[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                  FOLLOW THE MONEY, PART I AND PART II

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

                                HEARINGS

                               BEFORE THE

                   SUBCOMMITTEE ON INVESTIGATIONS AND
                               OVERSIGHT

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               ----------                              

                             March 19, 2009
                                  and
                              May 5, 2009

                               ----------                              

                           Serial No. 111-12
                                  and
                           Serial No. 111-25

                               ----------                              

     Printed for the use of the Committee on Science and Technology

  FOLLOW THE MONEY, PART I AND PART IIthe following is for the title 
                             page (inside)



                  FOLLOW THE MONEY, PART I AND PART II

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

                                HEARINGS

                               BEFORE THE

                   SUBCOMMITTEE ON INVESTIGATIONS AND
                               OVERSIGHT

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             March 19, 2009
                                  and
                              May 5, 2009

                               __________

                           Serial No. 111-12
                                  and
                           Serial No. 111-25

                               __________

     Printed for the use of the Committee on Science and Technology


       Available via the World Wide Web: http://science.house.gov

                                 ______
                  U.S. GOVERNMENT PRINTING OFFICE
47-858                    WASHINGTON : 2009
-----------------------------------------------------------------------
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092104 Mail: Stop IDCC, Washington, DC 20402ï¿½090001


                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                 HON. BART GORDON, Tennessee, Chairman
JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas         F. JAMES SENSENBRENNER JR., 
LYNN C. WOOLSEY, California              Wisconsin
DAVID WU, Oregon                     LAMAR S. SMITH, Texas
BRIAN BAIRD, Washington              DANA ROHRABACHER, California
BRAD MILLER, North Carolina          ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois            VERNON J. EHLERS, Michigan
GABRIELLE GIFFORDS, Arizona          FRANK D. LUCAS, Oklahoma
DONNA F. EDWARDS, Maryland           JUDY BIGGERT, Illinois
MARCIA L. FUDGE, Ohio                W. TODD AKIN, Missouri
BEN R. LUJAN, New Mexico             RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York              BOB INGLIS, South Carolina
PARKER GRIFFITH, Alabama             MICHAEL T. MCCAUL, Texas
STEVEN R. ROTHMAN, New Jersey        MARIO DIAZ-BALART, Florida
JIM MATHESON, Utah                   BRIAN P. BILBRAY, California
LINCOLN DAVIS, Tennessee             ADRIAN SMITH, Nebraska
BEN CHANDLER, Kentucky               PAUL C. BROUN, Georgia
RUSS CARNAHAN, Missouri              PETE OLSON, Texas
BARON P. HILL, Indiana
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
VACANCY
                                 ------                                

              Subcommittee on Investigations and Oversight

               HON. BRAD MILLER, North Carolina, Chairman
STEVEN R. ROTHMAN, New Jersey        PAUL C. BROUN, Georgia
LINCOLN DAVIS, Tennessee             BRIAN P. BILBRAY, California
CHARLES A. WILSON, Ohio              VACANCY
KATHY DAHLKEMPER, Pennsylvania         
ALAN GRAYSON, Florida                    
BART GORDON, Tennessee               RALPH M. HALL, Texas
                DAN PEARSON Subcommittee Staff Director
            JAMES PAUL Democratic Professional Staff Member
            TOM HAMMOND Republican Professional Staff Member
                     JANIE WISE Research Assistant


                            C O N T E N T S

 Follow the Money, Part I: Accountability and Transparency in Recovery 
                          Act Science Funding

                             March 19, 2009

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Prepared Statement by Representative Bart Gordon, Chairman, 
  Committee on Science and Technology, U.S. House of 
  Representatives................................................    12

Statement by Representative Brad Miller, Chairman, Subcommittee 
  on Investigations and Oversight, Committee on Science and 
  Technology, U.S. House of Representatives......................     8
    Written Statement............................................     9

Statement by Representative Paul C. Broun, Ranking Minority 
  Member, Subcommittee on Investigations and Oversight, Committee 
  on Science and Technology, U.S. House of Representatives.......    10
    Written Statement............................................    11

                                Panel I:

Dr. Cora Marrett, Acting Deputy Director, National Science 
  Foundation
    Oral Statement...............................................    13
    Written Statement............................................    14
    Biography....................................................    16

Mr. Ronald R. Spoehel, Chief Financial Officer, National 
  Aeronautics and Space Administration
    Oral Statement...............................................    17
    Written Statement............................................    18
    Biography....................................................    20

Ms. Ellen Herbst, Senior Advisor for Recovery Implementation, 
  U.S. Department of Commerce
    Oral Statement...............................................    21
    Written Statement............................................    22
    Biography....................................................    26

Mr. Matthew Rogers, Senior Advisor, U.S. Department of Energy
    Oral Statement...............................................    26
    Written Statement............................................    28
    Biography....................................................    31

Discussion.......................................................    31

                               Panel II:

Mr. Gregory H. Friedman, Inspector General, U.S. Department of 
  Energy
    Oral Statement...............................................    44
    Written Statement............................................    46
    Biography....................................................    49

Mr. Todd J. Zinser, Inspector General, U.S. Department of 
  Commerce
    Oral Statement...............................................    49
    Written Statement............................................    51
    Biography....................................................    60

Mr. Thomas C. Cross, Interim Inspector General, National Science 
  Foundation
    Oral Statement...............................................    61
    Written Statement............................................    62
    Biography....................................................    65

Ms. Eileen Norcross, Senior Research Fellow, Mercatus Center, 
  George Mason University
    Oral Statement...............................................    65
    Written Statement............................................    67
    Biography....................................................   111

Ms. Patricia Dalton, Managing Director, Natural Resources and 
  Environment Division, U.S. Government Accountability Office
    Oral Statement...............................................   111
    Written Statement............................................   112
    Biography....................................................   117

Discussion.......................................................   117

             Appendix 1: Answers to Post-Hearing Questions

Dr. Cora Marrett, Acting Deputy Director, National Science 
  Foundation.....................................................   124

Mr. Ronald R. Spoehel, Chief Financial Officer, National 
  Aeronautics and Space Administration...........................   131

Ms. Ellen Herbst, Senior Advisor for Recovery Implementation, 
  U.S. Department of Commerce....................................   135

Mr. Matthew Rogers, Senior Advisor, U.S. Department of Energy....   144

Mr. Todd J. Zinser, Inspector General, U.S. Department of 
  Commerce.......................................................   150

Mr. Thomas C. Cross, Interim Inspector General, National Science 
  Foundation.....................................................   155

Ms. Patricia Dalton, Managing Director, Natural Resources and 
  Environment Division, U.S. Government Accountability Office....   161

             Appendix 2: Additional Material for the Record

NASA Plan for Improvement in the GAO High-Risk Area of Contract 
  Management, January 31, 2008...................................   166

NASA Government Accountability Office (GAO) High-Risk Scorecard 
  Status, Contract Management, October 2008......................   216

NASA High-Risk Corrective Action Plan, Executive Summary and 
  Definition of Success, September 26, 2008......................   218

Follow the Money, Part II: Government and Public Resources for Recovery 
                             Act Oversight

                              May 5, 2009

qWitness List....................................................   222

Hearing Charter..................................................   223

                           Opening Statements

Statement by Representative Brad Miller, Chairman, Subcommittee 
  on Investigations and Oversight, Committee on Science and 
  Technology, U.S. House of Representatives......................   228
    Written Statement............................................   230

Statement by Representative Paul C. Broun, Ranking Minority 
  Member, Subcommittee on Investigations and Oversight, Committee 
  on Science and Technology, U.S. House of Representatives.......   231
    Written Statement............................................   232

                                Panel I:

Mr. Earl E. Devaney, Chairman, Recovery Accountability and 
  Transparency Board
    Oral Statement...............................................   238
    Written Statement............................................   240
    Biography....................................................   242

Mr. Gene L. Dodaro, Acting Comptroller General, U.S. Government 
  Accountability Office
    Oral Statement...............................................   243
    Written Statement............................................   244
    Biography....................................................   260

Discussion
  Information Transparency and Compatibility.....................   261
  The Level of Detail in Tracking Contracts......................   262
  Keeping Accurate Job Statistics................................   263
  Whistleblowers.................................................   264
  Indications of Success.........................................   264
  Tracking Money at the Local Level..............................   265
  Preventing Misuse of Grant and Contract Funds..................   265
  Availability of Information....................................   266
  Agency Compliance With Recovery Act Requirements...............   269
  Oversight at the State and Local Level.........................   269
  Results From the Online Dialogue...............................   270

                               Panel II:

Dr. Clarence G. Newsome, President, Shaw University
    Oral Statement...............................................   272
    Written Statement............................................   274
    Biography....................................................   297

Dr. Gary D. Bass, Founder and Executive Director, OMB Watch
    Oral Statement...............................................   297
    Written Statement............................................   299
    Biography....................................................   306

Dr. Jerry Ellig, Senior Research Fellow, Mercatus Center, George 
  Mason University
    Oral Statement...............................................   307
    Written Statement............................................   308
    Biography....................................................   314

Ms. Danielle Brian, Executive Director, Project on Government 
  Oversight (POGO)
    Oral Statement...............................................   314
    Written Statement............................................   317
    Biography....................................................   318

Mr. Eric Gillespie, Senior Vice President of Products, 
  Technology, and Innovation and Chief Information Officer, 
  Onvia, Inc.
    Oral Statement...............................................   319
    Written Statement............................................   321
    Biography....................................................   329

Discussion
  Achieving Detail in Data Tracking..............................   329
  Monitoring Job Creation........................................   330
  Providing Equitable Funding Access.............................   333
  Closing........................................................   334

              Appendix: Answers to Post-Hearing Questions

Mr. Earl E. Devaney, Chairman, Recovery Accountability and 
  Transparency Board.............................................   338

Mr. Gene L. Dodaro, Acting Comptroller General, U.S. Government 
  Accountability Office..........................................   340

Dr. Gary D. Bass, Founder and Executive Director, OMB Watch......   345

Dr. Jerry Ellig, Senior Research Fellow, Mercatus Center, George 
  Mason University...............................................   347

Ms. Danielle Brian, Executive Director, Project on Government 
  Oversight (POGO)...............................................   350

Mr. Eric Gillespie, Senior Vice President of Products, 
  Technology, and Innovation and Chief Information Officer, 
  Onvia, Inc.....................................................   351


 FOLLOW THE MONEY, PART I: ACCOUNTABILITY AND TRANSPARENCY IN RECOVERY 
                          ACT SCIENCE FUNDING

                              ----------                              


                        THURSDAY, MARCH 19, 2009

                  House of Representatives,
      Subcommittee on Investigations and Oversight,
                       Committee on Science and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Brad 
Miller [Chairman of the Subcommittee] presiding.


                            hearing charter

              SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                     U.S. HOUSE OF REPRESENTATIVES

              Follow the Money, Part I: Accountability and

              Transparency in Recovery Act Science Funding

                        thursday, march 19, 2009
                         10:00 a.m.-12:00 p.m.
                   2318 rayburn house office building

I. Summary

    The Subcommittee will meet on March 19, 2009, to receive testimony 
relating to the accountability and transparency provisions in the 
American Recovery and Reinvestment Act (H.R. 1; hereafter cited as the 
``Recovery Act''). The Subcommittee will take testimony on steps taken 
by agencies under the Committee's jurisdiction to establish 
accountability for the funds they will receive under the Act.
    Witnesses on the first panel have been designated as ``senior 
accountability officers'' by their agencies and are nominally in charge 
of planning for spending Recovery Act funds. The second panel is 
composed of Inspectors General (IGs) and the Government Accountability 
Office (GAO). These witnesses will describe their roles in overseeing 
appropriate distribution of these funds and highlight for the 
Subcommittee issues specific to our agencies that will deserve close 
oversight attention while these funds are available.

II. Witness List

Panel I

  Dr. Cora Marrett, Deputy Director (Acting) and Senior 
Accountability Officer, National Science Foundation

  Ronald R. Spoehel, Chief Financial Officer, National 
Aeronautics and Space Administration

  Ellen Herbst, Senior Official for Recovery Implementation, 
Department of Commerce

  Matthew Rogers, Senior Advisor to the Secretary, Department 
of Energy

Panel II

  Tim Cross, Inspector General (Acting), National Science 
Foundation

  Todd Zinser, Inspector General, Department of Commerce

  Gregory H. Friedman, Inspector General, Department of Energy

  Patricia Dalton, Managing Director, Natural Resources and 
Environment Division, Government Accountability Office

    At the request of Mr. Broun, we have also invited testimony from 
Eileen Norcross, Senior Research Fellow at the Mercatus Center of 
George Mason University.

III. Funding Provisions

    Funds made available under the Recovery Act are intended to 
accomplish certain purposes, defined in Section 3(a):

        1.  To preserve and create jobs and promote economic recovery.

        2.  To assist those most impacted by the recession.

        3.  To provide investments needed to increase economic 
        efficiency by spurring technological advances in science and 
        health.

        4.  To invest in transportation, environmental protection, and 
        other infrastructure that will provide long-term economic 
        benefits.

        5.  To stabilize State and local government budgets, in order 
        to minimize and avoid reductions in essential services and 
        counterproductive State and local tax increases.

    Further, the Act requires that, ``The President and the heads of 
federal departments and agencies shall manage and expend the funds made 
available in this Act so as to achieve the purposes specified in 
subsection (a), including commencing expenditures and activities as 
quickly as possible consistent with prudent management.'' [Section 
3(b)]
    What follows is a short description of the Recovery Act funds 
allocated to the major agencies under the jurisdiction of the Committee 
on Science and Technology:

Department of Energy (DOE)      $15.9 billion

    Of direct interest to the Committee is $1.6 billion provided for 
the Department's Office of Science, and $400 million made available for 
the Advanced Research Projects Agency-Energy (established in the 
America COMPETES Act in the last Congress).
    The Department also received $2.5 billion for ``applied research, 
development, demonstration and deployment activities'' in energy 
efficiency and renewable energy. The bill directed $800 million to 
biomass energy efforts, $400 million to geothermal energy projects and 
$50 million to standards and efficiency work for information and 
communication technologies. Further, $2 billion is provided for grants 
in support of advanced battery manufacturing.
    For fossil research and development, the Act provides $3.4 billion. 
Approximately half ($2.32 billion) supports Round 3 of the Clean Coal 
Power Initiative and CO2 capture and storage research. 
Another $1 billion is available for general fossil energy research 
projects.
    Finally, the Act establishes a new loan guarantee program ``. . . 
for renewable technologies and transmission technologies.'' The 
Department will have $6 billion for this purpose, and the conference 
report indicates it is expected this will leverage ten times that 
amount in private funds to develop such technologies.

National Aeronautics and Space Administration (NASA)      $1 billion

    Each of the Agency's appropriation accounts received funding in the 
Recovery Act:

          The Science account received $400 million to expedite 
        development of the first round of missions set out in the 
        National Research Council's 2007 Earth science decadal survey, 
        and to upgrade NASA's supercomputers.

          Aeronautics has $150 million to focus on aviation 
        safety, mitigation of environmental impacts from aviation and 
        projects related to replacement of the air traffic control 
        system.

          $400 million is made available for Exploration, which 
        will likely be used to shrink the current hiatus between 
        Shuttle retirement and initial operation of new Constellation 
        systems.

          The agency also obtained $50 million to assist in 
        repairing facilities at the Johnson Space Center damaged by 
        Hurricane Ike last year.

National Science Foundation (NSF)      $3 billion

    The majority of funds available to NSF are provided in the Research 
and Related Activities account, with $300 million targeted on the major 
research instrumentation program and $200 million set aside for 
academic facilities modernization. The conference report requires that 
all of the research divisions share in at least some of the other $2 
billion in the account, after providing for ``. . . advancements in 
supercomputing technology.''
    Scholarship programs supported by the Foundation receive an 
additional $100 million, while $400 million is made available to 
programs funded by the Major Research Equipment appropriation.

National Institute of Standards and Technology (NIST)      $580 million

    The research program at NIST is bolstered by $220 million to 
support research, to provide more competitive grants and purchase 
needed equipment for laboratories. Remaining funding is split evenly 
between the agency's own facility construction efforts and a 
competitive grant program for research science buildings.
    Not included in the total above is an additional $20 million 
transferred from the Department of Health and Human Services to support 
NIST's efforts in developing security and inter-operability standards 
for health information technology. A further $10 million from the 
Department of Energy is intended to assist in bringing intelligence to 
the national electrical power grids.

National Oceanic and Atmospheric Administration (NOAA)   $830 million

    The Appropriations Committee directed NOAA to provide $230 million 
to reduce its ``backlog of research, restoration, navigation, 
conservation and management activities.'' The remaining $600 million is 
split between work on facilities, ships and equipment, weather 
forecasting and satellite development ($430 million), and $170 million 
targeted on climate activities such as modeling, data records and 
studies in mitigation.

IV. Accountability Provisions

    For the agencies, the Recovery Act imposes new requirements to 
accompany the new funding available. For spending on infrastructure 
projects, the agencies are directed to obligate at least half of the 
funds available within 120 days of the bill's enactment (February 16, 
2009). Grant funding is to be employed ``in a manner that maximizes job 
creation and economic benefit.'' Contracts awarded as part of Recovery 
Act activities are to be fixed-price and awarded by the competitive 
process set forth in the Federal Acquisition Regulation; contracts 
awarded by other means are to be highlighted in a special section of 
the Recovery.gov website.
    The Office of Management and Budget (OMB), on February 9, 2009, 
directed the agencies ``to name, no later than February 13, 2009, a 
senior official responsible for coordinating recovery-related efforts 
across your agency.'' Those officials represent the agency witnesses 
here today. Weekly reports on agency activities relating to 
implementation of the Recovery Act were to be posted on the agency's 
own website for Recovery Act actions beginning March 3. According to 
the first weekly reports published by the agencies testifying at the 
hearing, there have been no expenditures to date using Recovery Act 
funds. The formal plans for distributing Recovery Act resources are due 
to OMB by May 1.
    The Recovery Act does not relieve the agencies of their normal 
requirements for assuring the proper use of funds, such as prohibitions 
against discrimination in the Civil Rights Act and the reviews required 
by the National Environmental Policy Act. OMB has told the agencies 
that they can expect their performance to be measured against the 
following criteria:

        1.  Audits and investigation of Recovery Act funds occurring to 
        identify wasteful spending and minimize waste, fraud, and 
        abuse;

        2.  Qualified personnel overseeing Recovery Act funds;

        3.  Opportunities to use competitive awards maximized;

        4.  Timely award of dollars;

        5.  Timely expenditure of dollars;

        6.  Timely completion of planned work;

        7.  Cost overruns minimized; and

        8.  Improper payments minimized.

    However, because of the short window during which Recovery Act 
funds will be available (appropriations under the Act will generally 
expire at the end of Fiscal Year (FY) 2010 unless otherwise stated) and 
specific direction in the Act to expedite disbursement, the agencies 
will have to execute their normal processes with alacrity, over and 
above the work needed to deal with regular activities.
    At the same time, agency staff devoted to acquisition has been 
shrinking government-wide, from 67,085 in 1992 to 61,434 in FY 2007, 
according to the Federal Acquisition Institute (with half of those at 
the Department of Defense). The Professional Services Council, an 
organization of government contractors, warned last month that 
``[w]ithout a government workforce sufficient to plan, deliver and 
manage the contracts and grants that dispense these huge funds, it will 
be like constructing an office building on a foundation of sand.'' The 
state of these acquisition staffs was a focus of OMB Director Peter 
Orszag at the first meeting with the Cabinet to discuss Recovery Act 
implementation. Agency witnesses should be questioned closely about 
steps they are taking to address their weaknesses in this critical 
area.
    It is the responsibility of the agency Inspectors General to 
monitor agency operations for waste, fraud and abuse, and they will 
have similar responsibilities for funds made available by the Recovery 
Act. It is anticipated that their work will provide the bulk of the 
information related to accountability that will become available on 
Recovery.gov (http://www.recovery.gov/, the central information website 
created in the Recovery Act). The Inspectors General have a specific 
responsibility to receive reports from the public relating to items 
funded by the Act and to determine if those reports demonstrate 
improper use of those funds. It will also be the IGs investigating 
allegations of retaliation against whistleblowers under the protections 
for State, local and contractor employees providing information on 
misuse of Recovery Act funds. The following table identifies the 
additional funding made available to the IGs in the Act:




    These funds remain available to the DOE IG until the end of FY 
2012, and to the other IGs until FY 2013. The Subcommittee has asked 
each of the witnesses to describe how the extra resources will be 
employed.\1\
---------------------------------------------------------------------------
    \1\ The Subcommittee has made an affirmative decision to not invite 
the NASA Inspector General, Mr. Robert ``Moose'' Cobb. Both Chairman 
Gordon and Subcommittee Chairman Miller have recommended his ouster for 
almost two years, most recently in a letter to the White House. Based 
on investigative work by the Subcommittee and by the President's 
Council on Integrity and Efficiency (PCIE), Mr. Cobb has not lived up 
to the high standards of conduct and integrity expected of an Inspector 
General. It was apparent from the PCIE investigation that Mr. Cobb 
failed to understand how to properly employ auditors and did not 
respect the audit staff in his organization. This may explain the 
finding in a recent report by GAO (done at the request of Chairman 
Gordon and Chairman Miller) that the NASA IG audit operation 
demonstrated close to the weakest performance of any IG office in the 
Federal Government. For every tax dollar assigned to Mr. Cobb's office, 
his audit operation discovers just thirty-six cents in potential 
savings. For an agency that puts 80 percent of its budget out the door 
in contracts and grants, that is an inexplicably low number. The 
Department of Commerce IG and Department of Energy IG were found to 
return $2.25 and $2.37, respectively. If anyone wishes more information 
on these matters, please contact the Subcommittee staff.
---------------------------------------------------------------------------
    To coordinate the work of the IGs, Title XV of the Recovery Act 
establishes a new entity named the Recovery Accountability and 
Transparency Board. The Board will have the power to determine if 
contracts and grants issued with Recovery Act funding conform to law 
and regulation and if they are appropriately managed. The Board will 
also evaluate the performance of the agency acquisition staffs. The 
Board will report to Congress and the public regarding the use of 
Recovery Act funds at least on a quarterly basis, and can issue 
immediate (``flash'') reports in cases requiring immediate attention. 
The Board will also maintain Recovery.gov. Given its position at the 
apex of the accountability structure, the Board will make 
recommendations for the prevention of waste fraud and abuse to the 
agencies, to which the agency must respond by report to Congress and 
the President within 30 days.
    Membership for the Board is drawn from a subset of the departmental 
IGs, including two of our witnesses (Inspectors General Zinser and 
Friedman). President Obama has appointed the Inspector General of the 
Department of the Interior, Earl Devaney, to serve as the Board's 
Chairman (Mr. Devaney has taken leave from Interior to fill this job 
and has made a promise to Chairman Miller to appear at a future 
Subcommittee hearing). The Act specifically tasks the Board to consult 
and collaborate with the Inspectors General, the Government 
Accountability Office and State auditors in the conduct of its affairs 
and in the preparation of the reviews and reports it will publish. The 
Board receives a budget of $84 million to fund its activities until its 
termination date of September 30, 2013.
    With regard to GAO's contribution to Recovery Act oversight, the 
acting Comptroller General, Gene Dodaro, testified before the Senate 
Committee on Homeland Security and Government Affairs on March 5, 2009. 
He described the steps he has taken to begin cooperating with the IG 
community, State auditors and OMB as contemplated in the Act. Based on 
GAO's prior work, he highlighted fraud prevention, contract management 
and grant accountability as areas deserving special focus as Recovery 
Act funds are expended. GAO received an additional $25 million in the 
Act for salaries and expenses relating to their responsibilities under 
the Act.
    While we have asked the IG and GAO witnesses to distill general 
oversight principles (like those just discussed) from their respective 
bodies of work, they also can describe specific management challenges 
that relate to Recovery Act programs. Both NASA and the Department of 
Energy have spent years on GAO's high-risk list for contract 
management. When either agency employs a contract to spend Recovery Act 
money, how will the procurement process close the gaps GAO identifies? 
A recent report by the Department of Energy Inspector General indicates 
that the office managing loan guarantees at the Department is 
overstretched with its existing workload, and now faces an additional 
$6 billion provided for a new set of guarantees authorized by the 
Recovery Act. What will be done to reduce the overload?
    Ms. Norcross will address the ability of nongovernmental 
organizations, academia, and the private sector to complement existing 
oversight of the American Recovery and Reinvestment Act. Additionally, 
she will also speak to what tools Congress can provide to these 
organizations that will further enable transparency and oversight. As 
co-founder of the website StimulusWatch.org, Ms. Norcross will also 
discuss the role of technology in promoting accountability.
    Mr. Devaney, in a Wall Street Journal article published March 9, 
2009, noted that his previous experience indicated that fraud in 
federal expenditures averaged ``around seven percent of all big 
contracts.'' While he stated that he believes strong agency oversight 
can keep losses ``well below'' that level, it is unlikely that it will 
end up reduced to zero. The efforts being made on accountability are 
themselves an experiment. Depending on their success at minimizing 
improper expenditures, they may become the standard for measuring 
federal spending distributions in the future.
    Chairman Miller. Good morning and welcome to our hearing, 
``Follow the Money: Accountability and Transparency in Recovery 
Act Science Spending.'' I understand Dr. Broun, the Ranking 
Republican of the Subcommittee, will be with us shortly. Mr. 
Bilbray is serving in his stead for the moment.
    This subcommittee's hearings usually or frequently have as 
witnesses people that we think may have done wrong. None of our 
witnesses today have done wrong, yet anyway, but we want to 
hear from you on how you are going to do right.
    Our purpose today is twofold: to learn how agencies in this 
committee's legislative jurisdiction intend to distribute funds 
available under the American Recovery and Reinvestment Act and 
then to examine what will be done to guarantee that those funds 
are not awarded improperly or wasted.
    Last Thursday President Obama told State officials seeking 
guidance on the use of Recovery Act funds that, ``If we see 
money being misspent, we are going to put a stop to it.'' I 
assume he would give the same warning to universities, to 
scientists, to businesses seeking funds from our agencies and 
today we will begin to find out how that will be accomplished.
    Congress and the President enacted the Recovery Act to 
respond to extraordinary circumstances. It leaves the agencies 
to walk a fine line. If you want to jump-start the economy by 
expanding employment, the money in this bill needs to get into 
the pipeline quickly, but Congress did not relieve the agencies 
of their responsibility to adhere to federal contracting rules 
when distributing the funds, which takes time and skilled 
personnel, first to award the grant or contract and then to 
manage the contract in a way that ensures a productive outcome.
    The innovations in the Recovery Act are not in streamlining 
contracting techniques. Rather, the Act requires agencies to 
gather more information regarding their awards and to make that 
information more available to the public than has ever been 
done before. The Act also sets up elaborate systems among the 
Inspectors General and the Government Accountability Office, 
the GAO, to ensure that waste, fraud and abuse are at a 
minimum. It is probably unrealistic to think that they will be 
eliminated entirely.
    All of this--expanded spending, transparent competition and 
awards tracking, and accountability after the award has been 
made--must be carried out while dealing with the ordinary 
agency, the IG and GAO business.
    Our first panel has been asked to explain how they intend 
to balance these competing pressures and to accomplish the 
goals of the Recovery Act. The witnesses on the panel represent 
the designated accountability officers of the Department of 
Energy, NASA, NSF and Department of Commerce. They are in the 
front line of conversations with OMB and program divisions in 
their agencies about carrying out the Recovery Act.
    Congress turns to IGs and the Government Accountability 
Office, the GAO, for expertise and accountability. Our 
witnesses on the second panel bring to bear their experience in 
detecting waste, fraud and abuse, something that will be vital 
for managing the outflow of Recovery Act dollars. With the 
pressure to move the money, we cannot depend solely on audits 
after the fact to avoid diversion of those grants and contracts 
and I expect to hear that they are closely cooperating with the 
agency management to build protections into project evaluation 
and procurements.
    The late Senator from Illinois, Everett Dirksen, is 
credited with the line, ``A billion here, a billion there, 
pretty soon you are talking about real money.'' Today we are 
talking about 20 times that amount of money.
    When the stimulus funds run out next year, we want to know 
where the money went, and if those funds succeeded in meeting 
the goals that Congress set. This committee will particularly 
want to know, did they provide investments needed to increase 
economic efficiency by spurring technological advances in 
science and health?
    I expect to hear from our witnesses that this will not be 
an easy task but one that you are prepared to tackle and get 
right. Since this is just the first hearing on this subject, 
more to look forward to, for this subcommittee, we anticipate 
monitoring progress along these lines over the course of the 
111th Congress.
    I now recognize the Subcommittee's Ranking Member, if he 
has caught his breath, the gentleman from Georgia, Dr. Broun, 
for his opening statement.
    [The prepared statement of Chairman Miller follows:]

               Prepared Statement of Chairman Brad Miller

    Good morning, and welcome to our hearing, ``Follow the Money: 
Accountability and Transparency in Recovery Act Science Spending.''
    Our purpose today is twofold--to learn how agencies in the 
Committee's legislative jurisdiction intend to distribute funds 
available under the American Recovery and Reinvestment Act, and then to 
examine what will be done to guarantee that those funds are not awarded 
improperly or wasted.
    Last Thursday, President Obama told State officials seeking 
guidance on the use of Recovery Act funds that, ``If we see money being 
misspent, we're going to put a stop to it.'' I assume he would give the 
same warning to universities, scientists and businesses seeking funds 
from our agencies, and today we will begin to find out how this will be 
accomplished.
    Congress and the President enacted the Recovery Act to respond to 
extraordinary circumstances. It leaves the agencies to walk a fine 
line. If you want to jump-start the economy by expanding employment, 
the money in this bill needs to get into the spending pipeline quickly. 
Yet Congress did not relieve the agencies of their responsibility to 
adhere to federal contracting rules when distributing these funds, 
which takes time and skilled personnel first to award the grant or 
contract and then to manage in a way that ensures a productive outcome.
    The innovations in the Recovery Act are not in stream-lining 
contracting techniques. Rather, the Act requires agencies to gather 
more information regarding their awards and to make that information 
more available to the public, than has ever been done before. The Act 
also sets up elaborate systems among the Inspectors General and the 
Government Accountability Office to insure that waste, fraud and abuse 
are at a minimum.
    All of this--expanded spending, transparent competition and awards 
tracking, and accountability after the award has been made--must be 
carried out while dealing with the ordinary agency, IG, and GAO 
business.
    Our first panel has been asked to explain how they intend to 
balance these competing pressures and to accomplish the goals of the 
Recovery Act. The witnesses on that panel represent the designated 
``accountability officers'' for the Department of Energy, NASA, NSF and 
the Department of Commerce. They are on the front line of conversations 
with OMB and program divisions in their agencies, about carrying out 
the Recovery Act.
    Congress turns to Inspectors General and the Government 
Accountability Office for expertise in accountability. Our witnesses on 
the second panel bring to bear their experience in detecting waste, 
fraud and abuse, something that will be vital for managing the outflow 
of Recovery Act dollars. With the pressure to move the money, we cannot 
depend solely on audits after the fact to avoid diversion of these 
grants and contracts. I expect to hear that they are closely 
cooperating with agency management to build protections into project 
evaluation and procurements.
    The late Senator from Illinois, Everett Dirksen, is credited with 
the line, ``A billion here, a billion there; pretty soon you're talking 
real money.'' Today we'll be talking about some 20 times that threshold 
for real money.
    When the stimulus funds run out next year, we want to know where 
they went and if these funds succeeded in meeting the goals Congress 
set forth. This committee will particularly want to know, did they 
``provide investments needed to increase economic efficiency by 
spurring technological advances in science and health''?
    I expect to hear from our witnesses that this will not be an easy 
task, but one they are prepared to tackle and get right. Since this is 
just the first hearing on this subject for this subcommittee, we 
anticipate monitoring progress along these lines over the course of the 
111th Congress.
    I now recognize the Subcommittee's Ranking Member, the gentleman 
from Georgia, Dr. Broun, for his opening statement.

    Mr. Broun. I thank the Chairman and I beg his forgiveness 
and the panel's forgiveness for running late. Something very 
important came up and delayed me a bit and I came running 
literally from my office here, so I apologize and I hope you 
all will forgive me for running late.
    Thank you, Mr. Chairman. I want to thank you for holding 
this hearing and commend you for addressing oversight at our 
science agencies. This committee has an important 
responsibility to ensure that funding from the American 
Recovery and Reinvestment Act is spent appropriately, and I 
look forward to working with you, Chairman Gordon and Ranking 
Member Hall to make sure we do just that.
    Addressing oversight, accountability and transparency at 
agencies is an important task, but Congress should also be held 
to these same principles. In attempting to live up to these 
standards, Democratic leadership has failed the American 
people. The stimulus bill was bloated with earmarks and pushed 
through Congress without a single oversight hearing. We will 
hear from witnesses shortly about the importance of preventing 
waste, fraud and abuse ahead of time rather than trying to 
detect it after the fact. They will speak to the need to get 
policies and procedures for spending the money established 
early in the process instead of playing ``gotcha'' after the 
money has been spent. This is important guidance that we will 
insist the agencies follow, yet the irony of the situation is 
that Congress never did this work itself.
    Without a single hearing by any committee, the Democratic 
leadership has tripled our nation's debt and forced us to 
borrow from our children, grandchildren and foreign nations. We 
spent $787 billion in this bill. To put this into perspective, 
last year's budget for non-security discretionary spending was 
roughly $390 billion. That is almost twice as much as last 
year's budget and doesn't even take into account the omnibus or 
other bail-outs that we have passed on top of that. Neither 
this committee nor any other had a role in developing 
appropriate oversight, accountability and transparency measures 
necessary for such an enormous bill. We never held a hearing or 
a single markup. Therefore, it is somewhat comical to talk 
about stimulus accountability and transparency when there 
wasn't any behind this bill's formulation.
    Don't get me wrong, making sure our science agencies are 
funded at the appropriate authorization levels is important, 
but that is not what we are talking about here. We are talking 
about not learning from the lessons of post-Katrina disaster 
relief, Iraq reconstruction and the Troubled Asset Relief 
Program, all instances where expediency trumped accountability 
and the taxpayer suffered. I was outraged just as the American 
people were to hear that AIG executives received taxpayer money 
as bonuses while their company crumbled around them. If the 
stimulus bill had seen the light of day, perhaps Democratic 
leadership would not have been able to add a loophole for AIG 
executive bonuses. History has shown that throwing as much 
money as we can out the window as fast as we can has never 
ended well. Congress should have known this and taken a more 
measured approach to aiding our economy, which brings me to an 
important point. Obama Administration economic advisor Larry 
Summers indicated numerous times that the stimulus bill would 
be ``timely, targeted and temporary.'' I have serious concerns 
about the impact that a temporary surge of money will have on 
our scientific enterprise. A temporary influx of funds without 
a long-term commitment will lead to a boom-and-bust scenario 
similar to that experienced by NIH after its budget doubled 
earlier this decade. As Science Magazine noted in a 2007 
article, ``Between 1998 and 2003, the budget of the National 
Institutes of Health rose from $13 billion to more than $27 
billion with a plan known as The Doubling. Now that the tsunami 
of cash has receded, many life scientists, especially those in 
the early phase of their careers, have found conditions no 
better and in some ways worse than before the process began.''
    While the Obama Administration has clearly indicated that 
this enormous influx of money will be ``temporary,'' our 
investment in science should be steady and predictable, not 
volatile and fleeting.
    Thank you, Mr. Chairman. I look forward to the witnesses' 
testimony and look forward to working with you going forward, 
oversight in a truly nonpartisan endeavor. We have 
disagreements on the underlying substance and process 
associated with the stimulus bill but I hope now that the dust 
has settled, we can work together in a productive manner to 
minimize waste, fraud, abuse and mismanagement at our science 
agencies.
    I yield back.
    [The prepared statement of Mr. Broun follows:]

           Prepared Statement of Representative Paul C. Broun

    Thank you Mr. Chairman. I want to thank you for holding this 
hearing, and commend you for addressing oversight at our science 
agencies.
    This committee has an important responsibility to ensure that 
funding from the American Recovery and Reinvestment Act is spent 
appropriately, and I look forward to working with you, Chairman Gordon, 
and Ranking Member Hall to make sure we do just that.
    Addressing oversight, accountability, and transparency at agencies 
is an important task, but Congress should also be held to these same 
principles. In attempting to live up to these standards, Democratic 
Leadership has failed the American people.
    The stimulus bill was bloated with earmarks and pushed through 
Congress without a single oversight hearing.
    We will hear from witnesses shortly about the importance of 
preventing waste, fraud, and abuse ahead of time rather than trying to 
detect it after-the-fact.
    They will speak to the need to get policies and procedures for 
spending money established early in the process, instead of playing 
``gotcha'' after the money has been spent.
    This is important guidance that we will insist the agencies follow, 
yet the irony of the situation is that Congress never did this work 
itself.
    Without a single hearing by any committee, the Democratic 
Leadership has tripled our nation's debt and forced us to borrow from 
our children, grandchildren, and foreign nations. We spent $787 billion 
in this bill. To put this into perspective, last year's budget for-non-
security discretionary spending was roughly $390 billion. That's almost 
twice as much as last year's budget, and doesn't even take into account 
the Omnibus or other bail-outs that we passed on top of that.
    Neither this committee, nor any other, had a role in developing 
appropriate oversight, accountability, and transparency measures 
necessary for such an enormous bill. We never held a hearing, or a 
single markup. Therefore, it is somewhat comical to talk about stimulus 
accountability and transparency when there wasn't any behind this 
bill's formulation.
    Don't get me wrong, making sure our science agencies are funded at 
the appropriate authorization levels is important, but that's not what 
we are talking about here.
    We are talking about not learning from the lessons of post-Katrina 
disaster relief, Iraq Reconstruction, and the Troubled Asset Relief 
Program--all instances where expediency trumped accountability and the 
taxpayer suffered. I was outraged, just as the American people were, to 
hear that AIG executives received taxpayer money as bonuses while their 
company crumbled around them. If the Stimulus bill had seen the light 
of day, perhaps Democratic leadership would not have been able to add a 
loophole for AIG executive bonuses.
    History has shown that throwing as much money as we can out the 
window as fast as we can has never ended well. The Congress should have 
known this and taken a more measured approach to aiding our economy.
    Which brings me to an important point. Obama Administration 
Economic Advisor Larry Summers indicated numerous times that the 
stimulus bill would be ``timely, targeted, and temporary.'' I have 
serious concerns about the impact that a temporary surge of money will 
have on our scientific enterprise. A temporary influx of funds without 
a long-term commitment will lead to a boom-and-bust scenario similar to 
that experienced by NIH after its budget doubled earlier this decade.
    As Science Magazine noted in a 2007 article, ``Between 1998 and 
2003, the budget of the National Institutes of Health rose from $13 
billion to more than $27 billion in a plan known as ``the doubling.'' 
Now that the tsunami of cash has receded, many life scientists--
especially those in the early phase of their careers--have found 
conditions no better, and in some ways worse, than before the process 
began.''
    While the Obama Administration has clearly indicated that this 
enormous influx of money will be ``temporary,'' our investment in 
science should be steady and predictable, not volatile and fleeting.
    Thank you Mr. Chairman. I look forward to the witnesses' testimony 
and working with you going forward. Oversight it truly a nonpartisan 
endeavor. We may have disagreements on the underlying substance and 
process associated with the Stimulus bill, but I hope that now that the 
dust has settled, we can work together in a productive manner to 
minimize waste, fraud, abuse, and mismanagement at our science 
agencies.
    I yield back.

    Chairman Miller. Thank you, Dr. Broun.
    I ask unanimous consent, I am not sure I need to, but I ask 
unanimous consent that any additional opening statements 
submitted by Members will be included in the record, and 
without objection that is so ordered.
    [The prepared statement of Chairman Gordon follows:]

               Prepared Statement of Chairman Bart Gordon

    Good morning, Mr. Chairman. I am pleased to see your subcommittee 
devoting attention to how our agencies are preparing to spend recovery 
money.
    In the Recovery Act, Congress placed extra requirements on agencies 
to insure that taxpayer money was carefully managed and accounted for.
    The Congress expects that money will be put into circulation 
quickly to meet the employment goals of the Act, but it is just as 
important that the money is awarded fairly and for purposes that serve 
real public needs.
    I look forward to hearing how the agencies are getting ready to 
ramp up awards.
    The Recovery Act also provided extra funding for the Inspectors 
General and the Government Accountability Office so that they could 
expand their operations and monitor the coming surge in government 
spending. I look forward to the testimony of our IGs and GAO regarding 
their efforts to provide an extra level of oversight and accountability 
inside the agencies.
    Finally, the Obama Administration has brought a renewed commitment 
to transparency in all aspects of government. In our democracy, the 
greatest accountability measure you can embrace is to let the public 
know what you are doing and how you are doing it.
    I am very pleased that an unprecedented level of information will 
be made available to the public through Recovery.gov, however I am 
interested in learning how agencies intend to provide that information, 
where there will be challenges in providing accurate information, and 
whether the right policies are in place to guide the agencies in their 
reporting requirements.
    This will not be the last hearing on the Recovery Act held by this 
committee, but I think it is an excellent start.
    Thank you, Mr. Chairman and I yield back.

                                Panel I

    Chairman Miller. It is now my pleasure to introduce our 
witnesses at this time. Dr. Cora Marrett is the Senior 
Accountability Officer and Acting Deputy Director at the 
National Science Foundation. Mr. Ronald Spoehel is the Chief 
Financial Officer of the National Aeronautics and Space 
Administration. Ms. Ellen Herbst is the Senior Officer of 
Recovery and Implementation with the U.S. Department of 
Commerce, and Mr. Matthew Rogers is the Senior Advisor to 
Secretary Chu at the U.S. Department of Energy.
    As our witnesses should know, you will each have five 
minutes for your spoken testimony. Your written testimony will 
be included in the record for the hearing. When you all have 
completed your oral testimony, we will have questions. Each 
Member will have five minutes to question the panel. It is the 
practice of the Committee to receive testimony under oath. 
Since I said earlier none of you have done wrong yet, I don't 
think you have to worry about anything but we do take testimony 
under oath. Do any of you have any objection to swearing an 
oath, to take an oath? You also have a right to be represented 
by counsel. We are trying to make you at as ease as we can by 
asking you these questions. Do any of you have counsel here? 
Okay. Now if you would now please stand and raise your right 
hand. Do you swear to tell the truth and nothing but the truth? 
The record will reflect that all the witnesses took the oath.
    We will now begin with Dr. Cora Marrett. Dr. Marrett, you 
may begin.

STATEMENT OF DR. CORA MARRETT, ACTING DEPUTY DIRECTOR, NATIONAL 
                       SCIENCE FOUNDATION

    Dr. Marrett. Thank you for inviting me on behalf of the 
National Science Foundation. I am Cora Marrett, Acting Deputy 
Director and Senior Accountability Officer for Recovery Act 
activities at NSF.
    NSF is honored to have a role in stimulating the American 
economy. The $3 billion entrusted to us will sustain and 
advance major research initiatives, enhance support for 
science, technology, engineering and mathematics education, and 
help renew America's research infrastructure. The immediate 
impact will be felt by investigators, postdoctoral fellows, 
graduate and undergraduate students and teachers throughout the 
Nation. We now support nearly 200,000 of these individuals 
every year. We expect to add approximately 50,000 in Fiscal 
Year 2009 with Recovery funds. Over the long run, our 
investments should help the Nation meet the increasing demands 
for new knowledge and innovative technologies.
    We are confident that NSF can maintain the highest 
standards of competitive merit review, distribute the funds in 
a timely manner and meet all of the requirements for 
accountability and transparency. We have formal policies and 
procedures for implementing the guidance and a plan for 
allocating the funds.
    Moreover, we have proposals and procedures; we have 
proposals in place that merit the funding and procedures for 
handling expeditiously the other proposals we will receive. For 
all of these reasons, NSF is confident that we can make the 
first awards within the next few weeks.
    Of the $3 billion allotted to NSF, $2.5 billion is for 
Research and Related Activities, $400 million for Major 
Research Equipment and Facilities Construction and $100 million 
for Education and Human Resources. Now, not only is NSF 
prepared to distribute the funds, but so are the science and 
engineering research and education communities poised to expend 
the funds quickly and effectively.
    We recognize the importance of building and maintaining the 
confidence of Congress and the American people. We maintain an 
unwavering commitment to our merit review processes, processes 
considered by many to be the gold standard for achieving 
excellence, accountability and transparency in grant making. 
NSF will not compromise the fairness and competitiveness that 
mark our processes and we can make this commitment, given the 
caliber of our staff and of our management practices, both 
refined over many decades.
    Now, we have more than a plan for the Recovery Act funds, 
we have a structure in place. As the Senior Accountability 
Officer, I oversee a steering committee drawn from across the 
Agency. Several members of the committee themselves direct 
``tiger teams,'' teams with responsibilities aligned with the 
requirements of the Recovery Act. We are working closely with 
the National Science Board, our governing body, and our Office 
of the Inspector General. These connections will help us meet 
the enhanced monitoring and reporting requirements of the Act. 
Personally, I take seriously my responsibility to deliver 
information in a timely way and to ensure the quality of that 
information.
    In conclusion then, the high expectations for NSF derive 
from the discoveries and the innovations that the agency has 
helped generate over the past six decades. The landmark 
legislation then enables us to strengthen our contributions and 
in so doing move forward the Nation and the American people.
    Mr. Chairman, this concludes my remarks. I will certainly 
answer any questions should you have them.
    [The prepared statement of Dr. Marrett follows:]

                   Prepared Statement of Cora Marrett

    Chairman Miller, Ranking Member Broun, and distinguished Members of 
the Subcommittee, thank you for inviting me to speak on the National 
Science Foundation's participation in the America Recovery and 
Reinvestment Act. I am Dr. Cora Marrett, Acting Deputy Director and 
Senior Accountability Officer for Recovery Act Activities for NSF.
    The Foundation is grateful and honored that our role in stimulating 
the American economy has been recognized. The $3 billion Recovery Act 
investment in NSF programs will sustain and advance major research 
initiatives, enhance support for science, technology, engineering and 
mathematics education, and help renew America's research 
infrastructure:
    The immediate impact of this investment will be felt by 
investigators, post-doctoral fellows, graduate and undergraduate 
students, and teachers throughout the Nation. NSF funding now helps to 
support nearly 200,000 of these individuals every year. We expect to 
add approximately 50,000 in FY 2009 with Recovery Act funds.
    Over the longer-term, a vibrant research and education enterprise 
will help meet increasing demands for the new knowledge and innovative 
technologies that contribute to sustainable economic prosperity and 
quality of life.
    As you know, the Recovery Act mandates an unprecedented level of 
transparency and accountability. NSF is confident that the agency can 
maintain the highest standards of competitive merit review, distribute 
Recovery Act funds in a timely manner, and meet all requirements for 
accountability and transparency.

1.  How soon will you begin to allocate funds for your agency programs 
funded through the Recovery Act?

    The Foundation has developed formal policies and procedures for 
implementing the Recovery Act and a plan and framework for allocating 
funds. Moreover, we have proposals in place that merit the funding and 
we have and procedures for handling expeditiously other proposals we 
will receive. For these reasons, NSF is confident that we can begin to 
make the first awards within the next few weeks.
    As you know, NSF Recovery Act funds total $3 billion. $2.5 billion 
is available for Research and Related Activities, and includes $300 
million for Major Research Instrumentation (MRI) and $200 million for 
Academic Research Instrumentation (ARI). The remaining $2 billion 
supports new research grants and critical infrastructure needs; with an 
emphasis on deferred maintenance and enhancements for existing research 
facilities.
    In addition, the Recovery Act stipulates $400 million for Major 
Research Equipment and Facilities Construction, and $100 million for 
Education and Human Resources. The $100 million includes $25 million 
for the Math and Science Partnerships Program and $60 million for the 
Noyce Teacher Scholarship Program, and $15 million for a Science 
Masters program authorized in the America COMPETES Act.
    Not only will NSF distribute these funds expeditiously, we expect 
that the science and engineering communities are poised to immediately 
expend funds that will advance discovery and innovation, and enhance 
the economy. The highly rated proposals we have been unable to support 
provide ample evidence of this. Colleges and universities have urgent 
needs to retain talented faculty, graduate students and post-doctoral 
fellows. They. are also prepared to use Recovery Act funds to refurbish 
laboratories and upgrade information systems technology.

2.  There will be increased pressure to bypass standard procedures in 
order to accelerate the delivery of Recovery funds through grants and 
contracts. How will you ensure the expedited awards maintain a 
selection and management process that is fair, competitive, and 
advances the President's long-term policy agenda?

    In awarding Recovery Act funds, the Foundation recognizes the 
importance of building and maintaining the confidence and trust of 
Congress and the American people. NSF maintains a steadfast commitment 
to established merit review processes, considered by many to be the 
``gold standard'' for achieving excellence, accountability, 
transparency and effectiveness in grant-making activities.
    The NSF merit review process, relies on a pool of over 50,000 
volunteer reviewers, selected from a pool of national and international 
experts, to evaluate the proposals we receive. Proposals are weighed 
against two established criteria: intellectual merit and broader 
impacts of the proposed research. The second criterion considers the 
impact that the research can have beyond the advancement of new 
knowledge, for example in teaching, training and learning.
    NSF will not, and need not bypass these established procedures in 
order to move funds rapidly. We have proposals already reviewed through 
the merit process this fiscal year that we could not fund with our 
regular budget. The budgets for these highly rated proposals total at 
least $2 billion. Reviews underway or to be completed shortly will 
generate additional proposals appropriate for Recovery Act funding. NSF 
will not compromise the fairness and competitiveness that marks the 
review process.
    The Foundation's first priority is to fund highly-rated proposals 
that would otherwise be declined for lack of funds. These investments 
clearly reflect the Administration's commitment to advance science and 
innovation to build a sustainable economic future. NSF places a high 
priority on using Recovery Act funds to support proposals from first 
time principal investigators and for high risk and transformative 
research. Both of these goals are also priorities for the 
Administration.

3.  How will you ensure the agency staff responsible for contracts and 
grant management have the knowledge and skills necessary to properly 
award and manage contracts and grants funded by Recovery Act resources?

    The Recovery Act clearly requires NSF to employ highly qualified 
staff to execute the critical responsibilities of grant and contract 
management. As you know, awarding and managing grants and contracts is 
the bread-and-butter business of the Foundation. In addition to well 
established merit review processes, NSF has a cadre of highly 
experienced grants management staff. Effective management processes, 
refined over many decades, are already in place to ensure that Recovery 
Act funds are awarded in a timely-manner while maintaining the 
integrity of award management processes.

4.  What structures do you plan to establish to ensure compliance with 
directions from the Office of Management and Budget? How will these 
structures ensure the timely delivery of information on Recovery Act 
projects to the public web portal, Recovery.gov, as directed by the Act 
and President Obama?

    NSF has more than a plan; we have a structure in place. The Senior 
Accountability Officer, my role, oversees a Recovery Act Steering 
Committee drawn from across the agency. Many members of the Steering 
Committee themselves direct ``tiger-teams'' with specific 
responsibilities aligned with the requirements of the Recovery Act.
    NSF management continues to work closely with the National Science 
Board, our governing body, and the Office of the Inspector General to 
develop appropriate procedures to meet the enhanced monitoring and 
reporting requirements of the Recovery Act. The responsibility for the 
timely delivery of information to the Recovery.gov web portal rests 
with the Chief Accountability Officer. A single office compiles the 
information that currently is required on a weekly basis.
    In conclusion, the high expectations accompanying the Recovery Act 
are a direct reflection of the discoveries and innovations that NSF and 
its partners in the research and education community have brought to 
the Nation over the past six decades. This landmark legislation 
provides the means to move forward and to greatly strengthen these 
contributions to the Nation and the American people.
    Mr. Chairman, this concludes my remarks. I would be pleased to 
answer any questions.

                       Biography for Cora Marrett

    Dr. Cora Marrett was appointed Acting Deputy Director of the 
National Science Foundation, effective January 18, 2009.
    She had been the Assistant Director for Education and Human 
Resources (EHR), a position she held from February 2007 until becoming 
Acting Deputy Director. She led NSF's mission to achieve excellence in 
U.S. science, technology, engineering and mathematics (STEM) education 
at all levels and in both formal and informal settings. Earlier, from 
1992-1996, Dr. Marrett was NSF's Assistant Director for Social, 
Behavioral and Economic Sciences (SBE).
    Prior to returning to NSF in 2007, Dr. Marrett served as the 
University of Wisconsin's Senior Vice President for Academic Affairs 
for six years. Before that, she served as Senior Vice Chancellor for 
Academic Affairs and Provost at the University of Massachusetts-Amherst 
for four years.
    Dr. Marrett holds a B.A. degree from Virginia Union University, and 
M.A. and Ph.D. degrees from UW-Madison, all in sociology. She received 
an honorary doctorate from Wake Forest University in 1996, and was 
elected a fellow of the American Academy of Arts and Sciences in 1998 
and the American Association for the Advancement of Science in 1996.

    Chairman Miller. Thank you, Dr. Marrett.
    Mr. Spoehel for five minutes.

 STATEMENT OF MR. RONALD R. SPOEHEL, CHIEF FINANCIAL OFFICER, 
         NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

    Mr. Spoehel. Chairman Miller, Ranking Member Broun and 
distinguished Members of the Subcommittee, thank you for the 
opportunity to appear today to discuss steps being taken at 
NASA to implement the Recovery Act.
    The Recovery Act entrusts NASA with the stewardship of just 
over $1 billion of Recovery Act funds, with almost 95 percent 
or $950 million designated for expenditure on science, 
aeronautics and exploration activities, and $50 million for 
cross-agency support activities prioritized for hurricane 
damage repair, along with $2 million for the NASA Office of 
Inspector General.
    While NASA is working aggressively to fulfill the Act's 
mandate of commencing Recovery Act activities and expenditures 
as quickly as possible, the Agency is also committed to 
managing Recovery Act funding under the heightened level of 
transparency and accountability demanded by the Congress and 
the Administration. We want the American people to rest assured 
that they will know where and how each of their Recovery Act 
dollars is being spent at NASA.
    NASA's planning, execution, reporting and oversight for 
Recovery Act activities began early, even before the Act was 
signed by the President. NASA is still in the early stages of 
implementing Recovery Act specific processes and activities, 
and while OMB guidance continues to evolve, it is my view that 
the Recovery Act requirements can be successfully implemented 
at NASA within a framework that substantially relies on 
existing Agency processes and structures. NASA already has 
well-established and effective procedures in place for budget 
planning and execution and for procurement, as well as for 
internal controls and external reporting, and the Agency 
intends to leverage those existing capabilities to accomplish 
rapid, timely Recovery Act planning and budget execution and 
procurements, while fully meeting all the requirements of the 
Act, related OMB guidance, and relevant laws and regulations. 
The Agency's planning process for Recovery Act activities and 
the associated allocation of funds is well underway, consistent 
with Recovery Act direction provided by Congress and OMB 
guidance, and also consistent with NASA goals and priorities as 
established by the President and Congress.
    NASA senior management recognizes that meeting the 
commitments of the President and Congress will require 
sustained focus and accountability from all, particularly in 
the awarding, managing and overseeing the contracts and grants 
funded by the Recovery Act. NASA's annual procurement 
obligations have exceeded $15 billion on average over the last 
four years and the $1 billion of Recovery Act funds, most of 
which will go to contract awards, is just over six percent of 
that amount. For the Recovery Act funding, the Agency intends 
to use its well-established processes and procedures for 
effectively and efficiently awarding--or planning, awarding and 
managing contract and grant awards in a fair and equitable 
manner. Oversight of the procurement process is maintained 
through several means beginning with a strong internal 
communication network within NASA's procurement community, 
monthly reviews of major procurements, periodic on-site 
intensive reviews of individual procurements, further 
supplemented by oversight and internal control reviews 
conducted regularly by the Agency. NASA recognizes that these 
processes can only be effective if it maintains a skilled and 
knowledgeable cadre of acquisition professionals, and the 
Agency has established a rigorous procurement training program 
as well as a contracting certification program.
    In closing, NASA is committed to the effective, efficient 
and responsible use of the resources entrusted to the Agency, 
and to the implementation of a robust and comprehensive program 
that meets the requirements of the Recovery Act and other 
relevance guidance and laws with the level of transparency and 
accountability demanded.
    I would be happy to respond to any questions you or the 
Members of the Committee may have. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Spoehel follows:]

                Prepared Statement of Ronald R. Spoehel

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to appear today to discuss the steps being taken at NASA to 
implement the American Recovery and Reinvestment Act of 2009 (P.L. 111-
5), commonly referred to as the Recovery Act. My testimony will outline 
NASA's progress to date and the actions the Agency is taking to provide 
for the special accountability and transparency called for by the Act.
    The Recovery Act entrusts NASA with the stewardship of just over 
$1.0 billion in Recovery Act funds. Almost 95 percent of these funds, 
or $950 million, are designated for expenditure on Science, Aeronautics 
and Exploration activities. Specifically, $400 million has been 
appropriated for Science, $150 million for Aeronautics, and $400 
million for Exploration. Of the remaining funds, $50 million is for 
Cross-Agency Support, with the highest priority being given to 
restoring NASA-owned facilities damaged from hurricanes last year, and 
$2 million is for the NASA Office of Inspector General.
    While NASA is aggressively working to fulfill the Act's mandate of 
commencing Recovery Act activities and expenditures as quickly as 
possible, the Agency is also committed to managing Recovery Act funding 
under the heightened level of transparency and accountability demanded 
by Congress and the Administration. We want the American people to rest 
assured they will know where and how each of their Recovery Act dollars 
at NASA is being invested.

Reinforcing the Structures for Compliance with the Recovery Act and 
                    Initial Implementing Guidance for the Recovery Act

    In my role as the senior agency Recovery Act official for the 
Agency, as designated by NASA's Acting Administrator, I am coordinating 
NASA efforts in planning, execution, reporting and oversight related to 
the spending of the Recovery Act funds appropriated for the Agency. 
These efforts began even before the Recovery Act was signed by the 
President on February 17, and NASA has proactively considered the 
implications of the guidance from the Office of Management and Budget 
(OMB), even while still in draft form. Although the OMB guidance 
continues to evolve and NASA is still in the early stages of 
implementing its Recovery Act-specific processes and activities, it is 
my view that the Recovery Act can be successfully implemented at NASA 
within a framework that substantially relies on existing Agency 
processes and structures.
    For example, NASA has well-established procedures for budget 
planning and execution. The teams involved in that process include 
staff from offices across Headquarters. These same teams already have 
the processes and internal controls in place, with slight modification, 
for the rapid planning and budget execution encouraged by the Recovery 
Act. In the month since the Recovery Act was signed into law, NASA 
already coordinated with Treasury to establish unique Treasury Fund 
Symbols covering all of its Recovery Act funding, identified how it 
will implement separate accounting of Recovery Act funds in its 
financial systems with new Work Breakdown Structure codes, and 
developed and reviewed with the Administration the Agency's initial 
spending plans for use of Recovery Act funds for restoration of 
hurricane-damaged facilities, together with required apportionments 
from OMB and warrants from Treasury. Planning also is well underway for 
the Science, Aeronautics and Exploration Recovery Act activities, and 
those should be complete in advance of the 60 day deadline for the 
Agency spending plan specified in the Conference Report accompanying 
the Recovery Act. In all of this activity, NASA is able to leverage its 
existing teams and processes to accomplish timely Recovery Act planning 
and budget execution.
    NASA also will leverage its existing processes for internal 
controls and external reporting as the Agency implements the reporting 
and oversight requirements of the Recovery Act and the OMB guidance. 
Based on the information currently available on requirements, it is 
anticipated that NASA's processes or systems will require only minor 
modification for compliance with the final requirements. We do know, 
for example, that new reports will be required from NASA and other 
government contractors, and the Agency is in discussions with OMB about 
the need for new government-wide contract clauses to capture these 
requirements. Until such clauses and OMB's final requirements are 
approved, NASA will not know the full implications for how reporting 
and oversight is to be handled. However, our experience with other 
requirements, like developing and publicly posting weekly reports on 
Recovery Act activities, is that these have been readily implemented by 
the functional teams assigned. Overall, what we have seen so far leads 
us to believe that our functional teams involved in Recovery Act 
implementation are more than capable of developing and overseeing the 
timely implementation of the new reports and processes required.
    NASA senior management recognizes that meeting the commitments of 
the President and the Congress will require sustained focus and 
accountability from all, particularly in the awarding, managing, and 
overseeing the contracts and grants receiving Recovery Act funds. Close 
coordination of the functional teams at NASA, with almost daily 
meetings at present, is intended to ensure that the Agency Recovery Act 
activities achieve both the quick implementation and the full 
accountability and transparency called for by the Recovery Act.

Timeline for Funding of Agency Activities

    The NASA planning process for Recovery Act activities and the 
associated allocation of funds is well underway, consistent with the 
direction provided by Congress and OMB guidance. Initial plans for the 
$50 million in Cross-Agency Support appropriations for hurricane repair 
have been approved by OMB. Funding has been prepared for obligation 
under contract following submission of the spending plan called for in 
the Conference Report accompanying the Recovery Act and completion of 
the open procurement process. Each of the NASA Mission Directorates--
the organizations responsible for Agency mission programs and 
projects--which received appropriations under the Recovery Act are 
developing program plans for Agency review. Once these plans are 
finalized within NASA, as anticipated in the next few weeks, they will 
be provided to OMB for Administration review and, subsequently, 
submitted as part of the Agency spending plan as directed in the 
Conference Report accompanying the Recovery Act. Following that 
submission, the Agency will distribute the funds to the allocated 
projects, begin the procurement processes to award new contracts and 
tasks on existing contracts, and then obligate these funds.

