contractors and the grantees are living up to the 
terms and conditions of those projects.
    In the process, we found that they gave projects to people 
who didn't really know what they were doing. When they did 
that, those projects were dismal failures. When they gave them 
to people that knew what they were doing, who had a track 
record, and were in areas that they had the expertise, we 
didn't see those problems. But, in the haste to get the money 
out, often there was very little followup, very little 
monitoring. And in fact, 5 years after the hurricane, some of 
the funds still hadn't been spent. They were still sitting 
there un-obligated. And again, you saw millions of dollars that 
just sat idle during the period when they could have been 
redeployed.
    Mr. Whitfield. And so do you think there has been any 
significant changes that would prevent that from happening this 
time, or----
    Mr. Frazier. Yes, one of the things is, that you have 
different people there, and I think that has a lot to do with 
it. One of the things that we have been constantly hammering 
the Department about is the importance of monitoring and 
overseeing the projects--I mean on an ongoing basis. One of the 
problems is that a lot of the problems that we expect to see 
with Hurricane Katrina are things that we deal with every day, 
the problems associated with how well you do grants, how well 
you do contracts. If you don't do it fairly well on an ongoing 
basis, when you have an emergency or a catastrophe like this, 
you are not going to all of a sudden become experts at doing 
it.
    At the Department, I can tell you when contracts come out 
of one particular agency, we don't have many problems with 
them. If they come out of another agency in the Department, we 
have real concerns, so a lot of it has to do with the 
infrastructure and the controls that are put in place, and that 
exist now. So we think the Department has made some significant 
strides since 1998, and in fact, we have spoken with the Acting 
Assistant Secretary to discuss that report, and he has assured 
us that these kinds of problems will not happen this time 
around.
    Now, one of the concerns that we have is whether, when the 
money starts to come into the Department to fund grants, 
whether there will be adequate moneys given to the Department 
to do the monitoring and the oversight over the long term, or 
whether it will take the money, and just get it out there, and 
then, just walk away, and then, let these kinds of problems 
materialize.
    Mr. Whitfield. Okay. My time has expired, so I recognize 
the gentleman from Washington, Mr. Inslee.
    Mr. Inslee. Thank you. I want to ask kind of a broad 
question to anyone who wants to tackle this. One of our 
concerns, my concern, is that we need a proactive effort to 
prevent waste, fraud, and abuse, rather than just a 
retrospective effort to deal with this issue. Many of us, 
myself included, believe we ought to have a Chief Financial 
Officer appointed in the structure of this to define 
proactively how to establish a financial prospective means to 
prevent this from happening in the first place, prevent 
occurrences such as having cruise ships folks that we could 
actually send people on 6 month cruises for half the price that 
we are paying to actually have people sit at the dock at these 
cruise ships for a company that I won't make any comments 
about.
    So many of us feel that we need to get ahead of the curve 
here, and set a prospective structure that prevents overlap, 
wasteful spending, rather than just the function that you 
largely, and I think quite well, in almost all instances, do, 
which is a sort of pay and chase system. They pay, and then, 
you chase the defaulters and the folks who have made wasteful 
decisions. But we feel that, and I don't think I am alone, that 
we need a prospective system to handle this massive, perhaps 
$200 billion system across multiple states, to prevent, in 
part, politics from entering into those decisions as well, 
prospectively.
    Can you give us comments about that? I know this idea has 
been floated about a Chief Financial Officer prospectively. Do 
you have any thoughts about that, about how to structure this 
system in advance, rather than just retrospectively, as you 
traditionally do? That is to anyone who has thoughts about 
that. Mr. Skinner?
    Mr. Skinner. Let me comment on that from an OIG 
perspective. We are not simply a pay-and-chase operation. We 
are involved very, very early in the operations here. We are 
looking now at internal controls and processes, and contracts 
and contract proposals as they are going through the system. We 
are involved upfront with applicant briefings, those that are 
receiving grants. We are doing pre-award reviews to make sure 
that they have the means to account for funds. We are 
cautioning them, and briefing them, on the things that could go 
wrong, so we are upfront trying to prevent poor or bad 
decisionmaking with regards to these expenditures. That is from 
an OIG perspective.
    From a CFO perspective, you could probably dice that 120 
different ways. You can get 30 CFOs in a room and they will 
probably come up with 30 different conclusions. I think that, 
most certainly, there needs to be a central place where the 
Congress, where the public, can go, and expect answers with 
regards to where we are spending our money. And so that there 
is some individual that is providing the broad oversight, to 
ensure there is no duplication or replication in benefits, for 
example. Could that be in a Department? Yes. Could it be 
separate, outside of the Department? Yes, it could go that way 
as well. But there most certainly needs to be broad oversight, 
someone within government. Could that be in OMB? Could that be 
in DHS, or down at FEMA? As long as the authority is there to 
provide that oversight and get cooperation from the others, the 
other departments that are participating in these relief 
efforts, it could work.
    The important thing here is to remember that we are in the 
early stages of this recovery, reconstruction phase, the very, 
very early stages. The big recovery, reconstruction programs 
are yet to come, and the expenditures right now are generally 
being increased by DoD and DHS. As we go on through recovery, I 
know other departments and agencies are going to become very 
heavily involved, and I imagine that they will be receiving 
direct appropriations. Commerce, for example, with regards to 
recovery zones in the Gulf region. EPA, Energy, others will 
probably be receiving funds. Who is going to provide oversight 
from a governmentwide perspective?
    Mr. Inslee. Right. Right.
    Mr. Skinner. That authority needs to be clarified. I agree. 
It could exist in OMB, or within DHS. In any case, the 
President has to make it perfectly clear who has the authority 
to coordinate and provide oversight of all those funds.
    Mr. Inslee. Well, I appreciate your comments, because 
obviously, you may not know what is going on in Energy or 
Commerce or one of the others, and vice versa; they don't know 
what is going on in yours; so we are going to pursue that, and 
I hope that all the members of the panel will at least actively 
consider, and make suggestions, to the White House and the 
administration how to fashion such a centralized system, 
because this is such a massive effort.
    And frankly, you know, these are obviously not totally 
analogous, but the abuses and failures we have seen in Iraq, we 
don't want to duplicate that at home, and having a centralized 
system, that these multiple agencies, I think, would be 
helpful. By the way, I noticed, you made reference to the 
Council of Integrity.
    Mr. Skinner. The President's Council of Integrity and 
Efficiency.
    Mr. Inslee. Yeah, is the Council, was the Council of 
Integrity responsible for the civilian contracting in Iraq?
    Mr. Skinner. No, sir.
    Mr. Inslee. Should they have been?
    Mr. Skinner. There was a special IG appointed for oversight 
in Iraq, and was given the authority to provide that oversight, 
so I don't think it was necessary that the PCIE, the 
President's Council on Integrity and Efficiency, actually 
become involved. I know that the IG for Iraq reconstruction 
coordinates very, very closely with the IG in the Department of 
State, and the IG at the Department of Defense.
    The other departments, as far as I am aware, and please, 
gentlemen, ladies, correct me if I am wrong, probably did not 
have a large role play in the reconstruction effort.
    Mr. Inslee. And when was the special IG appointed? Was that 
at the beginning of the war, or in the middle, or----
    Mr. Gimble. I think it was actually about 2 years ago, but 
the CPA, or Coalition Provisional Authority, had an IG 
position, and then, it became the special Iraqi IG. It was 
about 2\1/2\ years ago that they stood that up.
    Mr. Inslee. Would any of you others like to give your 
thoughts about if we are going to, as Mr. Skinner has talked 
about, increase our coordination and consolidation of this, on 
how to structure that?
    Mr. Gimble. Could I make a comment?
    Mr. Inslee. Yes. Yeah, Mr. Gimble, yeah.
    Mr. Gimble. I guess the first thing I would offer up is we 
do have oversight, if you are looking at it from the IG 
perspective. We have an extensive amount of oversight 
capabilities throughout the Federal Government, through both 
the PCIE, but let me just talk about how we do it in Defense.
    If you recall from my testimony, we identified a number of 
audit agencies that are within the Department, and they are 
loosely fitted under the oversight of the DoD Inspector 
General. We have periodic meetings and coordinations with the 
other DoD agencies, and there is a consolidated semiannual 
report that all IGs provide to the Congress. I think we fairly 
effectively manage this oversight and our responsibility to 
avoid duplication through our coordinating efforts and 
consolidated reporting, at the end of every 6 months.
    Now, going back to your point about what would have 
happened on the Iraqi contracting issues. The issue there, 
really, is more--the oversight, you are right, it comes in a 
lot of cases. However, I think you have to consider that in 
this case, it is a different issue. We are in the U.S., 
continental U.S., and I know at least in the Department of 
Defense, and I am sure all of the other departments, we have 
some fairly rigid contracting procedures. That is not to say 
that they won't be misused or circumvented or whatever. That is 
the role that we have to go into. But the basic contracting 
structures are in place; they should avoid or minimize this 
kind of risk.
    Mr. Inslee. I want to ask you about specific--I am going to 
get a flavor of what really happens in the real world. Which of 
you approved this contract for this cruise ship at $1,275 a 
week? That is assuming that all of the beds are filled. It 
turned about a third of them will, so it actually cost the 
taxpayers about $3,500 a week, and you can go on a cruise for 
$599 a week. Which of you approved that in advance?
    Mr. Skinner. None of us approved that in advance, nor do we 
have the authority to approve something like that. That is the 
responsibility of the program offices to do that. Nonetheless, 
with regards to the cruise ship, that is something that 
concerns us as well, and we are looking at that, as we speak, 
in coordination with DoD IG. DoD IG will be looking at how did 
we let the contract, was it done properly? Are we getting the 
best value for our dollar? And we will be looking at it from an 
operational perspective, that is, do we continue to need these 
cruise ships? Are there better alternatives out there that we 
should be considering? So this is something we are currently 
looking at.
    Mr. Inslee. Right. And we hope that the Congress, in a 
bipartisan fashion, and you will help us have a way to 
prospectively make those decisions, rather than just 
retroactively. By the way, I want to just--we are all great 
Monday morning quarterbacks in Congress, and it is a 
traditional activity here, and we know that there were 
decisions made by people in emergency situations in responding 
to this, that in retrospect won't look like the best decisions, 
in a lot of circumstances.
    We understand that there is intrinsically in an emergency 
response duplication, to some degree, but we understand the 
nature of that. For instance, in this cruise ship situation, I 
indicated there was angst because a lot of people didn't think 
anyone was going to get aboard. It turned out they were right.
    And nonetheless, maybe those are judgment decisions. But we 
just want to make sure that political connections do not 
influence the Federal Government decisions. I believe that has 
already happened in this situation to some degree, because it 
happened in Iraq, and I am seeing it happen already, so we are 
looking forward to working with you in a way to make sure that 
does not occur. Thank you.
    Mr. Whitfield. Thank you, Mr. Inslee. At this time, I will 
recognize Dr. Burgess for his 10 minutes.
    Mr. Burgess. Thank you, Mr. Chairman.
    I guess, Mr. Skinner, if it is all right with you, let us 
stay with the Department of Homeland Security for a moment. 
There was a newspaper article right after we passed the second 
supplemental 2 weeks ago about the purchase of a number of 
trailers, I guess to house evacuees. It seems like the number 
given was 100,000, but I may not remember that exactly. The 
rumor was that those trailers had actually already been 
purchased before we voted on that appropriation. Can you shed 
any light on that?
    Mr. Skinner. They may have. Some of those may, in fact, 
have been purchased prior to the second supplemental. FEMA did 
have funds available in its disaster relief account to respond 
to unexpected or new disasters, and they may have turned to 
those funds to actually purchase some of those trailers. But I 
am not exactly sure on how much money, additional money, they 
needed to buy the additional trailers that you are referring 
to, right after the second supplemental.
    Mr. Burgess. Was any thought given to placing people in 
available rental units that are dispersed around the country? I 
don't think the country is at 100 percent occupancy. Trailers 
are expensive. They take some time to build, and then, there is 
always the question of what do you do with them? I mean what--
and I haven't talked to the mayor of Baton Rouge, but I kind of 
figure he doesn't want 100,000 trailers to deal with right 
outside his city, but that may--I may be assuming something 
there.
    But what about putting people in actual housing that is 
available?
    Mr. Skinner. That is an excellent point, and at that point 
in time, those decisions were being made independently by the 
independent FCOs in the states of Mississippi, Alabama, and 
Louisiana. Since then, the Department has realized that may not 
have been a wise decision. So although we may have committed to 
buy these things, we could also terminate that commitment 
through the convenience of the government. And what we have 
done is put a freeze on the delivery of many of those trailers. 
We are reassessing our housing policy on a more global scale: 
one, we must determine how many we could actually put into 
vacant condominiums or apartments, through the temporary 
housing program; two, we must identify those that may have been 
homeless, or have been living in public housing programs, and 
working with HUD--put those people into the HUD vouchering 
program. Then, three, those that are left, we have to work with 
them to determine whether they want to return to Louisiana or 
Mississippi, or do they want to stay where they are at? And if 
they want to stay where they are at, and there is not available 
housing, then we can make trailers available to them.
    So what I think this will do is reduce considerably the 
number of trailers that we, in fact, thought we needed 
originally. That program, incidentally, I think was announced 
by Secretary Chertoff last Friday. However, it has yet to be 
implemented. They are still putting together the guidelines and 
coordinating with HHS and HUD on how the delivery will work, 
and the timing and the costs.
    Mr. Burgess. Yeah. It just calls into question the 
effective contracting practices that you talk about in your 
testimony, if we are rushing out and buying 100,000 trailers. 
Oftentimes, you don't get your best bargains that way.
    And on the same, you know, it is going to sound like I am 
complaining about the expenditure on one side, but then, the 
slow pace of reimbursement. I have got cities in my district in 
North Texas, the city of Fort Worth, the city of Dallas, the 
city of Denton, that have been told by, I guess, both FEMA and 
the State that if you have people that you want to move out of 
shelters, put them in apartments or hotels or motels, pay the 
bills, and we will get back to you 1 day. And all of that 
discretionary money, $3 million, I believe, in the case of the 
city of Fort Worth, is now used, and it has been 4 weeks, and I 
have signed on to two big appropriations bills, and taken a 
heck of a lot of heat about it at home. When does Fort Worth 
get their money?
    Mr. Skinner. That has historically been a problem 
oftentimes in certain programs, and this is one of them. The 
reason for the delay, in my opinion, is because that the 
Department had yet to work out its national housing policy, and 
until they had done that, which they had just done recently, 
like I said, they announced it Friday, and until they do that, 
they were reluctant to pay those bills.
    It is my understanding that program is going to be rolled 
out this week, if not this week, then next week. Part of that 
program includes reimbursing states and locals for their costs 
associated with providing temporary housing through the public 
assistance program, and I would suspect that you will see the 
funds flow very shortly.
    But the reason for the slowness is because we didn't have a 
global policy up front, or the policy that we did have was not 
the most efficient policy.
    Mr. Burgess. Well, we should have a policy up front. There 
should be something on the shelf that you can pull off. We are 
going to have another disaster, hopefully, never anything of 
this order of magnitude, but there will be some other disaster 
that we will have----
    Mr. Skinner. Yes.
    Mr. Burgess. [continuing] that will require multiple people 
to be displaced. I guess my concern is, back home, the Resource 
Connection spent all of its money to feed senior citizens next 
month to house evacuees this past month. They are out of money, 
and what are they going to feed their Meals on Wheels program, 
or how are they going to fund that in the month of October? I 
mean they don't run like we do, with the ability to run a big 
deficit. They need their bills paid, and I will just tell you, 
it is hard for me to go back home when I have the city of the 
Fort Worth, and the Resource Connection on one side saying you 
told us you would help us pay our bills if we did, basically, 
what I saw as the Federal Government's job, in many instances, 
and now, you are telling me the bureaucracy can't move fast 
enough to get these bills paid, and it is just a very 
uncomfortable position to be in. I am criticized for funding 
the money, and then, I am criticized because the money can't be 
spent. And I don't like that position, and I want that fixed. I 
don't know, Mr. Chairman, if there is anything that we can do 
at this committee level, but I will just tell you, it is making 
me crazy at home.
    The other thing that just bothers us, and I don't know if 
anyone has already brought it up, but there was another story 
in the newspaper about a big lobbyist meeting over on the 
Senate side earlier this week, where they were promised $200 
billion, and people were lining up. Does this fall in line with 
what you call the proactive procedures in your testimony?
    Mr. Skinner. No, Congressman. This is the first I have 
heard about a lobbyist meeting on the Senate side, or at the 
Senate, with regards to any activities associated with Katrina. 
With regards to the policy on housing, however, there is, in 
fact, a housing policy, but that policy, I think, was more 
directed to providing support for anywhere from 2,000, 5,000, 
to 10,000 people. This went way beyond the capability of FEMA, 
we are dealing with well over 150,000 people, if not more, 
scattered over 44 different States.
    And I sympathize with you and your community on the 
reimbursement issues, and it is something that FEMA has to take 
a very, very close look at, and do a better job of reimbursing 
these cities, states, nonprofits, and others for costs that 
they have incurred.
    Mr. Burgess. What about the--now, you talk about a hotline 
that you have set up, the FEMA Hotline, during the height of 
the crisis, no one could get an answer. Are we going to do a 
better job on your hotline for reporting waste, fraud, and 
abuse?
    Mr. Skinner. Absolutely. I recognize those problems, and--
--
    Mr. Burgess. If I called that number right now, would I get 
a busy signal?
    Mr. Skinner. Probably not. I hope not. We have partnered 
with the DoD, and we are going to have that thing manned with 
live voices, at least 8 hours a day. If volume increases, we 
may increase that to 16 hours a day, and we will evaluate that 
on a weekly basis. But we have, in fact, partnered with DoD to 
ensure that----
    Mr. Burgess. Right.
    Mr. Skinner. [continuing] we have adequate coverage.
    Mr. Burgess. On the biweekly reports, are those going to 
come to the committee? Will those come to us as individual 
members? How are we going to receive those?
    Mr. Skinner. Those would come to the committee----
    Mr. Burgess. Okay. And would the committee----
    Mr. Skinner. [continuing] for distribution.
    Mr. Burgess. [continuing] then disburse that to us as 
individual members? Because I would like to be kept----
    Mr. Skinner. Yes.
    Mr. Burgess. [continuing] up to date on those biweekly 
reports.
    Mr. Skinner. You will.
    Mr. Burgess. Just one other point, and it came up this 
morning in the conference meeting. What about the issue of 
illegal dumping in the State of Louisiana? Are we watching 
that, both from DHS' standpoint, from EPA's standpoint? We 
don't want to create problems that we then have to come back 
and clean up at great expense in months and years to come.
    Mr. Skinner. May I comment on that as well? We are 
providing very, very close oversight of all debris removal 
operations, and if there is illegal dumping, that is something 
that we will address immediately. But debris removal operations 
has historically, after each disaster, has always presented a 
problem for FEMA and it has also been a concern of ours. As to 
the oversight that is provided to those operators out there, 
that is something that we most certainly would be looking at.
    Mr. Burgess. All right. In the few seconds I have left, let 
me go to HHS, and just very briefly, you must have already 
disbursed a ton of money in this effort. Is that a fair 
statement?
    Mr. Vengrin. Not quite yet, Congressman. Money is still 
rolling in, and much of the expedited waivers under Medicaid 
and TANF are just beginning. In terms of inflow of transfer 
moneys, in the mission from the homeland, HHS has just outlaid, 
I think, approximately $119 million. A lot of that was for the 
replenishment of the stockpile. That typically goes under the 
VA contract, and also CDC contract. But the big game yet to be 
played is the Medicaid program, TANF, and programs of that 
sort.
    Mr. Burgess. Well, again, same deal. A lot of providers out 
there have really extended themselves. It has been 4 weeks. 
Many of them have worked without a day off, doctors and nurses 
without a day off, without a break. They need to be reimbursed. 
At the same time, I would like assurances that you have got 
someone onsite in those areas to make certain that those 
dollars are not disbursed inappropriately, because I can think 
of no greater tragedy for the people who have been displaced by 
the hurricane, the providers who stepped up and done the job 
that we have asked them to do, and then to have those funds 
stolen from them here at the last would be something I don't 
want to see.
    Mr. Vengrin. We absolutely will be looking at that.
    Mr. Burgess. Yes, sir. Thank you, Mr. Chairman. I will 
yield back.
    Mr. Whitfield. Dr. Burgess, thank you. We need to run 
downstairs. They are having a vote in committee, and we are 
going to recess for about 5 minutes, while we vote downstairs, 
and we will be right back. So thank you for your patience. We 
will be right back.
    [Brief recess.]
    Mr. Whitfield. And I would recognize the gentleman from 
Michigan, who is the ranking member on this subcommittee, Mr. 
Stupak, for his 10 minutes of questions.
    Mr. Stupak. Thank you, Mr. Chairman, and I apologize again 
for not being able to be here. I have been downstairs at the 
hearing on subsidies and price gouging on gas prices, and we 
will be bouncing back and forth all day. We have a great, 
distinguished panel, and I wish I had been able to spend some 
more time with them before we're sent down for the next vote. 
It would have been great to do this hearing uninterrupted.
    Let me ask a couple questions, and Mr. Skinner, you have 
been sort of answering a lot of questions, so how about if I 
start with you. The way I take it, each department, their 
Office of Inspector General is in charge of these contracts, 
and things like that. Right?
    Mr. Skinner. Correct.
    Mr. Stupak. But it is always after the fact. You release a 
contract, then you get a chance to see it? There is no pre-
approval process?
    Mr. Skinner. No. In this case, here, we are trying to be as 
proactive as we can.
    Mr. Stupak. But still, a contract is let, then you have the 
right look at it, right?
    Mr. Skinner. No. We have the right to look at that contract 
before it is awarded, as well.
    Mr. Stupak. So you have a right to----
    Mr. Skinner. Oftentimes, we are asked to look at contracts 
before they are awarded, to ensure the integrity of the 
contractor or----
    Mr. Stupak. So the only way you can look at it before it is 
awarded is if you are asked?
    Mr. Skinner. No, Not always.
    Mr. Stupak. Well, I am trying to figure out who pre-
approves this stuff? That is what I want to know.
    Mr. Skinner. Pre-approves?
    Mr. Stupak. Who pre-approves contracts? Who approves the 
contracts?
    Mr. Skinner. The contracting officer ----
    Mr. Stupak. In each department.
    Mr. Skinner. [continuing] is the only one authorized to 
approve or----
    Mr. Stupak. Okay.
    Mr. Skinner. [continuing] enter into a contract for the 
government.
    Mr. Stupak. So in this whole scheme of things, every 
department, and probably sub-department within the department, 
have contracting officers who must approve things. And they may 
or may not come to you to ask for your advice.
    Mr. Skinner. That is correct.
    Mr. Stupak. Okay. So like the cruise ship one, we don't 
know who did it, a contracting officer, right?
    Mr. Skinner. That is correct. Early on, and----
    Mr. Stupak. Would this be a contracting officer----
    Mr. Skinner. [continuing] in the disaster response----
    Mr. Stupak. [continuing] in the Department of Homeland 
Security?
    Mr. Skinner. I beg your pardon?
    Mr. Stupak. Would that be a contracting officer in the 
Department of Homeland Security?
    Mr. Skinner. Probably not. GSA is serving as our 
contracting officer----
    Mr. Stupak. GSA.
    Mr. Skinner. [continuing] for the disaster activities, or 
it could also have been, and I think in this case, it was 
actually the Corps of Engineers.
    Mr. Stupak. Well, see, the problem I am having is who is in 
charge here? You got eight different departments here 
represented, or seven different departments, and everybody has 
contracting officers underneath them, and people are approving 
these contracts. You don't know what contracts were approved in 
EPA, nor would I expect you to. Nor would EPA know for cleanup, 
for environmental cleanup, any contract you may approve or Army 
Corps may approve. So shouldn't there be someone who is in 
charge of this effort? Chief Financial Officer, Chief 
Contracting Officer, Chief of Police, anybody?
    Mr. Skinner. Well, as far as the Katrina operations, the 
primary contracting officials are either with DoD or with the 
GSA, through the mission assignment operations.
    Mr. Stupak. How many contracting officers are in DoD, then, 
who would have right to have contracts?
    Mr. Skinner. Tom, would you know the answer to that?
    Mr. Gimble. I will have to get back with an answer on the 
number.
    [The following was received for the record:]

