[Senate Hearing 109-520]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-520
 
                    NOMINATION OF DAVID L. NORQUIST

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                 ON THE

 NOMINATION OF DAVID L. NORQUIST TO BE CHIEF FINANCIAL OFFICER FOR THE 
                  U.S. DEPARTMENT OF HOMELAND SECURITY


                               __________

                              MAY 8, 2006

                               __________

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs



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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
            Jennifer A. Hemingway, Professional Staff Member
             Michael L. Alexander, Minority Staff Director
         Adam R. Sedgewick, Minority Professional Staff Member
                  Trina Driessnack Tyrer, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Collins..............................................     1
    Senator Lautenberg...........................................     2
    Senator Warner...............................................     3
    Senator Lieberman............................................     8
    Senator Levin................................................    14
    Senator Dayton...............................................    17
Prepared statement:
    Senator Akaka................................................    24

                                WITNESS
                          Monday, May 8, 2006

David L. Norquist to be Chief Financial Officer for the U.S. 
  Department of Homeland Security:
    Testimony....................................................     5
    Prepared statement...........................................    27
    Biographical and professional information....................    28
    Letter from U.S. Office of Government Ethics.................    35
    Responses to pre-hearing questions...........................    36
    Responses to post-hearing questions..........................    76

                                APPENDIX

Exhibits A through R submitted for the record by Senator 
  Lieberman......................................................    95
March 1, 2006, letter to Secretary Chertoff re: City of Roseau, 
  from Senator Dayton............................................   143


                    NOMINATION OF DAVID L. NORQUIST

                              ----------                              


                          MONDAY, MAY 8, 2006

                                       U.S. Senate,
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 3:31 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Susan M. 
Collins, Chairman of the Committee, presiding.
    Present: Senators Collins, Warner, Lieberman, Levin, Akaka, 
Dayton, and Lautenberg.
    Chairman Collins. The Committee will come to order.
    Today the Committee will consider the nomination of David 
Norquist to be the Chief Financial Officer for the Department 
of Homeland Security, a department with a budget that exceeds 
$40 billion.
    DHS is now in its third year of operations, yet it remains 
the only cabinet-level department without a CFO appointed by 
the President and confirmed by the Senate.
    The DHS Financial Accountability Act, passed in October 
2004, directed the President to name a CFO within 180 days. In 
October 2005, 6 months after the deadline passed, many of my 
Committee colleagues and I wrote to Secretary Chertoff urging 
him to bring DHS into compliance. The passage of time has only 
served to confirm the urgent need for this position. It was 
clear from the start of DHS that the effective melding of 22 
agencies into one cohesive department would depend to a 
considerable extent on the effective management of its 
financial resources.
    This Committee's investigation of the preparation for and 
response to Hurricane Katrina has revealed the consequences of 
not having an effective financial management system. From the 
fraud in the disaster relief payments to the wasteful ice 
shipments to the manufactured home debacle, it is clear that 
any attempts at the sound well-planned use of taxpayers' 
dollars were overwhelmed by a spending frenzy and a lack of 
adequate controls. Future disasters are, unfortunately, 
inevitable. The 2006 hurricane season is now less than a month 
away, and the need for financial accountability at DHS is as 
urgent as ever.
    Our nominee brings 16 years of experience working on 
financial management issues to this challenge. Mr. Norquist 
currently serves as Deputy Under Secretary of Defense for 
Budget and Appropriations Affairs, and he has also held other 
key financial positions within the Pentagon.
    Earlier in his career, Mr. Norquist served on the 
professional staff of the House Appropriations Committee, so he 
brings a welcome understanding of Congress to this process and 
position as well.
    In its first 3 years, the Department of Homeland Security 
has made some progress in its vital mission to improve the 
security of our Nation, but that progress at times has been 
impeded by persistent difficulties in financial management. 
From the Department's very beginning, the Government 
Accountability Office has warned that DHS has faced some 
considerable financial management challenges, including the 
absence of effective internal controls and conflicting or 
redundant financial management systems in its legacy agencies.
    These warnings from GAO, like the warnings that preceded 
Hurricane Katrina, have not been adequately addressed. Bringing 
accountability, efficiency, and good old fashioned thrift to 
this sprawling department is a tremendous challenge. It will 
require strong leadership by the CFO, and I look forward to 
hearing from our nominee this morning.
    I would note that the nominee is very fortunate to be 
accompanied by one of our most distinguished colleagues, the 
Chairman of the Senate Armed Services Committee. Before I turn 
to Senator Warner for his introduction, in the absence of 
Senator Lieberman, I would like to give Senator Lautenberg an 
opportunity, if he would like to make some opening comments. 
Senator Lautenberg.

            OPENING STATEMENT OF SENATOR LAUTENBERG

    Senator Lautenberg. Thank you very much, Madam Chairman.
    I am pleased that you have called this hearing today. This 
is a very important job. And one of the things I am struck by 
to begin with is that Mr. Norquist has his, apparently, 
budgeting team with him, sitting behind him. I hear them, and 
there is nothing I would rather hear than children's voices. 
That is a kind of thing with me, with 10 grandchildren up to 
the age of 12 and down to the age of 2.
    So I know that when you do your work, Mr. Norquist, you are 
going to be keeping those beautiful faces in mind as part of 
your responsibility. And I am encouraged by that.
    This is such a challenging assignment and one of the most 
important for our entire government. I am impressed with the 
fact that Mr. Norquist's experience is vast in financial 
management for the Federal Government.
    There are a couple of things that I am concerned about that 
we will have a chance to review, and I am pleased to note that 
our very distinguished colleague and friend is presenting you. 
That mostly augers well for you, Mr. Norquist.
    I want to discuss, which again we will do with questioning 
here, about Mr. Norquist's involvement in overseeing the 
Development Fund for Iraq. It dispersed at least $1.6 billion 
to Halliburton, much of it in questioned costs. Madam Chairman, 
you are aware that I had sent several letters asking for an 
opportunity to have Halliburton come in and examine their 
egregious overcharges, no bid contracts that cost taxpayers 
billions of dollars.
    The fact that we have been unable to have a hearing on this 
raises a question. How do we expect Mr. Norquist to do his job 
if we do not get to ours? We have a responsibility, in terms of 
this review, as well. We know that Mr. Norquist had a role in 
overseeing these Halliburton contracts. And I want to ask some 
questions about the role in the Defense Department efforts to 
protect Halliburton by covering of its abuses.
    That is why I was so anxious to get some hearings in this 
Committee because the question has been lingering. The 
questions are here but the answers are lingering. And while you 
are here, I think it also behooves us to use the firsthand 
knowledge that you have of these contracts to shed just a 
little bit of light on what Halliburton is spending, how it 
spends the taxpayers' money.
    Finally, Madam Chairman, I think we ought to know under 
just what circumstances Mr. Norquist believes it is acceptable 
for the Executive Branch to hold back information from Congress 
and the public. I will pursue that line of questioning when my 
turn comes.
    I thank you very much.
    Chairman Collins. Senator Warner, we are very pleased to 
have you here to present the nominee to the Committee. Please 
proceed.