Ensuring Fair and Competitive Awards, and Knowledgeable Procurement and 
                    Grants Management Staff

    NASA has well-established processes and procedures for effectively 
and efficiently planning, awarding and managing a substantial volume of 
contract and grant awards. Over the last four years, the average amount 
of NASA's annual procurement obligations was over $15 billion. As such, 
the $1.0 billion of Recovery Act funds, most of which will go to 
contract awards, represents just over six percent of NASA's annual 
amount of contract and grant obligations. While some changes to Agency 
processes will be needed to meet special Recovery Act requirements, the 
increase in total procurement activity represents only a modest 
increase over current annual levels.
    Consequently, NASA intends to continue utilizing its standard 
proven procedures for Recovery Act funding, in substantially the same 
way as for regular appropriations, in order to ensure that Agency and 
Government financial controls and accountability standards are 
maintained. These procedures begin with the project planning and 
approval process, which in this case includes identifying specific 
project activities that meet approved Recovery Act plans, and are 
consistent with NASA goals and priorities as established by the 
President and the Congress. NASA's financial system provides controls 
over the distribution of these funds, so only approved Recovery Act 
projects will receive funds--in NASA this occurs through the 
centralized financial system via approved Work Breakdown Structure 
codes.
    The Agency acquisition process complies with the Federal 
Acquisition Regulation (FAR) and the NASA FAR Supplement, both of which 
provide the regulatory guidance on the announcement, solicitation, 
evaluation, and award processes to ensure that each procurement is 
conducted in a fair and equitable manner. In addition, in 2007, NASA 
developed and published a set of NASA Procurement Tenets, which outline 
a framework for conducting procurements that meet the Agency's 
requirements with the best business approach for the Agency. These 
tenets are consistent with, and in substance reflect, many of the 
essential elements of the President's Memorandum on Government 
Contracting issued on March 4, 2009. For example, NASA's third tenet 
requires the Agency's programs and projects to maximize and optimize 
competition when acquiring supplies and services. This requires early 
and ongoing communication with all personnel involved in the 
procurement process, and the NASA Office of Procurement will be a part 
of the review process for specific implementation plans in order to 
ensure compliance with procurements regulations, NASA Procurement 
Tenets, the OMB Guidance related to the Recovery Act, and the Recovery 
Act.
    Further, oversight of the procurement process is maintained through 
several means. A strong communication network exists between the Office 
of Procurement at NASA Headquarters and the procurement staff at each 
NASA Center. For example, regular teleconferences are held with the 
procurement officers across the Agency, enabling the rapid 
dissemination of policy and the honing in on issues as they arise in 
the field. In addition, the Assistant Administrator for Procurements 
holds monthly reviews of major procurements, providing a regular 
opportunity to review each Center's activities in greater detail. 
Further, procurement surveys are conducted on-site at each Center on a 
periodic basis. These surveys encompass intensive reviews of individual 
procurements, permitting a validation that the proper process has been 
followed in compliance with applicable laws and regulations. And, those 
are further supplemented by oversight and internal control reviews 
conducted regularly by the Agency.
    NASA recognizes that these processes can only be effective if it 
maintains a skilled and knowledgeable cadre of acquisition 
professionals. To this end, NASA has established and maintains a 
rigorous procurement training program that provides its contracting 
workforce with the competencies and skills necessary to perform well in 
the increasingly complex and ever changing acquisition environment. In 
addition, NASA's contracting certification program requires fulfillment 
of education requirements, training, experience, and continuous 
learning points. Prior to receiving a new warrant, a contracting 
professional must be certified at the appropriate certification level. 
NASA also concentrates on continuously improving specific skills of the 
procurement workforce, such as cost and pricing skills, to ensure that 
the Agency receives the overall best value in the award of contracts 
and grants.
    In addition to established training, detailed information regarding 
the award and administration of contracts and grants, specifically 
designed for the Recovery Act funding, is currently being developed and 
planned for dissemination by the Office of Procurement to the NASA 
procurement community via the Agency's Center Procurement Officers. 
This information will be used to supplement the established policies 
and procedures at each NASA Center for the review and approval of 
processes leading to the award of contracts and grants, and the 
subsequent administration of those contractual vehicles. Stringent 
oversight will be implemented both at each Center and at Headquarters 
to ensure that the Recovery Act milestones and requirements are met.

Conclusion

    In closing, NASA is committed to a robust and comprehensive program 
that meets the requirements of the Recovery Act and other relevant 
guidance and laws. The effective, efficient, and responsible use of the 
resources that have been provided to NASA is good stewardship. NASA is 
committed to carrying out this stewardship to achieve the objective of 
the Administration and Congress to expedite Recovery Act project 
spending within increased standards for transparency and 
accountability.
    I would be happy to respond to any questions you or the other 
Members of the Subcommittee may have.

                    Biography for Ronald R. Spoehel

    Ronald R. Spoehel has served as the Presidentially-appointed 
Senate-confirmed Chief Financial Officer of the National Aeronautics 
and Space Administration since September 2007. As Chief Financial 
Officer, he oversees all financial management activities relating to 
the programs and operations of the Agency. He serves on the U.S. Chief 
Financial Officers Council coordinating agency financial management 
activities with other federal agencies and participating with other 
agency Chief Financial Officers in supporting implementation of 
Presidential objectives.
    Mr. Spoehel has held various financial and general management 
positions throughout his career, including serving as Executive Vice 
President, Chief Financial Officer and Director of ICx Technologies, an 
advanced technologies security solutions company; Executive Vice 
President, Chief Financial Officer and Director of ManTech 
International Corporation, a NASDAQ-listed government technology 
solutions company; Chairman and founder of Alpine Partners, a private 
investment advisory firm; Chief Executive Officer and Director of 
Optinel Systems, an optical communications equipment company; Vice 
President-Corporate Development of Harris Corporation, a NYSE-listed 
Fortune 500 global communications equipment and defense electronics 
company; Senior Vice President of ICF Kaiser International, a NYSE-
listed company with global operations; Vice President, Investment 
Banking of Lehman Brothers; Vice President of Bank of America; and, 
program financial management with Hughes Aircraft Company.
    Mr. Spoehel is an honors graduate of the University of 
Pennsylvania, where he received his Bachelor of Science degree in 
economics and MBA from the Wharton School and his Master of Science 
degree in engineering from the Moore School of Electrical Engineering. 
He serves on the U.S. Air Force Audit Committee and he has served on 
the Board of Directors of the Professional Services Council and the 
Advisory Council for the Wharton and Engineering Schools at the 
University of Pennsylvania. Mr. Spoehel has also served on the Boards 
of private companies both in the U.S. and in Europe.

    Chairman Miller. Thank you, Mr. Spoehel.
    Ms. Herbst for five minutes.

  STATEMENT OF MS. ELLEN HERBST, SENIOR ADVISOR FOR RECOVERY 
          IMPLEMENTATION, U.S. DEPARTMENT OF COMMERCE

    Ms. Herbst. Chairman Miller, Ranking Member Broun and 
distinguished Members of the Subcommittee, my name is Ellen 
Herbst. I am the Senior Advisor for Recovery Implementation at 
the Department of Commerce, and I appreciate this opportunity 
to discuss how the Department of Commerce will implement the 
American Recovery and Reinvestment Act.
    Under the Recovery Act, the Commerce Department is 
receiving $7.9 billion. Commerce agencies receiving funding 
include the Economic Development Administration, the National 
Institute of Standards and Technology, the National Oceanic and 
Atmospheric Administration, the Bureau of the Census and the 
National Telecommunications and Information Administration, and 
funding is also included for the Office of Inspector General to 
conduct audits and oversight. At the Commerce Department, 
Recovery Act funds will be used to invest in business 
development, innovative research, construction projects, 
expanding broadband services and other programs that will 
create jobs and build a foundation for recovery.
    The Subcommittee asks that my focus be on a number of 
important questions related to the Commerce Department's plan 
to ensure accountability and transparency. The Department has 
established a clear path forward for meeting our 
responsibilities under the Act. We are committed to allocating 
funding in an expeditious, open and transparent manner that 
ensures accountability. To this end, we are working closely 
with the senior management in each of the five agencies 
receiving Recovery Act funds. Additionally, we are working with 
Commerce's Office of Budget and the Administration's Office of 
Management and Budget and we are on track to transmit to 
Congress spending plans for agency programs funded in H.R. 1 
within the timeframe required. These plans will be posted to 
Commerce's recovery website.
    The Department is also committed to ensuring that all 
grants and contracts are awarded in a fair and timely manner. 
The Department has engaged its grants and acquisition counsels 
to thoroughly review requirements of the Act, establish 
standardizing reporting of grants and acquisitions awarded, 
ensure consistency in the wide dissemination of information to 
be made publicly available, and ensure the correct and complete 
recording of award information. Standard processes and 
procedures are to be followed in the awards of grants and 
contracts. At the same time, we are doing what we can to 
streamline and improve the underlying processes.
    Another key element of the Department's strategy involves 
staff competence. We have made significant progress in ensuring 
our acquisition core meets government-wide certification 
requirements and they will be working with other senior-level 
professionals and management to plan and execute the 
appropriate mechanisms for successful implementation of the 
Recovery Act. In all cases, our Office of Acquisition 
Management will be assisting the grants and acquisitions 
communities to ensure both timeliness and that the highest 
standards of accountability and transparency are met.
    The Department is also making sure we have the structure 
and personnel in place to ensure our compliance with OMB 
guidance. The Department appointed me as the senior staff 
person to coordinate, integrate and manage our implementation 
of the Recovery Act. We too have formed a steering committee 
and have formed several work teams with representatives from 
all Department offices and bureaus receiving funds to plan and 
implement the Act across the Department. We are also receiving 
proactive advice and education from our Office of Inspector 
General.
    Mr. Chairman, I will conclude with this: President Obama 
has called the American Recovery and Reinvestment Act the most 
sweeping economic recovery package in our history. At the 
Commerce Department, we are committed to working with the 
Congress, the President and the American people to meet the 
highest standards of transparency and accountability in 
allocating this vital Recovery Act funding.
    Thank you, and I would be happy to answer any questions you 
may have.
    [The prepared statement of Ms. Herbst follows:]

                   Prepared Statement of Ellen Herbst

    Good morning, Mr. Chairman, Ranking Member Broun, and Members of 
the Subcommittee. My name is Ellen Herbst. I am the Senior Advisor for 
Recovery Implementation at the Department of Commerce. Thank you for 
the opportunity to appear before you today to discuss the Department of 
Commerce plans for the American Recovery and Reinvestment Act of 2009.
    The American Recovery and Reinvestment Act of 2009 (``the Recovery 
Act'' ``ARRA'') was signed into law by President Barack Obama on 
February 17, 2009. It is an unprecedented effort to jump-start our 
economy, create or save millions of jobs, and put a down payment on 
addressing long-neglected challenges so our country can thrive in the 
21st century. The Recovery Act is an extraordinary response to promote 
economic recovery and growth, and includes measures to modernize our 
nation's infrastructure, enhance energy independence, expand 
educational opportunities, preserve and improve affordable health care, 
provide tax relief, and protect those in greatest need.
    The U.S. Department of Commerce will receive $7.9 billion to create 
and save jobs for American workers as part of the historic economic 
stimulus bill recently signed by President Obama. As he stated, ``The 
American Recovery and Reinvestment Act is the most sweeping economic 
recovery package in our history . . .. We have begun the essential work 
of keeping the American Dream alive in our time.'' The President has 
noted that the Recovery Act will create or save 3.3 million jobs over 
the next two years.
    ARRA investments in Commerce agencies, which will be allocated in 
an open, transparent and timely manner, include funding for business 
development, innovative research, construction projects, expanding 
broadband services and other programs that will create jobs in a broad 
range of occupations and industries.

Economic Development Administration

    The Recovery Act includes $150 million for the Economic Development 
Administration to provide grants to economically distressed areas 
across the Nation to generate private sector jobs. Priority 
consideration will be given to those areas that have experienced sudden 
and severe economic dislocation and job loss due to corporate 
restructuring. Funds will be disbursed through the agency's traditional 
grant-making process and will support efforts to create higher-skill, 
higher-wage jobs by promoting innovation and entrepreneurship and 
connecting regional economies with the worldwide marketplace.

National Oceanic and Atmospheric Administration

    The Recovery Act funding for the National Oceanic and Atmospheric 
Administration (NOAA) is $830 million including:

          $230 million slated for habitat restoration, 
        navigation projects and vessel maintenance

          $430 million for construction and repair of NOAA 
        facilities, ships and equipment, improvements for weather 
        forecasting and satellite development; and

          $170 million to be used for climate modeling 
        activities, including supercomputing procurement, and research 
        into climate change.

Bureau of the Census

    To ensure a successful 2010 Decennial Census, the Recovery Act 
includes $1 billion to hire new personnel for partnership and outreach 
efforts to minority communities and hard-to-reach populations, increase 
targeted media purchases, and ensure proper management of other 
operational and programmatic risks.

National Institute of Standards and Technology

    Through the Recovery Act, the National Institute of Standards and 
Technology (NIST) is provided a total of $610 million, including:

          $220 million for NIST laboratory research, 
        measurements, and other services supporting economic growth and 
        U.S. innovation through funding of such items as competitive 
        grants, research fellowships, and advanced measurement 
        equipment and supplies;

          $360 million to address NIST's backlog of maintenance 
        and renovation projects and for construction of new facilities 
        and laboratories, including $180 million for a competitive 
        construction grant program for funding research science 
        buildings outside of NIST;

          $20 million in funds transferred from the Department 
        of Health and Human Services for standards-related research 
        that supports the security and inter-operability of electronic 
        medical records to reduce health care costs and improve the 
        quality of care; and

          $10 million in funds are provided, through the 
        Department of Energy, for NIST to help develop a comprehensive 
        framework for a nationwide, fully inter-operable smart grid for 
        the U.S. electric power system.

National Telecommunications and Information Administration

    The Recovery Act provides critical funding for programs at the 
National Telecommunications and Information Administration (NTIA) 
including:

          $4.7 billion to establish a Broadband Technology 
        Opportunities Program (STOP) for awards to eligible entities to 
        develop and expand broadband services to rural and under-served 
        areas and improve access to broadband by public safety 
        agencies:

                  Of these funds, not less than $250 million 
                will be available for innovative programs that 
                encourage sustainable adoption of broadband services;

                  At least $200 million will be available to 
                upgrade technology and capacity at public computing 
                centers, including community colleges and public 
                libraries;

                  Up to $350 million of the BTOP funding is 
                designated for the development and maintenance of 
                statewide broadband inventory maps; and

                  $10 million will be a transfer to the Office 
                of Inspector General for the purposes of BTOP audits 
                and oversight; and

          $650 million for the DTV Converter Box Coupon Program 
        to allow NTIA to issue coupons to all households currently on 
        the waiting list, to start mailing coupons via first class mail 
        and to ensure vulnerable populations are prepared for the 
        transition from analog-to-digital television transmission.

Office of Inspector General

    The Recovery Act includes $6 million for the Office of Inspector 
General (OIG) to conduct audits and oversight of the programs and 
activities funded by the ARRA in addition to the $10 million provided 
to the OIG for oversight of the Broadband Technology Opportunities 
Program. With such a large infusion of cash expected to be obligated 
within a short time frame, this oversight will be important in 
evaluating the effectiveness of these programs and detecting and 
preventing waste, fraud and abuse.
    The Subcommittee, in its letter of invitation, asked that my 
testimony focus on a number of important questions related to the 
Commerce Department's plan to ensure accountability and transparency in 
the process of implementing the ARRA.
    Mr. Chairman, the Department of Commerce has established a clear 
path forward for meeting our responsibilities under the ARRA. First, 
the Department is working with the senior management in each bureau 
that received ARRA funding, as well as the Department's Office of 
Budget and the Office of Management and Budget (OMB), to complete 
approved spending plans for the agency programs funded through the 
Recovery Act. We expect to complete these plans and transmit them to 
Congress within the time frame required in the legislation. Once those 
spending plans are approved, they will be posted to the Department's 
Recovery website.
    The Department is committed to ensuring that all ARRA grants and 
contracts are awarded in a fair, impartial and timely manner. We are 
working to streamline and improve existing procedures without 
compromising transparency and accountability.
    The Department has worked closely with OMB to develop and 
promulgate standard processes and language to be included in grant and 
acquisition awards that address the recipient reporting requirements of 
ARRA and follow the specific guidance in the legislation (e.g., Buy 
American Act; Davis Bacon Act). As well, the Department has engaged its 
Grants and Acquisition Councils to thoroughly review requirements of 
the Act, to establish standardized reporting of grants/acquisitions 
awarded utilizing ARRA funds, to ensure consistency in wide 
dissemination of information to be made publicly available through 
Grants.gov, FedBizOps.gov, Recovery.gov and agency and bureau Recovery 
Act web pages, and to ensure the correct and complete recording of 
award information through existing processes to USASpending.gov.
    Recognizing the urgency of getting the funding made available by 
ARRA into the community, streamlined processes have been or are being 
established for acquisitions. For example, those programs/acquisitions 
less than S75 million anal not designated as a ``major investment'' 
will undergo an Office of Acquisition Management (OAM) review via a 
paper process in lieu of monthly Investment Review Board meetings. The 
process for reviewing those programs/acquisitions greater than $75 
million or those designated as a ``major investment'' is currently 
under refinement.
    These management reviews will ensure that, to the maximum extent 
possible, acquisitions will be made on a fully competitive basis and on 
a fixed price basis. Where other than full and open competition is 
necessary or appropriate, or where other than a fixed price type 
contract will be utilized, the justification will be reviewed for 
sufficiency, compliance with Federal Acquisition Regulations, and for 
full consideration of all options available.
    A reporting process has been established to provide DOC management 
with an on-going flow of information regarding planned acquisitions and 
grants and the progress of those awards through the process. To a large 
degree, existing processes will be utilized, but with a focus on 
streamlining the process wherever possible. The ability to expedite 
will rely heavily on the thoroughness and quality of the up-front work 
done by the acquiring/granting office. OAM will oversee that work to 
ensure speed of process does not diminish the quality of the decisions 
made or sacrifice quality of the process and award in favor of 
expediency.
    In order to meet that challenge, OAM has drafted a Risk Management 
and Oversight Plan. This Plan has been developed based on the 
provisions of ARRA, DOC OIG's Initial Oversight Plan, the guidance 
provided in ``A Guide to Grant Oversight and Best Practices for 
Combating Grant Fraud'' by the National Procurement Fraud Task Force, 
the Statement of the Acting Comptroller General of the United States, 
``GAO's Role in Helping to Ensure Accountability and Transparency'' and 
historical GAO and OIG reports regarding the acquisition and/or 
financial assistance functional areas.
    Another key element of the Department's strategy involves staff 
competence. The Department has been hard at work making sure that those 
with responsibility for carrying out the necessary work to well 
implement the ARRA have the knowledge and skills necessary,to properly 
award and manage contracts. The Department has been making significant 
progress in ensuring that its acquisition corps (including Program/
Project Managers, Contracting Officer Technical Representatives, 
Contracting Officers and Contract Specialists) meet government-wide 
certification requirements. Depending on the complexity of Recovery 
Act-funded acquisitions, Bureau Procurement Officials will be assigning 
those acquisitions to individuals within the existing cadre of staff 
with the requisite knowledge, skills, expertise and experience 
necessary to properly award and administer acquisitions. These 
individuals will be supplemented or assisted by others (other senior 
level acquisition professionals, the DOC Office of General Counsel, the 
Office of Acquisition Management) to strategize, plan and execute the 
appropriate contract mechanisms for successful implementation of the 
Recovery Act.
    We recognize that acquisition resources within DOC and across the 
Government will be challenged by the requirements of the Recovery Act. 
Therefore, the Department will take advantage of all hiring 
flexibilities and options available and will, where appropriate, 
transfer acquisitions to other federal agencies for execution where 
their resources and expertise surpass the resources available within 
DOC, or will utilize contractor support for the acquisition function. 
As staff is committed to the execution of the Recovery Act programs, 
new hires, transfers to other agencies for acquisition purposes and 
contractor support will be utilized to fulfill the other day-to-day 
acquisitions necessary outside of the Recovery Act.
    In the Grants area, DOC has been developing for the past two years 
a formal online Grants training and certification program. The first 
module developed, Price Evaluation, is of key importance to the 
successful evaluation of applications and the successful oversight of 
grant expenditures to mitigate fraud, waste anal abuse in the execution 
of a grant. The DOC Grants community has been relatively stable and, 
thus, will rely on seasoned, trained and experienced Grants Specialists 
and Federal Program Officers to execute programs under the ARRA. All 
grants specialists partner with the Financial Assistance Law Division 
of the DOC Office of General Counsel, which provides a fresh ``set of 
eyes'' to the process and its execution.
    In all cases, the Office of Acquisition Management (OAM) will be 
assisting the grants and acquisition communities to address developing 
issues and to provide guidance and assistance in compliance with the 
provisions of this legislation and the governing regulations. As well, 
OAM will, as detailed above, be instituting a rigorous oversight and 
reporting program associated with ARRA-funded grants and contracts, 
which will provide DOC management insight into resource challenges and 
allow for input into the process.
    Mr. Chairman, the Department is hard at work making sure that we 
have the structures and personnel in place to ensure DOC compliance 
with OMB guidance and statutory requirements. The Department appointed 
me as the senior staff person to coordinate, integrate and manage our 
implementation of the Recovery Act. We have formed several cross-
bureau, cross-function work teams to plan and implement the Recovery 
Act across the Department. Our Departmental Work Team structure is as 
follows:

          Senior Advisor and Program Management staff are 
        responsible for overall coordination and management at the 
        Department level of ARRA implementation, including timely 
        delivery of information on Recovery Act projects.

          ARRA Working Group structure--provides senior 
        oversight and management to all subgroups. This Working Group 
        consists of

                  Recovery Implementation Steering Committee with 
                subject matter expertise composed of senior managers 
                from all Department-level Offices (Acquisition and 
                Grants, General Counsel, Financial Management, Budget, 
                Human Resources, Legislative and Intergovernmental 
                Affairs, Public Affairs, Management and Organization, 
                Policy and Strategic Planning and the Chief Information 
                Officer) as well as a senior manager from the Office of 
                Inspector General, who provide proactive advice and 
                education. Members of the Steering Committee are 
                responsible for providing guidance in their area of 
                responsibility as well as coordinating communication 
                and activities. They, in turn, work with the functional 
                offices within each bureau to support specific 
                activities.

                  Recovery Implementation Bureau Points of Contact 
                (POC)--a single senior manager from each of the bureaus 
                receiving funding (Census, EDA, NIST, NOAA and NTIA) as 
                well as a representative from the Office of Inspector 
                General. These bureau POCs are responsible for 
                coordinating and managing bureau efforts with 
                Departmental efforts. Each bureau has its own internal 
                team working on bureau-specific activities and 
                oversight, and the bureau POC is the communication and 
                management liaison to the Department.

                  Leaders of each of the work group sub-teams. There 
                are multiple sub-teams working on specific issues 
                including:

                          Transparency to the public

                          Detailed data reporting and systems

                          Grant and contract recipient 
                        reporting.

    Mr. Chairman, thank you for the opportunity to testify before the 
Subcommittee today. Congress, the President and the American people 
have trusted us with this unprecedented effort to invest in our 
economy, create or save millions of jobs and build a foundation for 
recovery. We do not take this challenge lightly and are committed to 
the high standards both you in Congress and the President have charged 
us to uphold.
    The Department of Commerce is committed to implementing the 
provisions of the ARRA in a transparent manner that ensures 
accountability. We look forward to working with you, the other Members 
of this subcommittee, and the entire Congress, to ensure we do this 
right on behalf of the American people. I would be happy to answer any 
questions you may have.

                       Biography for Ellen Herbst
    Ellen Herbst joined the Federal Government as Director, National 
Technical Information Service (NTIS), effective July 11, 2005. As an 
agency of the U.S. Department of Commerce, NTIS serves our nation as 
the largest central resource for government-funded scientific, 
technical, engineering, and business related information available 
today.
    Ellen has spent 25 years in private industry with extensive 
involvement with growing businesses in the security, processing and 
imaging systems markets. She has held senior management positions at 
Spectra Systems Corporation, a supplier of security materials, and 
Giesecke & Devrient America, a supplier of banknotes, security 
documents and currency automation systems. Ms. Herbst has also held 
various key management positions at E.I. DuPont De Nemours and Company 
where she served as Business Manager for their Digital Systems and 
Equipment Service Divisions. In addition to these qualifications Ellen 
has extensive experience in financial and strategic planning and 
integration of acquisitions.
    She received her B.S., in Economics and Accounting in 1979 from the 
University of Delaware and her M.B.A., in 1995 from the Wharton School 
of Business, University of Pennsylvania.

    Chairman Miller. Thank you, Ms. Herbst.
    Mr. Rogers for five minutes.

     STATEMENT OF MR. MATTHEW ROGERS, SENIOR ADVISOR, U.S. 
                      DEPARTMENT OF ENERGY

    Mr. Rogers. Chairman Miller, Ranking Member Broun and 
Members of the Subcommittee, thank you for the opportunity to 
be here today to discuss the U.S. Department of Energy's 
actions to assure accountability and transparency in Recovery 
Act funding including our efforts to promote science and 
technology.
    Today's severe economic conditions demand rapid action. 
Effective implementation of the American Recovery Act and 
Reinvestment Act of 2009 is an urgent priority of the 
Administration, for Secretary Chu and for the Department of 
Energy. Congress has given the Department a great opportunity 
and a great responsibility to administer $32.7 billion in 
Recovery Act grant and contract authority, $6 billion in credit 
subsidy costs that will support tens of billions in new loan 
guarantees and $6.5 billion in borrowing authority. Secretary 
Chu is personally committed to providing the direction, 
resources and oversight needed to assure the timely but 
accountable distribution of this funding to support short-term 
needs and protect taxpayers while investing for the long term 
in a new economy powered by clean, reliable, affordable and 
secure energy.
    When Secretary Chu asked me to serve as his Senior Advisor 
for Recovery Act Implementation, he emphasized that we must 
deliver on four objectives: get projects underway quickly, 
invest in projects with lasting value, exercise an 
unprecedented degree of transparency and oversight, and deliver 
a tangible down payment on the Nation's energy and 
environmental future. We began the public part of this process 
last week with the Vice President's announcement of the first 
$8.1 billion for weatherization and State energy grant programs 
and we will soon have additional funding announcements. These 
Recovery Act funds will create jobs and lay the groundwork for 
a less carbon intensive, less oil dependent and cleaner energy 
economy. All of our efforts are geared toward meeting President 
Obama's pledge to act boldly and urgently to put Americans back 
to work by reinvesting in a new clean energy economy. At the 
time, we recognize that the Recovery Act programs will, and 
should, receive heightened public scrutiny and so we are 
putting in place the leadership and control procedures 
necessary to track performance and account for expenditures.
    The Department of Energy is committed to carrying out the 
economic recovery plan with the highest level of speed, 
discipline, transparency and accountability. Under our Chief 
Financial Officer Steve Isakowitz's leadership, the Department 
has taken significant steps to improve oversight and strengthen 
internal controls to ensure the funds are spent effectively. 
Every morning the Recovery Act leadership principals from every 
program and every major function get together to ensure clear 
alignment on priorities, to report progress and to resolve any 
outstanding issues that could impede success. We have developed 
strong oversight strategies for Recovery Act implementation 
including: building up-front risk assessments, building 
specific risk management plans, upgrading process controls, 
establishing personal risk assurance accountabilities and 
expanding outreach, training and coordination between 
headquarters and field offices.
    As soon as the Recovery Act was passed, we conducted 
Department-wide risk assessments to identify existing or 
potential vulnerabilities within our programs that could hinder 
our efforts to deliver on the Recovery Act. From these 
identified risks, senior management officials have begun 
developing risk mitigation plans to increase internal controls 
and reduce opportunities for fraud, waste and abuse of recovery 
funds. For example, some programs have determined to use a 
phased approach to their distribution of funds. This will allow 
them to better maintain accountability by measuring performance 
against clear project milestones and disbursing new funds on 
the basis of successful performance. Several programs have also 
significantly expanded fraud training for their program 
managers and senior officials. In high-risk programs such as 
the Office of Environmental Management, I have met personally 
or via phone and video conference with all of the site 
managers, major contractors, State regulators and major unions 
to make clear the expectations up front for accountability, 
delivery, oversight and transparency.
    As part of our planning and monitoring efforts, the Chief 
Financial Officer's Office of Program Analysis and Evaluation 
and the Office of Internal Review have taken steps to address 
internal controls, guidance, document standards, external 
reporting requirements, outcome validation and early issue 
identification.
    The Department has also taken several steps to ensure that 
all procurement vehicles incorporate a selection process that 
is fair and advances the President's long-term policy agenda to 
ensure that all solicitations, contracts and financial 
assistance awards comply with OMB's Recovery Act requirements. 
We have issued standard language for all these procurement 
instruments.
    Mr. Chairman and Members of the Subcommittee, at the 
Department of Energy we are committed to creating jobs by 
developing new, innovative ways to provide clean, reliable and 
secure energy. Congress has vested the Department with 
significant responsibility under the Recovery Act. We have 
begun and will continue to institute a culture of transparency, 
accountability, integrity and efficiency as we capitalize on 
our advances in science and technology to better manage the 
Nation's energy resources and contribute to a competitive, 
growing and environmentally sustainable U.S. economy.
    Mr. Chairman, thank you for the opportunity to appear 
before you today. This concludes my testimony and I am happy to 
answer questions.
    [The prepared statement of Mr. Rogers follows:]

                  Prepared Statement of Matthew Rogers

    Chairman Miller, Ranking Member Broun, and Members of the 
Subcommittee, thank you for the opportunity to be here today to discuss 
the U.S. Department of Energy's actions to ensure accountability and 
transparency in Recovery Act funding, including our efforts to promote 
science and technology.
    Today's severe economic conditions demand rapid action. Effective 
implementation of the American Recovery and Reinvestment Act of 2009 is 
an urgent priority for the Administration, for Secretary Chu, and for 
the Department of Energy. Congress has given the Department a great 
opportunity and a great responsibility to administer $32.7 billion in 
Recovery Act grant and contract authority, $6 billion in credit subsidy 
costs that will support tens of billions in new loan guarantees and 
$6.5 billion in borrowing authority. Secretary Chu has said repeatedly 
that getting this money into the economy quickly, carefully, and 
transparently is a top priority for him. To this end he has personally 
committed to providing the direction, resources, and oversight needed 
to assure the timely but accountable distribution of this funding to 
support short-term needs and protect taxpayers while investing for the 
long-term in a new economy powered by clean, reliable, affordable, and 
secure energy.
    When Secretary Chu asked me to serve as his Senior Advisor for 
Recovery Act Implementation, he emphasized that we must deliver on four 
clear objectives:

          Get projects under way quickly,

          Invest in projects with lasting value,

          Exercise an unprecedented degree of transparency and 
        oversight, and

          Deliver a tangible down payment on the Nation's 
        energy and environmental future.

    We began the public part of this process last week with the Vice 
President's announcement of $8.1 billion for Weatherization and State 
Energy programs, and we will soon have additional funding 
announcements. These Recovery Act funds will create jobs and lay the 
groundwork for a less carbon-intensive, less oil-dependent, and cleaner 
energy economy. All of our efforts are geared toward meeting President 
Obama's pledge to act boldly and urgently to put Americans back to work 
by reinvesting in a new clean energy economy. At the same time, we 
recognize that Recovery Act programs will, and should, receive 
heightened public scrutiny, and so we are putting in place the 
leadership and control procedures necessary to track performance and 
account for expenditures.

Department of Energy and GAO's High-Risk List

    In this context, it is critical that the Department have in place 
the most rigorous control and oversight processes to manage and account 
for the Recovery Act funds--the more so given the Department's past 
challenges and difficulties in providing adequate management and 
oversight of its major projects. Since 1990, contract and program 
management concerns have kept the Department of Energy on the 
Government Accountability Office's (GAO) High-Risk List. In recent 
years, however, the Department's Office of Management has made 
substantial progress and has implemented numerous corrective actions. 
For example, the Department has developed an action plan to address the 
major Department risk factors and significantly improve not only the 
Department's performance in contract and project management, but its 
overall culture of spending. The plan includes steps to improve risk 
management, strengthen cost estimation, increase oversight, optimize 
staff, improve acquisition planning and strategies, and better 
incorporate project management requirements. The plan also reflects the 
Department's commitment to improved performance and increased 
accountability through well-defined metrics and reporting.
    As a result of these and other efforts, GAO, in its January 2009 
High-Risk Update, noted that the Department has met three of the five 
criteria necessary for removal from its High-Risk List. Specifically, 
the Department has demonstrated strong leadership, developed a 
corrective action plan, and made progress in implementing effective 
solutions. Still remaining to be addressed, however, are issues 
relating to human capital and contract management, and these have 
caused the Department to remain on GAO's High-Risk List. To address the 
human resource challenges, the Department is implementing actions based 
on other federal agencies' best practices. We have also taken steps to 
establish a more structured, disciplined approach to contract and 
project management, with an emphasis on improved oversight.
    In its update, GAO recognized that the Department's Office of 
Science has demonstrated continuous, strong performance in meeting 
original cost and schedule targets. As a result, GAO refined the 
Department's high-risk area primarily to the National Nuclear Security 
Administration and the Office of Environmental Management. And, 
accordingly, the Department will be following the project management 
requirements of DOE Order 413.3A and paying special attention to the 
performance and oversight of those Environmental Management projects 
receiving significant funding from the Recovery Act.

Recovery Act Transparency and Accountability

    The Department of Energy is committed to carrying out the economic 
Recovery plan with the highest level of speed, discipline, 
transparency, and accountability. Under our CFO Steve Isakowitz' 
leadership, the Department has taken significant steps to improve 
oversight and strengthen internal controls to ensure that funds are 
spent effectively. Every morning, the Recovery Act leadership 
principals from every program and every major function, including 
representatives from the Offices of the Chief Financial Officer, 
General Counsel, Procurement and Human Capital, get together to ensure 
clear alignment on priorities, to report progress, and to resolve any 
outstanding issues that could impede success. We have developed strong 
oversight strategies for Recovery Act implementation, including up-
front risk assessments and building specific risk management plans, 
upgrading process controls, establishing personal risk assurance 
accountabilities, and expanding outreach, training, and coordination 
between Headquarters and field offices.
    As soon as the Recovery Act was passed, we conducted Department-
wide risk assessments to identify existing or potential vulnerabilities 
within our programs that may hinder our efforts to deliver on the 
Recovery Act. From these identified risks, senior management officials 
have begun developing risk mitigation plans to increase internal 
controls and reduce opportunities for fraud, waste, and abuse of 
Recovery funds. For example, some programs have determined to use a 
phased approach in their distribution of funds. This will allow them to 
maintain better accountability by measuring performance against clear 
project milestones and disbursing new funds on the basis of successful 
performance. Several programs have also significantly expanded fraud 
training for their program managers and senior officials. In high-risk 
programs such as the Office of Environmental Management, I have met 
personally or via phone and video conference with all of the site 
managers, major contractors, State regulators, and major unions to make 
clear the expectations up front for accountability, delivery, 
oversight, and transparency.
    As part of our planning and monitoring efforts, the Chief Financial 
Officer's Office of Program Analysis and Evaluation and the Office of 
Internal Review have taken steps to address internal controls guidance, 
documentation standards, external reporting requirements, outcome 
validation, and early issues identification. On an ongoing basis, we 
participate on government-wide teams led by OMB to develop 
implementation guidance and requirements. Based on the initial OMB 
guidance and subsequent meetings, we have already issued Recovery Act 
implementation guidance to aid programs in developing specific 
performance plans that detail the status of projects, performance 
metrics, major project milestones, and risk management. In addition, 
the CFO's office led a two day ``all-hands'' field CFO education 
session for financial control officers to make sure everyone 
understands his or her responsibilities with respect to oversight and 
accountability under the Recovery Act.
    Within the CFO's office, we are also aligning our financial systems 
to accept Recovery Act data, perform analysis, and track the execution 
of Recovery Act plans so that senior management can monitor progress. 
Separate Treasury account symbols have been established to comply with 
requirements for tracking and reporting Recovery Act funding separately 
from existing Department funding. Project codes are being established 
in our accounting system as Recovery projects are approved by the 
Secretary. These efforts will all allow the Department to better 
monitor and assess the progress of Recovery Act projects and will also 
facilitate the Department's reporting to Recovery.gov, which in turn 
will assure the accountability and transparency for the American people 
which the President has promised.
    The Department has taken several steps to ensure that all 
procurement vehicles incorporate a selection process that is fair and 
advances the President's long-term policy agenda. To ensure that all 
solicitations, contracts, and financial assistance awards comply with 
OMB's Recovery Act requirements, we have issued standard language for 
all these procurement instruments. We are also directing our 
contracting professionals to pay special attention to the content 
quality of specific areas, including clear scope definition, adequate 
documentation to support decisions, compliance with transparency 
requirements, and small business considerations.
    In our efforts to ensure accountability, we have required each 
Headquarters program element, field office managers, and Field Chief 
Financial Officers to sign an ``Acknowledgement of Management 
Accountability of Internal Controls.'' This document will serve as a 
commitment from management to maintain a strong internal control 
environment. The signed acknowledgements are required prior to any 
distribution of Recovery funds. The Department will require an 
additional assurance letter at the end of the fiscal year to support 
financial statement reporting. These policies and procedures will help 
ensure that we achieve the outcomes envisioned by the President and the 
accountability expected by our fellow Americans.

Loan Guarantee Program

    Title XVII of the Energy Policy Act of 2005 and the 2007 Energy and 
Water Appropriations Act authorized the Department of Energy to provide 
loan guarantees for advanced technology projects that avoid, reduce, or 
sequester anthropogenic greenhouse gas emissions or air pollutants. The 
GAO and Office of Inspector General have both identified issues with 
management, accountability and transparency in this program. I am 
pleased to report to you this morning that the Loan Guarantee Program 
has made substantial progress over this past year, and Secretary Chu 
has directed us to accelerate the process significantly and deliver the 
first loans in a matter of months, while maintaining appropriate 
oversight and due diligence to protect taxpayers' interests. We are 
taking steps to reduce the cycle time from application to loan 
guarantee so that good projects are funded, with all due speed and due 
diligence. We have also taken steps to improve the Program's 
transparency and to attract quality projects that will result in 
environmental benefits, create jobs, and contribute to long-term 
economic growth and competitiveness. The Loan Guarantee Program is 
expanding its efforts to recruit and hire highly qualified personnel to 
complete the necessary project evaluation, environmental compliance, 
due diligence, credit underwriting, monitoring, and oversight 
activities. The Department is committed to managing the Loan Guarantee 
Program carefully to maintain the integrity and objectives of the 
program and to ensure that the taxpayers' interests are protected.

Conclusion

    Mr. Chairman and Members of the Subcommittee, at the Department of 
Energy we are committed to creating jobs by developing new, innovative 
ways to provide clean, reliable, and secure energy. Congress has vested 
the Department with significant responsibility under the Recovery Act. 
We have begun and will continue to institute a culture of transparency, 
accountability, integrity, and efficiency as we capitalize on our 
advances in science and technology to better manage the Nation's energy 
resources and contribute to a competitive, growing, and environmentally 
sustainable U.S. economy.
    Mr. Chairman, thank you for the opportunity to appear before you 
today. This concludes my testimony and I am happy to answer questions. 
Thank you.

                      Biography for Matthew Rogers

    Matt Rogers is the Senior Advisor to the Secretary of Energy for 
the Recovery Act.
    Previously, he was a Senior Partner in McKinsey & Company's San 
Francisco Office. Over time with McKinsey he led their, America's 
Petroleum Practice and their North American Electric Power and Natural 
Gas practice, and helped establish their Clean Technology practice. 
Matt spent more than 20 years consulting with leading oil companies and 
utilities globally.
    Matt played a leading role in developing McKinsey's perspectives on 
global energy supply/demand and greenhouse gas abatement economics. He 
served the Obama Presidential Transition Team in a special effort to 
develop opportunities to reduce the cost and increase renewables 
content in federal energy procurement.
    Matt graduated magna cum laude from Princeton University. After 
graduation he joined Credit Suisse First Boston as an energy investment 
banking analyst. He earned an M.B.A. from Yale University's School of 
Management.
    Matt is married to the Honorable Yvonne Gonzalez Rogers, who serves 
as a California Superior Court Judge on the Alameda County bench. They 
have three children--ages 13, 10, and 7.

                               Discussion

    Chairman Miller. Thank you, Mr. Rogers.
    We will now begin our first round of questions, and the 
Chairman recognizes himself for five minutes.
    The idea of a stimulus package, of stimulus spending, is 
that it does not just help the immediate recipients but it 
ripples through the economy; that whoever directly receives 
federal funds buys meat, the butcher buys bread, the baker buys 
candlesticks, the candlestick-maker buys something else, and we 
obviously need that since we have been losing 600,000 jobs a 
month and we need it as quickly as we can to spend money 
quickly and spend money well, carefully. How quickly do you 
think you can get the money out the door so the recipients can 
start buying meat and bread and candlesticks? Dr. Marrett, an 
approximate date when the money will start going out?
    Dr. Marrett. I indicated in my testimony that we are 
talking about a matter of weeks. That should be two or three 
weeks at the most that we will begin to move the money out of 
the door.
    Chairman Miller. Mr. Spoehel.
    Mr. Spoehel. The timing in NASA's case will depend on the 
length of the procurement cycles. The award of contracts that 
we have for the initial hurricane repair, for example, will 
likely take a month so I would say it is probably at least two 
months before the actual work under any of those contracts 
would be undertaken and that is again assuming that all the 
approvals and requisite reviews by OMB and Congress have been 
achieved.
    Chairman Miller. Ms. Herbst.
    Ms. Herbst. The answer is dependent on the different 
bureaus but, for instance, in NTIA we have DTV coupon money 
flowing again already. Approximately two-thirds of our monies 
we believe will go out as competitive grants and contracts so 
we are in that process now of announcing grants and so forth.
    Chairman Miller. Mr. Rogers.
    Mr. Rogers. In the Department of Energy, the first funds 
should be going out in the next couple of weeks. The 
weatherization activities, we need to get a short form 
application from the states binding them under the Recovery Act 
terms and then we are turning around and obligating the first 
10 percent of the funds immediately to the states in response 
to that. Likewise, as soon as the obligations for the next 
departments come through, we will be getting those monies out 
the door quickly as well.
    Chairman Miller. Ms. Herbst, I understand that NIST had 
construction competition last year. You got 100 applications. 
You only had the funding for three. But I assume the others are 
still on the shelf. Were some of those also strong projects 
that would be logical, worthy recipients of funding?
    Ms. Herbst. The NIST spend plan is just about approved and 
we recognize the flexibility given to award from both 2008 
competition and 2009, so we are preserving that flexibility in 
our planning to move forward in that fashion.
    Chairman Miller. So you will be able to fund some of those 
projects without re-bidding them because you already evaluated, 
all the work has been done?
    Ms. Herbst. Well, we have been given the--the Act 
stipulated that we could do it that way and we are certainly 
looking at that in our planning.
    Chairman Miller. What would be the difference in timing if 
you took the plans already evaluated on the shelf versus re-
bidding, going back through all the rigmarole--I am sorry--all 
the oversight.
    Ms. Herbst. If I could, can I get back to you with that so 
I can give you a very specific answer on that?
    Chairman Miller. Okay.
    Ms. Herbst. Thank you.
    Dr. Marrett, I hear from the universities, the research 
universities in my district that the researchers love working 
with FastLane; they hate working with grants.gov. This all 
comes at an awkward time. Is there anything you can do to have 
this subject to FastLane so it can remain up and running and 
let the bugs in grants.gov be worked out later?
    Dr. Marrett. Well, we certainly will be processing our own. 
We will continue to use FastLane. We do work with a number of 
other agencies with reference to FastLane and have been in 
discussion recently. There will be some limits, of course, to 
how much we will be able to absorb from everywhere across the 
Federal Government, but we are in conversation about how to 
have our own processes and what would be available, how to make 
that as widely available as possible.
    Chairman Miller. Dr. Marrett, I also hear from researchers 
in my district that although the grants usually ask who will be 
doing this work, how many graduate assistants will you be using 
or whatever else, it is not typically--their work is not 
typically judged by how many jobs it creates, and they are a 
little puzzled by how all that is going to work and how they 
are supposed to report back on job creation from grants. What 
kind of guidance will they get from OMB--or are you getting 
from OMB--to tell the research agencies what to tell 
universities on job creation data, how to keep it, what to look 
for?
    Dr. Marrett. The guidance is emerging from OMB and we are 
in conversation with all of the agencies, but in addition, our 
grantees have always reported what they are doing, how many 
people they are anticipating and in their subsequent reports 
how many people they have in fact employed. So some of this 
will not be new for gathering the information. What I said 
about the numbers of students, post-docs, undergraduate and 
graduate students, postdoctoral students, for the programs that 
we have in the education world, I talk about teachers, we have 
for some time been monitoring these numbers that we are talking 
about. We will have additional procedures where this will have 
to be reported as a part of the activities for any grant that 
is given.
    Chairman Miller. I guess this is for all the panelists. Is 
there going to be a consistent policy across all agencies on 
how that data is going to be collected? What will be required? 
Just flip a coin.
    Ms. Herbst. All the agencies who receive funding are 
working with and through OMB, who is coordinating the guidance 
on jobs creation, counting methodology, tracking methodology 
and reporting methodology.
    Mr. Rogers. And we are working trying to--the Office of 
Science within the Department of Energy is trying to work quite 
closely with the National Science Foundation to make sure that 
the processes are similar across the various agencies because 
what you don't want to have is to have different researchers 
think one money group is different from another money group, 
either because the reporting is different or the application is 
different, so we are trying to get consistency between and 
among the agencies on that basis.
    Chairman Miller. My time has expired, not gloriously but 
some.
    Dr. Broun. I recognize Dr. Broun for five minutes of 
questioning.
    Mr. Broun. Thank you, Mr. Chairman.
    The first question would be to Mr. Rogers. Mr. Rogers, the 
Secretary was here--appeared before this whole committee--and 
during the questioning, I asked the Secretary if he realized 
that there was not a consensus, not a consensus, I repeat, not 
a consensus on human-induced global warming, and he disagreed 
with me on that. He talked about that if a scientist came 
forward and refuted the consensus, that that individual would 
be counted a hero. Well, there are thousands of such scientists 
around this country, around this world that refute that there 
is any human-induced, if any at the most a very minuscule 
effect on human-induced global warming. I am very concerned 
about the granting process and accountability that you guys are 
going to be doing when the Secretary displays such blatant 
scientific blindness. There are many scientists all over this 
country, all over the world, that will very readily say that 
human-induced global warming is not factual and so if you guys 
go forward in the granting process taking the attitude that 
this is absolutely the consensus, this is absolutely the fact 
and don't do any grants, don't do anything to look at the other 
side, first thing, it is not scientifically--there is no 
scientific integrity there, and I see a tremendous lack of that 
in the attitude of the Secretary.
    As you go forward with this granting process, I hope and 
pray that you will take into consideration that there are other 
views than the Secretary's and will look at granting some of 
this money to other people. Would you please reassure me, 
because I have no assurance today that that is going to happen? 
I see what is happening with this Administration and with your 
Secretary and I hope it stops there, but within your agency 
there is tremendous scientific blindness about other ideas. Can 
you please tell me how you are going to assure me, as a Member 
of Congress, and the American people who are watching you this 
moment how we are going to make sure that science prevails and 
not political policy that is being driven by other things than 
scientific methods? Before you answer that question, I want to 
tell you, I am a physician. I believe in scientific theory. I 
believe totally in scientific integrity and I do not see that 
with your Secretary.
    Mr. Rogers. One of the things that is helpful about the 
Recovery Act is, it actually specifies the blocks of that 
spending quite clearly, and my task is very straightforward in 
that regard. We need to move those funds out against those 
projects with a high degree of transparency and accountability. 
What is good about it is, if you take a look at the funds we 
have, for example, for grant programs, of the $32.7 billion 
that we have for grants and contracts, approximately $13 
billion of that is dedicated towards energy efficiency. I would 
argue and we would argue that those are among the highest 
return investment opportunities that the American public has 
and that these--we are working closely with the Council of 
Economic Advisors to show what the return on the American 
taxpayer's investment is in energy efficiency programs. These 
are programs that should put dollars back in the pockets of 
hardworking Americans and demonstrate a good investment in 
energy efficiency is a high-return one for the overall U.S. 
economy. So in those kind of topics, I don't think the issue is 
about global warming or not, it is just a good investment for 
the American people to make.
    In terms of the scientific question, what I think we are 
driving towards, and as we get the grant programs defined for 
the Office of Fossil Energy or the Office of Electricity, is 
what we are trying to do is create a series of experiments at 
scale against a broad range of technologies that address the 
particular topics that were brought up in the Recovery Act, and 
by examining a diverse range of technologies, what we then do 
is give the market the opportunity to decide what mix of 
capital costs, operating costs and efficiency is the most 
appropriate one to be adopted by industry, and so I think it 
creates quite a good dynamic where you do the good science 
across a broad range and then effectively leave it up to the 
market to adopt--to decide on adoption rates and adoption 
standards. So those are the approaches that we are taking. We 
should approach this with each of the different programs as 
they come out and explore whether in fact we are meeting that 
test.
    Mr. Broun. Well, thank you, sir. My time is expired and I 
thank the Chairman, but you still don't reassure me, sir.
    Chairman Miller. Thank you, Dr. Broun.
    Ms. Dahlkemper for five minutes.
    Ms. Dahlkemper. Thank you, Mr. Chairman.
    Thank you all for being here. I appreciate the opportunity 
to ask you a few questions. I am a new Member from 
Pennsylvania, and it is great to be on this type of a committee 
because people in my district expect when I vote for something 
as important as this Recovery Act that we know where the money 
goes and we have transparency. Obviously there is a lot of 
anger about money that has been given out, so this is very, 
very important to me and to my constituents. I want to ask on a 
scale of one to ten, how prepared do you believe you are 
currently to really be the stewards of this money, and my goal 
is that you are at a ten eventually if you are not there and 
how do you plan to get there if you are not?
    Dr. Marrett. I am glad you let us know what the scale was 
on. I was getting ready to put us down near one thinking that 
was at the top. But if 10 is where we are aiming for, it would 
depend on which parts. We certainly, as indicated, have the 
commitment, we have plans. There are still some matters that we 
are working on to ensure that everything is going to be in 
place and so I would not want to say that we have reached 10 as 
of today. I will guarantee we will be at 10 before that time 
period I had given you of when the grants, when the funds will 
go out of the door. So that is what we are aiming towards, and 
I think we are quite well on the way to being exactly at the 
point you are talking about.
    Ms. Dahlkemper. Thank you.
    Mr. Spoehel.
    Mr. Spoehel. I think the processes and structures that NASA 
has in place would allow the Agency to meet the requirements as 
they are known under the Recovery Act. There are guidances, as 
was mentioned before, that are evolving so it is hard to know 
until that solidifies exactly what readiness state we are in, 
but I believe we are ready.
    Ms. Dahlkemper. Ms. Herbst.
    Ms. Herbst. For the Department of Commerce, I would echo 
that we are following the guidance closely. We have plans in 
place. We have created a risk inventory and are looking at risk 
mitigation plans. The area that we are working on right now is 
staffing up particularly in the contracts and grants 
professional area. We have identified the resources we need and 
we are working expeditiously to obtain those resources.
    Mr. Rogers. I think as Dr. Marrett was arguing, different 
programs are different places in this process. Our commitment 
to you is that we are going to have the program to a high level 
of preparedness before the funds go out. What we did were two 
things. First is, we established this risk assessment for each 
of the programs and then are having each of the programs 
develop risk mitigation plans against the major risk areas that 
they have. Until those risk plans are in place and until we 
have walked through a series of quite disciplined milestones, 
none of the money can be obligated, or no checks can go out, 
and so that is the combination between my office and the CFO's 
office to make sure that each of them has to certify readiness 
before the first check clears, and again, each of the programs 
are at different places but all will be ready before the money 
moves.
    Ms. Dahlkemper. I have another question that I would like 
to kind of address to the entire panel. Different areas of this 
country are having greater economic issues than other areas. 
Where I am from, the northwest part of Pennsylvania, we had a 
depressed economy before the rest of the Nation was really 
suffering as they are right now. When you are looking at the 
monies and granting this money out, are you taking into 
consideration at all what areas of the country have the 
greatest needs for jobs, for job creation, for economic 
development?
    Dr. Marrett. As I indicated, we have proposals in place and 
proposals will be coming in, and we certainly--for National 
Science Foundation, we have to rely on what comes to us. But 
one of the things that we did quite recently was to map across 
the country where the current proposals that could be 
considered under the Recovery Act, where those are located, to 
try to make sure that when we talk about trying to have 
``broader impacts,'' we mean ``broader impacts'' making sure 
that we are addressing the needs as those might vary across the 
country. So we are paying close attention to the quality of the 
work that is coming to us and the fact that that work is, in 
fact, represented across all parts of the Nation.
    Ms. Dahlkemper. Would anyone else like to address that?
    Mr. Rogers. Within the Department of Energy, every dollar 
under the Recovery Act is associated with a job amount, a state 
and an impact, and then a set of milestones that that project 
has to achieve in order to reach those jobs and that impact, 
and so what is nice now is that we are going to be able to 
report out by state, which you can see with the existing 
formula grants, and then by Congressional district to be able 
to show the American people where those funds are going so that 
you can see that those dollars are in fact going to work in 
your neighborhoods. The good thing again about the Department 
of Energy's formula grant activities is both for the State 
levels and then as we come out with the energy efficiency 
activities for the local levels, we are going to be addressing 
every state in the country and we are going to be addressing 
1,700 municipalities with direct funds and then as with Dr. 
Marrett, there is a whole set of them that are coming in then 
from the marketplace but the ability to go back and track jobs 
by Congressional district is a really important one so that you 
can see where those monies are being spent.
    Ms. Dahlkemper. Ms. Herbst, did you want to comment at all?
    Ms. Herbst. I would echo Mr. Rogers in terms of in addition 
to the criteria around specific program outcomes that are grant 
making, the process already has, the jobs creation criteria is 
being added and we will track where those jobs are. 
Additionally, in Commerce we have the Economic Development 
Administration and specifically have been directed to look at 
regions that have experienced economic dislocation and job loss 
as part of the grant-making criteria.
    Ms. Dahlkemper. Okay. Thank you.
    Chairman Miller. Thank you, Ms. Dahlkemper. For information 
for Members of the Committee, when I exceed the time, I will 
generally use that as a rule of thumb of how indulgent I will 
be for other Members, so both Dr. Broun and Ms. Dahlkemper 
exceeded their time but not by as much as I exceeded my time.
    Mr. Bilbray for roughly five minutes.
    Mr. Bilbray. Thank you, Mr. Chairman.
    In the spirit of full disclosure, Mr. Chairman, I serve as 
the Ranking Member for the Government Oversight Committee on 
Procurement and Government Oversight so this is sort of a two-
fer for me. But I want to clarify that I think that what has 
happened this week with AIG is exactly why somebody like 
myself, who has been in government oversight since 1976--it is 
kind of scary to think I got elected to city council before 
Jimmy Carter was elected. That is how long I have been in the 
game. In fact, that was the days when I had a mustache and long 
hair. But the one thing I saw when the bail-out under Bush was 
being proposed was, it was wide open for this kind of abuse. 
Now, the discussion of this bill was the fact that we had a 
bill dropped at 10 minutes 'til midnight and we were asked to 
start an intelligent debate at 9:00 the next morning, and I 
just think that we have to recognize the huge potential for 
abuse because of the lack of oversight in the creation, and 
that means now the huge responsibility we have to really look 
at oversight in the implementation. So we have got to make up 
for that, and you think that people are upset right now about 
AIG, they are darn well going to be upset about this if we 
don't try to correct it, and the one thing I have tried to do 
working with my Democratic colleagues on oversight is to use 
the opportunity, that this is a new Administration with a whole 
new structure and help this new Administration avoid the 
pitfalls of the previous Administration. So rather than play 
gotcha the way that oversight usually does, we need to be 
proactive and point out the mistakes of the Bush and the 
Clinton Administrations so that the Obama Administration 
doesn't fall into the same problem. So just so you know where I 
am coming from and where we are working over on that committee 
and there is a lot of information that I receive there that I 
will apply here.
    Mr. Rogers, we talk about--we can argue the merits of what 
my scientists at Scripps say and where we are going and 
different scientists are saying whatever, but there are some 
scientific facts that we have ignored in the past. A good 
example is your choice of the term ``green'' or ``renewable,'' 
and let me tell you, let me tell you, when you have Duke 
University that just came out with a report that said it would 
be better never to plant the crop than to grow corn for 
ethanol, better for the soil, better for the environment, 
across the board. I certainly hope that when we are reviewing 
applications that we remember that. When you have the Air 
Resources Board of California, which I had the privilege of 
serving on for six years, the premiere clean air people--you 
would admit that they are cutting-edge when it comes to 
admissions issues. When the ARB, the Air Resources board of 
California, which there is a slew of states that do nothing but 
follow their guidelines, actually adopt their guidelines, and 
let us face it, most people don't like following California 
anywhere except to Hollywood, when they say that ethanol is no 
better for the environment than regular gasoline, in other 
words, the word is getting out from the scientists that the 
only thing green about burning ethanol is how much money the 
industry is making off of the consumer. Are you going to be 
able to reflect as you look at this that when you talk about a 
gallon, you don't talk about a gallon for gallon like what we 
get with ethanol where you lose 30 percent, but mile for mile, 
BTU to BTU, the outcome and the efficiency, not what people are 
telling you about what is clean and what gives you the mileage, 
are you able to be able to reflect that?
    Mr. Rogers. In the program evaluation, for example, of some 
of the auto loan programs, there is a simple one we have. The 
Argonne National Lab has done a very nice set of technical 
analysis that reflects a multitude of real-world functions in 
terms of the operations in that evaluation. So how do people 
really drive cars as a simple model as well as, you know, 
issues like the ones that you raised, and I think that is where 
the--what the Department can bring to this debate again is good 
scientific evaluation that incorporates all the different 
factors in a consistent fashion as we go through program 
evaluation.
    Mr. Bilbray. Okay, because E85, to give credit to E85 and 
not give a credit to natural gas compressed gas, even to have 
E85 in the same category is really ignoring good science, and I 
know politics the way it is and I know where the President is 
from and all his buddies, but the fact is, this is one of those 
things I am going to be pounding on because just as much as we 
need to stand up for good science about climate change is where 
the answer is.
    Now, we are going to be using non-profits a lot on this and 
one of the things we have run into, and Ms. Herbst, we brought 
into this issue, everybody is talking about the previous 
Administration's contracts with for-profit organizations in 
Iraq. The new big scandal is going to be what the Bush 
Administration did with so-called non-profits and the lack of 
accountability for those contracts in Afghanistan.
    Mr. Rogers, are we going to maintain a level of oversight 
on non-profits? Because when we do energy retrofits, you know 
that is very, very cost-effective, but traditionally non-
profits have jumped into that but the oversight and the 
accountability of non-profits have never, ever been up to the 
standards that we have held with for-profits. Are we ready to 
change that and hold them to the same standard just because 
they are so-called community based? Are they going to be 
required to hold the same standards that we do for profits?
    Mr. Rogers. So one of the most important improvements in 
oversight that we are implementing as part of the Recovery Act 
is a change in the way that we look at the weatherization 
program. Historically, the money flows through the states and 
we would look at the State level to figure out how the state is 
actually costing or spending those funds and we would do that 
every other year with the states. Under the current model, what 
we are doing is moving to a much more direct oversight model 
where first the States have to issue plans and milestones. They 
only get funding with respect to meeting their milestone 
objectives. Secondly, we are going to be auditing not just the 
funds flow but actually the outcomes from the way the states 
are spending the funds. So the states now have to report within 
five business days of the close of every month who receives the 
checks from the states, which non-profits receive that, and 
instead of us going in and just saying can you show us that a 
nonprofit did how many houses, we actually now have the ability 
to go in and look at which houses actually got done and go to 
the house and figure out was it done, to what standard, did 
they do it--how much money did they spend, what kind of returns 
did they get for that investment, which is something that we 
haven't had either the resources or the authority to do in the 
past.
    Mr. Bilbray. Ms. Herbst, following up on this just to get 
down to it is one of the critical components of distributing 
these funds was the census of what is the population base, and 
we are talking about--let me just follow up with this one, 
please. This is a very important issue in California, and that 
is, the scientific accurate data that we need for our census is 
going to be under your department. We have talk of the use of 
ACORN, one of those non-profits that are under investigation. 
In California, the criminal investigation is as long as my arm, 
and to talk about a non-profit that is under investigation, 
that is under that kind of cloud really lends itself to the 
kind of outrage that we said that private sector, you know, 
being investigated the same way. Are we going to be contracting 
with non-profits that have that cloud, and if we are, doesn't 
that send a whole message that the entire census if we use 
those groups may be suspect down the road when it is a critical 
time to be able to try to use that data?
    Chairman Miller. I am sorry. Ms. Herbst, Mr. Bilbray has 
now exceeded his time by substantially more than I exceeded my 
time, so if you could make your answer just a sentence or two 
and you can respond further in writing if you like.
    Ms. Herbst. Thank you, because I would like to respond in 
detail as a follow-up. We are committed to the importance and 
the accuracy of the census. The Census Partnership Program 
Plan, which is part of the Communication Plan, is under review 
regularly and the spending on that is under review and we 
intend to continue that. We also intend to have the same 
oversight regardless of whether it is a profit or nonprofit. 
All of our processes around acquisitions and grants do not 
distinguish between those two. Thank you.
    Chairman Miller. Thank you. I will now recognize myself for 
a second round of questioning. I understand with votes coming, 
it probably will not be the case that Members other than Mr. 
Broun and I will be able to have a second round.
    Dr. Marrett, your agency is getting a $3 billion increase 
over two years. You are now a $6 billion agency, so that is a 
pretty stiff increase. We have--our staff has heard that many 
of your employees, most of your employees are working hard 
already and most are in fact working well beyond an eight-hour 
day. How is your staff going to manage that really very 
significant increase in work to make sure that the money is 
managed properly?
    Dr. Marrett. Our staff acknowledges, we have to acknowledge 
that there are pressures on the Foundation given that the 
staffing levels have not been increasing. Against that backdrop 
though, there is a great deal of enthusiasm on the part of all 
the staff. The level of commitment is amazing. In addition, the 
workload is not going to be even across the Foundation and so 
some will have more than others and thus we are looking at how 
to even out a lot more the workload issues. So we are working 
on that. The other matter has to do with something that I think 
is affecting all of us. The Office of Personnel Management is 
also looking at strategies that might be put into place that 
will help with the staffing issues that we are all confronting 
at this time, so we are paying a lot of attention to what kinds 
of flexibilities we have internally, what kinds of strategies 
might be possible through the experiences elsewhere and 
certainly working to make sure that we do not place great 
stresses on what is still a very enthusiastic staff.
    Chairman Miller. Thank you, Dr. Marrett.
    Mr. Spoehel, my concerns about NASA are different. You make 
the point correctly that the increase for NASA is not really 
that much more than your current budget and that you can simply 
supervise this funding in the way that you supervise your 
existing funding. I think it is a $1 billion increase in a $17 
billion budget. The problem is your existing management. NASA 
has consistently remained on GAO's list of the agency that is 
at highest risk for mismanagement in contract administration, 
at risk for waste, fraud and abuse. This committee is now 
looking at various acquisition contracts by NASA, generally how 
NASA administers contracts and decides what to contract. We are 
not entirely reassured by the assertion that you will just 
manage this the way you are managing everything else. What 
changes does NASA--you are kind of a juncture where you can 
make changes. You will shortly have a new director. We devoutly 
hope you will have a new IG. What changes do you contemplate 
making in NASA's management of contracts now?
    Mr. Spoehel. Over a year ago, in response to the continued 
portrayal of NASA on the high-risk list, NASA undertook a 
comprehensive corrective action plan, and based on the progress 
under that, as may have been noted, GAO improved--recognized 
the improvement that NASA had made under the high-risk series. 
NASA continues to undertake additional actions under that and I 
would be glad to provide the Committee with a copy of that if 
that is something you would like to go into in more detail [see 
Appendix 2: Additional Material for the Record.]
    Chairman Miller. Okay. Ms. Herbst, the NPOESS satellite has 
been one of this committee's, the Subcommittee's and the 
broader Committee's concerns for the last several years and we 
have heard again and again, the project has been mismanaged and 
the mismanagement has cost taxpayers considerably, and that we 
are at some risk by not having the system in place to collect 
climate change data and weather prediction data to improve our 
weather prediction capability. Have you developed a plan to use 
some of the Recovery Act funds to address the many problems 
with the NPOESS system?
    Ms. Herbst. NOAA is very focused on program execution, 
particularly in this program, and is planning on using Recovery 
Act funds towards that program to reduce technical and schedule 
risk, and again, their spend plans are working their way 
through the approval process in the Department. We expect to 
have them out shortly. And that will include the plan around 
the NPOESS satellite.
    Chairman Miller. My time has expired by just a little bit.
    Dr. Broun.
    Mr. Broun. Thank you, Mr. Chairman. I am always going to 
give you leeway because I may need it at sometimes myself.
    Chairman Miller. And I have the gavel.
    Mr. Broun. And you have the gavel. Correct. I am sure you 
will remind me of that over and over again.
    I want to start with Ms. Herbst but I would like all of you 
to answer this question. I want to associate myself with the 
concerns and remarks that my colleague, Mr. Bilbray, said. Ms. 
Herbst, would you please reassure me, this committee and the 
American people that you all will not be granting any of these 
funds to profits or non-profits, either one, to any group that 
is under criminal investigation for whatever reason and that 
you will take diligent efforts to make sure that that happens? 
I think it is atrocious, totally unacceptable the way that the 
original TARP funds were handled by the Bush Administration, 
and I think it is extremely important for this Administration 
to make sure that those funds are expended in a better way, and 
one way to do that is to assure us as a committee and assure 
the American people that groups such as ACORN, which is under 
investigation in numerous states, it is not just one little 
enclave of these folks, it is a systemic problem with ACORN, 
but would you please reassure us that you will take very 
diligent efforts to ensure that the taxpayers' dollars are not 
going to be given to groups that are under criminal 
investigation, particularly those that are under investigation 
for fraud, and then I would like all the rest of you to answer 
that if we still have time within my five minutes.
    Ms. Herbst. The Department of Commerce has identified the 
contracts and grants area in total across all of our bureaus as 
a key area of risk to mitigate and manage and we have spent 
additional time with our senior people developing risk 
management and oversight plans, providing additional guidance. 
We also plan from a personnel standpoint to put our senior 
experienced contracts and grants people on Recovery Act 
contracts and grants. Because of the additional oversight, the 
additional reporting and accountability requirements, we feel 
we need to put our most experienced people on those. We intend 
to then bring in other resources to handle through our normal 
processes and oversight the existing underlying grants and 
contracts activity. We have also taken a specific look at our 
investment review board procedures and processes, which are 
used at the department level to review high-level, high-risk, 
high-dollar types of contracts, grants and programs, and we are 
putting special emphasis on Recovery Act grants and contracts 
for the review board. We will be very diligent in reviewing 
those grants and contract awards and will use all of the 
oversight and management processes that we have to ensure that.
    Mr. Broun. I am about to run out of time. I would like for 
the other three of you to please answer that in writing. We are 
going to present, I think, questions in writing, so if you all 
would please answer that question.
    But back to Ms. Herbst before my time runs out, would you 
assure me that you are not going to give grants to ACORN to do 
census?
    Ms. Herbst. I would like to be able to get back to you. I 
would like to go back to the Department and give you an answer 
in very great detail on that if I may.
    Mr. Broun. Well, if you don't have that answer, certainly I 
will be glad to give you that latitude, but I highly encourage, 
just for the sake of integrity of the census which is extremely 
important to every single American, and most of them don't 
realize how important that is, but this organization is under 
criminal investigation, criminal investigation, in numerous 
states across this country. And I highly recommend that the 
agency absolutely not even begin to consider granting ACORN any 
money whatsoever to be involved in the census, and I encourage 
all of your agencies to take diligent efforts to make sure that 
no contracts are given to anybody, profit or non-profit, that 
is under criminal investigation because it is going to lay a 
cloud on this Administration, on this Congress, on everything 
that is done, so I encourage you all to do so. There is a 
database that you all can search. It is not updated enough. 
That is a whole other issue. But I encourage you to do that. 
With that, I will yield back.
    Chairman Miller. Thank you, Ms. Herbst. I actually hold the 
435th seat in Congress, so I thought the Census Bureau did an 
outstanding job last time. The Members from Utah, not so much.
    It turns out we do have time for another round of 
questioning, Ms. Dahlkemper, if you have another round of 
questioning. If not, it probably makes sense for us to stand at 
ease and go to vote and have the next panel. Do you have a 
second round?
    Ms. Dahlkemper. I just have one question that should be 
fairly easy, hopefully, to answer. But it is about other 
agencies where desired or needed. Have you been getting the 
necessary support and if not, you know, can we do anything to 
help you with that because I find that agencies often don't 
cooperate as we really would hope that they would here in the 
Federal Government.
    Dr. Marrett. Well, speaking on behalf of NSF, there has 
been quite a bit of interaction across the agencies. You have 
heard some of that among us today, but there are other agencies 
that we are working with, especially both to learn about what 
are potential effective practices to ensure that there are 
commonalities. I can't think of, then, any particular problems 
that I would say we have encountered in working with the other 
agencies.
    Mr. Rogers. Indeed, from an Energy Department standpoint, 
the level of collaboration among departments has been at a 
very, very high level. We have joint ventures now with HUD and 
with HHS on community grant activities, with Interior and 
Agriculture on a whole set of siting issues, with Labor and 
Education on job training issues so that we are actually 
getting the most for the taxpayers' funds, that we are either 
not leaving big gaps or showing up in duplicative ways. And the 
level of commitment to collaboration in a positive way from the 
American taxpayer has been extraordinary since the passage of 
the Recovery Act.
    Ms. Dahlkemper. That is great to hear. Thank you very much.
    Chairman Miller. Thank you. Mr. Bilbray, it looks like you 
will have time for a couple minutes as well.
    Mr. Bilbray. Thank you, Mr. Chairman. Mr. Rogers, we had a 
great ability to talk directly to the Energy Secretary. The 
Energy Secretary made it very clear that he understands that 
the answer for clean fuel is a petroleum-like product with the 
BTU's, clean environment, and that alcohol ethanol is not the 
answer. Is your department ready to draw the line and make sure 
you are not using taxpayers' funds to subsidize technology that 
produces a fuel that is not recognized by the best experts as a 
clean fuel, i.e., ethanol?
    Mr. Rogers. The funding within the Recovery Act focused on 
renewables is still going through the consideration process, 
and we are still working with the Office of Management and 
Budget to be able to talk exactly about how that breaks down. 
We should have a very clear set of guidance out on that in the 
next several weeks where we can address that issue 
specifically.
    Mr. Bilbray. Mr. Rogers, were you around in the '90s when 
the Federal Government mandated the inclusion of MTBE, a.k.a. 
methanol in our gasoline stream in non-attainment areas?
    Mr. Rogers. I have been around the Federal Government for 
30 days, so I was not here in the 1990's.
    Mr. Bilbray. Well, let me just remind you. The fact is, the 
Federal Government has gone down roads before thinking it is an 
environmental option, not taking the time to talk to the 
scientists and creating not only a huge waste of taxpayers' 
money but huge environmental damage. Santa Monica now still has 
polluted wells from a federally mandated additive that was 
supposedly--and I just want to say again. I don't care if it is 
even cellulosic. The Secretary made it quite clear in his 
hearing that he is looking for an option that produces a fuel 
that is not 30 percent less efficient than traditional fossil 
fuels and does not create more pollution per mile. And watch 
the way they work their numbers. They will say per gallon, and 
they will say tailpipe emissions. They won't talk total 
emissions. And if I sound really hard-nosed about this, it is 
that we have had to live with the environmental damage of a 
misguided federal strategy, and if you want to see a scandal 
like AIG, in a few months we could have--all this new science 
coming out on ethanol and your department subsidizing it, and I 
don't think you want to be in that position, sir. So I hope 
that you look at these things, apples to oranges, mile for 
mile, gallon for gallon, and emissions at a truly environmental 
item. Can we do that?
    Mr. Rogers. The Secretary's guidance on this topic is quite 
clear, and you know, what is good about working for the 
Secretary is he sinks his teeth into a set of topics and gets 
into the science in great detail, and then that translates 
quite quickly into the structure of both the direct options 
that we have as well as of the grant-making that we undertake. 
As we work through this process, he is directly involved in 
that activity.
    Mr. Bilbray. Well, I think what I am excited about is I 
have got a Californian who knows the frustration of us in 
California watching Washington do things in the name of the 
environment that has been absolutely disastrous, and now we 
finally got somebody at the right place who can sort of try to 
wake up this town that there are environmental opportunities 
out there and there are some really lost leaders. And I am 
still very excited about somebody trying to show me how we are 
going to make coal clean from the mining to the transporting to 
the use, and I will still stand up and say clean coal is about 
as logical as safe cigarettes. In a few years people are going 
to understand that, but this one I really do not want us to 
waste this money. I don't want the outrage with this 
Administration that we have seen with the last Administration, 
and we can avoid this if we just are willing to take the time 
to make sure we got our facts straight first.
    And I don't care if it is the technology we choose or the 
people we choose to implement these funds. We darn well better 
be careful because Congress was not careful. We did not take 
the time, and you have got to make sure you take the time and 
do it right because we didn't do it right. Thank you very much, 
Mr. Chairman.
    Chairman Miller. Thank you. I think we have now completed 
with this panel. It does appear we might have time to get 
started on the second panel, at least perhaps to do the 
introductions. So if we could fairly quickly change places, but 
we will shortly be called for votes.