    Estimates indicate that there are over 6,000 warranted 
contracting officers currently within the Department of 
Defense. This data is based on the latest information from the 
Defense Manpower Data Center database and updated input from 
the component/defense agency.

    Mr. Stupak. More than one, right?
    Mr. Gimble. Oh, there are several, yes.
    Mr. Stupak. Okay. Several. Now, DSA, same thing, several?
    Mr. Gimble. Correct. There are multiple contract officers 
throughout the government. But let me just say this.
    Mr. Stupak. Sure.
    Mr. Gimble. The basic rules of the game governing contracts 
are the Federal Acquisition Regulations, so there is a 
framework that all contracting officers should be adhering to, 
so it is not like there is no policy or procedures out there, 
but each individual contracting officer is warranted up to a 
certain amount of what they are authorized to contract to.
    Mr. Stupak. Sure.
    Mr. Gimble. And then, they are personally liable and 
responsible for that. No one else is----
    Mr. Stupak. They are personally liable?
    Mr. Gimble. I believe so.
    [The following was received for the record:]

    Contracting officers can be held personally and financially 
liable for their actions. Criminal, civil penalties and 
administrative remedies apply to conduct that violates such 
requirements as those identified in the standards of Conduct 
(FAR 3.101), the Procurement Act (FAR 3.104 and 41 U.S.C. 423) 
and the Antideficiency Act (Title 31, U.S Code).