              OPENING STATEMENT OF SENATOR WARNER

    Senator Warner. Thank you, Madam Chairman. And to my good 
friend, Senator Lautenberg, I rather enjoyed relaxing and 
listening to your opening statement, both of you. It was very 
moving. As a matter of fact, there is very little left for me 
to say. I will ask unanimous consent if I might put my prepared 
statement in the record.
    Chairman Collins. Without objection.
    [The prepared statement of Senator Warner follows:]
                  PREPARED STATEMENT OF SENATOR WARNER
    Thank you, Madam Chairman for holding this hearing today. One of 
our greatest responsibilities as members of the U.S. Senate is to 
provide advice and consent regarding the President's nominees for 
Executive Branch positions. Today I have the pleasure to introduce an 
accomplished public servant, David Norquist, to be the Chief Financial 
Officer of the Department of Homeland Security.
    David Norquist has spent his entire 16 year career in government 
service, starting as a program and budget analyst for the Department of 
the Army, later working on the House Appropriations Committee, and most 
recently serving as the Deputy Under Secretary of Defense for Budget 
and Appropriations.
    His experience in the budget and appropriations process coupled 
with his financial management work have served Mr. Norquist well and 
prepared him for the challenges ahead at the fast growing Department of 
Homeland Security.
    This Committee has worked very closely with the Department in its 
oversight role with specific reference to financial efficiency and 
accountability. Since the creation of DHS in 2003 we have seen great 
improvements in their overall financial accountability and the 
President's nomination of David will help to build on that incremental 
success. His clear understanding of the relationship between the 
Executive and Legislative branches, and their roles, will serve this 
Nation well.
    In my pre-hearing meeting with Mr. Norquist he expressed his 
excitement with the opportunity ahead and shared with me the most 
important reasons why he is ready for the challenges before him--his 
family with him here today. At this point I would like to recognize 
them: Father--Warren Norquist. Wife--Stephanie, three children: 
Warren--5 years old; Elise--2 years old; and Vivian--6 months old.
    I am impressed by his willingness to serve his country in the best 
way that he could stretching all the way back to his days as an 
undergraduate at the University of Michigan where he was in the ROTC.
    The Armed Services Committee has, over the years, worked with David 
on the Department of Defense's $400 plus billion annual budgets and in 
the Administration's various supplemental appropriations requests.
    He is ready, willing, and able to get to work. I applaud his 
willingness to serve this President, the Secretary of the Department of 
Homeland Security, and the American people and urge the Committee to 
quickly report his nomination to the full Senate.

    Senator Warner. I think it is most appropriate, to follow 
on from Senator Lautenberg's observation, that you introduce 
your family, sir.
    Mr. Norquist. I would be honored to.
    If I can introduce my family, I have with me my father, 
Warren Norquist, who is down from Massachusetts. Sitting next 
to him is my son, Warren Norquist as well. Sitting next to him 
is my wife Stephanie, and she is holding our baby, Vivian. Next 
to her, being held by a friend of ours, Michelle, is my middle 
one, Elise.
    And they keep me very busy.
    Chairman Collins. We are delighted that your family could 
be with you today.
    Senator Warner. Thank you, Madam Chairman.
    Madam Chairman, I think the most important thing that I 
could say at this point in time, I have been discussing the 
nomination with the nominee, and that is that he has worked 
with the Armed Services Committee, of which you are a very 
distinguished and valued member, for over several years now on 
our budget of $400-plus billion. You have decided to drop down 
to a mere $40 billion; is that correct?
    Mr. Norquist. $42.7 billion, yes, sir.
    Senator Warner. That is pretty good. You ought to take your 
little machine with you. I hope it will work on those numbers 
over there.
    But anyway, this man is eminently qualified, Madam 
Chairman, and we are fortunate to get him at Homeland Security 
because I happen to think that the Department, over which this 
distinguished Committee provides helpful guidance and 
oversight, is in need of a person with his qualifications. And 
I respectfully say to the Chairman and the Members of the 
Committee, he has them and we are fortunate. I think it is a 
loss at the Department of Defense that does concern me though. 
That will be my problem now.
    Good luck to you, young man. You are on your own.
    Chairman Collins. Thank you, Senator.
    Mr. Norquist has filed responses to a biographical and 
financial questionnaire, answered pre-hearing questions 
submitted by the Committee, and had his financial statements 
reviewed by the Office of Government Ethics. Without objection, 
this information will be made part of the hearing record, with 
the exception of the financial data, which are on file and 
available for public inspection in the Committee's offices.\1\
---------------------------------------------------------------------------
    \1\ The letter from the Office of Government Ethics appears in the 
Appendix on page 35.
---------------------------------------------------------------------------
    Our Committee rules require that all witnesses at 
nomination hearings give their testimony under oath. Mr. 
Norquist, if you would please stand and raise your right hand 
so I can administer the oath.
    Do you swear that the testimony you are about to give to 
the Committee will be the truth, the whole truth, and nothing 
but the truth, so help you, God?
    Mr. Norquist. I do.
    Chairman Collins. Please be seated, and I would ask that 
you would proceed with your statement at this time.