                                Panel II

    I would like to introduce our second panel. Mr. Gregory 
Friedman is the Inspector General for the United States 
Department of Energy. Mr. Todd Zinser is the Inspector General 
for the U.S. Department of Commerce. Mr. Tim Cross is the 
Interim Inspector General at the National Science Foundation. 
Ms. Eileen Norcross is a Senior Research Fellow at the Mercatus 
Center, a think tank at George Mason University, and Ms. 
Patricia Dalton is the Managing Director of the Natural 
Resources and Environment Division at the U.S. Government 
Accountability Office.
    As you know, from having been here for the previous 
witnesses, you each have five minutes for your oral testimony. 
Your written testimony is as long as you would like for it to 
be within reasonable limits, and that will be submitted for the 
record. After your oral testimony, we will have rounds of 
questioning, perhaps just one, in which each Member will have 
five minutes to question the panel. It is the practice of the 
Subcommittee to receive testimony under oath. Do any of you 
have any objection to swearing an oath, to taking an oath? 
Okay. You also have the right to be represented by counsel. Do 
any of you have counsel here? If you would now all please stand 
and raise your right hand, do you swear to tell the truth and 
nothing but the truth? Let the record reflect that each of the 
witnesses swore the oath.
    Mr. Friedman, I think we have time to take your testimony.

 STATEMENT OF MR. GREGORY H. FRIEDMAN, INSPECTOR GENERAL, U.S. 
                      DEPARTMENT OF ENERGY

    Mr. Friedman. Mr. Chairman and Members of the Subcommittee, 
I appreciate the opportunity to testify today on accountability 
and transparency issue related to the American Recovery and 
Reinvestment Act of 2009. As you know, the Department of Energy 
will receive approximately $40 billion for various science, 
energy, and environmental programs and initiatives. 
Furthermore, based on the Recovery Act and previously approved 
programs, the Department has been authorized to make or 
guarantee loans totaling up to $127 billion for innovative 
technologies as well as auto industry advancements.
    The Recovery Act will undoubtedly have a significant impact 
on the operations and the activities of the Department and, in 
turn, on the Office of Inspector General. The passage of this 
legislation makes this a transformative time for the Department 
of Energy, particularly in the areas of scientific discovery 
and innovation.
    My staff and I are committed to evaluating the actions of 
the Department to ensure that Recovery Act funds are used both 
efficiently and effectively. Utilizing a risk-based oversight 
strategy, my office will: First, evaluate the internal control 
structure for the most significant programs receiving Recovery 
Act funds. Second, through transaction testing, evaluate the 
effectiveness of the Department's distribution of funds to key 
external recipients. Third, evaluate the Department metrics to 
gauge program success. Fourth, provide fraud awareness 
briefings throughout the Department complex and coordinate with 
federal, State, and local prosecutors and law-enforcement 
agencies, and fifth, enhance our program to process and report 
on whistleblower retaliation complaints. In addition, the Act 
creates the Recovery Accountability and Transparency Board. As 
Inspector General for the Department of Energy, I will 
participate actively as a member of this Board.
    This strategy takes into account management challenges that 
we have reported on over time as well as issues that we expect 
as a result of new initiatives related to the Recovery Act. 
These include concerns about the following: The Department's 
ability to administer or manage its large portfolio of 
contracts and related financial instruments; the Department's 
loan guarantee program, specifically related to having adequate 
staffing to manage the programs and the inherent 
vulnerabilities and operational risks associated with massive 
increases in funding and mission responsibilities, all in a 
relatively short timeframe. We will treat these concerns as 
priorities as we move forward.
    While continuing to focus attention on our customary 
responsibilities, in recent weeks my office has accelerated 
efforts to provide proactive oversight of Recovery Act funds 
and programs. In addition to developing our oversight strategy, 
my office will shortly issue two reports to the Department 
regarding the Department's implementation of the Act. First we 
will provide the Department with a report on lessons learned 
based on prior Office of Inspector General work. This report 
will provide the Department, we hope, with a resource to 
establish a framework to manage the unprecedented amount of 
funding under the legislation. Secondly, we will provide a 
report on staffing concerns relating to the Department's 
acquisition workforce and their impact on the implementation of 
the Recovery Act. Using our risk-based approach, my office has 
also initiated a review of the Office of Energy Efficiency and 
Renewable Energy. This office will be one of the first to put 
money on the street as a result of the Recovery Act. 
Furthermore, to mitigate potential fraud risks, my office has 
launched a proactive effort to communicate with federal and 
State prosecutors on strategy for pursuing allegations of 
fraud, and we have also delivered over 15 fraud awareness 
briefings to various Department elements. Finally, in order to 
make the most effective use of available oversight resources, 
my office is currently involved in discussions with several 
State auditors to establish collaborative efforts, most notably 
in the area of weatherization, to follow the expenditure of 
Recovery Act funds to project completion. We have also 
commenced outreach efforts with the Government Accountability 
Office to discuss interaction and communications as it relates 
to the Recovery Act.
    We appreciate the significance of the Department of 
Energy's participation in the Recovery Act and the potential 
short- and long-term implications for the U.S. economy. We are 
mindful as well of the special responsibilities of the Office 
of Inspector General to help ensure transparency and 
accountability, all in the interest of the American taxpayers. 
We will work diligently to meet these challenges. We look 
forward to keeping this Subcommittee and others in Congress 
apprised of the results of our work.
    Mr. Chairman, this concludes my statement, and I would be 
pleased to answer any questions that the Subcommittee may have.
    [The prepared statement of Mr. Friedman follows:]
               Prepared Statement of Gregory H. Friedman

Mr. Chairman and Members of the Subcommittee:

    I appreciate the opportunity to testify today on accountability and 
transparency issues related to the American Recovery and Reinvestment 
Act of 2009 (Recovery Act). My testimony focuses on the efforts of my 
office to provide effective oversight of Recovery Act funds at the 
Department of Energy, which will receive approximately $40 billion for 
various science, energy, and environmental programs and initiatives. 
Furthermore, based on the Recovery Act and previously approved 
programs, the Department has been authorized to make or guarantee loans 
totaling up to $127 billion for innovative technologies as well as auto 
industry advancements.
    The Recovery Act will undoubtedly have a significant impact on the 
operations and activities of the Department and, in turn, the Office of 
Inspector General. Under the Recovery Act, the Federal Government hopes 
to stimulate the economy in the shortest timeframe possible, while 
fostering an unprecedented level of accountability, oversight, and 
transparency. The passage of this legislation makes this a 
transformative time for the Department of Energy, particularly in the 
area of scientific discovery and innovation.
    Consistent with the objectives outlined in the Recovery Act, my 
office has developed a strategy to provide the most effective oversight 
possible given our available resources. Before discussing the specifics 
of the oversight strategy, I would like to outline a few fundamental 
principles that I believe must guide the Department's management of 
Recovery Act funds.

          Prevention and Detection: In terms of oversight, it 
        is important to note that simply detecting problems after the 
        fact is not satisfactory. As the Department works to establish 
        safeguards and internal controls for managing Recovery Act 
        funds, the prevention of fraud, waste, and abuse must be a top 
        priority.

          Expediency and Accountability: A principle feature of 
        the Recovery Act involves the allocation of funds with all 
        possible speed as a means of stimulating the economy. While 
        expeditious action is an important goal, the Department must be 
        mindful of the fact that accountability must be maintained over 
        funds.

          Management Responsibility: Responsible program 
        managers and contracting officials must exercise effective 
        program management as a primary tool to ensure Recovery Act 
        success. Inspector General oversight activities supplement, 
        rather than supplant, program execution.

Office of Inspector General Oversight Strategy

    My staff and I are committed to evaluating the actions the 
Department takes to ensure that Recovery Act funds are used both 
efficiently and effectively. Our risk-based strategy for achieving 
these goals includes the following steps:

          Evaluate the internal control structure for the most 
        significant programs receiving Recovery Act funds: To ensure 
        effective oversight, my office will review the internal control 
        structure and management of Department programs, beginning with 
        those receiving in excess of $500 million in funding under the 
        Recovery Act. To provide immediate feedback on areas needing 
        improvement, ``real time'' reviews will be initiated as 
        controls are established, and policies and procedures are 
        developed.

          Evaluate the effectiveness of the Department's 
        distribution of funds to key external recipients: The vast 
        majority of funds provided to the Department will be 
        distributed under various procurement instruments to 
        contractors, State and local governments, educational 
        institutions, and non-profit organizations. After reviewing the 
        Department's internal control structure, my office will 
        evaluate the controls established by the primary recipients 
        over the use of funds.

          Examine the use of funds through transaction testing, 
        utilizing a risk-based approach: My office will conduct 
        transaction testing at the recipient or end-user level to fully 
        explore the effectiveness and efficiency of Recovery Act 
        projects.

          Evaluate Department metrics to gauge program success: 
        We will evaluate established goals and metrics to ensure that 
        they address Recovery Act objectives. We will also test 
        specific performance and economic information, including 
        reported performance in the critical area of job creation, to 
        determine whether objectives are being met.

          Provide fraud awareness briefings throughout the 
        Department complex: On a regular basis, the Office of Inspector 
        General will provide fraud awareness briefings to groups of 
        federal employees, contractor officials, and fund recipients. 
        These briefings aid significantly in preventing fraud, waste 
        and abuse by heightening managers' awareness of fraud 
        indicators and familiarizing officials with our operations.

          Enhance existing relationships with federal, State, 
        and local prosecutors and law enforcement agencies: These 
        relationships are critical to establishing effective networks 
        for identifying areas that are most vulnerable to fraud, waste, 
        and abuse as well as bringing to justice those who would 
        defraud the government.

          Expand Hotline capabilities: The Office of Inspector 
        General maintains a Hotline to facilitate the reporting of 
        allegations of fraud, waste, abuse, or mismanagement in 
        Department of Energy programs or operations. On an annual 
        basis, the Hotline receives approximately 1,300 complaints. We 
        anticipate receiving an additional 500 Hotline complaints each 
        year that pertain to Recovery Act funds. In the coming months, 
        we will expand our Hotline capabilities, as necessary, to 
        accommodate these complaints.

          Enhance our program to process and report on 
        whistleblower retaliation complaints, to respond to new 
        requirements under the Recovery Act: The Office of Inspector 
        General will direct additional resources to review retaliation 
        complaints relating to Recovery Act programs.

          Participate actively as a member of the Recovery 
        Accountability and Transparency Board: As outlined in the 
        Recovery Act, I will serve with nine other Inspectors General 
        on the Recovery Accountability and Transparency Board. This 
        work will complement my regular duties as Department of Energy 
        Inspector General. I look forward to working closely with my 
        colleagues to help ensure that Recovery Act funds are spent 
        efficiently and effectively throughout government.

Areas Requiring Special Attention

    The strategy outlined above takes into account management 
challenges that we have reported on over time as well as new issues 
that we expect as a result of the sudden influx of substantial 
additional Department funding.
    For example, for over a decade, the Office of Inspector General has 
identified ``contract administration'' as one of the most significant 
management challenges facing the Department. We have issued numerous 
reports on a wide variety of contract administration and project 
management deficiencies. Given the Department's almost total reliance 
on contractors to carry out its mission, a commitment to effective 
contract administration will be of vital importance as the 
unprecedented flow of funds begins under the Recovery Act.
    The Office of Inspector General has also reported on the maturity 
of the internal control structure of the Department's loan guarantee 
program, questioning whether it was adequately staffed to support its 
goals and objectives. For example, prior to the signing of the Recovery 
Act, we reported that staffing levels were not adequate to, among other 
things, monitor disbursed loans and complete credit underwriting for 
applicants. We noted that the Department has stated its intention to 
augment the staffing levels. We think this is a positive step that 
should be pursued aggressively as the process of reviewing and 
approving loan guarantee applications proceeds.
    As implementation of the Recovery Act continues, all parties should 
recognize that the potential risk of fraud increases dramatically when 
large blocks of funds are quickly disbursed. Our experience in the 
investigative arena has demonstrated that even during periods of normal 
operation, the Department is vulnerable to the misuse of funds, 
submission of false or fictitious data, employee conflicts of interest, 
and other related wrongdoing.
    Finally, given the magnitude of the Recovery Act, successfully 
infusing funds into existing Department programs will be a significant 
challenge. For example, the Office of Electricity Delivery and Energy 
Reliability, which will continue to lead efforts to modernize the 
electric grid, had a budget of approximately $138 million in Fiscal 
Year 2008. Under the Recovery Act, this Office will receive $4.5 
billion, the bulk of which will be used for electricity delivery and 
energy reliability activities. Such an expansive increase in funding in 
a short timeframe carries with it certain vulnerabilities and 
operational risks.
    These are just a few examples of areas relating to Recovery Act 
programs and operations that we believe will require special attention 
by Department management. Utilizing the risk-based oversight approach 
previously outlined, in conjunction with experience gleaned in part 
from existing management challenges, we will continue our efforts in 
these, as well as other, critical areas to aid the Department in the 
successful implementation of the Recovery Act.

Accomplishments to Date

    While continuing to focus attention on our customary 
responsibilities, in recent weeks my office has accelerated efforts to 
provide proactive oversight of Recovery Act funds and programs. To 
date, my office has:

          Developed a comprehensive oversight strategy, as 
        outlined above.

          Completed and will shortly issue a ``lessons 
        learned'' report based on concerns identified in prior work. 
        The report will provide the Department with a resource as it 
        works to establish a framework to manage the unprecedented 
        amount of funding under the Recovery Act.

          Initiated a review of the Office of Energy Efficiency 
        and Renewable Energy's implementation of the Recovery Act.

          Launched a proactive effort to communicate with 
        federal and State prosecutors on strategies for pursuing 
        allegations of fraud.

          Completed and will shortly issue a report on staffing 
        concerns relating to the Department's acquisition workforce and 
        its impact on implementation of the Recovery Act.

          Delivered several fraud awareness briefings to 
        various Departmental elements, including the Office of the 
        Chief Financial Officer, the Office of Energy Efficiency and 
        Renewable Energy, the Office of Science, the Office of 
        Environmental Management, and the Bonneville Power 
        Administration. We have numerous other briefings scheduled in 
        the near future.

          Initiated discussions with the State Auditors in 
        several states to establish collaborative efforts, most notably 
        in the area of weatherization, to follow the expenditure of 
        Recovery Act funds to project completion.

          Commenced outreach efforts with the Government 
        Accountability Office to discuss interaction and communication 
        as it relates to the Recovery Act.

          Applied additional resources for receiving and 
        reviewing whistleblower retaliation complaints associated with 
        Recovery Act programs, as outlined in the legislation.

Conclusion

    We appreciate the significance of the Department of Energy's 
participation in the Recovery Act and the potential short and long term 
implications for the U.S. economy. We are mindful, as well, of the 
special responsibilities of the Office of Inspector General to help 
ensure transparency and accountability, all in the interest of the 
American taxpayers. We have already initiated efforts in this arena and 
will continue to work diligently to meet these challenges. We look 
forward to keeping this Subcommittee and others in Congress apprised of 
the results of our work.
    Mr. Chairman, this concludes my statement, and I would be pleased 
to answer any questions that the Subcommittee may have.

                   Biography for Gregory H. Friedman

    Gregory H. Friedman was nominated by the President and confirmed by 
the U.S. Senate as Inspector General of the U.S. Department of Energy 
in 1998. Mr. Friedman started his federal career in 1968 and has been 
with the Department of Energy, Office of Inspector General, since 1982. 
As Inspector General, he is responsible for a nationwide, independent 
program of audits, inspections, and law enforcement efforts related to 
the Department of Energy's programs and operations. In addition to his 
responsibilities as Inspector General, Mr. Friedman now serves as a 
member of the newly created Recovery Act Accountability and 
Transparency Board.
    Mr. Friedman received a Bachelor's degree in Business 
Administration from Temple University and a Master's degree in Business 
Administration from Fairleigh Dickinson University. In 1979-1980, Mr. 
Friedman was selected as a Princeton Fellow in Public Affairs and spent 
a year in residence at Princeton University's Woodrow Wilson School for 
Public and International Studies.
    In 2002, Mr. Friedman was named by the Comptroller General of the 
United States to serve as a member of the Advisory Council on 
Government Auditing Standards. In addition, he led the development of 
the ``Federal Audit Manual,'' for the first time providing universal 
guidelines for conducting federal financial audits.
    From 2005 to 2008, Mr. Friedman served as Vice Chairman of the 
President's Council on Integrity and Efficiency. Mr. Friedman has been 
a guest lecturer on the topics of audit, integrity, government 
oversight and management. In addition, Mr. Friedman is a member of 
several professional organizations, and has served in leadership 
positions in the Association of Government Accountants and the 
Institute of Internal Auditors. Mr. Friedman has also been active in a 
number of community and philanthropic organizations.
    During his federal career, Mr. Friedman has received numerous 
awards, including the Department of Energy's Meritorious Service Award, 
the Meritorious Presidential Rank Award, and the Presidential Rank 
Award for Distinguished Executive.

    Chairman Miller. Thank you, Mr. Friedman. Dr. Broun and I 
need to go and vote now. We have three votes. We should be back 
within half an hour, and when we return, Mr. Zinser, you will 
be first up. So we are now at ease.
    [Recess.]
    Chairman Miller. Okay. We are back. Mr. Zinser for five 
minutes.

   STATEMENT OF MR. TODD J. ZINSER, INSPECTOR GENERAL, U.S. 
                     DEPARTMENT OF COMMERCE

    Mr. Zinser. Good afternoon, Mr. Chairman, Ranking Member 
Broun. Thank you for inviting us to testify today on the 
oversight of the science program and initiatives at the 
Department of Commerce that will be funded through the American 
Recovery and Reinvestment Act. The Recovery Act requires 
unprecedented accountability and transparency on the part of 
government agencies receiving stimulus funds and establishes a 
strong oversight role for Offices of Inspector General. The 
Department of Commerce received approximately $7.9 billion in 
stimulus funding; $1.4 billion of this amount is for science 
activities at the National Oceanic and Atmospheric 
Administration and the National Institute of Standards and 
Technology.
    The Department has assigned some of its very best people to 
lead its Recovery Act efforts, and we have found that all those 
involved are committed to meeting the challenges ahead. 
Nonetheless, spending stimulus funds effectively poses 
significant risks and challenges for the Department of 
Commerce. At the outset, we see six areas of risk facing the 
Department in spending Recovery Act funds.
    First, spending these funds expeditiously with little time 
to staff up and gear operations to accommodate the additional 
activities significantly increases the risks for fraud and 
waste in stimulus-funded initiatives as well as in the 
Department's traditionally funded operations.
    Second, the executive branch, including the Department of 
Commerce, is still in transition. Key leadership positions 
remain unfilled. This puts at risk the leadership vision and 
the decision-making important in executing a cohesive Recovery 
Act plan.
    Third, the Act's emphasis on grant and contract spending 
puts additional pressure on already overburdened management and 
administrative operations, particularly the Department's grants 
management and acquisition workforce.
    Fourth, construction grants and contracts, which NOAA and 
NIST are expressly required to fund, are inherently risky and 
difficult to manage effectively. In addition, the construction 
grant program to be administered by NIST is a relatively new 
program.
    Five is specific requirements related to competitive 
contracts such as maximizing the use of fixed price contracts 
and the Act's Buy American requirements will require extra 
vigilance.
    And finally the Act's strict oversight requirements and 
reporting deadlines will require a greater level of centralized 
management of the bureaus than the Department has historically 
exercised. This is a significant challenge for the Department 
because it has been expected to exercise a greater centralized 
management role without sufficient funding to do so in the past 
and without funding to do so in the Recovery Act.
    Mr. Chairman, my written statement includes examples of 
audits and investigations of grants and contracts where we have 
found problems. My written statement also includes examples of 
important actions the Department is taking to strengthen its 
administration of grants and contracts. And you heard from 
Ellen Herbst on your first panel this morning about steps the 
Department is taking specifically for the Recovery Act.
    The Office of Inspector General has established a Recovery 
Act task force. We are also participating in the Department's 
steering committee in an advisory capacity to reinforce the 
recommendations we have made in our past audit work. We are 
scheduling fraud awareness briefings by our investigative staff 
and technical assistance briefings by our audit staff. We have 
hired a risk management expert to lead our task force and have 
organized along eight subject matter areas: transparency and 
accountability, grants, program acquisition and construction, 
scientific and technical research, the broadband technology 
program, census, digital TV, and fraud awareness.
    Our early work with the Department and its bureaus is aimed 
at the prevention of fraud, waste and abuse and reinforcing the 
notion that the program offices themselves have the most 
critical role in providing oversight of the projects and 
contracts they fund. With additional oversight funding we have 
received, we will not be able to audit every contract and 
grant. We will need to target our resources to those projects 
and grants that present the greatest risk.
    We would like to commend the Subcommittee for holding this 
hearing early in the process and focusing attention on the 
importance of oversight in the science programs funded by the 
Recovery Act. We would welcome the opportunity to assist the 
Subcommittee with your oversight work however we can. That 
concludes my statement, Mr. Chairman. I would be pleased to 
answer any questions you may have.
    [The prepared statement of Mr. Zinser follows:]

                  Prepared Statement of Todd J. Zinser

Mr. Chairman, Ranking Member, and Members of the Subcommittee:

    Thank you for inviting us to testify today on accountability and 
transparency in the science programs and initiatives that will be 
funded through the American Recovery and Reinvestment Act of 2009. The 
Recovery Act requires unprecedented accountability and transparency on 
the part of government agencies receiving stimulus funds, both for 
their spending decisions and the impact of funded activities--
particularly as they contribute to the Administration's goals of 
creating jobs and strengthening the economy.
    To ensure this accountability and transparency, the Act establishes 
a strong oversight role for Offices of Inspector General in monitoring 
their agency's use of stimulus funds and coordinating their collective 
Recovery Act oversight throughout the IG community. We have new 
responsibilities for investigating whistleblower complaints from 
employees of contractors, grantees, and State or local government 
entities receiving stimulus funding. And we have a new oversight entity 
in the Recovery Accountability and Transparency Board, created by the 
Act. As 1 of the 10 inspectors general appointed to serve on the Board, 
I believe Congress--in establishing the Board--created an important 
mechanism for building on the collective strength of the IG community 
to ``follow the money''--ensuring that agencies distribute stimulus 
funds effectively and exercise the oversight necessary to ensure that 
those funds are used in accordance with the intent of the legislation.
    My testimony today will respond to the Subcommittee's questions 
regarding science funding the Department has received under the 
Recovery Act; risks the Department faces in spending its stimulus 
funds, based on our prior audit and investigation work; and our planned 
approach for oversight. Specifically, I will address three areas:

        1.  The Commerce programs and operations that received funding.

        2.  The challenges and risks facing the Department in using 
        Recovery Act funds effectively to meet the objectives of the 
        Act.

        3.  The Office of Inspector General's initial work plans for 
        conducting effective oversight of the Department's stimulus-
        funded programs.

COMMERCE'S RECOVERY ACT FUNDING IS CONCENTRATED IN FIVE BUREAUS

    The Department of Commerce received $7.946 billion in stimulus 
funding--$1.440 billion of this amount is for science programs and 
activities at two Commerce bureaus--the National Oceanic and 
Atmospheric Administration and the National Institute of Standards and 
Technology (Table 1).



    The Office of Inspector General received a total of $16 million in 
stimulus funding to conduct oversight: $6 million for general oversight 
over the next four years and $10 million for oversight of the National 
Telecommunications and Information Administration's $4.7 billion 
initiative to expand access to broadband services.

Bureau Spending Will Focus on Science, Technology, Decennial Census, 
        and Business Development Initiatives Aimed at Job Creation

    NOAA will direct its stimulus dollars toward activities intended to 
promote and enhance its broad marine and environmental stewardship 
mandates.

          $430 million will be used for construction and repair 
        of NOAA facilities, ships, and equipment; improvements in 
        weather forecasting; and development of satellites;

          $230 million for habitat restoration, navigation 
        projects, and vessel maintenance; and

          $170 million for climate modeling activities, 
        including procurement of supercomputers and research into 
        climate change.

    NIST will use its Recovery Act funds to expand its technical 
research capacity. It will use

          $360 million to construct research facilities, 
        including $180 million in competitive grants for the 
        construction of research science buildings; and

          $220 million for scientific and technical research, 
        equipment, and services.

    NIST will receive an additional $20 million from the Department of 
Health and Human Services to accelerate efforts to develop and deploy 
electronic health records and a nationwide health care information 
technology testing infrastructure, and $10 million from the Department 
of Energy to help develop a comprehensive framework for a nationwide, 
fully inter-operable ``smart grid'' for the U.S. electric power system. 
The remaining Commerce agencies that received stimulus funds will 
similarly apply them to activities aimed at enhancing their missions 
and supporting a variety of national priorities and needs.
    NTIA received $4.7 billion to develop and expand broadband services 
in areas that have no service or are under-served and to improve 
broadband access among public safety agencies.
    NTIA received an additional $650 million for the Digital-to-Analog 
Converter Box Program, established under the Digital Television 
Transition and Public Safety Act of 2005. NTIA will use these funds to 
eliminate the backlog of coupon requests and ensure that consumers who 
are currently on the waiting list for coupons receive them promptly.
    The Census Bureau will use its $1 billion to staff and conduct 
certain 2010 decennial census operations, focusing on partnership and 
media efforts designed to increase participation among minority 
communities and hard-to-reach populations, and to enhance management of 
other 2010 operations and programs.
    EDA's stimulus funds will support grant programs in its traditional 
lines of business--public works projects, revolving loan funds, 
business development and technical assistance--in economically 
distressed areas throughout the Nation, with priority given to areas 
that have experienced significant job loss due to corporate 
restructuring.
    A detailed breakdown of the Recovery Act funding received by the 
Department is provided in Appendix A.

THE DEPARTMENT FACES SIGNIFICANT CHALLENGES AND RISKS IN SPENDING 
                    RECOVERY ACT FUNDS EFFECTIVELY

    The Department has assigned some of its very best people to lead 
its Recovery Act efforts and we have found that all those involved are 
committed to meeting the challenges ahead. Nonetheless, spending 
stimulus funds effectively and in a manner that meets the economic 
objectives of the Recovery Act poses significant risks for the 
Department of Commerce and will put significant strain on a number of 
already stretched resources and vulnerable operations.
    The Department's $7.9 billion in stimulus funding, in effect, 
doubles Commerce resources over FY 2008 levels. The Department's 
enacted budget was $7.7 billion last year. Its FY 2009 budget, apart 
from Recovery Act funding, is $9.2 billion. Although a substantial 
proportion of the Recovery Act funding received by the Department will 
continue to be expended in fiscal year 2010 and, to a lesser degree, in 
fiscal years 2011 through 2013, the clear intent of the Act is to award 
funds as expeditiously as possible. NOAA's stimulus funding effectively 
increases its FY 2009 resources by nearly 20 percent and NIST's 
Recovery Act funding increases its available resources by a potential 
74 percent.
    As the agencies carry out their plans, there will be significant 
challenges and risks along the way. At the outset, we see six areas of 
risk facing the Department and its bureaus.

        1.  Spending Recovery Act funding quickly and with little time 
        to staff up and gear operations to accommodate the new and 
        expanded programs, grants, and contracts it will support 
        significantly increases the risks for fraud and waste in both 
        stimulus-funded activities and the Department's traditionally-
        funded operations. This applies across the government--not just 
        the Department of Commerce.

        2.  The Executive Branch, including the Department of Commerce, 
        is still in transition. Key leadership positions remain 
        unfilled. While the career staff is capable of managing their 
        programs, this puts at risk the leadership vision and decision-
        making important in formulating and executing a cohesive 
        Recovery Act plan.

        3.  The Recovery Act's emphasis on grants and contract spending 
        puts additional pressure on weak management and administrative 
        operations that we have identified in our audit work over the 
        years, particularly with regard to

                  the Department's decentralized grants 
                management structure, which consists of three separate 
                management systems operated by three different 
                bureaus--each managing a subset of Commerce grant 
                activity according to policies established at the 
                Department level; and

                  the Department's shortage of qualified 
                contracting specialists, technical specialists, and 
                subject matter experts--particularly in light of the 
                anticipated shift from cost-type contracts, which are 
                predominantly used today, to fixed-price contracts, 
                which require different knowledge and skill sets.

        4.  Construction grants and contracts funded by the Recovery 
        Act are inherently risky and historically difficult to manage 
        effectively. In addition, the construction grant program to be 
        administered by NIST is a relatively new program for the 
        agency.

        5.  There are specific requirements related to competitive 
        contracts including maximizing the use of fixed-price contracts 
        and Buy American requirements that will necessitate extra 
        vigilance.

        6.  The Act's strict oversight requirements and reporting 
        deadlines will require a greater level of centralized 
        management of Commerce bureaus than the Department has 
        historically exercised.

    I would like to focus my discussion on the Act's emphasis on grants 
and contract spending at Commerce, particularly as it impacts science 
activities; to highlight some examples from our audits and 
investigations of potential problems; and to briefly discuss the 
special challenges facing NOAA and NIST in managing stimulus-funded 
construction projects.

THE RECOVERY ACT'S EMPHASIS ON GRANTS AND CONTRACT SPENDING PUTS NEW 
                    PRESSURE ON THE DEPARTMENT TO SHORE UP WEAKNESSES 
                    IN GRANTS AND PROCUREMENT MANAGEMENT AND OVERSIGHT

    We estimate that approximately two-thirds of Commerce's $7.9 
billion in stimulus funding will be dedicated to grants and 
contracting: in addition to the $215 million NIST will spend for 
science, research, and construction grants and contracts, NOAA will use 
the bulk of its $830 million for grants and contracts in a variety of 
mission activities, including $170 million for grants in coastal and 
marine habitat restoration. NTIA will operate a $4.7 billion grants 
program for improved broadband access. EDA's $150 million in stimulus 
funds is exclusively for economic development grants.
    Effective grants and acquisition management has been a long-
standing challenge for the Federal Government because these programs 
are susceptible to fraud, waste, and abuse if not adequately monitored. 
Acquisition management and shortages in skilled contracting staff are 
among the top management challenges we reported as facing the 
Department of Commerce this past November.

The Department Needs to Implement Strategies for Ensuring Sound 
        Management of Recovery Act Grants
    We recently concluded an audit of Department-wide grants oversight 
and will release our report shortly. This audit identified a number of 
weaknesses in grants oversight at the Department. More effective 
oversight by the Department and its bureaus is critical in order to 
avoid many of the problems we have identified in our grant audits and 
investigations over the years: fraud, inadequately documented or 
unallowable costs charged to the grant, financial accounting 
irregularities, conflicts of interest, improper procurement procedures, 
noncompliance with grant terms and conditions, and failure to complete 
funded projects. We have questioned millions of dollars in federal 
costs and identified millions more to be put to better use.

          Our investigation of a NOAA grantee found the 
        recipient had spent more than one-half of the $109,000 award on 
        personal items and travel expenses.

          An investigation of an EDA grant to establish a 
        revolving loan fund led to the conviction of four individuals 
        for fraud, conspiracy, and money laundering after converting 
        nearly $800,000 in grant funds to personal use.

          Another EDA RLF case involved grantees using award 
        proceeds to make more than $900,000 in unauthorized loans and 
        payments to benefit themselves and the companies they operated 
        and controlled.

          We questioned $4.5 million in costs claimed by a 
        grantee who repeatedly failed to comply with federal annual 
        audit requirements set forth in the award. The Commerce 
        oversight agency had continued to disburse funds even though 
        the grantee was not filing its required financial audit 
        reports.

    In operating grant programs funded by the Recovery Act, a major 
challenge for the Department will be minimizing or eliminating the 
problems we have identified in our prior work and maximizing oversight 
strengths within the ambitious spending goals of the stimulus program. 
Recommendations we have made in our prior grant audits bear repeating 
as the Department prepares to implement these programs. The Department 
must ensure that grant administrators:

          Are sufficiently trained in pre-award screening 
        techniques to identify high-risk proposals and grantees.

          Maintain documented analysis of a recipient's grants 
        management and financial capabilities, and past performance in 
        the award file.

          Fully document award activity, using information 
        technology tools developed specifically for this purpose.

          Assign high-risk designations or special award 
        conditions to grantees if pre-award screening or ongoing 
        oversight determines that such a designation is warranted.

          Are fully versed in grant policies and kept informed 
        of any changes to them.

          Ensure single audits are conducted for grantees 
        receiving awards of more than $500,000, and review the 
        resulting audit reports. The Single Audit Act requires these 
        grantees to obtain this annual audit, prepared by an 
        independent auditor, to ensure recipients have appropriate 
        internal controls for safeguarding federal funds and are using 
        funds in accordance with grant terms and conditions.

    Part of the challenge of sound grants management lies in the 
Department's decentralized management structure: overall policy and 
procedures are set by the Department's Office of Acquisition 
Management, but day-to-day grants management is housed in three 
bureaus--NOAA, NIST, and EDA. Each has its own management system. NOAA 
and NIST manage the grant activities of other bureaus as well as their 
own (Figure 1). All grant programs will eventually migrate to NOAA's 
Grants Online system, but this consolidation is not scheduled to occur 
until 2011.



    The strengths we have noted in the grants management operations are 
not across the board but apply generally to the individual bureaus. For 
example, NIST compares financial status reports against grantee 
withdrawals to verify the accuracy of the grantee's financial 
reporting, which is a strong internal control practice. NOAA uses the 
web-based Grants Online system as a management tracking tool for its 
grants activity. EDA has consolidated program and grants management 
functions at the regional office level, giving regional oversight staff 
the advantage of monitoring both program and administrative 
requirements in tandem.
    We are taking a number of proactive steps to help the Department 
bolster its grants management and curtail the potential for fraud with 
respect to Recovery Act funding. We are instituting a strong fraud 
awareness training program and conducting briefings on best practices 
for competitive grant awards, with a focus on identifying and 
monitoring high-risk grantees. As part of these briefings, we will 
provide technical advice on incorporating internal controls and risk 
analysis into the grants management process.

Recovery Act Spending on Contracts and Procurements Will Require 
        Improvements in Contract Formulation, Administration, and the 
        Department's Acquisition Management Workforce
    Acquisition and contract management has been a consistent watch 
list item for inspectors general, as related government spending has 
ballooned in recent years without a commensurate growth in the 
acquisition workforce or the higher-level skills needed to properly 
oversee complex procurements. Cost overruns, fraud, and a lack of 
oversight and accountability are common findings in IG audits and GAO 
reviews government-wide.
    The accelerated spending called for under the Recovery Act will 
undoubtedly further tax an already overwhelmed acquisition workforce at 
Commerce and exacerbate contract management weaknesses. Our November 
2008 report, Top Management Challenges Facing the Department of 
Commerce, described an acquisition infrastructure that does not have 
coherent policies to guide systems acquisition or effective oversight 
mechanisms. Hiring and retaining a skilled acquisition workforce has 
been difficult at the Department, as it has been for all federal 
agencies. The Department has a limited number of contracting 
specialists to meet its multi-billion-dollar workload. It has no 
reliable count of its program and project managers or contracting 
officer representatives--critical positions in the contracting 
oversight chain.
    Our audits have found repeated instances in which

          the Department's lack of sufficient skilled 
        contracting and project management professionals has resulted 
        in poorly defined requirements for deliverables and inadequate 
        contract management;

          contracts contained poorly structured incentive fees 
        and performance metrics that were not well aligned with the 
        goals of the contract; and

          communications between contracting officers and 
        program personnel, including contracting officer 
        representatives, were extremely ineffective.

    As a result of these weaknesses, contracts have experienced 
significant cost and schedule overruns and performance shortfalls, 
contractors have been paid high fees for poor quality work, and the 
Department has at times failed to address important contract 
requirements--such as implementation of adequate IT security controls 
to protect sensitive government information.
    Our recent audit of the Census Bureau's Field Data Collection 
Automation contract found that poorly defined requirements were a 
significant contributor to the problems encountered in developing the 
hand-held computers for automating key operations and the resulting $3 
billion increase in estimated costs for conducting the 2010 census. Our 
audits of the Census contract and a satellite acquisition at NOAA found 
that contractors were receiving high award fees for projects that were 
experiencing serious performance shortfalls and large cost overruns.
    Acquisition staff may be further challenged by the Administration's 
preference for using fixed-price contracts over ``cost type'' 
contracts, which have greatly increased in popularity in recent years. 
The President's policy memorandum on government contracting, issued on 
March 4, establishes a clear preference for fixed-price contracts 
without prohibiting cost-type contracts. The memorandum leaves 
contracting officers with the authority to use cost types when 
appropriate, but only after careful analysis leads to the exclusion of 
fixed-price options.
    Fixed-price contracts are most effective when the cost of 
performing the contract is predictable. This requires, among other 
things, clear and well-defined requirements. The risk associated with 
fixed-price contracts is that when requirements are not well-defined or 
new development is called for, the actual cost of performing the 
contract will far exceed the contract price. As a result, the 
contractor will inevitably seek price adjustments thereby driving up 
the cost to the government. Cost-type contracts, on the other hand, are 
more appropriate for projects involving significant development and 
innovation, and where the requirements are less conducive to detailed 
specifications. The shift to a policy preference for fixed-price 
contracts will demand an acquisition workforce with the skills to 
conduct a rigorous analysis of the appropriate contract type.
    The Department has taken several steps to address some of its 
contract and procurement weaknesses.

          It is working to complete revisions to its major 
        systems acquisition procedures.

          It combined the Commerce IT Review Board and the 
        Acquisition Review Board into a single Investment Review Board, 
        which has scheduled reviews for programs that will receive 
        Recovery Act funding.

          It has improved its certification program for 
        contracting officer representatives, in response to our 
        recommendation.

    And notably, the Office of Acquisition Management recently issued 
Implementation of the American Recovery and Reinvestment Act--a quick 
guide for the acquisition workforce--and created a Risk Management and 
Oversight Plan, currently in draft, to highlight contracting and grant 
risks and help agency program leaders and acquisition staff prepare 
mitigation plans.
    These are important improvements that the Department can use to 
ensure that contracts funded by the Act are properly structured and 
administered, promote contractor responsibility and accountability, 
produce good business deals for the Department, and create new jobs for 
the American people.

NOAA and NIST Face Unique Challenges in Managing Construction 
        Procurements and Grants
    I would like to briefly address the additional challenges to 
effective oversight and administration that NOAA and NIST face in using 
their stimulus funds for grants and contracts to build science 
facilities.
    The overarching goal of any federally funded construction project 
is to complete the project on time, within budget, and free from fraud. 
This will require first and foremost that agencies scrub proposals and 
cost estimates up-front before committing federal funds. Construction 
projects, including those funded by the Department of Commerce, are 
also at risk of anti-competitive practices, substandard workmanship, 
defective materials, nonperformance, and corruption. Our audits and 
investigations of public works projects, for example, have identified 
significant instances of nonperformance, misuse of federal funds, and 
bribery of a local official.

          Our audit of a $6.7 million project to develop a 
        technology park disclosed the grantee failed to carry out 
        numerous responsibilities and did not provide the necessary 
        engineering supervision. More than a year after the grant had 
        expired, the park remained without water and other 
        infrastructure and had no prospects for use.

          Our audit of a $6.44 million grant for construction 
        of a 40,000 square-foot business incubator resulted in 
        termination of the project after we found the grantee was on 
        the brink of insolvency and had used grant funds to stay 
        afloat.

          An audit of a $900,000 grant awarded for 
        infrastructure improvements to a proposed industrial park 
        questioned all claimed costs and recommended termination of the 
        project. Violations included failure to ensure full and open 
        competition in procuring materials and services, and allowing 
        conflicts of interest.

          A subcontractor on a construction grant for a public 
        works project was convicted of bribing a local official to 
        obtain minority business certificates for use in obtaining 
        contracts.

    Full and open competition is fundamental to ensuring that the 
government obtains the best value. However, in some areas obtaining 
competitive bids can be difficult when the number of companies and 
suppliers qualified to bid on these projects is limited. Increased 
demand for contractors and suppliers creates a risk of bid-rigging and 
other anti-competitive practices. In such schemes, contractors 
ostensibly in competition may secretly collude, agreeing to share 
future projects so as to keep prices high.
    These are just some of the potential problems NOAA and NIST grants 
and procurement specialists must be attuned to. Negotiating fair terms 
for construction projects and managing the work requires a distinctly 
different skill set from that needed to oversee research projects--the 
ability to evaluate architectural and engineering proposals, work 
schedules and labor rates, and assess whether proposed and actual 
materials costs are reasonable, to name a few. NOAA and NIST, as well 
as the other Commerce agencies, must carry out risk assessment as a 
fundamental part of its stewardship of Recovery Act funds. Such risk 
assessments must determine the agencies capacity to apply the necessary 
skills and expertise to these projects.

THE RECOVERY ACT IS REDEFINING ``BUSINESS AS USUAL'' IN GOVERNMENT 
                    OPERATIONS AND EXPANDING THE SCOPE OF IG OVERSIGHT

    We have taken several important steps to implement an appropriate 
oversight framework that will allow us to track the various stimulus 
activities Commerce undertakes and its compliance with the Office of 
Management and Budget's accountability and transparency requirements. 
On March 2, we issued our Initial Oversight Plan for the American 
Recovery and Reinvestment Act of 2009, which laid out four key elements 
of that framework:

          Dedicated Recovery Act staffing.

          Targeted risk-based audit and investigative planning, 
        and expedited reporting.

          Participation in Department steering committee and 
        working groups.

          Fraud awareness training and timely responses to 
        citizen complaints.

    I would like to briefly discuss these elements and our progress in 
implementing them.

Dedicated Recovery Act Staffing. We are organizing and staffing OIG to 
provide oversight of stimulus spending while continuing to oversee 
departmental programs and operations consistent with our ongoing 
priority areas.
    As a first step, we established within our Office of Audit and 
Evaluation a Recovery Act Task Force charged with coordinating our 
oversight of the funding received by the five Commerce bureaus. We have 
hired an audit expert in the area of risk management and internal 
controls to head the task force and assigned seasoned OIG staff as team 
leaders with responsibility for specific program and operational 
areas--one of those areas is science and research, with three 
additional teams--grants, procurements, and fraud prevention, also 
directly supporting science oversight.

Targeted Risk-Based Audit and Investigative Planning, and Expedited 
Reporting. The task force is developing a comprehensive audit and 
investigative oversight plan to guide our work and to track 
departmental and bureau compliance with legislative requirements and 
OMB guidelines for accountability and transparency. The bureaus are 
currently developing their detailed Recovery Program Plans, due to OMB 
by May 1, 2009, and making decisions on program design, internal 
controls, performance measurement, and reporting requirements, all of 
which will be critical in establishing accountability and transparency 
for their use of stimulus funds. We are working closely with the 
Department and bureaus to provide advice and recommendations on 
internal controls and best practices as they prepare these plans.
    We have prepared a draft Recovery Act Short-Term Oversight Plan 
which we will give to Department and bureau officials shortly. This 
plan describes the outreach, advisory, and monitoring activities we 
will undertake during the initial 120 days of our oversight efforts.
    We have also developed short-turnaround ``flash'' reports to 
provide quick, timely feedback to Congress, the Department, and the 
public regarding Commerce stimulus activities, with the goal of 
identifying potential and emerging program and financial risks and 
making recommendations to promptly address them.

Participation in Department steering committee and working groups. The 
Department has established a Recovery Act Implementation Team 
consisting of senior Commerce officials and headed by the Recovery Act 
Steering Committee. Our principal assistant inspector general for audit 
and evaluation participates on the Steering Committee in an advisory 
capacity so that we can share best practices and make recommendations 
up-front regarding internal controls and risk management for stimulus 
activities. Our task force is also providing technical assistance and 
advice to the working groups established by the steering committee and 
the bureaus.

Fraud awareness training and timely responses to citizen complaints. 
Our Office of Investigations has developed a Recovery Act fraud 
awareness briefing for the Department's grant and procurement 
specialists, program officials, financial management staffs, grantees, 
and State and local oversight entities. The training focuses on 
Commerce programs that will use stimulus funding and Commerce-specific 
risks. We have also reconfigured our online hotline system to uniquely 
identify incoming Recovery Act complaints for expedited processing.
    The Department of Justice is concurrently rolling out a national 
fraud awareness training program for the Recovery Act, and we have 
invited them be co-presenters at our briefings. The audiences for these 
training programs are those on the front line and therefore in the best 
position to prevent and deter fraud, waste and abuse and alert the 
inspector general about questionable or unusual activities.
    A key piece of the training describes the Recovery Act's expanded 
whistleblower protections for non-federal employees of firms receiving 
stimulus-funded grants or contracts, should they disclose information 
regarding the use of those funds that indicates:

          gross mismanagement or waste;

          substantial and specific danger to public health or 
        safety;

          abuse of authority related to the implementation or 
        use of covered funds; or

          violation of law, rule, or regulation.

    Under the Act, employers are prohibited from discharging, demoting, 
or otherwise discriminating against employees for making such 
disclosures, and OIGs must investigate these complaints within 180 
days, unless the complaint is deemed frivolous, does not relate to 
covered funds, or is already under consideration by another judicial or 
administrative body. Our reconfigured hotline system will help expedite 
these investigations to meet our legislative deadline.

SUMMARY OF OIG ACTIONS WITH REGARD TO RECOVERY ACT SCIENCE FUNDING

    In closing, I would like to summarize the Subcommittee's questions 
and our answers with regard to science stimulus funding at Commerce:

        1.  How do we plan to monitor this funding to ensure it is 
        spent promptly, in accordance with the Recovery Act's 
        objectives, and in compliance with the law?

                  We continue to emphasize and reinforce that 
                the program offices have a critical role in providing 
                oversight of the projects and contracts they fund.

                  We are participating on the Department's 
                Recovery Act Steering Committee and working groups to 
                share best practices and make recommendations regarding 
                internal controls and risk management.

                  We have created a Recovery Act Task Force 
                consisting of multi-disciplinary teams of auditors and 
                evaluators who will focus on the following program 
                areas and activities:

                        --  Grants

                        --  Procurements, Acquisition, and Construction

                        --  Scientific and Technical Research

                        --  Broadband Technologies Opportunities 
                        Program

                        --  Digital Television

                        --  Fraud Awareness and Prevention

                        --  Transparency and Accountability

           The task force is developing a long-term oversight plan, 
        will implement a short-term oversight plan to monitor the 
        Department's initial Recovery Act activities, and has 
        established expedited reporting products to promptly 
        communicate our concerns and recommended solutions.

                  We have developed Recovery Act fraud 
                awareness training and reconfigured our hotline system 
                to identify and expedite our responses to related 
                citizen complaints.

        2.  Based on our prior work, are there particular areas of 
        Recovery Act funding that deserve special attention to ensure 
        funds are put to best use?

           Our prior work has identified a number of weaknesses in the 
        Department's oversight of grants and contracts. These 
        activities bear very close watch. Given the particular 
        susceptibility to fraud and misuse of funds associated with 
        construction projects, NOAA and NIST stimulus-funded 
        construction activities also require close scrutiny.

        3.  To conduct effective oversight, what professional skill 
        areas do we need to increase and how quickly do we plan to fill 
        these positions?

           Conducting effective oversight of Recovery Act funds will 
        require increased staffing, including some specialized 
        expertise. The funding provided to our office will permit us to 
        hire a mix of permanent, temporary, and term employees, and 
        contract staff to do this most effectively. We will also need 
        to use all the flexibilities and authorities that the Office of 
        Personnel Management will allow. A key flexibility, for 
        example, would be to have the authority to rehire experienced 
        retirees without affecting their retirement annuities.

           In addition to the risk management expert we have hired to 
        head our task force, we plan to increase professional staffing 
        in all the critical skill areas required for stimulus 
        oversight-grant, contract, and performance audits and 
        evaluations. We are pursuing options for increasing staff 
        expertise in science and technology-related work, including 
        satellite engineers, an expert in climate research 
        supercomputer techniques, and specialists in fisheries habitat 
        restoration to help monitor NOAA stimulus spending; and 
        scientists and engineers to oversee NIST research into ``smart 
        grid'' energy technology and inter-operable digital health 
        records management systems.

    Mr. Chairman and Members of the Subcommittee, this concludes my 
statement. I would be happy to answer questions at this time.




                      Biography for Todd J. Zinser

    On December 26, 2007, Todd J. Zinser was sworn in as the fifth 
Inspector General of the U.S. Department of Commerce. As Inspector 
General, Mr. Zinser leads a team of auditors, evaluators, 
investigators, attorneys, and administrative staff responsible for 
promoting economy and efficiency and detecting and preventing fraud, 
waste, and abuse in the vast array of business, scientific, economic, 
and environmental programs administered by the Department and its 13 
bureaus.
    Mr. Zinser's appointment as Inspector General by President Bush 
follows his 24 years as a career civil servant. He began as an 
investigator for the U.S. Department of Labor in 1983. Mr. Zinser 
joined the Department of Transportation in 1991, serving as special 
agent in charge of OIG's New York regional Office of Investigations, 
Deputy Assistant Inspector General for Investigations, and Assistant 
Inspector General for Investigations. He was named Deputy Inspector 
General in 2001, with responsibility for day-to-day OIG operations and 
management of more than 400 auditors, investigators, and evaluators 
monitoring the activities funded by Transportation's roughly $60 
billion budget.
    Mr. Zinser has received numerous awards for superior performance 
and leadership throughout his career, including the Secretary of 
Transportation's 9-11 Medal and two Gold Medals--the first for his work 
with the Department's Hurricane Katrina Task Force (2006); the second 
for his involvement in Transportation's response to the collapse of the 
I-35W bridge in Minneapolis (2007). Also in 2007, he was awarded the 
Transportation IG's Bronze Medal for superior achievement as Deputy 
Inspector General.
    Mr. Zinser holds a Bachelor's degree in Political Science from 
Northern Kentucky University and a Master's degree in Political Science 
from Miami University, Oxford, Ohio. He has also completed the Senior 
Managers in Government Program at Harvard's John F. Kennedy School of 
Government.

    Chairman Miller. Thank you, Mr. Zinser. Mr. Cross for five 
minutes.