    Mr. Stupak. Well, then answer me this question, because I 
have been on this committee for 10 years, and we have gone 
through this a million times. It seems like credit cards, 
everyone likes to abuse the heck out of their government credit 
cards. Who approved to increase the limits for purchase on 
government credit cards from $2,500 to $250,000?
    Mr. Gimble. I am not exactly sure who did that.
    Mr. Skinner. That was done through the supplemental 
appropriation process, with stipulations that----
    Mr. Stupak. So it was in----
    Mr. Skinner. [continuing] it was--GSA----
    Mr. Stupak. [continuing] the bill that Congress voted on, 
that----
    Mr. Skinner. Yes.
    Mr. Stupak. [continuing] we would increase it?
    Mr. Skinner. That is correct. And it is my understanding, 
and I believe that there are also stipulations on how that 
authority could be used. GSA was required to issue guidelines 
to ensure that----
    Mr. Stupak. Okay. So----
    Mr. Skinner. [continuing] there were controls. Those 
guidelines have never been issued, so no one is actually, in 
fact, using that authority at this point in time. Under 
emergency----
    Mr. Stupak. Well, then, will your department put some 
controls on this credit card?
    Mr. Skinner. Absolutely. At GSA, we are prepared, I know, 
we have met with the procurement officials within DHS, and----
    Mr. Stupak. And if they----
    Mr. Skinner. [continuing] our counterparts----
    Mr. Stupak. [continuing] go over, they will be----
    Mr. Skinner. [continuing] as well.
    Mr. Stupak. And if the holder of that credit card goes 
over, that person will be personally responsible?
    Mr. Skinner. That is correct. And there are controls on how 
they can use those cards. Right now, those limits are set at 
$15,000, not $250,000, and there----
    Mr. Stupak. Sir, with all due respect----
    Mr. Skinner. [continuing] are multiple approvals----
    Mr. Stupak. With all due respect, I have sat here for 10 
years and listened to how these controls we have on credit 
cards, and all the time, if there was a place they abused the 
hell out of things, it is the credit cards, and I was just 
shocked to read that, that it was from $2,500 to $250,000. And 
so that is what I am concerned about. And do you feel we need 
someone in charge, like a czar, or a Chief Operating Officer, 
or do you like the process we have got now?
    Mr. Skinner. Right now, I would like to focus on the OIGs' 
oversight role.
    Mr. Stupak. Sure.
    Mr. Skinner. And I most certainly believe that we are now 
well equipped, well positioned, to provide that oversight, not 
only----
    Mr. Stupak. But only within your department. Only within 
your department.
    Mr. Skinner. We can coordinate----
    Mr. Stupak. How?
    Mr. Skinner. [continuing] through the PCIE, the President's 
Council on Integrity and Efficiency, and through the Homeland 
Security Roundtable.
    Mr. Stupak. The President's Council on Integrity Fitness, 
you said?
    Mr. Skinner. Efficiency.
    Mr. Stupak. Efficiency, I am sorry.
    Mr. Skinner. The President's Council on Integrity and 
Efficiency.
    Mr. Stupak. Is that appointed? Is that an appointed 
position?
    Mr. Skinner. That is established by Executive Order, and it 
is co-chaired by the IG from the Department of Energy----
    Mr. Stupak. Will they be held accountable, personally 
liable, if things go awry on these contracts?
    Mr. Skinner. No, not personally liable. The contract----
    Mr. Stupak. Well, what good is it to have a council, if no 
one is going to be held accountable?
    Mr. Skinner. The contracting officers will be held 
accountable.
    Mr. Stupak. Contracting officers, okay.
    Mr. Skinner. Yes.
    Mr. Stupak. What would happen to the contracting officers, 
then? Lose their job, or something like that?
    Mr. Skinner. If there is abuse, yes. Well, there could be 
criminal penalties, civil penalties, or----
    Mr. Stupak. Will this Council----
    Mr. Skinner. [continuing] administrative penalties.
    Mr. Stupak. Will this Council review contracts before they 
are let?
    Mr. Skinner. To the extent we can, our approach right now 
is we are reviewing the internal control processes over 
procurement to ensure that those processes are compliant with 
the FAR, and they have the appropriate internal controls, 
checks and balances, so that abuses cannot happen. If we find 
gaps, we are going to recommend immediately----
    Mr. Stupak. These controls----
    Mr. Skinner. [continuing] they be closed.
    Mr. Stupak. Do you have any kind of data base that will 
have all the purchases listed, or each contract let, so all 
your AGs can have access to it? Do you have----
    Mr. Skinner. Yes.
    Mr. Stupak. [continuing] a central data base?
    Mr. Skinner. Yes. That is the first thing we do, is----
    Mr. Stupak. Is that up and running now?
    Mr. Skinner. [continuing] develop an--we are in the process 
of developing an inventory of all contracts let, for example, 
under DHS, and each----
    Mr. Stupak. And this is across----
    Mr. Skinner. [continuing] department----
    Mr. Stupak. [continuing] all the agencies, then?
    Mr. Skinner. Yes, each of those that have received----
    Mr. Stupak. And these contracting officers will punch into 
it, so we all know what is going on?
    Mr. Skinner. Well, these contracting officers do--already 
punch into this system. I mean that is how they track their----
    Mr. Stupak. It is all going to be completely accessible.
    Mr. Skinner. I beg your----
    Mr. Stupak. It will be accessible to everybody? They can 
key in all these contracting officers for----
    Mr. Skinner. I can't say they are going to be accessible to 
everybody.
    Mr. Stupak. Yes.
    Mr. Skinner. But they will be----
    Mr. Stupak. Wouldn't that be helpful if everybody was 
accessible to this data base, so we know what is being awarded, 
so we don't have duplication and waste?
    Mr. Skinner. [continuing] accessible when? You have to 
define for everybody, Mr. Congressman.
    Mr. Stupak. Well, so your contracting officers, all your 
OIGs.
    Mr. Skinner. Yes, that will be----
    Mr. Stupak. And the contracting officers.
    Mr. Skinner. [continuing] made accessible to us, yes.
    Mr. Stupak. To us? OIGs?
    Mr. Skinner. The OIGs, yes.
    Mr. Stupak. Okay. But not the contracting officers.
    Mr. Skinner. Yes, of course, they are accessible to them. 
And----
    Mr. Stupak. Okay.
    Mr. Skinner. As well as the officials responsible for 
managing those contracting officers.
    Mr. Stupak. Do you think we should slow down some this--
letting these contracts, until you have this central data base 
established, until there is plan for recovery? I have a little 
bit of a problem putting all this money in the Army Corps to 
rebuild some levees that breached, so why are we rebuilding the 
things that breached? Shouldn't we have people look at it, and 
get a strategic plan on how we should redo the levee system in 
New Orleans, so we don't have this problem again, or are we 
just going to put money at it, and let them build on a system 
that didn't hold up.
    Mr. Skinner. Well, I don't think we should be slowing down 
as far as providing support in stopping the canal breaches at 
this point in time.
    Mr. Stupak. I agree.
    Mr. Skinner. But as far as----
    Mr. Stupak. Stop the flow of the water.
    Mr. Skinner. [continuing] long term, as far as----
    Mr. Stupak. [continuing] the water----
    Mr. Skinner. [continuing] long term planning, yes, I----
    Mr. Stupak. Recovery. But all----
    Mr. Skinner. [continuing] agree, and----
    Mr. Stupak. [continuing] these other contracts----
    Mr. Skinner. [continuing] the Department and the government 
needs to assess how we want to provide our long--or 
reconstruction effort--and how we want to provide----
    Mr. Stupak. Well, don't you think----
    Mr. Skinner. [continuing] recovery.
    Mr. Stupak. Things that are nonessential, they are not life 
threatening, don't you think we should slow down and get a 
plan, and say here is what we are going to do, because there is 
no strategic plan, right?
    Mr. Skinner. To our knowledge, there is no overall 
strategic plan. That is being developed right now. We are still 
in a response mode.
    Mr. Stupak. Right. Yeah, we are just feeling our way 
through this thing.
    Mr. Skinner. And we are going to be going into phase 2 of 
our operations, and that would be individual assistance, 
temporary housing----
    Mr. Stupak. Sure.
    Mr. Skinner. [continuing] and then phase 3 is the 
reconstruction and I believe, in fact----
    Mr. Stupak. See, we are reading----
    Mr. Skinner. [continuing] being those----
    Mr. Stupak. We are reading articles that people who blow 
the whistle, especially the 3 or 4 with the Army Corps, have 
been fired or let go, or have been given very difficult job, 
demoted, because they said things weren't going right. They 
shouldn't have done. And we are still trying to--don't have any 
plan, people are trying to watch the buck. Those who are 
watching the buck are being demoted, and things like that, so 
shouldn't we really slow things down a little bit, and make 
sure we know what we are doing, before we throw billions of 
more dollars out there?
    Mr. Skinner. As far as long-term reconstruction, there is 
no doubt we need to take a very close look at how do we want to 
approach these types of issues.
    Mr. Stupak. Let me ask you this, you know, and based on 
responses and again, I noticed a lot of questioning was focused 
to you earlier, Mr. Skinner, it sounds like, or let me put it 
like this, would DHS be willing to become the CFO or the head 
agency to coordinate all this relief effort, which may go up to 
$200 billion?
    Mr. Skinner. You would have to ask DHS officials, but I 
would say, right now, I believe they do view themselves as the 
coordinator for all of this activity.
    Mr. Stupak. Well, then would you view yourself, then, as 
the lead coordinator of the IGs, then?
    Mr. Skinner. That is correct.
    Mr. Stupak. Okay. I say this respectfully, but the GAO 
report I read here about a week ago indicated that DHS, in its 
current status, or I should say, is at a high risk for 
effectiveness because its procurement activities have not 
achieved the level of sophistication and control that we 
expect. So my concern is if DHS is going to be the lead agency, 
DHS Office of Inspector General is going to be sort of like the 
CFO of $200 billion----
    Mr. Skinner. No, we would not be the CFO. We are----
    Mr. Stupak. Well, I thought you----
    Mr. Skinner. [continuing] not accountants.
    Mr. Stupak. [continuing] said earlier, you----
    Mr. Skinner. We are not the accountants. No, we provide the 
oversight to ensure that----
    Mr. Stupak. Okay. The oversight, but your procurement has 
not reached the level of sophistication and control that it 
should, according to GAO. So should we hand this off to some 
other agency?
    Mr. Skinner. DHS has come a long way since that report was 
issued. They have increased their resources considerably. Yes, 
they still have a long way to go to be referred to as a model 
procurement operation. But with the resources, I am confident 
that it is something they can do. It is also something that 
they would probably do in partnership with other Federal 
agencies, such as GSA----
    Mr. Stupak. Sure.
    Mr. Skinner. [continuing] for example.
    Mr. Stupak. Sure. And I heard Mr. Feaster say in the little 
bit of testimony I came in, he was--needed more funds to do 
some of this stuff, and it sounds like funds are lacking within 
the Department of OIGs to help us out here. I guess my concern 
is this: I think we need a plan, No. 1, which we don't have. 
No. 2, we need someone in charge, who is going to be 
accountable. And No. 3, if you don't have the authority to do 
that, should Congress then do that, and designate a czar or 
somebody who would be held responsible. Because I just really 
think that we are throwing a lot of money out there, you know, 
visions of this $2,000-debit card that turned out to be a 
little bit of a disaster when everybody was getting it. There 
was no accountability there. We want to react, and we want to 
help people, but at the same time, we just got to have some 
accountability and someone in charge.
    Thank you. Sure. Go ahead.
    Mr. Skinner. Go ahead.
    Ms. Tinsley. I am afraid we are confusing managing this 
overall recovery and oversight, and those are by design 
different responsibilities.
    Mr. Stupak. I don't disagree with you, but all I want to 
know is, is there is a plan, who is in charge, who is 
accountable? I don't want a quagmire like we----
    Ms. Tinsley. Right.
    Mr. Stupak. [continuing] got going right now. And it is a 
mess out there. And I don't mean that disrespectful to anybody. 
But----
    Ms. Tinsley. And you have mentioned a couple times about a 
CFO to do this----
    Mr. Stupak. Sure.
    Ms. Tinsley. [continuing] and just like there is the 
President's Council on Integrity and Efficiency, that is 
coordinating on oversight, there is a CFO Council that is 
headed by OMB, and that might be the group that you would want 
to think about----
    Mr. Stupak. Maybe, but most of the thing----
    Ms. Tinsley. [continuing] as far as----
    Mr. Stupak. [continuing] I am hearing, it is DHS, 
Department of Homeland Security, and GSA, those are the two I 
am hearing right now. Maybe this Council should step forward 
and say we will be accountable, but I hope before they do any 
of this, they at least have a plan before we get going.
    And excuse me a minute, I have got a vote downstairs----
    Mr. Whitfield. Mr. Rabkin, Mr. Stupak had mentioned this 
GAO report, and would you like to make any comments about some 
of the issues that he raised?
    Mr. Rabkin. Mr. Chairman, the GAO has been looking at the 
transformation of the Department of Homeland Security, as it 
was formed, and the movement of different component agencies 
into the Department, looking at the overall management issues, 
as well as the performance, and we put it on our high risk 
list, even before the Department was created, concerned about 
that transformation, and how coming together as a department 
might affect the ability of the individual components to carry 
out their missions.
    Two-and-a-half years later, we are still concerned about 
that, and I agree with Mr. Skinner that the--in this case, we 
are talking about procurement and acquisition activities, that 
they have made progress, but they are still not at the level 
where we would consider them to be out of the woods, let us 
say.
    Mr. Whitfield. Okay.
    Mr. Rabkin. And we continue to monitor that, and we will do 
so as they carry out their functions with Hurricane Katrina.
    Mr. Whitfield. Okay. Well, thank you. At this time, I will 
recognize Mr. Walden for his 10 minutes.
    Mr. Walden. Thank you very much, Mr. Chairman.
    Mr. Skinner, I have a question for you. Do you think 
Members of Congress should be held personally liable when these 
funds aren't right? We vote for this stuff, and give you this 
authority. I sort of wonder.
    Mr. Skinner. No comment.
    Mr. Walden. Thank you. And I think we all are, in effect, 
liable, because we are responsible to our constituents, and I 
appreciate the work that all of you do in your IG roles. It is 
essential to our work here, to learn from you what works and 
what doesn't, and how we can get it right. And so I appreciate 
your testimony, your counsel, and the work you do with your 
folks within these agencies.
    I want to go to this issue of the credit card that Mr. 
Stupak raised. Can you explain, based on what you have seen, 
why we would extend the credit limit increase from, what was 
it, $2,500 or $2,000, to a higher level, in an emergency?
    Mr. Skinner. Generally, after a disaster, the credit card 
levels are increased to, I believe, from $2,500 to $15,000.
    Mr. Walden. Okay.
    Mr. Skinner. To allow for quick buys of supplies, things of 
that nature, to help us set up disaster service centers, 
disaster field offices, things of that nature. This is my first 
experience with having that level raised to $250,000. Although 
it has been raised to $250,000, that authority has not yet been 
exercised.
    Mr. Walden. It has not, and that is because the guidelines 
have not been written yet?
    Mr. Skinner. Part of the stipulation was that GSA would 
issue regulations on how those credit cards, or the holders of 
those credit cards, would operate, and you are correct, those 
regulations have yet to be published.
    Mr. Walden. And do you anticipate, in those situations, 
that such use at those levels would require more than one 
person to authorize?
    Mr. Skinner. No doubt. There is a whole series of internal 
controls that have to be imposed over the users of those credit 
cards. They are not going to go to everyone. They will simply 
go to those, to a very select few. There is documentation 
requirements to ensure that there is a demonstrated need. There 
will be supervisory approval, and there will be checks and 
balances. With regards to the OIG oversight of the use of those 
credit cards, we do have data mining capabilities, where we 
review the day to day use of those cards, and we intend to 
employ that software, regardless of whether it stays at 
$15,000, or goes to $250,000, so that we can monitor the use of 
those credit cards on a daily basis.
    Mr. Walden. Good, because I concur with my colleague from 
Michigan, having been on this subcommittee for a couple of 
years now. We have seen evidence elsewhere in the government 
where credit card abuse has been a real problem, where things 
have been purchased that never should have been, and 
eventually, it seems like it gets uncovered, and people are 
eventually held accountable. But wherever we can prevent that, 
and certainly, various signoffs and chain of command, and 
review is----
    Mr. Skinner. Yes, and again, we are going to be providing 
oversight on a day-to-day basis, and we are going to make that 
known to all the users of those credit cards.
    Mr. Walden. All right. Very good. And can you tell us, in 
some of the examples we are reading about in the news media and 
elsewhere, of potential contract abuses, what are the penalties 
that exist today, if you have a contractor that engages in some 
sort of fraudulent agreement, doesn't deliver the services, 
goes way over----
    Mr. Skinner. For false claims, yes, there are both criminal 
and civil penalties. Criminally, I think they could be subject 
to a $250,000 fine and 10 years imprisonment if convicted. If 
we could take this through civil court, we could get get treble 
damages for false claims, or if it doesn't rise to that level, 
we could take administrative actions against the contractor. 
That is, debar them----
    Mr. Walden. From being able to contract in the future.
    Mr. Skinner. Discontinue the contract, and fines, things of 
that nature.
    Mr. Walden. Do you need additional authority from the 
Congress to deal with the situation, because it is so unique, 
with Katrina and Rita? Are there any additional penalty needs 
that you have, or do you think the law is sufficient for----
    Mr. Skinner. No, I believe we cuttently have all the 
authorities that we need to do our job. We just need to 
implement these authorities.
    Mr. Walden. Do you have adequate resources to provide the 
oversight, and if not, what do you need?
    Mr. Skinner. Currently, without tapping into the resources 
we have--and I am speaking for the Department of Homeland 
Security--without tapping into the resources that we have 
dedicated to other activities----
    Mr. Walden. Right.
    Mr. Skinner. [continuing] providing oversight over the 
other $40 billion that is appropriated to the Department of 
Homeland Security on an annual basis. Yes, we will need 
additional resources. Congress has given us an additional $15 
million to get us started----
    Mr. Walden. On Inspectors General, right?
    Mr. Skinner. [continuing] for the Inspector General, so we, 
over the next 3 months, can hire about 40 people. Based on the 
size of this particular disaster, and the long-term recovery 
that is going to ensue, I would anticipate that we would 
probably need even additional funds and would need hire 
additional staff, to provide the adequate oversight that is 
going to be necessary.
    Mr. Walden. And do you feel you have the ability, the 
authority, to request fully what you think you will need?
    Mr. Skinner. Yes.
    Mr. Walden. Does anybody try and stop you from asking this?
    Mr. Skinner. Absolutely not. I could say the Department, 
from the top all the way down, has been very cooperative in 
working with us, and supporting any requests that we have made.
    Mr. Walden. All right.
    Mr. Skinner. We have already made one request, and it came 
to Congress, and it was approved. We are at a process of 
working with the Department and OMB for additional funds, and 
everyone has been very cooperative and understanding as to what 
our requirements are.
    Mr. Walden. So I am sure you can imagine the lights next 
time could be even brighter than this time, with the passage of 
time, in terms of us holding you all accountable, because we 
get held accountable.
    Mr. Skinner. Sure.
    Mr. Walden. We get a lot of questions on this level of 
money, and how it is being spent, and all of that.
    Mr. Feaster, I want to go to some of the communications 
issues, if I could, and I don't know to what level you have 
been involved. In terms of what happened during the emergency, 
what happens now, can you describe for me, in terms of the 
FCC's response during the emergency, and what sort of equipment 
needs may be necessary, how the systems work? Do you look at 
all of that?
    Mr. Feaster. We do, but we haven't done that yet. But 
basically, the regulatory flexibility offered to the TV and 
radio stations was very flexible, and I haven't seen or heard 
any negative comments on what happened. I think the FCC reacted 
in a very positive manner, establishing taskforces and making 
people available on a 7-day, 24-hour basis.
    Mr. Walden. Will you be evaluating how the Emergency Alert 
System worked, both on broadcast and cable? Does your office do 
that?
    Mr. Feaster. Yes, we do that. As I said earlier, we have 
very limited resources. Unlike my colleagues down there, my 
staff is 10 people, and we are looking at many more people than 
that----
    Mr. Walden. We have Inspector jealousy here, is that--four 
star, and you are the one star.
    Mr. Feaster. A million dollars is big money to me.
    Mr. Walden. Yes.
    Mr. Feaster. But we will try to use contract funds to do 
the necessary, appropriate audits, and we can certainly put 
that on our list of things to do.
    Mr. Walden. Because I know one of the issues was basically 
a lot of the broadcast facilities went dark.
    Mr. Feaster. Yes, sir.
    Mr. Walden. Either their towers went down, or they ran out 
of emergency fuel, or electricity, and there were a few 
stations that were able to stay on the air, and continue to 
communicate, but----
    Mr. Feaster. And it had always been hoped, when I was 
involved, before I was Inspector General, that backup power 
would work, and keep them on the air, but it was just too much, 
too long.
    Mr. Walden. Yeah. Yeah. And can you describe the situation 
today, in terms of the communications structure that is 
operating, and the FCC's response? I know there is some 
discussion I have heard about, and I think you reference in 
your testimony, about perhaps dipping into the E-rate moneys to 
do various things.
    Mr. Feaster. Yes. That situation, they are basically 
planning to spend about approximately $211 million out of E-
rate funds from the USF fund, for various programs, including 
High Cost, Low Income, and the E-rate--E-rate, used to rebuild 
the school's telecommunications infrastructure; the Rural 
Health Care, making services available to the various clinics, 
so that they can use telemedicine. The big one is from the High 
Cost--not the High Cost, but from the--excuse me, it is High 
Cost--cell phones, and 300 minutes of service that people have 
been without phone service can get their lives back and start 
moving ahead.
    Mr. Walden. All right. Well, as you know, this subcommittee 
has done a lot of work on the E-rate fund, and we----
    Mr. Feaster. Yes, sir.
    Mr. Walden. [continuing] found some abuses, in how all that 
process work, so I assume you are going to be looking very 
carefully at controls.
    Mr. Feaster. We will continue our oversight of that----
    Mr. Walden. So we are not building like TV studios and 
things of that nature.
    Mr. Feaster. We are very much aware of that, and we will 
continue that.
    Mr. Walden. And there may be some equipment still in a 
warehouse somewhere.
    Mr. Feaster. Out in Puerto Rico, I think.
    Mr. Walden. Puerto Rico. You might be able to facilitate. 
Thank you, Mr. Chairman. Thank you, ladies and gentlemen, for 
your participation in this hearing.
    Mr. Whitfield. Thank you, Mr. Walden. At this time, we will 
recognize Ms. Schakowsky for 10 minutes.
    Ms. Schakowsky. Mr. Chairman, if I could, I would like to 
defer to Mr. Waxman, who just came in.
    Mr. Whitfield. Okay. Go ahead, Mr. Waxman.
    Mr. Waxman. Thank you, Ms. Schakowsky and Mr. Chairman.
    Gentleman, and all of you, ladies. Looking to see what your 
name is. All of you Inspectors General, we are very pleased to 
have you here, and I want to tell you all I appreciate the goal 
that you have set out, providing oversight for the Gulf Coast 
recovery and reconstruction efforts. But unfortunately, we have 
been down this road before, and the record is not a good one. 
Twice in the last 5 years, the Bush Administration embarked on 
mammoth spending binges. The first was the frenzied and poorly 
planned award of huge homeland security contracts, after the 
September 11 attacks, and the second was the massive 
reconstruction effort in Iraq. We were assured in both cases 
that the Administration Inspectors General and other government 
auditors would protect the interests of the taxpayers, yet both 
cases resulted in unmitigated disasters, with the 
administration squandering literally hundreds of millions of 
dollars.
    But today, most of that money has been spent, and oil and 
electricity production remain below pre-war levels. I am 
talking, of course, about the reconstruction in Iraq. So we 
have virtually nothing to show for our investment for 
reconstruction in Iraq, for the oil and electricity production. 
The domestic record is no better. Contract after contract 
issued by the Department of Homeland Security has been plagued 
by poor management and huge cost overruns. In some instances, 
the problem was that the Inspector General pulled a punch. In 
other instances, the Inspectors General did their job, but 
their findings were ignored by the administration.
    The truth is that this administration simply cannot be 
trusted to oversee itself. Mr. Rabkin, GAO warned that both 
Iraq reconstruction and the reorganization at the Department of 
Homeland Security were ``high risk endeavors that needed 
diligent and robust oversight.'' Are you satisfied that the 
administration provided adequate oversight in these two areas?
    Mr. Rabkin. I don't think I am in a position to comment on 
the oversight in Iraq. For the Department of Homeland Security, 
the oversight that the IG is providing has been growing with 
the Department. The IG started slowly, with a small contingent, 
and it has grown, and it is much more robust than it was. And I 
think also, that the Congress' oversight has grown, likewise, 
as the Department has taken on additional responsibilities.
    Mr. Waxman. Well, I am sorry you can't comment on Iraq, but 
the Government Accountability agency has commented on Iraq, and 
it has been a very negative one. It was indicated as a high-
risk endeavor, and then, they have come up with subsequent 
reports that have raised serious questions about the hundreds 
of millions of dollars that don't seem to justified.
    Mr. Rabkin. Yeah, I am just personally not----
    Mr. Waxman. Okay.
    Mr. Rabkin. [continuing] prepared to talk about that.
    Mr. Waxman. But let me go down the line, and maybe not 
everyone on the panel is able to answer the question, but I 
would like to know whether any of you believe the procurement 
approach in Iraq was in the best interests of the U.S. 
taxpayers, and whether it could have been done better? Mr. 
Friedman?
    Mr. Friedman. To be honest with you, Mr. Waxman, the only 
thing I know, frankly, is what I read in the newspaper, and 
what I have learned through other media, so I really am not in 
a position to comment.
    Mr. Waxman. Okay. If you have a comment, Mr. Skinner.
    Mr. Skinner. I am sorry, Congressman. Likewise, I am not in 
a position to comment.
    Mr. Waxman. Okay. And Mr. Gimble.
    Mr. Gimble. Congressman, I think the answer to the one 
question, could the procurement have been done better? I think 
the answer to that is yes. I think the oversight community has 
stepped up and identified some significant problems, of which 
some are still under active criminal investigation. So I think 
the answer is yes, absolutely, it could have been better. But 
it was under hard circumstances that those folks had to 
operate.
    Mr. Waxman. And there is criminal investigation as to 
unsubstantiated charges, is that correct?
    Mr. Gimble. There are some active criminal investigations 
ongoing still, and normally, we don't----
    Mr. Waxman. Relating to private contracting in Iraq.
    Mr. Gimble. Correct.
    Mr. Waxman. Okay. Well, do you feel that you could say that 
the procurement approach in Iraq was in the best interest of 
the taxpayers of the country?
    Mr. Gimble. If you are asking me for the national strategy 
on whether we should have rebuilt Iraq, or committed those 
funds, I am not in a position to----
    Mr. Waxman. No, not whether we have done it, whether we did 
it, once we committed those funds, whether we spent those funds 
appropriately and wisely, in the best interests of the 
taxpayers.
    Mr. Gimble. I don't think I am in a position to comment on 
that.
    Mr. Waxman. Okay. Anyone else?
    Mr. Vengrin. No comment, Congressman.
    Mr. Waxman. Yeah.
    Mr. Little. Not in a position to comment.
    Mr. Waxman. Okay.
    Ms. Tinsley. Nor am I.
    Mr. Frazier. Nor am I.
    Mr. Waxman. Okay. Now, well, I want to tell you what I 
think, because I have been looking at this matter for some 
time, trying to exercise oversight, even though there has been 
resistance in the Congress to do that. I think unless 
fundamental reforms are put in place, and we create a truly 
independent oversight body, the taxpayers are going to get 
ripped off again.
    That is why I joined in legislation a couple days ago 
called the Hurricane Katrina Accountability and Clean 
Contracting Act. This legislation would create a panel of 
independent experts to guard against waste, fraud, and abuse, 
and it would require transparency in contracting, something 
that I think has been sorely missing.
    Americans want their government to act quickly and 
generously to meet the needs of the hurricane victims and their 
communities, even if the ultimate price tag is measured in 
hundreds of billions of dollars, but if we don't radically 
change course, what we are likely to get is another round of 
boondoggle contracts that enrich private contractors while 
squandering vast sums and driving the Nation deeper into debt.
    Mr. Chairman, I have some other questions, but I am trying 
to inquire about the time. I notice that there have been bells 
ringing.
    Mr. Whitfield. Yes, Mr. Waxman, you have about 3 minutes 
left.
    Mr. Waxman. Okay. Well, let me----
    Mr. Whitfield. But we have two votes on the House floor, 
and then, we will adjourn for about 25 minutes and come back.
    Mr. Waxman. Okay. Well, let me see if I can get into some 
of these other questions in the few minutes I have left. Mr. 
Skinner, I want to ask you whether you plan to investigate 
FEMA's failure to set up appropriate contingency contracts 
before Hurricane Katrina struck. Greg Rothwell, the Chief 
Procurement Officer at the Department of Homeland Security, has 
already expressed concern about this, and yesterday, Michael 
Brown was asked about it. Specifically, he was asked why FEMA 
did not have in place a contingency contract to recover dead 
bodies after the hurricane struck. This is a very unpleasant 
subject, but I am sure you recall the scores of bodies remain 
on the streets of New Orleans in plain view, decomposing for 2 
to 3 weeks after the hurricane. Now, this was a travesty, these 
corpses lay there after news stories reported their exact 
positions, the specific street corners.
    When asked about this yesterday, Mr. Brown answered, and I 
will quote him for you: ``That was a mistake, one that we 
should look at, and make sure we don't do in the future.'' Are 
you looking into this?
    Mr. Skinner. Yes, we are, sir. Two weeks ago, we initiated 
an inspection just to address those types of issues. We are 
going to be focusing on how well FEMA was, in fact, prepared 
for this particular disaster, and not only that, how prepared 
should they have been for this particular type of disaster. We 
anticipate having our review complete in early 2006, with a 
report to Congress no later than the end of March.
    Mr. Waxman. What is so tragic about this is that Mr. Brown 
was warned, even a year earlier, that such a storm could have 
come about, and FEMA had noticed that it could have been just 
like it was, yet he did nothing to prepare for it. Are you 
looking at the larger question of what contingency contract 
FEMA should have put in place, given the specific warnings of 
the Hurricane Pam exercise?
    Mr. Skinner. Yes, we will be. We will be using that as our 
baseline, the exercise held last year in New Orleans.
    Mr. Waxman. And the very sad thing here, as we have seen, 
and which hopefully we will learn from, is that FEMA brought on 
a company called Kenyon Worldwide Disaster Management to 
recover dead bodies, of course, after the hurricane hit, but 
after a week of dealing with FEMA's bungling, the company quit 
and started working directly for Governor Blanco of Louisiana. 
The company even wrote to Congress, and this is what they said 
about FEMA: ``In spite of our best efforts and honorable 
intentions, numerous roadblocks, hindrances, and interferences 
have resulted.'' They told FEMA the present situation is 
unacceptable, and the company had no choice but to transfer its 
participation to Governor Blanco. Are you examining this 
contract, Mr. Skinner?
    Mr. Skinner. Yes, we are. As part of our inspection of our 
preparedness, how prepared were we, and how prepared should we 
be, we are also going to be putting the response activities 
under very close scrutiny from the end of August all the way 
through September 30.
    Mr. Waxman. Well, we look forward to your report. We have 
got to, I think, ask for accountability for what has happened 
and then be sure this sort of thing never happens again.
    Thank you, Mr. Chairman.
    Mr. Whitfield. Thank you, Mr. Waxman. We are going to take 
a break. We are going to let Ms. Blackburn ask her questions, 
and I am going to ask her to come and chair the meeting, and 
then after that, we are going to have a recess for about 30 
minutes, because we want to come back after these votes, and we 
want to address some of these issues that we have outstanding.
    So Ms. Blackburn, if you will come up and take over the 
chair, we have about 5 minutes left in this vote, and I can't 
miss any more votes this year myself, so I am going to go vote. 
I am going to let Ms. Blackburn chair the meeting and ask her 
questions for the allowable time, and go from there.
    Ms. Blackburn. [continuing] we come back----
    Mr. Whitfield. Yeah. And we will come back, and we will be 
back here at 1.
    Ms. Blackburn [presiding]. Thank you all for your patience. 
I know we are running back and forth, and several of us do have 
questions, and want to ask them. And I appreciate that you are 
hanging with us and we are back and forth from the floor, and 
from downstairs.
    One thing I want to address before I get into my questions, 
my colleague had just mentioned that they are, you know, 
favoring an independent panel to review what happened with 
Katrina, and I will tell you, quite honestly, listening to my 
constituents in Tennessee, they expect us, as Members of 
Congress, and as those who take the responsibility for 
appropriating, to work with you all to find out exactly what 
happened, and then, to take the responsibility and the 
appropriate legislative action.
    And I think most of us welcome that responsibility, and we 
appreciate that you are willing to come before us. Mr. Rabkin, 
I want to go to you first. Somebody had mentioned a lack of 
transparency with the financial transactions. I want to go back 
to something that came up last year, as we worked with GAO 
through the Government Reform Committee, on the financial 
structure, the enterprise architecture, that exists for most 
departments, as they keep their financial records.
    Have we made any greater movement to having all of our 
departments through their CFO act, have a financial enterprise 
architecture, department-wide, system-wide, where there is 
transparency, where you can follow financial transactions on a 
more timely manner, or are we still in the process of trying to 
go in-house and build these, and have that transparency at some 
point in the future?
    Mr. Rabkin. Ms. Blackburn, it is my understanding that the 
government is moving in that direction. I don't have specific 
information on how far the government has come, in DHS or the 
other departments at this time.
    Ms. Blackburn. Would you like to get back to us on where 
they stand, how much they have spent, and how soon they think 
they are going to be compliant with being able to have the 
transparency that has been sought, that they have been tasked 
to perform.
    Mr. Rabkin. I would be glad to.
    [The following was received for the record:]

