[Senate Hearing 110-319]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-319

              ELIMINATING AND RECOVERING IMPROPER PAYMENTS

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

                                HEARING

                               before the

                FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
                   INFORMATION, FEDERAL SERVICES, AND
                  INTERNATIONAL SECURITY SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 29, 2007

                               __________

        Available via http://www.access.gpo.gov/congress/senate

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






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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas              NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana          TOM COBURN, Oklahoma
BARACK OBAMA, Illinois               PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri           JOHN WARNER, Virginia
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                  Michael L. Alexander, Staff Director
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk


FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, FEDERAL SERVICES, 
                AND INTERNATIONAL SECURITY SUBCOMMITTEE

                   THOMAS CARPER, Delaware, Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
BARACK OBAMA, Illinois               GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri           PETE V. DOMENICI, New Mexico
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                    John Kilvington, Staff Director
                  Katy French, Minority Staff Director
                       Liz Scranton, Chief Clerk





























                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
    Senator Coburn...............................................     3
    Senator McCaskill............................................     7

                               WITNESSES
                        Thursday, March 29, 2007

Hon. Linda Combs, Comptroller, Office of Federal Financial 
  Management, Office of Management and Budget....................     7
McCoy Williams, Director, Financial Management and Assurance, 
  U.S. Government Accountability Office..........................     8
John W. Cox, Chief Financial Officer, U.S. Department of Housing 
  and Urban Development..........................................    20
David M. Norquist, Chief Financial Officer, U.S. Department of 
  Homeland Security..............................................    23
Timothy B. Hill, Chief Financial Officer, Centers for Medicare 
  and Medicaid Services, U.S. Department of Health and Human 
  Services.......................................................    25
Terry Bowie, Deputy Chief Financial Officer, U.S. National 
  Aeronautics and Space Adminstration............................    27
Lee White, Executive Vice President for U.S. Operations, PRG-
  Schultz International, Inc.....................................    40

                     Alphabetical List of Witnesses

Bowie, Terry:
    Testimony....................................................    27
    Prepared statement...........................................   106
Combs, Hon. Linda:
    Testimony....................................................     7
    Prepared statement...........................................    47
Cox, John W.:
    Testimony....................................................    20
    Prepared statement...........................................    84
Hill, Timothy B.:
    Testimony....................................................    25
    Prepared statement...........................................    92
Norquist, David M.:
    Testimony....................................................    23
    Prepared statement...........................................    88
White, Lee:
    Testimony....................................................    40
    Prepared statement...........................................   109
Williams, McCoy:
    Testimony....................................................     8
    Prepared statement...........................................    51

                                APPENDIX

Questions and responses for the Record from:
    Ms. Combs....................................................   122
    Mr. Williams.................................................   138
    Mr. Cox......................................................   147
    Mr. Norquist.................................................   153
    Mr. Hill.....................................................   158
    Mr. Bowie....................................................   161
Public Law 107-300...............................................   163
























 
              ELIMINATING AND RECOVERING IMPROPER PAYMENTS

                              ----------                              


                        THURSDAY, MARCH 29, 2007

                                   U.S. Senate,    
          Subcommittee on Federal Financial Management,    
                Government Information, Federal Services,  
                                and International Security,
                            of the Committee on Homeland Security  
                                          and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:48 a.m., in 
room 342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Subcommittee, presiding.
    Present: Senators Carper, Coburn, and McCaskill.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. The hearing will come to order. I just want 
to start off by apologizing for Senator Coburn, myself, and our 
colleagues for starting about 45 minutes late. The Senate has 
been voting on the supplemental appropriation to provide 
largely for additional money for our forces in Iraq and 
Afghanistan and we have just finished the bill a few minutes 
ago, so now we are here starting late, but we are grateful to 
each of you for your patience and for those of you who have 
come to testify and to respond to our questions.
    When I first arrived in the Senate about 6 years ago, we 
were debating just what to do with a very large budget surplus. 
Just a few short years later, we find ourselves wrestling with 
record budget deficits and wondering how we were ever going to 
get our heads above water again.
    I think we took an important step toward addressing our 
serious fiscal problems last week with the passage of what I 
thought was a sound budget resolution. Going forward, however, 
we are going to need to do a lot more difficult work to close 
the budget deficit and put ourselves on stronger footing in 
preparation for the difficult fiscal period ahead when the baby 
boomer generation--that is my generation--begins to retire.
    We are going to need to find a way to collect some of the 
hundreds of billions of dollars in taxes that are owed to the 
Treasury that are uncollected each year, and we actually began 
to address that a bit in the budget resolution itself. We are 
going to need to control spending in some areas and in others 
to cut or maybe eliminate it altogether. And I am certain we 
will have a healthy debate about how best to do all of this, 
but I am equally certain that we can get just about everyone to 
rally around an effort to reduce what we call improper 
payments.
    When my staff and I first began our work on this 
Subcommittee more than 2 years ago, working with Senator Coburn 
and his staff, we held meetings with, among others, OMB, GAO, 
and various agencies to learn about some of the financial 
management challenges that the Federal Government faces and 
what was being done about them. We were shocked--outraged, 
even--to learn that at such a difficult time in our Nation 
fiscally, some Federal agencies were making literally tens of 
billions of dollars in avoidable improper payments year in and 
year out.
    In fiscal year 2006, agencies made some $42 billion in 
improper payments, according to OMB's estimates. Most of these 
improper payments were overpayments. Similar amounts of money 
were wasted in fiscal year 2004 and fiscal year 2005, the first 
2 fiscal years that agencies were required to report on the 
improper payments that they make.
    What Senator Coburn and I have learned through our 
oversight work is that, unfortunately, these estimates aren't 
always very meaningful. In fact, to a large extent, they are 
only the tip of what could be a pretty large iceberg. The true 
cost of a number of agencies' inability to implement the kind 
of sound financial management practices that could prevent 
improper payments, is likely billions of dollars higher than 
OMB's estimates.
    The official improper payments estimates that OMB releases 
each year do not include any estimates for Medicaid. They don't 
include estimates for the Medicare Advantage Program, the 
Medicare Prescription Drug Benefit, Temporary Assistance for 
Needy Families, or the school lunch program. They don't include 
estimates for a number of programs in the Department of 
Homeland Security, Department of Justice, NASA, and elsewhere 
that have not even been examined to determine their 
susceptibility to improper payments.
    While we clearly have our work cut out for us, I applaud 
the focus that OMB and the Administration have placed on the 
improper payments problem. Eliminating improper payments is now 
a major initiative under the President's Management Initiative 
and progress is clearly being made as a result of that 
emphasis. More programs are reporting improper payments each 
year, and some programs have seen a sustained reduction in 
their annual improper payments estimates.
    That said, we need to step up our efforts, and by ``we,'' I 
mean this Subcommittee, OMB, and more importantly, those 
agencies out there that still don't appear to take their 
responsibility under the law seriously when it comes to 
eliminating improper payments.
    About 2 weeks from now, taxpayers in Delaware, Oklahoma, 
and across this country will be rushing to post offices to 
submit their tax returns just as the filing deadline arrives. I 
suspect a good portion of them will be none too pleased. They 
would be even less pleased if they knew that the Federal 
agencies entrusted with their hard-earned dollars, including 
some who are represented here today and many who are not, have 
proven incapable of complying, at least to this point, with 
even the most basic elements of the Improper Payments 
Information Act--the main tool that we use to address the 
improper payments problem. Taxpayers also would not be pleased 
to learn that agencies, including some that report significant 
amounts of improper payments each year, may not be doing all 
that they can to recover overpayments that they have made.
    A number of agencies are required under the Recovery 
Auditing Act to review their books each year, identify 
overpayments, and attempt to collect those overpayments. 
According to data compiled by GAO, however, less than a third 
of the overpayments identified by auditors each year are 
actually recovered. On top of that, the only overpayments made 
subject to collections under current law are those made to 
contractors.
    It should be clear, then, there is a lot more work to be 
done. I think we have the leadership now from the 
Administration. Senator Coburn and I have been working hard, 
along with our staffs, to provide constructive oversight. We 
have been joined by Members of our Subcommittee, most 
especially Senator McCaskill, former Auditor of the State of 
Missouri.
    But what we need to do now is to get agencies to be more 
transparent about the mistakes they are making, start cleaning 
up the management and internal controls problems that lead to 
improper payments, and to work aggressively to recover those 
improper payments that can be recovered.
    I think I speak for all of my colleagues, and I don't need 
to speak for Dr. Coburn, but I will try to for a moment, when I 
say that this Subcommittee stands ready to help in the effort 
to eliminate improper payments in any way that we can. I know 
that the Administration has already submitted some suggested 
legislative fixes that we are going to be considering. Senator 
Coburn and I have already been working together to get two 
amendments, including this last week in the Senate-passed 
fiscal year 2008 budget, that would allow us to dedicate the 
revenues generated from reducing improper payments and 
increasing recovery auditing to deficit reduction.
    My thanks again to our witnesses for taking the time to 
participate in our hearing this morning to help us find a way 
to bring agencies into compliance with the Improper Payments 
Information Act and to reduce as much as we can the amount of 
money that we waste each year through improper payments.
    Senator Coburn.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Senator Carper, thank you so much for 
having this hearing. Before we start, I want to commend Linda 
Combs and OMB. They have been highly cooperative. I think from 
her efforts, we have seen a lot of progress on improper 
payments. I have some real disagreements with some of the 
decisions associated with that, but nevertheless, the 
cooperative nature and the way in which we have been able to 
work together is very much appreciated.
    I also want to thank GAO, and particularly Comptroller 
General David Walker and McCoy Williams, for their outstanding, 
fantastic work for the Congress. We would be imminently less 
effective without both these agencies' help. I think it points 
to the fact that the Executive and the Administrative Branch, 
in conjunction with GAO, can have an impact.
    I would just like to make a couple of comments. This is our 
fifth hearing on improper payments and I think we ought to 
assess what we are seeing. I disagree with Senator Carper. If 
you do real accounting, one time in the last 50 years, we have 
had a surplus, other than $3 billion one year in the 1990s, if 
you do real accounting. The rest of the time, we have never had 
a surplus and it is the game. It is just like this year we 
reported a $175 billion deficit. If you use that same 
accounting technique, we have never had a surplus, if you use 
the same combined accounting technique.
    So the national debt now stands at almost $8.9 trillion. We 
added $400 billion to it last year. Medicare and Social 
Security are likely bankrupt for our children and certainly for 
our grandchildren. Congressional restraint has not improved. As 
a matter of fact, you don't even have to worry about improper 
payments. We tried to put some teeth in it with an amendment on 
the 9/11 bill and the Senate won't enforce it. So consequently, 
even though we were going to have this hearing, there is not a 
will in the Senate yet to make sure that there are teeth 
associated with enforcing the law, not a desire, not a rule, 
but a Federal law that says the agencies have to comply.
    We also see that there is a lack of Congressional 
restraint. We have an emergency bill that just passed. Although 
it is controversial, we added $20 billion outside of the budget 
that will go straight to the deficit with a bill that we just 
passed that is getting ready to be conferenced with the House.
    Mr. Chairman, I have a rather lengthy statement and I think 
what I would like to do is submit that for the record, since we 
are late. I would say, and I will get into the area, there are 
rulings by OMB that go directly against what the law states. 
The law states that a risk assessment will be formed every 
year, not every 3 years, but every year. That is what the law 
states. And I don't believe that, although the spirit of 
cooperation is great, I think we have a real problem there. I 
am especially concerned with NASA.
    I also would make one final point, as I ask for this to be 
placed into the record.
    Senator Carper. Without objection.
    Senator Coburn. The three testimonies we received, two late 
yesterday afternoon, one last night--I asked the Chairman that 
those people not be able to actually give their testimony and 
just be here, as we do in several other committees within 
Congress. I think it is highly important--and there is no 
excuse, this hearing has been on the docket for a long time--
for us not to have had that testimony. Whether that is OMB 
holding it up or who, it doesn't matter to me. The fact is, it 
is inappropriate for Congress to get testimony the night before 
a hearing and expect for us to stay up and prepare all night 
because the Administration doesn't want to get its job done in 
a timely fashion.
    So I would suggest if that happens in the future, I would 
kindly ask the Chairman that those who are late with their 
testimony are not allowed to give their testimony and just have 
to respond to questions.
    Senator Carper. Thank you, Dr. Coburn.
    [The prepared statement of Senator Coburn follows:]
                  OPENING STATEMENT OF SENATOR COBURN
INTRODUCTION

    I want to commend OMB and Linda Combs in particular for their 
efforts to tackle the problem of payment errors. Ms. Combs, your 
efforts have been Herculean and I appreciate your work. We may not 
always agree on everything, but I can't thank you enough for how well 
your office has worked with this subcommittee. It has been a model for 
how the legislative and executive branches ought to work together to do 
the very best for the American people.
    I also want to thank GAO, particularly Comptroller General David 
Walker and Mr. Williams, who is with us today. As new Members and their 
staffs come into the Congress, we would be infinitely less effective on 
technical issues such as today's topic without the hand-holding and 
painstaking analysis you all provide us.
CONTEXT

    As we embark on our fifth hearing on improper payments in the past 
two years, let's review the nation's fiscal outlook.

      The national debt stands at $8.8 trillion.
      Medicare and Social Security are likely to bankrupt for 
our children and certainly for our grandchildren.
      Congressional restraint has not improved since the 
elections--``exhibit A'' is that the House recently passed an emergency 
war spending bill, but not before saddling this $100 billion spending 
with $20 billion more of pork and carve-outs for special interests such 
as spinach and peanut storage.

PROGRESS ON PAYMENT ERRORS

    That's the big picture. Let's look at today's part of that 
picture--payment errors.
    The Improper Payments Information Act of 2002 requires the 
following:

      Perform a risk assessment to determine whether or not 
programs and activities are susceptible to making ``significant 
improper payments,'' (defined by OMB as program where at least 2.5% of 
all payments are improper AND the absolute dollar figure associated 
with that 2.5% or more totals at least $10M.)
      Develop a statistically valid estimate of improper 
payments for all programs and activities identified as susceptible to 
significant improper payments in the risk assessment.
      Develop a corrective action plan for all programs where 
the statistical estimate exceeds $10 million in annual improper 
payments, The remediation plan must contain annual targets for reducing 
improper payment levels.
      Report the results of IPIA activities on an annual basis 
to Congress, and in the DHS Performance and Accountability Report.

    So that's what the law requires. Where are we?

      In the third year of IPIA reporting, only 18 of the 36 
agencies have reported even reviewing all programs and activities as 
part of the risk assessment process.
      In other words, only half of all Federal agencies have 
completed their required risk assessment.
      Twelve agencies provided enough details that indicated 
some level of review.
      Another six agencies have yet to report ANY information 
on their risk assessment.
      We have also made little progress in finding a proven, 
reliable methodology to determine accurate risk assessment data.
        Some agencies still use non-statistical sampling, while 
others use single audits to identify risk assessments. Others, 
including witnesses today, are incorrectly claiming that their recovery 
audits are valid proxies for the statutorily required statistically 
valid risk assessment.
        Both methods lack the depth and detail required to 
determine adequate risk assessments.

    So how does this status translate into dollars?
    This year, the government-wide improper payment estimate totaled 
$42 billion, up from $38 billion last year. Yet, given that only HALF 
of the agencies have provided complete risk assessments and that there 
is a lack of consensus on the methodology used to determine improper 
payment estimates, we're still in the dark when it comes to 
understanding the total magnitude of the problem.