 STATEMENT OF MR. THOMAS C. CROSS, INTERIM INSPECTOR GENERAL, 
                  NATIONAL SCIENCE FOUNDATION

    Mr. Cross. Good afternoon, Chairman Miller, good afternoon, 
Ranking Member Broun, and Members of the Subcommittee. Thank 
you for the opportunity to testify today about how the NSF 
Office of Inspector General will perform its oversight 
responsibilities under the Recovery Act.
    I would like to discuss three subjects with you today. 
First, the OIG's plan for monitoring NSF's recovery spending; 
second, important challenges facing NSF with regard to the 
Recovery Act; and finally, how my office will be addressing our 
current staffing needs.
    We will pursue a strategy aimed not only at safeguarding 
Recovery Act funds against waste, fraud, and abuse, but also at 
helping assess whether those funds produce the results sought 
in the Act. We will develop an implementation plan for our 
Recovery Act oversight that includes preparing a thorough risk 
analysis, reviewing past OIG audit and investigative findings 
that may be relevant, contracting for audits and other reviews 
of the agency's financial accounting systems, conducting 
focused reviews of the agency's actions to implement its 
spending and risk management plans, and initiating detailed 
audits and proactive investigation reviews to identify and 
evaluate issues flagged in our risk assessments.
    We have also launched an outreach effort aimed at both 
agency program managers and the public about OIG's role under 
the Recovery Act, and this also helps us gather information and 
insights that are useful in determining the issues on which we 
need to focus.
    Given our independent oversight role, we cannot participate 
in agency decision-making, but our input at this juncture may 
help NSF avoid problems down the road. Like other IG offices, 
we prepare a list each year of what we consider the most 
significant challenges facing agency management, and there are 
several challenges that have particular relevance to the 
administration of the Recovery Act. Previous reviews have 
identified major research equipment and facilities construction 
expenditures and NSF's monitoring of previously made awards as 
high-risk activities. Actions that NSF has taken in recent 
years in response to past OIG recommendations have mitigated 
some of the problems that we identified. However, we still 
consider both as high-risk areas for purposes of the Recovery 
Act because of the large amounts of money at stake and the fact 
that a number of our recommendations remain unimplemented.
    We understand NSF intends to use Recovery Act funds largely 
to support proposals that have already been submitted. It will 
be a challenge for NSF to implement the new requirements on 
awards that are based on earlier proposals which most likely 
did not envision or address the purposes or additional 
reporting requirements of the Act.
    Another management challenge that raises concern is the 
adequacy of the NSF's workforce, as you heard earlier this 
morning. The administration of the Recovery Act funds represent 
a significant increase in NSF's workload over at least the next 
year-and-a-half, and we are concerned that the work involved in 
distributing and monitoring the results of the Recovery Act 
funding will severely strain NSF's grant/processing operations, 
its staff, and its information systems across the agency.
    Further, a fundamental responsibility of my office is the 
promotion of research integrity. We devote significant 
investigative resources to both preventing and investigating 
research misconduct, and we are concerned that the large inflow 
of research dollars into an already highly competitive arena 
can only increase the opportunities for abuse.
    Finally, we will also be watchful of award recipients whose 
financial systems may have difficulty handling a sizable influx 
of funds. We have identified a number of specific grant 
characteristics as fraud indicators that, based on our 
experience, may reflect a higher potential for abuse, and we 
are sharing these indicators with NSF along with practical 
guidance on combating fraud.
    I was also asked by the Subcommittee to comment on our own 
staffing resources. Because the funding we received in the Act 
is temporary, we probably will not be able to use stimulus 
funding to hire additional permanent employees. Instead, we are 
looking into options for the temporary hiring of auditors and 
investigators, and we expect to use the bulk of our Recovery 
Act funding to retain contractors to conduct audits and provide 
forensic support for investigations.
    We expect that the additional workload generated by the 
stimulus funds will be significant and extend beyond the 
funding period. We are considering some adjustments to our work 
methods, such as developing reviews that are shorter and more 
focused than traditional audits tend to be in order to provide 
more timely results. Our challenge will be to continue to 
provide the robust audits and investigations necessary to 
address fraud, waste, and abuse issues occurring in NSF's 
programs and activities, while also giving top priority to the 
special oversight requirements of the Recovery Act, and we look 
forward to meeting that challenge.
    Chairman Miller, that concludes my testimony, and I would 
be happy to answer any questions.
    [The prepared statement of Mr. Cross follows:]

                 Prepared Statement of Thomas C. Cross

    Good morning Chairman Miller, Ranking Member Broun, and Members of 
the Subcommittee. Thank you for the opportunity to testify today about 
how the National Science Foundation (NSF) Office of Inspector General 
(OIG) intends to perform its oversight responsibilities under the 
Recovery Act for the $3 billion in Recovery Act funds allocated to NSF. 
Discussions regarding how best to ensure the accountability of Recovery 
Act funds have been ongoing within the IG community, between our office 
and NSF, and within our own office for several weeks. Like the hearing 
today, these discussions are helping us to better prepare for the many 
challenges ahead.
    To introduce myself, my name is Tim Cross and I was appointed 
Interim Inspector General last January after serving as the NSF Deputy 
Inspector General for the past eight years. Our office is unusual among 
the Designated Federal Entity OIGs in that we report to the National 
Science Board, a policy and oversight body, rather than to agency 
management. Over the years, this arms-length relationship from 
management has allowed OIG the freedom to pursue a vigorous audit 
agenda and provide the Congress and the Foundation with fully 
independent analyses and recommendations. NSF's mission to support 
education and basic research has also required that my office develop a 
strong investigative effort to ensure research integrity and to address 
instances of misconduct in research.
    I would like to discuss three subjects with you today. First will 
be the OIG's plan for monitoring NSF's recovery spending. Second, I 
will describe some of the important challenges facing NSF with regard 
to the Recovery Act. Finally, I will discuss how my office will be 
addressing our current staffing needs.

Planning. Ensuring compliance with the many requirements of the Act 
poses a challenge for all the IG offices involved, and we have 
appointed a special team within our office to coordinate our planning 
of Recovery Act activities. The NSF OIG will pursue a strategy aimed 
not only at safeguarding Recovery Act funds against waste, fraud and 
abuse, but also at helping assess whether those funds produce the 
results sought in the Act. NSF has submitted its Recovery Act plan to 
OMB for approval, and once the agency provides this plan to our office, 
we will develop an implementation plan for our Recovery Act oversight 
that includes:

          Preparing a risk assessment based on the agency's 
        spending plan and its own risk management plan;

          Assessing past OIG audit and investigative findings 
        that are relevant to NSF's management of Recovery Act funds;

          Contracting for audits and other reviews of the 
        capacity of the agency's financial accounting systems to track 
        separately and report accurately on Recovery Act funds;

          Conducting focused reviews of the agency's actions to 
        implement its spending and risk management plans at the 
        earliest possible point, when corrective actions will be most 
        beneficial; and

          Initiating detailed audits and proactive 
        investigation reviews to identify and evaluate issues flagged 
        in our risk assessments.

    We have also launched an outreach effort aimed at educating both 
agency program managers anal the public about OIG's role under the 
Recovery Act. This effort also helps us gather information and insights 
that are useful in determining the issues on which we need to focus. 
OIG staff members are attending NSF planning sessions at all levels to 
improve our understanding of agency activities and to make our concerns 
known at an early stage. Given our independent oversight role, we 
cannot participate in agency decision-making, but our input at this 
juncture may help NSF avoid problems down the road. We have also been 
meeting with the IGs in other agencies that received Recovery Act 
funding to brainstorm approaches to oversight. As you know, the Act 
requires that OIGs examine issues raised by the public about the funds 
and post the results of their inquiries on the OIG websites, with a 
link to the Recovery Accountability and Transparency Board's website. 
Our office will ensure that Recovery Act-related investigations, 
audits, reviews, and information received from the public are handled 
in a manner that is both expeditious and thorough. We are also 
developing new procedures to address the Act's broad requirements for 
investigating whistleblower allegations. In general, we are able to 
respond to a question or tip from the public within hours of an e-mail 
or hotline call, and we will be giving Recovery Act inquiries priority 
attention.

Challenges. Like other IG offices, we prepare a list each year of what 
we consider the most significant challenges facing agency management. 
With regard to funding areas that deserve special consideration, there 
are several challenges that have particular relevance to the 
administration of the Recovery Act. Previous NSF OIG reviews have 
,identified Major Research Equipment and Facilities Construction 
(MREFC) expenditures and NSF's monitoring of previously-made awards as 
high-risk activities. Actions that NSF has taken in recent years in 
response to past OIG recommendations have mitigated some of the 
problems that we identified. However, we still consider both as high-
risk areas for purposes of the Recovery Act because of the large 
amounts of money at stake and the fact that a number of our 
recommendations remain unimplemented. We will watch both areas closely 
to ensure that Recovery Act funds are spent promptly and prudently, and 
that:

          The agency keeps track of the awards and their 
        associated funding;

          The award outputs and outcomes are clearly identified 
        and consistent with the intended economic stimulus goals of the 
        Recovery Act; and

          Sub-awardees can accurately account for and report 
        their spending activities to the prime awardee.

    In addition, we understand that NSF intends to use Recovery Act 
funds largely to support proposals that have already been submitted. It 
will be a challenge for NSF to implement the new requirements on awards 
that are based on earlier proposals, which , most likely did not 
envision or address the economic stimulus purposes or additional 
reporting requirements of the Act.
    Another management challenge that raises concern is the adequacy of 
NSF's workforce. Despite an increase in workload driven by an 
increasing number of research proposals received over the past ten 
years, agency staffing levels have remained relatively flat. 
Consequently, the NSF workforce has at times struggled to keep pace 
with the incoming workflow. The administration of Recovery Act funds 
represents a significant increase in NSF's workload over at least the 
next year-and-a-half, with no provision for funding additional staff or 
overhead. The agency is hoping that the infusion of new funds will 
allow the rate of approved proposals to increase from the current 20 
percent to as much as 30 percent in the short-term, and we anticipate a 
concomitant increase in workload throughout the life of the two- to 
five-year standard awards. We are concerned that the work involved in 
distributing and monitoring the results of Recovery Act funding will 
severely strain NSF's grant-processing operations, staff, and 
information systems across the agency. Absent an increase in staffing 
resources, the additional workload will make compliance with the Act's 
transparency and accountability requirements considerably more 
difficult. This is an issue that we are discussing with NSF staff, as 
they seek ways to manage the workload strain.
    Further, a fundamental responsibility of my office is the promotion 
of research integrity, and we are encouraged by recent presidential 
statements about its importance to the advancement of science and 
technology in this country. In concert with NSF's mission to support 
basic research, we devote significant investigative resources to both 
preventing and investigating research misconduct, which includes 
plagiarism in proposals or reports, falsifying research data, and 
fabricating data. We are concerned that the large inflow of research 
dollars into an already highly competitive arena, where issues of 
questionable research practices and inadequate training in the 
responsible conduct of research remain unresolved, can only increase 
the opportunities for abuse.
    Finally, we will also be watchful of award recipients whose 
financial systems may have difficulty handling a sizable influx of 
funds. Institutions already under financial strain, for example, may be 
tempted to use the new funds for purposes other than those designated 
in the awards. We have identified a number of specific grant 
characteristics as ``fraud indicators'' that, based on our experience, 
may reflect a higher potential for abuse. These include indications of 
questionable cost-sharing claims by institutions receiving NSF awards, 
abuse of funds intended only for student support under a grant, 
duplicate submissions of proposals, and the diversion of grant funds to 
unrelated purposes. In addition to participating in NSF's planning and 
implementation teams, our investigators are sharing these indicators 
with NSF, along with practical guidance on combating fraud Through 
these efforts, we have developed a rigorous approach within our office 
for handling cases of grant fraud, while also keeping the agency well-
informed on how to identify the warning signs and reduce or prevent its 
occurrence.

Staffing. I was also asked by the Subcommittee to comment on our own 
staffing resources, specifically whether we planned to add staff and 
what professional skills might be needed to perform our Recovery Act 
oversight responsibilities. The expected increase in workload over the 
next five years creates a critical need for additional audit and 
investigations capability. Because the funding we received in the Act 
is temporary, we probably will not be able to use stimulus funding to 
hire additional permanent employees.
    Instead, we are looking into options for the temporary hiring of 
auditors and investigators, and we expect to use the bulk of our 
Recovery Act funding to retain contractors to conduct audits and 
provide forensic support to investigations. We also plan to contract 
with IT auditors to conduct technical reviews of specific NSF systems. 
However, with so many government organizations--IG offices and federal 
agencies alike--seeking contractor support as a result of the Act's 
requirements, we are concerned that it will be difficult to procure the 
professional assistance we need. In our FY 2010 budget request, we are 
seeking approval to add auditors and investigators, some of whom could 
conceivably be hired before the start of FY 2010 with Recovery Act 
funds. With an appropriation to back up such hires, we would not risk 
running out of staff funding when the Recovery Act money is gone. In 
any case, it seems clear that we will also be diverting some of our 
existing staff from audits and investigations they would normally 
handle to instead perform work that is necessary to ensure proper 
oversight of NSF's management of its stimulus funds.
    Due to the intense public interest and enhanced accountability 
requirements associated with the Recovery Act, and because our work 
inherently focuses primarily on assessing completed projects and 
expenditures, we expect that the additional workload generated by the 
stimulus funds in the form of audits, investigations, outreach, and 
administration will be significant and extend beyond the funding 
period. We are considering some adjustments to our work methods, such 
as developing reviews that are shorter and more focused than 
traditional audits tend to be, in order to provide more timely results. 
We have to be mindful, however, that cutting corners poses intrinsic 
risks, and we must avoid any actions that could compromise the quality, 
credibility, or usefulness of our work. Our challenge will be to 
continue to provide the robust audits and investigations necessary to 
address fraud, waste, and abuse issues occurring in NSF's programs and 
activities, while also giving top priority to the special oversight 
requirements of the Recovery Act. We look forward to meeting that 
challenge.
    Chairman Miller, this concludes my testimony. I again want to thank 
you for the opportunity to share my views. I will be happy to answer 
any questions.

                     Biography for Thomas C. Cross

    Tim Cross has served as the Interim Inspector General at the 
National Science Foundation (NSF) since January 2009. For the previous 
eight years, he was the Deputy Inspector General, managing Office of 
Inspector General operations and special projects.
    Previously, Mr. Cross was the Assistant Inspector General for 
Inspection and Evaluation at the Small Business Administration (SBA) 
from 1991 to 2000. He headed a division that assessed the performance 
of SBA programs and conducted analyses of related policy and management 
issues.
    From 1986 to 1991, Mr. Cross served as Chief of the Program 
Coordination Division in a crisis management office at the Department 
of State. In this capacity, he was responsible for coordinating 
interagency activities with the intelligence community, evaluating 
crisis management functions, and maintaining a crisis data base.
    From 1983 to 1986, Mr. Cross was Director of the Office of Policy 
and Management Analysis in the Criminal Division at the Department of 
Justice. He managed a staff that performed evaluations of law 
enforcement programs, intelligence analyses, planning for new 
Departmental initiatives, and policy analyses. He held various 
positions in the same office from 1979 to 1983, including Organized 
Crime Specialist and Associate Director. From 1978 to 1979, he was a 
drug enforcement program analyst in the Management Division at the 
Department of Justice.
    Prior to his federal employment, Mr. Cross held positions with the 
Massachusetts State government, including Coordinator of Staff 
Education for the Department of Correction and Director of Community 
Services in a maximum-security State prison.
    Mr. Cross earned a B.A. with honors in social sciences from Harvard 
University (1970), a Master's degree in criminology from the University 
of California, Berkeley (1972), and an M.B.A. from Stanford University 
(1977).

    Chairman Miller. Thank you, Mr. Cross. Ms. Norcross for 
five minutes.

   STATEMENT OF MS. EILEEN NORCROSS, SENIOR RESEARCH FELLOW, 
            MERCATUS CENTER, GEORGE MASON UNIVERSITY

    Ms. Norcross. Mr. Chairman and Members of the Subcommittee, 
thank you for inviting me to testify today on how citizens and 
non-governmental entities can help monitor stimulus spending. I 
am a Senior Research Fellow at the Mercatus Center, a 
university-based research center that works with scholars, 
policy experts, and government officials to connect academic 
learning with real-world practice. Part of that research 
focuses on using technology to improve government transparency, 
including accessibility and usability of data for agencies, 
Congress, and citizens.
    First, I would like to submit to the record a paper by my 
colleague, Jerry Brito on crowd sourcing, one of the tools I 
will discuss today.
    The Committee knows how vital accountability is to the 
performance of the nearly $800 billion committed in the 
American Recovery and Reinvestment Act. We are entering 
unsettling economic territory regardless of any potential 
short-term stimulus effect. We face a budget deficit of $1.75 
trillion in 2009. That is 12.3 percent of GDP, the highest 
deficit as a share of the economy since World War II.
    Another effect of the recession and stimulus actions is the 
massive uncertainty it has created. Transparency is important 
for many reasons, including restoring credibility and certainty 
with the public. Following the money as it flows from agencies 
to states, localities, contractors, and grantees is a 
monumental, if not impossible, task for a centralized entity, 
no matter how many auditors and analysts government commits to 
the job. The Administration noted why in its memo on 
transparency and open government: knowledge is widely dispersed 
in society. Those in government charged with stimulus 
accountability are being asked to manage an unprecedented 
deluge of data. Funds are to be spent quickly while ensuring 
prudent management.
    Fortunately, that work can be augmented at a low cost. The 
public, technically skilled and knowledgeable parties in the 
on-line transparency community can help fill that gap, but only 
if government provides the data. The data must be deep, 
structured, and standardized. With data made publicly 
accessible, there are literally no limits to how individuals 
can extract patterns, trends, using Internet tools and 
applications. One such tool is crowd sourcing.
    Crowd sourcing allows a large group of people to make 
small, individual contributions to a project. Wikipedia, the 
on-line encyclopedia, is the most familiar example. Wikipedia 
is built on wikis, a kind of on-line collaborative notebook 
built by volunteers who add, edit, and enhance reference 
articles on any topic conceivable. The result is a dynamic 
resource more extensive and deep than what a limited number of 
editors could produce in a traditional organization. The 
Internet allows people to gather and analyze data in novel 
ways, to take apart impenetrable masses of data quickly to find 
patterns. This technique can be used to follow stimulus money. 
In fact, it is being used right now at StimulusWatch.org, a 
website I co-founded with Jerry Brito and two software 
developers, Kevin Dwyer and Peter Snyder.
    The premise of StimulusWatch is simple. Using the U.S. 
Conference of Mayors' on-line wish list for projects cities 
would like to fund with stimulus money, in a manner of weeks 
the developers created a key word searchable database, allowing 
users to search projects, comment, and vote, and importantly 
contribute wikis or factual information on projects. In effect, 
StimulusWatch transformed a static, on-line list into a virtual 
town hall.
    Since the launch in January, the response has been 
tremendous. In the first month we had two million unique 
visitors and many journalists using the site. Projects deemed 
low priority rose to the top within hours. A few weeks after 
the site's launch, a local paper in Natchez, Mississippi, 
clarified that a nature trail listed at $600 million was only 
supposed to cost $3.1. An error had been made, but it had been 
caught because so many eyes were scanning the data.
    Other projects in transit and light rail quickly emerged as 
high priority, stimulating debate by local citizens. Many 
project descriptions were enhanced with factual information 
beyond what cities provided, in some cases clarifying what were 
initially viewed as wasteful projects.
    StimulusWatch demonstrates how crowd sourcing can help 
monitor projects that are actually funded with stimulus 
dollars. But first, the public needs raw, project-level data. 
Though Recovery.gov has promised accountability to citizens 
through reporting, the provisions of the Act are not 
encouraging.
    ARRA's reporting requirements are shallow and incomplete. 
Only prime, non-federal recipients and sub-awards made by prime 
recipients must be reported. The trail stops very high in the 
funding chain. Some recipients need not report. In many cases, 
that means reporting stops at the level of a city. The granular 
project level detail necessary for analysis and tracking may 
not be available.
    Secondly, ARRA doesn't stipulate how data should be 
provided. There is no guarantee of complete data sets or 
structured formats such as XML. Why is this important? An 
example: it may be possible to account for stimulus spending in 
a narrative form and posted online. We may be left with 
millions of individual narratives, but it would be impossible 
to read them all and make sense of them. Putting this data in a 
structured format that can be used by developers can permit any 
number of possibilities for monitoring and measuring the 
stimulus impact and performance, meshing the data with 
interactive maps, economic or industry statistics in 
Congressional districts. But short of project-level data 
provided in a structured format, the task at hand is not only 
an impossibility but a wasted opportunity that will leave more 
questions about the efficacy of the stimulus unanswered and 
even greater uncertainty among the public.
    Thank you, and I look forward to your questions.
    [The prepared statement of Ms. Norcross follows:]

                 Prepared Statement of Eileen Norcross

Mr. Chairman and Members of the Committee:

    Thank you for inviting me to testify on ``Follow the Money: 
Accountability and Transparency in Recovery Act Science Funding.'' My 
research at Mercatus has included considering ways to improve the 
access, clarity, and usability of government data so agencies, 
Congress, and researchers and citizens can make better use of that 
data, while helping ensure greater accountability for government 
spending.
    The Committee knows how vital transparency and accountability is to 
the progress and performance of the nearly $800 billion in funds 
committed as part of the American Recovery and Reinvestment Act (ARRA).
    Following the stimulus money--as it branches out from agencies to 
State and local budgets, contractors, subcontractors, individual 
projects and transactions--is a monumental and, frankly, impossible 
task for a centralized entity, no matter how many auditors and analysts 
the government commits to the job. Simply put: information about how 
funding is ultimately spent is dispersed, and knowledge about how funds 
are used is local. A central entity cannot possibly marshal or even be 
alert to all of the possible transactions and dedications of stimulus 
dollars, or comprehensively assess how projects are performing.
    Those in government charged with this important task are being 
asked to manage an unprecedented deluge of data that accompanies a 
funding commitment of this size. There is the added pressure and 
paradox of spending funds quickly, while ensuring prudent management. 
As the Professional Services Council stated, ``without a government 
workforce sufficient to plan, deliver, and manage the contracts and 
grants that dispense these huge funds, it will be like constructing an 
office building on a foundation of sand.''
    Fortunately that workforce can be augmented. The public--
individuals with local knowledge--aided by technology, can fill in the 
gap. To help government with the stimulus-monitoring effort, there are 
low-cost innovative solutions that embrace the best principles of 
government accountability, 21st century Internet technology, citizen, 
and community involvement. I would like to highlight one such approach 
today--crowdsourcing.
    Crowdsourcing or ``peer production'' allows a large group of people 
to make small individual contributions to a project or product that 
would traditionally have been produced by a single individual or 
organization.\1\
---------------------------------------------------------------------------
    \1\ Jerry Brito, Hack, Mash & Peer: Crowdsourcing Government 
Transparency, 9 Columbia Science and Technology Law Review 119 (2008), 
available at http://www.stlr.org/html/volume9/brito.pdf
---------------------------------------------------------------------------
    The most familiar example of crowdsourcing is Wikipedia--the online 
community-oriented encyclopedia. A wiki is a kind of online 
collaborative notebook. Wikipedia is a reference built by volunteers 
who add, expand, enrich and edit reference articles on any topic 
conceivable.
    The result is a vast, ever-evolving, but easy-to-use resource that 
is more extensive than what a limited number of editors could produce. 
Importantly, Wikipedia is dynamic, continually updated and monitored by 
users for content and accuracy.
    This kind of informational dynamism, which permits ongoing content 
and data enrichment and improvement, has only become possible with 
Internet technology. By reducing the transaction costs between 
individuals, the Internet and continual software developments allow 
people to gather and analyze data in novel and creative ways--to take 
apart seemingly impenetrable masses of data and extract patterns and 
new meaning.
    But it is only possible if government provides data according to a 
few basic principles, advanced by my colleague Jerry Brito.
    Data must be structured, open, and searchable. In other words, it 
must be provided in useful formats, standard, web-friendly, machine-
readable formats that can be aggregated, parsed, and sorted. A loose 
analogy is to think of this as data in a spreadsheet--with rows and 
columns that allow users to sort according to criteria and uncover 
trends and patterns.
    This is in contrast to disclosing spending in reporting narrative. 
The information might all be there, but it doesn't allow a computer to 
analyze it. However, putting information in XML (Extensible Markup 
Language) would allow a user to search, for instance, all projects over 
$500,000 for a contractor in a particular state, or congressional 
district.
    Providing data in this form allows users to innovate, building 
tools to analyze and improve upon the data, merging maps, economic 
statistics, industry information thereby enhancing reporting. This 
informs citizens, and also aids the government in the effort to gauge 
how federal funds are performing.
    I will now turn to a concrete example of how this is working in 
practice.

What crowdsourcing can do for stimulus accountability

    One of the great benefits of crowdsourcing is that it is low-cost 
and fast. The human capital is already in place--made up of volunteer 
programmers and good government activists in the online transparency 
community.

1) StimulusWatch.org

    In early December I came across the online U.S. Conference of 
Mayors Ready-to-Go wish list of projects cities submitted detailing how 
they would like to spend potential stimulus funds.
    The list had several virtues. Importantly it provided granular 
details of how federal funds might be spent on the local level. It was 
possible to sort by city, and federal funding type. Each project listed 
included valuable details: project dollar amounts, potential jobs 
created, and in most cases, brief project descriptions.
    However, there was a limited amount of information I could extract 
by myself not having local knowledge of all of the communities nor 
unlimited time. The data was meaningfully displayed, but the format was 
relatively rigid and did not allow for keyword searching.
    I asked my colleague Jerry Brito if the list might be a good 
opportunity for crowdsourcing--to invite people with local knowledge to 
improve the content while also proving localities with feedback on the 
relative merit of individual projects.
    Jerry, with the help of two volunteer software developers, Kevin 
Dwyer and Peter Snyder, screen-scraped the data from the Mayor's site 
and within a few weeks created StimulusWatch.org. The site uses the 
data reported by participating cities to the U.S. Conference of Mayors, 
while improving upon its usability by allowing visitors to vote and 
comment on individual projects and search projects by keyword.
    One of the most important features of the site is that it allows 
individuals--citizens and city officials alike--to contribute wikis, or 
factual information, on individual projects, in many cases enhancing 
and clarifying the project descriptions initially provided by 
individual cities. In effect, StimulusWatch.org helped transform a 
static report into a kind of online national Town Hall.
    We observed some interesting trends. First, the response was 
tremendous. In the first month we had two million unique visitors, and 
many journalists using the site. Users were actively commenting on 
projects and adding information.
    Projects deemed low-priority--dog parks, for example, rose to the 
top within hours of the site's launch. An official in Natchez, 
Mississippi clarified in the local paper a few weeks after the site's 
launch that a nature trail project listed on the site as costing $600 
million, was only supposed to cost $3.1 million--an error had been 
made, and it had been caught, because so many eyes were able to quickly 
parse the data.\2\
---------------------------------------------------------------------------
    \2\ ``City did not ask for $600M for project'' by Mary Hood, 
Natchez Democrat, February 7, 2009, http://www.natchezdemocrat.com/
news/2009/feb/07/city-did-not-ask-600m-project/
---------------------------------------------------------------------------
    Other projects, in particular in transit and light rail, quickly 
emerged as high-priority, stimulating active and ongoing debate by 
local citizens. Many project descriptions were enhanced by people 
contributing factual information, in some cases, clarifying what were 
initially regarded as wasteful projects.
    The result of StimulusWatch.org to date has been more than 
encouraging, it has functioned as a demonstration project--showing how 
the public can contribute and help the government keeps its commitment 
to accountability by ferreting out potential waste, while also becoming 
civically engaged, providing feedback to officials on how dollars are 
ultimately used to benefit the community.

2) Crowdsourcing and Stimulus Accountability
    The online community is eager to help government in the task of 
monitoring stimulus funding. Recovery.gov has made a commitment to 
provide information to the public.
    In order to meet the government's goals of transparency and 
accountability, certain details must be provided to the public. 
Specifically,

        a)  Project-level details on how funds were spent.

            Individual should be able to drill down from contractor, to 
        subcontractor, to the level of individual transaction, up to a 
        cap of $25,000.

        b)  Absent government provision of a database, raw data should 
        be made available.

            The government does not have to build such a database to 
        track spending, it only needs to require that grantees (states, 
        localities, and grantees) provide raw data according to the 
        principles mentioned-structured, open, and searchable, and then 
        make that data available to the public. This will allow users 
        to access, search, and analyze data for patterns and trends.

    But before this is possible, the disclosure and transparency 
requirements in the American Recovery and Reinvestment Act must be 
strengthened. ARRA does not require data be provided in structured 
machine-readable formats. Guidance issued by the Office of Management 
and Budget does not remedy other outstanding issues.
    The Recovery Accountability and Transparency Board must address 
four issues in how it requires and will publish data: detail in 
disclosure, standardization of information, aggregation and centralized 
access.

a) Detail and Depth in Disclosure
    According to OMB's guidance,

         ``Reporting requirements only apply to the prime non-federal 
        recipients of federal funding, and the sub-awards, (i.e., sub-
        grants, subcontracts, etc.) made by these prime recipients. 
        They do not require each subsequent sub-recipient to also 
        report. For instance, a grant could be given from the Federal 
        Government to State A, which then gives a sub-grant to City B 
        (within State A), which hires a contractor to construct a 
        bridge, which then hires a subcontractor to supply the 
        concrete. In this case, State A is the prime recipient and 
        would be required to report the sub-grant to City B. However, 
        City B does not have specific reporting obligations, nor does 
        the contractor or subcontractor for the purposes of reporting 
        on the Recovery.gov website.'' \3\
---------------------------------------------------------------------------
    \3\ Office of Management and Budget, Initial Implementation 
Guidance for the American Recovery and Reinvestment Act of 2009, Feb. 
18, 2009, pages 14-15, available at http://www.whitehouse.gov/omb/
asset/aspex?Assetl=703

    This, in effect, hobbles the accountability commitment of the 
Administration. The trail stops very high in the funding chain, making 
the ultimate destination of funds a mystery.
    It is not sufficient to know HUD made a grant to New York, which 
then made a grant to New York City. We should know to whom the grant 
was ultimately made. This level of detail allows citizens with local 
knowledge to uncover if funds are being used in accordance with the 
law, revealing fraud and misuse.
    Every dollar in the funding chain should be accounted for. Further, 
the reporting requirements do not stipulate how data should be 
provided. There is no guarantee that the complete data set of recipient 
reports will be provided, or that they will be provided in a useful 
format.\4\
---------------------------------------------------------------------------
    \4\ ARRA 1512 (c ) requires stimulus fund recipients report to 
awarding agencies how they have spent funds, there is no requirement in 
the Act that reports be made available to the public.

b) Standardization
    It is currently unclear how data will be provided. To continue the 
spreadsheet metaphor, we don't know what the columns and rows look 
like. The Act requires initial recipients to base their reporting on 
the Federal Funding and Transparency Act. Thus, we expect reports will 
contain, award grantee names, amounts, program source, description, 
city, and state. But we do not know what data elements will actually be 
published, or the format in which we can expect it.
    It would be helpful to know what Recovery.gov intends to provide, 
and in what form. That way, software developers can begin work on 
applications. Ideally data should be in XML format.

c) Aggregation
    When information is standardized (the what, who, when and where of 
data), then it is possible to aggregate it.

d) Centralized Access
    Funding will be widely distributed, thus information will come from 
many sources. For the information to be useful, it must be searchable 
from central locations. Recovery.gov should function as a web search 
engine that houses every single reporting data set. That does not 
preclude individual agencies publishing spending data on their 
websites. An analogy is to think of reports as books, indexed in a card 
catalog. As long as we know where the book is housed, it is possible to 
find it. Recovery.gov doesn't have to have all of the data sets, just 
the key for finding them.

Conclusion

    With the passage of ARRA, the Administration and Congress made a 
commitment to citizens that the government would ensure transparency 
and accountability for how stimulus funds were spent. That task is only 
possible with the involvement of citizens--interested, technically 
skilled, and knowledgeable parties from across the political spectrum 
who want to participate in and collaborate with their government.\5\ 
That community needs to know what data will be provided, and how to 
build the tools needed to make this effort work.
---------------------------------------------------------------------------
    \5\ The Coalition for an Accountable Recovery, at http://
www.ombwatch.org/car
---------------------------------------------------------------------------
    The President's Memorandum on Transparency and Open Government 
cites three themes: transparency, participation, and collaboration.\6\ 
The memo makes two important points developed in this testimony:
---------------------------------------------------------------------------
    \6\ President Barack Obama, Memorandum for the Heads of Executive 
Departments and Agencies on Transparency and Open Government, Jan. 21, 
2009, available at http://www.whitehouse.gov/
the-press-office/TransparencyandOpenGovernment/

         ``Knowledge is widely dispersed in society, and public 
        officials benefit from having access to that dispersed 
---------------------------------------------------------------------------
        knowledge.''

         ``Executive departments and agencies should use innovative 
        tools, methods, and systems to cooperate among themselves 
        across all levels of Government, and with non-profit 
        organizations, businesses, and individuals in the private 
        sector.''

    These are the operating principles upon which Recovery.gov should 
build its transparency and accountability effort. Linking citizens with 
detailed, structured, and standardized data will make it possible.
    Thank you.

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                     Biography for Eileen Norcross

    Eileen Norcross is a Senior Research Fellow with the Social Change 
Project at the Mercatus Center at George Mason University. Previously, 
she was a Senior Research Fellow with the Government Accountability 
Project from January 2003 to July 2008.
    Her research areas include the U.S. Budget, the use of performance 
budgeting in the Federal Government, tax and fiscal policy, and 
community and economic development.
    Before joining Mercatus, Ms. Norcross was the 2001-2002 Warren 
Brookes Fellow in Journalism at the Competitive Enterprise Institute in 
Washington, D.C. While there, she focused on trade, regulatory, and tax 
policies affecting the European Union and the United States.
    Before coming to Washington, Ms. Norcross worked for KPMG as a 
consultant with their transfer pricing division and as a research 
analyst with Thompson Financial Securities Data where she researched 
mergers and acquisitions for domestic and international transactions.
    A native of New Jersey, Ms. Norcross earned her Master's in 
Economics from Rutgers University in 1996. A member of Phi Beta Kappa, 
she graduated summa cum laude from Rutgers University in 1993 with a 
Bachelor of Arts degree in Economics and U.S. History.

    Chairman Miller. Thank you, Ms. Norcross. Ms. Dalton, five 
minutes.

 STATEMENT OF MS. PATRICIA DALTON, MANAGING DIRECTOR, NATURAL 
      RESOURCES AND ENVIRONMENT DIVISION, U.S. GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Ms. Dalton. Thank you, Mr. Chairman, Mr. Broun. I am 
pleased to be here today to discuss GAO's plans for carrying 
out our oversight roles related to the science funding under 
the Recovery Act. Today I want to discuss those 
responsibilities and plans that we have under way to oversee 
these funds as well as the risks and particular funding areas 
in R&D that deserve special attention to ensure that the funds 
are best used.
    The Recovery Act provides over $21 billion in additional 
spending at Energy, Commerce, NSF, and NASA for research and 
development-related activities. These range from fundamental 
research to demonstration projects to purchases of equipment, 
to the building of new facilities.
    The accountability community will play an important role in 
reviewing the use of Recovery Act funds. In addition to GAO, 
the community includes the IGs, the State auditors, local 
government auditors, and the Recovery Accountability and 
Transparency Board.
    Because of the scope of this work, we at GAO have reached 
out to the broader accountability community to coordinate our 
respective roles, planned approaches, and timelines. Through a 
coordinated approach, we feel that we can maximize our overall 
effectiveness.
    The Recovery Act directs GAO specifically to provide bi-
monthly reviews and reporting on selected states and 
localities' use of funds. We have already begun the first 
review, which will examine 16 states, the District of Columbia, 
and selected localities. These states represent 65 percent of 
the U.S. population and approximately two-thirds of the money 
going through the State governments under the Recovery Act 
program. Our first report will be issued in about a month.
    Over the next few years we will be able to provide an 
ongoing longitudinal analysis of the use of Recovery Act funds 
at the State and local level. We will look at other states as 
necessary.
    At the federal level, in consultation with the Congress and 
in coordination with the IGs, we will also be targeting at-risk 
programs for review. We will also incorporate reviews of 
stimulus funding in our ongoing reviews-based programs.
    In recent years, the accountability community has produced 
a wide variety of best practice and related guides in areas 
such as grant and contract management that can assist agencies 
in ensuring they have the needed internal controls in place 
from the outset. Up-front safeguards are critical to the 
successful program implementation. It is important to have the 
controls built in at the beginning so that we can hopefully 
prevent downstream problems.
    We at GAO are currently assessing programs for key risk 
factors. They include whether it is a new program under the 
Recovery Act, a significantly expanded program, there is a new 
delivery mechanism, or a program has known problems. A number 
of programs receiving science funding have one or more of these 
risk factors. For example, $6 billion is being provided for 
loan guarantees at the Department of Energy. That is a 
significant expansion of a new program that has had some start-
up problems. At NASA, when we examine projects with life cycle 
costs exceeding $250 million, 10 out of 13 projects have very 
serious implementation problems in terms of cost and budget and 
cost and schedule growth.
    In summary, to make the most effective and efficient use of 
resources, we will work together with the IGs to leverage our 
strengths and avoid duplication of effort wherever possible. We 
have moved quickly to begin our oversight work with our initial 
assessment of State funding currently under way as well as our 
program risk assessment.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Dalton follows:]

                 Prepared Statement of Patricia Dalton

                    GAO's Role in Helping to Ensure

                    Accountability and Transparency

                          for Science Funding

Chairman Miller, Ranking Member Broun, and Members of the Subcommittee:

    I am pleased to be here today to discuss our plans for carrying out 
our oversight roles related to science funding provided by the American 
Recovery and Reinvestment Act of 2009 (Recovery Act).\1\ I will also 
provide an overview of prior GAO work that identifies several programs 
that deserve special attention from agency managers and from the 
Inspectors General (IG) at the Department of Energy, the Department of 
Commerce, the National Science Foundation (NSF), and the National 
Aeronautics and Space Administration (NASA) to ensure that additional 
science funds these agencies will receive under the Recovery Act are 
put to the best uses. The Congress and the Administration have 
fashioned a significant response to what is generally reported to be 
the Nation's most serious economic crisis since the Great Depression. 
The Recovery Act's combined spending and tax provisions are estimated 
to cost $787 billion, including more than $21 billion in additional 
spending at Energy, Commerce, NSF, and NASA for research and 
development (R&D) related activities, including supporting fundamental 
research, demonstrating and deploying of advanced energy technologies, 
purchasing scientific instrumentation and equipment, and constructing 
or modernizing research facilities. (See Appendix I.)
---------------------------------------------------------------------------
    \1\ Pub. L. No. 111-5 (Feb. 17, 2009).
---------------------------------------------------------------------------
    The accountability community will play an important role in 
reviewing the use of Recovery Act funds. In addition to GAO, the 
community includes the IGs, State auditors, local government auditors, 
and the Recovery Accountability and Transparency Board. The Recovery 
Act has identified the following specific responsibilities for GAO, the 
IGs, and the Recovery Accountability and Transparency Board:

          GAO is charged with reviewing the use of funds by 
        selected states and localities and commenting on funding 
        recipients' estimates of the number of jobs created and 
        retained as a result of the funding. We also have several other 
        reporting responsibilities.\2\
---------------------------------------------------------------------------
    \2\ See GAO, American Recovery and Reinvestment Act: GAO's Role in 
Helping to Ensure Accountability and Transparency, GAO-09-453T 
(Washington, D.C.: March 5, 2009).

          IGs across government are expected to audit the 
        efforts of federal agencies' operations and programs related to 
        the Recovery Act, both individually within their particular 
        entities and collectively, as many of them are members of the 
---------------------------------------------------------------------------
        Recovery Accountability and Transparency Board.

          The Recovery Accountability and Transparency Board is 
        intended to help prevent waste, fraud, and abuse by reviewing 
        contracts and grants to ensure they meet applicable standards, 
        follow competition requirements, and are overseen by sufficient 
        numbers of trained acquisition and grants personnel. The Board 
        has a range of authorities and is charged with reporting to the 
        President and the Congress any potential problems requiring 
        immediate attention in addition to reporting quarterly and 
        annually.

    My statement today discusses (1) our responsibilities under the 
Recovery Act to provide bimonthly reviews of selected States' and 
localities' use of funds; (2) particular R&D funding areas that deserve 
special attention to ensure that funds are best used; and (3) our plans 
for carrying out our responsibilities under the Recovery Act.

Our Responsibilities Under the Recovery Act and Our Plans to Evaluate 
                    At-Risk Programs

    The Recovery Act directs GAO to provide bimonthly reviews and 
reporting on selected States' and localities' use of funds. We have 
initiated work on the first review, which will examine 16 states, the 
District of Columbia, and selected localities. Specifically, we axe 
examining how these states and localities are using the Act's funds and 
whether they are, among other things, (1) preserving and creating jobs 
and promoting economic recovery; (2) assisting those most impacted by 
the recession; (3) investing in transportation, environmental 
protection, and other infrastructure that will provide long-term 
economic benefits; and (4) stabilizing State and local government 
budgets in order to minimize and avoid reductions in essential services 
and counterproductive State and local tax increases. We will track the 
following 16 states, and the District of Columbia, over the next few 
years to provide an ongoing longitudinal analysis of the use of funds 
under the Recovery Act: Arizona, California, Colorado, Florida, 
Georgia, Iowa, Illinois, Massachusetts, Michigan, Mississippi, New 
Jersey, New York, North Carolina, Ohio, Pennsylvania, and Texas. These 
states contain about 65 percent of the U.S. population and are 
estimated to receive about two-thirds of the intergovernmental grants 
funds available through the Recovery Act.
    Because of the scope of this work, we have reached out to the 
broader accountability community to coordinate our respective roles, 
planned approaches, and timelines. Soon after the Act was passed, the 
acting Comptroller General reached out to the IG community and, with 
Ms. Phyllis Fong, the Chairman of the Council of Inspectors General on 
Integrity and Efficiency, hosted an initial coordination meeting on 
February 25, 2009, with the Inspectors General or their representatives 
from 17 agencies. It was a very productive discussion in which we 
outlined coordination approaches going forward. The acting Comptroller 
General also talked with Mr. Earl Devaney soon after the President 
appointed him as Chairman of the Board on February 23, 2009, to ensure 
effective coordination of our respective efforts.
    In consultation with the Congress in exercising our general 
statutory authority to evaluate the results of government programs and 
activities, we will target at-risk programs for review. We will also 
incorporate reviews of stimulus funding whenever we are examining base 
programs. There are many implementation challenges to ensuring adequate 
accountability and efficient and effective implementation of the 
Recovery Act. Experience tells us that the risk for fraud, waste, and 
abuse grows when billions of dollars are going out quickly, eligibility 
requirements are being established or changed, new programs are being 
created, or a mix of these characteristics. This suggests the need for 
a risk-based approach to target for attention on specific programs and 
funding structures early based on known strengths, vulnerabilities, and 
weaknesses, such as a track record of improper payments or contracting 
problems. We currently are assessing all of the programs receiving 
Recovery Act funds for key risk factors, including new programs, 
significant growth, new delivery mechanisms, and known problems. In 
recent years, the accountability community has produced a wide variety 
of best practice and related guides that can assist agencies in 
ensuring they have the needed internal controls in place from the 
outset. These best practices and related guides cover such areas as 
fraud prevention, contract management, and grants accountability.

R&D Funding Areas that Deserve Special Attention

    Our prior work has identified several areas that deserve special 
attention from management and the IG's office to ensure that funds are 
put to best use. The following examples highlight problems associated 
with (1) a new program--Energy's innovative technology loan guarantee 
program--which does not have established management and internal 
control activities, (2) an existing program that cannot readily 
determine whether private entities would fund a project without the 
federal funds, (3) an existing program that awards a large amount of 
matching funds to demonstrate or deploy advanced technologies but 
cannot ensure that industrial partners will complete the project, axed 
(4) an existing program with a history of cost overruns and schedule 
slippage for its major projects.

          The Recovery Act made $6 billion available to Energy 
        to support $60 billion in new loan guarantees under its 
        innovative technology loan guarantee program. However, our July 
        2008 report entitled Department of Energy: New Loan Guarantee 
        Program Should Complete Activities Necessary for Effective and 
        Accountable Program Management (GAO-08-750) found that DOE was 
        not well positioned to manage the loan guarantee program 
        effectively and maintain accountability because it had not 
        completed a number of key management and internal control 
        activities. To improve the implementation of the loan guarantee 
        program and to help mitigate risk to the Federal Government and 
        American taxpayers, we recommended that DOE take several steps, 
        including (1) completing detailed internal loan selection 
        policies and procedures that lay out roles and responsibilities 
        and criteria and requirements for conducting and documenting 
        analyses and decision making, (2) amending application guidance 
        to include more specificity on the content of independent 
        engineering reports and on the development of project cost 
        estimates to provide the level of detail needed to better 
        assess overall project feasibility, and (3) further developing 
        and defining performance measures and metrics to monitor and 
        evaluate program efficiency, effectiveness, and outcomes. We 
        are currently engaged in an ongoing engagement to determine the 
        current state of the loan guarantee program and what progress 
        DOE has made since our last report.

          The Recovery Act made $3.5 billion available to 
        Energy to fund R&D on renewable energy and fossil energy. 
        However our December 2008 report entitled Research and 
        Development: DOE Could Enhance the Project Selection Process 
        for Government Oil and Natural Gas Research (GAO-09-186) found 
        that DOE does not formally assess whether industry would 
        undertake oil and gas R&D without federal funding. To better 
        ensure that DOE selects oil and gas R&D projects that industry 
        is unlikely to pursue, we recommended that DOE's project 
        selection process include a formal assessment of the likelihood 
        that the R&D would not have occurred without federal funding. 
        Our review of similar federal programs has found that agencies 
        may be unable to ensure that their funding is not duplicating 
        existing or planned research that would be conducted in the 
        same period in the absence of federal financial assistance. In 
        addition, our work has questioned a R&D program's ability to 
        obligate a large influx of appropriations because the review, 
        selection, and approval of individual project proposals from 
        the private sector can be lengthy and requires substantially 
        more scientific peer review panels to assess the technical 
        merits of each proposal and staff with expertise in making 
        grant awards.

          The Recovery Act made $2.32 billion available to 
        Energy to jointly fund private sector projects demonstrating 
        clean coal and carbon capture and sequestration technologies. 
        However, our June 2001 testimony entitled Fossil Fuel R&D: 
        Lessons Learned in the Clean Coal Technology Program (GAO-01-
        854T) and a series of prior reports on the program found that 
        many demonstration projects had experienced delays, cost 
        overruns, bankruptcies, and performance problems. We identified 
        several lessons learned for improving DOE's selection and 
        oversight processes. As a result of the projects' problems, the 
        Congress since 1995 has rescinded or reprogrammed almost $900 
        million of the funds appropriated for the Clean Coal Technology 
        Program. More recently, our February 2009 report entitled Clean 
        Coal: DOE's Decision to Restructure FutureGen Should Be Based 
        on a Comprehensive Analysis of Costs, Benefits, and Risks (GAO-
        09-248) found that DOE did not base its decision to restructure 
        FutureGen on a comprehensive analysis of factors, such as the 
        associated costs, benefits, and risks. We recommended that, 
        before implementing significant changes to FutureGen or before 
        obligating additional funds for such purposes, DOE prepare a 
        comprehensive analysis that compares the relative costs, 
        benefits, and risks of a range of options that includes (1) the 
        original FutureGen program, (2) incremental changes to the 
        original program, and (3) the restructured FutureGen program.

          The Recovery Act provided a total of $1 billion to 
        NASA, including $400 million for exploration. However, our 
        March 2009 report entitled NASA: Assessments of Selected Large-
        Scale Projects (GAO-09-306SP) noted that NASA plans to invest 
        billions of dollars in the coming years in science and 
        exploration space flight initiatives. Our examination of NASA 
        projects with life cycle costs exceeding $250 million found 
        that 10 of 13 that had entered the implementation phase had 
        experienced significant cost and/or schedule growth--on 
        average, development costs had increased by 13 percent and 
        launch had been delayed by 11 months. NASA has acted to adopt 
        practices that would better ensure that programs proceed based 
        on a sound business case that addresses technology maturity, 
        design stability, complexity of heritage technology, contractor 
        performance and development partner performance. In particular, 
        NASA has undertaken an array of initiatives aimed at improving 
        program management, cost estimating, and contractor oversight. 
        However, until these practices become integrated into NASA's 
        culture, it is unclear monies will be well-spent and the 
        achievement of NASA's mission will be maximized.

Our Plans for Carrying Out Our Oversight Responsibilities

    To make the most effective and efficient use of our resources, we 
plan to fulfill our Recovery Act responsibilities related to science 
funding by working together with the IGs to leverage our strengths and 
avoid duplication of effort wherever possible. In consultation with the 
Congress, we will also target at-risk programs that receive Recovery 
Act science funding for review under our general audit authorities, and 
we will expand our work on base programs to examine any related 
stimulus funding.
    In summary, GAO welcomes the responsibility that the Congress has 
placed on us to assist it in the oversight, accountability, and 
transparency of the Recovery Act. We will continue to coordinate 
closely with the rest of the accountability community. We also are 
committed to completing our Recovery Act work on the timetable 
envisioned by the Act and will keep the Congress fully informed as our 
plans evolve.
    Mr. Chairman, Representative Broun, and Members of the Subcommittee 
this concludes my statement. I would be pleased to respond to any 
questions you may have.

Staff Acknowledgments

    Key contributors to this testimony were Richard Cheston (Assistant 
Director), Karen Keegan, and Stuart Ryba.





                     Biography for Patricia Dalton
    Patricia Dalton became Managing Director of the Government 
Accountability Office's Natural Resources and Environment Team in June 
2008. The Natural Resources and Environment Team is responsible for 
GAO's work in agriculture and food safety, energy, the environment, 
federal land stewardship, U.S. and international nuclear security, and 
water resources and science and technology. Before assuming her current 
responsibilities, Ms. Dalton was Managing Director of GAO's Physical 
Infrastructure Team, where she directed work in transportation, 
telecommunications, federal property, and the Postal Service. She was 
also a Director in GAO's Strategic Issues Team, where she was 
responsible for GAO's work related to government management issues, 
particularly performance management and the Government Performance and 
Results Act, and organization structure and design. She also was 
responsible for work related to the decennial census and the Census 
Bureau, intergovernmental relations, and tools of government. Before 
joining GAO in 2001, Ms. Dalton was the Deputy Inspector General for 
the U.S. Department of Labor for seven years. She received her 
appointment to the Senior Executive Service in 1993 from the U.S. 
Department of Army, where she served as Director of Audit Policy, 
Planning and Resources, Army Audit Agency. Ms. Dalton is a Certified 
Public Accountant. She holds an MBA from the University of 
Massachusetts, and a BA from the College of the Holy Cross.

                               Discussion

    Chairman Miller. We will now have questions. I would 
anticipate one round. Do you have more than that?
    Mr. Broun. No, that is fine. I know you have a hearing that 
you need to go to, and that is fine.
    Chairman Miller. Mr. Friedman and Mr. Zinser, the statute 
provides that the two of you sit on the Recovery Accountability 
and Transparency Board. The Board will meet for the first time 
on March 27. What will you take to the Board, what concerns, 
what recommendations?
    Mr. Friedman. There are 10 IGs on the Board, as you know, 
and I think--I of course am not the Chairman of the Board. Mr. 
Earl Devaney--who is the sitting IG, I guess, at the Department 
of the Interior but is temporarily in this capacity--will be 
chairing it. So I don't precisely know what the agenda will be 
for that date. My expectation is, number one, that we have a 
responsibility under the statute to operate Recovery.gov, and 
that will probably consume a good deal of our time at that 
meeting.
    Secondly I anticipate that we will be talking about the 
progress that we have made in proactively providing oversight 
at our respective agencies and determining if there are cross-
cutting issues that could be applied throughout the IG 
community and certainly throughout the accountability community 
in a broader context.
    So those are the three--and probably findings to date, you 
know, specific to our agencies but which may have application 
again across the board. So I anticipate that will be the 
primary focus of the meeting, but I am not setting the agenda 
so I don't know for sure.
    Chairman Miller. Mr. Zinser, any concerns?
    Mr. Zinser. Yes, sir. I think there will be a lot of issues 
surrounding technical problems with Recovery.gov and reporting 
requirements on the agencies and how they are going to fulfill 
those reporting requirements. I also think that a cross-cutting 
issue, both for the oversight groups as well as the agencies 
themselves, and it was discussed here several times this 
morning, is workforce issues, about how we staff both the 
oversight agencies and the agencies that are spending these 
monies. Do we have the right people in the workforce to do it?
    Chairman Miller. Okay. Mr. Cross, if I could bring you in, 
too, and ask the question of the three IGs. I know that most of 
the witnesses and perhaps all the witnesses touched on whether 
agency contract and grant management resources are sufficient 
or really ready to manage the extra workload. Do you believe 
they are sufficient? Are they ready for what is coming at them? 
And if not, what needs to be done?
    Mr. Cross. I think at NSF they are making strides in that 
direction. They didn't get any additional funding for workforce 
ameliorations. The workload is going to be there with 
essentially the same staff. Given that fact, you have to look 
for ways to make that productivity more efficient, and they are 
doing that in terms of beefing up their IT, doing some cross-
training, bringing in more support staff, that kind of thing, 
also looking at all the different possibilities with OPM for 
bringing people in on a temporary basis. So I think that's the 
thrust. They still have some new territory to tread in terms of 
the reports and the information they need to generate in terms 
of figuring out how to do undeclines as they call them, where 
you're taking formerly declined proposals and revisiting those 
for future funding. There are some new games in play here that 
people need to figure out, and I know they have got a lot of 
staff and managers looking at those issues and we will be 
watching to see how they work them.
    Chairman Miller. Mr. Zinser, Mr. Friedman?
    Mr. Zinser. I think at the Department of Commerce, it is 
mixed. I think some agencies are prepared for contracting but 
perhaps not grants and vice-versa. I know for example that a 
broadband technology program is going to require an increase in 
grants management personnel, and the agency or the Department 
has three different agencies that administer grants and I don't 
think they have settled on what agency is going to administer 
the grants under the broadband program. That is just one 
example, but whoever does is going to have to increase that 
workforce substantially.
    Mr. Friedman. It is a superb question, Mr. Chairman, and 
obviously it is one of the biggest problems that we feel the 
Department of Energy faces. As you may be aware, the Department 
of Energy perhaps is the most contractor-dependent agency in 
the civilian sector. Virtually everything is done by contract, 
grant, cooperative agreement, a whole series of contractual and 
financial instruments. And actually, we wrote to the Deputy 
Secretary expressing our concern in 2007, and we have just 
updated that. We will be issuing a report on that in the not-
too-distant future. They have made some progress, but given the 
influx of huge amounts of fresh dollars that are going to be 
flowing into the procurement system broadly defined, it is one 
of the most significant challenges that the Department faces 
and one that we have reported on regularly.
    Chairman Miller. Ms. Dalton, do you have any thoughts on 
that?
    Ms. Dalton. Well, I would agree with the Inspector Generals 
that it is kind of a mixed bag. Some agencies and programs have 
more experience in terms of grants and contract management, but 
I think across the board we are going to have a capacity issue 
because there has been so much money that is going into these 
programs, and the agencies are going to have to be looking at 
what is the best way to implement the programs, where can I get 
the resources and the expertise, and in training the people 
that they do have to manage these programs and the grants and 
the contracts and following best practices in terms of setting 
clear expectations for each of the grants and contracts and 
monitoring them.
    Mr. Friedman. Can I add one thing, Mr. Chairman, to my 
answer?
    Chairman Miller. Sure.
    Mr. Friedman. First of all, in the interest of being fair 
and balanced, which I want to be, the Department's procurement 
officials are aggressively trying to retain and recruit. For 
example, their retirement eligibility rate is quite high, so 
they are making aggressive efforts to try to retain and recruit 
the skilled workforce that they need to handle the influx of 
additional cash. So I want to be fair to them as well. They are 
making Herculean efforts to try to meet their responsibilities.
    Chairman Miller. My time is expired. Dr. Broun.
    Mr. Broun. Thank you, Mr. Chairman. I assume you all were 
here in my previous line of questions with the first panel. I 
wasn't convinced by the answers that I got, and I see you guys 
as street cops; and I see what you need to do is operate as 
street cops, and I know a street cop, when something is out of 
place, out of character, they start scratching and digging and 
looking into things. And they also look into the people who 
they know have already committed crimes or accused of 
committing crimes, and we already know that there are entities 
out there such as ACORN who are an organization under 
investigation in I think it is like 17 or 18 states for 
criminal activity. I am extremely concerned about the census 
and the possibility of the Department of Commerce contracting 
with entities like ACORN. And I just would like a yes or no 
answer. Can you all assure me that you will utilize available 
data--and I understand maybe it is the GAO that has a list of 
entities who are under criminal investigations. Will you all 
let the agencies know that you are going to look very strongly 
to make sure that criminal entities, or criminally accused 
entities, are not given contracts to carry out projects that--
so that the American people can be absolutely sure that there 
is not any of this shifty, shady groups that are doing the 
people's business? Please, start with Mr. Friedman.
    Mr. Friedman. Well, Dr. Broun, I am not sure I can give you 
the satisfactory answer that you perhaps desire. We face these 
sorts of challenges every day because we have 200 to 300 
potential criminal investigations ongoing at any given time 
dealing with the Department of Energy or Department of Energy-
related entities. So it is a problem we face.
    What I can tell you is the following. When you have a 
criminal investigation, and we understand that a contract or a 
grant has to be awarded to that entity--assuming that it will 
not compromise the investigation, assuming we will not 
compromise grand jury information, assuming that we 
appropriately coordinate with the Department of Justice, we 
will inform the Department's program managers of the ongoing 
investigation, and ultimately they will have to make the 
decision as to whether they will proceed with the contract of 
the procurement or not. Now, I know nothing about the ACORN 
investigation other than what I have seen in the media, so I am 
not familiar with that. I will tell you as well that, and I 
know this is obvious, that the mere fact that there is a 
criminal investigation, and I am not defending anyone here, 
should not necessarily lead anyone to conclude that ultimately 
there will be a charge resulting from the investigation.
    So it is a very tricky, difficult area, but I have tried to 
explain the steps that we go through to make sure that 
management, who ultimately awards the contracts, is aware that 
there is an investigation, and they will have to make the 
ultimate judgment on that.
    Mr. Broun. Mr. Zinser.
    Mr. Zinser. Sir, I think you are going to find that ACORN 
is working with the census bureau on their partnership efforts. 
I don't know----
    Mr. Broun. That is what----
    Mr. Zinser.--that they are getting any money, sir, but I 
think that they are working with the census. But I think what 
you have to do is identify those ACORN groups that are under 
investigation and see whether they are actually working with 
the census, and then if the census has some criteria that they 
can use in terms of the groups that they are associating with, 
you know, they have to make those decisions. But we would 
certainly be willing to help you get answers from the 
Department or the census bureau about where that is occurring.
    Mr. Broun. Well, I would appreciate that, and I am 
extremely concerned about this because of the integrity and the 
importance of the census. Just in the sake of time, I will just 
let Mr. Cross answer that and Ms. Dalton, too, in writing. And 
Ms. Norcross, if you would have any ideas about that, I would 
appreciate your thoughts.
    But Ms. Norcross, in your testimony you have mentioned a 
number of recommendations for Recovery.gov. How early will 
these recommendations need to be adopted before more reporting 
starts to flow into the website?
    Ms. Norcross. The sooner the better. There is no time to 
waste. People right now are waiting to know how data is going 
to be displayed so they can start building websites and 
monitoring data. In anticipation, even if the Administration 
just lets people know how they intend to display the data, that 
would be a help.
    Mr. Broun. Thank you so much. Mr. Chairman, my time is 
expired so I will yield back.
    Chairman Miller. Thank you. Mr. Zinser, as to the 2010 
census, if you just do what you did in 2000, I will be 
perfectly happy. If it ain't broke----
    Mr. Broun. Chairman, would you yield a moment?
    Chairman Miller. Yes, Dr. Broun.
    Mr. Broun. I would like to do the same thing. I certainly 
don't want to use statistical sampling in the census. People 
need to be counted. Real people need to be counted, and that is 
my concern. I just don't want any election stolen. As a 
scientist, I want to see real data and I would like to see 
right over wrong, and statistical sampling to me is a way of 
interjecting a tremendous amount of potential for fraud and 
abuse. So, thank you.
    Chairman Miller. I do not want to defend the position of 
wrong over right. I was not speaking to the methodology. I am 
not sure it is necessary that you actually touch each nose to 
do a nose count. But that ends our testimony today. Thank you 
very much. Under the rules of the Committee, the record will 
remain open for two weeks for additional statements from the 
Members and for any follow-up questions or answers, and I think 
at least one or two of the witnesses mentioned that they would 
provide further answers in writing. And with that, the 
witnesses are excused, the hearing is now adjourned.
    [Whereupon, at 12:50 p.m., the Subcommittee was adjourned.]
                              Appendix 1:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Cora Marrett, Acting Deputy Director, National Science 
        Foundation

Questions submitted by Chairman Brad Miller

Q1.  You heard the concerns expressed by the Subcommittee and by the 
Inspector General that the Foundation's grants management staff was 
working at full capacity even before the enactment of the Recovery Act. 
You testified that by revisiting existing proposals already reviewed, 
the Foundation can expedite the award of funds with the available 
staff. However, there remains the requirement to monitor the 
performance of these additional grants, which is likely to be a 
nontrivial increase in workload. Are you still confident no increase is 
needed in the Foundation's capacity for this function?

A1. NSF recognizes and is honored by the responsibilities brought by 
the Recovery Act. As I noted in my testimony, there will be major 
challenges associated with the increased workload, as the agency will 
be processing roughly 50 percent more awards than expected in FY 2009. 
Given that the Recovery Act did not increase funding for administrative 
activities, NSF staff and management will be monitoring the workload 
and reprioritizing and redeploying resources as appropriate.

Q2.  Should the Foundation's assumption about grant management staff 
prove incorrect, what plan is in place to detect and address the 
deficiencies?

A2. The NSF Chief Financial Officer is on NSF's Recovery Act Steering 
Committee and will provide regular updates on grants management 
workload. Should any issues arise, the Steering Committee will address 
how best to enhance and/or redeploy resources. Now that the FY 2009 
omnibus appropriation has been enacted, NSF has an additional 25 FTE 
that may be deployed and we have submitted a request to OPM for a dual 
compensation waiver far re-employed annuitants. This, in combination 
with continual evaluation of necessary resources by managers, will help 
to prepare NSF to manage federal funding. Continued and thoughtful 
reinforcement of NSF staff is needed to ensure appropriate monitoring, 
administration, oversight, accountability, and stewardship of the 
federal funds.