    A recently issued GAO report--Financial Management: 
Achieving FFMIA Compliance Continues to Challenge Agencies 
(GAO-05-881, Sept. 20, 2005)--deals with this issue (the report 
is available at www.gao.gov). In summary, we found that in 
spring 2004, OMB launched task forces to conduct a government 
wide analysis of five lines of business supporting the 
President's Management Agenda goal to expand electronic 
government. OMB and the designated agency Line of Business Task 
Forces plan to use enterprise architecture-based principles and 
best practices to identify common solutions for business 
process, technology-based shared services, or both to be made 
available to government agencies. Officials at OMB stated that 
the financial management line of business continues to evolve 
with four agencies (GSA, the Department of Interior's National 
Business Center, The Department of the Treasury's Bureau of the 
Public Debt, and DOT) being selected to become Centers of 
Excellence through the fiscal year 2006 budgetary process. We 
have ongoing work to analyze the financial management line of 
business.

    Ms. Blackburn. Thank you. Mr. Feaster, talking a little bit 
about communications, I had some questions that I wanted to 
direct to you, pertaining to VoIP and VoIP technology. I was on 
the ground on Mississippi, and nothing worked. And I think one 
of the failings of this is that the cell towers all went down. 
We had hardwired phones that didn't work. We had emergency 
communicators that forgot to power, fill the generators, and to 
have a backup supply, so that they could run the generators to 
run the equipment that we had. And cable service, when you talk 
about having cable TV down there, there are some areas I have 
talked to where they are saying it will be a year before that 
infrastructure is back in place. And I know you were saying 
your staff is small, and that it is going to take you all 
around--but talk, just for a moment, as you look at this in 
hindsight, and looking at the fact that most of your 
telecommunications failed, and if you had VoIP technology, if 
you were more reliant on satellite for news and information, 
what difference would it have made?
    Mr. Feaster. I really am not qualified to answer that 
question, ma'am.
    Ms. Blackburn. Can you have someone get back to me----
    Mr. Feaster. I will.
    Ms. Blackburn. [continuing] and provide that. I think it is 
an important part of our debate, as we move forward. A DHS 
question that I have. Mr. Skinner, we are hearing a good bit 
about illegal immigrants who are accessing benefits, and I want 
to know if--and then, also, we are hearing about individuals 
claiming to be residents of Louisiana, Mississippi, or Alabama, 
and coming in to try to access benefits. We are seeing some of 
this in Tennessee.
    I would like to know what type of measures you all have put 
in place to help with verification of individuals, to be 
certain that we are not dealing with a lot of identity theft or 
fraud, or individuals who are claiming to have been from 
somewhere they are not.
    Mr. Skinner. Yes. There are several initiatives ongoing 
with regards to the individual assistance program. The 
Department, for one thing, has developed software packages, 
which is relatively new, and they haven't used in the past, to 
match applicant's names, addresses, and other information 
against ChoicePoint software to validate that these people, in 
fact, live where they say they are going to live. At the same 
time, we are embedding our own auditors and investigators with 
the FEMA folks, so that we can be there on a real-time basis, 
and review applications on a sample basis, or test basis, and 
look at internal controls, to ensure that as applications are 
processed through the processing center, that we have internal 
controls and checks in place to ensure, that to the extent we 
can,----
    Ms. Blackburn. Okay. If I may interrupt you right there.
    Mr. Skinner. Yeah.
    Ms. Blackburn. So what I am hearing you say is that you 
have people in the fields----
    Mr. Skinner. Yes. Right.
    Ms. Blackburn. [continuing] that are doing--and then, you 
are doing a double check as the information comes in-house.
    Mr. Skinner. That is correct.
    Ms. Blackburn. Okay.
    Mr. Skinner. And we are going to embed people in our 
disaster finance center as well. So that will be a third check, 
where we can look at the controls as the payments go out, to 
ensure that certain checks have been made before these 
individuals have, in fact, been determined to be eligible, and 
a check is mailed. Once the check is mailed, we are inserting 
in all envelopes a fraud warning, and the penalties associated 
with submitting an application with false information to FEMA. 
Also, we are working with the Attorney General's Fraud 
Taskforce. Our emphasis is going to be on individual assistance 
fraud. We are working with the Postal Service, the FBI, and 
with the local U.S. Attorneys to prosecute individuals that may 
make fraudulent application. As you know, many of these 
individuals, the max you possibly could receive under any 
particular grant would be about $26,000. This, of course, 
doesn't rise to a threshold that most U.S. attorneys would 
prosecute across the country, but nonetheless, under this 
taskforce, they recognize this as a priority of the Attorney 
General, and they have agreed to work with us, and prosecute as 
many cases as possible. We have already prosecuted one case 
just last week. We have dozens coming down the pike.
    Ms. Blackburn. Well, sir, I can assure you, $26,000 is 
something that excites my constituents, when they see the fraud 
taking place.
    Mr. Skinner. And it adds up. It certainly adds up.
    Ms. Blackburn. Yes, sir. It does. And that is the thing. 
You know, I had a constituent tell me mind your pennies, the 
dollars will take care of themselves.
    Mr. Rabkin, Section 428(a) on the supplemental, the Katrina 
supplemental, allows the micro-purchases of $250,000, where you 
don't have to have a bid. It is a no competition, single source 
contracting, through that provision. Now, I want to know what 
measures you all are taking, or have put in place on the front 
end to be certain that that does not get abused.
    Mr. Rabkin. I think that is more the responsibility of the 
agencies that these people that have the credit cards and can 
use them, what controls they have on----
    Ms. Blackburn. Okay. Then, in the interests of time, if I 
can just direct to each and every one of you. If you will 
address that in writing, to let us know what you are going to 
do to be certain that 428(a) does not just become an ongoing 
account, and does not become something that is openly abused.
    One other question I want to throw out to you all before I 
go to cast my vote, and it has to do with minority contracting, 
and Mr. Skinner, I guess this is going to come to you and Mr. 
Frazier, primarily. In my district, I am having some complaints 
from minority businesses who are trying to get inside these 
contracts. We have contractors who have received prime 
contracts, and then, the subcontractors are having a very 
difficult time, and I would like to know specifically what are 
the requirements that are being placed, so that our small 
businesses and our minority businesses have the opportunity to 
fairly compete in this process for the cleanup and the 
reconstruction, and if you all will just submit that to me in 
writing, I am going to go vote, and we will be in recess for 25 
minutes, and then, the chairman will resume.
    [Brief recess.]
    Mr. Whitfield. There are a couple of additional questions 
that I wanted to touch base on. I want to thank Ms. Tinsley for 
pointing out the significant difference between managing for 
this recovery and oversight of this recovery, and that is 
something that a lot of members, I think, through their 
exuberance, enthusiasm, whatever, get into different areas, 
without recognizing and thinking about the differences.
    There has been a number of stories written recently, and 
sometimes, we can believe what we read in the newspaper, and 
sometimes, we cannot. But one of the things they pointed out 
was that on the levee system in New Orleans, which was 
breached, which was responsible for most of the flooding, that 
there was a defective construction of the levee by one of the 
contractors, subcontractors, whatever. Now, I am assuming that 
as Inspectors General, one of you that has the responsibility 
for that area, which maybe it would be Mr. Gimble, I am 
assuming that is something that you will be looking into.
    Mr. Gimble. Yes, sir.
    Mr. Whitfield. Is that correct?
    Mr. Gimble. Yes, sir.
    Mr. Whitfield. And were you already looking into it prior 
to these stories, or had you had any information prior to the 
newspaper stories about it, or how did it come to your 
attention?
    Mr. Gimble. Well, I am not sure. First of all, either we 
will look at it, or the Army Audit Agency will look at it, and 
to my knowledge, no one was looking at it prior to yhr 
newspaper stories. But I can't speak for the Army Audit Agency.
    Mr. Whitfield. Okay. You can't speak for the Army Audit 
Agency.
    Mr. Gimble. Not on that issue. I just simply don't know. 
I----
    Mr. Whitfield. But would you have any responsibility in the 
oversight of that issue?
    Mr. Gimble. We have oversight responsibility over the Army 
Audit Agency, as part of our role as the DoD IG, but we also 
have the ability to go in, if we want to go in, and look at a 
particular issue within the Corps of Engineers, we have that 
authority also.
    Mr. Whitfield. But if a contractor used defective methods, 
or was negligent in some way, obviously, you all will make 
every effort to get to the bottom of it, and would have the 
authority to bring criminal penalties, civil penalties, or 
whatever. Is that correct?
    Mr. Gimble. Correct.
    Mr. Whitfield. Okay. And you would be pursuing that.
    Mr. Gimble. I take it that we will pursue.
    [The following was received for the record:]

    Currently the Department of Defense, Office of the 
Inspector General (DoD OIG) is not performing work with regard 
to allegations that the construction of the New Orleans levee 
system was defective. The Army Audit Agency is conducting 
audits of the U.S. Army Corps of Engineers contracts and 
reconstruction efforts, their on-going and planned audits do 
not address the allegations.
    Three teams, the National Science Foundation, the American 
Society of Civil Engineers and the State of Louisiana, are 
currently conducting investigations of the floodwall breaches. 
Further, Secretary Rumsfeld announced on October 19, 2005, that 
the National Academies of Science will convene an independent 
panel of national experts to evaluate the performance of the 
hurricane protection system in New Orleans and the surrounding 
areas. This panel will conduct a forensic study and expects to 
issue a report by July 2006.
    After the above investigations and studies are completed, 
the DoD OIG will assess the results of these efforts and 
determine if additional audit or investigative work is 
appropriate. The DoD OIG will coordinate with other groups and 
audit organizations, such as the Government Accountability 
Office, in determining the extent of any future work.