RECENT DEVELOPMENTS

    One of the more troubling discoveries this year is the fact that 
OMB revised IPIA implementing guidance in a way that is fundamentally 
at odds with the law and Congressional intent.
    Despite the overwhelming evidence that we're not yet properly 
identifying risk-susceptible programs, the revised guidance lightens 
the burden and allows for agencies to perform risk assessments every 3 
years for those programs not deemed susceptible to significant improper 
payments.
    This is alarming for several reasons. First, the IPIA is still in 
its infancy. GAO reported that for fiscal years 2004 through 2006, 
``some agencies still had not instituted systemic methods of reviewing 
all programs and activities or had not identified all programs 
susceptible to significant improper payments.'' GAO also reported 
further that ``agencies employ different sampling methodologies to 
estimate improper payments and certain agencies risk assessments appear 
questionable.'' These facts suggest that there's not a consensus that 
we've got the risk assessment process well-in-hand enough to go easier 
on agencies in risk assessment.

For instance:

      In 2005, the Department of Agriculture's Marketing 
Assistance Loan Program had an error rate of 0.7%. This year, it 
skyrocketed to 20.3%.
      Another example is the Department of State's 
International Information Program-US Speaker and Specialist Program. In 
2005, the improper payment estimate totaled $1.9 million, with an error 
rate of 81.2%. In 2006, the error rate dropped to 23.8%, HOWEVER, the 
improper payment amount tripled to $6.7 million.

    I don't think we need to spend energy weakening the law and 
figuring out which programs should be exempt from annual risk 
assessments until a consistent, statistically valid method is 
established government-wide to identify payment errors.
RECOVERY AUDITS
    I am encouraged by the potential that recovery audits can bring to 
the problem of payment errors. A provision in the National Defense 
Authorization Act for FY 2002 requires that agencies that enter into 
contracts in total excess of $500 million in a fiscal year must carry 
out a cost-effective program for identifying and recovering amounts 
erroneously paid to contractors. Recovery audits are a win-win. First, 
they recapture lost payments. In Fiscal Year 2006, $256 million was 
recaptured.
    Unfortunately, that's only about a third of the amount that was 
identified as needing to be recovered. But the amount we're talking 
about here isn't even a billion dollars. With payment mistakes totaling 
over $40 billion, we need to do more than just recover a billion, which 
is why the second benefit of recovery audits is so useful.
    These audits help us determine weaknesses in our financial systems 
responsible for the payment errors in the first place. Agencies should 
pay close attention to the recovery audit reports as they provide 
useful insights about where their vulnerabilities exist and what 
effective internal controls can be implemented for prevention.
    I do want to note however, that recovery audits are only required 
on contracts larger than $500 million. They are also generally 
retrospective beyond the most recently ended fiscal year. In other 
words, under no circumstances can they serve as legal ``proxies'' for 
the statutorily required statistically valid risk assessments for the 
sake of estimating likely rates of payment errors for agency estimates 
for previous fiscal years. I am dismayed that some agencies seem to be 
in error on this point.
    Ultimately, transparency and risk assessment data are only the 
beginning of accountability, not the end. We can conduct oversight 
hearings until we all turn blue in the face. Exposing the true scope of 
the problem has been hard enough, and we're still not there with any 
sort of methodological rigor.

LACK OF POLITICAL WILL

    However, even if we were, it grieves me that so far, this Congress 
has not had the political will to address the problems that have been 
exposed. I have offered numerous amendments to bills in the past 2 
years to address payment errors and most of them have failed.
    Things are different here in Washington. If an employee at a 
private firm made a major payment error, he would probably face 
disciplinary action, and might even be fired or forced to pay for the 
lost funds. But if a government official makes a major payment error, 
or oversees a program which routinely makes payment errors, there is a 
strong possibility he would face few consequences, and that's assuming 
that the mistake were even discovered.
    Much of our Federal spending is too incoherent to be audited, much 
less pass an audit. If Members of Congress had to vouch for the 
integrity of our financial statements the way we require private firms 
to do under Sarbanes-Oxley requirements, we'd either have to admit we 
couldn't do it, or else go to jail for deceiving the public.
    Although progress has been made by this President, and he inherited 
the accumulated mess of decades of out-of-control government growth, 
still, the status quo is shameful. I hope that this Congress will be 
the Congress that finally finds the courage to bring the painful, but 
necessary accountability to address this problem.
    I want to thank our witnesses for coming today.

             OPENING STATEMENT OF SENATOR MCCASKILL

    Senator McCaskill. Thank you. I do not have an opening 
statement. I do, however, have to leave and preside at noon. I 
am hoping that--I am anxious to talk to the second panel about 
their failure to provide risk assessments. I know you all have 
worked on this for years and I appreciate both of your work on 
it and I want to just add to your chorus on this that it is 
unacceptable that we do not have risk assessments from these 
departments. If I am not here to hear it, I know that you all 
will do a great job of asking the questions for me as to what 
in the world their excuse could be not to have risk assessments 
in those departments.
    Thank you, Mr. Chairman.
    Senator Carper. I hope you will have that opportunity to 
ask the second panel. Thanks.
    Again, I am not going to introduce at any length Ms. Combs 
and Mr. Williams. We are delighted that you are here. Thank you 
for your good work that you do and for the spirit of 
cooperation that you bring to this effort. Ms. Combs.

  TESTIMONY OF HON. LINDA M. COMBS,\1\ CONTROLLER, OFFICE OF 
  FEDERAL FINANCIAL MANAGEMENT, U.S. OFFICE OF MANAGEMENT AND 
                             BUDGET

    Ms. Combs. Mr. Chairman and Members of the Subcommittee, I 
am very pleased to be here to speak with you today on the 
progress being made in implementing the Improper Payments 
Information Act and the Recovery Auditing Act.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Combs appears in the Appendix on 
page 47.
---------------------------------------------------------------------------
    Today, I am glad we can discuss accomplishments in 
implementing the IPIA, the government progress we have made, 
and how Congress can assist us in achieving our shared 
objective of eliminating improper payments. The Federal 
Government is achieving measurable results in meeting the 
President's goal to eliminate improper payments and fulfilling 
the requirements of IPIA. Since the first reporting under IPIA 
in fiscal year 2004, our efforts to eliminate improper payments 
have been centered on three primary requirements of IPIA: 
Identifying the risk-susceptible programs, eliminating the 
annual amount of improper payments in those risk-susceptible 
programs, identifying the root causes of those improper 
payments, and correcting the errors.
    In fiscal year 2006, agencies strengthened their methods 
for risk assessing their programs and activities for improper 
payments. As a result of these improvements, the amount of 
Federal outlays determined to be susceptible to improper 
payments increased from $1.4 trillion to $1.7 trillion. This 
increase reflects the continued commitment of Federal agencies 
to ensure that all potential sources of error are reported.
    Efforts are continuing to move the Executive Branch to full 
reporting under IPIA by 2008. Eighty-one percent of all risk-
susceptible outlays are being measured for improper payments, 
and when the fiscal year 2008 results are reported, almost 100 
percent of risk-susceptible dollars will report an error 
measurement.
    The amount of improper payments in programs originally 
reported in 2004 were reduced from a baseline of approximately 
$45.1 billion to $36.3 billion this year, a nearly $9 billion 
or 20 percent reduction. These original programs continue to 
represent a significant majority of the 2006 improper payments. 
The overall Federal 2006 improper payment rate was 2.9 percent 
and total improper payments equalled $40.5 billion.
    Let me take this opportunity to express my sincere 
appreciation to the Senate for providing over a billion dollars 
in adjustments to the discretionary caps for program integrity 
and tax compliance efforts in the Senate budget resolution, as 
reported out of the Budget Committee. We would, of course, 
encourage the House to include these cap adjustments in their 
budget resolution, as well, and we welcome your leadership, 
along with ours, in helping to make this happen.
    Additionally, we are most appreciative of the Senate's 
interest in including language to newly authorized bills that 
stress the importance of program integrity. We also invite your 
leadership in assisting in the enactment of the other program-
specific reforms that are included in the President's fiscal 
year 2008 budget. Those are listed in my written testimony, 
which I submit for the record.
    This Administration will continue to hold agencies 
accountable under our tool of the President's Management Agenda 
Eliminating Improper Payments Initiative, and further build 
upon recent results to address remaining challenges. We are 
optimistic that our current efforts, complemented by the 
enactment of the program integrity reforms proposed in OMB's 
annual IPIA report, and full funding of the President's request 
for program integrity efforts will continue to pave a path 
forward in achieving our shared objectives to eliminate 
improper payments.
    And I will add that the success that we have had to date 
and the success that we will have in the future would not have 
been possible without the cooperation of both the Legislative 
Branch, my colleagues at GAO, as well as our colleagues here on 
the Hill, and we look forward to continuing to work with you in 
ways that will, indeed, do the best for every taxpayer and that 
will focus our resources on the very best return for each 
dollar we put into this program. Thank you.
    Senator Carper. Thank you, Ms. Combs. Mr. Williams.