Q3.  The Subcommittee is concerned that a too rigid adherence to a 
specific level of point scores assigned by reviewers may lead to sub-
optimal award distributions as measured by intellectual promise. What 
level of discretion will program officers have in identifying grant 
applications already received by the Foundation that were worthy of 
funding but, due to insufficient funds, were not previously funded?

A3. A hallmark of NSF's merit review process is the discretion that 
resides with program officers. The NSF program officer reviews 
proposals and analyzes the input received from the external reviewers. 
Reviewer ratings are provided only as assistance to the program 
officer. In addition to the external reviews, program officers consider 
several factors in developing a portfolio of funded projects.
    For example, these factors might include different approaches to 
significant research and education questions; potential (with perhaps 
high risk) for transformational advances in a field; capacity building 
in a new and promising research area; or achievement of special program 
objectives. In addition; decisions on a given proposal are made 
considering both other current proposals and previously funded 
projects. After scientific, technical and programmatic review and 
consideration of appropriate factors, the program officer makes an 
award/decline recommendation to the division director.
    In order to accommodate situations where programs had proposals 
that were worthy of funding but they were not able to support them due 
to insufficient funds, the Foundation has developed functionality for 
reversal of a previous declination decision. The reversal of the 
decision must be based on both the high quality of the reviews received 
on the initial submission and the lack of available funding at the time 
the original decision was made.

Q4.  How is the Foundation coordinating distribution of Recovery Act 
resources with the Foundation's regular appropriations to maximize the 
value of both in achieving the Act's goals and the President's 
priorities?

A4. The Foundation is considering all available FY 2003 funds, both 
those from the Recovery Act and those provided through the omnibus 
appropriation, as it develops its FY 2009 award portfolio.
    NSF will utilize the majority of the Recovery Act funds to support 
highly-rated proposals that would otherwise be declined due to lack of 
available funding. NSF has many proposals already in hand that meet 
this criterion. NSF will prioritize funding of new principal 
investigators and high-risk, high-return research with Recovery Act 
funding. This is in keeping with the goals of the legislation--to 
increase economic efficiency by spurring technological advances in 
science and health and to jump-start the economy. Support will also be 
provided for critical infrastructure needs, with an emphasis on 
deferred maintenance and enhancements for existing research facilities. 
NSF expects that the science and engineering communities are poised to 
immediately expend funds that will advance discovery and innovation, 
and enhance the economy.
    Along with the funds provided in the Recovery Act, NSF will utilize 
funds provided through its regular FY 2009 appropriation to advance the 
frontiers of science and engineering, including support for addressing 
urgent national priorities, such as energy, environment, and climate 
change.

Questions submitted by Representative Paul C. Broun

Q1.  One of the selling points of the stimulus bill was that action was 
needed immediately. How long will it take you to spend all of the money 
directed to your agencies?

A1. NSF plans to obligate the majority of its Recovery Act funding by 
the end of FY 2009 and will carefully monitor the expenditure of funds. 
Of the $3.002 billion provided to NSF, over two-thirds will be used to 
fund highly-rated proposals that have already been received but would 
otherwise be declined due to lack of available funding. NSF will ensure 
that Recovery Act funds are awarded in a timely manner while 
maintaining its commitment to its established merit review process.
    NSF expects that some or all of the funds for the following 
programs may need to be carried forward into FY 2010:

          The Science Master's Program in the Education and 
        Human Resources Account. NSF is currently developing plans to 
        establish this program.

          The Academic Research Infrastructure (ARI) program in 
        the Research and Related Activities Account. There will be 
        multiple categories for ARI proposals, dependent on the size of 
        the proposal budget. NSF expects to make the majority of ARI 
        awards (those that are less than or equal to $2 million) in 
        January 2010. The remaining awards are expected to be made no 
        later than April 2010.

          The Major Research Instrumentation (MRI) program. NSF 
        intends to utilize approximately $100 million of the $300 
        million provided in the Recovery Act for MRI to support MRI 
        proposals already in hand. These awards will be made during FY 
        2009. The remaining $200 million will be used for a new MRI 
        solicitation to be issued in spring 2009. NSF expects to make 
        most of these MRI awards by the end of the 2009 calendar year.

    NSF expects to obligate funds for the three projects that will be 
supported through the Major Research Equipment and Facilities 
Construction (MREFC) account--Ocean Observatories Initiative (OOI), 
Alaska Region Research Vessel (ARRV), and Advanced Technology Solar 
Telescope (ATST)--either late in FY 2009 or early in FY 2010 so that 
construction can begin expeditiously.
    In addition, it may be necessary to carry forward into FY 2010 a 
small amount of funding within the Research and Related Activities 
(R&RA) account. Proposals that have been reviewed but not awarded by 
September 30, 2009 and awards to organizations that have not previously 
received NSF funding are examples of instances that might require the 
carry forward of Recovery Act funds.
    Funds provided to the NSF Office of Inspector General (OIG) are 
expected to be carried forward into FY 2010.
    All NSF awards made with Recovery Act funds will be ``standard'' 
grants, which means that the awardee receives all funds at the time of 
award rather than receiving funds over multiple years. The average 
award duration for NSF research grants is approximately three years. 
Therefore, NSF expects that the majority of Recovery Act funds will be 
spent by awardees within the next three years. Research grant awardees 
typically spend the majority of funding in the second year of their 
award.

Q2.  Current OMB guidance only requires that money be tracked to two 
layers down. For example, a state and a city would have to report data, 
but not the contractor or the subcontractor. Do you intend to require 
additional reporting beyond OMB guidance?

A2. At this time, NSF does not intend to require institutions that 
receive Recovery Act funding to report beyond the requirements 
established by OMB. The OMB guidance clearly states that ``the prime 
recipient is responsible for reporting on their use of funds as well as 
any sub-awards they make.'' Further. ``in limited circumstances, 
recovery will go from a federal agency to a state, and then to a local 
government or other local organization. In these cases, the current 
reporting model will not track funds to subsequent recipients beyond 
these local governments or other organization.''
    NSF agrees and requires that prime recipients report on their use 
of funds as well as any sub-awards they make. Per our General Grant 
Conditions (GC-1), we state ``The grantee remains responsible for 
maintaining the necessary documentation on all sub-awards and making it 
available to NSF upon request. The grantee shall include sub-award 
activities in the annual and final project reports that are submitted 
to NSF.''
    NSF already requires extensive technical and financial reporting 
for all assistance awards. These reports provide NSF program officers 
and administrative offices with information on the progress of 
supported projects and the way these funds are used. Awardee 
institutions are required to submit annual project reports as well as a 
final project report. Quarterly financial reports on the status of 
funds received from NSF are also required through submission of a 
Federal Financial Report (FFR).
    It should be noted that NSF awards very limited funding to State 
and local governments. Most NSF awards are made to research 
institutions.

Q3.  Do you believe two layers of accountability are enough?

A3. As described above, this particular concern is not of great impact 
to most NSF-funded organizations. In addition, NSF believes that it has 
adequate and appropriate policies and procedures in place to ensure 
awardees are held accountable for all funds awarded, inclusive of 
Recovery Act funding. Our general Grant Condition provisions hold all 
parties expending funds originating from the Federal Government 
responsible for expending funds in compliance with applicable federal 
and agency-specific requirements.

Q4.  Please list the top three risks at your agency associated with 
stimulus funding.

A4.
1. Risk of Non-compliance with Recovery Act Requirements: The most 
significant risk to the Foundation emanates from the fact that, 
although the Recovery Act appropriation represents an increase to the 
NSF budget of almost 50 percent, no additional administrative funding 
for staff or other resources was provided. Our regularly-appropriated 
resources will be used to ensure compliance with the Recovery Act 
mandates, in addition to our normal management and administrative 
activities.
    The Act requires the agency to provide additional information that 
was not considered when setting the agency's administrative FY 2009 
budget. Some examples include:

          Weekly Status Updates on Recovery Act Funding

          Monthly Financial Reports

          Award Transaction Data Feeds

          Agency Recovery Plan

          Recovery Program Plans

2. Risk of Systematic Flaws and/or Breakdowns: Additionally, there are 
risks inherent in implementing any new program responsibly, on an 
expedited time line. The Recovery Act requires additional reporting, on 
data not currently collected in recipient and agency systems. The 
tracking and reporting requirements have required both agencies and 
recipients to modify accounting and award systems in short order. Due 
to the expeditious nature of the Act, the time spent testing these 
modifications has been limited.

3. Risk of Administrators Not Hawing Sufficient Knowledge: There will 
be continuing education needed across multiple sectors in the recipient 
and federal awarding communities. Again, due to the expeditious nature 
of the Act, both agency and recipient administrators may encounter 
limitations as they try to keep up-to-date on Recovery Act guidance, 
which is currently in Interim Final status. Recovery Act recipient 
reporting data elements are not yet final.

Q5.  What contracts at your agency are ``mission critical''? That is, 
if the specific contract were to experience cast-overruns, schedule 
decays, or performance problems would it affect the mission of the 
agency?

A5. With regard to Recovery Act funds, the National Science Foundation 
will not award any contracts that are mission critical.

Q6.  The DOE IG identified contract administration as ``one of the mast 
significant management challenges facing the Department'' Please 
discuss the current status of your agency's ability to issue contracts 
and manage grants.

A6. Currently, NSF is well positioned to award and administer its 
current portfolio inclusive of the additional Recovery Act funding. NSF 
employs highly qualified and experienced staff to execute the critical 
responsibilities of grant and contract management. These professionals 
include grant and contract specialists, cost analysts, policy analysts, 
financial staff, and program officers who are vital to monitoring and 
administering the performance of awards to ensure appropriate 
monitoring, administration, oversight, accountability, and stewardship 
of federal funds. Although staffing resources are certainly a concern 
considering the increased workload, at this particular juncture, we are 
confident that the existing staffing level is sufficient to adequately 
award and manage the dollars within our agency's budget.

Q7.  Do you have adequate resources?

A7. NSF is aware of the need for continuous evaluation of resources 
required to successfully manage the increased responsibilities 
associated with the Recovery Act. To this end, NSF has put a Recovery 
Act steering committee in place to face the expected challenges by 
using all available resources as well as employing appropriate 
management oversight and flexibility to meet unforeseen challenges. The 
NSF CFO is on the Recovery Act steering committee and will provide 
regular updates on the awards management workload. NSF was allocated an 
additional 25 FTE in the FY 2009 omnibus appropriation, and a request 
for waiver of reemployed annuitants has been prepared for submission to 
OPM. Should any resource issues arise, the steering committee will 
address how best to enhance and/or redeploy resources to ensure that 
the NSF award portfolio receives adequate resources.

Q8.  Are your employees adequately trained?

A8. NSF makes every effort to ensure that all employees are adequately 
trained. We believe that the combination of experience and training of 
our current employees along with our outstanding record of recruiting 
and retaining qualified professional and administrative staff serves us 
well as we implement the requirements of the Recovery Act.

Q9.  Do you have adequate staff levels?

A9. NSF's current staffing levels are adequate at this time. NSF is 
committed to fulfilling its responsibilities under the Recovery Act and 
it is our intention to move forward expeditiously with all award and 
administrative activities using staff resources that are currently 
available.

Q10.  What can Congress do to help?

A10. NSF appreciates Congress' strong support in recent years far the 
agency's stewardship responsibilities. Enactment of the full FY 2310 
Request of $318 million for Agency Operations and Award Management--
currently pending before Congress--will be vital to NSF fulfilling its 
responsibilities under the Recovery Act.

Q11.  Understanding that coordination is sometimes necessary, IGs 
should not be used as an agency's internal auditor. What in-house 
auditing and program evaluation capabilities do your agencies have?

A11. The NSF IG reports directly to the National Science Board (NSB), 
as opposed to the head of the agency, the Director of NSF. This 
organizational structure is intended to maintain the IG's independence 
in performing both internal and external audits and reviews. Audit 
guidelines preclude auditors from making decisions an behalf of 
management.
    NSF has clearly established these distinct roles and 
responsibilities in its structure and NSF's appropriation clearly sets 
forth distinct funding for the IG audit function (not to be commingled 
with NSF administrative funding for audits and other evaluations).
    That being said, NSF realizes that sound financial management 
enables the Foundation to pursue critical investments in science and 
engineering research and education that ultimately ensure the Nation's 
security, prosperity, and well being. Over the past eight years NSF 
has, with the encouragement of the IG, continuously refined and 
enhanced its post-award oversight process. To that point; NSF senior 
management, and notably through the leadership of the Chief Financial 
Officer, has made post-award administration one of the agency's highest 
priorities. We are confident that, through the strategic analysis of 
need and the application of extensive staff and contracting resources, 
the Foundation is now postured with one of the most comprehensive 
programs of awardee monitoring and business assistance programs in the 
Federal Government.
    Through a combined set of activities, on-site visits, desk review, 
and/or transactional testing, we are ensuring that the entire high risk 
award universe receives past award review. We believe that the 
extraordinary measures NSF has taken to conceive and implement the 
Award Monitoring and Business Assistance program are having a positive 
impact on those institutions visited, desk reviewed and tested and are 
mitigating the risk of potential misuse of funds. We have been very 
careful in designing this program that we complement, rather than 
supplant, the auditing responsibilities of the Office of the Inspector 
General (OIG). Should we, in the course of the Foundation's post-award 
oversight activities find matters that require OIG audit or 
investigative scrutiny, we will refer them to the OIG.

Q12.  Have your agencies ever tasked IG to conduct work on your behalf?

A12. Annually, the Office of the Inspector General solicits from the 
Director of the NSF, recommendations for external audits to be 
performed of our recipient institutions. These are considered by the 
OIG, along with the results of their independent assessment of the NSF 
awardee and award portfolio. The OIG makes its determination as to what 
institutions will be audited. As described above, the OIG is 
independent from agency management.

Q13.  How has the Internet portal www.grants.gov operated recently?

A13. Overall questions on the operations of the Grants.gov portal are 
best directed to the managing partner, the Department of Health and 
Human Services, as they have program management responsibilities, on 
behalf of the Federal Government, for this initiative. As such, they 
would collect, maintain, and analyze performance data for Grants.gov.
    Consistent with OMB Guidance, NSF has been posting all of our 
funding opportunities, and associated application packages, to 
Grants.gov. Analysis of submission data consistently demonstrates that 
applicants for NSF awards, in large numbers and percentages, continue 
to use NSF's own system, FastLane, as the default solution when 
submitting research proposals to the Foundation. Less than three 
percent of NSF's total proposals are submitted through Grants.gov.

Q14.  What is the Federal Government doing to ensure its operation and 
effectiveness?

A14. The Office of Management and Budget established the Grants 
Executive Board (GEB), comprised of the major grants making agencies, 
as an advisory body to the Grants.gov initiative and to the HHS managed 
Grants.gov program management office. Among the GEB responsibilities 
are:

          The review and approval of the annual funding 
        algorithm that supports the Grants.gov operational budget

          Ensuring the timely execution of memoranda of 
        understanding, and associated funding transfers that support 
        the Grants.gov operational cost

          Review and approval of the HHS-prepared Grants.gov 
        business case

          Ensuring that respective agencies comply in all of 
        the OMB issued guidance concerning Grants.gov participation and 
        support

          Provision of policy and operation input, review of 
        documents, and additional staff support to Grants.gov tactical 
        matters

          Consistent communications to respective applicant/
        awardee communities concerning Grants.gov

          Advice to OMB on the initiative's direction.

Q15.  What impact would the crashing of this site have on the ability 
to issue grants?

A15. The impact is agency-specific. There will be no impact of 
Grants.gov issues on NSF's ability to issue grants. The Foundation's 
FastLane system well pre-dates Grants.gov ``Find'' and ``Apply,'' so we 
have not been subject to such restrictions. NSF is able to accept 
directly its full complement of proposals, both regular submissions and 
those additional proposals anticipated through the Recovery Act. We 
will use our legacy FastLane capabilities for proposal submission and 
acceptance.
    In 2006, NSF was also selected by OMB to provide grants management 
services beyond the Grants.gov ``Find'' and ``Apply'' services for the 
broad research community, using modernized FastLane services in 
partnership with other research agencies. This ``next generation 
`FastLane' '' system, called Research.gov, provides a menu of service 
offerings for 2,200 research institutions in partnership with NASA and 
Department of Defense science agencies. In light of the recent issues 
with Grants.gov, we are currently exploring the feasibility of 
including a new Research.gov ``Application Preparation and Submission'' 
service as an alternative to Grants.gov for the research community 
(only) and for research agencies that may be interested in using the 
service to support their research constituents.

Q16.  I am concerned that the ``Buy American'' provisions in the 
Stimulus legislation could add significant costs to and restrict agency 
flexibility in spending for science-related construction and 
facilities. How will this provision be implemented with respect to 
construction of scientific buildings, facilities, and major research 
equipment and how will you work to ensure the restrictions do not 
result in cost overruns and delays?

      NOTE: the language specifically states: SEC. 1605. USE OF 
AMERICAN IRON, STEEL, AND MANUFACTURED GOODS. (a) None of the funds 
appropriated or otherwise made available by this Act may be used for a 
project for the construction, alteration, maintenance, or repair of a 
public building or public work unless all of the iron, steel, and 
manufactured goods used in the project are produced in the United 
States.

A16. NSF is working with the Office of Management and Budget and the 
Office of the U.S. Trade Representative to develop an NSF-specific 
implementation strategy in response to the Section 1605 of the Act and 
will provide it to the Committee as soon as possible.

Q17.  BACKGROUND: The stimulus package provides $200 million for the 
Academic Research Facilities Modernization Program, which is a grant-
making program to allow eligible research entities to repair, renovate, 
or replace obsolete laboratories and research facilities. This statute 
was enacted over 20 years ago and has not even been used by NSF since 
the mid-nineties. My question is three-fold:

Q17a.  Why has this program not recently been put to use?

A17a. The decision to halt the Academic Research Infrastructure (ARI) 
program in the latter 1990s (a) rested on the premise that investing in 
the modernization of individual institution's research facilities was 
of a lower priority than supporting shared-use, large-scale facilities 
which are accessed by the broader the scientific and engineering 
research community and (b) was consistent with the National Performance 
Review's recommendation that facilities modernization might reasonably 
be accommodated by institutions, states, and the private sector.

Q17b.  Given that NSF has not utilized the program in many years, is it 
even feasible that you have mechanisms in place to formulate guidelines 
and appropriately award grants within the timeframe provided in the 
stimulus package? If so, how do you plan to accomplish this?

A17b. Mechanisms and Guidelines. NSF's Office of Integrative Activities 
(OIA) will oversee the ARI program and coordinate Foundation-wide 
efforts. The process is analogous to the current Major Research 
Instrumentation program. OIA staffing has been augmented to meet the 
added responsibility of managing ARI; (a senior program director has 
been seconded to OIA to manage the program and additional staff support 
is being secured). An internal office team and a cross-Foundation 
working group, including program officers with experience with 
infrastructure programs, have been established to implement the 
program. The guidelines for the 2009 ARI program have been updated to 
reflect the requirements for conducting 21st century research as well 
as to conform to current, federal construction-related policies.
    Timeline. NSF will fund all ARI awards within the allowable 
stimulus package timeframe (i.e., no later than September 30, 2010).



Q18.  It is my understanding that these funds will not to used for any 
new construction--only repair and renovation. Can you please confirm 
this?

A18. The NSF 2009 ARI program will not fund any new construction. It 
may accept a proposal for the reconstruction of a research facility. 
Consistent with previous ARI solicitations, the 2009 ARI will support 
projects to repair, renovate, or in exceptional cases, replace existing 
research facilities. If an institution were to demonstrate that it was 
more cost-effective to raze and then rebuild a research facility or 
research training facility, rather than to try to repair or renovate 
the existing structure, then the program would accept a proposal for 
replacement.
                   Answers to Post-Hearing Questions
Responses by Ronald R. Spoehel, Chief Financial Officer, National 
        Aeronautics and Space Administration

Questions submitted by Chairman Brad Miller

Q1.  The Recovery Act directs that the funding available in the Science 
account be provided for supercomputing capability and to bring forward 
the planning activities for the first of the Earth Science Decadal 
Survey missions at NASA. How do you anticipate breaking down the 
funding to fulfill that direction?

A1. The NASA spending plan for use of Recovery Act funding, including 
the Science program plan, has been submitted to the Committees on 
Appropriations. NASA has posted its Recovery Act Program Plans on both 
the Agency's website and on the government-wide website and will update 
the information as may be appropriate following consultation with the 
Committees on the spending plan.

Q2.  In developing the plan for using Recovery Act resources, is an 
effort being made to contribute to meeting the longer-term missions of 
the Agency? For example, can the Recovery Act funds be used for 
technology development to support the Europa mission NASA hopes to 
conduct with the European Space Agency in the next decade?

A2. Every effort is being made to use Recovery funds to further the 
Agency's programmatic goals, as well as stimulate economic activity. 
With respect to specific spending plans, the NASA spending plan for use 
of Recovery Act funding, including the Science program plan, has been 
submitted to the Committees on Appropriations.

Q3.  The Recovery Act states that funds are to be awarded primarily 
using competitive procedures and with a preference for fixed-price 
contracts. NASA, however, regularly employs cost-type and incentive 
contracts in its business. How do you expect to meet the law's 
direction when issuing contracts using Recovery Act funds?

A3. Consistent with the Federal Acquisition Regulation (FAR), it is 
NASA's policy to utilize fixed price contracts when requirements are 
relatively certain which permits costs to be estimated with sufficient 
accuracy for pricing. When issuing contacts with Recovery Act funds, 
NASA will utilize competitive procedures and fixed-price contracts to 
the maximum extent practicable. We also anticipate using Recovery Act 
funds on contracts that are non-competitive and other than firm fixed-
price, as NASA mission requirements often contain uncertainties that do 
not permit costs to be estimated with sufficient accuracy to use a 
fixed-price contract. In those cases, NASA will comply with all 
requirements of the Recovery Act, including those which require the 
publication of the rationale for using other than a competitive and 
fixed-price contract as part of the award notice.

Q4.  In his March 20th memorandum, the President established a process 
for communications with outside sources relating to Recovery Act 
activities. What steps has the agency taken to implement the internal 
controls needed to assure compliance with the President's direction?

A4. NASA has taken a variety of steps to effectively and efficiently 
implement the Recovery Act, including almost daily tag up meetings with 
key officials involved in Recovery Act activities. NASA has distributed 
the President's Memorandum and the Office of Management and Budget 
Interim Guidance on Communications with Registered Lobbyists About 
Recovery Act Funds within the Agency and provided appropriate guidance 
as to their requirements. In addition, NASA is currently preparing 
further guidance tailored for even broader dissemination in the near 
future.

Questions submitted by Representative Paul C. Broun

Q1.  One of the selling points of the stimulus bill was that action was 
needed immediately. How long will it take you to spend all of the money 
directed to your agencies?

A1. NASA's Program Plans have been developed, have been finalized with 
OMB, include publicly information available on expenditure estimates, 
and were filed with OMB on May 15th.

Q2.  Current OMB guidance only requires that money be tracked to two 
layers down. For example, a state and a city would have to report data, 
but not the contractor or the subcontractor. Do you intend to require 
additional reporting beyond OMB guidance?

A2. Federal Acquisition Regulation (FAR) interim rules relating to 
required recipient reporting have been developed and approved. NASA 
will comply with these rules and use our standard reporting procedures 
for contracts and grants. These procedures should be sufficient with 
some modifications, as necessary, to capture the required two layers 
for contract and grant reporting. For NASA activities, two levels of 
reporting would typically include the prime contractor and 
subcontractor.

Q3.  Do you believe two layers of accountability are enough?

A3. Yes.

Q4.  Please list the top three risks at your agency associated with 
stimulus funding.

A4. Almost all NASA Recovery funds were appropriated for ongoing 
operations, so programmatic risks are relatively small. The challenges 
to the agency associated with Recovery funding relate to the special 
requirements for procurement and resource management processes and 
control of these funds, the tension in the Act between speed of 
implementation and process control, and the many reporting 
requirements--some of which are still being defined.

Q5.  What contracts at your agency are ``mission critical''? That is, 
if the specific contract were to experience cost-overruns, schedule 
delays, or performance problems would it affect the mission of the 
agency?

A5. Any individual contract is critical to its specific program, such 
that overruns, delays or performance problems would likely affect that 
program's commitments, and potentially other activities within the 
program's portfolio. No single contract is large enough that it could 
put the mission of the Agency at risk.

Q6.  The Department of Energy's Inspector General identified contract 
administration as ``one of the most significant management challenges 
facing the Department.'' Please discuss the current status of your 
agency's ability to issue contracts and manage grants.

        a.  Do you have adequate resources?

        b.  Are your employees adequately trained?

        c.  Do have adequate staff levels?

        d.  What can Congress do to help?

A6. NASA believes that it has a well-trained, experienced workforce, 
capable of diligently administering the Recovery Act contracts. The 
NASA employees' management and technical expertise will help ensure 
that the money is spent as intended and that the process is transparent 
with full accountability to the American public.
    While our current staff is adequate for the job of awarding 
Recovery Act contracts and grants, with an anticipated increase in 
contract support activities, including reporting and oversight, we will 
be continuously assessing our posture and make reassignments and 
changes in resource allocation and staff assignments as needed.
    NASA has an aggressive training program for acquisition personnel. 
In addition to core classes which serve as a mandatory framework to 
bring developmental training to contracting professionals, NASA 
provides its workforce with supplemental training on topics that will 
improve our administration of Recovery Act contracts. Recent examples 
include special training on cost and pricing techniques, and fraud 
awareness.
    Congress' continued support for hiring flexibilities will permit 
agencies to hire qualified procurement personnel in an expedited 
fashion.

Q7.  Understanding that coordination is sometimes necessary, IGs should 
not be used as an agency's in-house auditor. What in-house auditing and 
program evaluation capabilities do your agencies have?

A7. NASA has robust capabilities for in-house auditing and program 
evaluation. The NASA Office of Internal Controls and Management Systems 
(OICMS) serves as the in-house auditor for NASA Headquarters. With 
contractor support, OICMS performs in-house audits of Headquarters 
organizations on a three-year cycle. OICMS reviews of actions related 
to the use of Recovery Act funds will be conducted on a regular basis. 
The NASA Office of the Chief Financial Officer also has a Quality 
Assurance Division that, among its activities, provides and oversees 
internal controls and OMB A-123 Appendix A audits; Improper Payment 
Information Act and, as needed, associated recovery audits; and 
financial statement audit planning and coordination. NASA Centers have 
in-house audit staffs to perform audits of key processes and controls 
at the Centers. They, too, will review Recovery Act implementation and 
operation at NASA on a regular basis. Additionally, NASA's Office of 
Program Assessment and Evaluation (PA&E) serves as an independent 
assessment organization that provides objective, transparent, and 
multidisciplinary analysis on all aspects of NASA programs and 
institutions. PA&E is responsible for evaluating NASA programs, 
projects and institutions for cost effectiveness, quality, and 
performance in achieving strategic objectives. OICMS also performs 
quality assurance reviews over NASA's compliance with FMFIA and the 
guidance contained in OMB A-123 as it pertains to performing self 
assessments of controls in place to mitigate key risks faced by the 
Agency.
    Beyond its in-house audit capabilities, NASA uses multiple methods, 
processes, and entities for monitoring and evaluating its performance. 
These same processes and procedures will be used for activities funded 
under the Recovery Act. NASA's programs are assessed for relevance, 
quality, and performance. A relevance review assures alignment with 
national priorities; alignment with the NASA Strategic Plan; impact on 
related fields of research or technology; and alignment with 
``customer'' (users of NASA data, research results, etc.) needs. 
Determining quality is generally prospective and assures ``best value'' 
for an investment, using peer review processes. Performance reviews 
evaluate whether a program is on track to meet its baseline performance 
commitments (cost, schedule, science/technical deliverable).
    Reviews are conducted internal and external to the Agency. External 
evaluations are performed by entities such as the NASA Advisory Council 
(NAC) and the National Research Council to assess NASA's program 
content and direction. Additional independent reviews are commissioned 
by the NASA Administrator or responsible mission organization to review 
programs for relevance and quality, as well as performance. Reviews are 
rigorous and methodical and focused on the program's methods, results, 
and findings by others in the field with requisite expertise, and 
independence.
    Responsibility for program and project management and their control 
mechanisms (NASA Procedural Requirements (NPR) 7120 series)*, 
institutional management (NPR 8500 series)*, and financial management 
(NPR 9010 and 9120 series)*, occurs at all management levels of the 
Agency. NASA's management monitors different aspects of program or 
institutional performance, at the highest Agency levels, and uses a 
rigorous structure of program and management reviews for Agency-level 
decisions. To continue through each phase of development, programs must 
demonstrate, on an on-going basis and at key life cycle junctures, an 
ability to manage in a manner that produces identifiable results, and 
must document performance against previously defined commitments 
including multi-year outputs, annual performance goals, milestones and 
other metrics, as appropriate.
    NASA internally monitors performance through monthly and quarterly 
reviews, at each management level. At the senior management level, 
program reviews, accompanied by an independent (internal) assessment, 
occur across all mission areas (aeronautics, science, space operations 
and exploration systems), with an in-depth review each quarter rotating 
among the mission organizations. Senior management also reviews 
institutional data (finance, human capital, acquisition, 
infrastructure), and aggregated Agency measures and metrics, e.g., 
safety, cross-cutting technical and non-technical issues. The data 
reviewed, and the accompanying analysis, allows the Agency to focus on, 
and proactively address, issues that could lead to not achieving 
desired performance goals.

    * The NASA Online Directives Information System Library ensures 
access by NASA employees and contractors to the most current 
documentation.

Q8.  Have your agencies ever tasked IG to conduct work on your behalf?

A8. NASA does not task the IG to conduct in-house audits on 
management's behalf.

Q9.  How has the Internet portal www.grants.gov operated recently?

A9. Over the past year, both NASA internal users and external grant 
proposers have experienced technical issues and difficulties associated 
with the ``Apply'' functionality within the Grants.gov application.

Q10.  What is the Federal Government doing to ensure its operation and 
effectiveness?

A10. NASA fully supports the overall purpose and intent of Grants.gov 
and continues to contribute funding to support the maintenance and 
operations of the Internet portal. On March 19, 2009, NASA received 
approval from OMB exempting the Agency from use of the ``Apply'' 
functionality within Grants.gov and authorizing the Agency to 
exclusively use NASA's proposal data system, NASA Solicitation and 
Proposal Integrated Review and Evaluation System (NSPIRES), (http://
nspires.nasaprs.com) for the receipt of all grant proposals. This 
measure was taken to help relieve the stress on the Grants.gov Internet 
portal based on projected increased demands resulting from the American 
Recovery and Reinvestment Act of 2009.

Q11.  What impact would the crashing of this site have on the ability 
to issue grants?

A11. In the event the Grants.gov Internet portal were to crash, NASA 
would be able to temporarily provide a backup posting process using 
existing Agency resources. This may create some public confusion until 
NASA could educate the public regarding the temporary posting URL. In 
addition, any existing announcement of opportunities on Grants.gov 
would be lost and would require re-posting on NASA's NSPIRES Internet 
portal. Otherwise, the Agency's ability to receive, evaluate, process, 
and issue grants would experience little disruption.

Q12.  I am concerned that the ``Buy American'' provisions in the 
Stimulus legislation could add significant costs to and restrict agency 
flexibility in spending for science-related construction and 
facilities. How will this provision be implemented with respect to 
construction of scientific buildings, facilities, and major research 
equipment and how will you work to ensure the restrictions do not 
result in cost overruns and delays?

      NOTE: the language specifically states: SEC. 1605. USE OF 
AMERICAN IRON, STEEL, AND MANUFACTURED GOODS. (a) None of the funds 
appropriated or otherwise made available by this Act may be used for a 
project for the construction, alteration, maintenance, or repair of a 
public building or public work unless all of the iron, steel, and 
manufactured goods used in the project are produced in the United 
States.

A12. The Federal Acquisition Regulation (FAR) Council has made changes 
to the Federal Acquisition Regulation which implements the `Buy 
American' provisions of the Recovery Act, and NASA will comply with the 
regulations in issuing and administering construction contracts with 
Recovery Act Funds. NASA will include clauses in accordance with the 
regulations in all appropriate contracts which will require that 
contractors provide domestic iron, steel, and manufactured goods in 
performing the contract.
    NASA will mitigate the impact the restrictions may have on cost 
overruns or delays by utilizing, as appropriate, the exceptions in the 
Federal Acquisition Regulation which permit waiver of the `Buy 
American' requirement when the product is unavailable domestically, 
only available at an unreasonable cost, or when domestic item use is 
inconsistent with the public interest. Established approval protocols 
will be followed to ensure that waiver decisions are supported and 
well-documented, and that they are consistent with the intent of the 
Recovery Act.
                   Answers to Post-Hearing Questions
Responses by Ellen Herbst, Senior Advisor for Recovery Implementation, 
        U.S. Department of Commerce

Questions submitted by Chairman Brad Miller

Q1.  NIST receives funding from the Recovery Act to prepare standards 
for two areas where the Administration intends to make significant 
investments--health information technologies and monitoring and control 
technology for the electrical grid. How is NIST cooperating with both 
the Department of Health and Human Services and the Department of 
Energy to complete development of the standards so that they inform the 
expenditure in these areas?

A1. In the area of health information technology (IT), the National 
Institute of Standards and Technology (NIST) interacts regularly with 
the Department of Health and Human Services' Office of the National 
Coordinator for Health Information Technology (ONC). The Recovery Act 
funding will accelerate efforts to develop and deploy electronic health 
records and a nationwide health care information infrastructure. 
Specifically, NIST's efforts will target two critical areas: standards 
harmonization and the development of a technology testing and 
evaluation infrastructure. This builds on the formal collaboration NIST 
has had with ONC since 2005, through which NIST provides expertise in 
IT standards, testing for conformance to standards, pilot 
implementation of standards-based technologies, security, and 
certification processes.
    In the area of monitoring and control technology for the electric 
grid (Smart Grid), NIST is working closely with the Office of 
Electricity Delivery and Energy Reliability in coordinating the 
development of Smart Grid standards. NIST participates in the 
Department of Energy (DOE) Interagency Smart Grid Task Force and has 
organized six expert working groups addressing standards issues under 
the umbrella of the DOE-sponsored GridWise Architecture Council. NIST 
is also working with DOE in developing an interagency agreement 
defining how the $10 million of Recovery Act funding directed to NIST 
will be used to establish a Smart Grid Inter-operability Standards 
Panel by the end of 2009 to provide ongoing coordination and oversight 
of the implementation of the Smart Grid standards roadmap now under 
development.

Q2.  Your testimony described changes in the agency's acquisition 
management process, stating that projects less than $75 million will 
now receive only ``paper reviews'' instead of discussion at the 
Department Investment Review Board. Projects over $75 million or 
declared ``major investments'' are to be handled by a process that is 
``currently under refinement.'' In the tug-of-war between speed of 
award and oversight, this sounds very much like oversight letting go of 
the rope. Please explain why these changes don't represent backsliding 
from the accountability requirements of the Recovery Act?

A2. The Department of Commerce has a two-prong oversight approach to 
Departmental acquisitions. For those programs with a life cycle cost 
exceeding $75 million, the program and associated acquisitions must be 
reviewed by the Investment Review Board (IRB) to address management and 
oversight of the program and planned acquisition strategies for 
acquisitions planned to be processed in support of the program. The 
Deputy Secretary has the authority to designate other programs that do 
not meet the life cycle cost threshold for IRB review as well. All 
Recovery Act programs, regardless of whether the program will be 
executed internally, through acquisitions or through grants, or some 
combination thereof, have been designated as ``major investments.'' 
Thus, a more stringent review process is in place for all Recovery Act 
acquisitions.
    The IRB focuses on all aspects of the program (management, risk, 
security, systems architecture, acquisition strategies, etc.). Prior to 
the meeting of the IRB, the Office of Acquisition Management (OAM) 
conducts a comprehensive review of the acquisition plan, the proposed 
statement of work, other specific portions of the proposed 
solicitation/contract (schedule of items/services to be provided, 
deliverables, award/incentive fee/term plans, evaluation criteria, 
proposal instructions) to ensure, generally, all Federal Acquisition 
Regulations and Commerce Acquisition Regulations and policies are being 
adhered to, and specifically, to ensure compliance with all provisions 
of the Recovery Act as it relates to acquisitions. Prior to review by 
the IRB, the Office of General Counsel (OGC) and the Office of Small 
and Disadvantaged Business Utilization (OSDBU) must concur with the 
proposed strategy.
    For acquisitions that do not meet the threshold or specific 
designation as a major investment, OAM has eliminated a formal, once-a-
month meeting to review acquisition plans and strategies. The same 
process of reviewing acquisition plans, statements of work, evaluation 
criteria and other associated documents still occurs. The concurrence 
of the OGC and OSDBU is still required.
    These Department-level procedures are in addition to the individual 
bureau's internal review processes and are separate from the 
Acquisition Management Reviews (AMR) that are being instituted with 
this new review policy. Those reviews will focus on the work products 
(contracts, supporting files) for compliance with law, regulation and 
policy and for completeness. All Recovery Act acquisitions will undergo 
a post-award AMR to focus on decision documentation and effective 
oversight and management of the contract once the award has been made.

Q3.  How are NIST and NOAA coordinating distribution of Recovery Act 
resources and their regular appropriations to maximize the value of 
both in achieving the Act's goals and the President's priorities?

A3. Both the National Oceanic and Atmospheric Administration (NOAA) and 
NIST have placed a high priority on coordinating reviews and internal 
clearances required to move forward with the obligation of funds under 
the Recovery Act. In determining the allocation of Recovery Act 
funding, NIST and NOAA management took into careful consideration the 
resources that were being provided by the FY 2009 Omnibus appropriation 
as they made decisions in allocating resources in the Recovery Act. 
Investment decisions for Recovery Act funds have focused on activities 
promoting near-term recovery by creating and preserving jobs. The 
funding will also provide longer-term sustained economic growth by 
supporting important science and research activities in critical 
national priority areas.
    NIST's Recovery Act funding supports the procurement of state-of-
the-art scientific equipment that will greatly benefit NIST's 
measurement research. Additionally, Recovery Act funding for 
fellowships, Postdoctoral researchers and research contracts will 
augment NIST's ability to conduct its mission, while meeting the goals 
of the Recovery Act. The FY 2009 Omnibus appropriation provides 
additional resources for Scientific and Technical Research and Services 
(STRS) that invest in longer term research programs that support NIST's 
mission to promote U.S. innovation and industrial competitiveness by 
advancing measurement science, standards and technology in ways that 
enhance economic security and improve our quality of life. NIST 
management coordinated the use of funds from the Recovery Act and FY 
2009 Omnibus appropriation for construction to best meet NIST's 
facilities construction and renovation needs. Furthermore, the Recovery 
Act funding targeted at construction provided a timely and expedient 
mechanism to achieve the goals laid out in the Recovery Act of 
providing economic stimulus, creating jobs, and introducing funds to 
the national economy.
    NOAA is also emphasizing coordinated distribution of these funds to 
maximize their value in achieving the President's priorities. For those 
facility construction investments funded with resources jointly under 
the Recovery Act and the FY 2009 Omnibus appropriation, NOAA is 
ensuring close coordination of the investment planning efforts to 
effectively achieve the intended results of the Recovery Act and 
regular appropriations, both in terms of job creations and 
stabilization, and in terms of facility construction, replacement and 
repair necessary to maintain and improve NOAA mission performance.

Q4.  In his March 20th memorandum, the President established a process 
for communications with outside sources relating to Recovery Act 
activities. What steps has the Department taken to implement the 
internal controls needed to assure compliance with the President's 
direction?

A4. The Department of Commerce has communicated the President's memo 
widely throughout the Department. We have issued interim detailed 
guidance for reporting contacts with registered lobbyists. We have 
discussed rigorous compliance requirements with our leadership and will 
continue to emphasize these requirements to all employees affected by 
this requirement. We are preparing training which will be available to 
all employees through our online training system to support compliance.

Questions submitted by Representative Paul C. Broun

Q1.  One of the selling points of the stimulus bill was that action was 
needed immediately. How long will it take you to spend all of the money 
directed to your agencies?

A1. We are confident we will meet the legislative requirement to 
obligate all programmatic Recovery Act funds by September 30, 2010. The 
Department of Commerce did not receive block or formula grant funds. 
The $7.9 billion in Recovery Act funding for DOC will be expended 
through competitive grants and acquisitions as well as support for the 
Decennial Census. We anticipate obligating funds throughout the balance 
of FY09 and throughout FY10 with the exception of the Office of the 
Inspector General (OIG). The OIG funding is authorized through 2013.

Q2.  Current OMB guidance only requires that money be tracked to two 
layers down. For example, a state and a city would have to report data, 
but not the contractor or the subcontractor.

     Do you intend to require additional reporting beyond OMB guidance?

A2. At this time, we do not have plans to require additional reporting 
beyond the OMB guidance.

Q3.  Do you believe two layers of accountability are enough?

A3. Yes, we believe two layers of reporting are sufficient.

Q4.  Please list the top risks at your agency associated with stimulus 
funding.

A4. In the Department's planning and risk management activities and 
utilizing OMB guidance on risk identification, three areas have been 
identified as top risks associated with stimulus funding.

        1)  Administering the Broadband Technology Opportunities 
        Program (BTOP). STOP received the largest share of the DOC ARRA 
        funds ($4.7 billion of the total $7.9 billion that DOC 
        received). Based on the amount of funding as a percentage of 
        total funding, and because BTOP is a brand new program, DOC has 
        focused particular management oversight on this program.

        2)  Administering the increased volume of funding and 
        transactions associated with Recovery Act funding. The $7.9 
        billion of Recovery Act funding represents approximately one 
        annual appropriation for the entire Department of Commerce. The 
        volume of funds, transactions and activities require increased 
        risk management activities to adequately oversee their 
        administration.

        3)  Staffing requirements, particularly for contract and grants 
        professionals. DOC is actively working with the Office of 
        Personnel Management to use all hiring flexibilities and 
        options available, including direct hire authority; rehired 
        annuitant waivers and job fairs. Additionally, DOC will, where 
        appropriate, utilize existing resources through detail 
        assignments to meet Recovery Act staffing needs.

Q5.  What contracts at your agency are ``mission critical?'' That is, 
if the specific contract were to experience cost-overruns, schedule 
delays, or performance problems would it affect the mission of the 
agency?

A5. NIST: The only contracts that could be considered ``mission 
critical'' would be the contracts associated with the Building 1 
Extension construction project in Boulder, CO. NIST has put in 
management safeguards for this as well as all NIST construction 
projects to mitigate the potential of cost overruns or scheduling 
delays.
    Census: All Decennial contracts are considered critical to the 
Census Bureau's mission. Accordingly, these contracts are continuously 
monitored to identify problems early and mitigate the risk of cost-
overruns, schedule delays and/or performance problems. When issues 
arise in these areas the Census Bureau takes immediate action to 
minimize the impact to our Decennial Programs.
    NOAA: All contracts that are entered into by NOAA are in direct 
support of our missions and functions. They are the result of a process 
that has distilled all NOAA requirements into our highest mission 
priorities for contract funding. We work very hard to make sure that 
contract challenges do not affect direct mission accomplishment by 
having appropriate work around actions to provide direct support should 
there be delays, overruns, or performance issues. Due to their inherent 
complexity, NOAA's satellite programs are our highest risk contract 
activities, with the greatest potential impact to our weather 
prediction and climate research and services missions. However, ARRA 
funding for NOAA's satellite program will be used to mitigate both cost 
and schedule risk for the National Polar-orbiting Operational 
Environmental Satellite System (NPOESS) program.
    NTIA: The National Telecommunications and Information 
Administration (NTIA) has contracted with IBM to provide administrative 
services for the TV Converter Box Coupon Program, which received 
Recovery Act funds to continue to educate the public about the 
transition and issue converter box coupons to households wishing to 
keep using their analog sets after all broadcasters stop analog 
broadcasting on June 12, 2009. IBM performs critical program functions 
with respect to coupon distribution and redemption. NTIA provides 
extensive oversight of this performance-based contract to ensure that 
the contractor performs within budget and according to service levels 
and milestones agreed upon in the contract.

Q6.  The DOE IG identified contract administration as ``one of the most 
significant management challenges facing the Department.'' Please 
discuss the current status of your agency's ability to issue contracts 
and manage grants.

        a.  Do you have adequate resources?

        b.  Are your employees adequately trained?

        c.  Do have adequate staff levels?

        d.  What can Congress do to help?

A6. The Department, and its subordinate bureaus, have identified 
additional staff resources needed and are taking full advantage of all 
hiring flexibilities to recruit and/or acquire the needed resources. 
This includes participation in hiring fairs, rehiring annuitants, 
contracting for appropriate support and re-assigning appropriate staff 
to handle Recovery Act acquisitions and grants.
    DOC has a cadre of experienced, well-trained acquisition and grants 
specialists for executing this work. Recruiting efforts are focused on 
acquiring well-trained and experienced individuals to meet the 
increased workload. Where appropriate, more skilled and/or experienced 
staff or hires will focus on Recovery Act acquisitions/grants and those 
with less training or experience will handle the more routine 
acquisitions/grants.
    The Department will continue to work to ensure proper management 
and oversight of its contracting. We look forward to working with 
Congress on this issue.

Q7.  Understanding that coordination is sometimes necessary, IGs should 
not be used as an agency's internal auditor.

     What in-house auditing and program evaluation capabilities do your 
agencies have?

A7. The Department of Commerce coordinates its in-house auditing and 
program evaluation capabilities with its external auditors.
    The Department of Commerce has a Senior Management Council (SMC) 
that provides leadership and oversight for internal control assessments 
under OMB Circular A-123, Management's Responsibility for Internal 
Control. The SMC is co-chaired by the Deputy Chief Financial Officer 
and the Director, Office of Management and Organization, and is 
composed of all bureau Chief Financial Officers, the Chief Information 
Officer, and the heads of Human Resources, Acquisition Management, 
Budget and Administrative Services offices. The Department also has a 
Senior Assessment Team (SAT) which is responsible for conducting day-
to-day A-123 activities, including review, documentation, and testing 
of internal controls. The SAT is composed of representatives from 
bureaus and offices that have a material impact on the Department's 
financial reporting. To the greatest extent possible, the SAT will be 
leveraged to assess the additional risk posed for financial reporting 
requirements by the receipt and administration of Recovery Act funds 
and will be used to test Recovery Act transactions.

Q8.  Have your agencies ever tasked IG to conduct work on your behalf?

A8. We have not asked the IG to do something for us that would 
ordinarily be considered a bureau or Department administrative 
function. We have of course referred matters to the OIG that fall 
within the OIG purview of ``waste, fraud and abuse.''

Q9.  How has the Internet portal www.grants.gov operated recently?

A9. NOAA had the first competitive grant program under the Recovery Act 
with a closing date of April 6, 2009. So far, applicants report that 
they are able to submit applications through the Grants.gov portal. We 
are continuing to monitor and will report through the Grants Executive 
Board issues that are being brought to our attention. We have 
encouraged applicants to use Grants.gov but to allow themselves 
sufficient time to submit a paper application if needed.

Q10.  What is the Federal Government doing to ensure its operation and 
effectiveness?

A10. The Grants Executive Board, in partnership with General Services 
Administration and Department of Health and Human Services is actively 
working to resolve the capacity problems that exists with Grants.gov 
with a goal of ``right sizing'' the capacity to handle not just routine 
grant applications but also Recovery Act grant applications.

Q11.  What impact would the crashing of this site have on the ability 
to issue grants?

A11. We believe this contingency to be remote. Grants.gov has 
successfully handled the first round of grant applications for NOAA 
where over 600 applications were received with few problems.
    However, if there were no electronic means to receive applications, 
DOC would need to revert to paper-based processes, which are more time-
consuming and labor-intensive than electronic processes. While paper 
applications can be ``input'' into Grants Online, it is a time-
consuming process that is subject to human error.

Q12.  I am concerned that the ``Buy American'' provisions in the 
Stimulus legislation could add significant costs to and restrict agency 
flexibility in spending for science-related construction and 
facilities.

      How will this provision be implemented with respect to 
construction of scientific buildings, facilities, and major research 
equipment and how will you work to ensure the restrictions do not 
result in cost overruns and delays?

      NOTE: the language specifically states: SEC. 1605. USE OF 
AMERICAN IRON, STEEL, AND MANUFACTURED GOODS. (a) None of the funds 
appropriated or otherwise made available. by this Act may be used for a 
project for the construction, alteration, maintenance, or repair of a 
public building or public work unless all of the iron, steel, and 
manufactured goods used in the project are produced in the United 
States.

A12. This provision will be implemented by incorporating the provisions 
of Federal Acquisition Regulation (FAR) Sub-part 25.6 and including FAR 
Clauses 52.225-21, 22, 23 or 24 in all contract solicitations and 
contracts. We will work to ensure the restrictions do not result in 
cost overruns and delays by carefully coordinating with the acquisition 
team to determine the availability, quantity, quality and cost of 
domestic construction material needed for the specific projects. The 
appropriate level of acquisition planning and contract administration 
will mitigate the risk of construction delays and cost overruns.

Q13.  I am concerned that the funding for ``external construction 
grants'' at NIST--$180 million for a program that was not authorized or 
reviewed by this committee and whose origin was simply a single line in 
an appropriation bill.

      This program appears to be a particularly high oversight risk--
does the Department plan to take any special action to ensure funding 
for this program is spent wisely and in a manner that advances NIST's 
mission?

A13. The Recovery Act appropriated $180 million to NIST ``for a 
competitive construction grant program for research science 
buildings.'' Consistent with the legislation, NIST intends to award the 
grant funds on a competitive basis. NIST will comply with all federal 
guidelines to ensure maximum competition, fair treatment of proposals 
received, and that funding is spent wisely. NIST will also closely 
adhere to the additional oversight requirements of the Recovery Act and 
OMB Recovery Act guidance.

Q14.  In your testimony you indicate that the ``Recovery Act'' was 
intended to jump-start the economy and create millions of jobs; yet you 
mention several activities that will be funded by the stimulus that do 
not seem to do either.

      For instance, how many jobs do you expect the $170 million for 
climate modeling activities to create?

A14. The Recovery Act funds for climate modeling will be used to 
acquire two large-scale supercomputing systems, including associated 
networking and storage needs, and to perform modifications to data 
center space to house these systems. These funds will also be used for 
technical and support activities needed for a systematic, comprehensive 
and sustainable Climate Data Record Program. These activities will 
create, or maintain, short-term jobs amongst the construction, facility 
engineering and management, software development and systems 
engineering sectors. In addition, it is estimated the economy will 
benefit from a host of indirect jobs that the acquisition will affect 
(e.g., manufacturing, shipping, and storage of supercomputers and 
facilities equipment).

Q15.  How many jobs will the $20 million for research on electronic 
medical records at NIST create?

A15. DOC recognizes that the Recovery Act funding carries with it the 
additional criteria of creating jobs and stimulating economic activity 
along with advancing the underlying program goals. We expect that as we 
receive grant applications and contract bids, we will develop an 
understanding of what the potential recipients believe the jobs 
creation potential of their proposals will be. In addition, the 
recipients of these grants and contracts will be required to report on 
the jobs created through this funding.

Q16.  How many jobs do you expect the $200 million to upgrade computers 
at libraries and community colleges to create?

A16. The purpose of the Broadband Technology Opportunities Program is 
to stimulate demand for broadband, economic growth, and job creation. 
NTIA will structure this program to accomplish these purposes. As NTIA 
evaluates any grant application, whether it proposes to expand computer 
center capacity to community colleges and public libraries, or offer 
broadband to unserved and under-served communities, the agency will 
consider the extent to which the applicant proposes to create new jobs. 
In this regard, the agency will consider the local employment 
opportunities presented by the actual project--such as the procurement 
and installation of computers--as well as the long-term employment 
opportunities presented by bringing state-of-the-art computing systems 
to local communities and thereby enabling such communities to witness 
the transformative power of broadband.

Q17.  The Recovery Act includes $1 billion for the 2010 Decennial 
Census. Your agency performs a decennial census every ten years, 
correct?

      Given the fact that the Census is expected, allocated and, 
appropriated every 10 years, why would it be necessary to provide 
additional funds for it in a stimulus bill that was designed to create 
jobs that would otherwise not exist?

A17. The U.S. Census Bureau counts America's population every 10 years. 
The $1 billion provided in the Recovery Act will help the Census Bureau 
conduct a more accurate census in. 2010 and will create jobs.
    Consistent with direction in the Recovery Act, the Census Bureau 
will use Recovery Act funds to recruit over 2,000 partnership 
specialists, partnership assistants and other partnership support 
staff. This will quadruple the partnership staff funded through the 
regular appropriations process. This program is instrumental in helping 
to improve the mail out/mail back response rate. Higher mail back 
response rates result in a more accurate and less expensive census. The 
additional partnership staff will be hired in areas of the country that 
are most difficult to count, including areas with large numbers of 
recent immigrants, race and ethnic minorities, dense urban 
neighborhoods, rural and tribal areas.
    The Census Bureau will be increasing media buys from the current 
media contractor. Increasing media buys will provide more exposure for 
the upcoming census. A major focus of increased advertising and other 
promotions will be in the minority-based areas that have historically 
lower than average mail back response rates.
    Recovery Act funds will also be used to increase Coverage Follow-Up 
(CFU). In this operation, the Census Bureau will contact households 
that may have made errors on the census form in reporting the number of 
persons in the household. The Census Bureau will hire an additional 
1,250 temporary telephone interviewers to conduct this operation, who 
will work from commercial call centers.
    The balance of Census Bureau Recovery Act funds will focus on 
funding early census operations, including staffing 494 local census 
offices throughout the country, group quarters data collection efforts 
(e.g., college dormitories, prisons, etc.), update/leave (i.e., leave a 
form and update the address list for the respondent to mail back in 
areas with non-traditional addresses), and update/enumerate (i.e., 
update the address list and conduct the enumeration interview in areas 
we believe it is more efficient to get the enumeration in person).

Q18.  In your testimony, you mention ``streamlined processes'' that 
have been established to get money out the door and into the community.

      What types of barriers do you face either in regulations or laws 
that would make this more difficult? (Davis-Bacon, Federal bidding 
practices, environmental regulations, etc.)

A18. We are committed to complying with all requirements. We have not 
identified any of the existing laws or regulations as particularly 
burdensome in implementing the Recovery Act.

Q19.  It has been widely reported that ACORN is one of the 
organizations that may be awarded contracts to assist in producing the 
2010 decennial census. As you know, the Federal Government relies on 
the Census for allocation of seats in the House of Representatives as 
well as determinations on all areas of federal funding. Given the 
number of federal investigations and criminal charges that have been 
brought against ACORN and a number of its employees, do you feel 
confident there will be no misuse of taxpayer dollars and that they can 
provide scientifically reliable and accurate data?

A19. The Census Bureau is not contracting with ACORN to assist in 
conducting the 2010 Census, nor with any other national or local 
partner. No data is being requested or received from ACORN or any other 
organization that partners with the Census Bureau. ACORN is among the 
hundreds of national organizations that have signed up as a partner 
with the Census Bureau to promote participation in the 2010 Decennial 
Census. These organizations will assure members of the communities they 
serve that participation in the census is safe, and beneficial to local 
communities. ACORN will not have any role in hiring or collecting 
census data.

Q20.  The Recovery Act included $430 million for NOAA acquisition, 
construction and repair of ships, facilities, equipment and satellite 
instruments.

      How has the $430 million been divided up?

A20.

          $7.4 million for accelerating improvements (Dual 
        Polarization capabilities) to the Nation's NEXRAD Doppler 
        weather radar system

          $9 million for accelerating NOAA/National Weather 
        Service, Alaska Region (Weather Forecast Office) construction 
        projects in Barrow and Nome, Alaska

          $74 million to accelerate climate sensor development 
        and risk mitigation for the National Polar-orbiting Operational 
        Environmental Satellite System (NPOESS) program

          $78 million to complete the construction of a 
        Fisheries Survey Vessel

          $261.6 million has been allocated for NOAA facility 
        construction and repairs:

                  $142 million for construction of the Main 
                Facility of the NOAA Pacific Regional Center on Ford 
                Island, Pearl Harbor, Hawaii;

                  $102 million for construction of the 
                replacement facility for the NOAA Southwest Fisheries 
                Science Center in La Jolla, California;

                  $9 million for construction of the 
                replacement facility for the NOAA Fairbanks Satellite 
                Operations Facility in Fairbanks, Alaska;

                  $8.6 million to address high priority NOAA 
                facility repair projects.

Q21.  How much will be going to the NPOESS and GOES-R programs?

A21. NOAA has allocated $74 million for accelerating satellite 
development. $48 million will be used for climate sensor development, 
specifically, to complete procurement activities for the Clouds and the 
Earth's Radiant Energy System (CERES) FM-6 and to continue development 
and production of the Total Solar Irradiance Sensor (TSIS) for NPOESS 
C-1. The remaining $26 million will accelerate funding for NPOESS. 
Funds will allow NOAA to perform critical NPOESS development activities 
and address risk mitigation within the program.

Q22.  How do these satellite programs compare with construction and 
repair of NOAA ships and other facilities in competing for this 
funding?

A22. The projects selected are capital infrastructure investments that 
are needed to sustain NOAA's mission. Facility and ship maintenance is 
required to ensure the health and safety of our employees, while 
satellite observations are required for weather forecasting for the 
Nation. These projects have been ongoing, and have previously been 
included in NOAA's budget requests. Thus, investments in both capital 
infrastructure and satellite programs support NOAA's mission.

Q23.  In the Recovery Act, $170 million was set aside for climate 
modeling. It is my understanding that President Bush's FY09 budget 
request for the Office of Oceanic and Atmospheric Research was about 
$382 million. This includes operating and procurement funding for all 
of NOAA research labs, the Sea Grant College Program, the Undersea 
Research Program AND the NOAA Climate Program Office, the office under 
which climate modeling is conducted. The set aside seems to be a 
substantial amount compared with the funding of the entire Program 
Office in years past. Furthermore, we have learned that other 
organizations that conduct world-class climate modeling, like the 
National Center for Atmospheric Research, sets aside $5 million from 
their budget every year, so that every four years they can make a 
substantial upgrade to their computing capacity.

      Please explain exactly how this $170 million will be spent in a 
responsible manner if similar facilities can do the same level of 
upgrades for less than one-quarter of this amount.

A23. NOAA's global climate models are among the best in the world and 
played a premier role in the last Intergovernmental Panel on Climate 
Change (IPCC). Currently, the high performance computing (HPC) 
available to the Nation's climate scientists allows global climate 
models to resolve climate research questions down to the scale of 
continents. Additional research HPC capacity for climate would be 
targeted toward using currently available higher resolution models to 
meet stakeholder demand for regional to local scale climate 
information. The additional HPC would also be used to produce more 
comprehensive climate outlooks with advanced models that improve 
treatments of processes critical to our understanding of climate 
change, such as aerosols and clouds. These advanced models would also 
include processes that are missing in today's models, such as ice sheet 
melting that is crucial to address sea-level rise. Another example of 
what advanced models would include are complex biogeochemical cycles 
that can be applied to answer questions about the carbon cycle and 
interaction of climate and ecosystems, such as the effects of ocean 
acidification.
    NOAA will use money from the Recovery Act to acquire two large-
scale supercomputing systems and associated networking and storage in 
support of advanced environmental modeling to address critical gaps in 
climate modeling and climate data records. Recovery Act money will also 
be utilized to modify data center space to house these systems; NOAA 
estimates that construction and outfitting will be complete and the 
systems will be in place by mid-to-late FY10.
    Below is the proposed spending plan for the High Performance 
Computing funding.


                   Answers to Post-Hearing Questions
Responses by Matthew Rogers, Senior Advisor, U.S. Department of Energy

Questions submitted by Chairman Brad Miller

Q1.  The Inspector General has now released the report on the 
Department's acquisition workforce he described during the hearing. It 
states that, despite the effort the Department has devoted to closing 
gaps, sustaining the emphasis will be difficult. Further, the 
Department will see an increased need for project directors and 
contracting officer representatives as Recovery Act activities 
increase. How will you incorporate the Inspector General's 
recommendations into the Department's effort to shore up its 
acquisition management function?

A1. The Department has long focused attention on both the size and 
qualifications of its acquisition workforce. With respect to the 
Inspector General's recommendations, the Office of Human Capital 
Management is gathering information in accordance with 5 CFR 337.201 to 
support a Secretarial approval of Direct Hire Authority to facilitate 
hiring of contract specialists and federal project directors, among 
other segments of the acquisition workforce. In addition, in August 
2008, the Department received approval from the Office of Personnel 
Management to waive reduction in the annuity of federal retirees if 
necessary to re-hire qualified individuals to augment the acquisition 
workforce. This allows us the ability to quickly bring individuals on-
board with the necessary experience and skill to support the 
Department's immediate contract and financial assistance support needs. 
If Direct Hire Authority is considered to be appropriate and is 
approved, such authority will permit the Department to bring applicants 
on more quickly and will enable DOE to compete more effectively for 
scarce acquisition resources against other federal agencies that 
currently have Direct Hire Authority. DOE can also make use of the 
special Recovery Act authority that provides for certain excepted 
service appointments.
    In addition to these workforce initiatives, the Department is 
leveraging internal resources by shifting workload and resources from 
offices that are not receiving substantial Recovery Act funding to 
offices that have received substantial amounts of Recovery Act funding. 
The Department will use existing personnel vehicles to ensure proper 
alignment of funding and staffing. In essence, the Department is 
adopting a virtually mobile workforce model by leveraging its resources 
and using technology to allow employees to assist other organizations 
without traveling to that site.
    As part of the Department's initiative to institutionalize strong 
contract and project management practices, DOE has identified 
impediments to performance, outlined in the Department's Root Cause 
Analysis Corrective Action Plan, dated July 2008. One impediment that 
was identified is an inadequate number of federal contracting and 
project management personnel with appropriate skills to plan, direct 
and oversee project execution. As part of the effort to identify 
solutions to inadequate staffing, an algorithm, based on bench-marking 
with other federal agencies, was developed to facilitate identification 
of the right staff size for a given project. This algorithm will help 
identify gaps in current project staffing and inform future staffing 
decisions.
    Complementary to this effort is the Department's conduct of an 
annual Gap Analysis Study to assess current and future skill gaps. The 
results of this annual study will serve to drive the Department's 
strategies for acquisition workforce development, training, and 
recruitment.