    Mr. Whitfield. Okay. Now, let me ask another question. 
There has been a lot of discussion today. Some of the news 
media here ask us questions about it outside, about the 
necessity for some, for lack of a better term, special 
Inspectors General to oversee all of this, and of course, we do 
have a special Inspectors General in Iraq for reconstruction, 
and there has been a lot of criticism of that situation. Is 
there any one of you that would support, that believes that 
Congress should act in some way, or the President should act in 
some way, to set up a different structure for oversight in 
dealing with an issue of the magnitude of Katrina, or do you 
feel like the current system is adequate to deal with it? I 
would just like to just go down the line.
    Mr. Friedman. Mr. Chairman, in an event as complex and 
convoluted, there will never be a perfect governing system, nor 
will there ever be a perfect oversight system. But we have 
looked at it--as the President's Council on Integrity and 
Efficiency, and on the Executive Council on Integrity and 
Efficiency, and we have taken a position on this issue. We have 
a consensus position, and that is that the structure that we 
have set in place is the most effective structure that we can 
think of to address precisely the stewardship issues that you 
are referring to.
    Mr. Whitfield. Okay.
    Mr. Friedman. Right now, as I think has been evidenced by 
the testimony this morning, Mr. Skinner and his staff have a 
very good sense of what is going on in DHS, Ms. Tinsley at EPA, 
etc. We have created the working group, the Homeland Security 
Working Group, and we are interacting effectively. We are going 
to be reporting to one another, in essence. So, I think we have 
the experience in our respective agencies. Setting up a new IG, 
you essentially lose all of the learning curve that we have 
built up over many years of experience. And Mr. Frazier, I 
think, alluded earlier to the fact that as the sitting IGs, we 
know both the strengths and weaknesses of our respective 
agencies. We have identified the main management challenges, 
and we honestly believe that while there may be arguments, I 
mean there are at least 4 or 5 different proposals that I have 
heard about on Capitol Hill currently, while there are lots of 
alternatives and people can tweak the system, we think we have 
got everybody working together to do the best possible job that 
we can do in this oversight business.
    So I think creating another entity, another layer that has 
to start recreating what we have, already, like relationships 
with the U.S. Attorneys around the country. We also have 
relationships with the State and local auditors. These are 
relationships that we have built up over many years. We are 
experienced in the grants making process, and a lot of this 
money will be spent, of course, by the states and local 
governments. So we have a tremendous body of experience that we 
think we bring to the task, and we think what we have created 
here, with the Homeland Security Working Group, Mr. Skinner's 
leadership, and the participation of all the IGs, that we have 
the best formulation that we can think of.
    Mr. Whitfield. Now, is there anyone on here that would 
disagree with that.
    Mr. Rabkin. Yes. I am not going to disagree, but I guess 
you could say that GAO is probably the only organization here 
without a dog in the fight, and I have talked to the 
Comptroller General about this, and he is very confident in the 
organizational structure that has been set up through the 
existing IGs, as Mr. Friedman has described, and would support 
the--you know, he is confident in their capabilities, their 
expertise, their coordination activities, and doesn't see the 
need for any special IG.
    Mr. Whitfield. Okay. All right. Thank you. At this time, I 
would recognize Ms. Schakowsky for her 10 minutes.
    Ms. Schakowsky. Thank you, Mr. Chairman. I apologize for 
getting here a bit late. Thank you for giving me the time to 
address this really important issue. I wanted to first 
associate myself with the questions that Mr. Stupak and others 
raised about the purchase cards, about the credit cards. I 
served as the ranking Democrat on the Government Efficiency 
Subcommittee of the Government Reform Committee, at the time 
that Steve Horn was here, and we requested a number of GAO 
reports that revealed these blatant abuses, and the really 
frustrating part was, and many people have expressed 
frustration, we would come back, and focus on just another, 
instead of over here, just over here a little while later, and 
the same thing would be there, and you got the feeling that 
wherever the light of day was focused, you would find, coming 
out from under that rock, all of these problems, and so forgive 
us if we have the certain skepticism about the kind of 
oversight that is being done.
    What I really wanted to focus on, in particular today, oh, 
and Mr. Chairman, if I could have unanimous consent to put my 
opening statement in the record, I would appreciate that.
    [The prepared statement of Hon. Jan Schakowsky follows:]

Prepared Statement of Hon. Jan Schakowsky, a Representative in Congress 
                       from the State of Illinois

    Thank you Chairman Whitfield and Ranking Member Stupak. I am 
pleased that this committee will have the opportunity today to address 
what can be done to guard against waste, fraud, and abuse in the post-
Katrina recovery period. A thorough discussion on the policy of 
employing contractors to perform inherently government work is long 
overdue.
    More than 80 percent of the $1.5 billion worth of contracts signed 
by FEMA for work in the Gulf region were awarded without bidding or 
with limited competition. As thousands of contractors head into the 
Gulf region, President Bush jumped at the chance to suspend the Davis-
Bacon fair labor law, condemning reconstruction workers to an endless 
cycle of poverty and lack of opportunity, while leaving profits of 
contractors in the reconstruction effort unchecked. Clearly, disaster 
victims should have the priority for Katrina recovery jobs and job 
training. I am looking forward to hearing what plans FEMA, and other 
agencies responsible for disaster relief, had in place before Katrina 
and what plans are being developed now, to make sure every taxpayer 
relief dollar is spent wisely, effectively, and fairly. The residents 
of the Gulf Coast and the American taxpayers deserve to have this 
information. And members on both sides of the aisle should demand 
accountability.
    I'm concerned about the Department of Homeland Security's hiring of 
private security contractors to perform work such as ``securing 
neighborhoods'' and ``confronting criminals'' in New Orleans. Time and 
time again, from Columbia to Iraq, and now to New Orleans, we have seen 
how the federal government has unwisely and irresponsibly utilized the 
services of private military firms. Private military contractors should 
not be tasked with security operations in the Gulf Coast because they 
continue to fall outside the official command structure and operate 
without clear protocols or responsibility. Ask any American if they 
want thugs from a private, for-profit company with no official law 
enforcement training, roaming the streets of their neighborhoods. The 
answer will be a resounding NO.
    I would like to submit for the record an article from The Nation 
entitled ``Blackwater Down'', which depicts the author's firsthand 
observations of military contractors in New Orleans. In one instance, 
after a potentially deadly exchange of fire involving employees of the 
security firm Bodyguard and Tactical Security, their security chief 
reports: ``the Army showed up, yelling at us and thinking we are the 
enemy. We explained to them that we were security. I told them what had 
happened and they didn't even care. They just left.'' This was 
reportedly after staff from the private firm opened fire with automatic 
weapons in the middle of the streets of New Orleans.
    Members of Congress and the public rightfully questioned the 
President's suggestion that we may need to change the posse comitatus 
law to make it easier for the military to enforce U.S. laws in times of 
crisis. I doubt any of them would prefer to have for-profit companies 
doing it instead. Do we want to be placing the same security 
contractors on the ground in New Orleans who committed sadistic abuses 
of Iraqi prisoners at Abu Ghraib? Do we want to have fully-armed 
security contractors on the ground in the United States who have just 
returned from Iraq, with a war-like mentality, and possible post-
traumatic stress disorder? Who is responsible when something bad 
happens and who gives them their orders?
    And what about the costs? Why should New Orleans fire and police 
personnel and all the patriotic first responders on loan from other 
states and localities continue to receive their regular salaries while 
these contractors are making the equivalent of six figure salaries off 
the taxpayers? It doesn't make sense.
    This Committee must not allow the Bush Administration to re-import 
the contracting practices linked to spending abuses in Iraq as it 
begins the largest and costliest rebuilding effort in U.S. history. 
Taking advantage of a national tragedy to line the pockets of federal 
contractors and friends of the President should not be tolerated. I 
look forward to hearing how the Inspectors General and GAO plan on 
helping us to avoid fraud and abuse as we rebuild the Gulf Coast. I 
want to thank the witnesses for being here today.

    Ms. Schakowsky. I am very concerned about the Department of 
Homeland Security hiring private security contractors to 
perform law enforcement work, and I wanted to ask a bit about 
that. There is an article called ``Blackwater Down'' in the 
Nation, and I don't see a date here, 9/28, talking about a 
company now that also has a contract for work in Iraq, a 
company right now, by the way, whose Chief Operating Officer 
and General Counsel is Joseph Schmitz, who just resigned as the 
Pentagon's Inspector General, and now, he is head of Prince 
Group, which is the parent company of Blackwater.
    So here is what it says about what is going on, on the 
ground, in New Orleans. ``Some patrolled the streets in SUVs 
with tinted windows, and the Blackwater logo splashed on the 
back. Others sped around the French Quarter in an unmarked car 
with no license plates. They congregated on the corner of St. 
James and Bourbon in front of a bar called 711, where 
Blackwater was establishing a makeshift headquarters. From the 
balcony above the bar, several Blackwater guys cleared out what 
had apparently been someone's apartment. They threw mattresses, 
clothes, shoes, and other household items from the balcony to 
the street below. They draped an American flag from the 
balcony's railing. More than a dozen troops from the 82nd 
Airborne Division stood in formation on the street watching the 
action.
    ``In an hour-long conversation, I''--the reporter--``had 
with four Blackwater USA men, they characterized their work in 
New Orleans as `securing neighborhoods' and `confronting 
criminals.' They all carried automatic assault weapons, and had 
guns strapped to their legs. Their flak jackets were covered 
with pouches for extra ammunition.
    ``When asked what authority they were operating under, one 
guy said, `We're on contract with the Department of Homeland 
Security.' Then, pointing to one of his comrades, he said, `He 
was even deputized by the Governor of the State of Louisiana. 
We can make arrests and use lethal force if we deem it 
necessary.' ''
    So I wanted to ask you, Mr. Skinner, is this an unusual 
scenario?
    Mr. Skinner. It certainly is. This is the first I have 
heard of that. I suspect, just based on the little information 
you have just given me, that that contract is probably a 
contract through the state or the city of New Orleans. However, 
they are probably using FEMA or Department of Homeland Security 
or Federal funds to support that activity, and it is something 
we will look into.
    Ms. Schakowsky. Okay. Would you let me know----
    Mr. Skinner. Certainly.
    Ms. Schakowsky. [continuing] and this committee know, as 
soon as possible, if they are, in fact, under contract with the 
Department of Homeland----
    Mr. Skinner. Yes.
    Ms. Schakowsky. [continuing] Security? I am concerned that, 
you know, we are debating right now whether or not even men and 
women in uniform, if the Federal Government, under Posse 
Comitatus, can carry out law enforcement activities. I am just 
wondering what both of you actually, Mr. Skinner and Mr. 
Gimble, think about having these private contractors which, you 
know, while it seems clearly unusual to me in New Orleans, 
quite frankly, it seems in many ways as unusual to me in Iraq 
as well. And we need a lot of oversight on what it is that 
these private military contractors, questioning the chain of 
command and the Military Code of Conduct and all those things. 
But right here on our soil, I just wondered what you think, 
both of you, on you know, comparing that to Posse Comitatus.
    Mr. Skinner. I have serious concerns in using contractors 
in this capacity, and the reason I have concerns with that is 
because one, with the Department of Homeland Security, we have 
well over 80,000 law enforcement officers that have authority, 
preexisting authority, and in coordination with the state, we 
could provide those services. I also know that the PCIE IG 
community went out, and under Greg's leadership, and recruited 
well over, I believe, 300 volunteers, law enforcement officers, 
who are on call, and have agreed to provide law enforcement 
services on behalf of the Federal Government. So to use a 
contractor, I question whether this is something that was done 
directly by the Department of Homeland Security, but 
nonetheless, these are services that would have been made 
available to the city or the State upon request, and this is 
something I am going to follow up on, you can rest assured.
    Ms. Schakowsky. Okay. Mr. Gimble.
    Mr. Gimble. Yes. I would be very concerned about the 
implications of that, but I would also be very concerned if 
this is, in fact, the, you know, the truth on what they were 
contracted for. Did they, in fact, have arrest powers, and were 
they authorized to use lethal force? And I read that in the 
newspaper article myself, so I guess if you had somebody you 
contracted, and you gave them those powers, I would question by 
what authority you would do that.
    Ms. Schakowsky. Let me read you a little bit more. And Mr. 
Chairman, I would like to put this article in the record.
    [The article referred to follows:]

                            Blackwater Down
                           by JEREMY SCAHILL

 This article can be found on the web at http://www.thenation.com/doc/
                            20051010/scahill