TESTIMONY OF McCOY WILLIAMS,\1\ DIRECTOR, FINANCIAL MANAGEMENT 
      AND ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Williams. Thank you, Mr. Chairman, Members of the 
Subcommittee. I am pleased to be here today to discuss the 
government-wide problem of improper payments and agencies' 
efforts to address key requirements of the Improper Payments 
Information Act and Recovery Auditing Act. Our work over the 
past several years has demonstrated that improper payments are 
a longstanding, wide-spread, and significant problem in the 
Federal Government.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Williams appears in the Appendix 
on page 51.
---------------------------------------------------------------------------
    At the outset, let me commend this Subcommittee for 
continuing to hold oversight hearings on this important issue. 
Also, OMB has played a key leadership role in addressing this 
problem. For example, OMB continues its commitment to identify 
and eliminate all improper payments government-wide by working 
with the agencies to establish corrective action plans to 
address their root causes. OMB also annually reports on 
agencies' efforts to address IPIA and Recovery Auditing Act 
requirements.
    Mr. Chairman, my testimony today will focus on three areas: 
Trends in agencies reporting under IPIA for fiscal years 2004 
through 2006, challenges in reporting improper payment 
information, and agencies' reporting of Recovery Auditing 
efforts to recoup improper payments.
    First, since 2004, agencies have made some progress in 
reporting improper payment information. The total number of 
programs reporting improper payment estimates for fiscal year 
2004 totaled 41, compared to 60 programs for fiscal year 2006. 
The total improper payment dollar estimates was $45 billion for 
fiscal year 2004, $38 billion for fiscal year 2005, and about 
$42 billion for fiscal year 2006. The increase in the estimate 
from 2005 to 2006 was primarily attributable to 15 newly 
reported programs totaling about $2.4 billion, and a $1.6 
increase in USDA's Marketing Assistance Loan Program estimate 
due to improvements in how it measures improper payments. In 
addition, several programs experienced increases in their 
improper payment estimates as a result of lax up-front 
eligibility controls related to benefit delivery to victims 
devastated by Hurricane Katrina.
    Now I would like to highlight some of the major challenges 
that remain in meeting the goals of the Act and ultimately 
improving the integrity of payments. First, some agencies have 
not yet reported for all risk-susceptible programs. For 
example, the fiscal year 2006 total improper payment estimate 
of about $42 billion did not include any amounts for 13 
programs that had fiscal year 2006 outlays totaling about $329 
billion.
    Second, certain methodologies used to estimate improper 
payments did not result in accurate estimates.
    Finally, GAO noted that internal control weaknesses 
continued to plague programs susceptible to significant 
improper payments. For example, in the Department of 
Education's fiscal year 2006 PAR, the OIG reported that 
identifying and correcting improper payments remains a 
challenge for the agency due to ineffective oversight and 
monitoring of policies, programs, and participants.
    With regard to recovery auditing, Mr. Chairman, again, we 
have seen some progress. For fiscal year 2004, 12 agencies 
reported recovering about $53 million, compared to 18 agencies 
that reported recovering about $256 million for fiscal year 
2006. Given the large volume and complexity of Federal payments 
and historically low recovery rates for certain programs, I 
would like to emphasize that it is much more efficient and 
effective to pay bills and provide benefits properly in the 
first place.
    In closing, Mr. Chairman, we recognize that measuring 
improper payments and designing and implementing actions to 
reduce them are not simple tasks and will not be easily 
accomplished given today's budgetary pressures and the American 
public's interest and increasing demand for accountability over 
taxpayer's funds. Oversight hearings such as this one today 
help keep agencies focused on the goals of IPIA and being 
accountable for results.
    I look forward to continuing to work with this Subcommittee 
as well as Federal agencies and the Administration to address 
this problem. This concludes my statement. I will be pleased to 
respond to any questions you or Members of the Subcommittee may 
have. Thank you.
    Senator Carper. Thank you very much. I think we are going 
to take 7 minutes for questions and I will try to keep us close 
to that. I will certainly stay close to that myself.
    Thank you very much for your testimony. Let me start, Ms. 
Combs, with a question for you, if I may. Speaking on behalf of 
OMB and the Administration, what do you feel is especially good 
that you all have been doing over the last 3 or 4 years since 
the law was passed in 2002? What do you feel especially good 
about and where is the heavy lifting that still remains to be 
done?
    Ms. Combs. Thank you, Mr. Chairman. I think the thing I 
feel especially good about is that the trends that Mr. Williams 
just spoke about are continuing to go the right way. We 
obviously still have an awfully lot to do. It is clear when we 
look at the challenges with particularly State administered 
programs, that is where our challenges remain.
    We have some very good things to be proud of. They are 
included in my written testimony as well as GAO's, so I won't 
go over those. But probably it serves us all best to 
concentrate on where the challenges are.
    Senator Carper. If you would, please.
    Ms. Combs. I think that the federally-funded programs that 
are State administered pose the greatest challenge for our 
agencies and departments as well as for the work that we are 
all doing in a more collective way.
    Senator Carper. Can you give me some examples of those? 
Medicaid and what else?
    Ms. Combs. Well, there are several of those and let me just 
say where I think the critical challenges are.
    Senator Carper. OK.
    Ms. Combs. The critical challenges, I think, are to make 
sure that the roles and responsibilities for what is a State 
responsibility versus what is a Federal responsibility is very 
important. I think a lot of States have situations where they 
really need to understand how the money is distributed. They 
have their own requirements. I think what we have done with 
meeting with some of the State agencies and some of these State 
representatives, I personally have met with some of them to try 
to ferret out what we can do individually with States and 
collectively and I appreciate the partnerships that we have had 
with the Association of Government Accountants, for example. We 
have had additional meetings continue as we work with those 
groups of people.
    And I think that one of the things that we have talked with 
you and your staff about that we will continue to do and that 
continues to help all of us is that when statutes are enacted, 
making it very clear to have the authorization in there that 
lets the Federal components do what needs to be done in order 
to work with the agencies and put in program integrity roles 
and responsibilities, making sure those are clearly defined and 
that the program integrity funds are set aside so that we can, 
indeed, assure that we don't have improper payments like we 
have now.
    Senator Carper. Mr. Williams, it is clear to me, at least, 
that when you look at the major high-risk programs that have 
not yet reported improper payment estimates, that some of them 
have a lot in common. They all spend a lot of money. Many of 
them seem to involve grants or some shared administrative 
responsibilities with States, as Ms. Combs has just said. Why 
do you suppose programs like this have had so much trouble 
reporting improper payment estimates? What does OMB do to help 
them along and what can Congress do to help make that job 
easier? Do we need to make it clear to States or to grant 
recipients in some way that they have a responsibility to help 
agencies make sure the program funds are spent properly?
    And as sort of an adjunct to that, one of our later 
witnesses talks about incentivizing States. It is hard, as an 
old governor, to expect States to do a whole lot of extra work 
if they don't get something out of it. If there is a shared 
responsibility to administrate in recovering these funds, I 
think as sort of an adjunct to that, common sense would be that 
they ought to share in some of the gain.
    So if you could sort of reflect on those series of 
questions, I would be grateful. Thank you.
    Mr. Williams. Mr. Chairman, we issued a report last year, I 
believe it was in the spring--I don't remember the exact 
month--but it looked at those particular programs and we 
basically reported that there is about $400 billion in grants 
that the Federal Government issues each year. I think our 
bottom line message was that this is going to take a 
coordinated effort between the Federal Government and the 
States to address this improper payment issue. Everyone has a 
responsibility to make sure that the funds make it to the 
intended recipient.
    So I think that needs to be taken into consideration, and I 
think that one of the other components of your question related 
to why this is such a difficult area to get a handle on. I 
think OMB has basically stated in its reports, and we would 
agree, that if you look at the Medicaid program, for example, 
within the Federal Government framework, each State has its own 
rules and regulations as to how it operates, so you have to 
work with these individual States and see if you can come up 
with the method where you can actually identify a methodology 
that you can come up with a number that is reasonable and that 
will give you that baseline that you need to begin identifying 
and reporting so that the ultimate job of reducing the improper 
payments can get underway in these particular grant programs.
    Senator Carper. Ms. Combs, you stated that certain 
methodologies used to estimate improper payments that did not 
result in accurate estimates. Could you just take a moment and 
explain to us what that means and what needs to be done to help 
ensure that amounts reported by agencies are, indeed, accurate?
    Ms. Combs. The rationale is that any of our guidance 
documents, we try to ensure that the cost of requirements that 
we impose on agencies are justified by the benefits that are 
realized. I think that one of the things that we have an 
opportunity to do here is, as we mentioned earlier, to do what 
is best for the taxpayer and to focus our resources on what is 
the best return possible.
    Senator Carper. We may come back to that one after we go 
one time through. Dr. Coburn.
    Senator Coburn. Thank you, Mr. Chairman.
    Do you want to reflect back now and answer the Chairman?
    Ms. Combs. OK.
    Senator Coburn. I will give you some of my time.
    Ms. Combs. I was going to mention the 13 programs. They 
have been mentioned here earlier. And all I wanted to say was 
that we have all 13 of those programs scheduled to report an 
error measurement and they all have a timeline for reporting. 
You have mentioned TANF. That has a component rate coming in 
this year. One of the components is going to report in 2007, 
and then the full rate will be in 2008. And CCDF will report a 
component rate in 2008. Medicare Advantage, Medicare 
Prescription Drug Benefit are all going to report component 
rates in 2008. I just wanted to get that on the record.
    Senator Coburn. Thank you. Mr. Chairman, I have several 
questions I would like for us to be able to submit in writing 
to the witnesses, if we can----
    Senator Carper. Without objection.
    Senator Coburn [continuing]. And have a prompt response.
    I also want to enter into the record, Public Law 107-300, 
and here is what it says in Section 2.\1\ The head of each 
agency shall, in accordance and with guidance prescribed by the 
Director of OMB, annually review all programs and activities 
that it administers and identify all such programs and 
activities that may be susceptible to significant improper 
payments. Estimation: With respect to each program and activity 
identified, the head of the agency shall estimate the annual 
amount and submit those estimates to the Congress. It couldn't 
be more clear.
---------------------------------------------------------------------------
    \1\ Public Law 107-300 appears in the Appendix on page 163.
---------------------------------------------------------------------------
    Ms. Combs. A proven track record of low rate of improper 
payments.
    Senator Coburn. Like what?
    Ms. Combs. National Science Foundation, education and 
research programs. They reported in 2004 and 2005 and they have 
a 0.02 error rate.
    Senator Coburn. OK.
    Ms. Combs. VA insurance programs reported in 2004 and 2005 
a 0.02 percent error rate. EPA Clean Drinking Water and State 
Revolving Fund Programs reported in 2004 through 2006, 0.18 
percent.
    Senator Coburn. OK. I just wanted one.
    Ms. Combs. OK.
    Senator Coburn. That's fine.
    Ms. Combs. I realize that there has been some contention 
over this and we are certainly--we have an open book, as you 
know.
    Senator Coburn. I know you do.
    Ms. Combs. We have offered many times that if there are 
specific programs that we need to scrutinize more closely, we 
will do so.
    Senator Coburn. Here is the point I am going to. IPIA has 
only been reporting 3 years, so how do you have a proven track 
record if we have only been doing this for 3 years.
    Senator Carper and I were successful, along with several 
other Senators, in passing the Transparency and Accountability 
Act. In 2009, all this stuff is going to be on computer. All 
this stuff is going to be on a website. There isn't going to be 
a reason why something can't be reported or followed.
    Is all these contracts and all these State-run programs 
that we supposedly have problems with, like TANF, Medicaid, 
CDBG, Child Care Block Grant, Food Stamps, and everything else, 
has to come online at the same time? Otherwise, we are going to 
be out of compliance with that law like we are this one. So 
what assurance can you give me that we are on track on the 
others and staying on track as far as the payment error 
problem?
    Ms. Combs. Well, I just want to say, Dr. Coburn, I 
certainly commend the Senate and your efforts, and the 
Chairman's efforts, in making these things possible because it 
is through our collective efforts that all of us have been able 
to work together to give the kinds of pushes that we have 
needed to make these things happen.
    I think all of these new technologies that are coming into 
play will do nothing but accelerate our efforts. All I am 
appealing to you today to let happen is let us get the very 
best dollars we possibly can for the American taxpayer by using 
the resources we have to make sure that there aren't any huge 
holes in there like we saw in 2004. I am convinced of that and 
I do believe that the statistics that we have and that we have 
worked through play out to that effect, not that we are where 
we need to be. We can all do more.
    Senator Coburn. Right. I understand. We are shooting at a 
moving target, but we are getting better, and----
    Ms. Combs. Yes, we are.
    Senator Coburn [continuing]. I have no complaints with OMB 
other than on some of the decisions they have made with what is 
in compliance and what is not.
    Explain to me, Mr. Williams, if you will, how you all can 
find NASA out of compliance and OMB can find them in 
compliance. How does that happen? I mean, we have 2004 from you 
all saying they are not in compliance and OMB is saying on the 
basis of the look-back 10 years ago on a recovery audit that 
they are in compliance. How does that fit with the law?
    Mr. Williams. Let me just speak for GAO. We took the basic 
requirements of the law, which basically states that you are 
supposed to do your risk assessment and then develop your 
statistically valid estimates, come up with some corrective 
action plans, and report. We are basically saying that they are 
not in compliance because the review that was done by the 
auditors, it questioned the risk assessment. So in our opinion, 
if you did not do all four of those requirements, then you are 
not in compliance. So that is how we came up with the non-
compliance.
    Senator Coburn. So the auditors had a question about the 
risk assessment that was made----
    Mr. Williams. Yes. On a lot of these agencies that we are 
talking about, we basically refer to the work that the auditors 
performed in the area of IPIA while they were performing their 
financial statement audit. As you know, the law itself 
basically does not require the IG or an IPA to do an 
independent review to see as far as the quality is concerned. 
As you probably noticed in my testimony, we kind of referred to 
that, that might be a good idea to have that independent set of 
eyes, because we view the risk assessment as the basic 
foundation for making sure that you are actually carrying out 
the steps----
    Senator Coburn. So if you have a questionable risk 
assessment, then, what that means is you can't comment on 
whether or not you are in compliance or not.
    Mr. Williams. I guess an analogy is kind of like if you 
miss out on the introduction to accounting, you are probably 
lost the rest of the way through accounting.
    Senator Coburn. I have got you. Thank you. My time is 
expired.
    Senator Carper. Thank you, Dr. Coburn. Senator McCaskill.
    Senator McCaskill. Thank you. The estimates that we are 
using for improper payments, I am uncomfortable with those 
estimates. I know that there is appropriate back-padding going 
on as it relates to progress, but if we are using estimates 
that we know are too low, I don't know that we are really doing 
anyone a service on this. I want to make sure I understand 
correctly, Mr. Williams, I think that your testimony is what 
touches on this because GAO is the one who has done this work--
that there are 13 risk-susceptible programs that have outlays 
of $329 billion in fiscal year 2006 that are not even included 
in these estimates. Is that correct?
    Mr. Williams. That is correct. That number is approximately 
$329 billion, and what we are basically saying is that--and I 
guess our overall message is that, yes, progress has been made, 
but we are not at the point where we have our hands around the 
entire picture and these 13 programs are the ones that we are 
talking about that over the next couple of years, it appears 
that they will have these risk assessments in place. But until 
then, we are not for sure what the total number is.
    We are using some baseline data based on those agencies 
that reported in those years, but at no point in time up to now 
do we have a number that represents the entire Federal 
Government.
    Senator McCaskill. And how confident are you of the 
baseline data? Are you confident of the baseline data? It makes 
me nervous.
    Mr. Williams. The baseline data is a first step. We have 
identified problems over the last 2 years with some of the risk 
assessments, some of the sampling, and we have reported on 
situations in which agencies have basically said one thing and 
the independent auditors have gone in and contradicted that 
statement.
    So I think that while there has been progress, there is 
still a lot of room for improvement. There are a lot of things 
to be done before I am comfortable with saying that I think we 
know what we are dealing with. I think we still have work to do 
in identifying what is our universe of improper payments?
    Senator McCaskill. Ms. Combs, the significant designation 
guidance from OMB, the significant improper payment, that you 
all have indicated that to be significant, it has to exceed $10 
million and 2.5 percent of outlays. The ``and'' in that 
phrase--I am curious why we need the ``and,'' because we are 
talking about potentially hundreds of millions of dollars that 
could not be significant if you are dealing with some of these 
programs, and frankly, some of the programs that right now are 
not even part--I mean, we are talking about $329 billion that 
we haven't even gotten any kind of indication yet.
    Ms. Combs. Well, if we start from the universe of the $2.7 
trillion of outlays and we know now that we have a high-risk 
outlay of $1.7 trillion of that $2.7 trillion, and we look at 
where are the best places to put our resources in taking care 
of that $1.7 trillion in high-risk that is currently being 
tracked today, we decided that the basis for the $2.5 trillion 
was to make sure that Federal agencies indeed focused on the 
resources for the programs that would provide the most return 
on investment for the taxpayer. If you look at the first seven 
programs we came out with in 2004, those seven programs are 
still the most significant programs in our 2006 reporting where 
we have the most improper payments.
    So in order to help you with your confidence level a little 
bit, hopefully, if you look at those and realize that is 95 
percent of that $1.7 trillion, then most of that is 
encapsulated in that. So that is some confidence. Granted, 
there is still a lot out there, as Mr. Williams just talked 
about. There are still some things that we don't know. But we 
do have risk assessments. We have 81 percent of these high-risk 
programs have measurements today, and by 2008, 100 percent of 
them will have.
    So those are the kinds of things that we know we are making 
progress on. We are not there yet and we welcome the 
opportunity to work with you and the Subcommittee to work on 
specific programs. If you know of some that are out there, we 
have an open invitation that we will be glad to monitor and 
follow those----
    Senator McCaskill. That is a dangerous invitation to extend 
to me. Very dangerous. [Laughter.]
    Calling something that might be more than $10 million 
insignificant just kind of sticks in my craw and I think that 
is problematic.
    Let me ask both of you about the recovery audits, my 
experience has been that there are all kinds of companies out 
there that are willing to do this and absorb the costs in 
return for a cut of the money. I assume that is the case in the 
Federal Government, that these contractors that are being used 
on these recovery audits are being paid a percentage of what 
they recover?
    Ms. Combs. Yes, that is correct.
    Senator McCaskill. Well, then why is it not cost effective 
for everybody to do it?
    Ms. Combs. Cost effective for every agency to do it?
    Senator McCaskill. And every program. I mean, if the 
recovery audits are all being done on contingency, in other 
words, if we don't have to put any money out of our pocket and 
we hire people and they are the ones that are taking the risk 
and they are the ones that have to have the overhead, and if 
they recover money, we get what they recover and they take a 
piece of it, then why in the world are we waiting until 2010 in 
CMS and other places to make it system-wide? Why do we want to 
do pilot programs? Why don't we say, come one, come all. If you 
are in the private sector and you think you can recover money 
for us, sign up, and if you do, we will give you part of it and 
the taxpayers are the winner there.
    Ms. Combs. Well, I think that those are some things that we 
could sit down and talk about. There are, as I mentioned 
earlier, some very complicated issues when it comes to trying 
to address a one-size-fits-all. It does not one-size-fit-all, 
so we welcome your suggestions and look forward to meeting with 
your staff and talking about that.
    Senator McCaskill. If I could tell one story--when there 
was a flood in Kansas City and I was a prosecutor, I saw people 
lined up to get Food Stamps in an area of town where water had 
not come near. I sent my investigator down to interview people 
in the line--the line stretched around the block--and started 
asking people in line if they had flood damage. People readily 
admitted, no, they just told you to come and sign up and you 
got Food Stamps.
    So I held a press conference the next day and said, if you 
got Food Stamps and you didn't deserve them, if you turn them 
in in the next 2 days, we won't prosecute you. It was kind of a 
recovery program. And we had hundreds of thousands of dollars 
of Food Stamps that were turned in voluntarily. Now, someone 
from the Federal Government called me and asked me what the 
heck I thought I was doing. They wanted to make it complicated. 
They wanted to know where I asked the people to turn them in 
and what kind of authority I had to ask them. Well, I just 
asked people if they got them and they didn't deserve them and 
they thought they had done it illegally, they should turn them 
in. I just worry sometimes that we make this more complicated 
than it needs to be, and that gets in the way of just going 
after it. Thank you, Mr. Chairman.
    Senator Carper. Thank you very much. I think maybe we will 
take a couple of minutes apiece for follow-up and then we will 
turn to our second panel.
    A number of high-risk programs have had trouble reporting 
estimates on the Improper Payments Act. Thus far, they have 
goals in place to begin reporting, I believe in 2007 and 2008. 
There are, I think, at least four major programs--we have 
talked about them already--the Child Care Development Fund, 
Medicare Advantage, Medicare Prescription Drug Program, and the 
Temporary Assistance for Needy Families Program--that are not 
reporting and, as I understand it, don't yet have a timeline in 
place for coming into compliance with the Act.
    This is probably more for Ms. Combs than not--what 
progress, if any, has been made in bringing those four specific 
programs into compliance and when you think that we can expect 
estimated improper payments from them?
    Ms. Combs. TANF will report a component rate by 2007 and a 
full rate by 2008. CCDF will report a component rate in fiscal 
year 2008. Medicare Advantage----
    Senator Carper. Say that again.
    Ms. Combs. Fiscal year 2008.
    Senator Carper. For what?
    Ms. Combs. CCDF, Child Care----
    Senator Carper. Yes, but what will they do by 2008?
    Ms. Combs. Child care.
    Senator Carper. What will they do--what will be 
accomplished by 2008?
    Ms. Combs. They will report a component rate. One of their 
divisions will report, so they will be reporting what we would 
call a partial rate.
    Senator Carper. Alright.
    Ms. Combs. Medicare Advantage and Medicare Prescription 
Drug Benefits will both report component measurements in fiscal 
year 2008.
    Senator Carper. Mr. Williams, should we take some comfort 
from that, what Ms. Combs has just responded?
    Mr. Williams. Well, anytime that you have an agency or 
component within an agency that is not reporting and there is a 
timeline, that is better than some that we have seen in the 
past in which there was no information at all, that we were not 
for sure when anything was going to be reported. So yes, there 
is some progress there, but as I have stated earlier, the 
sooner that you are able to get your hands around the entire 
universe, the better I think we will all be in looking at this 
particular issue of getting that good base of improper payments 
government-wide.
    Senator Carper. Alright, thanks. And the only other 
question I have, I want to go back to how do we incentivize 
States. When we have these partnership programs, how do we 
incentivize the States to work with us so they can come out 
ahead, the Federal Treasury comes out ahead, the taxpayers come 
out ahead, both in the States and at the Federal level?
    Ms. Combs. I think you are going to hear from the next 
panel one of the very good success stories of how we 
incentivize States to do that. Rather than stealing their 
thunder, maybe you should hear directly from them. But there 
are some very good ways. When we work collectively with States 
and hear their concerns, know what it takes for incentives for 
them to work through these situations, which are very 
complicated, in their own individual States with their State-
administered programs, we really can have some good, positive 
lessons learned, and I think you will hear that in the next 
panel coming up from particularly one or two of these.
    Senator Carper. Mr. Williams, I want to ask you the same 
question. How do we incentive States, more broadly? I 
appreciate the fact that we are going to hear from at least one 
witness in the next panel, but how do we do it more broadly, 
because there are a number of programs where there is this 
shared partnership, as you know.
    Mr. Williams. Yes.
    Senator Carper. It is those programs where we have some of 
the biggest problems in recovering improper payments.
    Mr. Williams. Yes. I think we have to look at that 
particular process, and one of the things that I have seen in 
the past is that if you take these programs and if money is 
recovered, for example, and you are able to keep that rather 
than it going back to another fund or going to another 
operation, then if there is some incentive there that if I get 
this money back, I can use it to carry out this program 
further, and I think that type of an incentive is something 
that you really want to have in place. But if you have a 
program in which there is an improper payment, for example, and 
if the money is collected it goes back into a fund that cannot 
be used for the purpose of carrying out that particular 
program, then there is no incentive there. So you need that 
type of incentive.
    Just from an overall accountability standpoint, one thing 
that, if I could add to all of this, as far as not just the 
incentives are concerned, but as I stated in the testimony, the 
recovery component of it is your second choice. You really want 
to have systems, policies, and procedures in place----
    Senator Carper. You make that point in your testimony----
    Mr. Williams [continuing]. To prevent this from happening 
in the first place.
    Senator Carper. Good point. And I am going to come back and 
ask each of you to reply to that same question again in writing 
because I want you to think it through. How do we take these 
specific results that we are going to hear in the next panel 
and how do we broaden that application throughout this shared 
partnership. Thank you.
    Senator Coburn. Well, first of all, I want to say how 
pleased I am Senator McCaskill is on this panel.
    Senator Carper. Me, too.
    Senator Coburn. It is refreshing and greatly needed to have 
the help and thank you for being here.
    The thing you will notice is that you did not get an answer 
to your question, and that is not a criticism of Ms. Combs. She 
doesn't have the ability to agree with you because of the 
constraints that she operates under. But that is the question 
that ought to be answered for the American public.
    The Recovery Act limits it to $500 million or more, so the 
first question is how do we change that Act to where we move 
that down the scale, which is one of the things that needs to 
be done. But I agree with you, it needs to happen.
    I am going to ask almost a rhetorical question, because I 
think I know the answer, but I would like for both of you to 
respond. Other than two small programs in the Defense 
Department, right now, the Defense Department as a whole really 
isn't reporting under the Improper Payments Act, is that 
correct?
    Mr. Williams. I will take it. Dr. Coburn, as you know, in 
last year's legislation, there was a mandate for GAO to take a 
look at DOD's compliance in the area of travel because of the 
various reports that we had been issuing about the travel 
issue. That work is currently underway and we are looking at it 
very closely from the standpoint of, again, using those basic 
four criteria that we have talked about here. And we will take 
those criteria and we will go through and we will look at each 
one to see what is DOD doing in that particular area. But in 
addition to that, we are also looking at the Recovery Auditing 
Act. We got a request from the Subcommittee or the full 
Committee--I am not sure right now which one--to take a look at 
the Recovery Auditing Act with DOD and look at other IPIA 
reporting.
    At first glance, you look at an agency that large and I 
think it would raise the point that was brought up earlier when 
you talk about whether this is in compliance or not. You have 
to take into consideration that there are probably some very 
large numbers, but when you throw in the 2.5 percent criteria, 
that might put some of those programs under the radar. So it is 
difficult for us to say at this particular point in time.
    Senator Coburn. So there is no question, I think Senator 
Carper and I have come to some agreement that we need to modify 
the IPIA Act to a little degree to address one of the areas 
that Senator McCaskill raised, and this is this 2.5 percent and 
$10 million. Congress didn't set that. OMB set that, and there 
are some practical reasons for why they set it, but I am not 
convinced that is the threshold that we need to have and I 
think we need to address that.
    Senator Carper. Thanks very much. Senator McCaskill.
    Senator McCaskill. I will yield to the Chairman and let 
these folks go and maybe get a chance to hear from the second 
panel before I have to leave, Senator Carper. Thank you.
    Senator Carper. OK, fair enough. Alright. Ms. Combs, Mr. 
Williams, thank you for joining us today. Thank you for your 
testimony. Thank you for responding, and we will be providing 
some additional questions and would appreciate your prompt 
response.
    Mr. Williams. Thank you.
    Senator Carper. Clearly, some progress is being made here. 
There is a good deal of work for us all to do, as you know. I 
always like to say, if it isn't perfect, make it better, and 
this is not a perfect situation and we need to work hard to 
make it better and obviously we need to work together to make 
it better. But our job is to try to provide some oversight to 
hold someone's feet to the fire and we will be endeavoring to 
do that. When people are doing a good job, agencies are doing a 
good job, we put a spotlight on them and applaud them. Those 
that aren't, we will put a spotlight on them, as well, and let 
the lack of action or inaction speak for itself. Thank you both 
very much.
    Mr. Williams. Thank you.
    Ms. Combs. Thank you.
    Senator Carper. Mr. Williams, I am just going to ask you if 
you would take a seat in the front row, if you could.
    Mr. Williams. OK. That is fine.
    Senator Carper. Just don't go away too far. We may want to 
call you back to the table to respond to some further 
questions. Thank you.
    Mr. Williams, Lee White, who is Executive Vice President of 
U.S. Operations for PRG-Schultz, is going to testify on a third 
panel, so he is not going to be needing this seat right now, so 
we have an extra spot there and just feel free to take that 
one. We appreciate your flexibility here.
    We want to welcome each of our witnesses for our second 
panel today. I am not going to provide lengthy introductions, 
but I will say that John W. Cox, who is the Chief Financial 
Officer of the Department of Housing and Urban Development, we 
are grateful that you are here. We appreciate your presence and 
your work.
    David Norquist is the Chief Financial Officer of the 
Department of Homeland Security. Mr. Norquist, one of the 
things we are going to be asking you is why we didn't get your 
testimony on time. I am sorry that Dr. Coburn is not here to 
hear that response, but I am sure his staff will convey the 
message. But when you speak, one of the first things I want you 
to do is to explain that.
    We want to welcome Timothy Hill, who is the Chief Financial 
Officer of CMS. Thank you for coming.
    And Terry Bowie, Deputy Chief Financial Officer at NASA. 
Mr. Bowie, thank you for coming, as well.
    I am just going to ask Mr. Cox, if you will, just to lead 
it off. You have about 5 minutes. Your entire statement will be 
made part of the record. We welcome your presence and your 
testimony. Thank you.