    TESTIMONY OF DAVID L. NORQUIST,\1\ NOMINEE TO BE CHIEF 
    FINANCIAL OFFICER, U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. Norquist. Thank you, Chairman Collins, Members of the 
Committee.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Norquist appears in the Appendix 
on page 27.
---------------------------------------------------------------------------
    It is an honor to appear before you today as President 
Bush's nominee to be Chief Financial Officer of the Department 
of Homeland Security.
    I am humbled by the confidence that the President and 
Secretary Chertoff have shown in recommending me, and I thank 
this Committee for its consideration of my nomination.
    I would like to thank Senator Warner for his very kind 
introduction.
    On a personal note, I would like to thank my parents, 
Warren and Carol Norquist, for their unwavering support, strong 
values, and thoughtful guidance.
    I thank my wife, Stephanie, for her love, her dedication to 
our family, and her patience with the long hours and endless 
demands of my government service.
    Finally, I would like to thank my children, Warren, Elise, 
and Vivian, whose presence reminds me every day about the 
importance of building a better future for America.
    I began my career as a Federal civil servant, a GS-9 
Program Budget Analyst working for the Department of the Army. 
Over the course of my 16 years of government service, I have 
worked financial management issues at virtually every level at 
which the Federal Government spends or oversees the expenditure 
of money, positions ranging from the professional staff of the 
House Appropriations Committee to Director of Resource 
Management at an Army field site overseas.
    Currently, I am the Deputy Under Secretary of Defense for 
Budget and Appropriations Affairs in the Office of the 
Undersecretary of Defense (Comptroller).
    The office for which I have been nominated has the dual 
mission of protecting this Nation's security and protecting the 
taxpayers' money. It is a profound responsibility, but these 
are things I believe in passionately. It is what I do for a 
living. It is why I enjoy my job.
    If confirmed, strengthening the internal controls needed to 
meet these challenges would be among my highest priorities. As 
Chief Financial Officer, I would constantly be mindful that the 
security of the American homeland depends on wise decisions in 
both the Legislative and Executive Branches of the Federal 
Government and on the effort of our State and local partners.
    Over the course of my career, I have also learned that on 
matters of national security, bipartisanship and cooperation 
are essential. I would look to bring that perspective and 
experience with me to the Department of Homeland Security.
    In closing, I would like to thank the Committee for its 
consideration of my nomination, and I look forward to answering 
your questions.
    Chairman Collins. Thank you very much.
    We will start with an initial round of questions limited to 
8 minutes each. But first, I will begin by asking you the three 
standard questions that we ask of all nominees.
    First, is there anything that you are aware of in your 
background which might present a conflict of interest with the 
duties of the office to which you have been nominated?
    Mr. Norquist. Not to my knowledge.
    Chairman Collins. Second, do you know of anything personal 
or otherwise that would in any way prevent you from fully and 
honorably discharging the responsibilities of the office?
    Mr. Norquist. No.
    Chairman Collins. And third, do you agree without 
reservation to respond to any reasonable summons to appear and 
testify before any duly constituted committee of Congress, if 
you are confirmed?
    Mr. Norquist. Yes.
    Chairman Collins. Thank you. You got those correct.
    Mr. Norquist, you served, as Senator Lautenberg mentioned 
in his opening remarks, as an official observer to the 
International Advisory and Monitoring Board for the Development 
Fund for Iraq for some 7 months. During your service as an 
observer, the IAMB asked that the Department of Defense provide 
audits of the restore Iraqi oil contracts between the Army 
Corps of Engineers and Kellogg, Brown and Root without 
redaction.
    Could you tell us, first, who was responsible for the 
decision on whether or not to release copies of the audits 
without redactions in response to the request from the Board?
    Mr. Norquist. The Corps of Engineers, as the contracting 
office, has the authority to decide what, if anything, is 
releasable from a DCAA audit.
    Chairman Collins. Did you play any role at all in that 
decision?
    Mr. Norquist. The role I played was to ask a lot of 
questions. My concern was that the Corps of Engineers concluded 
that the audits could not be released unredacted without the 
consent of the contractor, and the contractor had not 
consented. They were concerned about violations of what I 
believe is called the Trade Secrets Act. And so the approach 
they took was to have the contractor do the redactions.
    I was concerned about the need to provide as full an answer 
as possible to the IAMB. So I asked questions such as: Is there 
a way we can provide this unredacted without the contractor's 
consent? Do we have to accept the contractor's redactions? Or 
can you, as the Corps, do your own version of the redactions? I 
asked, if the IAMB members signed a nondisclosure agreement, 
could we, in fact, turn it over that way so they would have the 
unredacted audits?
    And finally, one area we were actually able to get some 
positive ground on was: Could they provide it to a third party? 
And the answer was if they were under contract to the U.S. 
Government, like an independent auditing firm, or an IG, we 
could.
    And so I proposed that we give the unredacted audits to 
them so that they could advise the IAMB, as a neutral party, as 
to the contents and the efficiency and effectiveness of a DCAA 
audit.
    Chairman Collins. What was your personal opinion as to 
whether or not the Board should have had access to unredacted 
audits?
    Mr. Norquist. I felt the Board should have as much 
information as the law would let us provide. The decision as to 
whether or not the law would permit redacted or unredacted 
audits I left to the General Counsel Office in the Corps of 
Engineers. They are the ones with the expertise in the law to 
make that determination.
    Chairman Collins. While at the Department of Defense, were 
you responsible for informing the Board of the management and 
expenditures of monies from the Development Fund for Iraq?
    Mr. Norquist. No, I was an observer. The Coalition 
Provisional Authority regularly briefed the Board on their 
management of the DFI. My function was to help provide 
transparency by observing the Board's proceedings.
    Chairman Collins. As you may be aware, this Committee held 
extensive hearings into the response to Hurricane Katrina, 
including three hearings in which we examined how taxpayer 
dollars meant to help the victims recover from Hurricane 
Katrina were instead lost to egregious waste, fraud, and abuse, 
and poor management and decisionmaking.
    The Inspector General and the GAO both reported to us that 
the Department, and FEMA in particular, lacked basic management 
controls that would have prevented wasteful spending when it 
came to providing individual assistance and, of course, the 
debacle with the purchase of some $750 million worth of 
manufactured housing, much of which still sits in a field in 
Hope, Arkansas.
    What immediate steps do you believe should be taken in 
preparing for the 2006 hurricane season to better protect the 
taxpayer's dollars?
    Mr. Norquist. I think at this stage, rather than focusing 
on doing an additional study, I would look at the reports that 
have been done to date. Inspector General Skinner did an 
examination of this issue. He looked both at the trailers as 
well as the Expedited Assistance Program and others. This 
Committee and others have looked into these issues, and there 
is an established series of recommendations from different 
organizations.
    So what I would do, should I be confirmed, would be to get 
together with the CFO and the procurement officers at FEMA and 