    The men from Blackwater USA arrived in New Orleans right after 
Katrina hit. The company known for its private security work guarding 
senior US diplomats in Iraq beat the federal government and most aid 
organizations to the scene in another devastated Gulf. About 150 
heavily armed Blackwater troops dressed in full battle gear spread out 
into the chaos of New Orleans. Officially, the company boasted of its 
forces ``join[ing] the hurricane relief effort.'' But its men on the 
ground told a different story.
    Some patrolled the streets in SUVs with tinted windows and the 
Blackwater logo splashed on the back; others sped around the French 
Quarter in an unmarked car with no license plates. They congregated on 
the corner of St. James and Bourbon in front of a bar called 711, where 
Blackwater was establishing a makeshift headquarters. From the balcony 
above the bar, several Blackwater guys cleared out what had apparently 
been someone's apartment. They threw mattresses, clothes, shoes and 
other household items from the balcony to the street below. They draped 
an American flag from the balcony's railing. More than a dozen troops 
from the 82nd Airborne Division stood in formation on the street 
watching the action.
    Armed men shuffled in and out of the building as a handful told 
stories of their past experiences in Iraq. ``I worked the security 
detail of both Bremer and Negroponte,'' said one of the Blackwater 
guys, referring to the former head of the US occupation, L. Paul 
Bremer, and former US Ambassador to Iraq John Negroponte. Another 
complained, while talking on his cell phone, that he was getting only 
$350 a day plus his per diem. ``When they told me New Orleans, I said, 
`What country is that in?' '' he said. He wore his company ID around 
his neck in a case with the phrase Operation Iraqi Freedom printed on 
it.
    In an hourlong conversation I had with four Blackwater men, they 
characterized their work in New Orleans as ``securing neighborhoods'' 
and ``confronting criminals.'' They all carried automatic assault 
weapons and had guns strapped to their legs. Their flak jackets were 
covered with pouches for extra ammunition.
    When asked what authority they were operating under, one guy said, 
``We're on contract with the Department of Homeland Security.'' Then, 
pointing to one of his comrades, he said, ``He was even deputized by 
the governor of the state of Louisiana. We can make arrests and use 
lethal force if we deem it necessary.'' The man then held up the gold 
Louisiana law enforcement badge he wore around his neck. Blackwater 
spokesperson Anne Duke also said the company has a letter from 
Louisiana officials authorizing its forces to carry loaded weapons.
    ``This vigilantism demonstrates the utter breakdown of the 
government,'' says Michael Ratner, president of the Center for 
Constitutional Rights. ``These private security forces have behaved 
brutally, with impunity, in Iraq. To have them now on the streets of 
New Orleans is frightening and possibly illegal.''
    Blackwater is not alone. As business leaders and government 
officials talk openly of changing the demographics of what was one of 
the most culturally vibrant of America's cities, mercenaries from 
companies like DynCorp, Intercon, American Security Group, Blackhawk, 
Wackenhut and an Israeli company called Instinctive Shooting 
International (ISI) are fanning out to guard private businesses and 
homes, as well as government projects and institutions. Within two 
weeks of the hurricane, the number of private security companies 
registered in Louisiana jumped from 185 to 235. Some, like Blackwater, 
are under federal contract. Others have been hired by the wealthy 
elite, like F. Patrick Quinn III, who brought in private security to 
guard his $3 million private estate and his luxury hotels, which are 
under consideration for a lucrative federal contract to house FEMA 
workers.
    A possibly deadly incident involving Quinn's hired guns underscores 
the dangers of private forces policing American streets. On his second 
night in New Orleans, Quinn's security chief, Michael Montgomery, who 
said he worked for an Alabama company called Bodyguard and Tactical 
Security (BATS), was with a heavily armed security detail en route to 
pick up one of Quinn's associates and escort him through the chaotic 
city. Montgomery told me they came under fire from ``black 
gangbangers'' on an overpass near the poor Ninth Ward neighborhood. 
``At the time, I was on the phone with my business partner,'' he 
recalls. ``I dropped the phone and returned fire.''
    Montgomery says he and his men were armed with AR-15s and Glocks 
and that they unleashed a barrage of bullets in the general direction 
of the alleged shooters on the overpass. ``After that, all I heard was 
moaning and screaming, and the shooting stopped. That was it. Enough 
said.''
    Then, Montgomery says, ``the Army showed up, yelling at us and 
thinking we were the enemy. We explained to them that we were security. 
I told them what had happened and they didn't even care. They just 
left.'' Five minutes later, Montgomery says, Louisiana state troopers 
arrived on the scene, inquired about the incident and then asked him 
for directions on ``how they could get out of the city.'' Montgomery 
says that no one ever asked him for any details of the incident and no 
report was ever made. ``One thing about security,'' Montgomery says, 
``is that we all coordinate with each other--one family.'' That co-
ordination doesn't include the offices of the Secretaries of State in 
Louisiana and Alabama, which have no record of a BATS company.
    A few miles away from the French Quarter, another wealthy New 
Orleans businessman, James Reiss, who serves in Mayor Ray Nagin's 
administration as chairman of the city's Regional Transit Authority, 
brought in some heavy guns to guard the elite gated community of 
Audubon Place: Israeli mercenaries dressed in black and armed with M-
16s. Two Israelis patrolling the gates outside Audubon told me they had 
served as professional soldiers in the Israeli military, and one 
boasted of having participated in the invasion of Lebanon. ``We have 
been fighting the Palestinians all day, every day, our whole lives,'' 
one of them tells me. ``Here in New Orleans, we are not guarding from 
terrorists.'' Then, tapping on his machine gun, he says, ``Most 
Americans, when they see these things, that's enough to scare them.''
    The men work for ISI, which describes its employees as ``veterans 
of the Israeli special task forces from the following Israeli 
government bodies: Israel Defense Force (IDF), Israel National Police 
Counter Terrorism units, Instructors of Israel National Police Counter 
Terrorism units, General Security Service (GSS or 'Shin Beit'), Other 
restricted intelligence agencies.'' The company was formed in 1993. Its 
website profile says: ``Our up-to-date services meet the challenging 
needs for Homeland Security preparedness and overseas combat procedures 
and readiness. ISI is currently an approved vendor by the US Government 
to supply Homeland Security services.''
    Unlike ISI or BATS, Blackwater is operating under a federal 
contract to provide 164 armed guards for FEMA reconstruction projects 
in Louisiana. That contract was announced just days after Homeland 
Security Department spokesperson Russ Knocke told the Washington Post 
he knew of no federal plans to hire Blackwater or other private 
security firms. ``We believe we've got the right mix of personnel in 
law enforcement for the federal government to meet the demands of 
public safety,'' he said. Before the contract was announced, the 
Blackwater men told me, they were already on contract with DHS and that 
they were sleeping in camps organized by the federal agency.
    One might ask, given the enormous presence in New Orleans of 
National Guard, US Army, US Border Patrol, local police from around the 
country and practically every other government agency with badges, why 
private security companies are needed, particularly to guard federal 
projects. ``It strikes me . . . that that may not be the best use of 
money,'' said Illinois Senator Barack Obama.
    Blackwater's success in procuring federal contracts could well be 
explained by major-league contributions and family connections to the 
GOP. According to election records, Blackwater's CEO and co-founder, 
billionaire Erik Prince, has given tens of thousands to Republicans, 
including more than $80,000 to the Republican National Committee the 
month before Bush's victory in 2000. This past June, he gave $2,100 to 
Senator Rick Santorum's re-election campaign. He has also given to 
House majority leader Tom DeLay and a slew of other Republican 
candidates, including Bush/Cheney in 2004. As a young man, Prince 
interned with President George H.W. Bush, though he complained at the 
time that he ``saw a lot of things I didn't agree with--homosexual 
groups being invited in, the budget agreement, the Clean Air Act, those 
kind of bills. I think the Administration has been indifferent to a lot 
of conservative concerns.''
    Prince, a staunch right-wing Christian, comes from a powerful 
Michigan Republican family, and his father, Edgar, was a close friend 
of former Republican presidential candidate and antichoice leader Gary 
Bauer. In 1988 the elder Prince helped Bauer start the Family Research 
Council. Erik Prince's sister, Betsy, once chaired the Michigan 
Republican Party and is married to Dick DeVos, whose father, 
billionaire Richard DeVos, is co-founder of the major Republican 
benefactor Amway. Dick DeVos is also a big-time contributor to the 
Republican Party and will likely be the GOP candidate for Michigan 
governor in 2006. Another Blackwater founder, president Gary Jackson, 
is also a major contributor to Republican campaigns.
    After the killing of four Blackwater mercenaries in Falluja in 
March 2004, Erik Prince hired the Alexander Strategy Group, a PR firm 
with close ties to GOPers like DeLay. By mid-November the company was 
reporting 600 percent growth. In February 2005 the company hired 
Ambassador Cofer Black, former coordinator for counterterrorism at the 
State Department and former director of the CIA's Counterterrorism 
Center, as vice chairman. Just as the hurricane was hitting, 
Blackwater's parent company, the Prince Group, named Joseph Schmitz, 
who had just resigned as the Pentagon's Inspector General, as the 
group's chief operating officer and general counsel.
    While juicing up the firm's political connections, Prince has been 
advocating greater use of private security in international operations, 
arguing at a symposium at the National Defense Industrial Association 
earlier this year that firms like his are more efficient than the 
military. In May Blackwater's Jackson testified before Congress in an 
effort to gain lucrative Homeland Security contracts to train 2,000 new 
Border Patrol agents, saying Blackwater understands ``the value to the 
government of one-stop shopping.'' With President Bush using the 
Katrina disaster to try to repeal Posse Comitatus (the ban on using US 
troops in domestic law enforcement) and Blackwater and other security 
firms clearly initiating a push to install their paramilitaries on US 
soil, the war is coming home in yet another ominous way. As one 
Blackwater mercenary said, ``This is a trend. You're going to see a lot 
more guys like us in these situations.''

    Ms. Schakowsky. ``A possibly deadly incident involved 
Quinn's''--this is referring to Patrick Quinn III, who brought 
private security to guard his estate and his luxury hotels, 
which are under consideration for a lucrative Federal contract 
to house FEMA workers--``a possibly deadly incident involving 
Quinn's hired guns underscores the danger of private forces 
policing American streets. On his second night in New Orleans, 
Quinn's security chief, Michael Montgomery, who said he worked 
for an Alabama company called Bodyguard and Tactical Security, 
was with a heavily armed security detail en route to pick up 
one of Quinn's associates and escort him through the chaotic 
city. Montgomery told me they came under fire from `black 
gangbangers' on an overpass near the poor Ninth Ward 
neighborhood. `At the time, I was on the phone with my business 
partner,' he recalls. `I dropped the phone and returned fire.'
    ``Montgomery says he and his men were armed with AR-15s and 
Glocks, and that they unleashed a barrage of bullets in the 
general direction of the alleged shooters on the overpass. 
`After that, all I heard was moaning and screaming, and the 
shooting stopped. That was it. Enough said.'
    ``Then, Montgomery says, `the Army showed up, yelling at us 
and thinking we were the enemy. We explained to them that we 
were security. I told them what had happened and they didn't 
even care. They just left.' ''
    So you know, we heard a lot about looters, and we heard a 
lot about disorder, and we heard a lot of things about lack of 
security and law enforcement there, but I am just wondering if 
we have people there who are paid now to supposedly secure law 
and order who themselves are shooting at will, maybe killing 
and/or hurting people, and that the Army and the Department of 
Homeland Security is just standing by. So even in the case of 
private contractors for a private purpose, what are they doing 
there, and how, in this instance, is the military reacting to 
that?
    Mr. Gimble. I would have to get back you on the specific 
incident of the 82nd Airborne. I am not actually familiar with 
what actually happened down there that day.
    [The following was received for the record:]

    The 82nd Airborne presence in New Orleans was part of 
``Joint Task Force All American.'' As part of the joint task 
force the 82nd Airborne provided support as requested by the 
Federal Emergency Management Agency and directed by the 
Department of Defense. The support included humanitarian relief 
and activities including medical, logistical, and 
communications support, as well as clean-up assistance.
    The DoD OIG has contacted the Department of the Army, the 
Army Inspector General, and the 82nd Airborne for information 
pertaining to the previously described instance. There is no 
formal record of an incident involving the 82nd Airborne as 
described in, ``Blackwater Down,'' Nation, October 10, 2005.