  TESTIMONY OF JOHN W. COX,\1\ CHIEF FINANCIAL OFFICER, U.S. 
          DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Mr. Cox. Thank you very much, Mr. Chairman and Senator 
Coburn, and distinguished Members of the Committee, my name is 
John Cox, the Chief Financial Officer for Housing and Urban 
Development. I want to thank you for inviting me here to appear 
before this Subcommittee today to speak about the results of 
HUD's efforts to reduce improper payments.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Cox appears in the Appendix on 
page 84.
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    The Department has aggressively complied with the Improper 
Payments Information Act of 2002 and was the first agency to 
achieve green status on the President's Management Agenda 
Initiative for Eliminating Improper Payments. I would like to 
go over a few of the Department's accomplishments since my 
office last testified before this Subcommittee on this very 
topic in September 2005.
    We are in the process of updating our Fourth Annual 
Improper Payment Risk Assessment. Our most recently completed 
risk assessment covered $58.8 billion in payments made by the 
Department in fiscal year 2005, and no new high-risk programs 
activities were identified. Over the past 3 years, the results 
of HUD's annual risk assessments called for the measurement of 
improper payment levels in 11 major program areas with the risk 
potential to exceed the $10 million high-risk program 
threshold. Those 11 programs constitute about 65 percent of the 
Department's annual budget and payment activity. Five of the 11 
programs measured exceeded the $10 million threshold to require 
corrective action planning, annual reporting, measurement, and 
follow-up efforts to reduce improper payment levels.
    We completed and verified corrective actions to reduce 
improper payments to an acceptable level in two of the five 
programs originally determined to be at risk of significant 
improper payment levels, payments under the Single Family 
Acquired Asset Management System and the Public Housing Capital 
Fund.
    We exceeded our internal goals for reducing improper 
payment levels for HUD's three remaining at-risk program areas, 
the Public Housing Tenant-Based Assistance and Project-Based 
Assistance Program, collectively referred to as HUD's Rental 
Housing Assistance Programs. This reduction, and more 
importantly the underlying internal control components, was one 
of the key reasons HUD's Rental Housing Assistance Program area 
was removed from the GAO high-risk list in January 2007.
    The reductions in housing subsidy determination errors 
resulted from HUD efforts to work with its public housing 
industry partners and multi-family housing projects through 
enhanced program guidance, training, oversight, and 
enforcement. The reduction of erroneous payments due to tenant 
under-reporting of income resulted from improved income 
verification efforts by housing program administrators, 
increased voluntary compliance by tenants due to promotion of 
the issue, HUD's initiation of improved computer-matching 
processes for up-front verification of tenant income, and an 
improved methodology for reviewing income discrepancies 
identified through computer matching to better determine actual 
cases of under-reported income which impact subsidy levels.
    In fiscal year 2006, HUD implemented its new Enterprise 
Income Verification System for use by public housing agency 
program administrators in conducting improved verifications of 
tenant income during the annual recertification process. I want 
to thank our agency partners at the Department of Health and 
Human Services and the Social Security Administration for their 
assistance in this project. This new web-based secure 
verification system will be expanded to the multi-family 
housing project-based assistance programs during the current 
fiscal year. This computer matching capability has the 
potential to eliminate the majority of the remaining estimated 
improper rental housing assistance payments. This system is not 
only fast and more efficient, but just as importantly, it 
affords more privacy to tenants by eliminating the previous 
paper income verification letter that was formerly mailed to 
the assisted tenant's employer.
    HUD's long-range strategic goal is to reduce improper 
rental assistance payments to less than 2.5 percent of total 
payments by the end of fiscal year 2008. That would be quite an 
accomplishment given the high degree of complexity of the 
housing subsidy determinations and the decentralized nature of 
the program administration.
    In conclusion, Mr. Chairman, I want to thank Secretary 
Jackson, Deputy Secretary Bernardi for their leadership, the 
employees of HUD, our industry and agency partners for working 
together to tackle the tough issue of improper rental housing 
assistance payments. These efforts not only reduced improper 
payments, which allows more funds to be able to serve HUD's 
mission, but we also proved that by working together, we could 
correct these longstanding issues.
    I am now pleased to answer any questions you may have.
    Senator Carper. Mr. Cox, thanks very much.
    Senator McCaskill, I know you have to go preside at noon. 
Did you want to ask a question of this panel before you leave? 
That is a little bit out of order, but I want to afford you 
that opportunity if you would like.
    Senator McCaskill. Well, I would appreciate, Mr. Chairman--
thank you for this opportunity. Just quickly, I want to make 
sure that anybody who doesn't have a risk assessment, I would 
like to know specifically for the record, and you don't need to 
answer it now, but anyone who has not done a complete risk 
assessment, and I know there are several departments 
represented here who haven't, I would like to know why, and if 
the law requires it, why it hasn't been done.
    And second, specifically for CMS, why wait? If the three 
pilot programs have been successful, why wait until 2010? Why 
not just put them all open for contract now and say, go to it?
    Mr. Hill. That is what the RFI requires. The 2010 date is 
in statute, so we are sort of benchmarking ourselves against 
the statute----
    Senator McCaskill. You are not supposed to do it until 2010 
in the statute?
    Mr. Hill. The statute requires it by 2010, and so that----
    Senator McCaskill. But is there any rule that says you 
can't do it earlier?
    Mr. Hill. Nope, and we would like to get it done earlier if 
we can.
    Senator McCaskill. Well, wouldn't that just mean like 
opening it up for contracts and saying, we want you to propose 
coming in and doing a contingency recovery audit, like now?
    Mr. Hill. The RFI for that contract is on the street as we 
speak.
    Senator McCaskill. For system-wide?
    Mr. Hill. Yes.
    Senator McCaskill. And when does it have to be responded 
to?
    Mr. Hill. I can get back to you for the record on that. I 
don't have all the details with me----
    [The information provided for the Record follows:]

                  INFORMATION PROVIDED FOR THE RECORD
    CMS released a Request for Information (RFI) on March 16, 2007. The 
RFI included a draft Statement of Work (SOW) and capability statements 
for small businesses. Responses to the RFI are due to CMS on April 9, 
2007.