say where do you stand in implementing these recommendations? 
What controls have you added? Have they been tested? Do you 
have the means in place to be more confident about the way you 
would handle the next hurricane season when it arrives?
    Chairman Collins. I guess what is particularly troubling to 
me is that this Committee held hearings on FEMA's management of 
assistance in the wake of the Florida hurricanes and found 
exactly the same kinds of ineffective or absent controls that 
allowed similar waste, although on a far greater scale, to 
happen with the hurricanes that affected the Gulf region. I 
would urge you to make this a priority.
    I think the American people are very generous, but they do 
not want to see their hard-earned money lost to waste and fraud 
and abuse. That is exactly what happened in the wake of both 
hurricanes.
    Mr. Norquist, the Department has had financial problems 
with several of its component agencies, most notably 
Immigration and Customs Enforcement. The component CFOs in 
those individual agencies do not have a direct reporting 
relationship to the Department CFO, something that I think 
needs to be rectified.
    Without that direct relationship, how are you going to 
ensure sound financial management and reporting throughout the 
Department?
    Mr. Norquist. I think there are a number of ways to 
approach it. First, there is a CFO Council, which provides a 
vehicle to meet regularly with the CFOs of the components. I 
would also look to strengthen the personal connection, meeting 
regularly with the individual CFOs.
    In addition, there are some authorities and some 
opportunities that the CFO at Homeland Security has which we do 
not actually have at the Department of Defense. The CFO at 
Homeland Security has a role to play in the selection of a 
component CFO, has a role to play in determining their 
performance standards and evaluating their success against 
their performance standards and evaluating their bonuses. So 
these provide some additional tools.
    So I think between the cooperation and the council that we 
should be able to be successful in building that relationship.
    Chairman Collins. Thank you. Senator Lieberman.

             OPENING STATEMENT OF SENATOR LIEBERMAN

    Senator Lieberman. Thanks very much, Madam Chairman.
    Apologies to you, my colleagues, and Mr. Norquist. The 
plane landed at 2:45, but did not empty until 3:30 at National, 
coming from Hartford. So I apologize.
    I am going to enter my opening statement in the record and 
just paraphrase.
    Chairman Collins. Without objection.
    [The prepared statement of Senator Lieberman follows:]
                PREPARED STATEMENT OF SENATOR LIEBERMAN
    Thank you, Madam Chairman, and welcome to this hearing, Mr. 
Norquist.
    I can't stress enough how important this hearing is. The person 
stepping into the job of Chief Financial Officer of the Department of 
Homeland Security faces enormous challenges.
    The CFO will have to steer the 22 different agencies that makes up 
DHS to financial stability so that DHS will finally get a clean audit.
    Previous audits have detailed serious shortcomings and poor 
financial management that has resulted in agencies running out of money 
for critical missions or having to improve sudden hiring freezes.
    We cannot have these types of disruptions to the Department charged 
with securing our homeland.
    And the CFO must work closely with the Chief Procurement Officer of 
the Department to bring an end to the embarrassing waste we have seen 
in many large DHS contracts.
    The CFO will also need to decide what to do with the financial 
modernization project called EMERGE2--or Electronically Managing 
Enterprise Resources for Government Effectiveness and Efficiency.
    The system was originally designed as a total transformation of 
DHS' financial systems, but has been downscaled in the President's FY07 
budget request.
    Given the importance of this job, in 2004, Congress changed the law 
to make the position of Chief Financial Officer subject to Senate 
confirmation.
    Serving as Chief Financial Officer will require a commitment not 
only to sound financial management, but also to openness and 
transparency.
    If you are confirmed, Mr. Norquist, we would expect you to 
cooperate closely with the Inspector General and GAO, and to provide 
information promptly to Congress.
    In that spirit, I intend to ask you about your involvement in a 
troubling incident that relates to these important principles.
    While working at the Department of Defense, you led a team of 
government officials that decided not to disclose to a United Nations 
oversight board that KBR--a subsidiary of Halliburton--was suspected of 
overcharging Iraq millions on dollars.
    In December 2003, the Defense Contract Audit Agency (DCAA) 
announced that its draft audit had found overcharges by KBR of as much 
as $61 million for importing Kuwaiti fuel into Iraq, DCAA also said 
that significant additional overcharges were likely in the months to 
come.
    The contract was largely paid for from the Development Fund for 
Iraq, also known as DFI, which was established by UN Secretary Council 
Resolution 1483.
    The money in this fund belongs to the Iraqi people. It came from 
Iraqi oil sales, assets that had been frozen in bank accounts outside 
the United States, and $8 billion in funds transferred from the UN Oil-
for-Food program.
    The UN gave control of the DFI to the Coalition Provisional 
Authority. The UN also established the International Advisory and 
Monitoring Board for Iraq to monitor our government's administration of 
DFI.
    Resolution 1483 required that the Iraqi funds be ``used in a 
transparent and equitable manner'' and for the benefit of the Iraqi 
people.
    Beginning in April 2004 and continuing through September, the UN 
oversight board made repeated requests for the DCAA audits of the KBR 
contracts.
    During that period, you were the U.S. Department of Defense's 
observer and liaison to the Board.
    Accordingly, as you've told the Committee's staff investigators, 
you headed up the process that considered whether the audits would be 
given to the UN Board.
    In October 2004, you provided the oversight board redacted copies 
of the DCAA audits that struck every reference to every overcharge in 
every audit--463 redactions in all.
    Had they not been redacted, the DCAA audits would have shown that 
more than $177 million in overcharges and more than $17 million in 
unsupported costs were funded with Iraqi money.
    These redactions were made at KBR's request. The Department of 
Defense did not dispute a single one.
    It would have been proper to redact information of a strictly 
proprietary nature.
    But when KBR handed over the redacted audits to the Department of 
Defense, it stated that it had struck information other than propriety 
information.
    KBR explained that it had also redacted statements that the company 
believed were incorrect or misleading and that could damage KBR's 
ability to win and negotiate new work.
    It is also very troubling that a contractor implicated in an 
overcharging scandal would be given the final say on what information 
to provide to the UN oversight board. After all, the UN board was the 
legal entity responsible for oversight of misspent Iraqi funds.
    Mr. Norquist, I would like to hear more about your role in this 
incident.
    I think this episode is relevant to today's hearing because DHS 
needs a CFO who puts taxpayers first; who is committed to sound 
financial management and transparency, and who is willing to confront 
agencies that may be shirking their legal responsibilities.
    In preparing for the hearing Committee staff reviewed many 
documents that had been produced by the Department of Defense, as well 
as others that are publicly available. I ask that a selection of the 
documents be entered into the hearing record so that I can ask the 
nominee about them.
    I would also note that the Department of Defense refused to provide 
us with many hundreds of pages of responsive documents, but did let 
Committee staff review the documents at the Pentagon. In my questions I 
may refer to documents that our staff reviewed but we do not have.
    Thank you, Madam Chairman.