    Ms. Schakowsky. Okay. All right. I think this whole area 
really, really needs to be explored. The use of private 
military contractors hired by the Federal Government, and those 
who may be carrying out illegal activities while the military 
stands by and lets it happen.
    Thank you very much. I yield back.
    Mr. Whitfield. And Mr. Skinner, would you get back to the 
committee, and verify if that contract was with the Federal 
Government or agency or----
    Mr. Skinner. Yes, I will, sir.
    Mr. Whitfield. [continuing] or through the state, and we 
would appreciate that.
    Mr. Skinner. Yes.
    Mr. Whitfield. At this time, I am going to recognize Mr. 
Stupak. We had agreed on a second round of questions, and since 
our Republican member we were anticipating is not here, Mr. 
Stupak, I would recognize you for 10 minutes for your second 
round.
    Mr. Stupak. Do you want to follow up?
    Ms. Schakowsky. No, go ahead.
    Mr. Stupak. Thank you. One of the things I saw in the 
newspaper recently was that the Federal Government is going to 
reimburse the American Red Cross $100 million of the money that 
they have donated toward the victims in Hurricane Katrina. If 
that is true, what is that $100 million going to be for? Does 
anyone know, and who would have oversight on that?
    Mr. Skinner. I could only speculate. I know after 9/11, 
that FEMA entered into a prearranged agreement, pre-disaster 
agreement with the Red Cross, to reimburse them for their 
extraordinary expenses in assisting and providing aid early on 
in the disaster. Those expenses could possibly be for overtime 
for their staff, for the cost of extraordinary type expenses, 
for sheltering, food, things of that nature. And it is a 
contract; it is a prearranged contract; and it has been 
longstanding, at least since 9/11.
    Mr. Stupak. My only concern was like 9/11, we had this, 
sort of like the same type of situation, where they went on TV, 
and solicited funds from the American people, and the American 
people are so generous they open up their wallets and their 
hearts, and they give the American Red Cross money, only to 
find that it is not for disaster relief. I am sure this $100 
million will not go for the disaster relief, but sounds like 
operating costs, and unless it is directly related to Hurricane 
Katrina, I think you are going to be really on some weak ground 
there, and I think the American people would be upset.
    The American Red Cross has raised close to $1 billion 
through the generosity of the American people, and I just want 
to make sure it is not going to be used in that $100 million 
for general operating costs. That is a real concern of mine.
    When you have waste, fraud, or abuse, and you want to bring 
charges against somebody, do you follow the State statute of 
limitations if you are going to bring a charge, a criminal 
charge?
    Mr. Skinner. We use Federal statute.
    Mr. Stupak. Okay. What is the statute of limitations there?
    Mr. Skinner. I believe it is 7 years. I believe it is 7 
years from the time that we----
    Mr. Stupak. Has that time been adequate? I have had one or 
two officials tell me that they wish the length of time was 
further, because it seems like it is 4 or 5 years out, after 
one of these disasters, that is when we find out that there has 
been duplication and waste and things like that. Should it be 
longer, in your estimation?
    Mr. Skinner. Well, from a Federal law enforcement 
perspective, of course, we would like to have it to be longer.
    Mr. Stupak. Well, what length of time?
    Mr. Skinner. I don't have----
    Mr. Stupak. I mean if Congress has to act on it, we should.
    Mr. Skinner. From my personal experience, the 7 years has 
generally been adequate. For major fraud initiatives or fraud 
efforts made by our office in any regard, it hasn't presented, 
or prevented us from prosecuting. You may want to ask the FBI 
or U.S. Attorney, someone that has more, a broader range of 
responsibilities, outside disaster activities.
    Mr. Stupak. If we put one of those no-bid contracts in, and 
you find that it is not what it should be, or being paid too 
much, what can you do? Can you go back and try to renegotiate 
down that contract?
    Mr. Skinner. Absolutely. The first thing we would do is 
recommend that that contract be frozen, that we sit back down, 
and depending on what the issues are, we either renegotiate it 
or cancel it.
    Mr. Stupak. Have any of these contracts been long-term? I 
mean I know the cruise line is like 6 months or something like 
that.
    Mr. Skinner. Most of these contracts are, in fact, going to 
be long-term. The technical assistance contracts, for example, 
will probably run us for 2 to 3 years. The cruise thing is 
somewhat of a short-term----
    Mr. Stupak. Sure. That is----
    Mr. Skinner. [continuing] finite.
    Mr. Stupak. If some of these--and you said a lot of them 
are 2, 3 years, then I guess it just really begs--and go back 
to the question I had earlier, then. Why don't we know what our 
strategic plan is, then, before we let these contracts, 
especially technical contracts, which really have nothing to do 
with saving lives or things like this?
    Mr. Skinner. We certainly can do a better job in that 
regard. I think that as part of your National Response Plan, we 
need to be in a position to react to an incident of this 
nature. Historically, FEMA has, in fact, a plan in place, a 
National Response Plan. We also have contracts in place, but no 
one, I don't believe, has ever anticipated that we would have 
any devastation to the degree we have experienced in the Gulf 
Coast.
    Mr. Stupak. Will the Inspectors General, will they go back, 
and then look, and see what went wrong here with Hurricane 
Katrina?
    Mr. Skinner. Yes, sir. We will. Matter of fact, we are 
doing that as we speak. We initiated a review 2 weeks ago. We 
are looking at how prepared FEMA was, and not only that, but we 
are looking to assess how prepared should they have been, 
particularly in light of the fact that we have had considerable 
experience with exercises in the New Orleans area.
    Mr. Stupak. Well, and speaking of that exercise, that Pam 
exercise, what you learned from Pam, was that followed in 
Katrina?
    Mr. Skinner. No, evidently, it was not.
    Mr. Stupak. Then why not? If there was a plan, and there 
was, I know someone testified at one of our other hearings, Mr. 
Chairman, that they had tabletop discussions about it, but why, 
if it hasn't worked, the exercise didn't work, or it didn't 
achieve the results you wanted, what would be the one thing you 
would point to that said why it didn't work. Was it resources, 
assets, what is it?
    Mr. Skinner. I think the exercise, in itself, did work, in 
that it uncovered the vulnerabilities that would exist if a 
major hurricane would hit New Orleans. The issue is, although 
the Federal Government learned a lot from that exercise, I 
don't think there was an action plan to correct the issues that 
were identified as a result of the exercise.
    Mr. Stupak. So the weaknesses learned from the exercise 
wasn't in place when Katrina hit.
    Mr. Skinner. Precisely.
    Mr. Stupak. Is that unusual, because it was over a year 
later?
    Mr. Skinner. I would suggest that those questions should be 
directed at FEMA. My uninformed observation would be that no, 
that is not unusual.
    Mr. Stupak. Okay. Mr. Gimble, I mentioned earlier those 
four employees with the Army Corps of Engineers. They fall 
underneath your department, do they not, Army Corps of 
Engineers?
    Mr. Gimble. They do.
    Mr. Stupak. Is someone going to look into why they were let 
go or demoted? Or is that something you don't handle?
    Mr. Gimble. Actually, the demotion, if we are talking about 
the same one, is being looked at. It has been looked at by the 
Army. It has been looked at by us, and the actual demotion, I 
think, was found to be proper, unrelated to any other 
allegations in criminal investigations that still may be 
ongoing. I am not sure, when you say the four, I am not sure 
who the other three are.
    Mr. Stupak. Trying to find a question here I wanted to ask 
you. Mr. Gimble, there has been some suggestion that DoD take 
over evacuations in certain disasters, like we have seen here 
with Rita and Katrina. Has any internal thought been given to 
that at your level? Did you learn anything from Pam that would 
make you believe that the military would be better equipped to 
handle it than FEMA?
    Mr. Gimble. The answer at my level is, no, there hasn't 
been any great discussion about it. What we saw was that the 
President announced that he thought that might be an idea to be 
explored. I think there are some Posse Comitatus issues that 
surround it, so, at this point I haven't been involved in any 
discussion, and I think there would be a lot more discussion 
that would have to take place before any decisions were made.
    Mr. Stupak. Let me yield to you. I am going to yield by 
remaining time to Ms. Schakowsky. She wanted to follow up on 
some questions.
    Ms. Schakowsky. Thank you. Thank you. You know, I am really 
concerned that you seem so unaware of Blackwater's presence. I 
am kind of reminded of the conversation with both Secretary 
Chertoff and Michael Brown, we don't know anything about what 
is going on at the Convention Center, at the Superdome. I am 
looking now at the POGO website, the Project on Government 
Oversight. I am looking at an article from the Virginian Pilot, 
and I am looking at a press release issued by Blackwater. Let 
me just read a little bit of this article. ``Blackwater USA, 
the North Carolina-based security firm best known for 
supplementing U.S. troops in Iraq, is now attracting 
international attention''--obviously not here--``patrolling the 
flooded streets of New Orleans.''
    ``Accounts of Blackwater personnel carrying M-16s and other 
assault weapons around the devastated city have appeared on 
dozens of Web sites, including sites in Europe, Canada, and 
Australia. Many of the reports compare Blackwater's presence in 
New Orleans to the company's work in Iraq.''
    Okay. Here is from Blackwater. ``Blackwater USA continues 
to support Katrina-devastated areas. Since first joining the 
relief efforts on September 1, Blackwater USA has continued to 
provide support to hurricane-devastated area, with a variety of 
services, including search and rescue, helicopter support, 
security services, and critical infrastructure protection.'' 
Anne Duke said, this is from the POGO site: ``Anne Duke, a 
Blackwater spokeswoman, said Wednesday that the company has 
about 200 personnel in the hurricane-ravaged area. The vast 
majority, 164 employees, are working under a contract with the 
Federal Protective Service, a division of the Department of 
Homeland Security, to protect government facilities. The 30-day 
contract can be extended indefinitely, she said.''
    So explain to me how you could come here--there are 200 
people there, ultimately under your auspices, and I am just 
telling you for the first time?
    Mr. Skinner. These people are not under our auspices. We, 
right now, just deployed there last week. We are focusing on--
--
    Ms. Schakowsky. Well, then explain to me what this means.
    Mr. Skinner. Not that particular contract, but all 
contracts, major contracts, if that is one of them, they will 
fall under our purview, as far as reviewing it to determine 
whether it is a worthwhile or legitimate contract.
    Ms. Schakowsky. Well, then you----
    Mr. Skinner. No one has brought that----
    Ms. Schakowsky. [continuing] need to explain to me----
    Mr. Skinner. [continuing] particular issue to my personal 
attention.
    Ms. Schakowsky. Okay. So then explain to me how the 
organizational chart works. It says under a contract with the 
Federal Protective Service, a division of the Department of 
Homeland Security. So----
    Mr. Skinner. Yes.
    Ms. Schakowsky. So is that not the Department of Homeland 
Security?
    Mr. Skinner. Oh, yes.
    Ms. Schakowsky. And you are--okay.
    Mr. Skinner. In that regard, yes. If that is, in fact, a 
subcontract, FEMA obviously issued a mission assignment to the 
Federal Protective Service. The Federal Protective Service 
then, in turn, contracted with Blackwater to provide security 
within the New Orleans area. They would be under the DHS' 
purview, of course. Has our office directed our attention to 
that particular contract at this point? No, we have not. But 
that is something that I can assure you we will.
    Ms. Schakowsky. Okay. And how is the decision made to, 
whether or not to hire these private security forces?
    Mr. Skinner. We would have to look to see what type of 
capabilities the Federal Protective Service has within their 
own office. They may have competed for protective services 
contractors, or they may have no-bid it. I don't have the 
information at this point in time.
    Ms. Schakowsky. Okay. Well, I know my time is up. Go ahead.
    Mr. Stupak. Sorry. I am sorry, Jan. I think her question 
just makes the point, it seems like we want to have the 
authority to review the contracts, but we don't want to have 
the authority to review the contracts, and it is probably why 
we need a CFO, or someone in charge, someone accountable, 
because you are all trying to run your own agencies and that, 
and we need, on this one, need someone in charge, who can be 
held accountable to this whole thing on these contracts.
    Thank you, Mr. Chairman. Thank you.
    Mr. Whitfield. Thank you. I want to go into one area just 
briefly here. The cruise ship issue, which has been publicized 
so much in today's Washington Post, and the amount of $236 
million, who actually, if you were doing oversight on, who 
would have the authority to enter into that contract? You 
talked about contract officers, and I am assuming they have 
responsibility to a certain level. Who would have the authority 
to sign off on a $236 million contract?
    Mr. Skinner. In this particular case, I believe it was the 
Federal coordinating officer----
    Mr. Whitfield. The Federal coordinating----
    Mr. Skinner. [continuing] that had, from an operational 
perspective, made a decision, yes, we need housing, and the 
ships is an alternative to provide that housing.
    Mr. Whitfield. Right.
    Mr. Skinner. As far as entering into the contract, per se, 
that would be a contracting officer, most likely within the 
Department of Defense, who we have employed to act as a 
contracting officer for the Department of Homeland Security.
    Mr. Whitfield. The contract officers in most of your 
agencies, what level of authority do they have to enter into 
contracts? Is it different per agency, or----
    Mr. Frazier. It varies, because in certain agencies, people 
have warrants that give them the authority to obligate the 
government up to $1 million. Sometimes, it is much higher. But 
it varies by agency and by individual.
    Mr. Whitfield. Okay. Okay. Because I know at the FCC, I 
mean you all are, this is a minor item, but you have given out 
cell phones to people through various programs, for 
communication purposes. Correct?
    Mr. Feaster. Yes.
    Mr. Whitfield. Okay. Okay. Now, one of the values in having 
a hearing like this, is that you all come in here with a lot of 
expertise and experience, and we value that. From your 
perspective, and if you were giving advice to Congress, or if 
you were sitting down at a town meeting in New Orleans, let us 
say, with people who have been affected by this disaster, I 
would like to give all of you an opportunity to tell us, as 
Members of Congress, some needs that you have that could make 
your program more effective, if you have any thoughts on that.
    I know that you have indicated that from your perspective, 
you feel pretty good about the organization, the way it works 
right now. Recognizing that there are shortcomings, recognizing 
there are all sorts of problems, but when you look at 
alternatives, you feel pretty good about what you have. So I 
would like to open it up, and give you an opportunity for some 
specific suggestions that you might have to do a better job at 
what you are doing.
    And Mr. Rabkin, we can start with you, and if you don't 
have any, that is fine, too.
    Mr. Rabkin. Well, generally, Mr. Chairman, we look for 
criteria when we go in to audit how well an organization has 
performed. We would like to know how well were they supposed to 
perform, and the National Response Plan is supposed to be that 
criteria. It was, as you heard, it was just developed and 
implemented earlier this year, or late last year. This is 
really the first test of it, and also, within each of the 
agencies, we look for criteria, regulations, et cetera. So and 
I just hope that the, as we do our work, that the agencies are 
cooperative with not just the GAO, but also with all the IGs, 
in making people and documentation available, so that we can do 
our jobs.
    Mr. Whitfield. Now, just the preliminary information that 
you have in relating to this National Response Plan, do you 
have any assessment of how it has worked to this point, or is 
it too early?
    Mr. Rabkin. Well, I think it is too early, but you know, 
having glanced at the plan, you know, it has got, I think, an 
appropriate structure. The question is depth, and the question 
is, you know, how much of a catastrophe did it anticipate, and 
those are some of the questions that we are going to be looking 
at.
    Mr. Whitfield. Okay. Mr. Friedman.
    Mr. Friedman. Well, a couple of points, if I can, Mr. 
Chairman. First of all, on a more narrow level, you made a very 
good point when we began the afternoon session, and I would be 
more than happy to meet with majority counsel and minority 
counsel to make sure there is no lack of clarity about the role 
of the Inspectors General, and the distinction, which is an 
important distinction, between our role and that of management. 
If we get too close to management, we lose our independence, 
and so I think there may be some lack of clarity, and we would 
be more than happy to work with you to clear that matter up.
    In a crisis of this magnitude, with the amount of money 
that is being spent, there are enhanced or increased 
vulnerabilities. The point that we have been trying to push 
within the PCIE, and Mr. Skinner has picked up on that, and 
others have as well, is prevention. The key is preventing the 
dollars from going out the door, rather than performing an 
after-the-fact exercise. And we in the IG community are 
attempting to do that, and do that aggressively. In other 
words, concurrent reviews, contemporaneous reviews, not after-
the-fact reviews. And we are trying to do that. I think to the 
extent that this subcommittee and others, who have cognizance 
over this huge amount of money that is being spent, should look 
to that sort of model.
    I think, though, there is one important point, and may get 
back to my original point, and that is the responsibility of 
management. When we talk about prevention, it is critically 
important that the various agencies and the senior managers set 
the tone from the top. This in terms of making sure that there 
are the right controls, management processes, and procedures in 
place, so there is a discipline, from the get-go, that is 
applied to the people who are working this crisis at all 
levels, that there are performance metrics in place, to make 
sure that there are ways in which the management can evaluate 
the progress, the success they have had. The people should be 
held accountable and responsible for what goes right and what 
goes wrong.
    Mr. Whitfield. Okay.
    Mr. Friedman. So I think there are lots of people involved, 
including the Congress, obviously, which plays a major role. 
There are some lessons that we can, from past experiences, if 
applied to this experience, I think we will all be better off.
    Mr. Whitfield. Mr. Skinner, do you have any comments?
    Mr. Skinner. Thank you. Yes. First of all, I would like to 
just echo what Mr. Friedman has said with regards to a 
clarification or clarity as to what our roles are vis-a-vis, 
the role of program managers and the people that are charged 
with delivering the services. Keeping in mind that our role is 
to ensure that the program people do their job, and they do it 
properly, and that they apply the proper internal controls, and 
that they act as good stewards of Federal dollars. And that is 
exactly what our role is.
    In something as large as this, what do we need? Obviously, 
it goes back to resources. There are thousands of contracts out 
there, and Blackwater may be an example. We don't have the 
resources to look at every one, every contract action out 
there. We are focusing on the big dollar tickets, those that 
are the most vulnerable to fraud, waste, or abuse, that being 
the no-bid contracts, things of that nature. There is no office 
that can provide 100 percent coverage----
    Mr. Whitfield. Right.
    Mr. Skinner. [continuing] of all activities or all 
expenditures that are being incurred out here as a result of 
Katrina. Yes, there needs to be some type of accountability. 
That can take place in a variety of places. If we are looking 
for a nationwide office to turn to, as to provide accounting 
for where these funds are going, I would suggest that could be 
OMB, because all moneys eventually flow through OMB, from 
Congress, into the states, in the reports back, flow back to 
OMB. Our responsibility is to provide oversight. I think we 
have an excellent mechanism in place right now to provide that 
oversight, both individually, for our individual programs, and 
collectively, overall, in the Federal Government, through the 
PCIE Homeland Security Roundtable, and we are, in fact, through 
that working group, doing that as we speak.
    Mr. Whitfield. Do you, or does anyone else have any 
specific suggestions on places this could be improved? Mr. 
Frazier?
    Mr. Frazier. Yes, Mr. Chairman, the only thing that I would 
say is that I think that if the IGs should work closer with the 
Congress: one of the things that I heard many of the members of 
the subcommittee talking about, repeatedly was credit cards and 
the purchase cards. That is something that is going to be a 
very important tool as we go forward, but if you recall, 4 or 5 
years ago, the purchase cards in government were just in 
shambles.
    And then, once the Congress starting holding hearings, and 
the IGs did quite a bit of work in that area, and while it is 
still not perfect, it is a much better system than we have ever 
had before. It forced the IG community to work together. We 
have put together a data base that is on the IG net, where we 
share all of the work and reports that we do in the areas of 
purchase cards. We have more consistent guidelines, so that 
people now can get fired when they abuse those cards. So when 
we are in a position, now, where these limits are going to be 
raised, we know there are going to be some problems. But, you 
are not going to have the level of problems that you would have 
had if the Congress and the IGs had not worked together in the 
last few years.
    So I guess if I had one message here, it is that Katrina 
gave us a mess, but there is a message that will come out of 
this, and that is the importance of us working together on 
issues before the problems actually come up. One of the things 
that you have heard just about everybody on this panel talk 
about: we are concerned about procurements. But if you read our 
semiannual reports, and the annual reports put out by the 
President's Council on Integrity and Efficiency, it is almost 
at the top of everybody's list of the problems that exist in 
government and in this area.
    So if we deal with these problems before there is a crisis, 
it better prepares us, if you will, when the crises come, and 
they will come. We are in a better position to deal with it. So 
if I had to add one thing, it would be that more of the 
opportunities for the IG and the Congress to work together. We 
work for you too, you know.
    Mr. Whitfield. Well, thank you, Mr. Frazier. At this time, 
I will recognize the gentleman from Mississippi for 10 minutes.
    Mr. Pickering. Thank you, Mr. Chairman. I appreciate this 
hearing. Let me first do something just for the entire panel. 
It is going to be very important for us as policymakers, as we 
look forward, as we learn lessons from Katrina and the 
response, that we have very good reporting, that you will 
document how the contracts were performed, if there was waste 
and fraud, but one thing that I am particularly interested in 
is the current contracting procurement methods, the contracts, 
the national contracts on cleanup and recovery, that we are now 
seeing implemented in the field. How efficient are those? How 
much administrative costs are part of those contracts? And let 
me tell you why.
    For example, there is, in Mississippi, in the cleanup and 
recovery, AshBritt, a large corporation, won a contract. Then 
it is time to clean up. It takes them at least 5 to 7 days to 
get into the State after the event. They are then working, I 
believe, with the Corps of Engineers administering the 
contract. They then hire subcontractors to find subcontractors 
to find subcontractors. How much inefficiency is in that type 
of process, of bureaucratic costs, or administrative costs, 
from FEMA, to the Corps, to the contract, to the subcontractor, 
to the subcontractor, to the subcontractor. And as you can 
imagine, when you go through that process, one of the most 
important things that you have a need of, and remember, this 
whole area has been declared by the Secretary of Health and 
Human Services as a health hazard, so cleanup of the health 
hazard, very, very quickly, is critical to the wellbeing and 
the health of the region, and it also becomes, very quickly, a 
fire hazard. But as we are going down through the chains to get 
people cleaning up, we still have a lot of debris that is 
sitting on the ground, on the roads, in the streets, all over 
the affected region, a month after the storm. And I imagine it 
will be there, in some places, months from now.
    So your commitment to give us reporting not only on fraud, 
but whether this is the most efficient way to do business, is 
going to be very critical, and I would just ask that you would 
commit to reporting both the fraud, but also, is this the most 
efficient administrative way to manage the contracts? That is 
more of a statement than a question.
    I would like to ask specifically Mr. Gimble, I believe that 
you are managing the contracts through the Corps of Engineers 
for the cleanup and recovery. Is that correct?
    Mr. Gimble. The DoD IG is not managing the contracts. We 
have the oversight of the contracts.
    Mr. Pickering. Yeah, you have, but DoD Corps is 
administering, and you are the oversight IG.
    Mr. Gimble. And we have announced a project to look at the 
very thing that you mentioned: are all of these contracts being 
executed efficiently, effectively, and in accordance with the 
laws and regulations. We have a team already working on that 
very issue.
    Mr. Pickering. When the Corps of Engineers administers, 
what is their overhead cost?
    Mr. Gimble. On overall contracts, or just on specific, 
these----
    Mr. Pickering. These specific for cleanup and recovery.
    Mr. Gimble. I don't have an answer for you. I will have to 
get back, and it may take some time to figure that out, but----
    Mr. Pickering. I have heard anywhere from 7 percent to 30 
percent. Would that be in the range?
    Mr. Gimble. I don't know. I will have to get back to you on 
that.
    [The following was received for the record:]

    The DoD OIG is working with the U.S. Army Corps of 
Engineers, the Army Audit Agency, and the Defense Contract 
Audit Agency to determine information on overhead rates 
contained in debris removal contracts related to Hurricane 
Katrina efforts. Ongoing audits by the Army Audit Agency and 
the Defense Contract Audit Agency should provide the 
information necessary to determine and compare contractor 
overhead rates. Upon completion of these audits we will provide 
the committee information on debris removal contract overhead 
rates.