    Senator McCaskill. The idea that we know that these are 
going to be successful and we know they are going to recover 
hundreds of millions of dollars, it seems to me that the minute 
you have a pilot program--frankly, I don't even know why the 
pilot was done. Once you know you can do it and it is legal to 
do it, I don't understand why every department isn't signing up 
immediately for these recovery audits, because there is 
absolutely no cost, right?
    Mr. Hill. You will get no argument from me. We are very 
happy with the recovery audit process. The history here was 
some of the arcania in the Medicare statute not allowing us to 
do it before we had the demo, but we are very excited about it 
and we are ready to move forward.
    Senator McCaskill. Is there any other department that is 
represented here that does not see the light in terms of 
recovery audits and how important they are and that they don't 
cost us anything to do, but they have the potential of 
recovering lots of money? Is there any other department that is 
represented here that wants to express some kind of reluctance 
or reticence to engage in those kinds of contracts?
    Mr. Norquist. We use those types of contracts and they are 
effective and they don't cost the taxpayer, and to be clear, we 
use them even on low-risk programs. The answer is you use high-
risk assessments, but even on programs that are low-risk, those 
organizations bring in teams to go through and look for cases 
even within a low-risk program where there is an opportunity to 
recover funds.
    Senator McCaskill. And, Mr. Cox, do you do it at HUD?
    Mr. Cox. We do not, Senator. I am very familiar with that 
from the private sector. Our experience at HUD, we actually had 
an outside party look at the potential for that and the 
potential, if I recall from a couple years ago, was very low. 
It was a couple hundred thousand dollars. And the reason for 
HUD is most of our contracts are firm fixed-price contracts. We 
have a a government transaction specialist (GTS), on each one. 
So we actually did a study to look at the potential, and at 
least in our case, an outside party conducted that and found 
that there was very little evidence. In fact, of the $200,000, 
on further review, the actual number was reduced to zero.
    So the potential, and again, I am very familiar with it 
from the private sector, the potential at HUD, given the nature 
of our contracts and our funding, was very small. We will 
certainly look at it again, but it was very small at that time.
    Senator McCaskill. Well, to me, it would be something that 
you wouldn't even need to study. I mean, if somebody is willing 
to do this work at no cost to the government and we get the 
money back, I don't know what there is to study. Now, maybe if 
you put it out for proposal and nobody makes a proposal, it 
seems to me the market has told you----
    Mr. Cox. Right. That is right.
    Senator McCaskill [continuing]. That there is no chance for 
recovery.
    Mr. Cox. Right.
    Senator McCaskill. It doesn't seem to me we need to hire 
anybody or have an outside consultant because the market is 
going to look at what the program is. All of the privatization 
that has gone on in our Federal Government under the guise of 
more efficiencies, and it just is amazing to me that there is 
any kind of reluctance anywhere just to let the private sector 
have a whack at this.
    Thank you, Mr. Chairman, for giving me that opportunity.
    Senator Carper. You bet, and thanks for being with us 
today. Good luck in the Chair.
    Senator McCaskill. Thank you.
    Senator Carper. They will be pretty quiet over there.
    Senator McCaskill. They will be very quiet.
    Senator Carper. Alright. Mr. Norquist, we have a policy 
here, as I think the other witnesses know, that testimony 
should be submitted 48 hours before our hearings begin. Not 
everyone complied with that. A number of our witnesses did. The 
most egregious offender was the Department of Homeland 
Security, and I would just ask why?

  TESTIMONY OF DAVID M. NORQUIST,\1\ CHIEF FINANCIAL OFFICER, 
              U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. Norquist. Sir, there is no acceptable answer. We know 
the timeline you gave us. We know that OMB needs to review it. 
It is our responsibility to get it to them enough in advance 
and we didn't do that. That is my responsibility because the 
folks working on it worked for me and I apologize to you for 
that. We will not do that again.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Norquist appears in the Appendix 
on page 88.
---------------------------------------------------------------------------
    Senator Carper. Thank you. You are recognized. Proceed with 
your testimony.
    Mr. Norquist. Thank you, sir. Thank you, Chairman Carper, 
Ranking Member Coburn, and Members of the Subcommittee for this 
opportunity to testify before you regarding the Department of 
Homeland Security's efforts to reduce improper payments. 
Secretary Chertoff and I are committed to strengthening the 
processes needed to implement the Recovery Auditing Act of 2001 
and the Improper Payments Information Act of 2002.
    I also want to thank you for S. Res. 94. Your statement of 
support and recognition for the DHS workforce is greatly 
appreciated.
    In 2005, the Department's improper payment testing and 
reporting was limited. However, in 2006, we improved our 
process and executed statistically valid sample test plans. 
They identified two high-risk programs, FEMA's Individuals and 
Households Program and their vendor payments. We also conducted 
sampling on 16 other programs across the Department, totaling 
over $7.3 billion in payments, and determined that these 
programs were not high-risk.
    This year, we expand the scope and quality of our testing, 
and to ensure the long-term effectiveness of this program, our 
2008 budget requests some additional resources so my office can 
evaluate the components' testing procedures. We are a new 
department. We will be doing these tests for a long time, and I 
want to make sure that as we do these tests that we are 
confident that they have done rigorous risk assessments and 
they have done quality testing. So while we have outside folks 
helping us, we are looking to be able to evaluate those and 
confirm the quality of them.
    I would like to now briefly touch on our two high-risk 
programs. In the wake of Hurricane Katrina, FEMA tested and 
identified two programs under the Disaster Relief Fund as being 
high-risk for improper payments, the Individuals and Households 
Program and vendor payments. This evaluation was designed to 
determine if improper payments occurred, assess the cost of 
improper payments, and develop corrective action plans to 
mitigate the risk of future occurrences.
    For the Individuals and Households Program, FEMA selected a 
statistical sample covering the period of September 2005 
through March 2006, the days immediately following the 
hurricane, resulting in an estimate of 8.6 percent for improper 
payments. FEMA initiated corrective action plans to address the 
root causes, and this included preventing duplicate 
registration, confirming applicant identity, handling a high 
volume of transactions, and an enhancement to the post-payment 
reviews. Moving forward, FEMA has taken steps to strengthen 
compliance with IPIA and to implement OMB guidance, and so a 
second round of IPIA testing and risk assessment is currently 
underway for the payment period of March to November 2006.
    Regarding vendor payments, FEMA's statistical sampling over 
the same period estimated 7.4 percent of total payments as 
improper and they have initiated corrective action plans to 
include enhanced training guidance for invoice processing, 
developing a vendor payment quality assurance program, and 
reviewing contract language for consistency of similar goods 
and services.
    In conclusion, DHS has made progress on IPIA and we are on 
track to make more progress this year. We will continue to work 
closely with Director Paulison and FEMA to strengthen their 
core capabilities and capacity to manage payments. We will also 
continue to work closely with the Office of Management and 
Budget to ensure continued progress in eliminating and 
recovering improper payments.
    I appreciate the support we have had from the Congress and 
this Subcommittee. Thank you for your leadership and your 
continued support of the Department of Homeland Security. I 
would be happy to answer any questions you may have.
    Senator Carper. Thanks, Mr. Norquist. Mr. Hill.

   TESTIMONY OF TIMOTHY B. HILL,\1\ CHIEF FINANCIAL OFFICER, 
           CENTERS FOR MEDICARE AND MEDICAID SERVICES

    Mr. Hill. Good morning, Chairman Carper, distinguished 
Members of the Subcommittee. I am honored to be here today to 
discuss with you CMS's efforts to measure and reduce improper 
payments in Medicare, Medicaid, and the SCHIP program.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Hill appears in the Appendix on 
page 92.
---------------------------------------------------------------------------
    When I last testified before this Subcommittee about 18 
months ago, I discussed CMS's aggressive targets for reducing 
improper payments in our programs and I am pleased to be here 
today to tell you that our efforts are showing substantial 
results. I want to use my remarks this morning to briefly 
discuss the status of our measurement programs for Medicare, 
Medicaid, and SCHIP, describe for you some of our corrective 
actions, and briefly touch on what I believe is our biggest 
challenge to continuing our efforts.
    On the measurement front, much has been accomplished over 
the last 18 months. For Medicare, last year, we reported an 
error rate of 4.4 percent, a significant decrease from the 5.2 
percent reported in 2005 and a reduction of greater than 50 
percent from the error rate we reported in 2004. This is a 
cumulative savings to Medicare and the taxpayers of over $10 
billion. With continued monitoring and error reducing efforts, 
our goal is to achieve an error rate of 4.3 in 2007 and 4.1 by 
2009. I am happy to report that our preliminary data indicate 
that we are on track to meet our 2007 goals.
    In the coming year, we will be adding payments for Medicare 
Part D and C into this calculation to bring all of Medicare 
into full compliance with IPIA. We have completed preliminary 
risk assessments and are in the process of developing pilot 
areas to test payment risks across C, D, and the retiree drug 
subsidy program. We plan to use this information from the risk 
assessment and pilots to report component level error rates for 
these programs in the 2008 PAR next November.
    In Medicaid and SCHIP, we have made much progress since I 
was last before the Subcommittee. Last August, we published 
final regulations creating the Payment Error Rate Measurement 
Program (PERM), which requires States to assist us in measuring 
and reducing improper payments in Medicaid and SCHIP. We began 
implementing this program in 17 States across the country this 
past year and will be reporting an error rate for Medicaid 
claims in the 2007 PAR, which will be issued this fall. Our 
efforts will continue through the coming fiscal year as we 
extend our error rate calculation to Medicaid Managed Care and 
to the SCHIP program, and we are on track to have a fully 
compliant report in the 2008 PAR next November.
    Let me now turn to our remediation efforts. As you know, 
calculating the error rates is only one step in the process. 
Remediation is the key to IPIA compliance. The cornerstone of 
our remediation efforts in Medicare is our error rate reduction 
plan, which includes agency-level strategies to clarify CMS 
policies and implement new initiatives to reduce improper 
payments. It lays out how we use improper payment information 
to manage our contractors that process our claims and to target 
our activities in particularly error-prone benefit-type areas.
    We are also using new tools to recover improper payments. 
In 2004, we implemented a recovery audit contract demonstration 
to identify improper payments. Based on early results, we see 
the RAC program is an indispensible tool in reducing and 
eliminating future improper payments. To date, the RACs have 
identified more than $400 million in improper payments and have 
collected $144 million. We have an aggressive time table to 
meet the statutory requirements for implementing RACs 
nationwide.
    We expect our remediation efforts in Medicaid to be equally 
robust. To reduce Medicaid improper payments that are 
identified through the PERM program, we will require States to 
submit corrective action plans that describe the actions they 
will implement to address major areas of concern. We expect 
that the corrective actions taken by States as well as our 
active monitoring and oversight of States will lead to 
reductions in the reported Medicaid rates over time.
    Finally, let me turn to what I foresee is our biggest 
challenge as we continue our efforts in this area, and that is 
allocating scarce resources to fund our activities. Under the 
PMA, Federal agencies are mobilizing people, resources, and 
technology to identify improper payments. Consistent with these 
efforts, CMS is firmly committed to ensuring the highest 
measure of accountability. Unfortunately, since funding for our 
efforts has been capped since 2003, we have sustained a huge 
degradation of our purchasing power relative to inflation. 
Thus, to preserve our commitment to program integrity, the 
President's 2008 budget requests an additional $183 million in 
discretionary funds to build upon our programs so that we can 
continue our proven record for accountability.
    We are proud of our results. CMS is setting the standard in 
identifying, reducing, and recovering improper payments. But 
while we continue to make great strides, there is more room for 
improvement. We look forward to continuing to work 
cooperatively with this Subcommittee and to strive to protect 
the taxpayers we serve and ensure financial management of 
Medicare and Medicaid programs.
    I look forward to answering any questions you might have.
    Senator Carper. Mr. Hill, thank you very much. Mr. Bowie, 
you are recognized. Thank you.

 TESTIMONY OF TERRY BOWIE,\1\ DEPUTY CHIEF FINANCIAL OFFICER, 
         NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