    Senator Lieberman. First, welcome to you and your family, 
who I presume are the people behind you. And I would like to 
say that this position of Chief Financial Officer of DHS is one 
that faces very significant challenges.
    The CFO is going to have to steer the 22 different agencies 
that make up DHS to the higher ground of financial stability so 
that DHS will get what it has not gotten yet, which is a clean 
audit.
    As you know, previous audits have detailed serious 
shortcomings and poor financial management that has resulted in 
agencies running out of money for critical missions or having 
to impose sudden hiring freezes. Now that is something we 
cannot afford, those kinds of disruptions, in this Department, 
which is charged with securing our homeland.
    The CFO must also work closely with the Chief Procurement 
Officer of the Department to bring an end to the embarrassing 
waste we have seen in some of the large DHS contracts. And you 
will also need to decide what to do with the financial 
modernization program called EMERGE2 or Electronically Managing 
Enterprises Resources for Government Effectiveness and 
Efficiency.
    I want to go to this question that I know has been raised 
already by others, which is that during the time you worked at 
the Department of Defense, you led a team of government 
officials that ultimately decided not to disclose to a UN 
Oversight Board that KBR, a subsidiary of Halliburton, was 
suspected of overcharging Iraq millions of dollars. This was 
Iraqi money collected and funneled through the UN, which we 
were spending at the outset for the benefit of the Iraqi 
people.
    As you know, the Defense Contract Audit Agency, in December 
2003, in its draft audit, found overcharges by KBR of as much 
as $61 million for importing Kuwaiti fuel into Iraq. So they 
were overcharging for that. And additional significant 
overcharges that were likely to come in the months after.
    I would just jump ahead to say that in October 2004 you 
provided the Oversight Board redacted copies of the DCAA audits 
that struck every reference to overcharge in every audit, 463 
redactions in all, which is what KBR had asked. Had they not 
been redacted, the DCAA audits would have shown more than $177 
million in overcharges and more than $17 million in unsupported 
costs were funded with Iraqi money.
    Just continuing to pick out here, when KBR handed over the 
redacted audits to the Department of Defense, it stated that it 
had struck information other than proprietary information.
    That is correct, to your knowledge, is it not?
    Mr. Norquist. That is my understanding, yes.
    Senator Lieberman. KBR explained that it had also redacted 
statements that the company believed were incorrect and 
misleading and that could damage KBR's ability to win and 
negotiate new work.
    I must say, to me it is really unacceptable that a 
contractor implicated in an overcharging scandal would be given 
the final say on what information to provide the UN Oversight 
Board. After all, that board was the legal entity responsible 
for oversight of misspent Iraqi funds.
    I want to say what is probably obvious, but I want to say 
it for the record. Nobody says that you are involved in any of 
this wrongdoing yourself, at all.
    I think the appropriate question for the Committee, as we 
consider you for this position, and you bring an impressive 
background, personal skills, and background in government 
agencies, is the way you handled this.
    And let me pose it as directly as I can because I have 
heard at least one person looking over this record say to me 
that though you made some efforts to unredact, which I think 
was the right thing to do, ultimately you may have been caught 
between two bureaucracies and a private interest here and 
simply resolved it in what might be called the most manageable 
way.
    In other words, I want to confront you with this question, 
which is: Should your handling of this very difficult but 
important situation lead us to conclude that you would not be 
as strong a decision maker--including making decisions that 
make people unhappy--as I think will be necessary in this Chief 
Financial Officer position?
    Mr. Norquist. Sir, I made a number of recommendations that 
made people unhappy in the process, but it was out of a desire 
to provide as much information as possible. There was, for 
example, initially only going to be redacted executive 
summaries. And I made the point that if we are going to do 
this, you ought to deliver the full audit.
    There was some concerns about how much would be missing 
from those. And I said fine, but we owe the IAMS as much 
information as we can give them. And if you feel, as the Corps, 
that it needs to be redacted, that is your jurisdiction and 
your authority.
    But I was quite willing and stood very strongly in favor of 
pushing this everywhere I believed I could, except when I ran 
up against the advice of lawyers. When our General Counsel at 
OSD concurred with the advice of the Army's General Counsel 
that there was not a way to provide these audits unredacted, 
that was the point at which I was not in a position where I 
could take an alternative position.
    So the Corps had to make the call. Their lawyers gave them 
advice that I bounced off our lawyers to ensure that there was 
not a different reading of the law, that we could not find a 
way around this.
    And the answer was pretty consistent. The people with an 
expertise agreed you could not do it unredacted because of the 
way the Trade Secrets Act was written.
    But nevertheless, I continued to push. Is there a way we 
can find another precedent or something that will let us go 
forward? Can the Corps do the redacting instead of the company? 
Can we do nondisclosure agreements? I consistently pushed to 
get people to think of alternative ways of solving this problem 
so that we did not default into the ``this is the easiest way 
forward'' approach.
    Now in the end it was a hard way forward, and it was an 
awkward situation to be in. But I wanted to ensure that they 
had properly evaluated the alternatives and had not simply 
fallen in on the easiest answer.
    Senator Lieberman. I am sure my colleagues will have other 
questions about this. And I would just say finally, in 
preparing for the hearing, Committee staff reviewed many 
documents that had been produced by the Department of Defense, 
as well as others, that are publicly available.
    Madam Chairman, I would like to ask that a selection of 
those documents be entered into the hearing record at this 
point.\1\
---------------------------------------------------------------------------
    \1\ The Exhibits submitted by Senator Lieberman appear in the 
Appendix on page 95.
---------------------------------------------------------------------------
    Chairman Collins. Without objection.
    Senator Lieberman. Thank you. Thanks, Mr. Norquist.
    Chairman Collins. Senator Lautenberg.
    Senator Lautenberg. Thanks very much, Madam Chairman.
    It is obvious, Mr. Norquist, that all of us are concerned 
about the redaction and the redaction process.
    In the beginning, did you express your view of what the 
Trade Secrets law might say? Because as we look at this first 
chart, and we have others which we will not bother the 
Committee with right now, but when you look at it, it is 
awfully hard to understand what the trade secrets are that were 
being redacted. When they say KBR proposed, and now it is 
common knowledge, $252 million rounded for unleaded gas, and 
other numbers, in the schedule.
    I wonder how in the world can it be suggested that is a 
trade secret? I mean the taxpayers pay for it. It is not a 
practice that you find in very many places in our business 
world. And certainly in government, when we are much more 
obliged to operate with transparency.
    The other things, to go on, the highlights there, ``our 
audit found purchase orders and procurement files related to 
the Kuwait supplier did not contain data to support the 
reasonableness of the negotiated purchase orders.''
    Trade secret? And it goes on like that. It is very 
disappointing to see that government acted in response to what 
looks like a dictate by Halliburton or KBR to define these as 
trade secrets and have it hidden from the public view.
    Does that strike you that way? And I am going to give you 
credit, Mr. Norquist, because as I read some of the history 
here, it was obvious that you disagreed or at least voiced an 
objection to this redaction. But then I think it took almost 6 
months, am I correct, in order to provide the unredacted 
documents?
    Mr. Norquist. Let me just clarify. Although they were 
requested in April, the audits were not actually completed 
until the last days of August to the middle part of October. So 
at the point the audits were available for review until they 
were delivered, there was only a matter of a few weeks of going 
both through the review and the redaction process and the back 
and forth with the Corps of Engineers. Up until that point, the 
DCAA audits were only in draft stage, and we were not in a 
position to move forward.
    But to get to your first question that you asked me, about 
my reaction to seeing the redactions, I did, in fact, raise the 
very same types of concerns you did. I did not necessarily see 
this particular page. But I said, I am a layman, I do not have 
an expertise in this area, but I do not see why this would be--
and I used the euphemism--``proprietary'' data. I do not know 
if that is actually cited in the Trade Secrets Act as a 
criteria.
    But it did not strike me as proprietary data. And that is 
why I encouraged the Corps to go back and take a look at this 
information and to make their own independent judgment as to 
what should or should not be redacted, as opposed to simply 
following what the company had sent forward.
    Senator Lautenberg. Senator Lieberman discussed with you in 
detail something that relates to the question I am going to ask 
you. The fact that one department decided that the government, 
we were entitled to refunds of some $61 million in overcharges. 
And that was agreed upon.
    But then there was a decision not to accept or not to 
demand these refunds. How did that come about?
    Mr. Norquist. Sir, I cannot speak to how that came about. I 
think what you are talking about is the difference between what 
DCAA recommended and the actions the Corps of Engineers chose 
to take.
    I was not part of the process of managing this contract. My 
involvement was as an observer with the request for the audits. 
And so I do not know the story behind how the Corps reacted to 
the recommendations from DCAA as to what----
    Senator Lautenberg. Of the independent audit?
    Mr. Norquist. I am referring to the DCAA audit. If there is 
a different one, then I am not familiar with it.
    Senator Lautenberg. One is the first stage of an audit 
process. And then on, would you say it was on appeal that the 
refunds were ordered not to be collected?
    Mr. Norquist. Let me walk through, to the extent I 
understand it, the mechanics of this. And I apologize that I am 
not an expert in this area.
    But the Corps of Engineers negotiates and sets up the 
contract with the company. They ask the Defense Contract Audit 
Agency, particularly in a contract like this, to review the 
pricing and the procedures that the company followed to 
determine that they were only charging a fair and reasonable 
price.
    The auditors then identify what I think they call 
questioned costs, meaning either they disagreed with it or they 
simply did not see enough documentation to support it. And it 
provides the basis for the contracting officer to negotiate, to 
either insist upon being provided that documentation or to make 
decisions as to whether or not to pay.
    It is not a decision of the government. The audit is an 
advisory document given to the contracting officer. So again, 