Q2.  The President has made the expansion of renewable energy a 
cornerstone of his energy policy. If we are to get the full benefit of 
that new source of supply, the transmission grid will need updates to 
compensate for the variability in output that can be expected from the 
solar and wind generators. The Department receives Recovery Act funds 
to advance both of these goals; how are these resources being managed 
to match grid improvements to the expansion of renewable supply 
sources?

A2. The Department anticipates applying Recovery Act funding to support 
a variety of smart grid technologies through a merit-based, competitive 
solicitation process. The term ``smart grid'' encompasses a portfolio 
of approaches to integrate information technologies and computer-based 
controls more fully into the planning and operations of the electric 
power system. These systems can be used to enable greater levels of 
renewable power generation.
    For example, phasor measurement units can be deployed in the 
electric transmission system to collect detailed information about the 
status of the grid. These systems can be used to monitor the variable 
generation from wind energy systems due to changes in the weather and 
can provide the ability to offset dips in generation with other 
resources.
    Advanced metering infrastructure (AMI) involves a two-way 
communications network and smart grid devices installed at the customer 
level. AMI devices such as smart meters enable participation in demand 
response programs such as dynamic pricing, which can be used by 
utilities to lower demand during peak periods or during those times 
when variable resources are not available. Smart meters can also be 
used to make it easier for customers to install and operate rooftop 
photovoltaic arrays and account for the two-way flow of power into the 
home and back into the grid.
    The Recovery Act will also support energy storage demonstrations 
projects. Energy storage will address the effects of increased 
renewables on the grid in a variety of ways. Ancillary services 
provided by fast storage, such as flywheels and batteries, will 
accommodate the additional need for frequency regulation. These 
technologies have minimal carbon footprint and are twice as effective 
as regulation by fossil fuel generators. Large battery systems in the 
tens of megawatts (MW) range will aid in smoothing wind and mitigating 
ramps. Compressed air energy storage projects will be able to store 
hundreds of MW diurnally. This can greatly enhance the utilization of 
renewable energy in areas such as California and Texas where wind is 
anti-correlated. Projects in all these areas will be solicited in a 
competitive process.
    The Recovery Act also provides funding for an assessment of 
electricity-related resources and interconnection-level grid planning. 
These funds will be used to support collaborative analyses (by federal, 
State, industry and Non-Governmental Organization (NGO) 
representatives) of a broad range of electricity futures and their 
associated transmission requirements. These analyses will also take 
into account major uncertainties that could affect transmission 
requirements, such as the prospects for offshore wind development, cost 
reductions for photovoltaic devices, and improved batteries for plug-in 
hybrid electric vehicles.

Q3.  The Department transferred $10 million to the National Institute 
of Standards and Technology for standards development work related to 
the electrical grid upgrades. Will the Department wait to make awards 
for grid projects employing Recovery Act funds until these standards 
are available? If not, how does the Department address the risk that 
projects will invest in incompatible technologies as a result?

A3. The Department is working with the National Institute of Standards 
and Technology (NIST) to accelerate the development of standards for 
the smart grid. Next steps involve the development of a roadmap to 
identify the high value technology interfaces where standards agreement 
can significantly reduce costs and unleash innovation.
    While final, fully agreed upon and mature standards could enable 
deployments to proceed more efficiently, the best way to proceed is for 
deployments and standards development to move forward in parallel. The 
large extent of our electric system means that standards for automation 
are needed in many areas, and indeed, many applicable standards already 
exist. But this is a landscape in motion. Given the rapid change in 
technology and the emerging value to consumers, the economy, and the 
environment that characterize these early stages of market entry for 
smart grid, co-development is a reasonable path forward. The Department 
therefore does not see the need to delay implementation of the Recovery 
Act for smart grid activities. As part of the smart grid project 
solicitation process, the Department plans to require applicants to 
address how inter-operability considerations will be applied and 
updated with any changes in standards.

Q4.  In his March 20 memorandum, the President established a process 
for communications with outside sources relating to Recovery Act 
activities. What steps has the Department taken to implement the 
internal controls needed to assure compliance with the President's 
direction?

A4. After the President issued the March 20th memorandum, the Office of 
General Counsel briefed the Recovery Act leadership principals from 
every program and every major function and outlined the communication 
process as it relates to outside sources and Recovery Act funding. In 
addition, the programs sent out guidance to the field offices 
explaining acceptable and unacceptable communication practices. 
Secretary Chu also issued a department-wide advisory on this topic. The 
Department is committed to complying with the President's direction and 
maintaining integrity in the distribution of Recovery Act funds.

Questions submitted by Representative Paul C. Broun

Q1.  One of the selling points of the stimulus bill was that action was 
needed immediately. How long will it take you to spend all of the money 
directed to your agencies?

A1. The Department intends to have all funds obligated by September 30, 
2010. Some investments will be spent after September 2011, but these 
will generally be large projects that will start in 2009 or 2010 but 
require a longer timeframe for full completion.

Q2a.  Current OMB, guidance only requires that money be tracked to two 
layers down. For example, a state and a city would have to report data, 
but not the contractor or the subcontractor. Do you intend to require 
additional reporting beyond OMB guidance?

A2a. The Department of Energy will comply with all reporting 
requirements in the ``Updated Implementing Guidance for the American 
Recovery and Reinvestment Act of 2009'' issued by OMB on April 3, 2009. 
Our current internal reporting requirements and data tracking 
activities include contracting and grants information that is directly 
fed to Recovery.gov from USASpending.gov and the Federal Business 
Opportunities (FBO.gov) websites. In addition to that data, we will 
gather data that is reported by the recipients of Recovery Act funds 
directly to Recovery.gov, both of which have the potential to go beyond 
the State and city levels.

Q2b.  Do you believe two layers of accountability are enough?

A2b. The Department recognizes the importance of accountability in 
managing Recovery Act funds and believes consistency in adhering to 
levels of reporting established by OMB is critical. To comply with OMB 
guidance, the Department will utilize a variety of methods to ensure 
the funds are spent effectively and efficiently. These methods include 
tracking funds execution, implementing risk mitigation strategies, 
assessing performance, and conducting site visits. These types of 
actions taken together with levels of reporting are important 
considerations and must be assessed as a whole.

Q3.  Please list the top three risks at your agency associated with 
stimulus funding.

A3. As the Department distributes and manages Recovery Act funds, we 
face some challenges in contract management, grant administration, and 
human capital. To address concerns in contract management and grant 
administration, we have developed strong oversight strategies, provided 
programs with guidance, upgraded process controls, and engaged in risk 
mitigation planning. Given the reporting requirements of the Recovery 
Act, we recognize the need to significantly improve oversight 
activities and we are currently developing plans to monitor award 
recipients, validate reported outcomes, and conduct site visits. To 
address the human resource challenges, the Department's Office of 
Procurement and Assistance Management is aggressively recruiting 
additional contracting specialists and will avail itself of 
opportunities to increase staffing through direct hire authority, 
temporary reassignment of personnel from other programs, and temporary 
hires.

Q4.  What contracts at your agency are ``mission critical?'' That is, 
if the specific contract were to experience cost-overruns, schedule 
delays, or performance problems would it affect the mission of the 
agency?

A4. The Department of Energy has disparate missions which involve high-
level energy research and development, weapons production and stockpile 
management, and environmental remediation, restoration, and site 
closure. DOE obligates approximately 85 percent of its annual budget 
for executing the functions and activities associated with these 
programs to its management and operating and other major site and 
facility management contracts. These contractors manage and operate 
DOE-owned scientific, engineering, and production facilities, and 
environmental cleanup sites in direct accomplishment of DOE's missions. 
Currently, these contractors have approximately 100,000 employees as 
compared to DOE's approximately 14,000 federal employees. These 
management and operations contracts are considered the most critical 
contracts supporting the Department's missions.

Q5.  The DOE IG identified contract administration as ``one of the most 
significant management challenges facing the Department.'' Please 
discuss the current status of your agency's ability to issue contracts 
and manage grants.

Q5a.  Do you have adequate resources?

A5a. The Department, like most federal agencies, is addressing the 
challenges of supporting existing acquisition and financial assistance 
requirements together with the significant increase in pre-award and 
post-award workload resulting from the Recovery Act. The Department's 
strategy for meeting these needs is both short- and long-term. 
Consistent with the objectives of the Recovery Act to expedite the 
obligation of funds, the Department is supplementing its high impact 
acquisition workforce with acquisition and program personnel assigned 
to areas that are not directly or significantly impacted by the 
Recovery Act. DOE is also leveraging existing information management 
systems to speed the solicitation, evaluation, and award of Recovery 
Act procurement and financial assistance instruments, and to provide 
post-award administration. As necessary and appropriate, the Department 
is also supplementing its existing acquisition workforce with temporary 
contractor support. To ensure that appropriate federal personnel are in 
place to manage and oversee the disbursement of Recovery Act funding, 
the Department has identified essential staffing needs, in both 
acquisition and program organizations and is pursuing expedited hiring 
strategies, including Direct-Hire authority and use of the Department 
of Veterans Affairs' Veterans and Disability Program and the Reemployed 
Annuitant program.

Q5b.  Are your employees adequately trained?

A5b. The Department has one of the most comprehensive acquisition, and 
financial assistance training and certification programs for both its 
acquisition and project management workforce. While some competency 
gaps continue to exist, they are moderate to small gaps. Multiple 
training classes were delivered in fiscal year 2008 and are being 
delivered in fiscal year 2009 to specifically address those gaps. In 
addition, the certification program for financial assistance 
specialists was recently revised to increase mandatory minimum training 
and experience requirements and to establish certification requirements 
for Technical Project Officers who oversee the technical aspects of 
financial assistance projects and activities.

Q5c.  Do you have adequate staff levels?

A5c. The Department has a short-term (one-year) gap of 31 GS-1102s 
(contract specialists). While progress has been made in closing the 
Department's resource gaps, market conditions present a challenge. The 
Department is competing with other federal agencies for a limited pool 
of qualified acquisition professionals. Competition is fierce, 
particularly in the Washington, DC, metropolitan area, both from other 
federal agencies and from the private sector. The Department is using 
and/or pursuing a number of tools to effectively recruit and hire 
qualified individuals to fill current and future staffing needs, 
including Direct-Hire Authority, the Department of Veterans Affairs' 
Veterans and Disability Program, and the Re-employed Annuitant Program.

Q5d.  What can Congress do to help?

A5d. The Department is currently limited to spending no more than 0.5 
percent of its Recovery Act funding on management and oversight of the 
programs, projects, and activities funded in that Act, a situation we 
face alone among agencies funded in the Act. That limitation seriously 
constrains our ability to carry out the Recovery Act, by sharply 
limiting the number of additional personnel we can hire to manage and 
support these, added programs. Replacing that restriction with the 
limited transfer authority which the explanatory statement accompanying 
the Act indicates was intended would go a long way in assisting the 
Department to carry out the Recovery Act more effectively.

Q6a.  Understanding that coordination is sometimes necessary, IGs 
should not be used as an agency's internal auditor. What in-house 
auditing and program evaluation capabilities do your agencies have?

A6a. The Department recognizes the Office of Inspector General is 
required to exercise independence during audits and reviews. Within the 
Office of the Chief Financial Officer, the Office of Internal Review is 
tasked with performing internal assessments of critical financial 
management activities. In addition to performing cyclical assessments 
of Departmental operations and maintaining a capability for ad hoc 
assessments, the Office of Internal Review coordinates a corporate 
management control program to evaluate internal control systems on an 
on-going basis. After the Recovery Act was passed, the Office of 
Internal Review took a lead role in conducting and facilitating 
Department-wide risk assessments to identify existing or potential 
vulnerabilities within our programs. The Office of the Chief Financial 
Officer's Office of Program Analysis and Evaluation also maintains a 
robust program evaluation capability and has taken concrete actions to 
ensure corporate planning and evaluation of projects are well managed 
and effective. These organizations are also leaders in establishing 
internal controls guidance, developing documentation standards, and 
coordinating external reporting requirements, outcome validation, and 
early issues identification.

Q6b.  Have your agencies ever tasked IG to conduct work on your behalf?

A6b. Since the Department of Energy received an unprecedented level of 
funding from the Recovery Act, the Department requested that the Office 
of Inspector General provide grant fraud training to headquarters and 
field offices. In addition, we asked the Office of Inspector General to 
prioritize the first round of their Recovery Act reviews on programs 
that received substantial funding increases and/or are associated with 
high risks.

Q7a.  How has the Internet portal www.grants.gov operated recently?

A7a. The Department of Energy's users have experienced significant 
problems with the grants.gov system, including lack of advance notice 
by the Department of Health and Human Services (HHS) of systems changes 
and problems logging onto the system. The applicant community has also 
experienced problems in submitting applications due to delays by HHS in 
implementing software changes to the system.

Q7b.  What is the Federal Government doing to ensure its operation and 
effectiveness?

A7b. The Office of Management and Budget (OMB) is working with the 
Department of Health and Human Services to resolve performance issues 
of the system. In the meantime, OMB has requested that agencies, 
including DOE, find alternative systems to receive and manage financial 
assistance applications for Recovery Act projects and activities.
    Accordingly, while Grants.gov remains a viable tool for the posting 
of Funding Opportunity Announcements, DOE is not using Grants.gov to 
collect and retrieve proposals for financial assistance actions, 
including those relating to Recovery Act projects and activities. 
Alternatively, DOE is using FedConnect, a commercial system, and DOE's 
Industry Interactive Procurement System (IIPS), an in-house system, for 
receiving applications.

Q7c.  What impact would the crashing of this site have on the ability 
to issue grants?

A7c. The impact on the Department of Energy would be minimal since we 
are currently using alternative approaches for receiving applications 
for DOE financial assistance opportunities.

Q8.  I am concerned that the ``Buy American'' provisions in the 
Stimulus legislation could add significant costs to and restrict agency 
flexibility in spending for science-related construction and 
facilities.

     How will this provision be implemented with respect to 
construction of scientific buildings, facilities, and major research 
equipment and how will you work to ensure the restrictions do not 
result in cost overruns and delays?

     NOTE: the language specifically states: SEC. 1605. USE OF AMERICAN 
IRON, STEEL, AND MANUFACTURED GOODS. (a) None of the funds appropriated 
or otherwise made available by this Act may be used for a project for 
the construction, alteration, maintenance, or repair of a public 
building or public work unless all of the iron, steel, and manufactured 
goods used in the project are produced in the United States.

A8. Our goal in implementing the Recovery Act is to stimulate the 
economy through jump-starting job creation by accelerating planned 
conventional construction projects and the procurement of major items 
of equipment. We are evaluating whether the Buy American provision has 
significant impacts on a project-by-project basis. The primary area of 
concern is scientific equipment and instrumentation within construction 
projects already underway. After we better understand the provision's 
impacts on our projects, we may consider using one of the Buy American 
exception provisions; but to date we have not made any exception 
requests.

Q9.  Mr. Rogers: GAO's testimony mentions four specific examples that 
highlight risks at science agencies--three of which are at DOE.

     How do you plan on addressing their concerns?

A9. Loan Guarantee Program
    GAO recommended that the Loan Guarantee Program (LGP) complete 
internal loan selection policies and procedures, amend application 
guidance for more specificity, and further define performance metrics 
to measure outcomes. The LGP has finalized a policies and procedures 
document.
    The Department's generic loan application guidance document states 
that the determination of the technical merit of the project will be 
influenced by the quality of the independent engineering reports, 
including the credentials of the consultants, scope of the undertaking, 
and strength of the opinions provided. Due to the unique nature of each 
project, the Department will provide more detailed requirements for the 
required independent engineering reports during its preliminarily 
review of application submissions. The Department notes that two 
independent engineering reports will be separately prepared by two 
independent engineering firms. This information will then be reviewed 
and analyzed for a third time by the LGP's underwriting team. On the 
basis of the detailed reports and multiple reviews, the Department will 
determine whether the application process should move forward or if 
applicants require additional guidance.
    The Department has developed an initial draft set of performance 
measures and metrics for the loan guarantee program. The Department 
will continue to refine these measures with the aim of completing the 
effort by the time of the fiscal year 2010 budget submission.

Research and Development Selection Process for Oil and Natural Gas 
        Projects
    The Office of Fossil Energy fully supports GAO's recommendation to 
modify the Department's oil and natural gas research and development 
selection process. Specifically, the Department agrees with GAO's 
recommendation to avoid activities that industry would conduct without 
federal funding. The FY 2010 budgets propose to terminate DOE's 
mandatory and discretionary oil and gas R&D, except for methane 
hydrates, which has a long-termer, higher-risk focus. In FY 2009 the 
Department is including an evaluation criterion in all oil and gas R&D 
solicitations to formally assess whether industry would undertake the 
research without federal funding. The Department is compiling 
information on industry's current and planned research activities to 
help reviewers make this evaluation and requires that proposers 
specifically address this criterion in their application.

Coal Technology Program
    The Office of Fossil Energy has taken significant steps in working 
with the National Energy Technology Laboratory (NETL) to address GAO's 
concerns dealing with a variety of project and program challenges in 
jointly funding private sector projects demonstrating clean coal and 
carbon capture and sequestration technologies. These actions include 
improved project management practices such as the establishment of the 
NETL Federal Project Management Center and project manager 
certification training. The Department is considering evaluation of the 
Center and the additional training on project management. In addition, 
recent Funding Opportunity Announcements have been released with 
specific time limits on the length of negotiations in order to 
facilitate closure on the terms of a cooperative agreement. The 
Department is considering more rigorous cost-effectiveness criteria to 
address GAO's concerns for project selection. The Department is 
implementing GAO's recommendation to require a 50 percent private 
sector cost-share (in cash, as opposed to projected revenues from 
electricity sale) and full-funding prior to award (vs. incremental 
funding). While many demonstration projects have unique risks that are 
challenging to mitigate, the Office of Fossil Energy has worked hard to 
address these risks and continues to take appropriate actions to limit 
their effects.

                   Answers to Post-Hearing Questions

Responses by Todd J. Zinser, Inspector General, U.S. Department of 
        Commerce

Questions submitted by Chairman Brad Miller

Q1.  What indicators will your office use to determine if the training 
provided to Department contract and grant management staff is resulting 
in earlier detection of fraud or other problems?

A1. The training we provide has a number of purposes which help to 
strengthen our fraud awareness and detection programs across the 
Department. The relationships we develop during these training sessions 
with the program offices help facilitate open communications which can 
result in more timely inquiries and notices to our investigation team 
when unusual trends are identified. When calls are received, they are 
logged in a tracking system, which will allow us to link those contacts 
back to our outreach and training efforts.

Q2.  Is the current presentation of Recovery Act information on the 
Department's web site adequate to meet the Act's requirement for 
transparency? If not, what improvements would you suggest?

A2. We have reviewed the Department's Recovery Act web site and the 
requirements established by the Office of Management and Budget in its 
Recovery Act Guidelines for recovery related web pages, and discussed 
the content and implementation of the web site with Department 
officials. Based on our review, we found that the Department's Recovery 
Act web site (http://www.commerce.gov/recovery) conforms with OMB's 
requirements, including providing a prominent link to Recovery.gov and 
a link to the Office of Inspector General's web site. Although 
reporting by agencies is still evolving and stimulus funds have just 
begun to be disbursed, we expect the Department's Recovery Act web site 
will continue to meet the Act's requirement for transparency by posting 
major communications, funding notifications, and financial and activity 
reports. This site is intended to expand and evolve as additional 
information becomes available, so we will continue to assess whether it 
is meeting accountability and transparency standards and advise the 
Department of any concerns we might have as they arise.

Q3.  The Act gives you the responsibility to protect ``. . . 
employee[s] of any non-federal employer receiving covered funds . . .'' 
who provide information concerning waste, fraud, and abuse of Recovery 
Act funds. How do you intend to ensure your responses to whistleblower 
complaints are made within the mandated 180-day review period? Under 
what circumstances will you choose to discontinue or not to conduct a 
whistleblower's requested investigation? How will you protect such 
whistleblowers from retaliation?

A3. We intend to make whistleblower complaints under the Recovery Act, 
a top priority when they are received. Our Office of Investigations has 
been tasked with this responsibility. We will meet the statutorily 
mandated 180-day review period for these complaints through a tracking 
system we have designed and implemented. The system provides for a 
focal point to log dates of receipt of complaints, status, and due 
dates for follow-up and disposition. The tracking system will be 
monitored on a regular basis to ensure that we remain aware of 
statutory timeframes.
    The Act requires that we investigate unless we find that the 
complaint is frivolous, it does not relate to covered funds, or another 
federal or State judicial or administrative proceeding has previously 
been invoked to resolve the compliant. This will require an initial 
determination by our office in that regard. If we determine that a 
complaint does not meet the requirements for an investigation we will 
close the compliant. The Act mandates that Inspectors General list all 
such complaints in their semi-annual reports to Congress. Additionally, 
the Act specifically provides for final remedies for the protection of 
a whistleblower through a report issued by the IG to the Head of the 
Department. In the event that the OIG report establishes a fording of 
probable cause that retaliation has occurred, the burden of proof will 
shift to the employer to prove that they did not retaliate. It will 
then be up to the Secretary to adjudicate the matter and apply remedies 
provided under the stature. These include: 1. Order the employer to 
take affirmative action to abate the reprisal; 2. Order the employer to 
reinstate the employee and provide him/her with appropriate 
compensation; or 3. Order the employer to pay the complainant's costs 
reasonably incurred in bringing the complaint.
    While these remedies are good, the Department should consider 
including a standard provision in all contracts and grants awarded 
under the Recovery Act, stating that a finding by the Department of 
whistleblower reprisal by a contractor or financial assistance 
recipient may result in termination of funding under the respective 
contract or financial assistance award. We intend to discuss this 
recommendation with the Department as another means of strengthening 
whistleblower protection.

Questions submitted by Representative Paul C. Broun

Q1.  Please list the top three risks at your agency associated with 
stimulus funding.

A1. Our top three stimulus funding risks are as follows:

        1.  Meeting the Act's Aggressive Spending Timeline: The 
        Recovery Act requires funds to be spent quickly, giving bureaus 
        little time to staff up and gear operations to accommodate the 
        new and expanded programs, grants, and contracts that this 
        funding will support. This aggressive spending timeline 
        significantly increases the risks for fraud and waste in both 
        stimulus-funded activities and the Department's traditionally 
        funded operations. This applies across the government--not just 
        to the Department of Commerce.

        2.  Shoring Up Grants and Contracts Management: The Recovery 
        Act's emphasis on grants and contract spending puts additional 
        pressure on weak management and administrative operations that 
        we have identified in OIG work over the years, particularly 
        with regard to three aspects of the Department's grant and 
        contract management and operations:

                  A decentralized grants management structure, 
                which consists of three separate management systems 
                operated by three different bureaus--each managing a 
                subset of Commerce grant activity according to policies 
                established at the Department level;

                  The shortage of qualified contracting 
                specialists, technical specialists, and subject matter 
                experts--particularly in light of the anticipated shift 
                from cost-type contracts, which are predominantly used 
                today, to fixed-price contracts, which require 
                different knowledge and skill sets; and,

                  The significant dollars dedicated to funding 
                construction grants and contracts, two areas that are 
                inherently risky and historically difficult to manage 
                effectively.

        3.  Fraud Potential: Under the Recovery Act the Department of 
        Commerce received a significant amount of funding, almost 
        double that which is routinely received on an annual basis. 
        Regardless of the strength of the existing internal controls, 
        anytime there is an influx of money of this magnitude, there is 
        an increased potential for fraud. For example, Internet scams 
        linked to Recovery Act funding have already been identified. 
        While Congress provided certain safeguards in the Act, 
        continued diligence by OIGs and agencies will be essential to 
        mitigate this increased risk of fraud.

Q2.  What contracts at your agency are ``mission critical''? That is, 
if the specific contract were to experience cost overruns, schedule 
delays, or performance problems, would it affect the mission of the 
agency?

A2. We have not conducted an audit to determine all the mission 
critical contracts in the Department, but we have discussed with 
Departmental officials that each bureau should engage in such an 
exercise to identify its mission critical controls. Those we have 
identified are as follows:

    Contracts for the 2010 decennial census, NOAA satellites, and 
digital/broadband expansion support key mission-critical operations for 
the Department of Commerce. These contracts, costing billions of 
dollars, support programs that are essential to determining 
Congressional representation, allocating federal and State funding for 
community improvements, public health, education, and transportation, 
and public safety and security. Failure to execute these contracts 
effectively would seriously impact its mission.

2010 census contracts
    Deadlines for the delivery of decennial counts--which are used for 
apportionment, to redraw congressional districts, and to distribute 
hundreds of billions of dollars in federal funds--are set by law. The 
Census Bureau is facing significant challenges in preparing for the 
2010 decennial as a result of problems with its plan for automating its 
major operations, which had to be significantly scaled back late in the 
decade. Four contracts, representing approximately $2.2 billion, are 
critical to the bureau's ability to conduct a successful census.

          Field Data Collection Automation (FDCA) contract for 
        hand-held computers and related systems and automation support 
        for decennial field operations.

          Decennial Response Integration System (DRIS) contract 
        for integration of all data responses, including mail-back 
        forms and non-response follow-up.

          Decennial Access and Dissemination System II contract 
        for data tabulation and dissemination services.

          2010 Communication Campaign contract for integrated 
        communications that includes a mix of public relations, 
        partnership materials, grassroots marketing, special events and 
        more to help ensure that all people are reached in the most 
        efficient and effective manner.

NOAA contracts
    Two NOAA satellite systems currently in development are critical to 
the Nation's ability to provide continuous long- and short-term weather 
and environmental data: the National Polar-orbiting Operational 
Environmental Satellite System (NPOESS) and the Geostationary 
Operational Environmental Satellite R-Series (GOES-R). Both of these 
systems have experienced significant cost overruns and schedule delays. 
They are intended to replace aging satellites that are nearing the end 
of their life cycles, and must be deployed in time to avoid a gap in 
critical satellite coverage.

Digital/broadband conversion
    The National Telecommunications and Information Administration's 
(NTIA) $1 billion contract to prepare consumers for the switch to all-
digital programming and the management support contract the agency 
expects to award in support of the $4.7 billion broadband program are 
also mission-critical initiatives for the Department.

Q3.  Where do you believe your office should concentrate its time and 
resources--focusing on high-risk programs or on the most expensive 
programs?

A3. Our work on Recovery Act oversight is risk-based. As part of the 
Recovery Act, the Department's bureaus themselves will be assessing the 
risk within their programs and developing plans and operating 
procedures to adequately address these risks. As part of our oversight, 
we will be reviewing the draft plans and providing feedback to ensure 
that the bureaus have implemented adequate preventive, detective and 
monitoring controls over Recovery Act programs. While our risk 
assessment results are preliminary, we believe the Broadband program 
represents the highest risk to the Department.

Q4.  Despite campaign promises by the President to not issue signing 
statements, and to ensure whistleblower protections, the President 
recently issued a signing statement that said the following:

         ``Sections 714(1) and 714(2) in Division D prohibit the use of 
        appropriations to pay the salary of any federal officer or 
        employee who interferes with or prohibits certain 
        communications between federal employees and Members of 
        Congress. I do not interpret this provision to detract from my 
        authority to direct the heads of certain executive departments 
        to supervise, control, and correct employees' communications 
        with the Congress in cases where such communications would be 
        unlawful or would reveal information that is properly 
        privileged or otherwise confidential.''

     How do you reconcile the President's campaign promise with his 
recent signing statement?

          If you believe that these statements are consistent, 
        do you believe they have a chilling effect on whistleblowers?

          What affect will this have on your ability to uncover 
        waste, fraud, and abuse?

A4. The IG Act and Departmental orders provide clear authority for the 
IG to receive whistleblower complaints, complete investigations, and 
protect the identity of whistleblowers regardless of the nature of the 
information provided in their complaints.
    As part of our Recovery Act efforts we are conducting fraud 
awareness briefings, which include a discussion of whistleblower 
protections under the Whistleblower Protection Act and the Recovery 
Act. In that regard, we do not think that the President's signing 
statement will affect our ability to protect the identity of 
whistleblowers or to uncover fraud, waste, and abuse.

Q5.  The stimulus bill contains $350 million for the IG community and 
GAO to provide oversight:

          What entity will provide oversight of how these funds 
        are spent?

          How can the taxpayers be sure that the IG community 
        and the GAO are spending this money wisely?

A5. OMB's Updated Implementing Guidance for the Recovery Act 
establishes an independent requirement for OIGs to report monthly on 
their total Recovery Act spending. It is our understanding that these 
reports will be posted to Recovery.gov, and we will include in our 
reporting the office's Recovery Act activities. Stimulus funding 
provided to the OIG will be spent primarily on personnel and travel to 
conduct oversight, and potentially to hire specialized contract 
support. One measure of how we spend these funds will be the work 
products that we produce and publish on our Recovery Act web page. 
Congress is, however, the entity that is in the best position to 
provide oversight to the IG community.

Q6.  Are you concerned that the Recovery Accountability and 
Transparency (RAAT) Board will create a new level of bureaucracy and 
ultimately undermine your independence?

          Does the RAAT Board, or anyone in the Administration, 
        have the ability to terminate your investigations?

          What steps are you required to take in order to 
        maintain an investigation if directed to terminate one?

A6. I serve as a member of the Recovery Accountability and Transparency 
Board with 10 other Inspectors General, including the Board's Chairman. 
The RAAT Board has discussed this issue and cannot envision a case 
where the Board would consider asking an inspector general to terminate 
an investigation. Based on these discussions, we do not anticipate this 
circumstance arising.

Q7.  Understanding that coordination is sometimes necessary, IGs should 
not be used as an agency's internal auditor.

          Have you ever been asked by an agency to do work?

          What was your response?

A7. We have, on occasion, initiated work at the request of the 
Secretary. For example, in the past year we conducted work in response 
to a request from the Secretary regarding the Decennial Census.
    Commerce agencies are familiar with the authority, 
responsibilities, and duties accorded to the OIG under the Inspector 
General Act, including our mandate for maintaining independence. There 
are times, however, when our interactions with Department officials to 
prevent and detect fraud, waste, and abuse may result in an audit or 
investigation. We are often called on by program managers and grants 
officers to provide assistance when they suspect misuse of funds or 
other program irregularities. In these instances, we conduct a 
preliminary analysis to determine whether additional follow-up work is 
warranted and take the appropriate next step based on our findings.

Q8.  What lessons can be learned from other initiatives (like the 
Reconstruction in Iraq, Katrina Relief, or the Troubled Asset Relief 
Program) that attempted to balance expediency with accountability? Are 
these lessons currently being included in your oversight plans?

A8. The Department of Commerce received emergency funding to assist 
recovery efforts in the aftermath of Hurricanes Katrina and Rita in 
2005 and Andrew in 1992. Though the size of these allocations and the 
scope of spending were significantly smaller than Commerce's Recovery 
Act funds and programming, the Department nonetheless was faced with 
some similar challenges: establishing strong internal controls to 
safeguard funds, accelerating the awards process, keeping contractors 
and grantees accountable, and ensuring programs meet their objectives.
    Our oversight of the Department's use of hurricane-related funds 
found that Commerce took steps to ensure that contracts and grants were 
awarded quickly and appropriately, and that funded projects were sound 
in concept and responsive to the economic recovery needs of the area. 
But we identified weaknesses in grantees' reporting and in departmental 
oversight of their performance. We found that conducting site visits 
was critical to effectively monitoring the progress of funded projects, 
many of which involved construction and a range of economic development 
activities--common focuses for Recovery Act funding.
    This work also reinforced the recognition that balancing expedience 
with accountability requires vigilant attention to maintaining 
comprehensive systems of internal controls; robust mechanisms for 
developing accurate budget estimates and tracking project costs; 
sufficient staff in terms of both skill and number to oversee 
contractor performance; and timely, systematic contractor and recipient 
reporting. These lessons learned are being included in our oversight 
plans for Recovery Act spending.

Q9.  Mr. Zinser: I am particularly concerned with the part of your 
written testimony in which you state that a recently completed audit of 
NOAA satellite acquisition contracts found that contractors were 
receiving high award fees for projects that were experiencing serious 
performance shortfalls and large cost overruns. Will you please expand 
on your audit findings and explain to the Committee why contractors are 
being rewarded for failing?

          How will the sudden influx of funding from the 
        Recovery Act and the Omnibus Appropriations bill affect the 
        success (or failure) of these satellite acquisition programs?

A9. Our September 2006 audit report, Poor Oversight and Ineffective 
Incentives Leave NPOESS Program Well Over Budget and Behind Schedule, 
found that the prime contractor (Northrup Grumman) had received more 
than $123 million in award fees--84 percent of the available fee pool--
for the first six award periods of the NPOESS contract, despite 
ongoing, significant delays and cost overruns. We found that the 
contract's award fee plan did not sufficiently tie fee amounts to 
critical, high-risk tasks; that program officials were awarding interim 
fees even though the contractor was missing key milestones, and that 
the contract allowed for unearned fees to be ``rolled over'' to 
subsequent fee periods to give the contractor additional chances to 
earn them. Our report provided recommendations for correcting these 
problems.
    The practice of awarding high fees to contractors for programs that 
are failing, behind schedule, and over budget is a systemic problem 
throughout the government. Other OIGs, as well as GAO, have reported 
these abuses. As a result, federal agencies, including the Department 
of Commerce, as well as the Office Federal Procurement Policy (OFPP) 
are reviewing award-fee policies and practices and are issuing new 
guidance to ensure award-fee contracts truly promote and reward 
excellent performance.
    Sustained funding for NOAA's satellite programs is critical. The 
development and launch of these satellites, which will modernize the 
government's environmental monitoring capabilities, are high risk 
programs that will be at even greater risk if there are any gaps in 
satellite funding. Continued congressional support for these programs 
is, therefore, critical. It is imperative that NOAA, NASA and the Air 
Force address the management and technical issues with the NPOESS 
satellite program, however, in our view it is equally important that 
the program receives sustained funding.
                   Answers to Post-Hearing Questions
Responses by Thomas C. Cross, Interim Inspector General, National 
        Science Foundation

Questions submitted by Chairman Brad Miller

Q1.  Your testimony regarding the capability of the Foundation's grants 
management staff expressed a concern about their ability to deal with 
the increased workload expected from the Recovery Act. How can you 
monitor performance in those offices to detect if a workload problem is 
occurring?

A1. Any time an agency receives a significant amount of new funding 
without a concomitant increase in funding for the administrative costs 
associated with managing and overseeing programs, there is an increased 
risk of fraud and abuse. With the Recovery Act, NSF will increase the 
amount of funding available to the scientific community by $3 billion, 
nearly half of NSF's regular annual appropriation. However, NSF did not 
receive any additional funding in its salaries and expenses 
appropriation. We are already working to monitor how NSF will mitigate 
this potential risk. First, we are reviewing the processes through 
which NSF intends to award the bulk of these funds. By using already-
existing programs and processes, to the extent possible, NSF can 
potentially mitigate the impact on its staff. Second, as NSF begins 
making awards and then moves into the post-award monitoring phase, we 
will continue to monitor NSF's processes and identify those areas that 
may be in need of improvement. Finally, through ongoing communications 
with NSF staff at all levels, we can identify potential workload 
problems before they occur and assess NSF's actions to reduce those 
problems.

Q2.  What indicators will your office use to determine if the training 
you provided to Foundation contract and grant management staff is 
resulting in earlier detection of fraud or other problems?

A2. We believe that the training and resources we have provided to the 
agency about uncovering grant fraud, combined with the additional 
information required of recipients of Recovery Act funds, will 
ultimately yield more referrals to our investigators than what would 
otherwise be the case. Although we maintain statistics on hotline 
contacts, in the past they have not been categorized according to 
source. We are reconsidering this policy to better track how we obtain 
our referrals. An increase in referrals from the agency would be an 
indication of the effectiveness of the training, and an increase in 
queries or other communications concerning potential fraud would show 
an improved awareness of fraud issues by agency personnel.

Q3.  Is the current presentation of Recovery Act information on the 
Foundation's web site adequate to meet the Act's requirement for 
transparency? If not, what improvements would you suggest?

A3. The OIG is currently reviewing the NSF's web site presentation of 
the Recovery Act and expects to provide suggestions to improve the 
transparency and accountability to the public. NSF is generally 
following the common Recovery Act web page formats set forth in the 
Office of Management and Budget's implementation guidance. In addition, 
the Foundation's web page incorporates some of the best practices 
suggested in the guidance. For example, the Foundation has placed the 
Recovery web page link at a prominent place on the NSF home page and 
has made an effort to ensure that as much content as possible is 
accessible to a wide audience, including persons with disabilities. 
Because the Recovery web page will mostly likely be the primary means 
for NSF to inform and communicate with the public and the research 
community about Recovery Act activities, we are taking the time to 
review the web site more closely to help ensure that it will 
disseminate information effectively.

Q4.  The Act gives you the responsibility to protect ``. . . 
employee[s] of any non-federal employer receiving covered funds . . .'' 
who provide information concerning waste, fraud and abuse of Recovery 
Act funds How do you intend to ensure your responses to whistleblower 
complaints are made within the mandated 180-day review period? Under 
what circumstances will you choose to discontinue or not to conduct a 
whistleblower's requested investigation? How will you protect such 
whistleblowers from retaliation?

A4. With OIG resources already stretched and the anticipation of a 
significant increase in allegations of fraud, waste, and abuse of 
Recovery Act funds, we recognize that meeting these time requirements 
will be a challenge. However, we have taken a proactive approach by 
educating our staff on the specific whistleblower responsibilities we 
have under the Act and emphasizing the new time requirements.
    We will incorporate additional milestones specific for Recovery Act 
cases into our existing electronic case management tracking system and 
monitor them closely to ensure that we adhere to them. We also are 
planning to hire additional staff to handle the anticipated increase in 
whistleblower and other cases.
    Allegations that we receive concerning Recovery Act funding will be 
thoroughly reviewed and evaluated. In the case of a whistleblower 
complaint, the initial review will include determining if the funds in 
question or the alleged retaliation involves Recovery Act funds. We 
will also evaluate the substance of the matter and the supporting 
evidence to determine its merits and whether a full investigation is 
warranted. Decisions to discontinue an investigation are based on the 
evidence identified during the investigation and are reviewed by 
management to ensure the decision is consistent with the IG community's 
Quality Standards for Investigations.
    In the case of whistleblowers who allege retaliation, the identity 
of the complainant has already been compromised, and the best 
protection we can provide is a timely and thorough investigation to 
provide them a remedy if appropriate. When a whistleblower submits a 
confidential allegation to our office, on the other hand, our standard 
practice is to protect him or her from retaliation, as in the case of 
anyone who reports fraud, waste, or abuse. It is the office policy not 
to identify the source of allegations, and we have procedures to 
provide complainants with Confidential Source status, when requested, 
to further protect their identity.
    One step that we have already initiated is to educate through our 
outreach program the recipients of Recovery Act funds of the 
requirements they must comply with, including the section covering 
whistleblowers. By ensuring that recipients are aware that this 
protection covers State and local government employees, as well as 
contractors, and that the Act requires our office to investigate any 
allegations of retaliation, we reinforce the serious consequences of 
retaliation. Additionally, completing timely, thorough investigations 
and referring our results to the Agency for action, when appropriate, 
serve as a further deterrent.

Questions submitted by Representative Paul C. Broun

Q1.  Please list the top three risks at your agency associated with 
stimulus funding.

A1. First, while NSF received $3 billion in additional funding, nearly 
half of its regular annual appropriation, it did not receive any 
additional funding for its administrative activities. Consequently, NSF 
faces the risks associated with spending these funds appropriately, 
within a very demanding timeframe, without an increase in staffing. 
Second, over the past several years, we have identified the management 
of large-facility projects as one of NSF's top challenges. Through the 
Recovery Act, NSF received an additional $400 million in its Major 
Research Equipment and Facility Construction appropriation for these 
large science-infrastructure projects. NSF will continue to be 
challenged to properly oversee these complex efforts. Finally, NSF's 
mission of supporting basic science and engineering research and 
education, where outcomes are less tangible in the short-term, is 
unique among federal agencies. With respect to stimulus funding, NSF 
will be challenged to identify, track, and report on how it will meet 
the goals of the Recovery Act in a way that provides meaningful 
information to the public on NSF's unique role. This will also require 
increased agency effort to monitor a large volume of new grants awarded 
over a relatively short period of time to ensure that the associated 
funding is accurately accounted for and expended properly.

Q2.  What contracts at your agency are ``mission critical?'' That is, 
if the specific contract were to experience cost-overruns, schedule 
delays, or performance problems would it affect the mission of the 
agency?

A2. As you are aware, NSF's mission generally is to support all fields 
of science and engineering primarily through providing grants for 
research and education. Unlike many other federal agencies, NSF does 
not conduct its own research or operate its own laboratories. Thus, 
NSF's achievement of its mission is not dependent upon a handful of 
contracts, rather it is dependent upon a community of thousands of 
researchers in all scientific disciplines.
    However, there is one area of NSF's activities to which this 
question is particularly germane. NSF has a more direct role in its 
management of the United States Antarctic Program (USAP), which is 
administered under the agency's largest single contract. In addition to 
funding research, NSF provides scientists with logistics, operational, 
and laboratory support in Antarctica. This includes a year-round inland 
research station at the South Pole; two year-round coastal research 
stations with extensive laboratory and computing capabilities; summer 
research camps; ice-breaking research ships; U.S. Air Force and Air 
National Guard air transports; a fleet of ski-equipped LC-130 
airplanes; Twin Otter airplanes; helicopters; U.S. Coast Guard and 
commercial icebreakers for channel breaking; treaty inspection 
missions; a variety of over-snow vehicles; and automated, unmanned 
weather and geophysical observatories. NSF provides the bulk of these 
services through a contract, currently with Raytheon Polar Services 
Company, and is currently conducting a competition for its renewal. For 
USAP, this contract is clearly ``mission critical.''

Q3.  Where do you believe your office should concentrate its time and 
resources--focusing on high risk programs, or on the most expensive 
programs?

A3. Our office will use its process for identifying the highest-risk 
programs as the primary means for allocating OIG time and resources. It 
should be noted, however, that many of the most expensive programs will 
be assessed as high-risk based in part on the amount of funding 
involved. To identify high-risk programs, we will evaluate factors such 
as significant past audit and investigation findings, current program 
management challenges, complexity of the program and related 
activities, issues of substantial concern to the Congress and 
Administration that impact the program, NSF's own risk assessments, and 
the dollar value of the program. Programs that have significant risk 
factors in other areas, such as institutions that have been repeatedly 
faulted for mishandling of NSF funds, will also be a priority for OIG. 
Our established risk-based approach--including consideration of program 
expense--will enable our office to target Recovery Act programs that 
potentially pose the greatest problems in terms of ineffectiveness, 
inefficiency, fraud, waste and abuse.

Q4.  Despite campaign promises by the President to not issue signing 
statements, and to ensure whistleblower protections, the President 
recently issued a signing statement that said the following:

         ``Sections 714(1) and 714(2) in Division D prohibit the use of 
        appropriations to pay the salary of any federal officer or 
        employee who interferes with or prohibits certain 
        communications between federal employees and Members of 
        Congress. I do not interpret this provision to detract from my 
        authority to direct the heads of executive departments to 
        supervise, control, and correct employees' communications with 
        the Congress in cases where such communications would be 
        unlawful or would reveal information that is properly 
        privileged or otherwise confidential.''

     How do you reconcile the President's campaign promise with his 
recent signing statement? If you believe that these statements are 
consistent, do you believe they have a chilling effect on 
whistleblowers? What affect will this have on your ability to uncover 
waste, fraud, and abuse?

A4. We do not believe that the President's statement will have any 
effect on our ability to uncover waste, fraud and abuse. Given the 
independent status of an OIG, we also believe the statement is unlikely 
to deter whistleblowers from approaching our office.

Q5.  The stimulus bill contains $350 million for the IG community and 
GAO to provide oversight. What entity will provide oversight of how 
these funds are spent? How can the taxpayers be sure that the IG 
community and the GAO are spending this money wisely?

A5. OIGs are subject to oversight by Congress, OMB, and the new CIGIE. 
Moreover, specifically in the case of Recovery Act funding, the 
Recovery Accountability and Transparency (RAT) Board will provide 
coordination and general oversight of related OIG activities and 
expenditures. If inappropriate or illegal behavior within an OIG is at 
issue, the Integrity Committee of the CIGIE has shown in recent years 
that it is capable of policing the OIG community for OIG senior staff 
that might be engaged in improper conduct.
    With regard to whether or not the money is spent wisely, the IG 
community is largely operating in a fish bowl. Under the Act's 
requirements for transparency, OIGs must report their activities and 
expenditures related to the Recovery Act on a monthly basis. Taxpayers 
will be able to decide for themselves, by seeing the products issued 
and the expenditures made, whether or not OIG money is being spent 
prudently. Our office posted its first Recovery Act report for the 
month of March on our web site on April 8.

Q6.  Are you concerned that the Recovery Accountability and 
Transparency (RAT) Board will create a new level of bureaucracy and 
ultimately undermine your independence?

A6. For those of us who administer, receive and oversee Recovery Act 
funds, the Act requires an unprecedented measure of transparency and 
accountability. It is apparent that the procedures followed in the past 
by agencies and their OIGs will not be sufficient to accomplish the 
goals of the legislation. We therefore view the Board not as an 
impediment to getting things done, but as supporting the efforts of the 
community to establish and effectively coordinate oversight in response 
to the heightened standards in the Recovery Act.
    Our communications with the Board so far have been reassuring in 
that regard. It has indicated that it will work to coordinate efforts 
of OIGs when appropriate, disseminate best practices, and otherwise be 
as supportive as possible. We are satisfied that the protections of our 
independence included in the Recovery Act are adequate. We also take 
comfort in the fact that the Board is comprised entirely of agency 
Inspectors General.

Q7.  Does the RAT Board, or anyone in the Administration, have the 
ability to terminate your investigations?

A7. No. The Board may request that we refrain from an investigation, 
but the Recovery Act states that each IG makes the final decision on 
audits and investigations.

Q8.  What steps are you required to take in order to maintain an 
investigation if directed to terminate one?

A8. We are required to respond within 30 days to the Board, the agency, 
and the Congress, with our reasons for rejecting the Board's request.

Q9.  Understanding that coordination is sometimes necessary, IGs should 
not be used as an agency's internal auditor. Have you ever been tasked 
by an agency to do work? What was your response?

A9. Every year, the NSF OIG goes through an annual audit planning 
process to determine the most significant areas on which to focus our 
audit efforts. As part of this process, the OIG solicits information 
and audit ideas from both the National Science Board (NSB) and the NSF. 
The agency typically identifies institutions or particular awards that 
they believe present a significant risk to NSF and federal funds. After 
a thorough review, we choose audits to conduct based on our own risk 
assessment, and they may include audit ideas brought to the OIG by NSF 
or the NSB. By requesting input from the agency, we are able to focus 
our work on substantive matters without compromising our independence.
    In addition, the NSB or NSF may make requests for audits anytime 
during the year. For example, approximately two years ago at the 
request of the NSB, the OIG conducted a review of the Joint Statement 
of Understanding entered into between the NSB Chairman and the Governor 
of Hawaii. To ensure independence during an agency-requested audit, the 
OIG is solely responsible for determining the scope, planning, 
execution, and the reporting of audit results. If the agency requests a 
review that supports its management function, but OIG decides not to 
perform it because it is not a priority for our oversight function, the 
agency may expend its own funds to have the review performed by a 
contractor.

Q10.  What lessons can be learned from other initiatives (like the 
Reconstruction in Iraq, Katrina Relief, or the Troubled Asset Relief 
Program) that attempted to balance expediency with accountability? Are 
these lessons currently being included in your oversight plans?

A10. Although NSF played only a minor role in Katrina relief, we are 
aware that the IG community successfully coordinated its efforts to an 
unprecedented degree to assure appropriate oversight of the Gulf Coast 
recovery funds. IG Phyllis K. Fong, Chair of the CIGIE, recently 
outlined a number of key lessons learned by the IG community during the 
Hurricane Katrina relief efforts in her testimony before the Senate 
Committee on Homeland Security and Government Affairs on March 5, 2009. 
From NSF's perspective, the most relevant lessons pertain to: 1) the 
efficacy of risk management activities; 2) interagency data sharing 
and; 3) staffing.
    Risk management activities are of critical importance because not 
all programs (or grants) are created equal when it comes to risk, and 
they therefore require different levels of oversight. Interagency data 
sharing refers to the difficulty of sharing data or conducting matches 
of computer databases across agencies due to federal privacy laws. From 
an accountability perspective, we know through first-hand experience 
that it is not easy to determine whether a grant applicant has received 
duplicate funding from another federal agency for doing the same work. 
Staffing concerns arose during the Katrina relief oversight effort, as 
OIGs had to improvise to ensure proper oversight of both Katrina and 
their agencies' normal activities.
    Both risk management and staffing issues figure prominently in our 
oversight planning. To date, we have shared numerous resources related 
to risk with NSF; participated on their implementation planning teams, 
in large part to advise them on risk management issues; and are 
currently reviewing past audit findings for their relevance to the 
implementation of Recovery Act funding. With regard to staffing, we are 
mindful of the need to provide active oversight to both Recovery Act 
funds and NSF's regular appropriation. Once we see NSF's agency plan, 
we will develop our own spending plan to ensure that resources are 
effectively allocated between these two imperatives. We are already 
preparing to hire at least two more full-time staff by the end of the 
fiscal year, and we have submitted a request to OPM for authority to 
hire retired annuitants.

Q11.  Mr. Cross: In your testimony, you indicate you have launched an 
``outreach effort'' to educate agency managers and the public about 
your role under the Recovery Act How have you reached out to the public 
and what types of issues have you focused your outreach efforts on? How 
do you expect the public to be made aware of the use of funds by NSF 
and how will they communicate concerns to you?

A11. We maintain a multi-pronged outreach effort to reach personnel 
within NSF and the research community, including both principal 
investigators and institution officials/research administrators.
    Within NSF, we have established a liaison program, whereby a team 
from OIG, generally composed of one investigator and one auditor, is 
assigned to every directorate and office. Our liaisons meet with their 
NSF counterparts in both formal and informal settings providing 
briefings; attending staff meetings; and providing outreach resources 
and OIG material, such as Semiannual Reports and Audit Plans. We 
regularly present to NSF's Program Managers. We also maintain a 
presence on NSF's Announce Channel, a system of television monitors 
throughout the agency on which important information is shared. Our 
Announce presentations include the NSF Hotline information. We are in 
the process of producing a new presentation alerting agency personnel 
to the requirements for whistleblower allegations under the Recovery 
Act. We have an internal (within NSF) web page, from which NSF 
personnel can access OIG resources, including presentations, audits, 
Semiannual Reports, and material addressing fraud and research 
misconduct.
    Regarding our outreach to the research community, we maintain 
effective lines of communication through presentations, workshops, 
briefings, meetings, and site visits. We routinely present to members 
of groups like the Society of Research Administrators International and 
National Council of University Research Administrators, who have the 
best vantage point from which to identify fraud or waste in the 
expenditure of NSF grant funds. We also regularly participate in NSF 
Regional Grants Workshops, which are forums for new faculty, 
researchers, and administrators. At the last such conference, our staff 
provided our recently completed brochure entitled A Guide to NSF OIG 
and The American Recovery and Reinvestment Act (ARRA) of 2009. This 
handout explained the Recovery Act, identified the NSF OIG priorities 
regarding the Act, addressed the whistleblower protections under the 
Act, and provided contact information regarding misuse of stimulus 
funds. Finally, we routinely present to groups involved in applying for 
or administering NSF awards or performing supported research. We always 
include information for contacting us to report concerns. We are 
incorporating Recovery Act-related topics into all such presentations.
    We publicize our address, telephone numbers, telephone hotline, e-
mail hotline, and web-based hotline. It is our intention that all 
parties involved in the research enterprise--from NSF program personnel 
to research administrators to principal investigators and their 
collaborators--will know how to communicate with us and bring 
information to our attention.

Q12.  Mr. Cross: In your testimony, you indicate that your work 
generally focuses on completed projects and expenditures; however, with 
the stimulus funding the goal is to prevent the waste of taxpayer 
dollars before the money is committed I understand your office will 
prepare an implementation plan for Recovery Act oversight once the 
agencies approved plan is returned from OMB. But other than training 
activities you mentioned, will your office have any role prior to the 
money being committed to specific projects or research?

A12. While NSF has not yet provided the OIG with its spending plan or 
submitted its agency-wide recovery plan to OMB, we believe it is 
critical that we start work as early as possible to help ensure 
Recovery Act funds are spent appropriately and expeditiously. We have 
already started real-time reviews that will enable us to more quickly 
respond to potential areas of concern. We plan to conduct these reviews 
while NSF develops its plans, policies, and procedures in order to 
provide timely feedback to NSF. This timely feedback will allow NSF to 
take corrective actions and prevent problems before they arise.
    Because NSF will rely in large part on its existing policies, 
procedures, systems, and processes, our first review will focus on 
whether they are adequate to ensure that its awardees understand and 
are accomplishing the goals of the Recovery Act, accounting properly 
for ARRA funds, and reporting accurately and in a timely manner on ARRA 
funds and activities. By verifying that NSF has sound systems in place, 
we can help ensure NSF meets the Recovery Act's expectations for 
transparency and accountability.

Q13.  Mr. Cross: Since the goal of the stimulus is to create jobs, has 
anyone in your office been tasked with verifying the number of jobs a 
specific grant or project actually will create or created? Are you 
aware of anyone in the agency that will be verifying that?

A13. Chairman Devaney of the Recovery Accountability and Transparency 
Board recently told an IG working group on which we participate that 
the Council of Economic Advisors is discussing how to define ``jobs 
created'' and ``jobs saved'' with regard to the Recovery Act. Once it 
has determined standard definitions to be applied government-wide, we 
are expecting the administration to provide the agencies and OIGs with 
guidance on this key issue. At that time, we will determine what 
approach is appropriate. In the meantime, we have been discussing with 
NSF issues surrounding how to capture the data and validate it. We are 
aware that the agency has had some preliminary internal discussions 
about this subject, but it has not yet determined how to verify jobs or 
other measurable economic benefits that are generated by Recovery Act 
funds.
                   Answers to Post-Hearing Questions
Responses by Patricia Dalton, Managing Director, Natural Resources and 
        Environment Division, U.S. Government Accountability Office

Questions submitted by Chairman Brad Miller

Q1.  Are you satisfied with the progress DOE has made in implementing 
the recommendations in your reports for improving its loan guarantee 
programs, and that it is ready to properly handle these projects? Are 
you confident that DOE is prepared to appropriately evaluate and manage 
the higher-risk projects Secretary Chu wishes to pursue?

A1. DOE has taken several actions in response to the recommendations in 
our July 2008 report.\1\ We recently began to evaluate these actions as 
part of our annual mandated review of the program. However, because we 
have not completed that evaluation, we are not in a position to say 
whether we are confident that DOE has taken adequate steps to ensure 
that the program will be well managed. The American Recovery and 
Reinvestment Act of 2009 (Recovery Act) changed the program by 
providing $6 billion to pay the subsidy costs of loan guarantees for 
projects that can be started quickly and associated administrative 
expenses of up to $25 million. At the same time, Secretary Chu directed 
the program to expedite the issuance of loan guarantees. As a result, 
DOE is continuing to develop the program while also accelerating its 
implementation, which may present challenges and additional risks. We 
will evaluate and report on these apparent increased risks as part of 
our ongoing review.
---------------------------------------------------------------------------
    \1\ GAO, Department of Energy: New Loan Guarantee Program Should 
Complete Activities Necessary for Effective and Accountable Program 
Management, GAO-08-750 (Washington, D.C.: July 2008).

Q2.  What improvements would you recommend for agency systems 
submitting data to Recovery.gov to meet accountability and transparency 
---------------------------------------------------------------------------
requirements?

A2. We are currently in the process of issuing our first report under 
the Recovery Act. The focus of this report is the steps the 16 states 
and selected localities are taking to comply with federal requirements 
and efficiently and effectively use the influx of the Act's funds. 
Because the IGs are expected to audit federal agencies' operations and 
programs related to the Recovery Act, we have not directly examined 
federal agency systems that submit data to the Recovery.gov web site. 
However, we plan to examine accountability and transparency issues, 
including Recovery.gov web site information, as an element of our 
bimonthly reviews.

Q3.  Is the current presentation of Recovery Act information on the 
agency's web site adequate to meet the Act's requirement for 
transparency? If not, what improvements would you suggest?

A3. Transparency issues related to information on the Recovery.gov web 
site will be an important element of our bimonthly Recovery Act 
reviews. Our first Recovery Act report is focused on the steps the 16 
states and selected localities are taking to comply with federal 
requirements and efficiently and effectively use the influx of the 
Act's funds. [GAO9]Our subsequent reviews will examine the states' use 
of Recovery Act funds, including the level of detail of their 
submissions, and whether web site information is accurate, well-
organized, understandable, and complete.

Questions submitted by Representative Paul C. Broun

Q1.  Please list the top three risks at your agency associated with 
stimulus funding.

A1. Our prior work has identified several areas that deserve special 
attention from federal agency management and the IG's office to ensure 
that funds are put to best use. Specifically, we are concerned about 
risks for (1) new programs that do not have established management and 
internal control activities; (2) existing programs that do not have 
adequate staff to distribute and oversee a significant infusion of 
funds; and (3) fraud, waste, and abuse because billions of dollars are 
going out quickly and eligibility requirements are being established or 
changed.

Q2.  To all panelists, what contracts at your agency are ``mission 
critical?'' That is, if the specific contract were to experience cost-
overruns, schedule delays, or performance problems would it affect the 
mission of the agency?

A2. This question can better be answered by the departmental IGs 
because the Recovery Act has directed the IGs to review the federal 
agencies' related operations and programs and GAO to review the use of 
funds by states and localities. In addition, the Recovery 
Accountability and Transparency Board will help prevent waste, fraud, 
and abuse by reviewing contracts and grants to ensure they meet 
applicable standards, follow competition requirements, and are overseen 
by sufficient numbers of trained acquisition and grants personnel.

Q3.  Where do you believe your office should concentrate its time and 
resources--focusing on high risk programs, or on the most expensive 
programs?

A3. We are particularly concerned about high-risk programs because of 
the potential for fraud or waste that results in little, if any, 
benefit to the taxpayers. Experience tells us that this risk grows when 
billions of dollars are going out quickly and eligibility requirements 
are being established or changed. Accordingly, we plan to focus on new 
programs that lack established policies and procedures for ensuring the 
proper use of Recovery Act funds and existing programs with known 
vulnerabilities that are receiving a significant infusion of funds.

Q4.  Despite campaign promises by the President to not issue signing 
statements, and to ensure whistleblower protections, the President 
recently issued a signing statement that said the following:

         ``Sections 714(1) and 714(2) in Division D prohibit the use of 
        appropriations to pay the salary of any federal officer or 
        employee who interferes with or prohibits certain 
        communications between federal employees and Members of 
        Congress. I do not interpret this provision to detract from my 
        authority to direct the heads of executive departments to 
        supervise, control, and correct employees' communications with 
        the Congress in cases where such communications would be 
        unlawful or would reveal information that is properly 
        privileged or otherwise confidential.''

     How do you reconcile the President's campaign promise with his 
recent signing statement?

          If you believe that these statements are consistent, 
        do you believe they have a chilling effect on whistleblowers?

          What effect will this have on your ability to uncover 
        waste, fraud, and abuse?

A4. While the consistency of the President's campaign promises with the 
quoted signing statement is beyond the scope of GAO's work, we can tell 
you that our ability to uncover waste, fraud, and abuse is unaffected 
by the President's signing statement. GAO has independent authority to 
access information needed for our work under both our organic statute 
and the Recovery Act.
    Under our organic statute, GAO has authority to access information 
needed for the effective and efficient performance of GAO reviews and 
evaluations. Subject to certain limited exceptions, all agencies must 
provide the Comptroller General access to information he requires about 
the duties, powers, activities, organization and financial transactions 
of that agency.\2\ Under section 902 of the Recovery Act, GAO has 
additional authority to examine the records of contractors or their 
subcontractors pertinent to contracts they are awarded from funds made 
available by the Act. GAO may also interview officers and employees of 
such contractors or their subcontractors as well as officers or 
employees of any State or local government agency administering the 
contract, regarding such transactions.
---------------------------------------------------------------------------
    \2\ 31 U.S.C.  716(a), (d).

Q5.  To all panelists, the stimulus bill contains $350 million for the 
---------------------------------------------------------------------------
IG community and GAO to provide oversight.

          What entity will provide oversight of how these funds 
        are spent?

          How can the taxpayers be sure that the IG community 
        and the GAO are spending this money wisely?

A5. The Recovery Act delineates an important set of responsibilities 
for the accountability community to ensure that the Act's $787 billion 
maximizes the benefits to the taxpayers. GAO is charged with reviewing 
the use of funds by selected states and localities, and IGs will audit 
federal agencies' operations and programs. To make the most effective 
use of the accountability community's limited funds and, in particular, 
to avoid duplication of effort, GAO has outreached to each of the 
federal IGs and will continue to coordinate with them in the next years 
as we review Recovery Act activities. We believe that many eyes can 
best ensure that all of the Recovery Act funds are used efficiently and 
effectively. This includes continued oversight by Congressional 
committees, including the Subcommittee on Investigations and Oversight. 
In addition, the House Committee on Oversight and Government Reform has 
oversight responsibility over the Government Accountability Office. GAO 
also has its own Inspector General, recently established as a statutory 
office rather than an administratively created one by the GAO Act of 
2008, who could be requested to investigate GAO's usage of stimulus 
funds.

Q6.  Are you concerned that the Recovery Accountability and 
Transparency (RAT) Board will create a new level of bureaucracy and 
ultimately undermine your independence?