    Mr. Bowie. Chairman Carper, Senator Coburn, and Members of 
the Subcommittee, thank you for the opportunity to appear today 
to discuss NASA's progress in identifying, eliminating, and 
recovering improper payments. In my testimony today, I will 
outline the steps NASA has taken to address improper payments, 
including complying with the Improper Payments Act.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Bowie appears in the Appendix on 
page 106.
---------------------------------------------------------------------------
    I would like to briefly explain the composition of NASA's 
contracts and how that affects our payments. Contractors 
support the execution of many of NASA's research and 
development programs. The variable and often unpredictable 
nature of this complex R&D work leaves NASA to use cost versus 
fixed-price contracts. While both contracts are used in various 
NASA programs, cost contracts represent approximately 88 
percent of payments made and fixed-price contracts represent 
the remaining 12 percent.
    NASA has implemented a multi-pronged approach to oversee 
integrity of the payments for its R&D programs and associated 
contracts. Effective contract and financial process controls 
represent one element of our approach and are the cornerstone 
of NASA's efforts to ensure proper payments.
    As an important second element to our approach, the Defense 
Contract Audit Agency (DCAA), reviews cost contracts and our 
contractors' adherence to accounting controls and requirements. 
For cost contracts, the DCAA also conducts contract close-out 
audits that may identify questionable costs. Any questionable 
costs are then reviewed by the NASA contracting officer for 
resolution.
    As a third element complementary to our program integrity 
activities, the agency has established an Acquisition Integrity 
Program. This program was formally launched in December 2006 by 
NASA's Deputy Assistant Administrator, Shana Dale, and this is 
a collaborative effort among the Office of the Inspector 
General, the Chief Financial Officer, General Counsel, and 
procurement.
    Finally, in accordance with the Improper Payments Act and 
consistent with OMB guidance, NASA, as well as other agencies, 
is required to complete an Improper Payments Risk Assessment. 
For its fiscal year 2006 risk assessment, NASA used the results 
of the prior year's recovery audit. Through that process, NASA 
reviewed approximately $57 billion of cost and fixed-price 
contracts across all programs dating back to 1997. Based on the 
results of that assessment, NASA found the total value of 
improper payments that had not already been identified and 
reported in prior years to be $256,255. This formed the basis 
for the amount reported in our fiscal year 2006 Performance and 
Accountability Report. In that document, NASA reported that the 
agency's risk assessment and actuals represented for the past 3 
years had shown NASA's improper payments to be less than a 
benchmark 2.5 percent of program payments and less than $10 
million.
    There have been several observations regarding questioned 
questions and the relationship to improper payment figures 
reported in NASA's PAR. Questioned costs are not analogous to 
improper payments. Rather, they are costs that NASA's Office of 
Inspector General recommends be reviewed by NASA to determine 
validity. There are more categories of possible questioned 
costs than exist for improper payments, and since these audited 
questioned costs are not always sustained, the IG report would 
have a higher figure for questioned costs than the amount that 
would be reported in terms of improper payments.
    For fiscal year 2007, NASA's risk assessment approach 
incorporates all the lessons learned from the prior year's 
audit, recovery activities, and incorporates OMB's instructions 
in their memorandum dated August 10, 2006. This risk assessment 
addresses disbursement activities on programs based for both 
cost and fixed-price contracts. A statistically valid sample of 
payment transactions will be obtained and tested, after which 
NASA will report the results.
    We have taken steps to bring our program into compliance 
with OMB guidelines for implementing improper payments, the 
Improper Payment Act. We will continue to adopt lessons learned 
for future recovery audits to make sure that we are making the 
most of those efforts.
    In closing, NASA is fully committed to ensuring that the 
agency's payments are properly made and that the agency fully 
complies with the Improper Payments Act. Mr. Chairman, I am 
pleased to respond to any questions you or other Members of the 
Subcommittee may have.
    Senator Carper. Thanks, Mr. Bowie.
    We have at this table a number of agencies whose improper 
payments are measured annually not in the millions of dollars 
or the tens of millions of dollars, but literally hundreds of 
millions of dollars. We have heard of the efforts that have 
been launched particularly in HUD and CMS to go out there to 
identify those improper payments and to reduce them, to recover 
monies that have been improperly paid.
    When I read your testimony and listening to it again today, 
what I take away from it is that you have identified in your 
agency--roughly what is your agency's budget on an annual 
basis?
    Mr. Bowie. Roughly $16 billion.
    Senator Carper. How much? Sixteen billion?
    Mr. Bowie. Sixteen billion, yes.
    Senator Carper. What I took away from it was the belief 
that there is really not much, given the way that you award 
contracts and the work of your contracts, in the way of 
improper payments that are made, and I think I heard the figure 
$250,000. I don't want to put words in your mouth, but it 
sounds like you have looked at your payments and you just don't 
think, at least with respect to your agency, that it is a 
problem.
    Mr. Bowie. I believe that we have to always be vigilant in 
terms of ensuring that taxpayer dollars are properly accounted 
for and we will look and judge every dollar based upon that. We 
would not automatically assume that there are no problems. 
There always could be an issue and we will always be vigilant 
to tackle those issues as they arise.
    Senator Carper. But as you look back at 2004, 2005, 2006, 
what I take away from your testimony is that you don't believe 
there are any really material problems with respect to 
mispayments, overpayments, or improper payments?
    Mr. Bowie. In looking at the criteria as established by OMB 
for reporting, the 2.5 percent or over $10 million, that would 
be the conclusion.
    Senator Carper. Mr. Williams, let me just ask you to 
reflect on that for a moment, if you would.
    Mr. Williams. Mr. Chairman, in listening to the testimony, 
as I was reflecting back to the 1980s when President Reagan and 
President Gorbachev used to get together and President Reagan 
used to always tell President Gorbachev to trust but verify, 
and I have this professional skepticism, I guess, that is just 
basically ingrained in the work I do.
    In reflecting back on the point that I made earlier, in 
listening to some of the statements and looking at what the 
auditors had reported, it makes me want to reiterate the other 
point that I made, that while not required, it would be a good 
idea at each one of these agencies that independent set of eyes 
would be required to take a look at this process, because I am 
looking at a couple of the agencies and I think the auditors 
basically stated that there was a potential non-compliance at 
NASA, I believe, because of the supporting documentation that 
they questioned. I think at Homeland Security, the auditors 
basically stated that the risk assessment was not performed for 
all of the programs and I also think that there were some 
questions raised about the sampling at that particular agency.
    And I think, in conclusion, we kind of get back to this 
issue that we talked about earlier, also, of this $10 million 
and 2.5 percent criteria. As I have stated in previous 
testimonies before this Subcommittee on that particular issue, 
I was involved, or I was asked to take a look at the original 
drafting of the legislation, and as I have stated, it 
originally started out at $1 million. It was any agency that 
had improper payments of $1 million would be required to go 
through the steps that are listed on the board up there. 
Looking at it from a cost-benefit standpoint, we did suggest, 
and our suggestion was taken into consideration, to raise it to 
$10 million.
    So I have a little bit of institutional knowledge of what 
the Congress was intending in this area and I think that not 
just members on this panel now, but if you look at some of the 
other agencies that have looked at this issue, I think when you 
throw in the 2.5 percent criteria and the word ``and,'' it kind 
of takes some of these issues below the radar screen.
    Senator Carper. Alright. Thank you.
    Mr. Cox, if I could come to you. In Ms. Combs' testimony 
earlier today, I think she held out HUD as an example of an 
agency that has done a good job in trying to identify improper 
payments and eliminating them. I just want to ask you to 
briefly sketch for us some of the best practices and processes 
you think that you have adopted over the years to address 
improper payments, to try to reduce them, and is there 
something in that list that you all have done that maybe some 
other agencies, including some at the table, but a number who 
aren't at the table, could emulate?
    Mr. Cox. Thank you, Mr. Chairman. I think if you look at 
the large area for us of improper payments, it centers around 
our Rental Housing Assistance Program, and there are really 
three areas that we look at to determine improper payments. The 
first is, is this subsidy itself calculated correctly? Second, 
is the tenant's income reported correctly? And third, once we 
have determined one and two, have we been billed correctly for 
what was determined in step one and two?
    The biggest efforts--and I will set aside No. 3 for just a 
second, but the biggest efforts we have made is to, first of 
all, educate the public housing authorities and the multi-
family owners on the complexity of those calculations. They are 
very complex. There are over 40 income deductions and 
exclusions, so that is a very complex, not unlike the tax code.
    No. 2, probably our biggest success, and I would say, Mr. 
Chairman, where other agencies could use it, is our income 
verification system. Working with the Department of HHS and 
Social Security, we actually get secure data off-line but then 
put on-line on a public housing authority by public housing 
authority basis, and they are able to verify what the tenant 
has told them is their income, which is a key component of 
determining what the subsidy could be.
    Senator Carper. Excuse me for interrupting. A long time ago 
when I was a member of the House of Representatives and served 
on the Banking Committee Housing Subcommittee, one of the 
things that I focused on was tenant income verification and we 
were trying to make sure that, given the fact that you had a 
lot of people in waiting lines to get into public housing, we 
wanted to make sure that the folks that were there were 
actually income-eligible. We tried to figure out, working with 
the State and local folks, how best to make that verification, 
do so in a way that was respectful of people's privacy rights 
but also in a way that would enable us to quickly and regularly 
make an identification of who was appropriately there and 
eligible and who was not.
    My recollection is that we used Department of Labor data 
from folks who were employers that were paying, had people on 
their payrolls, and submitted on a regular basis employment 
data, and I don't think you mentioned that. I think you said 
that you were doing it through a couple of other things. How do 
you do it today?
    Mr. Cox. We used the National Registry of New Hired Data, 
which is now captured by HHS, and so we used to use Department 
of Labor data, but there were some delays in reporting on a 
quarterly basis and in some cases even on an annual basis. So 
the information that we have today, Mr. Chairman, is actually 
more current, or is the most current that we can get.
    Senator Carper. Alright. Do you want to add anything? I 
interrupted you. Do you want to complete your thought from 
earlier?
    Mr. Cox. I would just say, again, any program that is based 
on income--ours clearly is, the majority of ours, but I would 
say--you asked the specific question, what can other agencies 
look to, I would say this is a good example of both interagency 
cooperation as well as working with our industry partners and 
that is a big success story here to reduce improper payments by 
over $2 billion since 2001.
    Senator Carper. Alright. That is a lot of money.
    Mr. Cox. It is a lot of money.
    Senator Carper. Thank you. Again, if I come over to Mr. 
Hill for a moment, if I could. We are going to hear, I think, 
on the next panel some testimony that CMS serves as an example 
of how a successful government audit recovery program can be 
run and should be run. I just want to ask you to provide us 
with your perspectives on why the recovery work underway in 
Medicare has been successful and describe your plans to expand 
this program. I know you spoke just a little bit in response to 
Senator McCaskill's questions, but how do you plan to expand 
this program beyond the three States which are now underway? 
And also, do you have any sense for how much money could be 
saved once you are doing this nationally, not just in three 
significant States, but in all 50 States?
    Mr. Hill. Thank you. We plan on having our national RACs up 
and running. We are going to chunk the country up a bit. We are 
not going to have one contractor do the entire country. We will 
sort of set up some regions and describe in a general way who 
will be responsible for which area.
    There is a procurement, a request for comment on the 
street. It is a little special in terms of the work that has to 
be done. It is not like looking at a vendor payment or an 
invoice. We are looking at actual medical records and claims 
that are coming in from providers and beneficiaries and so we 
want to be sure the RACs have the appropriate medical skills on 
staff to be able to review those claims and to be able to do 
that work, and so there will be some review of the contracts as 
they come in.
    We expect to be able to have those contracts out and let 
and beginning to run in calendar 2008. That is our timeline.
    A significant issue for us as we roll this out nationally 
is educating and working with the providers and the 
beneficiaries we serve, because this is a new entity that is 
sort of going to interject themselves into the Medicare system, 
and physicians and hospitals are going to be getting letters 
from companies that they have never heard of before saying you 
owe the Federal Government some money, and so we want to be 
sure that we have done all the appropriate leg work there to be 
sure that there is no surprises.
    In terms of the money to be saved, I mean, we have 
identified just in the three States in the short time that we 
have been doing it, $400 million in overpayments, and I think a 
lot of that has----
    Senator Carper. Say that again? How many?
    Mr. Hill. Four-hundred million dollars.
    Senator Carper. And was that for 1 year or several years?
    Mr. Hill. Since January 2005, so it is over several years. 
But again, it has taken a while for them to get up, get 
familiar with the data, get familiar with the areas that they 
are going to be working in, so we have seen that grow over 
time. Month to month, it gets higher and higher. I expect that 
the recoveries will, I am hoping, certainly get into the 
``b''s, out of the millions and into the billions, over time. 
When that will start and how soon we can get there remains to 
be seen, but we are anxious of get started and we are anxious 
to continue the relationship we started with these contractors.
    Senator Carper. Thank you. Talk with us again a little bit 
about improper payments with respect to Medicaid and the SCHIP 
program. What kind of timeline are you on there?
    Mr. Hill. Right now, we are out in the field collecting 
data and measuring rates in 17 States. We had some sort of fits 
and starts getting going with Medicaid. We finally got our 
final regulations out in the summer of 2006, sort of 
articulating exactly how we are going to implement the IPIA for 
the State programs, and the way we are doing it is in a phased, 
cyclical approach. So we will do 17 States each year to get to 
all 50 over a 3-year cycle. We began the first 17 this past 
year.
    We will be reporting on those rates in this year's PAR and 
that is for one component of Medicaid, the biggest component, 
the fee-for-service component. For the Medicaid Managed Care 
piece, which in some States is big but nationally it is a 
smaller piece, and SCHIP will be done beginning in fiscal year 
2008 for a report next year, in next year's PAR.
    The challenge for us here has been, of course, as folks 
have identified already, is dealing with 50 different States 
and 50 different entities and setting up a process that ensures 
we get the data we need to do the appropriate calculations but 
sort of does it in a way that the State is sort of working 
cooperatively and has the incentive to be sure that they give 
us that data. Quite frankly, some of the comments that we got 
from some of the States on the regulations that we put out were 
less than favorable in terms of them viewing this as a State 
activity versus a Federal activity, so it has become quite a 
challenge to sort of convince them that, yes, this is, in fact, 
in their best interest to do this measurement and help us do 
the assessments.
    Senator Carper. Alright. Dr. Coburn is back, so why don't 
you just jump in and take as much time as you would like.
    Senator Coburn. Thank you.
    Senator Carper. We have, I think, one more panel.
    Senator Coburn. Mr. Bowie, in your statement, you described 
that NASA conducted last year's risk assessment--let me put the 
poster up here--for its 2006 risk assessment, NASA used the 
results of the prior year's recovery audit. Through that 
process, NASA reviewed approximately $57 billion of cost and 
fixed-price contract payments across all programs dating back 
to 1997. Based on the results of that assessment, NASA found 
the total value of improper payments that had not already been 
identified and reported in prior years to be $256,000. This 
formed the basis for the amount reported in the fiscal year 
2006 PAR document. You also reported in that document that the 
agency's assessed risk and actual results for the past 3 years 
have shown NASA's improper payments to be less than the 
benchmark of 2.5 percent of program payments and less than $10 
million.
    I have some concerns with this risk assessment on several 
levels. First of all, I am kind of fuzzy on how you conducted 
this assessment. So what I would like for you to do is break 
that down for me sentence by sentence. First is, NASA used the 
result of the prior year's recovery audit. First of all, how is 
that a valid risk assessment for present? We already had the 
GAO testify that recovery audits are the more expensive way to 
do that. The least expensive is have the program integrity 
there in the first place. It lacks the depth and detail 
necessary to carry out a thorough and comprehensive review of 
the entire agency because you are limiting that to programs of 
$500 million to begin with. That is what the recovery audit 
requirements are.
    So the IPIA mandates that the entire agency and all of its 
programs perform an improper payment risk assessment. Do you 
believe the results of an improper payment, this passes muster 
for a valid risk assessment?
    Mr. Bowie. For 2007, we will be doing a very robust risk 
assessment. For 2006, since we did have the recovery audit that 
examined basically all contracts dating back to 1997 and there 
was no dollar threshold imposed on that, so it was open, that 
we felt that if we had, even in doing a risk assessment, we 
would have still projected similar results as the actual 
results of the audit themselves.
    Senator Coburn. What was found in the recovery audit? How 
much money was found in the recovery audit?
    Mr. Bowie. For the recovery audit, it was approximately 
that $256,000.
    Senator Coburn. That is all that you found going back to 
1997? In your recovery audit, you found $256,000 in payment 
errors?
    Mr. Bowie. That had not already been resolved or corrected.
    Senator Coburn. I know, but that is my whole point. What 
was the amount that had already been resolved or collected?
    Mr. Bowie. For 2004, it was $70,000. For 2005, it was 
$617,442.
    Senator Coburn. OK. So your testimony is that for NASA, 
your total payment errors, your estimate of your total payment 
errors is this $256,000 plus $70,000?
    Mr. Bowie. And the $617,000.
    Senator Coburn. Six-hundred-and-seventeen thousand dollars.
    Mr. Bowie. Those are for past years.
    Senator Coburn. OK, but your risk assessment by law has to 
be for every year. So you are using a recovery audit to state 
an assessment of 2006. Mr. Williams, what do you think about 
that?
    Mr. Williams. Dr. Coburn, as you know, this Subcommittee 
has requested GAO to take a look at NASA and the scope of that 
particular work is basically looking at how well did they go 
about doing their risk assessment. From looking at the numbers 
and what we have in our report, in 2004, there was no report, 
and the $70,000, I guess, is the number, while it wasn't 
reported.
    But when you add these two numbers together--and as I 
stated earlier, we believe that the risk assessment is the 