how the contracting officer uses it, whether they were right to 
accept or reject those, I cannot speak for the contracting 
officer on that.
    Senator Lautenberg. It borders on the outrageous that an 
audit agency, after its review, has its recommendation 
overturned by another department. An audit, as I see it, an 
audit is an audit. That is a check on what is going on. The 
tactics here are hard to understand.
    The Defense Contract Audit Agencies have shown that 
Halliburton has billed more than $1.4 billion in unsupported or 
questioned costs. Has the Department of Defense paid 
Halliburton for these costs?
    Mr. Norquist. Sir, I cannot speak to that. I think the 
number you said might have been the total contract, but I am 
not certain.
    Senator Lautenberg. The total contract was larger.
    Mr. Norquist. I am not familiar with the underlying 
contract or the dollar amounts involved there.
    Senator Lautenberg. I would have thought that these had 
become somewhat under your purview, Mr. Norquist.
    Mr. Norquist. No, the contracting involvement was the Corps 
of Engineers. I was involved in this because I was an observer 
at the IAMB, and specifically on the issue of the request for 
the copy of the DCAA audits, not the actual resolution of those 
comments.
    Senator Lautenberg. Were you the senior financial person in 
the Department of Defense?
    Mr. Norquist. No, I was one of the Deputy Under 
Secretaries, and contracting is an acquisition authority, not a 
financial management authority.
    Senator Lautenberg. Madam Chairman, I am out of time here. 
I would like to talk further to Mr. Norquist.
    Chairman Collins. Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Thank you very much, Madam Chairman.
    Let me pursue this redaction because I am mystified, first 
of all, that we allow a company being audited to do the 
redacting. What is the precedent for that?
    Mr. Norquist. I do not know. I asked if there was a way we 
could do it instead, but the advice was, from the Corps of 
Engineers lawyers, that to change the contractor's redactions--
and again, let me cite their words because this is not an area 
where I have an expertise--they said, the Corps counsel noted 
that there were significant legal risks to include potential 
individual criminal violations associated with changing the 
redactions provided by KBR. So that was the advice of the Corps 
lawyers. That is what they said was the proper way forward. And 
since they are the ones who make the call on this one, I did 
not have much----
    Senator Levin. Potential criminal liability to whom?
    Mr. Norquist. To the individual who releases the document, 
to the actual individual who couriers it to the recipient is my 
understanding.
    Senator Levin. That would be to you?
    Mr. Norquist. Actually, I made sure the Corps of Engineers 
couriered the document.
    Senator Levin. To the UN?
    Mr. Norquist. To the UN.
    Senator Levin. And the UN objected to this, did they not?
    Mr. Norquist. No, they did not. When they received it, I 
provided a letter to the chairman to explain that the audits 
had just been completed, to walk through what was in it, to 
note that the contractor had done the redactions, and what the 
law was that created the obstacle. They were pleased to have 
received them. They understood that we were operating within 
limitations set by U.S. law.
    But I also put forward at that time an alternative option 
of providing the unredacted audits to a third party because I 
wanted to show the good faith effort, that they would not have 
to take my word for it, or the Corps word for it. We could give 
it to a third party. That third party could read it over and 
tell them DCAA audits are good, sound audits, or whatever the 
words----
    Senator Levin. Where did that proposal go?
    Mr. Norquist. They originally went--again----
    Senator Levin. Who were you proposing that to?
    Mr. Norquist. I proposed it to the IAMB, and I said would 
you like us to do this? We are prepared to do this if you chose 
to.
    I stopped working with the IAMB on October 11. We handed 
over this responsibility to other offices. But let me give a 
summary of what I understand happened.
    They first went to the option of seeking an outside 
auditing firm to look it over. That ran into some obstacles. So 
I think they provided it to the Special Inspector General for 
Iraq, who reviewed the documents. But here I am outside my 
expertise.
    Senator Levin. The redacted documents?
    Mr. Norquist. No, they were provided the unredacted in 
order to be able to provide an opinion or a view to the IAMB. I 
wanted somebody else to be able to see the full document and be 
able to give their advice to the IAMB.
    Senator Levin. And a UN Council saw the unredacted 
documents?
    Mr. Norquist. No, the requirement to avoid the Trade 
Secrets Act is they have to have a relationship with the U.S. 
Government.
    Senator Levin. Who was it specifically that saw the 
unredacted document?
    Mr. Norquist. It is my understanding, again I am not 
certain on this, that it was the Special Inspector General for 
Iraq.
    But if you like, I will take that for record so I can be 
certain about who was the recipient and provided the report.
    Senator Levin. If you would.
    And that person was satisfied that it was properly 
redacted?
    Mr. Norquist. I do not know how they set it up, what they 
were asked to do. They were asked to be available to support 
the IAMB by reviewing it. But the terms of the agreement, I am 
not familiar with.
    That would have happened well after I had stopped working 
on this.
    Senator Levin. If you could supply that for the record, it 
would be useful.
    You say that the IAMB, the UN International Advisory and 
Monitoring Board for Iraq, was satisfied with the redaction, 
they did not object to it.
    The press release that they issued on April 29 said the 
following, ``that these reports indicate overcharges and 
questionable amounts billed under the sole source contracts of 
an amount in excess of $200 million. The IAMB notes with 
regret''--that does not sound like they were satisfied with it. 
It says they, ``note with regret that these findings have been 
redacted in earlier DCAA reports submitted by the U.S. 
Government to the IAMB.''
    Mr. Norquist. At the time we provided it to them and gave 
them the information to show what the extent of the DCAA audit 
was, how thorough the DCAA audit was, what they covered, that 
went a long way toward addressing some of their issues.
    The fact that they would have liked to have seen more, I 
would completely understand. And the fact that the redactions 
created a challenge and that was a regret of theirs, I would 
understand as well.
    Senator Levin. It sounds a little different from saying 
that they were satisfied.
    Mr. Norquist. They did not express any concern at the time 
we sent it to them. This is an issue that came up later on.
    Senator Levin. When did you send it to them?
    Mr. Norquist. We delivered it to the chairman, I think, 
before the full IAMB meeting and then provided copies to the 
rest of the members on October 11, 2004.
    Senator Levin. You are familiar with that April 29, 2005, 
press release?
    Mr. Norquist. I actually only became familiar with it 
afterwards when the questions started coming up and somebody 
raised it to my attention.
    Senator Levin. If you thought that the redaction was 
improper, and you did, why did you not appeal that higher up 
above the lawyers?
    Mr. Norquist. I raised it to the OSD lawyers. The Corps of 
Engineers lawyers had said it could not be released.
    Senator Levin. Why did you not go above their head. Lawyers 
are not the final determiners.
    Mr. Norquist. If I have a set of lawyers that advise that 
an action is illegal, and I confirm it with another, to then go 
up and say you should engage in an action that your lawyers 
will tell you is illegal, is not a very productive way forward. 
If I had had dissent, if I had found----
    Senator Levin. You think the client should be consulted? 
The clients are not the lawyers. The lawyers do not have the 
final say. It is the client. And you yourself, in your own good 
conscience, and I think you were right, saw this as pure common 
sense, as Senator Lautenberg went over these. These comments 
are not trade secrets under any stretch of the imagination.
    The Trade Secrets Act cannot possibly protect this kind of 
redaction. ``The cost and pricing data and the information 
other than cost or pricing data submitted by the offerer are 
not adequate.'' That is not a trade secret.
    ``We consider KBR's estimating system to be inadequate.'' 
That is not a trade secret. That is not proprietary.
    ``In addition, KBR was unable to demonstrate their proposal 
was based on actual cost.'' This goes to the heart of 
overcharging. This is not trade secret stuff. This is 
fundamental.
    KBR cannot demonstrate here the costs behind their charges. 
There is no trade secret. You were familiar with that. And just 
because the lawyers say that there is some reason that should 
be redacted is not the end of the matter. Clients are the ones 
who make decisions, unless you are the client. Are you the 
client?
    Mr. Norquist. Sir, the Corps of Engineers was the one to 
make the decision, and their lawyers were the ones who gave 
them advice. I went above that to the OSD lawyers to see if 
there was any dissent, to see if there would be a disagreement 
by going up to the lawyers for the Department. But the OSD 
lawyers had the same opinion as the Corps of Engineers lawyers.
    Senator Levin. Did you ever think of going to the people to 
whom those lawyers are responsible, the client for those 
lawyers, and say, you know, your lawyers are saying this, but I 
have got to tell you there is no common sense way, there is no 
way you can read these and say there is a trade secret here.
    I mean this is a cover-up of overcharging. Not by you. By 
the way, I think Senator Lieberman is absolutely right. We all 
ought to make that clear. This is not anything you did 
improperly in terms of any cover-up.
    But this redaction was a cover-up, and it was tolerated by 
lawyers for reasons that we have trouble understanding. I have 
trouble understanding. Senator Lautenberg does, too. There may 
be others.
    It seems to me that at a minimum your obligation would have 
been to go to the clients for those lawyers, the people to whom 
they are accountable, to say this is what your lawyers are 
telling me, but it does not make sense.
    I am wondering whether that thought crossed your mind? And 
that is my last question.
    Mr. Norquist. Sir, if there had been disagreement among the 
advisors--again, I have no expertise. I am told the Trade 
Secrets Act is very broadly written. I have no way of knowing 
and judging whether or not they were being reasonable or 
unreasonable in asserting that these things are protected by 
that.
    But if I had gotten dissent, if I had one office of lawyers 
saying it was perfectly acceptable to release it and one saying 
not, then I would have had a very sound basis upon which to go 
and say the Corps of Engineers are holding this up but the OSD 
lawyers think they are wrong.
    But there was not. There was not a dissent. Those people 
with an expertise in this area had a very similar opinion.
    Senator Levin. Thank you. And if you could provide for the 
record then the names of the lawyers that you spoke with, it 
would be helpful so we can ask them. Because we have had an 
investigation into the UN, improper UN kickbacks. And here we 
have a situation where materials provided to the UN, which are 
redacted, do not allow them to do their job, and there is no 
action being taken here. It may not be your responsibility. You 
may be right. But someone is responsible here for covering up 
clearly charges which could not be justified.
    Thank you. Thank you, Madam Chairman.
    Chairman Collins. Senator Dayton.