          Does the RAT Board, or anyone in the Administration, 
        have the ability to terminate your investigations?

          What steps are you required to take in order to 
        maintain an investigation if directed to terminate one?

A6. GAO is not concerned that the Recovery Accountability and 
Transparency Board will undermine our independence. The Board does not 
have the ability to terminate our investigations. It must coordinate 
its investigations with the Comptroller General pursuant to section 
1528 of the American Recovery and Reinvestment Act. Furthermore, no one 
in the administration may terminate our investigations because GAO is 
an independent legislative agency.

Q7.  Understanding that coordination is sometimes necessary, IGs should 
not be used as an agency's internal auditor.

          Have you ever been tasked by an agency to do work?

          What was your response?

A7. This question is not relevant to GAO because it is a Congressional 
agency.

Q8.  What lessons can be learned from other initiatives (like the 
Reconstruction in Iraq, Katrina Relief, or the Troubled Asset Relief 
Program) that attempted to balance expediency with accountability?

          Are these lessons currently being included in your 
        oversight plans?

A8. A key lesson learned from our work on disaster relief after 
Hurricanes Katrina and Rita is that agencies sometimes do not focus on 
the importance of preventive controls, including (1) validating data 
used in decision making against other government or third-party 
sources; (2) inspecting whenever possible to confirm information prior 
to payment; (3) conducting system edit checks to identify problems 
before payments are made; and (4) training staff on fraud awareness. In 
addition, we testified in February 2009 that businesses and individuals 
that have been excluded for egregious offenses ranging from national 
security violations to tax fraud have improperly received federal 
contracts and other funds.\3\ Also in February 2009, the National 
Procurement Fraud Task Force published a white paper that identified 
best practices and made recommendations for agencies to consider in 
preventing fraud, waste, and abuse in grants they administer.\4\ These 
recommendations included enhanced certifications, increased training, 
improved communications with grant recipients, increased information 
sharing concerning potential fraud, and rigorous oversight of how grant 
dollars are spent after they are awarded. Our audit approach includes 
verification that states and localities are implementing preventive 
controls.
---------------------------------------------------------------------------
    \3\ GAO, Excluded Parties List System: Suspended and Debarred 
Businesses and Individuals Improperly Receive Federal Funds, GAO-09-
419T (Washington, D.C.: Feb. 26, 2009).
    \4\ National Procurement Fraud Task Force, Grant Fraud Committee, A 
Guide to Grant Oversight and Best Practices for Combating Grant Fraud 
(Washington, D.C.: Feb. 2009).

Q9.  Given that three of your four high-risk programs are in DOE, how 
confident are you that they can manage the creation of a new agency, 
---------------------------------------------------------------------------
ARPA-E?

A9. ARPA-E has several similarities with DOE's innovative technology 
loan guarantee program, one of the four programs that I identified as 
needing special attention. Specifically, we are concerned that because 
ARPA-E is new, DOE has not completed a number of key management and 
internal control activities. As a result, DOE may not be well 
positioned to manage the $400 million in Recovery Act funds to ensure 
that they are effectively and efficiently used with controls to prevent 
fraud or waste.

Q10.  The Secretary of Energy recently stated that he would reinstate 
FutureGen with some modifications. Please explain the risks of going 
forward with FutureGen as originally planned by DOE.

A10. Our February 2009 report found that the former Secretary of Energy 
restructured the original FutureGen project primarily because of 
concerns that DOE was contractually responsible to pay 74 percent of 
the project's rapidly rising costs.\5\ Specifically, we found that the 
FutureGen project was projected to grow from $950 million (in 2004 
dollars) to about $1.3 billion (in 2005 dollars)--an increase of about 
$370 million, or 39 percent. However, because the former Secretary of 
Energy's decision was not based on a systematic and comprehensive 
comparison of the costs, benefits, and risks of the original FutureGen 
versus the restructured FutureGen, we recommended that, before 
implementing significant changes to FutureGen or before obligating 
additional funds for such purposes, DOE prepare a comprehensive 
analysis that compares the relative costs, benefits, and risks of a 
range of options that includes (1) the original FutureGen program, (2) 
incremental changes to the original program, and (3) the restructured 
FutureGen program.
---------------------------------------------------------------------------
    \5\ GAO, Clean Coal: DOE's Decision to Restructure FutureGen Should 
Be Based on a Comprehensive Analysis of Costs, Benefits, and Risks, 
GAO-09-248 (Washington, D.C.: Feb. 2009).

Q11.  The Stimulus bill requires GAO to provide bimonthly reports of 
---------------------------------------------------------------------------
states and localities use of funds.

          How was the decision made to conduct reviews on only 
        16 entities at a time?

          Are you worried that this is insufficient?

A11. We decided to follow 16 states and the District of Columbia over 
the next few years in order to provide an ongoing longitudinal analysis 
of the use of funds under the Recovery Act. We selected these 16 states 
on the basis of outlay projections, percentage of the U.S. population 
represented, unemployment rates and changes, and a mix of states' 
poverty levels, geographic coverage and representation of both urban 
and rural areas. They contain about 65 percent of the U.S. population 
and are estimated to receive about two-thirds of the intergovernmental 
grants funds available through the Recovery Act. The states are 
Arizona, California, Colorado, Florida, Georgia, Iowa, Illinois, 
Massachusetts, Michigan, Mississippi, New Jersey, New York, North 
Carolina, Ohio, Pennsylvania, and Texas. We will also sample localities 
within these states to provide a perspective on the use of Recovery Act 
funds at a local level.
    In addition, we will review the recipient reports from all 50 
states as part of our responsibilities to review these filings. These 
recipient reports are to include information on funds received, the 
amount of recovery funds obligated or expended to projects or 
activities, and the projects or activities for which funds were 
obligated or expended. Depending on our assessments, we may visit 
states other than the 16 core group to review targeted areas.

Q12.  Given the recent scandals with companies misusing recovery funds 
to bestow bonuses to employees, and the lack of oversight that allowed 
such actions to take place, would it be beneficial for Congress to 
``flex'' its oversight responsibilities by significantly increasing the 
number of hearings and other legislative tools to keep a closer eye on 
agencies?

          Or do you feel that a stepped up effort by GAO and 
        the Inspector General offices of the different departments will 
        be able to keep such mismanagement of funding to a minimum?

A12. We believe that Congressional oversight hearings have the salutary 
effect of encouraging all parties involved--federal agencies, State and 
local governments, and the auditors--to redouble their efforts to 
ensure that federal funds are effectively and efficiently spent in 
compliance with laws and regulations.

                              Appendix 2:

                              ----------                              


                   Additional Material for the Record


















































































































FOLLOW THE MONEY, PART II: GOVERNMENT AND PUBLIC RESOURCES FOR RECOVERY 
                             ACT OVERSIGHT

                              ----------                              


                          TUESDAY, MAY 5, 2009

                  House of Representatives,
      Subcommittee on Investigations and Oversight,
                       Committee on Science and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 2:10 p.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Brad 
Miller [Chairman of the Subcommittee] presiding.


                            hearing charter

              SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                     U.S. HOUSE OF REPRESENTATIVES

                       Follow the Money, Part II:

                    Government and Public Resources

                       for Recovery Act Oversight

                          tuesday, may 5, 2009
                          2:00 p.m.-4:00 p.m.
                   2318 rayburn house office building

I. Summary

    The Subcommittee will meet on May 5, 2009, to continue oversight of 
the accountability and transparency provisions in the American Recovery 
and Reinvestment Act (hereafter cited as the ``Recovery Act''). The 
first panel will examine the establishment of the Recovery 
Accountability and Transparency Board, set up under the Act to 
coordinate the efforts underway to measure the outcomes from the 
investment of the Recovery Act's $787 billion. The Board's new Chairman 
and the Acting Comptroller General of the Government Accountability 
Office (GAO) will also discuss what progress has occurred on oversight 
since the Subcommittee's previous hearing in March.
    Witnesses on the second panel have been invited to testify on the 
policies, processes and organizations that will provide the public its 
ability to participate in Recovery Act oversight. With the capabilities 
of the Internet, new channels for gathering information increase the 
opportunity to forestall misuse of government resources as they happen, 
not when they are identified in audits months or years later. The 
Recovery Act calls for citizen involvement; the Subcommittee has asked 
the panel how to assure this happens.

II. Witness List

Panel I

  Mr. Earl Devaney, Chairman, Recovery Accountability and 
Transparency Board

  Mr. Gene Dodaro, Comptroller General of the United States 
(Acting), Government Accountability Office

Panel II

  Dr. Clarence Newsome, President, Shaw University (Raleigh, 
NC), representing the National Association for Equal Opportunity in 
Higher Education

  Dr. Gary Bass, Founder and Executive Director, OMB Watch 
(Washington, DC)

  Dr. Jerry Ellig, Senior Research Fellow, Regulatory Studies 
Program, The Mercatus Center, George Mason University (Arlington, VA)

  Ms. Danielle Brian, Executive Director, Project on Government 
Oversight (Washington, DC)

  Mr. Eric Gillespie, Senior Vice President, Products, 
Technology and Information, Onvia (Seattle, WA)

III. Panel I: Managing the Oversight Corps

    Subtitle B of the Recovery Act's Title XV provides the statutory 
foundation for the Recovery Accountability and Transparency Board, 
established to ``. . . coordinate and conduct oversight of covered 
funds to prevent fraud, waste, and abuse.'' President Obama named Mr. 
Devaney to chair the Board on February 23. Besides Mr. Devaney, the 
Board is made up of ten Inspectors General from federal agencies 
receiving funds in the Recovery Act. Two Board members, the IGs from 
the Departments of Commerce and Energy, testified at the Subcommittee's 
earlier hearing on March 19.
    At that time, the Board had not met; as Mr. Devaney told the 
Committee on Oversight and Government Reform, ``The status of the Board 
is what you might expect just 30 days after the Recovery and 
Reinvestment Act of 2009 was signed into law.'' The Board finally met 
on March 27. Mr. Devaney has been asked to describe for the 
Subcommittee the progress made by the Board in assuming its 
responsibilities.
    In the Recovery Act, Congress explicitly required that grants and 
contracts issued using these funds be awarded using competitive 
procedures and for fixed prices,\1\ as defined in the Federal 
Acquisition Regulation (unless exempted by the Act). This could be an 
item of special concern to agencies under the jurisdiction of the 
Committee, as research and development contracts are regularly awarded 
on a cost-reimbursable basis. The selection of contract type is 
normally a function of how much knowledge the agency has about the 
product or service it intends to buy and how confident it is that its 
needs will not change during the life of the contract. For NASA, which 
received $400 million in the Recovery Act to support the development of 
the Space Shuttle's replacement vehicles, this means that contracts 
using these funds have a higher likelihood of drawing Board attention. 
On the other hand, research grants issued by the National Science 
Foundation are normally awarded after undergoing merit review and are 
issued for fixed amounts. Thus, the NSF Inspector General is less 
likely to find this to be an issue. The Board is specifically tasked to 
review agency success at accomplishing these goals. The Board must also 
review whether the agencies properly report information on grants and 
contracts and identify what will be delivered by the recipient.
---------------------------------------------------------------------------
    \1\ P.L. 111-5, Section 1554.
---------------------------------------------------------------------------
    The Board will also have the responsibility to examine Recovery Act 
spending to detect ``. . . wasteful spending, poor contract or grant 
management, or other abuses . . ..'' \2\ While the Board has the 
authority to initiate its own audits, the Act clearly expects the Board 
to rely on the Inspectors General for the bulk of audit and 
investigation work. The Board will likely find its most important 
contributions to be distributing the workload most effectively and 
identifying topics that need immediate attention. Insight on specific 
Recovery Act projects, however, will come from direct work by an agency 
inspector general or cooperating State or local oversight offices.
---------------------------------------------------------------------------
    \2\ Section 1523(a)(2)(C).
---------------------------------------------------------------------------
    ``The President and the heads of federal departments and 
agencies,'' says the Act, ``shall manage and expend the funds made 
available in this Act so as to achieve the purposes specified . . ., 
including commencing expenditures and activities as quickly as possible 
consistent with prudent management.'' \3\ Mr. Devaney and Mr. Dodaro 
would likely agree with the witnesses at the Subcommittee's hearing in 
March that satisfying these simultaneous mandates puts a spotlight on 
the performance of the program managers and contracting officers 
directly managing the funds. As the government's representatives 
closest to the actual performance of a particular grant or contract, 
they have an early opportunity to prevent wasteful spending. They can 
just as easily be the source of the ``poor contract or grant 
management'' that the Board will seek out. Members expressed concerns 
numerous times about this issue at the March hearing.
---------------------------------------------------------------------------
    \3\ Section 3(b).
---------------------------------------------------------------------------
    In the course of its activities, the Board will collect information 
particularly useful in helping Congress gauge the severity of this 
problem. The Board will review whether agencies have an adequate number 
of people to determine what the agency needs, conduct competitions that 
result in maximum value for the money, and then manage the grantee or 
contractor to produce the expected outcome at the desired time and for 
the agreed cost.\4\ What training these people receive will also be 
scrutinized so that gaps in institutional knowledge and preparedness 
can be closed. This information will also be valuable as Congress 
considers reform of government acquisition generally.
---------------------------------------------------------------------------
    \4\ Section 1523(a)(2)(D) and (E).
---------------------------------------------------------------------------
    Central to the Board's interaction with the public is the 
Recovery.gov web site, established by Section 1526 of the Recovery Act. 
The goal is to produce ``a user-friendly, public-facing web site to 
foster greater accountability and transparency in the use of covered 
funds.'' \5\ The statute has specific requirements for the types of 
data that are to be made available, such as the agency plans for 
distributing Recovery Act funds to be provided May 1.
---------------------------------------------------------------------------
    \5\ Section 1526(a).
---------------------------------------------------------------------------
    The Recovery Act defines an expansive role for the public in 
oversight of Recovery Act activities, and Recovery.gov should be viewed 
as the data well that citizens can draw on to obtain source material. 
The Act requires the web site to ``. . . provide a means for the public 
to give feedback on the performance of contracts that expend covered 
funds,'' and in Section 1514 of the Act Inspectors General are directed 
to:

         ``. . . review, as appropriate, any concerns raised by the 
        public about specific investments using funds made available in 
        this Act. Any findings of such reviews not related to an 
        ongoing criminal proceeding shall be relayed immediately to the 
        head of the department or agency concerned.''

    Whether Recovery.gov is able to provide the support to interested 
citizens desiring to offer such support for oversight has been 
questioned in the early days of Recovery Act implementation. The 
Subcommittee has asked Mr. Devaney to discuss the Board's plans for 
management of the web site; he will likely refer to the online forum 
the National Academy on Public Administration conducted for the Board 
this week seeking suggestions for web site improvements. Mr. Devaney is 
likely to stress for the Subcommittee that Recovery.gov is a work in 
progress and that improvements to the site will likely be made 
throughout the life of the Board. The complexity of the task, involving 
the collection of data from multiple sources, assuring the quality of 
that data, and presenting it in comprehensible terms to the public, is 
formidable.
    In the Recovery Act, the Government Accountability Office is 
focused more on how states, cities and other localities handle their 
allocations of Recovery Act resources. However, in the course of its 
regular work, GAO is likely to discover problems with the use of 
Recovery Act funds. The public is also likely to ignore the 
distinctions the Recovery Act makes in assigning oversight 
responsibilities and provide GAO with information that will need to be 
provided to the Board and Inspectors General for action. Thus the 
cooperation between GAO and the Board will be an important aspect in 
promoting Recovery Act oversight.
    The Subcommittee has asked Mr. Dodaro to follow up on GAO's 
testimony at the Subcommittee's first hearing. GAO recently testified 
on the ability of Grants.gov, the web site that is supposed to allow 
application for any federal grant from one site, to handle the 
increased workload generated by the Recovery Act. In its first report 
examining implementation of the Act by the States, GAO reports on 
concerns expressed by officials that lack of resources may hamper the 
submission of data sufficient to meet the accountability and 
transparency requirements of the Act. Given GAO's responsibility for 
regular oversight of government activities, he was specifically asked 
for comments on public contributions to assist with oversight and on 
whistleblower protection. The Recovery Act offered new protection to 
whistleblowers in State and local governments and employed by 
contractors, and it is the responsibility of the Board and the 
Inspectors General to provide those protections. Mr. Dodaro should be 
able to provide additional insights on the issues Mr. Devaney now 
faces.

IV. Panel II: Public Perspectives on the Recovery Act

    Witnesses on Panel II have been asked to discuss several different 
aspects examining how the Recovery Act is working or will work. This 
begins with the most basic question--how does someone who might benefit 
from Recovery Act funds learn how to compete for them?--to assuring 
that the oversight mechanism set up in the Act will improve our ability 
to ``follow the money'' and determine if it has contributed to ``. . . 
provid[ing] investments needed to increase economic efficiency by 
spurring technological advances in science and health . . .'' along 
with the other overall goals of the Act.
    The Committee has continuing interests in the health of the 
American university system, driven by the need for educated citizens 
and the contributions colleges and universities make to economic 
development. Members of the Committee worked to include significant 
funding increases for science and technology programs in the Recovery 
Act. While the Recovery Act itself and the total level of resources 
available received wide publicity, potential beneficiaries have little 
assistance in actually obtaining funds if they are unfamiliar with the 
often opaque methods by which agencies conduct competitions and award 
grants and contracts. Members of the Committee also promote improved 
educational opportunities for communities that are hampered by historic 
barriers to top-quality education. The Subcommittee has therefore 
invited Dr. Clarence Newsome, representing the institutions of the 
National Association for Equal Opportunity in Higher Education, to 
describe their efforts to take advantage of the Recovery Act's 
opportunities to fill immediate and long-term needs for improvements at 
their campuses.
    Dr. Bass has been asked to discuss the broadest set of oversight 
issues. If the Recovery Act is an experiment in encouraging information 
flow so that we can detect problems with federal spending earlier, is 
the initial structure actually accomplishing that goal? If the Act is 
trying to harness the collective knowledge that citizens may have about 
the particular projects being funded with Recovery Act dollars, can 
they find information on those projects and then easily find the proper 
person who needs to know that the funds are not being used as described 
by the contract or grant? Dr. Bass helped establish the Coalition for 
an Accountable Recovery, which has argued that the government does not 
collect enough information to provide the accountability and 
transparency sought by the Recovery Act. Unless states and localities 
present data on their use of Recovery Act funds, the ability to detect 
trouble may be lost.
    Simply implementing the Recovery Act itself is also a work in 
progress. Guidance from the Office of Management and Budget to the 
agencies has evolved. Given Dr. Bass's experience at OMB Watch, the 
Subcommittee has asked for his comments on how accountability and 
transparency should be accomplished; he should also be able to comment 
on what the results of this experiment will mean for the regular 
operations of the Federal Government.
    Dr. Ellig, of the Mercatus Center, is testifying at the suggestion 
of Dr. Broun, the Ranking Member. He has interests similar to those 
discussed by Dr. Bass, and will also discuss criteria for measuring the 
Act's performance. Dr. Ellig should also provide comments on the 
guidance issued to the agencies by the Office of Management and Budget 
on subjects such as counting the number of jobs produced or preserved 
by Recovery Act investments. Dr. Ellig has extensive knowledge about 
the Government Performance and Results Act of 1993, and helps to 
prepare the Mercatus Center Annual Performance Report Scorecard, which 
evaluates the annual agency GPRA Performance Reports for transparency 
and documentation of program outcomes. [While Congress spent a lot of 
effort on GPRA-related matters in the 1990s, the Bush Administration 
implemented a new initiative, the PART Process (Program Assessment and 
Results Tool), that largely supplanted GPRA. OMB managed PART and 
neither Congress nor the White House seemed to find any interest in 
GPRA plans or results after the initiative of PART by then-OMB Director 
Mitch Daniels.]
    Whistleblowers will be critical sources of information when 
conducting oversight of Recovery Act projects. The Act establishes new 
protections for whistleblowers working in State and local 
organizations, and for employees working for recipients of grants and 
contractors. The law requires the appropriate Inspector General to 
investigate a case unless it is the subject of another administrative 
or judicial process, does not involve Recovery Act funds or is 
determined to be frivolous. The Inspector General involved has 180 days 
to prepare a final report that goes to the whistleblower, that person's 
employer, the head of the funding agency and the Board. Because the Act 
has extended these protections to non-Federal employees, there may be 
new and unique issues that arise if it becomes necessary for an 
Inspector General to enforce these powers. The Subcommittee has asked 
Danielle Brian, Executive Director of the Project on Government 
Oversight, to evaluate the new protections. The Subcommittee asked for 
her comments on the difficulties that may arise, and for advice on how 
to let prospective whistleblowers know of their rights under the Act.
    Developing and managing Recovery.gov will pose challenges for the 
Board. To offer some insight on the extent of that challenge, the 
Subcommittee will receive testimony on a private-sector equivalent, 
Recovery.org. This web site was developed by Onvia, a Seattle company 
whose regular business involves identifying and tracking government 
procurement opportunities, and alerting private companies interesting 
in bidding. After passage of the Recovery Act, the company decided to 
use its capabilities to develop a tracking site for use by the public.
    The Subcommittee has invited Eric Gillespie, the company's Senior 
Vice President for technology, to describe what was required to prepare 
the site, where to find the data for display, and how to present data 
for different audiences with different interests seeking different 
information from the site. Onvia has identified some 90,000 
``purchasing units'' across the U.S. that generate procurement 
opportunities. Each has unique rules for how funds should be spent and 
requirements for transparency. While Mr. Bass's coalition argues that 
data on spending should be provided down to contractor level, Mr. 
Gillespie's experience indicates this cannot be achieved overnight--if 
at all. Not all jurisdictions make their data accessible on the net to 
outside organizations. Changes must be tracked sometimes at hourly 
intervals, as it can't be guaranteed that postings will be permanent. 
States and localities may not have funds to collect, process and 
provide this data; Chairman Towns of the Oversight and Government 
Reform Committee is considering legislation to assist the states with 
funds to address this issue. While the Act provides the Board with $84 
million to fund its operations, building the data infrastructure it 
authorizes will take that and more.
    The Board has a statutory termination date of September 30, 2013, 
and Mr. Devaney is considering what will be left behind when the Board 
is done. Some agencies are already viewing their work overseeing 
Recovery Act activities as a new model for managing regular 
appropriations. The database behind Recovery.gov will embody many 
lessons learned about understanding where the Federal Government's 
resources go and how they affect the economy. It may become possible to 
shorten the time to determine the effectiveness of federal spending in 
order to react quickly to failure or reinforce success. The legacy of 
the Recovery Act may go beyond the physical infrastructure and economic 
benefits to include new ways to illuminate government performance for 
citizens.
    Chairman Miller. The meeting will come to order.
    We are in the middle of a recession. We are trying to 
figure out how to spend $500 billion quickly in a way that 
stimulates the economy as much as possible, and we are trying 
to do with a minimum of waste, fraud, and abuse. All that is 
important, but there is a resolution on the Floor honoring my 
alma mater for winning the national men's basketball 
championship. I hope you understand the priority there.
    I do welcome everyone to the Committee's second hearing on 
oversight related to the American Recovery and Reconstruction 
Act. These hearings are titled ``Follow the Money,'' after the 
character in the movie and the book, ``All the President's 
Men,'' the ``Deep Throat'' character who told Bernstein and 
Woodward to trace the money back to find out where the 
corruption began. Now we are at the front end trying to figure 
out where the money is going to go.
    And we hope we will not end up with anything as sordid as 
that was, but perhaps by starting this effort and knowing at 
the outset the care that must be taken we can avoid it.
    Our hearing in March featured inspectors general describing 
their efforts to establish the oversight mechanisms called for 
in the Act, and now we will hear from Mr. Devaney, Chairman of 
the new Recovery Accountability and Transparency Board. He has 
before him the daunting task of sitting at the top of the 
Recovery Act oversight pyramid. He has to marshal the 
capabilities of the inspectors general devoted to Recovery Act 
oversight, coordinate their deployment across multiple 
agencies, cooperate with opposite numbers in cities and states, 
share all the lessons learned, and run a data management 
operation trying to turn a massive amount of information into 
answers to the questions we all have.
    Are we improving the economy? How many people have we put 
to work? Or how many have--how many jobs have we saved? He was 
not able to testify in March at our first hearing, but he said 
that he would appear as soon as possible, and he has proven 
good to that word, and we welcome him today.
    We also welcome General Gene Dodaro, head of the Government 
Accountability Office, GAO. His job description is very similar 
to Mr. Devaney's except that his jurisdiction covers all of 
Federal Government. Mr. Dodaro will bring us up to date on the 
progress our science agencies have made in using their Recovery 
Act appropriations.
    GAO has also issued the first of its reports examining 
State and local use of Recovery Act funds. It mentions the loss 
of funding and staff at stake in local oversight organizations 
at the same time that we are asking for the State and local 
governments to play a significant role in monitoring Recovery 
Act projects. That should concern us, as it will directly 
affect our ability to build a system that can follow a Recovery 
Act dollar as it leaves our Treasury and then goes, to use one 
example, to the Department of Transportation, from there to the 
Department of Transportation in North Carolina, and eventually 
becomes asphalt paving, a part of the Raleigh Beltline, 
Interstate 440. It seems like a simple task, but Dr. Bass and 
Mr. Gillespie before explained that there remain a number of 
issues, and Mr. Devaney will have to deal with these issues.
    Dr. Ellig will also raise some questions about the methods 
of reporting performance as Recovery Act initiatives advance. 
Traditionally oversight has been an after-the-fact focus, when 
someone has done wrong, and by the time we get here, the money 
is already gone, and there is nothing much we can do about it 
except scold the people who were responsible. Perhaps provide a 
good deterrent for others to make the same mistakes.
    But with the Recovery Act we are trying to set out a new 
approach, giving the people, all the American people, the 
opportunity to look at the raw data, or as raw as possible, and 
bring to bear their own experience, their own experience and 
some knowledge from places we may not have expected, to help us 
avoid--spot the danger ahead. We are in essence deputizing the 
entire American citizenry to help with the oversight of this 
program.
    A whole industry is growing up around the release of 
National Weather Service data benefiting other important 
sectors of the economy like agriculture and utilities. That 
model works because the Weather Service takes seriously its 
responsibility to provide high-quality data, check for accuracy 
and integrity, and we need Recovery Act data to do the same 
thing.
    Very often discovery of the misuse of public resources 
cannot happen without the willing of someone to step forward to 
say something is wrong, to blow the whistle. That can be a 
life-altering decision for those who do blow the whistle, and 
there is pressure to avoid damaging the organization of which 
they are a part, sometimes intense pressure. The Recovery Act 
adds to the protections that whistleblowers get outside of the 
Federal Government because those folks will be perfectly 
positioned to tell us if something is going wrong.
    We had--have to make sure the potential whistleblowers know 
that those protections will be effective and that they are safe 
to do their duty to step forward and tell us that something is 
wrong. Ms. Brian has long experience with those issues and will 
help us with that.
    I have a special welcome for one of our witnesses today. 
Dr. Clarence Newsome, the President of Shaw University in 
Raleigh. Dr. Newsome has told me for some time of his concern 
that--for smaller institutions like his it is--for them it is 
not easy to find out about opportunities in the Recovery Act, 
and I have heard the same thing from elected officials in small 
towns in my district, telling me the same thing, trying to 
figure out a way to get access to some of the funds for worthy 
projects in their own communities.
    Funds in the Recovery Act are supposed to be distributed 
based upon competition so that all the best ideas should be in 
the running, but as we try to speed those funds into the 
economy, I think we are all concerned that there is a fair 
chance that less competitive projects don't win out by default 
because they have access to better information.
    Every August, Washington goes into a slumber known as the 
August recess. Dr. Broun and Ms. Dahlkemper and I will not 
sleep through August. We will be home in our districts talking 
to people. There is our chance to find out how Congress is 
doing, how we are doing, and with this hearings, with these 
hearings we want to make sure that we can answer questions 
about Recovery Act.
    Again, we are trying to spent $500 billion or so--the total 
amount of recovery is closer to 800 billion, but about 600--
more than 60 percent of it is spending as opposed to tax cuts, 
and we are trying to spend it quickly and at the same time 
spend it efficiently without waste or abuse, which is no small 
task.
    And with that I now recognize Dr. Broun, the Ranking 
Republican on the Committee.
    [The prepared statement of Chairman Miller follows:]
               Prepared Statement of Chairman Brad Miller
    I'd like to welcome everyone to the Subcommittee's second hearing 
on oversight related to the American Recovery and Reconstruction Act. 
These hearings are titled, ``Follow the Money.'' We are, of course, 
borrowing Hal Holbrook's classic coaching, in his role as ``Deep 
Throat'' from the movie All the President's Men, on how Bernstein and 
Woodward could reveal the corruption at the heart of the Watergate 
scandal.
    Let us hope we never reveal anything that sordid in this effort. 
However, the Recovery Act will spend $787 billion in public funds, a 
sum that makes ``following the money'' important.
    Our hearing in March featured Inspectors General describing their 
efforts to establish the oversight mechanisms called for in the Act. 
Now we will hear from Mr. Devaney, Chairman of the new Recovery 
Accountability and Transparency Board. He has a daunting task seated at 
the top of the Recovery Act oversight pyramid. He has to marshal the 
capabilities of the Inspectors General devoted to Recovery Act 
oversight, coordinate their deployment across multiple agencies, 
cooperate with opposite numbers in states and cities, share all the 
lessons learned--and run a data-management operation trying to turn a 
massive amount of information into answers to the questions we all 
have: ``Are we improving the economy,'' and ``how many people have we 
put to work?'' He wasn't able to testify in March but promised to 
appear later. He is a man of his word.
    We also welcome Comptroller General Gene Dodaro, head of the 
Government Accountability Office (GAO). His job description is very 
similar to Mr. Devaney's except that his jurisdiction covers all of the 
Federal Government. Mr. Dodaro will bring us up to date on the progress 
our science agencies have made in using their Recovery Act 
appropriations. GAO has also issued the first of its reports examining 
State and local use of Recovery Act funds. The report points out the 
loss of funding and staff at State and local oversight organizations at 
the same time we are asking for their help monitoring Recovery Act 
projects.
    This should concern us, as it will directly affect our ability to 
build the system that can follow a Recovery Act dollar as it leaves the 
Treasury, then goes (for example) to the Department of Transportation, 
from there to the transportation department of the State of North 
Carolina, and then to pay for the asphalt in the machine filling 
potholes on Interstate 440 near Raleigh. It seems a simple task, but 
Dr. Bass and Mr. Gillespie will explain that there remain a number of 
issues Mr. Devaney will have to deal with. Dr. Ellig will also raise 
some questions about the methods for reporting performance as Recovery 
Act activities advance.
    Traditionally, oversight has had an after-the-fact focus here in 
Washington. By the time we learn what went wrong, the money's already 
gone and we have nothing to show for it. With the Recovery Act, we're 
trying out a new approach: give many people the opportunity to look at 
a data set and bring to bear their own expertise and experience, and 
some unanticipated knowledge may be revealed or unexpected danger 
avoided.
    A whole industry has grown up around the release of National 
Weather Service data, benefiting other important sectors of the economy 
like agriculture and utilities. But that model works because the 
Weather Service takes seriously its responsibility to provide high-
quality data, checked for accuracy and integrity. We will need that for 
Recovery Act data as well.
    Very often, discovery of the misuse of public resources cannot 
happen without the willingness of one person to step forward and say, 
``something's wrong.'' This can be a life-altering decision, and the 
pressure to avoid damaging an organization can be intense. The Recovery 
Act adds new protections for whistleblowers outside the Federal 
Government, because they will be perfectly placed to see what's 
happening after funds begin flowing within the grant or contract. Now 
we have to make people believe the protections will actually work. Ms. 
Brian has long experience with these issues to share with us here.
    I have a special welcome for one witness, Dr. Clarence Newsome, the 
president of Shaw University in Raleigh, North Carolina. Dr. Newsome 
has been telling me of his concern that for smaller institutions such 
as his, it is not easy to learn about the opportunities in the Recovery 
Act. I've also had elected officials in some of the small towns in my 
district telling me similar stories.
    Funds in the Recovery Act are supposed to be distributed based on 
competition, so all the best ideas should be in the running. As we also 
try to speed these funds into the economy, I'm concerned that we may 
not give some folks a fair chance, and that some other less-competitive 
projects will succeed by default.
    Every August, Washington D.C. goes into a slumber known as August 
recess. But for Member's themselves, August is far from a recess or 
vacation. That is the month that I, and I'm sure every other Member of 
this committee, go home, talk to my constituents and ask the question, 
``how are we doing? Is Congress doing what it needs to do for you''?
    With these hearings, we're making sure we can answer those 
questions, with regard to the Recovery Act. Again, I'd like to thank 
everyone for joining us today, and I now recognize the Ranking Member, 
Dr. Broun, for his opening statement.

    Mr. Broun. Thank you, Mr. Chairman. Let me welcome our 
witnesses here today. I think I shook hands with the two in the 
first panel. I apologize for not having shook hands with the 
other witnesses, but welcome. We are glad to have you.
    This is the second hearing that this committee has held on 
this very important topic, the Stimulus Act oversight. While it 
is no secret that my colleagues on this side of the desk and I 
voted against the stimulus bill, this committee does have an 
obligation to make sure that if taxpayers' money is going to be 
spent, that it be done appropriately.
    As I said at the previous hearing, the identifying of 
waste, fraud, and abuse is a non-partisan endeavor. In addition 
to providing oversight of stimulus funding, it is also 
important for Congress to accurately assess the effectiveness 
of the Act by using metrics to track success and evaluate 
outcomes. Without this Congress is simply spending money based 
on evaluations just as random as how to determine the ultimate 
funding level for the Act.
    Like the TARP bail-out, funding levels seem to have been 
chosen arbitrarily as if drawn from a hat. Presumably the 
anticipated results were as well. The President advertised 3.5 
million jobs as a result of this Act, yet I am not sure how 
many folks will be able to explain where that number came from 
or how it will be ultimately verified. Perhaps it came from the 
same hat the funding level was pulled from.
    The National Bureau of Economic Research, the group of 
economists tasked with determining the start and end of 
economic downturns, announced that December 2007 was the start 
of the current recession. Their research also indicated that 
economic downturns have usually lasted between six and sixteen 
months since the Great Depression.
    Take into consideration that most of the stimulus spending 
won't occur until after 2010, and that the CBO determined that 
the Stimulus Bill will actually decrease gross domestic product 
in the out years by crowding out private investment. One has to 
wonder what we are doing for this--what we are doing this for. 
Our children and grandchildren who ultimately are going to pay 
for this deserve an answer.
    The stimulus bill put taxpayers on the line for $3.27 
trillion when you add debt servicing and account for program 
extensions. Under the Obama budget the national debt will 
double in five years and triple in ten. That is outrageous. Add 
to that the revelation that the Federal Government has already 
run out of money halfway through this fiscal year, and we have 
a recipe for disaster.
    Whether or not you agree with the underlying Act, we still 
have to make sure that the government is capable of spending 
this money appropriately, with as little waste, fraud, and 
abuse as is possible and in a manner that directly benefits our 
country. In order to determine if the Act does, indeed, benefit 
the Nation, we need to clarify--we need to clearly define 
metrics for this success.
    Simply put, the American people need to know what they got 
for their money. Since the stimulus bill was sold as a means to 
jump-start our economy and create jobs, it is important to 
identify baselines, track progress, and evaluate whether those 
outcomes were the result of a stimulus act or by other means.
    On today's second panel we will hear from outside groups 
who can contribute greatly to ensuring that the funds are spent 
appropriately in a transparent and accountable manner. With 
agencies, inspector generals, OMB, GAO, and the RAT Board, and 
Congress, overwhelmed by the size of the spending, everyday 
citizens and outside groups will prove to be critical in 
ferreting out waste, fraud, and abuse.
    That can also help evaluate not only the effectiveness of 
the spending, but also whether the Administration has followed 
through on its ambitious promise of transparency and 
accountability.
    In addition to the witnesses appearing before us, I would 
also like to include in the written record a letter from the 
Americans for Tax Reform. Their letter clearly highlights the 
fallacy of government wealth creation, concerns with employment 
metrics, and also some of the challenges associated with 
transparency and accountability.
    Thank you, Mr. Chairman. I look forward to the witnesses' 
testimony and yield back the rest of my time.
    [The prepared statement of Mr. Broun follows:]

           Prepared Statement of Representative Paul C. Broun

    Thank you, Mr. Chairman. Let me welcome our witnesses here today, 
and thank them for attending. This is the second hearing that this 
committee has held on a very important topic--Stimulus Act oversight. 
While it's no secret that my colleagues on this side of the dais and I 
voted against the stimulus bill, this committee does have an obligation 
to make sure that if taxpayer money is going to be spent that it be 
done appropriately. As I said at the previous hearing, identifying 
waste, fraud, and abuse is a nonpartisan endeavor.
    In addition to providing oversight of stimulus funding, it is also 
important for Congress to accurately assess the effectiveness of the 
Act by using metrics to track success and evaluate outcomes. Without 
this, Congress is simply spending money based on evaluations just as 
random as how it determined the ultimate funding level for the Act.
    Like the TARP bail-out, funding levels seem to have been chosen 
arbitrarily as if drawn from a hat. Presumably, the anticipated results 
were as well. The President advertised 3.5 million jobs as a result of 
this Act, yet I'm not sure how many folks will be able to explain where 
that number came from or how it will ultimately be verified. Perhaps it 
came from the same hat the funding level was pulled from.
    The National Bureau for Economic Research (the group of economists 
tasked with determining the start and end of economic downturns) 
announced that December 2007 was the start of the current recession. 
Their research also indicated that economic downturns have usually 
lasted between six and sixteen months since the Great Depression. Take 
into consideration that most of the stimulus spending won't occur until 
after 2010, and that the CBO determined that the stimulus bill will 
actually decrease gross domestic product in the out-years by crowding 
out private investment, and one has to wonder what we are doing this 
for. Our children and grandchildren, who ultimately are going to pay 
for this, deserve an answer.
    The stimulus bill put taxpayers on the line for $3.27 trillion when 
you add debt servicing and account for program extensions. Under the 
Obama budget, the national debt will double in five years and triple in 
ten. Add to that the revelation that the Federal Government has already 
run out of money half way through this fiscal year, and we have a 
recipe for disaster.
    Whether or not you agree with the underlying Act, we still have to 
make sure that the government is capable of spending this money 
appropriately, with as little waste, fraud, and abuse as possible, and 
in a manner that directly benefits our country. In order to determine 
if the Act does indeed benefit the Nation, we need to clearly define 
metrics for its success. Simply put, the American people need to know 
what they got for their money. Since the stimulus bill was sold as a 
means to jump-start our economy and create jobs, it is important to 
identify baselines, track progress, and evaluate whether those outcomes 
were a result of the Stimulus Act, or by other means.
    On today's second panel we will hear from outside groups who can 
contribute greatly to ensuring that the funds are spent appropriately 
in a transparent and accountable manner. With Agencies, Inspector 
Generals, OMB, GAO, the RAT Board, and Congress overwhelmed by the size 
of the spending, everyday citizens and outside groups will prove to be 
crucial in ferreting out waste, fraud and abuse. They can also help 
evaluate not only the effectiveness of the spending, but also whether 
the Administration has followed through on its ambitious promise of 
transparency and accountability.
    In addition to the witnesses appearing before us, I would also like 
to include in the written record a letter from the Americans for Tax 
Reform. Their letter clearly highlights the fallacy of government 
wealth creation, concerns with employment metrics, and also some of 
challenges associated with transparency and accountability.
    Thank you, Mr. Chairman. I look forward to the witnesses testimony 
and yield back my time.

    [The information follows:]
    
    
    
    
    
    
    
    

    Chairman Miller. Thank you, Dr. Broun. If you could attach 
that letter to your testimony, it can be part of the record.
    Mr. Broun. Thank you, sir. Appreciate it.
    Chairman Miller. And without objection, we will take 
opening statements submitted by other Members to include in the 
record. It is so ordered.

                                Panel I

    Chairman Miller. It is now my pleasure to introduce our 
first panel of witnesses, although I have largely introduced 
them already in my opening statement.
    Mr. Earl Devaney is the Chairman of the Recovery 
Accountability and Transparency Board established by H.R. 1 and 
is formerly the Inspector General of the Department of the 
Interior.
    Mr. Gene Dodaro is the Acting Comptroller General of the 
United States Government Accountability Office, the GAO.
    As our witnesses should know, you have five minutes for 
your spoken testimony. Written testimony will be included in 
the record for the hearing. When you have completed your spoken 
testimony, we will begin with questions, and we will alternate 
with each Member having five minutes to question the panel.
    It is the practice of this committee or the Subcommittee to 
receive testimony under oath. Do either of you have any 
objections to taking an oath? The record can reflect that 
neither did. You also have the right to be represented by 
counsel. Do either of you have counsel here? And the witnesses 
both responded no. We ask you these questions to put you at 
ease for your testimony.
    If you would now please stand and raise your right hand. Do 
you swear to tell the truth and nothing but the truth? The 
record should reflect that both witnesses did take the oath.
    We will now start with Mr. Devaney. Mr. Devaney, you may 
begin.

     STATEMENT OF MR. EARL E. DEVANEY, CHAIRMAN, RECOVERY 
             ACCOUNTABILITY AND TRANSPARENCY BOARD

    Mr. Devaney. Mr. Chairman, Ranking Member Broun, and 
Members of the Subcommittee, I want to thank you for the 
opportunity to appear before you today to discuss the efforts 
and progress of the Recovery Board. My testimony today will 
address the current status and mission of the Board, and after 
I make my opening remarks, I will be glad to answer any 
questions.
    Mr. Chairman, the members of the Board and I view the Board 
as having a duel mission. First, the Board is responsible for 
establishing and maintaining a web site; the purpose of which 
is not only to foster historic levels of transparency of 
Recovery funds but to do so in a user-friendly way.
    Second, the Board will coordinate and conduct oversight of 
Recovery funds to help minimize fraud, waste, or mismanagement. 
I am pleased to tell you that the Board continues to advance 
its mission of accountability and has recently taken several 
important steps to achieve its goal of an unprecedented level 
of transparency of recovery funds.
    With respect to the accountability mission, the Board has 
formed a Recovery funds working group. Unlike the Board, which 
is by law composed of ten specific IGs and a chairperson, the 
working group was created to foster participation and input 
from all 28 IGs that oversee agencies receiving Recovery funds. 
The working group is co-chaired by the Department of 
Transportation's IG and a former IG who is on the Board's 
staff. The working group has already identified a number of 
projects such as creating a Recovery audit work plan, 
suggesting ways to improve the single audit process, and 
identifying high-risk programs in the agencies.
    Beyond the Federal Government IG community, the Board has 
interacted with many others involved in the oversight of 
recovery funds. As a part of its initial outreach the Board's 
procurement compliance staff is meeting with senior procurement 
executives from each agency receiving funds. The Board's staff 
has also developed a procurement checklist to assist federal 
agencies charged with spending recovery funds. It is our hope 
that this type of agency outreach can help prevent fraud, 
waste, and mismanagement of recovery funds before it happens.
    The Board is also reaching out to assist states with their 
new Recovery Act responsibilities. This week, for example, I am 
hosting a visit from a new Recovery IG of California, a state 
that will be receiving more than $45 billion in Recovery Act 
funds. I will be introducing her to the IGs who are overseeing 
monies headed for California, the Board staff, and the Recovery 
teams at OMB and GAO. I hope to host similar meetings with 
oversight officials from other states and cities in the future.
    Last week I spoke, as I have several times before, at a 
meeting of high-level State officials who convened in 
Washington to discuss Recovery fund implementation issues. In 
addition, on May 20 I will be speaking to a gathering of State 
IGs in Orlando. On each of these occasions I deliver the 
message that the Board is here to assist them with their 
oversight, and they should feel free to tell us about any help 
that they may need.
    In order to better focus and utilize its resources, the 
Board has formed two committees; one dedicated to the Board's 
accountability mandate and the other to the Board's continuing 
development of Recovery.gov. Each committee is currently 
composed of three Board members. These committees meet in 
addition to the regular Board meetings and then report back to 
the entire board on the status of these critical initiatives, 
as well as giving recommendations for moving forward.
    The Board's accountability committee, for instance, will 
discuss strategies for not only receiving reports of fraud, 
waste, and mismanagement, and referring them to the appropriate 
IG, but also analyzing and developing reports in light of 
available open-source data. These reports will make the Board's 
referrals more value added for the IGs and will also contribute 
to risk-based predictions about potential fraud.
    On the IT side the Board's Recovery.gov committee is 
working to provide strategic direction on an entire range of IT 
efforts that are before the Board.
    Mr. Chairman, it is important to remember that the creation 
of the web site is an involving process, with multiple phases. 
It is not a single event. Now that the first phase of getting 
Recovery.gov is up and running has ended, we are moving quickly 
to implement the second phase of development. The Board is 
beginning to manage the web site's design and content. OMB will 
still retain responsibility for the reporting guidance and the 
verification of the data, and GSA will continue to host the web 
site and will work with the Board to collect and store the 
data.
    I am confident that this division of labor will provide the 
best opportunity to maximize Recovery.gov's use as a 
transparency and accountability tool, and I am equally 
confident that we will have the opportunity to achieve 
unparalleled citizen participation.
    On the subject of citizen participation, we also hope to 
employ the creative and innovative ideas the public may have 
for the future of Recovery.gov. The Board just this past week 
hosted an electronic town hall with NAPA and OMB, designed to 
engage the public recipients and IT professionals and our State 
and local and tribal partners.
    While my impression was that we would get a high level of 
participation, the overwhelming response to our electronic town 
hall surpassed even my wildest expectations. At the end of this 
event the site had received well over 4.2 million hits, over 
1,800 citizens had taken the time to register online, and we 
feel we have close to 550 solid ideas. NAPRA is now in the 
process of assembling and analyzing these ideas which will then 
allow us to move quickly to a competitive process for vendor 
selections.
    Mr. Chairman, I think I have run out of time, so why don't 
I just stop there because I think the questions are going to be 
more informative.
    [The prepared statement of Mr. Devaney follows:]

                 Prepared Statement of Earl E. Devaney

    Mr. Chairman and Members of the Subcommittee, I want to thank you 
for the opportunity to appear before you today to discuss the efforts 
and progress of the Recovery Accountability and Transparency Board (the 
Board). As you know, the President recently appointed me Chairman of 
that Board, which was established by the American Recovery and 
Reinvestment Act of 2009 (the Recovery Act). My testimony today will 
address the current status and mission of the Board, and after I make 
my opening remarks, I will be glad to answer any questions you have for 
me.
    The Members of the Board and I view the Board as having a dual 
mission. First, the Board is responsible for establishing and 
maintaining a web site, the purpose of which is not only to foster 
historic levels of transparency of Recovery Act funds but to do so in a 
user-friendly manner. Second, the Board will coordinate and conduct 
oversight of Recovery Act funds to help minimize fraud, waste or 
mismanagement. I am pleased to tell you that the Board continues to 
effect its mission of accountability and has recently taken several 
important steps to achieve its goal of unprecedented transparency of 
Recovery Act funds.
    With respect to our accountability mission, the Board has formed a 
Recovery Funds Working Group. Unlike the Board, which by the Recovery 
Act's terms is composed of 10 specific agency IGs and a Chairperson, 
the Working Group was created to foster participation and input from 
all 28 Offices of Inspectors General that oversee an agency receiving 
Recovery Act funds. The Working Group is co-chaired by the Department 
of Transportation Inspector General (IG) and a former IG who is now on 
the Board's staff. The Working Group has identified a number of initial 
projects, such as creating a Recovery Audit Work Plan, suggesting ways 
to improve the Single Audit process, and identifying high-risk programs 
at the agency level.
    Beyond the federal IG community, the Board is interacting with 
others involved in federal and State oversight and management of 
Recovery Act funds. As part of its initial outreach, the Board's 
procurement compliance staff is meeting with senior procurement 
executives from each agency receiving funds. The Board's staff has also 
developed a procurement checklist to assist federal agencies charged 
with spending Recovery Act funds. It is our hope that this type of 
agency outreach can help to prevent fraud, waste, and mismanagement of 
Recovery Act funds before such funds leave the agencies.
    The Board is also reaching out to assist states with their new 
Recovery Act responsibilities. This week, for example, I am hosting a 
visit by the new Recovery IG of California, a state that will be 
receiving more than $45 billion in Recovery Act funds. I will be 
introducing her to the IGs who will be overseeing monies headed for 
California, the Board's staff, and the Recovery Teams at the Office of 
Management and Budget (OMB) and the Government Accountability Office 
(GAO). I hope to host similar meetings with oversight officials from 
other states and municipalities in the near future. Last week I spoke, 
as I have several times before, at a meeting of governors and other 
high-level State officials who convened in Washington to discuss 
Recovery Act fund implementation issues. In addition, on May 20th, I 
will be speaking to a gathering of all State IGs in Orlando for the 
Spring Conference of the Association of Inspectors General. On each of 
these occasions, I deliver the message that the Board is here to assist 
with State oversight and that they should feel free to call on us for 
any help that they may need.
    I can assure you that the Board considers this type of assistance 
to be one of its highest priorities. Clearly, for the Board to 
accomplish its mission of accountability, we will need to ensure open 
communications and frequent interactions with State and local officials 
engaged in oversight, as well as with the GAO.
    In order to better focus and utilize its resources, the Board has 
formed two committees: one dedicated to the Board's accountability 
mandate and the other to the Board's information technology (IT) 
operations and the continuing development of Recovery.gov. Each 
committee is currently composed of three or four Board members. These 
committees meet in addition to the regular Board meetings and then 
report back to the entire Board on the status of these critical 
initiatives, as well as any recommendations they may have for moving 
forward.
    The Board's accountability committee, for instance, will discuss 
strategies for not only receiving reports of fraud, waste, and 
mismanagement and referring them to the appropriate IG, but also 
analyzing and developing reports in light of available open-source 
data. These analyses will make the Board's referrals more value-added 
for the IGs and will also contribute greatly to risk-based predictions 
about any potential fraud. On the IT side, the Board's Recovery.gov 
committee is working to provide strategic direction on the entire range 
of IT efforts that are before the Board.
    Mr. Chairman, a great deal of credit must be extended to OMB and 
GSA for their efforts to launch Recovery.gov. Because of their efforts, 
all Americans can visit the web site today. However, it is important to 
remember that the creation of this web site is an evolving process with 
multiple phases. It is not a single event.
    Now that the first phase of getting Recovery.gov up and running has 
ended, we are moving quickly to implement the second phase of 
development: The Board is beginning to manage the web site's design and 
content, OMB will still retain responsibility for the reporting 
guidance and the verification of data, and GSA will continue to host 
the web site and will work with the Board to collect and store the 
data. I am confident that this division of labor will provide the best 
opportunity to maximize Recovery.gov's use as a transparency and 
accountability tool, and I am equally confident that we will also have 
the opportunity to achieve an unparalleled level of citizen 
participation.
    On the subject of citizen participation, we also hope to employ the 
creative and innovative ideas the public may have for the future of 
Recovery.gov. The Board just this past week held an online Recovery 
Dialogue on Information Technology Solutions, or, as it has sometimes 
been referred to, an ``electronic town hall.'' In partnership with the 
non-profit National Academy of Public Administration (NAPA) and OMB, we 
hosted a national online dialogue to engage the public, potential 
stimulus recipients, IT professionals, and State, local and tribal 
partners in answering the key question: What ideas, tools, and 
approaches can make Recovery.gov a place where the public can monitor 
the expenditure and use of Recovery Act funds? Through this online 
dialogue, which ran from April 27th through May 3rd, participants from 
across the Nation were able to recommend, discuss and vote on the best 
ideas, tools, and approaches to web site design, data collection, data 
warehousing, and data analysis, as well as fraud, waste, and abuse 
detection.
    While my impression was that we would get a high level of 
participation, the overwhelming response to our electronic town hall 
surpassed my expectations. On the first day alone the Recovery Dialogue 
site received more than 593,000 hits. The feedback we received was also 
encouraging. As one participant said, ``Traditionally, the U.S. 
[Government] has only really been a successful early IT adopter via NSA 
or NASA, and actions such as this National Dialogue give me hope that 
may change.'' NAPA is now in the process of assembling the great ideas 
that emerged from this exercise, which will then enable us to move 
quickly to a competitive process of vendor selections.
    Perhaps even more importantly, we are excited about the public's 
potential contribution to the Board's mission of accountability. I am 
convinced that heightened citizen participation will act as a force 
multiplier for IGs and others charged with oversight of Recovery Act 
funds. The public--which in many cases is in the best position to see 
how money is actually being awarded and spent at the lowest levels--
will likely be our ``first responders'' to potential fraud, waste, and 
mismanagement of Recovery Act funds.
    I want to assure this subcommittee that--just as I am aware of the 
potential power that citizen participation can bring to the Board's 
efforts--I am acutely aware of the damage that can be done by only 
appearing to give weight to that participation and in reality letting 
it languish unheard. The Board's committee on accountability, as I 
mentioned earlier, has already begun analyzing the best methods of 
collecting, managing, and analyzing the public's comments and feedback. 
Currently, that committee is weighing options for a comprehensive 
referral management system, which would include a hotline service, 
through which the public would be able to share potentially crucial 
information with the Board.
    This hotline (which will allow for input in all manner of 
communication) cannot simply be an off-the-shelf, ``plain vanilla'' 
hotline, with personnel who do not understand what questions to ask or 
what information to obtain. The Board faces a new challenge here in 
that, typically, hotlines are set up to address a single agency or a 
specific type of funding, and yet the Recovery Act has given the Board 
oversight responsibility for numerous and varied agency appropriations. 
For example, a hotline service might easily train its personnel to 
process information relating just to grants awarded by the Department 
of Education. However, in the Board's case, any hotline personnel will 
need to be able to understand and digest information about education 
grants, as well as federal construction contracts, rural development 
loans, or broadband technology programs. The Board will strive to 
ensure that any hotline personnel and technology will be both expansive 
and thorough enough to meet this challenge.
    Whenever citizens have the potential to assist oversight and 
enforcement entities, legitimate concerns are raised about 
whistleblower protection. The Recovery Act explicitly states that 
employees of non-federal employers cannot be fired, demoted, or 
otherwise discriminated against as punishment for disclosing to the 
Board or several other entities any information that they believe is 
evidence of fraud, waste, or gross mismanagement of Recovery Act funds. 
If citizens believe they are being retaliated against for such 
disclosures, they may either contact the Board or submit a complaint 
directly to the appropriate IG.
    Mr. Chairman, while I was the IG at the Department of the Interior, 
I believe I had a well-deserved reputation for aggressively 
investigating whistleblower complaints of federal employees. I intend 
to now extend that practice outside the federal arena. If citizens 
trust in their government, they will eagerly participate in the 
transparency and accountability of the Recovery Act funds. And, in a 
circular fashion, such transparency and accountability make the 
foundation upon which the public trust is built. Because I believe that 
public contributions to transparency and accountability are critical to 
the Board's success, I plan to do everything I can to earn and keep 
safe that public trust.
    Mr. Chairman and Members of the Subcommittee, that concludes my 
prepared testimony. Thank you for this opportunity. I will now be glad 
to answer any questions you might have.

                     Biography for Earl E. Devaney

    Earl E. Devaney was appointed by President Obama on February 23, 
2009 to chair the Recovery Act Accountability and Transparency Board 
(Board). In this role, Mr. Devaney will lead the Board in its dual 
mission of delivering unprecedented levels of transparency through 
Recovery.gov and coordinating and conducting oversight of Recovery 
funds to prevent fraud, waste of abuse.
    Devoting his full attention to his duties as Board Chairman, Mr. 
Devaney is on leave as the Inspector General for the Department of the 
Interior. He was nominated by President Clinton on July 1, 1999 to be 
the seventh Inspector General for the Department of the Interior, and 
confirmed by the full Senate on August 3, 1999. As head of the Office 
of Inspector General, he was responsible for overseeing the 
administration of a nationwide, independent program of audits, 
evaluations, and investigations involving the Department of the 
Interiors programs and operations.
    Mr. Devaney transformed the Office of Inspector General into an 
innovative organization dedicated not only to detecting fraud, waste, 
and mismanagement, but also to assisting the Department in identifying 
and implementing new and better ways of conducting business. Mr. 
Devaney and his team of senior managers worked diligently toward 
developing strong working relationships with senior departmental 
managers, congressional staff and key congressmen and senators. Armed 
with a philosophy that blends cooperation with strong oversight and 
enforcement, the Office of Inspector General for the Department of the 
Interior made significant advances under the leadership and vision of 
Mr. Devaney.
    Mr. Devaney began his law enforcement career in 1968 as a police 
officer in his native State of Massachusetts. After graduating from 
Franklin and Marshall College in 1970 with a degree in Government, he 
became a Special Agent with the United States Secret Service.
    At the time of his retirement from the Secret Service in 1991, Mr. 
Devaney was serving as the Special Agent-in-Charge of the Fraud 
Division and had become an internationally recognized white collar 
crime expert regularly sought by major media outlets. During his tenure 
with the Secret Service, Mr. Devaney was the recipient of five U.S. 
Department of Treasury Special Achievement Awards and numerous honors 
and awards from a wide variety of professional organizations.
    Upon leaving the Secret Service, Mr. Devaney became the Director of 
the Office of Criminal Enforcement, Forensics and Training for the U.S. 
Environmental Protection Agency. In this position, Mr. Devaney oversaw 
all of EPA's criminal investigators, EPA's Forensics Service Center, 
and the National Enforcement Training Institute. Mr. Devaney's years of 
managerial excellence were recognized in 1998 by the prestigious 
Meritorious Presidential Rank Award for outstanding government service.

    Chairman Miller. Thank you, Mr. Devaney. You were just 
barely over time.
    Mr. Dodaro, you are recognized for five minutes.

 STATEMENT OF MR. GENE L. DODARO, ACTING COMPTROLLER GENERAL, 
             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Dodaro. Thank you very much, Mr. Chairman. I am pleased 
to be here with you and Ranking Member Broun and Congresswoman 
Dahlkemper. I am very pleased to have this opportunity to 
discuss how GAO has been working with the broader 
accountability community to carry out our responsibilities 
under the Recovery Act.
    The Act assigns GAO a range of responsibilities to include 
bimonthly reviews of the uses of the Recovery funds by selected 
states and localities. Now, given the inter-governmental nature 
of this task, it has been a priority from the beginning to make 
sure that we are coordinating properly with the broader 
accountability community. Soon after the Act was passed, I 
outreached to the inspector general community and within a 
couple of weeks of the Act's passage we met with 17 inspectors 
general, or their representatives. I also outreached to the 
State community, and we had a conference call with over 46 
State audit offices and dozens of local audit offices across 
the country. We are coordinating, of course, with Mr. Devaney's 
board functions as well.
    Now, this coordination activity really served us well as we 
took our teams to the field. In order to fulfill the 
responsibilities for the bimonthly reviews, we selected 16 
states and the District of Columbia to do a longitudinal study 
over the next two or three years of the uses of the Recovery 
funds, by those jurisdictions and what impact those funds would 
have in those localities. These 16 states and the District of 
Columbia are expected to receive over two-thirds of the amount 
of Recovery Act funds flowing to states and localities.
    Now, during fiscal year 2009, there are estimated outlays 
of $49 billion that are expected to go to the states and 
localities, and in the question and answer period I can talk 
about the projected outlay ratio rate over the next few years 
if you would like and how the composition of the funding will 
be changing from 2009 to 2012, to the states and localities. 
But in--for fiscal year 2009, over 90 percent of the $49 
billion to be distributed to the states and localities is going 
to be in the health area, education area, and transportation 
area.
    Now, the three largest programs are the Medicaid Program, 
which is the federal matching share, and the highways area for 
the transportation area, and the State Stabilization Fund in 
the education area. So we focused largely on those three 
programs in our first bimonthly review, and our report was 
issued last month.
    Now, basically in terms of the uses of the funds, most of 
the funds were drawn down in the Medicaid area. The 16 states 
and the District had an allocation of about $16.9 billion. They 
had collectively drawn down $7.9 billion or about 40 percent, 
47 percent of their allocation.
    In the highways area, about $15.5 billion had been 
allocated to the 17 jurisdictions. About $3.3 billion had been 
obligated, and by obligated that means the Federal Department 
of Transportation and the State Department of Transportation 
had agreed on projects. So there were about 950 projects, but 
most of them were in the competitive bid stage during the April 
and May timeframe and were not yet awarded so that there was 
not a significant amount of Recovery Act funds yet distributed 
in the transportation area.
    In the State Stabilization Fund area over $20 billion was 
allocated to these states, but before they can award--spend the 
money, they have to submit an application to the Department of 
Education, who reviews it and then gives them the ability to 
spend the money. Of the 16 states at the time our report was 
issued only two states, California and Illinois, had received 
approval from the department.
    Now, we made a series of recommendations to strengthen the 
accountability features at the State level. A big concern was 
that the states were under fiscal constraints, and they had cut 
back some of their accountability and oversight mechanisms, 
both in the management area and audit area, and we suggested 
that OMB clarify whether or not Recovery Act funds could be 
used to strengthen the State and local accountability 
mechanisms. And this is very important. And also we made a 
recommendation to more effectively use the single audit 
process, which is the standard accountability tool, to make 
sure that it can be more effective in providing adequate 
oversight over the Recovery Act funds earlier in 2009, before 
the vast majority of funds are spent in 2010 and 2011.
    We also suggested that OMB provide greater guidance on 
methodologies to be used to report the number of jobs created 
and the number of jobs preserved.
    Now, with regard to the R&D funding in the agencies that we 
reported to you on within this committee's jurisdiction in 
March, of the almost $22 billion in R&D funding, as of last 
week basically $342 million of that had been obligated, largely 
in the Department of Energy's Office of Science, for funding 
some renovations at the National laboratories.
    And so, you know, but I would be happy in the question and 
answer session to talk more about our recommendations in this 
area and any other questions that you would like to pose to me.
    Thank you very much.
    [The prepared statement of Mr. Dodaro follows:]
                  Prepared Statement of Gene L. Dodaro

Chairman Miller, Ranking Member Broun, and Members of the Subcommittee:

    I am pleased to be here today to discuss our efforts to carry out 
GAO's oversight roles related to the American Recovery and Reinvestment 
Act of 2009 (Recovery Act).\1\ An important part of our work entails 
coordinating with the accountability community including the federal 
Inspectors General (IGs), the Recovery Accountability and Transparency 
Board, and State and local government auditors. I will also provide 
updated information on the status of Recovery Act funds to be spent for 
research and development (R&D) activities, about which we testified 
before this subcommittee in March 2009.\2\
---------------------------------------------------------------------------
    \1\ Pub. L. No. 111-5 (Feb. 17, 2009).
    \2\ GAO, American Recovery and Reinvestment Act: GAO's Role in 
Helping to Ensure Accountability and Transparency for Science Funding, 
GAO-09-515T (Washington, D.C.: Mar. 19, 2009).
---------------------------------------------------------------------------
    The Recovery Act delineates an important set of responsibilities 
for the accountability community. GAO is required to conduct bimonthly 
reviews of the use by selected states and localities of funds made 
available under the Act; we issued the first of these bimonthly reviews 
on April 23, 2009.\3\ GAO is also charged with reporting on, among 
other things, specific areas including trade adjustment assistance, new 
education incentive grants, new health care tax credits, and the 
effects of national economic downturns on states--especially in the 
Medicaid area--over the past several decades.\4\ IGs across government 
are expected to audit the efforts of federal agencies' operations and 
programs related to the Recovery Act, both individually within their 
particular entities and collectively, as many of them are members of 
the Recovery Accountability and Transparency Board (the Board). The 
Board will help prevent waste, fraud, and abuse by reviewing contracts 
and grants to ensure they meet applicable standards, satisfy applicable 
competition requirements, and are overseen by sufficient numbers of 
trained acquisition and grants personnel. The Board is charged with 
reporting to the President, Vice President, and the Congress any 
potential problems requiring immediate attention in addition to 
reporting quarterly and annually.
---------------------------------------------------------------------------
    \3\ GAO, Recovery Act: As Initial Implementation Unfolds in States 
and Localities, Continued Attention to Accountability Issues Is 
Essential, GAO-09-580 (Washington, D.C.: Apr. 23, 2009).
    \4\ GAO, American Recovery and Reinvestment Act: GAO's Role in 
Helping to Ensure Accountability and Transparency, GAO-09-453T 
(Washington, D.C.: Mar. 5, 2009).
---------------------------------------------------------------------------
    As we testified before the Subcommittee on March 19, 2009, the 
Recovery Act's combined spending and tax provisions are estimated to 
cost $787 billion, including more than $21 billion in additional 
spending for R&D-related activities at the Department of Energy (DOE), 
Department of Commerce, National Science Foundation (NSF), and National 
Aeronautics and Space Administration (NASA). These activities include 
supporting fundamental research, demonstrating and deploying advanced 
energy technologies, purchasing scientific instrumentation and 
equipment, and constructing or modernizing research facilities. Our 
earlier testimony identified several R&D programs that deserve special 
attention from agency managers and IGs based on our prior work. 
Sustained oversight attention on these programs will be critical as 
Recovery Act funds are spent.
    Because funding streams of the Recovery Act--including R&D 
funding--will flow from different federal agencies to the states, 
localities and institutions within them, we have been coordinating with 
the IGs and the Board, as well as with State and local auditors. My 
statement today discusses (1) GAO's efforts to fulfill its 
responsibilities under the Recovery Act; (2) GAO's coordination with 
the Board, IGs, and State and local government auditors; (3) GAO's 
authorities to assist whistleblowers and elicit concerns from the 
public; and (4) updated information on Recovery Act funds to be spent 
for R&D from our previous testimony.