foundation of this whole exercise that we are going through, 
and using recovery auditing, as I stated in my written 
testimony, even using the single audits, we don't think that 
those are good bases for going about doing a thorough risk 
assessment that is needed in order to do the things that need 
to be done to properly identify those programs that are 
susceptible to significant risk.
    Senator Coburn. Don't get me wrong. I love NASA, OK. I just 
hate waste. I have trouble believing that on a $56 billion 
program, that is the amount of waste that was there in terms of 
improper payments when I look across all the rest of the 
Federal Government and don't find hardly anybody that can 
compare to that. And I know that NASA is good, but they are not 
that good. So I have real doubts about the accuracy of what you 
are reporting and also whether or not--and I would tell you, by 
law, a recovery audit does not pass muster with what the law 
states on the Improper Payments Act. You can read that. I have 
introduced that into the record. You heard me do that.
    Is it possible that NASA could commit to fulfilling what 
GAO would like to see in terms of a recovery audit for next 
year?
    Mr. Bowie. That is our intention.
    Senator Coburn. OK. So you are going to do a true risk 
assessment next year?
    Mr. Bowie. Correct.
    Senator Coburn. Well, that is great to hear.
    Mr. Bowie. That is already in place and we have already 
done the first phases of that risk assessment by program and we 
are moving to the test phase.
    Senator Coburn. That is great. Mr. Chairman, I have heard 
what I wanted to hear.
    I would like to submit the rest of my questions so that 
these people don't have to wait such an extended period of 
time, and I apologize for my absence during your testimony.
    Senator Carper. That is quite alright.
    I want just to follow up on what Dr. Coburn said. I hope 
the amount of improper payments are as low as you have 
suggested here, and if they are, maybe we will ask you to come 
back and we can figure out how the rest of the Federal agencies 
and States can learn from what you are doing.
    Mr. Williams, we look forward to the closer scrutiny that 
you all are going to take with respect to NASA and we will see 
what we can find.
    A couple of questions, if I could, for Mr. Norquist from 
Homeland Security. First of all, one of the issues that has 
been raised by GAO, and I think by your auditors, is that your 
Department has not yet performed risk assessments on all of its 
required programs to determine whether they are susceptible to 
improper payments. When do you expect that work is going to be 
completed?
    Mr. Norquist. Sure. That is a great question. Two years 
ago, they asked the components to look at the risk and 
basically everyone answered, we are not high risk. That was 
considered not an adequate answer, so last year, they simply 
used a dollar threshold. Whether you think you are high-risk or 
not, if you are spending in certain areas over a certain amount 
of money, do the sample testing, and there were 16 more 
programs where we did that. The numbers came in with error 
estimates of less than $1 million, but we felt it was 
worthwhile to do that test even where people weren't asserting 
it.
    This year, we have issued the guidance to do a proper risk 
assessment. We will be working with our organizations to make 
sure they do that. We understand the dollar threshold alone is 
not an adequate substitute for risk assessment. My predecessor 
thought it was better than accepting the answers he had been 
receiving previously about what was risk. But we are going to 
work with the components to ensure that the risk assessment is 
done consistent with the law.
    Senator Carper. Alright. Thanks. I understand that as a 
secondary measure to help improve the Department's improper 
payments, that recovery audits were being performed at three of 
the Department's components. At the time of your improper 
payments reporting for the last fiscal year, fiscal year 2006, 
however, the recovery auditing work had progressed but was not 
yet at a point where it could yield any kind of conclusive 
results. Discuss with us for a minute or so, if you could, the 
current status of that work and the results that have been 
yielded.
    Mr. Norquist. I would be happy to, sir. At the end of last 
year, they had a challenge getting some of the recovery audit 
teams on board. There was a clearances issue. In most of those 
cases, they are on board and operating, and while we only have 
them in a few components, those components are service 
providers and do the finance and accounting for a number of 
other organizations in DHS, so it is a much broader group.
    Those efforts are ongoing at Coast Guard and ICE, and I 
will have to get the number for the record, but there are 
several hundred thousand, I believe, that was being reviewed at 
Coast Guard as potential candidates for recovery. Again, not 
enormous sums, but sums worth following. These are not high-
risk programs, but as I mentioned to the Senator before, they 
are programs that are worth looking into because there is the 
opportunity to recover as long as you have the recovery audit 
teams working alongside you.
    We expect to have all those teams in place for this year, 
and again, they are going back over 2004 and 2005 payments, as 
well.
    Senator Carper. Alright. A couple of people made the point 
in their testimony, I think Mr. Williams among them, that it is 
all well and good that we do risk assessments. It is good that 
we identify improper payments that were made. It is good that 
we go out and recover after the fact monies that have been 
misspent, inappropriately spent. But the best thing we could do 
is to make sure that we don't make the mistake in the first 
place. Take a moment and talk to us about what Homeland 
Security is doing in that regard.
    Mr. Norquist. OK. Well, let me do a couple of things. The 
biggest area, the highest-risk area was in FEMA's Individuals 
and Households payments. That was the program that last year's 
sample fell right during the start of the response to Hurricane 
Katrina, and so you had a number of issues that contributed to 
that.
    First of all, given the immediacy of responding to people's 
needs and the sheer volume of people they had to assist, they 
relaxed some of the controls to put an emphasis on helping 
people, in addition to which some of the controls one would 
like to have in place--a person goes and visits the individual, 
visits the location--were not possible because of the extent of 
the damage. So that resulted, when we tested that, as clearly 
showing up on our high-risk list.
    FEMA has put in corrective action plans. We have published 
those in our PAR. They also include putting in--when you have 
this surge in applicants, people started coming in registering 
on the phone and on-line and not all of those had the 
appropriate controls to check, was it the right individual, 
were we getting duplicate registrations, and so FEMA has been 
putting in the controls in those places to both put the strong 
controls in up front, recognizing they are going to happen 
during a surge in activity, during a point of urgency, and 
still trying to strike that balance but yet----
    We have a process underway to recoup those funds, but 
again, it is a long, slow process and it is much more effective 
to be able to have those controls in place on the front.
    Senator Carper. Alright. Mr. Williams, any comment in 
response to what Mr. Norquist just said?
    Mr. Williams. Mr. Chairman, it seems like after each one of 
these, I make the same statement, but we do have a review 
underway also looking at improper payments at the Department of 
Homeland Security. That job is currently underway and we are 
looking at the basic steps that we have talked about up there.
    I would like to add that in talking about the last point 
that you made there, about it is better to prevent improper 
payments from occurring, I would also like to add to that 
statement that in our previous testimonies, we have always 
talked about that if you trace down the root cause of these 
improper payments, it goes back to a breakdown in internal 
controls.
    There is also another component to that and that is also 
you get improper payments when programs are poorly designed. So 
that is something that we also need to take a look at, and by 
that I mean that if you have got a program that is set up in 
such a way that you basically open yourself up to improper 
payments from occurring, we need to take a look at some of 
those designs, also.
    Senator Carper. Alright. Thanks.
    Mr. Norquist. If I can join in, that is an excellent point. 
The entire control environment matters. One of the initiatives 
that we have started at Homeland Security in our financial 
field is everyone who is a new hire, regardless of whether they 
are hired by my office or one of the components, we brought 
them in last week for a week of training and we gave them, 
among other things, training on fiscal law and internal 
controls because they need to be aware of their 
responsibilities in that area, and if you can do up-front 
training of the employees, if you can have adequate controls in 
place, you dramatically reduce the amount of effort we have to 
put on the recoupment and recovery side, and I think that is a 
very good recommendation to respond to and that is one we have 
tried to tackle.
    One quick correction. I misquoted on the Coast Guard. It 
was 19 cases and $134,000 that their recoupment team had 
identified so far.
    Senator Carper. Alright. Thanks. The last question I will 
ask, and I will start it with Mr. Hill. Last week when we were 
debating the budget resolution in the Senate, Senator Coburn 
and I offered, and it was adopted, legislation that says that 
to the extent monies are recovered in the next several years 
from improper payments, those monies should be used for deficit 
reduction. It was unanimously accepted, without objection.
    When I think about our efforts to try to get States to be 
our partner in some of these programs, Medicaid, SCHIP, and 
others. I don't want us to be saying that we have somehow tied 
your hands or the hands of the States or others that are 
administering these joint programs with States. I don't want to 
feel that we have tied your hands by saying, none of the monies 
that have been recovered can be used to incentivize the States 
to be our partners. I just want to ask if that is a fear that 
may be misfounded or not, and Mr. Williams, I would ask you to 
respond, as well.
    Mr. Williams. I would like to start with it, and I would 
like to refer to the Food Stamp Program, in which there are 
bonuses and there are penalties in this particular area. States 
receive bonuses if they get that number down and there are also 
penalties that have been mandated by the Federal Government, 
that if your improper payment rate is above the national 
average, I believe it is. So the Congress has put some things 
in place that will, in my opinion, bring the States to the 
table to realize that we are in this together.
    Senator Carper. As a former governor, I remember full well 
how those carrots and sticks work. [Laughter.]
    Mr. Hill, let me ask you to respond.
    Mr. Hill. As Mr. Williams said, I think the carrot and 
stick approach is one that we have to employ. Unfortunately, I 
think that to the extent that, say, for example, we have an 
improper payment recovery in Medicaid and now under the 
resolution it is going to deficit reduction. The State's first 
reaction to me is going to be, well, it is not my deficit. It 
is a State dollar that is now going somewhere else.
    So I think the real trick for us is going to be, and it has 
been and will continue to be sort of being sure the States 
understand--let us use Medicaid for a minute--a dollar saved on 
Medicaid or a dollar recovered in improper payments, on 
average, 50 percent of it is going back to the State and 50 
percent of it is going back to us. The more we can sort of 
build that into the relationship and be sure that the States 
are seeing the incentive and the pay-back that they are going 
to get from investing in these kinds of activities, the more 
likely they are that they are going to invest in them.
    At the same time, I do think, ultimately, there will need 
to be a stop-gap, because you will get a State out there or 
somebody will say they don't want to make the investment, or 
they may think that the recoveries that we are getting aren't 
big enough to make the investment, and I think at some level, 
the Federal Government is going to need to be able to step in 
with the stick, if you will, and say, well, you need to. 
Whether it is a penalty or however we build that policy, there 
needs to be some of that sort of pain going back the other way 
if there is not the appropriate reaction, and unfortunately, 
that is not in the IPIA now. It is the sort of Federal--it is 
going to require some unique solutions by program to be sure we 
can be compliance by program.
    Senator Carper. Alright. Thanks. Anybody else want to 
respond on this particular point? Mr. Cox.
    Mr. Cox. Senator, I would just say that we have a similar 
issue, except instead of dealing with States we are dealing 
with 4,100 public housing authorities and over 22,000 
individual private property owners. So again, it is going to be 
challenging to incent them. Now, we do have, as others have 
mentioned, Mr. Hill mentioned, we do have some sticks. We 
believe, like Mr. Williams, the best way to do this is on the 
up-front and it is a process, an internal control issue, and we 
do have a couple of sticks there where we can actually monitor 
use of the Enterprise Income Verification, the new web-based 
system, and if you are not using it, actually, we can reduce 
some of their administrative fees that they receive. So there 
is a little bit of a stick there that we can use.
    But I would say, in general, your general question of can 
we assume that they will take some of that or not sit back 
while we take the rest for deficit reduction, as much as I 
support it, I think our industry partners and private owners 
are not going to sign up for that.
    Senator Carper. Alright. My last question for this panel 
would be, and this is a question I ask of a lot of panels, we 
expect a lot of the agencies in terms of complying with the 
law. I think in terms of being able to comply with the law, it 
has to be a reasonably law, reasonably explained. We need 
enforcement and someone like GAO looking over the shoulders of 
the agencies to make sure that you are doing what you are 
supposed to under the law. There have to be some incentives for 
you to comply. You need strong leadership in order to comply 
and you need the kind of systems that will enable you to 
comply.
    And we have a role to play, too, in oversight, in putting a 
spotlight on those agencies that are doing a particularly good 
job and to ask of you, how can we learn from your good 
performance, and from those agencies that aren't doing the kind 
of job that we want or, frankly, that they know they ought to 
do, to put them on really a little bit of a hot seat.
    The last question that I want answered is what further do 
we need to do, not just this Subcommittee, not just this 
Committee, but the Congress and the Legislative Branch? What do 
we need to do? Mr. Hill, I think you may have spoken to this a 
little bit in one of your comments, but let me just close by 
asking, what further do we need to do to better ensure that the 
Improper Payments Act is complied with, that the monies that 
are being inappropriately spent, misspent, that we will 
continue to reduce that, in some cases start reducing it in 
certain agencies?
    Mr. Hill. Right. Two things I think I would say. The first 
is, I think, your continued oversight is needed. I think it is 
very helpful. Anybody who sits in a CFO job will tell you that 
in many ways, our job is as much persuasion as anything else, 
getting folks in program components or States or others to pay 
attention to things that we believe they need to pay attention 
to, even if it is in the statute, and to the extent that the 
Congress is taking an active role in overseeing and ensuring we 
comply, that makes our jobs that much more easy to implement 
this law that needs to be implemented.
    The other piece I would mention and I mentioned in my 
testimony, this is not a cost-less exercise. It is an expensive 
exercise. The recovery audit contracts are a tool that are 
helpful when you are recovering overpayments, but they are not 
a tool that is helpful when you are trying to comply with the 
other pieces of the statute. The President's budget, as Ms. 
Combs mentioned and I mentioned, includes some requests for 
additional funds to continue these activities over time. I know 
that in both the House and Senate budget resolutions, there has 
been room included for those activities and I would encourage 
you to encourage your colleagues to continue to look upon that 
favorably.
    Senator Carper. Is there anybody at the table who agrees 
with that? [Laughter.]
    Mr. Cox. I would just say, Mr. Chairman, we would not have 
been able to reduce improper payments 60 percent without the 
use of technology. It just simply would not have happened. And 
if you look at how we do risk assessments, we have to use 
technology. So I would echo Mr. Hill's comments. For a 
relatively low investment, in our particular case in our 
working capital fund, we get a huge payback for that. So that 
is one thing that Congress can help us out with.
    Senator Carper. What would be helpful here, and I don't 
know who to direct this to, I will just direct it to you, what 
would be helpful in trying to make the point when we get into 
the back-and-forth on the appropriations bills and how much to 
actually appropriate in accordance with the budget resolution 
that we have adopted would be to know what that payback is. 
For, what did you say, $160 million that the Administration was 
asking for, for every one of those dollars, what is the return 
to the Treasury? That would be very helpful. If you could help 
us with that, I would be grateful.
    Mr. Cox. Alright.
    Mr. Norquist. Senator, on that theme, this is--those of us 
who work on this, this is why we do this for a living. We get 
to protect the homeland, in my position, and we also get to 
help protect the taxpayers' dollars. It is sort of the passion 
we bring to this work.
    But the description of the initiatives does not come across 
as sexy. I mean, phrases like ``acquisition workforce 
training'' in a budget request will not grab attention, but it 
is the front end of the type of controls that GAO and others 
are talking about. And you will see them in accounts with 
unexciting names like ``management,'' and so as you are working 
through this, particularly things like appropriation and 
authorization bills, keep in mind that some of the initiatives 
that have these payoffs have relatively unexciting titles and 
to be able to help ensure that as they go through, that people 
recognize the payoff there. That would be greatly appreciated 
by everyone.
    Senator Carper. My colleagues and I don't always appreciate 
some of the terms that you may have just mentioned, but we do 
appreciate a $20 return for $1 invested, so that is the kind of 
thing that could be very helpful as we debate these issues 
going forward.
    This is a work in progress. As you know, we have been 
working on this for about, I guess this is about the fifth year 
since the law was adopted. In some respects, I am encouraged 
here today by the work, the good work that is being done that 
is represented by a number of your agencies. I think for some 
of you, you have got a whole lot of work ahead of you, but I am 
encouraged that you are beginning to take those 
responsibilities seriously, not seriously enough to help all 
those folks who are going to be mailing in their tax payments 
on April 15, but it is good to know that some help is not just 
on the way, but some help has actually turned up some dollars 
that we can use to reduce budget deficits and our tax burden.
    As I said at the beginning, everything I do, I know I can 
do better, and I think that is probably true for all of us. We 
appreciate the work that you are doing and we just urge you to 
continue it and to go from those three States with Medicare to 
another 47 and let us get started on Medicaid and SCHIP, and 
Homeland Security, you have got your work cut out for you. Mr. 
Bowie, I hope that NASA is as good as you guys think you are. 
We will find out in the times going forward. Mr. Cox, thank you 
for giving a trip down memory lane to recount an old war tale 
on tenant income verification. Thank you all.
    We are now pleased to welcome our very patient third 
witness, Mr. White. Thank you all.
    Lee White, you are a good man to come and to have been as 
patient as you have been and to share with us your testimony. 
The room has begun to empty out, but I think in reading the 
testimony, a lot of it was valuable for me, but I think maybe 
the most valuable and instructive testimony that I read in 
preparing for this hearing was your own testimony. While there 
may not be many people in the room right now, believe me, I 
very much look forward to what you are about to share with us 
and you are recognized for 7 minutes. You are the Executive 
Vice President for U.S. Operations of PRG-Schultz, is that 
right?
    Mr. White. Yes.
    Senator Carper. First of all, tell us a little bit about 
that, about your firm and what you all do, and after that we 
will start the clock and you can present your testimony. But 
thank you for coming and thank you for your patience.