              OPENING STATEMENT OF SENATOR DAYTON

    Senator Dayton. Thank you, Madam Chairman.
    Mr. Norquist, I am wondering if you discussed this job and 
its time demands with Warren, Elise, and Vivian?
    Mr. Norquist. I have sir, and it is with some trepidation 
that we have signed up for the hours that this involves. This 
will be a tough job.
    Senator Dayton. As the parent of a 25-year-old and a 22-
year-old, I encourage you to make sure they come first.
    Mr. Norquist. Does it get easier?
    Senator Dayton. Yes, they will not want to have anything to 
do with you all too soon. I mean that facetiously and also 
seriously.
    The Congress has appropriated $62 billion, most of it going 
through the Department of Homeland Security, for the Hurricane 
Katrina cleanup. And the Senate just last week, in its 
supplemental, appropriated another $27 billion. That is $89 
billion then. I do not know what is a reasonable timeline, but 
I would like to ask you within say a month, if possible, 2 
months at the outside, after you have been confirmed for this 
position, to provide this Committee with your best accounting 
on how that money has been spent, at least where it has been 
distributed. It may not be possible to get to the level of the 
contractors, subcontractors and the like. But at least so we 
have an accounting.
    And I, at a Committee meeting last week, encouraged my 
colleague from Minnesota, Chairman of the Permanent 
Subcommittee on Investigations, to conduct a similar oversight.
    Because I think it is imperative, particularly if, and I 
expect when, we will have another request for additional funds 
for Mississippi and Louisiana, that we understand at least as 
fully as possible to that current date how that money has been 
distributed.
    Mr. Norquist. Should I be confirmed, I would be happy to do 
the best I can to do that.
    Senator Dayton. Thank you.
    I hope this will be concluded before you are confirmed, but 
I have had the greatest difficulty, to my frustration, getting 
information from Secretary Chertoff from FEMA's handling in the 
aftermath of a flood that devastated Roseau, Minnesota, in June 
2002. FEMA has been more of an obstructionist, I regret to say, 
than an ally in the effort to rebuild that city and some of its 
key projects to both repair what occurred and also to prevent 
future flooding.
    The city began, in March 2003, that is over 3 years ago, a 
request for $617,000 that 2\1/2\ years later was denied by 
FEMA's Region V.
    The incongruity of, on the one hand, $62 billion being 
passed through with almost no feedback on how it is being 
spent, and the 2\1/2\ year effort that a small city in 
Northwestern Minnesota that is struggling, that is trying to do 
its best to rebuild from a flood that wiped out its downtown 
just as completely as Hurricane Katrina's flooding wiped out 
parts of New Orleans. And yet here, 2\1/2\ years later, they 
are denied what is--from everything I can determine--a very 
responsible and certainly a very modest amount of money to 
engage in some rebuilding projects.
    They have then appealed that decision and now, 5 months 
later, have not gotten a decision from FEMA as to the final 
disposition of that appeal.
    I handed a letter when Secretary Chertoff was before this 
Committee on March 1 regarding this matter. Madam Chairman, I 
would ask unanimous consent that a copy of that letter be 
submitted for the record in this proceeding.
    Chairman Collins. Without objection.\1\
---------------------------------------------------------------------------
    \1\ The March 1, 2006, letter to Secretary Chertoff re: City of 
Roseau, from Senator Dayton appears in the Appendix on page 143.
---------------------------------------------------------------------------
    Senator Dayton. Thank you.
    I did not hear anything back from him, not even the 
acknowledgment of receipt of the letter, which I know he did 
receive because I handed it to him.
    I happened to meet him just outside the Capitol 2\1/2\ 
weeks ago, and I brought this matter to his attention again. 
And one or two of his accompanying aides wrote down the 
details, Roseau, Minnesota, and the like. I still have not 
heard back anything from him or from anybody at FEMA. The city 
of Roseau has not heard back.
    I am incredulous that, regardless of the disposition, and 
that is a determination for the proper FEMA officials to make, 
but that I, in my responsibilities as a U.S. Senator 
representing the city of Roseau, cannot get from the Secretary 
or from anybody underneath him a response to first a letter and 
then 2\1/2\ weeks ago a further direct inquiry about the status 
of the review and the project.
    So again, you have nothing to do with this. You do not have 
any responsibility for it. But in your new position, when you 
assume it, I would ask for your assistance getting somebody in 
that vast bureaucracy to respond.
    Mr. Norquist. I would be happy to assist you, Senator, 
should I be confirmed.
    Senator Dayton. All I can say is if that is indicative, and 
unfortunately from some of my constituents' other experiences 
with FEMA, and particularly it is Region V, if that is 
indicative of the lack of responsiveness to elected 
representatives of the people, and more importantly to the 
people themselves, I seriously wish you the very best in this 
undertaking because it badly needs people who are going to be 
responsible for the expenditures of dollars and the reporting 
of those dollars and feel some sense of responsibility to the 
people whose tax dollars are paying their salaries and 
providing the mission that they are supposed to honor and carry 
out.
    So I wish you well. Thank you, Madam Chairman. This 
concludes my questions. Thank you.
    Chairman Collins. Thank you. We will now have a second 
round of questions for those who wish to participate, limited 
to 4 minutes each.
    Mr. Norquist, in 2003 the GAO designated the Department of 
Homeland Security on its High Risk list of government 
operations, and it has subsequently reaffirmed that 
designation. An area of specific concern identified by the GAO 
is the weak financial management of the Department.
    In forming the Department, the Department had to combine 
some 19 financial management systems. I think that now there 
are eight.
    What are your plans for specifically identifying the 
financial weaknesses that the GAO has pointed out as the 
justification for putting DHS on the High Risk list?
    Mr. Norquist. Senator, there have been a number of reviews 
of the Department of Homeland Security's financial practices. 
You have the GAO reviews, you have the independent audit of the 
financial statements that identified, I believe it was, 10 
material weaknesses. There have been some other reviews, as 
well.
    I think the important task before us, and the task I would 
take on should I be confirmed, is to get to the root cause of 
those weaknesses, identify the corrective action, who is going 
to take the action and by when, and begin the somewhat 
difficult task of advancing the corrections across the board. 
You have got corrective action you have to take in a number of 
areas.
    So I think the important thing is to identify them, lay out 
the corrective action process, and then the challenge is 
maintaining the discipline to stay on top of that issue while 
other crises are happening that are distracting the 
organization, to keep that focus on fixing the basic underlying 
financial process.
    Chairman Collins. In your response to the Committee's 
written questionnaire, you indicated that you had experience, 
including involvement in or direct oversight of financial 
management transformation. I assume this is at the Department 
of Defense; is that correct? Or were you referring to other 
efforts?
    Mr. Norquist. Actually, my experience with financial 
management transformation began when I was with the House 
Appropriations Committee. One of the accounts I had oversight 
of included the Department's Financial Management Modernization 
Program.
    Chairman Collins. The Department of Defense?
    Mr. Norquist. The Department of Defense's. And so there 
were a number of challenges they had, one of which, for 
example, was their CFO had difficulty enforcing compliance with 
the intended architecture. And so we worked with the committee, 
and the Congress adopted language to strengthen their hand in 
forcing systems under development to comply with the 
architecture.
    We also were concerned about systems that were built and 
were what in the Defense Department they called joint systems, 
that were supposed to bring the services together. But 
somewhere around year two of the program a service backs out, 
then another service backs out, and eventually you have a 
software solution that only works for one.
    So we worked very closely with them on trying to help 
prevent these types of challenges.
    I was originally hired by the Department of Defense to 
address those issues as my original position. But in the course 
of a reorganization, my duties shifted, but I continued to work 
alongside people who had that initiative.
    Chairman Collins. One final question.
    I mentioned earlier what I think is an anomaly of having 
the CFOs of the component agencies of DHS not report to the 
overall Department CFO. Is that a change that you think we 
should make in the law?
    Mr. Norquist. I am not shy. If I were confirmed and found 
that was an insurmountable obstacle, I would certainly come 
back and alert you to that challenge.
    But in the Department of Defense, the Assistant Secretary 
of the Army for Financial Management reports to the Secretary 
of the Army. So it is similar to the structure I am used to 
working in. Whether it proves to be sufficient and effective in 
this environment, I would just have to get there, should I be 
confirmed, and see how it goes.
    Chairman Collins. Thank you. Senator Lieberman.
    Senator Lieberman. Thanks, Madam Chairman.
    I think you know, Mr. Norquist, because you are here, that 
in 2004, Congress expressed its concern about the importance of 
this job by making the position of CFO subject to Senate 
confirmation. I think there is a message there, and it goes 
back to the questions raised about the redacted materials, 
which is how important this position is to the public.
    To me that means a commitment, if you take this position 
and are confirmed, to openness and transparency, that we would 
expect you to cooperate closely with the Inspector General and 
GAO and to provide information promptly to Congress when 
requested.
    Are you comfortable saying that you would do so, if 
confirmed?
    Mr. Norquist. Absolutely.
    Senator Lieberman. Let me ask you a question about a 
different part of that enactment of 2004.
    The DHS Financial Accountability Act imposes a requirement 
that the Department conduct audit opinions of the internal 
financial controls starting in fiscal year 2006, the one we are 
in now. These audits will be an important tool in putting DHS 
on the path to financial stability because they will help DHS 
uncover inherent weaknesses that we have referred to in one way 
or another here this morning in its business practices.
    As you may know, the former DHS CFO testified before a 
House Subcommittee that the fiscal year 2006 audit of internal 
controls--and here I quote from the former CFO--``Will be 
taxing on a thin financial management cadre that is still 
coping with the challenging organizational structure of DHS and 
fixing the weaknesses already identified in the financial 
audit.''
    I am of the opinion, though, that despite the difficulties 
that the audit poses, it is really important that the 
Department proceed with this audit of internal controls. I 
wanted to ask you where you come down on that question?
    Mr. Norquist. My first inclination is always to comply with 