    Mr. Pickering. I assume the thinking was, if we could have 
a national contract prior to a storm, that that would be more 
efficient. You get people working more--you don't have to go 
into a contracting process prior to a storm. As you all know, 
the way that the FEMA contract worked with AshBritt is that if 
AshBritt does it, and there are subcontractors, the local 
community gets 100 percent reimbursement. If the locality has 
either a preexisting or they go out and contract on their own 
with local companies, they only get a 75 percent reimbursement. 
So you have a very strong bias toward the national FEMA Corps 
contractor, and against the local contractor. Also, the 
threats, not the threats, but the possibility of audits by FEMA 
of the local contract also makes it almost 100 percent, not 
quite, that they are going to go with the FEMA contractor.
    Now, this is a devastated area that is trying to put people 
back to work, working with companies from all over the country, 
but not their own companies. As you can imagine, that creates 
extreme frustration in the local communities, and in local jobs 
and local contractors. And I just believe, and I need your 
data, that local communities and the pulpwood haulers, and the 
debris removers in my State could do it more cost effectively 
than the way it is being done now. And should we give states, 
instead of having FEMA do these huge national contracts, should 
we say as part of national preparedness, that they will have 
preexisting contracts with certain standards, and then after 
the fact, the accountability and the documentation, but let it 
be done more at the local level than at a national level that 
includes so many different layers.
    So as we go through this process, that type of comparative 
analysis would be very helpful, to know what is the best way to 
do this, not only in helping a local area recover with jobs, 
but what is the most cost effective way to do this. And Mr. 
Chairman, one thing that I would be interested in, if we can 
get kind of an economic rate of cleanup based on debris, 
whether it is on a volume amount, or in some type of 
measurement, I would just as soon give a cap, and tell states 
and localities you can do it. This is all you are going to get, 
and I am sure they will find a way to do it with a cap. And I 
tell you, they would be cleaning up the day after the storm, 
not weeks after the storm.
    So I hope we can find a more efficient way to get cleanup 
and recovery, a less adversarial relationship between the 
Federal Government and local communities and contractors. And 
one way that we can predict costs, rather than having an 
unpredictable surge of spending, and concern over fraud and 
waste. I think there is a better way to get at the concern of 
fraud and waste without the way it is being done now.
    I gave a speech, and didn't ask many questions, Mr. 
Whitfield, but these are all things that you can help us on 
this committee, and in Congress, as we look at, and look for 
lessons learned from Katrina, so that as we go forward, 
hopefully we can have a more efficient way, a more 
compassionate way, and a more effective way of doing this.
    Thank you, Mr. Chairman.
    Mr. Whitfield. Mr. Pickering, thank you. We have enjoyed 
your speech very much, and look forward to some more, and I 
would to say to Mr. Walden and Mr. Burgess, that Mr. Stupak and 
I both had an opportunity to ask additional questions in a 
second round. Do either of you have any additional questions 
you would like to ask?
    Mr. Pickering. Mr. Chairman, if I could. Mr. Gimble, when 
can you give me the numbers on the administrative cost of the 
Corps?
    Mr. Gimble. I will get back to you as soon as I can. If I 
can't get them, if they are not readily available, I will tell 
you that, but short of that, I will get you the answers back.
    Mr. Pickering. If you could get those back as soon as 
possible.
    Mr. Gimble. I will.
    Mr. Pickering. And I assume that you will be giving the 
information to Mr. Whitfield on the committee. And if there is 
any, also, administrative costs to AshBritt, subcontractors and 
subcontractors, if you can tell me how much are we spending on 
the administrative overhead. So then, if we are spending $1 
billion, and we have got 30 percent administrative overhead, 
that is $300 million, to try to stop maybe $100 million of 
fraud.
    That is what I want to know.
    Mr. Whitfield. Now, Mr. Walden, you are recognized for 5 
minutes.
    Mr. Walden. Thank you very much, Mr. Chairman. It just 
strikes me that when you have got a crisis of this magnitude, 
or an emergency with this level of disaster, the numbers of 
people that had to be evacuated and all, government is almost 
in a damned if you do, damned if you don't situation. Because I 
have sat through several of these hearings now, where the first 
barrage is the government didn't act quick enough, quickly 
enough, and throw every resource at it, and everybody had a 
million ideas about what should have happened, most coming from 
people who weren't down there, and then, there is sort of this 
phase. It is almost going through a grieving phase, now, what 
did you do wrong? And we need to do that analysis, but I just 
wonder how you get at these issues. My colleague and friend 
from Mississippi talked about how you pre-position the assets 
you may need in case of a disaster of this magnitude, although 
it is rare we get one this bad, fortunately. And I know the 
military does some of that, pre-positioning of pre-bid, pre-
position packages to do certain things.
    Can maybe you speak about how the military does that, 
versus in a domestic disaster, how we might benefit from that 
knowledge and capability, be able to get in quickly? Because I 
mean I don't know how you have time to go out and competitively 
bid fixing a levee that just broke, while the waters are 
rushing in flooding nursing homes and killing people. And there 
is a lot of second guessing that can go on afterwards, but at 
the time, I have to think for the most part, it is good 
intentioned people trying to do the best they can to be 
innovative to solve a crisis at hand, and take the flak for it 
later. And I just--and I throw that out. How do you do pre-
positioning? What happens in the thrust of the emergency?
    Mr. Gimble. I think there are two things. One is the pre-
positioning of war reserve stocks; that is what I think you are 
talking about. Typically, that is not contracts. That is hard 
supplies and equipment. If we think we are going to go to war 
in Europe, we may put in that region a strategic supply of 
fuels and ammunition that would be available to meet certain 
surge rates. If we had to replace a wing of aircraft, for 
example, where would the parts come from? So that is kind of 
a----
    Mr. Walden. That is the plan.
    Mr. Gimble. [continuing] different scenario than when you 
have a one-time flood that comes in on a random basis, and you 
don't know exactly where it is. In the firct scenario, you know 
the part of the world you are going to be in.
    Mr. Walden. Right.
    Mr. Gimble. And you would do whatever you could to pre-
position equipment over there now. When you get into the 
emergency contracting, a lot of that is--you saw that in Iraq. 
There was a lot of emergency contracting, and I said earlier, I 
think that could have been done better by the Department than 
it was. So I don't necessarily know that there is a parallel, I 
guess that is my point.
    Mr. Walden. Okay. Let me give you another potential 
example, then. The way we fight forest fires, there are 
national contracts out there for crews that can be moved 
anywhere in the nation, wherever fire breaks out. Is that a 
model that could be used during hurricane season, to have ready 
attack crews, and I think actually some of those national 
contractors have brought in in cleanup efforts, can you speak 
to me about that, as an example?
    Mr. Gimble. I think I would probably defer to----
    Mr. Walden. That is fine.
    Mr. Gimble.  [continuing] Homeland Security on it, because 
it is kind of out of the realm of what we do in Defense, but--
--
    Mr. Walden. Sure. Mr. Skinner.
    Mr. Skinner. Yes. In fact, it is my understanding that FEMA 
does----
    Mr. Walden. Is your mike on, by the way? Can't----
    Mr. Skinner. Yes, it is.
    Mr. Walden. There you go.
    Mr. Skinner. Okay. It is my understanding that FEMA does, 
in fact, have a program to pre-position supplies, staff, and 
response capabilities, including preexisting contracts, who 
also have, for example, preexisting contracts with the Corps of 
Engineers that allow us to bring in MREs, ice, water, tarps for 
homes, things of that nature. What happened here in the Gulf 
Coast is that the storm grossly exceeded the capability of 
those resources that were pre-positioned and brought in, and as 
a result, that is where we had to go out, or FEMA had to go out 
and do a 24 hour sole source contract to bring in additional 
resources to supplement what they have already pre-positioned.
    Mr. Walden. What would have happened if you had to 
competitively bid that process, to deal with the overwhelming 
need?
    Mr. Skinner. Then----
    Mr. Walden. What kind of timeline would you have been on?
    Mr. Skinner. It could be done, you can do limited 
competition, and to some extent, some of that was done. I was 
not on the ground when FEMA had deployed, or no one from the IG 
was actually on the ground----
    Mr. Walden. Right.
    Mr. Skinner. [continuing] when they were deploying in this 
response mode, per se. You run the risk of delaying delivery of 
services that could impact the protection of property or saving 
lives, or getting people shelter, getting them water, getting 
the basic essentials. You can't try to go out and get 
competition in the middle of a battle, the resources were 
needed yesterday. FEMA obviously has long term standing 
relationships with many of the contractors, so they just turned 
to them, and asked them to provide additional resources.
    Mr. Walden. And will you be doing review of some of those 
sole source----
    Mr. Skinner. We are going back to day one, and looking at 
all of the sole source contracts.
    Mr. Walden. Okay. So you will be able to catch if there 
was----
    Mr. Skinner. Yes. We are going to look for evidence as to 
whether it was justified to use sole source, whether there was 
other alternative means, limited competition, or full 
competition. We will be looking to see if the contracts that we 
entered into were fair and reasonable, and the contractor was 
qualified, and able to provide the services.
    And then, of course, we will be looking to see if they did, 
in fact, provide the services as agreed upon.
    Mr. Walden. Right. Right. Thank you very much.
    Mr. Whitfield. Mr. Burgess, did you have any additional 
questions?
    Mr. Burgess. Yes, Mr. Chairman. Mr. Skinner, one of the 
things we heard about repetitively during the crisis was all 
the various pinch points, and certainly, FEMA and the Federal 
level seemed responsible or some of those, inability to get 
material in, and inability to get ambulances in to patients 
that needed to be evacuated from a ventilatory hospital. And 
there also seemed to be difficulty with FEMA working with State 
and local officials, and I guess the question then comes up in 
my mind, for the going forward with oversight, what are you 
going to do to make certain the DHS works well with State and 
local officials, in order to keep that oversight in line?
    Mr. Skinner. I am not quite sure I understand the question. 
When we provide oversight, we will be looking at----
    Mr. Burgess. Well, you will have to coordinate with State 
and local officials. Your expensing of dollars, your 
functioning as the wholesaler is going to produce material for 
them. I got the impression, maybe it was the wrong impression, 
during that first week after the hurricane, that that interplay 
between FEMA and the local officials wasn't working, for 
whatever reason, and not to assign fault to anyone for that, 
but it wasn't working. Well, now, you have got the task of 
oversight ahead of you, and how are you going to--and we have 
got an enormous amount of money coming Louisiana's way, and it 
is not all going to be administered by FEMA. Some of it will be 
delegated from FEMA to State and local officials, and how are 
you going to be certain that those moneys are spent 
appropriately?
    Mr. Skinner. That is one of the things we are doing in 
Louisiana. We have already with the State legislative auditor 
and the State Inspector General.
    Mr. Burgess. When did that happen?
    Mr. Skinner. This was about, I am going to say the week of 
September 12, about 2 weeks after the incident. They have 
agreed to put forward about 36 auditors to provide oversight of 
all the applications that will flow to FEMA through the Office 
of Emergency Preparedness, so that we will be working with them 
hand in hand in that regard. We are also in meetings, as we 
speak, with the State auditor in the State of Alabama, and the 
State auditor in Mississippi as well, to develop partnerships 
with them, so that we can collectively look at all the bills 
that will be coming through.
    Not just the bills, I should say, but all the applications. 
What we want to make sure is that when these applications come 
in, before they are even awarded or reviewed by FEMA, the State 
auditors will be making a determination whether one, are you 
eligible, two, do you have support for the estimate of your 
costs associated with whatever you want to rebuild. Then, when 
that comes into FEMA, we will be working with the FEMA folks in 
reviewing those things at a second tier level, to make sure 
that these people, in fact, have met all the minimum 
requirements for eligibility, have the adequate documentation 
to support their costs. If they are using contractors, which 
they will, to reconstruct, we will determine whether they have 
adequate procurement controls, things of that nature.
    We are working with the State auditors to go out and visit 
all of the parishes and the local towns, before they receive 
any money, and to evaluate their ability to account for the 
money, because many of these parishes and townships are so 
small that they have never had to be held accountable for such 
large sums of money. We will be advising them from our own 
lessons learned, about types of things that are going to get 
you in trouble. Instruct them on their documentation 
requirements, accounting requirements, things of that nature. 
During the pre-award phase, we will be using contractors to 
supplement our staff to do pre-award audits of those local 
entities and State entities that will be receiving FEMA funds.
    Mr. Burgess. Who is going to have the jurisdiction to 
prosecute if something goes wrong, and money is misapplied or 
misspent?
    Mr. Skinner. We have two places to go to. First, we will go 
to the Department of Justice, and use the local U.S. Attorneys 
there. And incidentally, we have a taskforce that is being run 
right now by the Assistant Attorney General for the Criminal 
Division, and involves all the local U.S. Attorneys. The IGs 
participate on that taskforce, as well as the FBI, Postal 
Service, and others. So we are pretty confident that we will 
get attention at the Federal level, but in those cases where 
they may choose not to get involved, or our cases may not reach 
the threshold for Federal prosecution, we can work with the 
State or local prosecutors as well. We have prosecuted at the 
local level in the past, when we were unable to get prosecution 
at the Federal level.
    Mr. Burgess. Okay. Thank you, Mr. Chairman. I appreciate 
the extra time.
    Mr. Whitfield. Thank you, Mr. Burgess, and I want to thank 
all of you for being with us today. I want to announce that the 
record will be kept open for 30 days, in case any members who 
were unable to be here want to submit an opening statement. I 
want to confirm with you all as I had asked in the opening 
statement, that at the end of 3 months, that you all would just 
give us a progress report for each of your agencies on how you 
are coming along with Katrina, and the problems you are facing 
there, progress report.
    Also, Mr. Gimble, if you would submit to the committee the 
information that Mr. Pickering had asked for, and then I think 
Mr. Skinner, you were also going to provide information that 
Ms. Schakowsky had asked for about the Blackwater, and she was 
asking about the contract in New Orleans, and whether it was 
with the State or with the Federal Government.
    Mr. Skinner. I will provide details on that contract, 
amounts, the timeframes, and----
    Mr. Whitfield. Okay.
    Mr. Skinner. [continuing] and how that contract was let.
    Mr. Whitfield. Okay. With that, the hearing is concluded. 
Thank you all again for your patience, and we look forward to 
working with you as we move forward.
    [Whereupon, at 2:10 p.m., the Subcommittee was adjourned.]
    [Additional material received for the record follows:]
                                U.S. Department of Commerce
                                    Office of the Inspector General
The Honorable Marsha Blackburn
U.S. House of Representatives
509 Cannon House Office Building
Washington, D.C. 20515

    Dear Representative Blackburn: I appreciated the pportunity to 
testify at the September 28 oversight hearing regarding my office's 
plans to monitor Commerce spending on hurricane relief and recovery 
efforts. I am writing to follow-up on your question pertaining to 
requirements on small and minority businesses to ensure opportunities 
to compete fairly in hurricane cleanup and recovery.
    Commerce has several initiatives to help ensure that small and 
minority firms have access to information about contracting 
opportunities. For example, the Department set up a Hurricane Contract 
Information Center and a call center to help businesses, particularly 
small, minority, and women-owned firms, learn about the contracting 
process. In addition, the Minority Business Development Agency has 
announced that it has diverted $300,000 in FY 2005 funds to an existing 
Minority Business Development Center in Houston to help provide direct, 
on-the-ground assistance for minority businesses seeking reconstruction 
contracts.
    My office is currently monitoring the Department's efforts to 
provide assistance to the communities, businesses and individuals 
affected by this year's hurricanes. As part of that work, we are 
tracking the expenditure of Commerce funds, including those funds used 
to assist small and minority businesses in competing for hurricane 
relief and recovery contracts. As we continue monitoring the 
Department's hurricane relief activities, my office will pay particular 
attention to the Department's efforts to provide assistance to minority 
businesses.
    If you have any questions or require additional information, please 
contact me at (202) 482-4661, or have your staff contact Susan 
Carnohan, Congressional Liaison, at (202) 482-2187.
            Sincerely
                                                 Johnnie E. Frazier
cc: Representative Ed Whitfield, Chair
   Representative Bart Stupak, Ranking Member

                                 
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