 TESTIMONY OF LEE WHITE,\1\ EXECUTIVE VICE PRESIDENT FOR U.S. 
          OPERATIONS, PRG-SCHULTZ INTERNATIONAL, INC.

    Mr. White. Thank you, Mr. Chairman and other distinguished 
Members of the Subcommittee. PRG-Schultz is the largest 
recovery audit firm in the United States.
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    \1\ The prepared statement of Mr. White appears in the Appendix on 
page 51.
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    Senator Carper. How long have you all been around?
    Mr. White. Well over 20 years.
    Senator Carper. OK.
    Mr. White. And recovery audit has become an accepted part 
of American business. Large corporations as well as mid-sized 
corporations have embraced the process and it has evolved over 
time. It used to be that people audited literally out of boxes, 
looking at invoices and contracts, but now it has become quite 
sophisticated and we literally evaluate billions of 
transactions that are very data-intensive and we use 
proprietary methods and approaches for how we do that.
    Each year, we audit many of the Fortune 100 and other 
companies and we review over $1 trillion of their spending 
transactions representing approximately 7 percent of GDP, and 
for them, we recover over $1 billion. So it is quite 
significant and it has evolved, as we discussed. Our corporate 
clients have really found that the effort that they expend to 
support this process is justified, and as my testimony 
indicated, they view that the juice is worth the squeeze.
    Senator Carper. Now, when I read that, the juice is worth 
the squeeze, where did that come from? Is that yours, or is 
that----
    Mr. White. It has been going around our company and our 
industry for a while, and I think it has everything to do that 
if you squeeze an orange, you are really looking for the juice.
    Senator Carper. Well, I am going to use that one. I guess I 
don't have to attribute it to you, though, so----
    Mr. White. Absolutely not. You may feel free to use it any 
way that you see fit.
    Senator Carper. Thank you. Alright. Thanks.
    Mr. White. Recovery auditing in government, I think equally 
represents a great potential. I think the opportunity is to 
apply the same principles and practices that we have been 
applying in the commercial marketplace, along with state-of-
the-art technology, to the incredible complexity and also 
volume of spend that is represented by the government agencies, 
both that previously testified here and then the rest that 
exist.
    We also recognize that recovery auditing is a tool and it 
is not a panacea. I think that the agencies as well as the GAO 
and OMB did a good job of describing the other efforts that 
they are expending. Even the IPIA obviously speaks to the risk 
assessment and other vehicles that need to be employed to truly 
get your arms around the totality of the issue. So we are only 
one tool and certainly should not be viewed as a panacea.
    With our successful corporate clients, we find that a 
number of different things have to be available to create a 
rich program. They include massive databases of their 
transaction history. They usually have large and complex 
spending environments and they do have central management of 
that spend. The same characteristics exist in government, and 
therefore, I think that they lend themselves to the same type 
of approach.
    We have entered into contracts with GSA, HHS, the 
Departments of Justice, Transportation, Defense, Interior, 
State, and Agriculture, so we do have quite a bit of experience 
in the government sector, and to date, we estimate that 
contingency recovery auditors government-wide have returned 
over $600 million to the taxpayer. However, we believe we could 
have done much better and we believe that the greatest success 
will come when agencies make recovery of overpayments a 
significant priority and where they are willing to provide us 
access to data and then the support we need to successfully do 
our jobs. Where that prioritization is not there and where the 
access to data has been lacking, we haven't had good results.
    Our experience is that motivation is key and incentives are 
really an important part of that motivation. We find that with 
the profit motivation most of our corporate clients have, and 
their obligation is to serve their shareholders, they really 
look to get the money back and it is a very important part of 
it. So even if they are not trying to do anything else, just 
recovering the money is a sufficient motivation and causes the 
behavior that you would expect. If we want the agencies to have 
that same sort of motivation to use recovery audits as a tool, 
we believe they need to be incentivized as well.
    We did highlight in the written testimony that we believe 
that to be a very successful program, although it was a pilot 
program, it was exemplified by CMS. There, as Mr. Hill 
testified, they identified over $400 million in recoverable 
overpayments and they actually have recovered $144 million of 
that so far. That is only operating in three States, and as a 
participant in one of those States, there is a significant 
ramp-up period to get started and to create the relationships, 
analyze the data, actually identify potential overpayments, and 
do all the things associated with recovering it. We would be 
happy to tell you that we have not yet hit our stride, and 
therefore we don't believe that we're necessarily close to the 
total potential that exists.
    CMS officials have proven to be very motivated and willing 
partners and they have helped reduce the normal start-up kinds 
of things that you would expect as well as other impediments 
that might have kept us from being as successful as we would 
like to be.
    So incentives are a very important element, but they are 
not the only element, and we believe that access to data, 
recovering valid claims, and helping resolve any disputes are 
the rest.
    Because I am running short on time, I would really like to 
bridge to the recommendations we made.
    Senator Carper. Let me say, my time is yours, so if you 
need a little extra time, you have got it.
    Mr. White. Well, thank you very much. I will try to keep it 
brief.
    As part of the Improper Payments Information Act, we think 
it would be good for agencies to be required to report on their 
recovery audit efforts; where they have contracts in place, 
whether they are using internal or external resources, what 
their results are, what efforts they have made to remove 
impediments, and then finally, what instances have happened 
where overpayments were identified but, for one reason or 
another, they elected not to pursue them. We think that would 
add teeth and clarity to the Act and, therefore, provide more 
information for analysis.
    We suggest establishment of a joint industry and OMB task 
force, which would be comprised of key agency officials and 
recovery audit firms, like ourselves, so that we could 
establish the scale of collectable overpayments, overpayments 
that are conducive to recovery audits, to look at standardized 
protocols that could be applied, contracting vehicles, those 
types of things, and then ultimately to develop a road map for 
removing those impediments that might exist so that everybody 
could benefit from the experience that each group may be having 
individually.
    We also believe that the recovery audit process should be 
institutionalized as part of the traditional internal 
government erroneous payment identification techniques. We 
think it augments the other sampling and risk analysis 
techniques that exist and can provide collaboration and 
validation of the amounts that are being identified and may 
help address some of the questions that were raised about the 
NASA numbers to see if they could be independently verified as 
they use recovery audit to generate them in the first place.
    Along these lines, we think that a contract vehicle and a 
standard set of protocols could be developed which could lead 
to a government-wide disbursement audit of all centralized 
payment facilities.
    Picking up on the CMS theme, we did suggest that we believe 
the same approach being used in Medicare can be applied to 
Medicaid. We think the key thing there is to provide incentives 
to the States. Although in aggregate 50 percent of the dollars 
that may be recovered could accrue to the States or could 
accrue to the Federal Government, in practice, sometimes the 
amount recovered actually accrues directly to the Federal 
Government and the cost associated with us as well as any 
resources necessary to support the program accrue to the State. 
So they actually are hindered and not rewarded for their 
recovery efforts and we think there are ways to create 
incentives that would ameliorate that concern.
    To provide the incentives we think are so critical for 
motivation, we believe that agencies should be allowed to keep 
a portion of the funds that are recovered in order to be able 
to be reinvested in efforts to reduce erroneous payments. One 
mechanism would be to create a Government Efficiency Fund, 
where recovered money would be made available for government 
efficiency initiatives that would be reported. We would 
advocate they would be reported for Congressional oversight 
annually, but they would be earmarked for new programs either 
around process improvements, policy improvements, new 
technology, or whatever could be applied directly to reducing 
improper payments.
    We also recommend removal of the restrictions of the 
Paperwork Reduction Act. Some of those impede the issuance of 
appropriate documentation requests or payment demand letters. I 
think this is an area where one well-intended legislative 
action could be impeding another.
    Last but not least, we recommend examination of the Single 
Audit Act to facilitate recovery audits for programs such as 
grants to States by Federal agencies that currently are 
prohibited from a secondary audit under that Act. The 
provisions of the Act should be reviewed to see if programs 
where there is evidence of intolerable levels of erroneous 
payments should be subjected to a secondary audit.
    Thank you, Mr. Chairman. I am prepared to answer any 
questions you might have.
    Senator Carper. Thank you for your excellent testimony.
    Let me return to a theme that was sounded a number of times 
in the course of this hearing, and that is incentives, and 
particularly with respect to Medicaid borne partly by the 
Federal taxpayers, borne partly by State taxpayers as we 
attempt to provide health care to low-income folks, in some 
cases nursing home assistance for our elderly. The comment I 
think you made was that as we look at efforts to recover 
improper payments or monies allocated inappropriately, States 
tend to bear the costs and the Federal Government tend to keep 
the dough. Is that a fair characterization of what you said? If 
it is, there is no wonder not a whole lot is being recovered 
and I certainly think I see a road map there for changing that.
    Mr. White. Not trying to put too fine a point on it, what I 
said was that although the characterization was made that if 
there were overpayments, frequently, they were split 50-50. It 
is not quite always that simple, and in some instances, it is 
split 50-50. In some instances, it may be that the State 
recoups the entire amount, and in other instances, it may be 
that the Federal Government recoups the entire amount. So what 
we were advocating was setting up a system where if a State has 
a good productive recovery audit program, perhaps through some 
sort of a rate adjustment or something, they would get a better 
recoupment or keep a better portion of the split for those 
funds that are recovered.
    Senator Carper. OK. Good. We might want to explore that 
with you a little bit more.
    Mr. White. Sure.
    Senator Carper. Thank you. You have given us a pretty good 
to-do list for those of us here in Washington, in the Executive 
and Legislative Branchs, of things that we need to do 
differently. I am going to ask you to go back and just 
reiterate those again, if you would, please.
    Mr. White. Sure. I really made a series of six 
recommendations. The first one had to do with the reporting in 
the IPIA itself, and what we were encouraging Congress to 
evaluate is whether you could augment that reporting by not 
only reporting the statistics of what had been identified and 
what steps have been taken to pursue it, but whether there was 
a recovery audit program at all. Whether there were impediments 
that had been identified, and then what steps have been taken 
to ameliorate them. One of the issues that we have seen is 
where overpayments are identified, but for one reason or 
another, they are not pursued and we would request and think it 
would be wise to get an explanation for why they were not 
pursued.
    The second recommendation was the joint task force with 
OMB, or OMB leading the task force between the agencies and the 
industry. The third was basically a standard contracting 
vehicle to make it easier for agencies to employ recovery audit 
firms as well as standard protocols and a government-wide 
disbursement audit.
    We talked about the CMS Medicaid extension of their current 
efforts, and then we talked about incentives quite a bit with 
the Government Efficiency Fund, the reduction of the Paperwork 
Reduction Act, and then last but not least, the Single Audit 
Act and its sometimes effect on not being able to audit grants.
    Senator Carper. Dwell on that one for a little bit. If you 
had been here at our last hearing, I turned out to be, I think, 
the author in the House of Representatives when I was a 
Congressman for the Single Audit Act, encouraged by State 
auditors like former State Auditor McCaskill. What kind of 
changes do you think we ought to make in the Single Audit Act?
    Mr. White. I think the one that we are recommending is to 
review particular grant types for high degrees of erroneous 
payments, and if those thresholds are exceeded, then waive the 
Single Audit Act and allow a secondary audit.
    Senator Carper. OK. A couple more questions, if I could. 
You mentioned at a couple of points in your written testimony 
that you believe that private sector auditing firms can do a 
better job and be more efficient in recovery auditing than 
agencies' internal auditors can be.
    Mr. White. Yes.
    Senator Carper. I just want to know why you think that is 
the case.
    Mr. White. For a number of different reasons. First, it is 
all we do. Second, we are used to dealing with the size of the 
spend categories and the data. Third, we are independent and 
sometimes just a fresh point of view where you don't have as 
much ingrained history can be refreshing. This is a standard 
practice also in the commercial world. I think it has become 
accepted because of the reasons that I just expressed.
    Senator Carper. OK. Thank you. Senator McCaskill raised the 
question when we were talking with our earlier question from 
CMS and we were talking about the pilot work that is being done 
in three States with respect to recovery of Medicare improper 
payments. I think you indicated that your firm is involved in 
one of them. Which State are you all involved in?
    Mr. White. We are involved in California.
    Senator Carper. OK. Senator McCaskill asked, well, we are 
getting such good results in these three States, why don't we 
just do the other 47? I remember the old, what was it, Nike 
ad----
    Mr. White. Just do it.
    Senator Carper [continuing]. Let us just do it. Why don't 
we just do it?
    Mr. White. I agree with you. I think we should move as 
rapidly as possible. One of the points that Senator McCaskill 
made was that basically we bear all the cost and risk, and that 
is partially true. We do bear the majority of the cost and 
risk, but these programs are not cost-less nor risk-less for 
the States and/or for CMS, HHS, or any of the other agencies. 
They do have to invest resources to put the programs in place. 
They need to be supported. They have to provide data. They have 
to help us setting up regulations and protocols. They have to 
deal with the provider education and all the things that they 
described. It does take a little bit of time.
    Senator Carper. I can see that.
    Mr. White. I do think that CMS, by their approach to the 
legislation that was passed in December, is moving very 
aggressively. They do have the RFI already out. It is due April 
9. The bid process would ensue apparently shortly thereafter. 
So I think they are moving very expeditiously and I think their 
intent is to be in all 50 States ahead of the deadline.
    Senator Carper. OK. Another question, I understand that 
some agencies that have employed maybe you or a competing firm 
and sometimes wall off entire portions of their budgets to keep 
the auditors away and maybe even decline to recover some 
overpayments that you have uncovered. Let me just ask, how 
often does that kind of thing happen? Why does it happen, and 
how can we push agencies to be more open and more aggressive in 
collecting what is owed to them?
    Mr. White. Well, I think we have talked about the incentive 
side of it enough, so I probably should put that aside.
    Senator Carper. OK.
    Mr. White. Why they do it, I think that they perceive there 
are some areas and programs that are particularly sensitive, 
and therefore either for security reasons, privacy reasons, or 
other reasons, they have to be very judicious in who they allow 
to look at it, and I think is a viable and valid concern.
    I think they also, with the OMB interpretation of the 
legislation that exists, set thresholds, and then whether it is 
$10 million and 2.5 percent, whether that is exactly the right 
threshold, I am not really here to comment on it one way or the 
other, but thresholds do make some sense because if the agency 
is incurring some effort and if we are incurring some effort, 
you have to have a reasonable amount of spend in order to make 
it worthwhile. You can't go look at every dollar cost 
effectively.
    So I can understand why some of those things exist and they 
are very practical. On the other hand, I think that, 
frequently, people perceive either people from the outside as 
being a threat or they perceive any examination of erroneous or 
improper payments as being critical of their previous efforts 
and they are naturally protective of their previous efforts and 
therefore, they may take that to a bit of an extreme.
    Senator Carper. OK. Well, there is an old saying about 
saving the best for last. I don't know that this testimony and 
these responses are the best, but they are really good and very 
helpful. I want to say for myself, for our staff, for the 
Members that were here and those that had to leave, thank you 
for sticking around and for your patience today and----
    Mr. White. Thank you for all the work that you are doing.
    Senator Carper. Oh, no, we get paid for this, and as it 
turns out, I guess you do, too. [Laughter.]
    But you gave us some really good insights, and as I said, a 
very helpful to-do list, as well. We thank you for coming and 
for being with us this morning and this afternoon. There is 
still plenty of work to do for all of us, but I think we are 
maybe better informed now as we approach those 
responsibilities.
    The hearing record is going to be open for 2 weeks for the 
submission of additional statements and questions. I would ask 
you and our other witnesses who have been kind enough to join 
us today for your cooperation in getting some prompt responses 
to any questions that we may submit for the record.
    Again, thank you very much for your input and for your 
patience, and for that of the witnesses that preceded you.
    With that, the hearing is adjourned. Thanks very much.
    [Whereupon, at 1:13 p.m., the Subcommittee was adjourned.]

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