the guidance that the Congress has provided. If the Congress 
would like this done in 2006, then we need to work to provide 
it in 2006.
    If there is some overwhelming compelling reason why that is 
not practical, then we owe it to the Congress to get back to 
you and explain to you what the trade-offs are, what the 
challenges are. But my going-in position would be to go with 
the direction you have provided in the Congress.
    Senator Lieberman. I think you have got the right 
priorities. And I urge you, if you are confirmed for this 
position, to focus on that early on in your tenure. If you feel 
you cannot comply with the law, I would ask you to let this 
Committee know as quickly as possible.
    Let me ask this question about your credentials for the 
job. As I mentioned earlier, you have had a series of 
impressive positions throughout your career. In these you have 
handled a broad range of budget appropriations and financial 
matters. I think those experiences will serve you well should 
you be confirmed for the CFO position.
    You have had less experience in accounting and management 
responsibilities, the kind that will face you as CFO if you are 
confirmed. I wonder what steps you will take to better prepare 
yourself for these central tasks of the position of CFO?
    Mr. Norquist. In financial management, people come up 
through different paths. And as you pointed out, I came up as a 
program budget analyst. But during my time in financial 
management I have, for example, when I was Director of Resource 
Management at a field site in England, over seen the finance 
and accounting office. They reported to me.
    When I served as Acting Principal Deputy, the Deputy Chief 
Financial Officer in the accounting office reported to me. So I 
am familiar with the work they do, the important things they 
do. I have worked very closely with them.
    So I would look to draw on the strength of the people in 
the field who are CPAs. But I am also familiar with what we 
should expect them to be able to do in terms of providing 
guidance and proper internal controls for organizations.
    Senator Lieberman. OK, my time is up.
    There is not time today, but I am going to submit for the 
record a number of detailed questions about the KBR material 
redacted and ask you to answer them for the record.
    From what I know now, I would draw two conclusions that I 
hope you have drawn from this experience that you had in this 
matter. The first is that your personal instinct on this was 
the right one, and therefore I hope you follow that kind of 
personal instinct.
    The second is lawyers are not always right. It is not so 
bad sometimes to say thanks, Mr. Attorney, but that does not 
seem right to me.
    Thank you.
    Chairman Collins. Senator Lieberman, I think that Senator 
Lautenberg and I would agree that lawyers are not always right.
    Senator Lieberman. It was a declaration against my own 
interests.
    Senator Lautenberg. I would be inclined to review the 
Chairman's educational background.
    Chairman Collins. Senator Lautenberg.
    Senator Lautenberg. I come from the business side of the 
ledger. I ran a fairly sizable company before I came to the 
Senate. The audit was kind of the Bible in terms of how the 
company did in its past year when it reported its financial 
statements.
    You sounded, very frankly, more obedient to the rule than I 
think you might have to be, to the rules and the structure, 
than you might have to be as the chief financial officer now of 
DHS. Not unlike the Defense Department, this critical agency to 
the manner in which we conduct ourselves, would it have been 
appropriate, could it have been appropriate for you to go to 
the IG and say look, this is not right, to defend your view 
more aggressively?
    I hear what you said, and I know you are apparently very 
careful to stand by the rules. But is there a point in time 
when you say the rule is not correct? I mean, the notion that 
the company could tell you what to redact, what to take out of 
the public notice, I think is outrageous. I ran a public 
company.
    Would the IG have been an appropriate party to go to in 
terms of doubt?
    Mr. Norquist. I do not know that the IG would have issued a 
legal opinion. I would go to the IG if I thought there was 
improper activity by someone, but I had no reason to suspect 
that. I want to be very clear about this, however much I was 
unhappy with the answers I was getting from the Corps of 
Engineers, I had no reason to believe they were doing other 
than their professional jobs as lawyers of the Department or as 
contracting officers.
    So if I had felt that there was an improper activity, I 
would have indeed gone to an IG. But they were doing their job, 
they were making their opinions. I just did not like the 
answer.
    Senator Lautenberg. But in terms of making certain that--
you had a very lofty position in terms of the Department of 
Defense. Would it not have been appropriate for you to say this 
does not seem right? You expressed your reservations about it. 
But at some point, I hope that when you are confirmed for this 
job that you will be aggressive in terms of asking the 
questions that go beyond--the numbers tell you something about 
the policy, it tells you a lot about it.
    I think you are going to have to be fairly forceful if you 
are going to manage a department like that.
    The Chairman raised a question I thought was really 
important, that is do the separate auditors, separate financial 
executives in the different branches report in to a central 
agency? Some place there is going to have to be an audit. An 
audit is the confirmation of what is correct.
    I think it might do you well to look at the structure, as 
well as just being sure that the money is coming in and the 
money is going out, etc.
    I want to ask you one last question. You were in charge of 
looking for grants to help with the reconstruction in Iraq to 
go to a donor body; is that correct?
    Mr. Norquist. Correct.
    Senator Lautenberg. Who made up the donor body?
    Mr. Norquist. We had an outreach effort to raise 
international donations for Iraq reconstruction. The U.S. 
Government team consisted of under secretaries from State, 
Treasury, and Defense. The international community effort was 
led by the IMF, the World Bank, and the UN. And so the 
international donations that were made were made to trust funds 
managed by those international agencies.
    Senator Lautenberg. Am I correct in noting that you were 
searching for $50 billion and the commitments we got were only 
$13 billion? Is that accurate?
    Mr. Norquist. I believe it was the World Bank and the UN, 
if I have that correctly, that went into Iraq and did a needs 
assessment to determine what it would take to reconstruct Iraq. 
I believe their initial assessment was that over many years it 
would take about $50 billion. And that would include funds from 
the Iraqis, what they were going to spend on their own 
reconstruction, international donations, and, of course, the 
U.S. Congress made a very sizable appropriation to support that 
reconstruction effort.
    Senator Lautenberg. We would be defined as a donor?
    Mr. Norquist. We were a donor country under the system.
    Senator Lautenberg. So were we----
    Mr. Norquist. We are by far the largest. The Japanese, I 
believe their pledge was on the order of about $5 billion. They 
were another large donor.
    Senator Lautenberg. But the total raised, the total 
committed was $5 billion, as I understand it?
    Mr. Norquist. The total raised from all the parties against 
the $50 billion dollar multiyear target----
    Senator Lautenberg. It was $13 billion.
    Mr. Norquist. It was $13 billion from the international 
community in addition to about $18 billion or so from the 
United States.
    But again, let me point out, that is significantly larger 
than a normal donor conference. I believe it is actually, 
according to the State Department, I was told it was the single 
largest donor conference result.
    But for many countries it was a one-year pledge, for some 
countries a multi-year.
    So it was not everything that Iraq would need to get 
reconstructed, but it was a very significant first step. I 
would frankly say, given the situation, being able to bring the 
international community together to be part of an effort to 
rebuild Iraq was a very important political step forward for 
the world. And I greatly appreciate all the countries that 
participated in that.
    Senator Lautenberg. Have those bills been paid? Do you 
know? Have those pledges been paid?
    Mr. Norquist. I do not know all of them. I know that they 
have been coming in. When I was there, we were working with the 
Japanese who were delivering things. So I am familiar with some 
of them, but not the overall.
    Senator Lautenberg. Thanks, very much, Madam Chairman.
    Thank you, Mr. Norquist.
    Chairman Collins. Thank you, Mr. Norquist. I want to thank 
you for appearing before the Committee today.
    I want to second my colleagues in saying that I am 
impressed, with three such young children, that you are willing 
to take on a job that is going to involve a tremendous 
commitment on your part. I think that speaks very well as far 
as your commitment to public service. And you obviously have a 
very supportive family for them to allow you to do that.
    Without objection, the record will be kept open until 6 
p.m. on Tuesday, May 9, for the submission of any additional 
written questions or statements for the record.
    I do want to point out that Senator Akaka, who has been 
very active in the area of financial management, does have 
questions that he will be submitting for the record. Mr. 
Norquist, I encourage you to complete your responses to those 
questions as soon as possible. Senator Akaka also has a 
prepared statement he submitted for the record.
    [The prepared statement of Senator Akaka follows:]
                  PREPARED STATEMENT OF SENATOR AKAKA
    Thank you very much Madam Chairman. I, too, welcome Mr. Norquist as 
we consider his nomination to be the Chief Financial Officer (CFO) for 
the Department of Homeland Security (DHS).
    As one of the three sponsors of legislation that brought DHS under 
the Chief Financial Officers Act, thus making the DHS Chief Financial 
Officer a Senate-confirmed position, I understand the tremendous 
challenges facing the CFO at this time. For a relatively new Federal 
agency, which has very high expectations from Congress, a primary 
challenge is integrating all financial management activities in the 
Department.
    Moreover, as the Ranking Member of the Armed Services Readiness 
Subcommittee, I have worked with my colleagues to ensure that the 
Department of Defense develops a financial management architecture to 
integrate its systems and business processes. Unfortunately, we were 
forced to mandate--by statute--timetables for implementation at DOD. 
Hopefully we won't have to take the same action for DHS.
    I look toward Mr. Norquist, if confirmed, to be a steadfast leader 
who will work to overcome the internal stovepipes and barriers to 
integrating Department operations. It is my expectation that he will 
promote efficiency and transparency of the Department's financial 
management efforts.
    As CFO, Mr. Norquist will also be expected to take the necessary 
actions to investigate and eliminate any waste and abuse of taxpayer 
money, even in the face of political pressure. He must be accountable 
to the taxpayers. I trust that should he be confirmed, he will be 
steadfast and persistent in fulfilling the duties of this office.
    Thank you.

    Senator Collins. Thank you for being here today. This 
hearing is now adjourned.
    [Whereupon, at 4:43 p.m., the Committee was adjourned.]

                            A P P E N D I X

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