Our Reporting to Date Under the Recovery Act

    In order to meet our mandate to conduct bimonthly reviews and 
prepare reports on selected states' and localities' use of funds, we 
have selected 16 states and the District of Columbia to track over the 
next few years to provide an ongoing longitudinal analysis of the use 
of funds under the Recovery Act.\5\ These states contain about 65 
percent of the U.S. population and are estimated to receive about two-
thirds of the intergovernmental grant funds available through the 
Recovery Act. In addition to reporting on the core group of 16 states, 
we will review the recipient reports from all 50 states. These 
recipient reports are to include information on funds received, the 
amount of Recovery funds obligated or expended to projects or 
activities, the projects or activities for which funds were obligated 
or expended, and the number of jobs created or preserved as a result of 
Recovery Act funds. The Recovery Act also included a number of specific 
mandates on which GAO must take action between April 2009 and February 
2014.\6\
---------------------------------------------------------------------------
    \5\ We will track the following 16 states: Arizona, California, 
Colorado, Florida, Georgia, Iowa, Illinois, Massachusetts, Michigan, 
Mississippi, New Jersey, New York, North Carolina, Ohio, Pennsylvania, 
and Texas. In addition, we will sample localities within these states 
to provide a perspective on the use of Recovery Act funds at a local 
level.
    \6\ See appendix I of GAO-09-453T for a list of GAO's mandates 
under the Recovery Act. In addition to issuing our first bimonthly 
report, we have completed two other requirements under the Act: First, 
on April 3, 2009, we announced the appointment of 13 members to the 
Health Information Technology Policy Committee, a new advisory body 
established by the Recovery Act. Second, on April 16, 2009, we reported 
on the actions of the Small Business Administration to, among other 
things, increase liquidity in the secondary markets for Small Business 
Administration loans (see GAO, Small Business Administration's 
Implementation of Administrative Provisions in the American Recovery 
and Reinvestment Act of 2009, GAO-09-507R (Washington, D.C.: Apr. 16, 
2009).
---------------------------------------------------------------------------
    Our first bimonthly report, issued two weeks ago, covers the 
actions of selected states and localities under the Recovery Act as of 
April 20, 2009. About 90 percent of the $49 billion in Recovery Act 
funding being provided to states and localities in fiscal year 2009 
will be through health, transportation, and education programs. (See 
app. I for federal programs that are receiving Recovery Act funding and 
are administered by states and localities.) Our first report focused 
particularly on Recovery Act funds for the three largest programs in 
these categories--Medicaid Federal Medical Assistance Percentage grant 
awards, highway infrastructure investment, and the Department of 
Education's State Fiscal Stabilization Fund. We reported on the status 
of states' activities related to these three programs. The report 
contains separate appendixes on each of the 16 states and the District 
of Columbia that discuss the plans and uses of funds in these three 
major programs as well as selected other programs that are receiving 
Recovery Act funds. The report also makes several recommendations to 
the Office of Management and Budget (OMB) directed toward improving 
accountability and transparency requirements; clarifying the Recovery 
Act funds that can be used to support State efforts to ensure 
accountability and oversight; and improving communications with 
Recovery Act funds recipients about when funds become available for 
their use and when federal guidance is modified or newly released. OMB 
concurred with the overall objectives of our recommendations and plans 
to work with us to further accountability for these funds.
    In consultation with the Congress in exercising our general 
statutory authority to evaluate the results of government programs and 
activities, we also will continue to target programs for additional 
review using a risk-based approach and will incorporate reviews of 
Recovery Act funding where practicable when we are examining base 
programs. There are many implementation challenges to ensuring adequate 
accountability and efficient and effective implementation of the 
Recovery Act. Experience tells us that the risk for fraud, waste, and 
abuse grows when billions of dollars are going out quickly, eligibility 
requirements are being established or changed, new programs are being 
created, or a mix of these characteristics. This suggests the need for 
a risk-based approach to target for early attention specific programs 
and funding structures based on known strengths, vulnerabilities, and 
weaknesses, such as a track record of improper payments or contracting 
problems. Of particular concern to this subcommittee will be the extent 
to which Recovery Act R&D funding is effectively expended, and we 
discuss the initial implementation of R&D funding below.

GAO's Coordination with the Accountability Community

    Regular and frequent GAO coordination with federal IGs, the Board, 
and State and local government auditors is a critical component of our 
work to ensure effective and efficient oversight. With several early 
coordination meetings, we laid the foundation for this ongoing 
coordination soon after the Act was passed. First, I reached out to the 
IG community and, with Ms. Phyllis Fong, the Chairman of the Council of 
Inspectors General on Integrity and Efficiency, hosted an internal 
coordination meeting on February 25, 2009, with Inspectors General or 
their representatives from 17 agencies. It was a very productive 
discussion in which we outlined coordination approaches going forward. 
In addition, soon after the President appointed him as Chairman of the 
Board on February 23, 2009, I talked with Mr. Earl Devaney, former 
Inspector General at the Department of the Interior, to begin to 
coordinate such efforts as the audit of the U.S. Government's 
consolidated financial statements whereby GAO relies on the individual 
efforts of the IGs' financial audits of their departments and entities 
across the government. I am confident that we will coordinate our 
respective efforts well, both with the IG community and with the Board.
    We also reached out to the State and local audit community and 
participated in initial coordination conference calls. The first call, 
on February 26, 2009, included State auditors or their representatives 
from 46 states and the District of Columbia. The next day, we held a 
similar discussion with auditors from many localities across the 
country. State and local auditors perform very important oversight 
functions within their jurisdictions and have unique knowledge about 
their governments; we are continuing to coordinate with them closely as 
we carry out our responsibilities.
    It is also important for us to coordinate with OMB, especially in 
regard to the reporting requirements and other guidance to fund 
recipients and on what information is to be collected in order to 
adequately evaluate how well the Recovery Act achieves its objectives. 
We participate in weekly coordination conference calls with OMB, the 
Board, IGs, and State and local auditors. The impetus to schedule these 
calls was a letter OMB Director Peter Orszag and I received from the 
National Association of State Auditors, Comptrollers, and Treasurers; 
the National Association of State Budget Officers; the National 
Association of State Chief Information Officers; and the National 
Association of State Procurement Officials. This letter expressed their 
strong interest in coordinating reporting and compliance aspects of the 
Recovery Act. During these calls, we provide updates on our Recovery 
Act activities, and OMB provides updates on its actions. One important 
outcome of these calls thus far has been to call OMB's and the Board's 
attention to the need to clarify certain reporting requirements. For 
example, the Recovery Act requires federal agencies to make information 
publicly available on the numbers of jobs created and retained as a 
result of Recovery Act funded activities. Our work in the states 
yielded information that local level officials needed to define how to 
capture these data, and the State and local auditors were able to 
corroborate what we had heard. We included a recommendation to OMB in 
our first bimonthly report on the Recovery Act actions of selected 
states and localities to clarify this requirement, and OMB generally 
concurred with this recommendation.
    In addition to these regular calls, we are actively participating 
in discussions with State and local organizations to further foster 
coordination within the accountability community. These organizations 
include the National Association of State Auditors, Comptrollers, and 
Treasurers; the National Association of State Budget Officers; the 
National Association of State Procurement Officials; the National 
Association of State Chief Information Officers; the National Governors 
Association; the National Conference of State Legislatures; and the 
National League of Cities. For example, in March 2009, we 
participated--along with a State auditor, local auditor, and inspector 
general--in a webinar hosted by the National Association of State 
Auditors, Comptrollers, and Treasurers for its members.
    As Acting Comptroller General, I also serve as the Chairman of the 
National Intergovernmental Audit Forum (NIAF). The NIAF is an 
association that has existed for over three decades as a means for 
federal, State, and local audit executives to discuss issues of common 
interest and share best practices. NIAF's upcoming May meeting will 
bring together these executives, including OMB, to update them on the 
Recovery Act and provide another opportunity to discuss emerging issues 
and challenges. In addition, a number of Intergovernmental Audit Forum 
meetings have been scheduled at the regional level that seek to do the 
same, and this regional coordination is directly contributing to our 
work in the states. For example, GAO's western regional director 
recently made a presentation at the Pacific Northwest Audit Forum 
regarding GAO's efforts to coordinate with State and local officials in 
conducting Recovery Act oversight. In conjunction with that forum and 
at other related forums, she has regularly participated in meetings, 
panel discussions, and break-out discussions with the principals of 
State and local audit entities to coordinate efforts to provide 
oversight of Recovery Act spending.
    The work of our 16 State teams that resulted in our first bimonthly 
report on the actions of selected states and localities under the 
Recovery Act also exemplifies the level of coordination we are 
undertaking with the accountability community. During the conduct of 
our work, we collected documents from and interviewed State Auditors, 
Controllers, and Treasurers; State Inspectors General; and other key 
audit community stakeholders to determine how they planned to conduct 
oversight of Recovery Act funds. We also coordinated as appropriate 
with legislative offices in the states concerning State legislatures' 
involvement with decisions on the use of Recovery Act funds. In 
addition, we relied on reporting and data collected from the Federal 
Audit Clearinghouse, which operates on behalf of OMB to assist 
oversight agencies in obtaining audit information on states, local 
governments, and non-profit organizations. Illustrative examples 
follow:

          Our team working in Georgia coordinated closely with 
        that state's State Accounting Office, the State Auditor, and 
        Inspector General among others, to understand their plans for 
        mitigating risks and overseeing Recovery Act funding. For 
        example, the Inspector General developed a database 
        specifically to track Recovery Act complaints and a public 
        service announcement to alert the public of how to report 
        fraud, waste, and abuse.

          Our team working in North Carolina coordinated with 
        the State Auditor regarding that state's plans to ensure that 
        Recovery Act funds are segregated from other federal funds 
        coming through traditional funding streams to help ensure 
        accountability and transparency.

          Our team working in New Jersey coordinated with the 
        state's new Recovery Accountability Task Force, which will 
        review how State and local agencies spend Recovery Act funds as 
        well as provide guidance and best practices on project 
        selection and internal controls. As part of the Task Force, the 
        State Comptroller has responsibility for coordinating all of 
        the oversight agencies within the state.

          Our team working in California is coordinating with 
        the state's newly appointed Recovery Act Inspector General, who 
        is seeking to make sure that Recovery Act funds are spent as 
        intended and to identify instances of waste, fraud, and abuse. 
        In addition, the team relied on the work of the State Auditor, 
        whose most recent single audit identified numerous material 
        weaknesses associated with programs included in GAO's review.

GAO's Authorities to Assist Whistleblowers and Elicit Public 
                    Contributions

    Provisions in GAO's authorizing statute, the Whistleblower 
Protection Act, and the Recovery Act as well as a dedicated fraud 
reporting hotline facilitate our ability to evaluate allegations of 
waste, fraud and abuse in the Federal Government. Under our authorizing 
statute, we have authority to access information needed for the 
effective and efficient performance of our reviews and evaluations. 
Subject to certain limited exceptions, all agencies must provide the 
Comptroller General access to information he requires about the duties, 
powers, activities, organization, and financial transactions of that 
agency,\7\ including for the purpose of evaluating whistleblower 
complaints.
---------------------------------------------------------------------------
    \7\ 31 U.S.C.  716(a), (d).
---------------------------------------------------------------------------
    Moreover, the Recovery Act applies certain federal whistleblower 
protections to the employees of recipients of Recovery funds. The 
Whistleblower Protection Act prohibits personnel actions taken against 
federal employees in reprisal for the disclosure of evidence of a 
violation of any law, rule, or regulation, gross mismanagement, a gross 
waste of funds, an abuse of authority, or a substantial and specific 
danger to public health or safety. Similarly, the Recovery Act 
prohibits reprisals against employees of nonfederal recipients of 
Recovery funds, but its protections only relate to disclosures 
regarding the use of Recovery funds. The Recovery Act provides 
employees of a non-federal entity receiving a contract, grant, or other 
payment funded in whole or part by Recovery funds may not be 
discharged, demoted, or otherwise subject to discrimination as a 
reprisal for disclosing to the Board, an IG, the Comptroller General, 
the Congress, a State or federal regulatory or law enforcement agency, 
the employee's supervisor, a court or grand jury, or a federal agency 
information about mismanagement, waste, danger to public health or 
safety, or a violation of law regarding the use of Recovery Act funds. 
People who believe they have been subject to reprisal may submit a 
complaint to the appropriate inspector general for investigation and 
seek redress through the courts. Table 1 outlines the coverage of 
Whistleblower Act and Recovery Act provisions.




    Section 902 of the Recovery Act gives us additional authority to 
examine the relevant records of contractors, subcontractors, or State 
or local agencies administering contracts that are awarded with 
Recovery Act funds. We may also interview officers and employees of 
such contractors or their subcontractors as well as officers or 
employees of any State or local agency administering such transactions. 
This additional authority could be applied to examining allegations 
made by whistleblowers.
    As part of our normal operations, we maintain a fraud reporting 
service. Anyone can report evidence of fraudulent activity to FraudNet 
through an automated answering system, a dedicated fax line, a 
dedicated e-mail address, a dedicated mailing address, or an online 
form accessible from our web site at www.gao.gov. Information about how 
to provide evidence of fraud is available on our web site at http://
gao.gov/fraudnet.htm and on the last page of every GAO report. After 
the Recovery Act was passed, we coordinated with the IG community to 
publicize the use of FraudNet as a means to solicit public input and 
gather information on potential instances of waste, fraud, and abuse in 
the allocation and spending of Recovery Act funds. We also issued a 
press release on March 30, 2009, which was cited by the national news 
media in articles about the Recovery Act. Over the past few months, 
Fraudnet has received more than 25 allegations related to the misuse of 
Recovery Act, Troubled Asset Relief Program,\8\ or other related funds. 
These allegations are currently under review by GAO's Forensic Audits 
and Special Investigations (FSI) unit, a specialized team with many 
years of experience conducting fraud investigations. FSI coordinates 
with the IG community as appropriate to ensure that there is no 
duplication of investigative efforts across the Federal Government. 
Further, in cases where GAO determines that another agency is better 
positioned to perform an investigation, FSI will refer relevant 
information to the appropriate agency. Although it is too soon to 
discuss details of the allegations we have received or the status of 
ongoing investigations, we will continue to work with our partners in 
the IG community, with the appropriate law enforcement agencies, and 
with the Congress, to ensure that all allegations are reviewed and 
investigated.
---------------------------------------------------------------------------
    \8\ Pub. L. No. 110-343 (Oct. 3, 2008), the Emergency Economic 
Stabilization Act of 2008, seeks to stabilize the Nation's financial 
markets by, among other things, authorizing the Troubled Asset Relief 
Program.

Updated Information on the Recovery Act's R&D Funding

    On March 19, 2009, we testified before this subcommittee on our 
role in helping to ensure accountability and transparency for Recovery 
Act science R&D funding. Our statement identified over $21 billion in 
related funding appropriated to DOE; the National Institute of 
Standards and Technology (NIST) and the National Oceanographic and 
Atmospheric Administration (NOAA) within the Department of Commerce; 
NSF; and NASA. As initial implementation of the Recovery Act unfolds, 
we are tracking these agencies' activities to plan for science R&D 
expenditures. Table 2 provides information on the status of these 
agencies R&D-related Recovery Act funds, as of April 28, 2009. To 
collect this information, we worked with agencies' officials and 
coordinated with agencies' IGs. As implementation of the Act 
progresses, further evaluations will continue to be coordinated with 
agencies' IGs to prevent duplication and minimize any overlap in our 
work.




    As Table 2 shows, the status of agencies' R&D-related funding 
varies. Officials from each agency told us about the controls in place 
to ensure that their program plans are approved before funds are either 
apportioned by OMB or allotted by their agencies' CFOs. For example, 
officials from each agency told us they are following OMB's April 3, 
2009, guidance for implementing the Recovery Act. OMB's guidance 
requires that agencies' submit program plans justifying Recovery Act 
expenditures that include a program's objectives, funding, activities, 
types of financial awards to be used, schedule, environmental review 
compliance, performance measures, description of plans to ensure 
accountability and transparency, and a plan for monitoring and 
evaluation. In addition, this guidance requires that agencies submit 
the program plans to OMB for approval by May 1, 2009, and states that 
OMB will approve these program plans by May 15, 2009. Officials from 
NIST, NOAA, and NSF told us that their agencies' CFOs will not allot 
funds for obligation until the House Appropriations Subcommittee on 
Commerce, Justice, and Science has reviewed their program plans. DOE 
CFO officials told us that the CFO will allot apportioned funds after 
an internal DOE approval process, even if OMB has not yet approved 
program plans; however, officials said DOE programs cannot obligate 
funds until OMB program plan approval is complete. As of April 28, 
2009, only DOE's Office of Science had obligated any funds for R&D 
project expenditures. These obligations, totaling $342 million will 
support various construction, facilities disposition, and general plant 
projects at national laboratories, as well as procurement and 
installation of experimental equipment and instrumentation. (See 
Appendix II for additional details on each agency's planned uses of 
funds.)
    Related to the efforts of the four federal agencies to obligate the 
R&D funds, our April 29, 2009, report discussed our initial 
observations on improving grant submission policies that could help 
minimize disruptions to the grants application process during the 
Recovery Act's peak filing period.\9\ Our report was requested in 
response to two OMB memoranda to federal agencies stating that the 
existing Grants.gov infrastructure would not be able to handle the 
influx of applications expected as key Recovery Act deadlines 
approached. We found that at least 10 agencies will accept some or all 
applications outside of Grants.gov during the Recovery Act's peak 
filing period. For example, NSF and NASA are only accepting 
applications through their own existing electronic systems for some 
grants. We recommended that the Director of OMB take actions to 
increase the likelihood that applicants can successfully apply for 
grants during the Recovery Act's peak application filing period. 
Specifically, we recommended that OMB (1) ensure that an announcement 
discussing agency alternate submission methods similar to that recently 
posted on Grants.gov is posted in a prominent location on Recovery.gov 
and on all federal Websites or in all documents where instructions for 
applying to Recovery Act grants are presented and (2) prominently post 
certain government policies for all grant applications submitted during 
the peak filing period for Recovery Act grants, notifying applicants 
that, among other things, if an application was deemed late they are 
notified of such an outcome and are provided an opportunity to provide 
supporting documentation demonstrating they attempted to submit the 
application on time. OMB generally concurred with these 
recommendations.
---------------------------------------------------------------------------
    \9\ See GAO, Recovery Act: Consistent Policies Needed to Ensure 
Equal Consideration of Grant Applications, GAO-09-590R (Washington, 
D.C.: April 29, 2009).
---------------------------------------------------------------------------
    In addition to direct expenditures, the Recovery Act also includes 
tax provisions that benefit individuals and businesses. The Internal 
Revenue Service (IRS) recently published a fact sheet on 12 different 
tax credits available under the Recovery Act for various energy 
efficiency measures taken by homeowners and businesses as well as for 
qualified renewable energy producers. Some of these credits are new, 
and others are modifications of existing tax credits previously 
included in the tax code. As I testified in March 2009, one particular 
area that needs additional early attention is identifying the data to 
be collected concerning the use and results of the Recovery Act's 
various tax provisions. Accountability and transparency are perhaps 
easier to envision for the outlay portions of the stimulus package, but 
the billions of dollars in tax provisions in the Recovery Act are 
considerably different than outlay programs in their implementation, 
privacy protections, and oversight. Most tax benefits are entirely 
administered by the Internal Revenue Service (IRS), and all taxpayer 
information, including the identity of those using the benefits, is 
protected by law from disclosure. Further, unlike most outlay programs, 
IRS does not know who makes use of the tax benefit until after the 
fact, if then. While IRS previously collected information that may have 
been sufficient to evaluate the benefits of energy tax credits, IRS has 
not yet announced what information it will collect for the credits as 
revised or added by the Recovery Act.
    In closing, I want to underscore that we welcome the responsibility 
that the Congress has placed on us to assist in the oversight, 
accountability, and transparency of the Recovery Act. We will continue 
to coordinate closely with the rest of the accountability community and 
honor our ongoing commitment to promptly address information provided 
by whistleblowers. We are committed to completing our Recovery Act work 
on the timetable envisioned by the Act and will keep the Congress fully 
informed as our plans evolve.
    Mr. Chairman, Representative Broun, and Members of the Subcommittee 
this concludes my statement. I would be pleased to respond to any 
questions you may have.

Staff Acknowledgments

    Key contributors to this testimony were Richard Cheston (Assistant 
Director), Divya Bali, Allison Bawden, Karen Keegan, Michelle Munn, and 
Barbara Timmerman.





Appendix II:

                      Updated Recovery Act Funding

                       for R&D-Related Activities

    To update information on Recovery Act funding for R&D-related 
activities, we met with and interviewed Department of Energy (DOE), 
National Institute of Standards and Technology (NIST), National 
Oceanographic and Atmospheric Administration (NOAA), National Science 
Foundation (NSF), and National Aeronautics and Space Administration 
(NASA) officials, and analyzed documentation they provided. We also 
reviewed publicly available information provided by the Office of 
Management and Budget (OMB), through the Recovery.gov web site, and 
agencies' own recovery web sites. Finally, we coordinated with each 
agency's Inspector General (IG) to discuss the data we collected. We 
conducted this work in accordance with generally accepted government 
auditing standards.

Department of Energy

    DOE's program offices vary in the extent to which they have funds 
available to obligate for expenditure. A little more than 40 percent of 
DOE's R&D-related Recovery Act funding has been apportioned by OMB, and 
only DOE's Office of Science has obligated R&D project funds. OMB has 
not apportioned any funds to DOE's Office of Fossil Energy and has only 
apportioned minimal funds to its Loan Guarantee Program.
    Energy Efficiency and Renewable Energy (EERE). The Recovery Act 
appropriated $2.5 billion to EERE for R&D activities related to 
alternative and renewable energy sources, such as biomass and 
geothermal. An additional $2.4 billion was appropriated for advanced 
transportation research focused on next-generation plug-in hybrid 
electric vehicles, their advanced battery components, and 
transportation electrification. OMB has apportioned all of EERE's 
appropriation, and DOE's Office of the Chief Financial Officer (CFO) 
has generally allotted the funds to support the R&D activities 
associated with vehicle technologies and electrification. EERE has 
issued a solicitation for grants, which closes May 13, 2009, to 
establish development, demonstration, evaluation, and education 
projects to accelerate the market introduction and penetration of 
advanced electric drive vehicles. In addition, EERE has issued a 
solicitation for grant proposals supporting the construction of U.S.-
based manufacturing plants to produce batteries and electric drive 
components, which closes May 19, 2009.\1\
---------------------------------------------------------------------------
    \1\ We are currently examining the potential benefits and 
challenges associated with plug-in hybrid electric and other plug-in 
vehicles; the status of development, factors that could delay 
availability or encourage development of these vehicles; and challenges 
to incorporating plug-in hybrid electric vehicles and other plug-ins 
into the federal fleet.
---------------------------------------------------------------------------
    Fossil Energy (FE). The Recovery Act appropriated $3.4 billion to 
FE for R&D-related activities, including funds to support a third round 
of competition under the Clean Coal Power Initiative; fossil energy R&D 
programs, such as fuel and power systems research or FutureGen;\2\ and 
competitive grants for carbon capture and energy efficiency improvement 
projects. As of April 28, 2009, OMB had not apportioned any of these 
funds to DOE, and thus no funds have been allotted, obligated, or 
expended. According to an FE official, OMB is unlikely to apportion 
funds to FE until after May 15, 2009, when its program plans are 
expected to be approved.
---------------------------------------------------------------------------
    \2\ See GAO, Clean Coal: DOE's Decision to Restructure FutureGen 
Should Be Based on a Comprehensive Analysis of Costs, Benefits, and 
Risks, GAO-09-248 (Washington, D.C.: Feb. 13, 2009).
---------------------------------------------------------------------------
    Science. The Recovery Act included a $1.6 billion appropriation for 
DOE's Office of Science (Science). Nearly all $1.6 billion appropriated 
has been apportioned by OMB to DOE without restriction, and the 
Secretary of Energy has announced priorities for $1.2 billion of these 
funds, including:

          $248 million for major construction, modernization, 
        infrastructure improvements, and needed decommissioning of 
        facilities at national laboratories;

          $330 million for operations and equipment procurement 
        and installation at major scientific user facilities;

          $277 million for competitive research collaborations 
        on transformational basic science needed to develop alternative 
        energy sources;

          $90 million for core scientific research grants to be 
        awarded to graduate students, post-docs, and Ph.D. scientists 
        across the Nation for applications of nuclear science and 
        technology, and for alternative isotope production techniques; 
        and

          $215 million to accelerate construction of two 
        experimental facilities.

           Science has obligated $342 million to support various 
        approved construction, infrastructure improvement, and facility 
        decommissioning projects at national laboratories, as well as 
        procurement and installation of experimental equipment and 
        instrumentation. Table 3 describes Science's Recovery Act 
        projects at its national laboratories, including those for 
        which funding has already been obligated.

        
        

    Advanced Research Projects Agency-Energy (ARPA-E). The Congress 
authorized the establishment of ARPA-E within DOE in August 2007.\3\ 
ARPA-E supports transformational energy technology research projects 
with the goal of enhancing the Nation's economic and energy security. 
ARPA-E received its first appropriation of $400 million in the Recovery 
Act, which was soon followed by an additional $15 million in the 
Omnibus Appropriations Act, 2009.\4\ According to a DOE official, the 
Secretary of Energy signed a memorandum formally creating the new 
office on April 22, 2009, and designated an Acting Deputy Director 
until a presidential appointee is confirmed by the Senate. As of April 
28, 2009, DOE's CFO had allotted $2 million in program direction funds 
to ARPA-E to hire employees, set up office space, and support 
requirements necessary to implement the provisions of the Recovery Act. 
In addition, ARPA-E issued its first competitive solicitation on April 
27, 2009, to fund up to $150 million of high-risk, high-potential 
projects focused on innovative energy technologies. Project proposals 
are due June 2, 2009, and awards are generally expected to range from 
$2 million to $5 million. According to a DOE official, ARPA-E 
anticipates issuing more targeted solicitations associated with the 
remaining Recovery Act funds; however, the official said these 
solicitations are not likely to be issued until a Senate confirmed 
appointee is in place to lead the organization.
---------------------------------------------------------------------------
    \3\ Pub. L. No. 110-69 (Aug. 9, 2007).
    \4\ Pub. L. No. 111-8 (March 11, 2009).
---------------------------------------------------------------------------
    Loan Guarantee Program (LGP). The Recovery Act included 
appropriations totaling $6 billion to LGP, which could support $60 
billion in new loan guarantees, depending on the credit subsidy rate. 
LGP officials told us the program plans that they submitted to OMB on 
May 1, 2009, support new loan guarantees for renewable energy systems, 
electric power transmission systems, and leading-edge biofuel projects 
performing at the pilot or demonstration stage and that the Secretary 
of Energy determines are likely to become commercial technologies.\5\ 
In addition, the Secretary of Energy has announced a number of 
restructuring initiatives for the program, which, as we reported in 
July 2008, faces a number of challenges.\6\ Officials have indicated 
that 6 of the 11 applicants who responded to DOE's August 2006 
solicitation for various types of innovative technology loan guarantees 
could be eligible for loan guarantees under Recovery Act terms.\7\ We 
are currently examining the status of LGP's efforts to solicit and 
review loan guarantee applications, including its efforts to use 
Recovery Act funds, and its progress in implementing the 
recommendations in our July 2008 report.
---------------------------------------------------------------------------
    \5\ The Recovery Act appropriated $6 billion for the credit subsidy 
costs of approved projects--i.e., the estimated net present value of 
long-term costs to the government from defaults, delinquencies and 
interest subsidies for those projects. The original loan guarantee 
program did not receive an appropriation for such costs, which must 
therefore be paid by fees charged to borrowers.
    \6\ See GAO, Department of Energy: New Loan Guarantee Program 
Should Complete Activities Necessary for Effective and Accountable 
Program Management, GAO-08-750 (Washington, D.C.: July 7, 2008).
    \7\ The August 2006 solicitation invited applications for loan 
guarantees under DOE's Innovative Technologies loan guarantee program. 
The Recovery Act added a new program that provides loan guarantees for 
a different set of project categories, some of which overlap with those 
eligible for loan guarantees under the original program.

Department of Commerce

    As of April 28, 2009, OMB had apportioned all $1.41 billion 
directly appropriated to NIST and NOAA for Recovery Act R&D-related 
activities. According to agency officials, funds have not yet been made 
available for obligation pending OMB and Congressional approval of 
program plans.
    NIST. NIST plans to spend the $580 million it was directly 
appropriated to support, competitive research grants, fellowships, and 
procurement of advanced research and measurement equipment and 
supplies. These funds are also planned to support a construction grant 
program for research science buildings, construction of new NIST 
facilities, and the reduction of the backlog of deferred maintenance 
for existing NIST facilities. In addition, NIST will receive $10 
million appropriated to DOE under the Recovery Act for work on the 
electricity grid and $20 million appropriated to the Department of 
Health and Human Services to create and test standards related to 
health security. According to one official, NIST is working with OMB to 
prepare solicitations and other grant-related documents, so the agency 
can quickly issue Recovery Act grant solicitations once its program 
plans are approved.
    NOAA. The Recovery Act appropriated $830 million to NOAA for 
construction and procurement related to R&D-related activities, 
including support for research operations and facilities; construction 
and repair of facilities, ships and equipment; and research to address 
gaps in climate modeling and to establish climate data records for 
research into the cause, effects, and ways to mitigate climate change. 
NOAA has issued a competitive solicitation for up to $170 million in 
grants for shovel-ready projects to restore marine and coastal 
habitats. Applications were due on April 6, 2009. A NOAA official told 
us that NOAA is working with OMB to draft solicitations and other 
contract-related documents so the agency can quickly issue Recovery Act 
contract solicitations once its program plans are approved.

NSF

    The Recovery Act appropriated $3 billion to NSF for R&D-related 
activities, including competitive research grants; major research 
instrumentation and equipment procurement and facilities construction; 
academic research facilities modernization; and education and human 
resources. NSF officials believe their Recovery Act funds can be 
obligated quickly once program plans are approved because, for example, 
$2 billion of the $3 billion will fund proposals that NSF's independent 
expert review panels have already deemed of merit but that NSF was not 
previously able to fund. Specifically, NSF officials have stated that 
these grants will be awarded by September 30, 2009, and NSF expects its 
Recovery Act funds will allow the agency to support an additional 
50,000 investigators, post-doctoral fellows, graduate and undergraduate 
students, and teachers throughout the Nation.

NASA

    The Recovery Act appropriated $1 billion to NASA for expenditures 
on space exploration; Earth science and climate research missions; 
adding supercomputing capacity; aeronautics activities, including 
aviation safety research, environmental impact mitigation, and 
activities supporting the Next Generation Air Transportation System; 
and restoration of facilities at the Johnson Space Center in Houston, 
Texas, damaged during Hurricane Ike in 2008. $50 million to support 
restoration work at the Johnson Space Center has been apportioned by 
OMB, and NASA has begun to issue requests for proposals for this 
restoration work. According to a NASA official, OMB has agreed with 
NASA on the funding priorities for the remaining $950 million 
appropriated, and funds will apportioned once OMB approves NASA's 
program plans.





                      Biography for Gene L. Dodaro
    Gene L. Dodaro became Acting Comptroller General of the United 
States and head of the Government Accountability Office on March 13, 
2008.
    Mr. Dodaro has testified before Congress dozens of times on 
important national issues. Most recently he has testified on the 
American Reinvestment and Recovery Act of 2009, the Troubled Asset 
Relief Program, federal assistance to the auto industry, U.S. 
involvement in Iraq and Pakistan, the Federal Government's financial 
condition and fiscal outlook, and the need to modernize the U.S. 
financial regulatory system. He has led efforts to fulfill GAO's new 
audit responsibilities in connection with the 2008 Economic 
Stabilization Act to help stabilize financial markets and institutions, 
as well as the American Recovery and Reinvestment Act--the stimulus 
legislation designed to combat the economic downturn. Under Mr. Dodaro, 
GAO has also undertaken initiatives such as a new transition web page 
and a new high-risk list to help bring to the attention of the 111th 
Congress and the new Administration the major challenges GAO has 
identified across the Federal Government, from improving food safety to 
rebuilding transportation infrastructure.
    As Acting Comptroller General, Mr. Dodaro helps oversee the 
development and issuance of hundreds of reports and testimonies each 
year to various committees and individual Members of Congress. These 
and other GAO products have led to hearings and legislation, billions 
of dollars in taxpayer savings, and improvements to a wide range of 
government programs and services.
    In a GAO career dating back more than 30 years, Mr. Dodaro has held 
a number of key executive posts. For nine years, Mr. Dodaro served as 
the Chief Operating Officer, the number two leadership position at the 
agency, assisting the Comptroller General in providing direction and 
vision for GAO's diverse, multi-disciplinary workforce. Mr. Dodaro led 
the development of GAO's strategic plans for serving Congress and 
improving government in the 21st Century. He also played a key role in 
guiding the agency's efforts to highlight current and emerging issues 
that warrant attention from policy-makers.
    Until 1999, Mr. Dodaro headed GAO's Accounting and Information 
Management Division, the agency's largest unit, which specialized in 
financial management, computer technology, and budget issues. While 
there, he directed the first-ever audit of the comprehensive financial 
statements covering all federal departments and agencies. Mr. Dodaro 
also helped conceive GAO's strategy for strengthening computer security 
government-wide and led the updating of standards for internal controls 
in the Federal Government.
    Mr. Dodaro worked closely with the Congress and several 
administrations on major management reform initiatives, including the 
1994 Government Management Reform Act, which expanded the Chief 
Financial Officers Act; the revised 1995 Paperwork Reduction Act and 
the Clinger-Cohen Act of 1996, which require agencies to implement 
modern management practices for information technology management; and 
the 1996 refinements to the Single Audit Act, which outlines 
requirements for audits of federal assistance to State and local 
governments. Mr. Dodaro also led management reviews of the Department 
of Justice, the Internal Revenue Service, the Office of Management and 
Budget, and the Office of Personnel Management and has extensive 
experience working with State and local government officials.
    Mr. Dodaro, who holds a Bachelor's degree in accounting from 
Lycoming College in Williamsport, Pennsylvania, is a fellow of the 
National Academy of Public Administration and a member of the 
Association of Government Accountants. Mr. Dodaro has received many of 
GAO's top honors as well as recognition from outside organizations, 
including the American Society for Public Administration, the Institute 
for Internal Auditors, and Federal Computer Week. These include:

          The 2008 Association of Government Accountants' 
        National President's Award in recognition of outstanding vision 
        in leading GAO through a major transition and for partnering 
        with AGA to improve government financial management.

          The 2006 Association of Government Accountants' Elmer 
        B. Staats Award for improving government performance and 
        government accountability.

          The 2003 American Society for Public Administration's 
        and the National Academy of Public Administration's National 
        Public Service Award recognizing outstanding practitioners in 
        public service.

          The 2001 Association of Government Accountants' Frank 
        Greathouse Distinguished Leadership Award for sustained 
        outstanding leadership in financial management.

          The 2000 Institute of Internal Auditor's (D.C. 
        Chapter) Person of the Year for leadership in addressing the 
        Year 2000 computing challenge.

          The 1999 Federal Computer Week's Information 
        Technology Top 100 Award.

          The 1989 Arthur S. Flemming Award for outstanding 
        individual performance in government.

    Mr. Dodaro will serve as Acting Comptroller General until the 
President nominates, and the Senate confirms, a successor from a list 
of candidates that will be proposed by the Congress.
    Mr. Dodaro is married to the former Joan McCabe and has three adult 
children.

                               Discussion

    Chairman Miller. Thank you. By the standards the Committee 
has set and other witnesses have set you both were very close 
to your time limits, and I think it is probably a good thing 
that men in your position are rule followers. I look forward to 
seeing if the benefit of your example affects any Member of the 
Committee.
    I do now recognize myself for five minutes of questioning, 
and each Member here will have a turn.

               Information Transparency and Compatibility

    Mr. Devaney, the President, President Obama, promised a 
level of transparency through the Internet, Recovery.gov. The 
public was led to believe that that would be available, that 
would get right down to who got the contract for pouring 
asphalt. But it has been the experience of this subcommittee in 
the last two years, particularly with respect to IT projects, 
trying to assemble information from--in different forms from 
different agencies and put it all in one usable format, 
although that seems like that ought to be something readily 
accomplished, we find out that years later and millions of 
dollars later, what appeared to be a very qualified bidder got 
the contract and what they produced is worse than what they 
started with.
    How do you intend to provide that level of transparency to 
see how--who actually got the contract to pour asphalt?
    Mr. Devaney. Mr. Chairman, obviously it will probably be 
done through the Recovery.gov web site.
    Chairman Miller. Right.
    Mr. Devaney. And as I mentioned in my testimony that web 
site is evolving and developing, and I will be the first to 
admit today that web site doesn't give you that kind of 
information. The information, quite frankly, isn't there yet. 
It hasn't come back in yet, but it will have to be--the web 
site will have to be ready to receive the data that comes 
pouring back into the government in--October is the big date. 
So we have a challenge here. We have about 140 days to move 
very quickly from this electronic town hall, which I described, 
to where we get all these great ideas to, in the next week or 
two, moving into some sort of a competitive process and get the 
vendors working.
    It is an enormous challenge. The integration issues are 
profound, but I am optimistic by nature, a little bit--mixed in 
with a little bit of realism, but optimistic, and I think it 
can be done. And my hope, and our goal on the Board is that, 
you know, come October or shortly thereafter the American 
public will begin to see the data that they so desperately want 
to see. And we will ensure that that site gets better and 
better and better as time goes on. We are not going to stop in 
October, obviously.
    Chairman Miller. Okay. Mr. Devaney, are you going to build 
an IT team within your agency? Or are you going to rely upon 
private contractors? How do you plan to proceed?
    Mr. Devaney. Well, we have already assembled a team; a 
good, solid IT team. I think I have got the best and brightest 
in government. We have sort of stolen them, if you will, from 
other agencies. Borrowed them, and in some cases put a lot of 
leverage on agencies to provide us with the very best people 
they have. Combined with some contractor help we have and the 
vendors that will be involved in the building of this 
infrastructure I think we can get it done.
    Chairman Miller. Okay. Mr. Dodaro, you are facing much the 
same challenge. You are certainly familiar with trying to bring 
in diverse data, inconsistent data, agencies that use different 
formats, collect different data, et cetera, et cetera.
    What are your observations or thoughts on the task of 
creating from all that diverse data an integrated--from two 
different, from two dozen agencies creating that in a format 
that will be usable in a single format? Understandable.
    Mr. Dodaro. Yeah. First of all, I want to say I think that 
the goals that are set out by the legislation and by the 
implementing guidelines are very laudable goals, and I think 
set a standard for transparency and accountability in federal 
spending that haven't been set before.
    That being said, there will be definitely implementation 
challenges associated with making sure the data is complete, it 
is accurate, it is timely, and it is in an understandable 
format. And so those things can be achieved with a lot of 
effort, but it will be a challenge and a stretch goal, if you 
will, for the agencies in order to be able to achieve that.
    One of my earlier responsibilities was to help orchestrate 
the first ever financial audit of the Federal Government's 
financial statements, and believe it or not, prior to 1997, 
there was never a financial audit done of any federal 
department or agency, let alone the consolidated statements of 
the U.S. Government, and that was a monumental achievement, but 
it took time and effort. It can be done, and I think the 
commitment is there, but we will have to wait to see how 
implementation unfolds.
    Chairman Miller. Following the example set by the 
witnesses, my time has expired.
    Dr. Broun is recognized for five minutes.
    Mr. Broun. Thank you, Mr. Chairman. I have a question for 
both of you gentlemen.

               The Level of Detail in Tracking Contracts

    Current OMB guidance only requires that money be tracked 
two layers down. For example, a state and city would have to 
report data but not the contractor or subcontractor. Do you 
intend to require additional reporting beyond the OMB guidance, 
and do you believe two layers of accountability are enough to 
satisfy the President's promise that, ``Every American will be 
able to go online and see where and how we are spending every 
dime?''
    Mr. Devaney. I will answer that by saying that if I could 
make--wave a magic wand, I would want to follow a dollar from 
cradle to grave. As I said earlier, the division of labor here 
and as it should be, is that OMB is responsible for providing 
the guidance as to what needs to be reported. They are also 
going to be responsible for scrubbing the data, which is--my 
fellow witness mentioned this is going to be an enormous 
challenge to make sure that that data is accurate.
    So I think that we are going to have a situation where we 
are going wait, probably, for OMB to come out with some 
additional guidance in the future after a few quarters have 
gone by and we see where the missing gaps are, and I am going 
to push them very hard to give me as much data as possible.
    Mr. Broun. Do you intend to carry that all the way down to 
the ultimate consumer----
    Mr. Devaney. I would like to----
    Mr. Broun.--as the Chairman is talking?
    Mr. Devaney.--do that.
    Mr. Broun. So two layers is not enough?
    Mr. Devaney. I would like to get it down to where we can 
see where it went at the end of the day. That is--from an 
accountability standpoint.
    Mr. Broun. Mr. Dodaro.
    Mr. Dodaro. Yeah. I agree completely with what Mr. Devaney 
has just said. My understanding is that based upon input that 
had been received by GAO State and local officials and others, 
OMB is reevaluating the guidance that they have. I know this 
issue came up when I testified on this subject before the 
Senate, and the expectation is and the hope is that more 
complete reporting will be included in the next set of expanded 
guidance.
    I mean, it definitely needs to be on the manager's screen 
to make sure there is adequate accountability, and if you have 
that, and the real challenge will be to make sure it is in a 
cost-effective type of reporting approach. But you need more 
complete reporting.

                    Keeping Accurate Job Statistics

    Mr. Broun. I agree with both of you, and I think this 
promise that the President made is unfillable, and I don't 
think it is going to be, unfortunately.
    Mr. Devaney, the Americans for Tax Reform point out an 
interesting contradiction in their letter. President Obama 
recently claimed in his press conference marking his 100th day 
in office on April 29, that the stimulus act has already saved 
150,000 jobs. Don't know where he got that figure. Maybe pulled 
it out of the hat like a lot of these figures are.
    I also point out that the Bureau of Labor Statistics show 
1.3 million jobs lost since the President took office. Given 
that you are tasked with providing accountability with 
independence, how do you plan to verify the actual number of 
jobs created?
    Mr. Devaney. Well, sir, we haven't really received any 
information about that on the web site--to the Recovery Board. 
It hasn't come into us. I am assuming that those figures come 
from a council of economic advisors, which has been working in 
the jobs area and information--forthcoming information--
hopefully soon--will be coming forward about how to count jobs.
    So we don't have it yet. I eagerly await it, and as soon as 
I get it, we will put it up.
    Mr. Broun. Well, I appreciate that, and I hope that you 
will verify the numbers. I think very probably these numbers 
were just picked out of the clear blue sky and are not 
authenticated or authenticable at this point, but anyway, let 
me carry on.

                             Whistleblowers

    In her testimony, Ms. Brian describes Congress's decision 
not to provide meaningful protections for federal 
whistleblowers with respect to stimulus funding as, ``simply 
absurd.'' Separate from the absence of such protections what 
options are available to you as head of the RAT Board to assist 
in protecting federal whistleblowers?
    Mr. Devaney. Sir, I have been pretty aggressive about 
protecting whistleblowers in my former position as Inspector 
General of Interior. I don't intend to abandon that practice 
now. When the Board hears from a whistleblower, we are going to 
make sure that the appropriate IG gets the information, and if 
there is any charge of retaliation, I am going to be pretty 
aggressive about making sure that we try to put a stop to that.
    Mr. Broun. Thank you very much. I trust that you will and 
look forward to you doing so.
    Mr. Chairman, I am out of my time.
    Chairman Miller. An even better example for all of us.
    Ms. Dahlkemper is recognized for five minutes.

                         Indications of Success

    Ms. Dahlkemper. Thank you, and thank you both for coming 
today and speaking in front of us.
    As a new Member of Congress and someone who did vote for 
the Recovery Act, obviously I feel a lot of obligation to make 
sure that this money is spent in the way those of us who voted 
for it intended.
    So, Mr. Devaney, with that in mind, looking to the future, 
when you close down your office in 2013, what would you 
consider as success? Could you describe that to me, please?
    Mr. Devaney. Well, we have held fraud, waste, or 
mismanagement to an absolute minimum, that we have been able to 
prevent that from happening as opposed to merely detecting it 
after it happened.
    With respect to the web site, my hope is that this web site 
will serve as a prototype for how we provide transparency to 
the American people for years to come. I think if we do this 
right and take our time, do it right, and that transparency 
becomes part of what we do every day, that folks in the future 
will look to this web site as a model for how to build future 
models, to democratize the process.
    I mean, this is the very first time that I can recall that 
every dollar is being tagged by a specific title of Recovery 
funds, and for an IG that is very exciting because I get to--I 
get a better shot at making sure that none of it is wasted or 
fraud takes place.

                   Tracking Money at the Local Level

    Ms. Dahlkemper. I have asked my staff, particularly back in 
my district, to try to track what they can within my district. 
Can you give me any suggestions on what I should be trying to 
do back in my district in trying to make the transparency and 
the accountability there for the people in the third district 
of Pennsylvania?
    Mr. Devaney. Well, I am hoping to give everybody in the 
third district of Pennsylvania an opportunity--in the not too-
distant future--to be able, for instance, to go on that web 
site and put in a zip code and see the expenditures in their 
neighborhood or look at across the country. Can't do that now 
but I am very confident that in the coming months, in the short 
amount of months, we are going to be able to do that for you.
    Ms. Dahlkemper. Summertime, fall, end of the year? When do 
you----
    Mr. Devaney. Well, I----
    Ms. Dahlkemper.--have any thoughts on----
    Mr. Devaney.I stay awake a little bit at night worrying 
about October 10, which is when the data comes rushing into the 
government from the recipients, and so by then it has to work.

             Preventing Misuse of Grant and Contract Funds

    Ms. Dahlkemper. Okay. Thank you.
    And Mr. Dodaro, GAO has also been conducting extensive work 
on the government's acquisition resources. What improvements 
need to be made to enhance an agency's ability to intervene and 
prevent misuse of funds at a time when speedily completing a 
grant or contract action is also being emphasized?
    Mr. Dodaro. Yeah. The acquisition area is one, as you 
mentioned, that we have tracked a number of federal contracting 
activities on our high-risk list that we keep, and the 
acquisition workforce area, in particular, is important; that 
there be adequate numbers of people that are there in order to 
track some of the contracting activities. This has been a 
particular area we focus on at the Department of Defense, where 
they have doubled the amount of spending on contract services 
over the past several years, but the acquisition workforce has 
grown less than one percent. So having adequate numbers of 
people are important. People have to be trained properly. There 
has to be adequate reporting and monitoring of those 
activities.
    Now, there it is also important that the proper contracting 
vehicles be used, that there be competition in contracting 
whenever possible to ensure that the government has the best 
prices available for the services that they are trying to 
contract with.
    So those are some of the fundamental things that, you know, 
we think. In this area I know for the Recovery Act that the 
inspectors general have been focused on trying to provide some 
best practices, as we have up-front, to try to deal with the 
contracting activities and following these best practices to 
minimize potential problems going forward. But it is an area to 
keep an eye on as the Recovery Act money gets distributed over 
the next few years.
    Ms. Dahlkemper. Thank you very much.
    Chairman Miller. Thank you. We do have votes coming up 
shortly, but I will recognize myself for a second round of 
questioning, and we should have time for all three of us to ask 
a second round, and the second panel will probably be after a 
series of votes.
    I now recognize myself for five minutes.
    Mr. Devaney, I--it may be true that not all of the 
accountability we would--and transparency we would like to 
achieve with the Recovery Act is achievable right now, but the 
first step in achieving a government that is accountable and 
transparent is to elect people to office who will be 
transparent and accountable. And to see those obstacles not as 
an excuse for being opaque and unaccountable but as something 
to try to overcome and continue to try to overcome. And our 
experience in trying to provide as much transparency and 
accountability as possible now will improve our efforts later. 
It will be a continuing effort to get more and more accountable 
and more and more transparent.

                      Availability of Information

    Mr. Dodaro, in your testimony you said the Department of 
Energy--I believe that Mr. Whittaker has a couple of graphics 
that are--I think it is being displayed here for you. In your 
testimony you say that the Department of Energy has obligated, 
I assume contracted, $342 million of the funds allocated for 
the Office of Science. In the appendix of your testimony you 
provide a great deal of detail on the spending, but at the DOE 
Recovery Act web site it is very easy to find the 342 number in 
the total obligations----
    Mr. Dodaro. Uh-huh.
    Chairman Miller.--but kind of impossible to find the level 
of detail that you have provided in the Appendix.
    How did the GAO get the level of detail that you reported? 
Did I say Mr. Dodaro?
    Mr. Dodaro. Yes.
    Chairman Miller. Right.
    
    
    
    

    Mr. Dodaro. Right. Right. Our staff interviewed the people 
at the Department of Energy and looked at the supporting 
documentation available. You know, obviously we have more 
access to information than the general public would be, but 
that doesn't mean that the web sites could not be improved and 
additional level of detail there, and I think that is the 
expectation going forward.
    But we did it through normal auditing procedures that we 
have.
    Chairman Miller. What is the task of getting that level of 
detail that is in the Appendix? Your testimony available to all 
God's children with Internet access----
    Mr. Dodaro. Right.
    Chairman Miller.--which is most of God's children in this 
country at least now, up at a usable forum?
    Mr. Dodaro. Yeah. I think that the task is to just put in 
the disciplined processes necessary in order to achieve that, 
and as I mentioned earlier in response to Congressman Broun's 
question, I mean, this is a stretch goal for agencies to have 
that level of detail and timely reporting. It could be 
achieved, but there needs to be disciplined processes put in 
place to make sure that when it is posted, it is complete and 
accurate and timely, and I think that the expectation of the 
Administration moving forward is to try to get that level of 
detail provided.
    Now, that money has been, you know, obligated, and as 
things move through the process, you know, additional funds 
will become obligated, but I think the--it is just a matter of 
having the proper procedures in place.

            Agency Compliance With Recovery Act Requirements

    Chairman Miller. Okay. Mr. Devaney, our committee is 
looking into contracting issues that one of the agencies within 
our subcommittee's jurisdiction, our committee's jurisdiction, 
and our initial efforts suggest that the staff, the contracting 
staff are not particularly aware of the legal requirements of 
the Recovery Act. And that is worrisome, that if they don't 
know about, they are not going to do it very well.
    What efforts are either of you making to try to make sure 
that all those in government agencies know what the 
requirements are?
    Mr. Devaney. Well, we have our compliance, procurement 
compliance staff out there talking to the chief procurement 
officers of each of the agencies. I am not sure what agency you 
are referring to, but there is the visit, there is the 
opportunity I had to speak to the Cabinet on a couple of 
occasions and talking about, you know, the work that we were 
seeing initially was sloppy, that mistakes were being made. It 
is probably true that this is--goes on all the time, but the 
sunlight has never been shone on this work before.
    So I know the Vice President, for instance, challenged the 
Secretaries to make sure that those kinds of guidance pieces 
that are coming out of OMB get down to the lowest level, which 
is not always the case in most big departments. And every time 
we have an opportunity to interact with those levels, we are 
trying to be helpful and informative to them as to what the 
rules really are.
    Mr. Dodaro. Yeah. I would just say in response to your 
question about, you know, our activities here, our 
responsibilities under the Recovery Act are mostly to track the 
uses of the funds at the State and local level, so we have been 
deferring to the inspectors general to work with the federal 
departments and agencies.
    Now, what we will plan to do is coordinate with them, if we 
see some gaps or other areas that we can help out in, we will 
do that as part of our coordination of follow-up activities.
    Chairman Miller. Okay. My time has expired.
    Dr. Broun for five minutes.

                 Oversight at the State and Local Level

    Mr. Broun. Thank you, Chairman. Just going along with what 
the Chairman was just asking, State and local governments and 
even the private sector are being overwhelmed with both funding 
and new transparency requirements.
    Does the Act allow states to use stimulus money to increase 
their ability to comply with transparency and accountability 
requirements, and do you have any recommendations on how the 
Federal Government can assist State and locals in meeting these 
requirements?
    For both of you, please.
    Mr. Dodaro. I would say, you know, in our first report, 
Congressman, last month we recommended that OMB clarify this 
very point. Now, some of these programs or existing programs 
that allow for administrative expenses to be recouped, a 
certain percentage of them, there are indirect costs, rate 
allocations that are in some of the programs, but there is a 
lot of confusion out there at the State and local level, and we 
recommended that OMB clarify this. And I think they have a 
number of options available to them in order to do this. Our 
understanding is they are looking at this very carefully and 
hope to clarify it soon.\1\
---------------------------------------------------------------------------
    \1\ OMB issued Memorandum M-09-18, ``Payments to State Grantees for 
Administrative Costs of Recovery Act Activities,'' on May 11, 2009.
---------------------------------------------------------------------------
    I think this is a very important issue because I do believe 
that a number of states have very legitimate concerns about 
their ability to implement adequate accountability, and this 
clarification if very important.
    Mr. Broun. Mr. Devaney.
    Mr. Devaney. Same thing. I think OMB is about to clarify 
that issue and maybe bring a little help to the states. I hear 
this every time I talk to them, and when asked if I would be 
supportive of even legislation that might help in this area, I 
have been--I have personally responded yes.
    So they need help. They are overwhelmed with this 
responsibility. As you know, the federal IGs get a considerable 
amount of money to perform oversight, and the states didn't get 
anything. So I am empathetic to that situation. I want to help 
them. I will do anything to help them and be very supportive of 
any effort to make sure that money gets down to them.
    Mr. Broun. Thank you. I appreciate that.
    I understand there is some legislation that is going to 
help mitigate this issue, but I think this Act has tremendous 
unfunded mandates all the way down even to the local contractor 
that people just don't understand. In fact, a lot of states 
have looked at opting out of various parts of this Act for that 
reason.

                    Results From the Online Dialogue

    Mr. Devaney, you noted in your testimony that you held an 
online dialogue to receive comments on how best to structure 
the Recovery.gov web site and how to best collect and analyze 
data.
    What, if any, notable consensus or theme emerged from this 
dialogue?
    Mr. Devaney. Well, I am still waiting for the official 
results from NAPA [National Academy of Public Administration], 
which was our partner in this, but my understanding is there is 
a number of really good, solid ideas that emerged from this 
exercise; some very notable people wrote to us and suggested 
things. As part of the process people were able to engage in 
running dialogue and actually vote at the end of the day, so I 
haven't seen the tallies of the votes, but, you know, we had 
been looking already, of course, at what is out there, but the 
people that I have doing that told me they were surprised by 
some of the ideas. We have got to consider them, but we have 
got to do it very quickly.
    Mr. Broun. When do you expect to announce how you plan to 
incorporate any suggestions as a result of that dialogue?
    Mr. Devaney. Well, I think we are going to move very 
quickly to the dialogue is being shaped by NAPA to reflect the 
buckets of information we got. We are going to take a look at 
that, then we are going to move very quickly to having some 
people in to show us things as opposed to just talking about 
them, and do that in a competitive way in a very short period 
of time.
    Mr. Broun. All right. Very good. Do you expect the 
information detailed on Recovery.gov will be maintained and 
updated throughout the life of the stimulus awards and grants?
    Mr. Devaney. Yes. Absolutely.
    Mr. Broun. Do you believe that it would be appropriate as 
Dr. Ellig suggested to include information on performance 
outcomes on the Recovery.gov web site?
    Mr. Devaney. I think the whole issue of performance metrics 
is an issue that we haven't really addressed yet, and as you 
may know, there is an advisory panel that is supposed to be 
appointed by the President to provide the Board with expert 
advice. I am very much interested in having some performance 
people or a performance person on that panel and have made that 
known.
    I want to very quickly get my hands around that as soon as 
I can find the time to--once the vendors are selected that that 
is being built, then I want to go back to the metrics and try 
to see what we can do in that area.
    Mr. Broun. I think it is very critical to have those 
performance metrics in place, and I thank you, sir.
    My time is up.
    Chairman Miller. Dr. Broun--Ms. Dahlkemper for five 
minutes.
    Ms. Dahlkemper. Mr. Devaney, during the drafting of the 
Recovery Act there was concern among the inspectors general 
that the Board had been given too much power to determine what 
investigations they would be allowed to pursue, or that there 
was insufficient protection against political interference with 
investigations. And ultimately the language in the Act made it 
clear that the inspectors general retain their independent 
discretion.
    I just want to ask if you are comfortable with the Act's 
language limiting the Board's authority in this area?
    Mr. Devaney. Well, if I had written it, I may have written 
it differently. I certainly am not about to tell an inspector 
general that they should not investigate something. I don't 
think I would ever do that. I think I have--I am expressing the 
view of the Board entirely, and I have made it known in any 
opportunity I have had before the IGs to tell them that. I am 
going to speak to them next week down at their annual retreat. 
I will reiterate that. The board is not about to tell somebody 
not to investigate something.
    So, that language--it is implied in the language that the 
Board would do that. We are not going to do that.
    Ms. Dahlkemper. Okay. That is good to hear. That is all I 
have. I don't have any further questions.
    Chairman Miller. I don't have any further questions either. 
We have not yet been called to votes. I suppose it makes sense 
to excuse this panel. Thank you very much for being here, and 
we will continue to talk with you about how to do this, and 
perhaps we should begin the second panel, although we will 
probably not be able to complete all the testimony of the panel 
before called to votes.
    We will all just be at ease for a second while everyone 
gets repositioned.
    The bell is calling us to vote, and I understand that Mr. 
Bilbray has already gone on over to vote. It doesn't take us 15 
minutes to get there, but it is an awkward time, so I think we 
will resume at the end of the last vote. Thank you very much. 
See you shortly.
    [Recess.]

                                Panel II

    Chairman Miller. Hello, again. I understand that Mr. 
Bilbray will be substituting for Dr. Broun for the second 
panel, and he will be here momentarily, but I will now 
introduce our second panel.
    Dr. Clarence Newsome is the President of Shaw University in 
Raleigh, a well-regarded institution, I think literally across 
the street from my district. Dr. Gary Bass is the Founder and 
Executive Director at OMB Watch, not OMB as my notes say. I do 
know the difference. OMB Watch has been very helpful to me, to 
my staff, to this subcommittee in the last two years.
    Dr. Jerry Ellig is the Senior Research Feller, Fellow--
Feller is actually the North Carolina pronunciation--at the 
Mercatus Center at the--at George Mason University. Ms. 
Danielle Brian is the Executive Director of POGO, the Project 
on Government Oversight, and Mr. Eric Gillespie is the Senior 
Vice President of Products, Technology, and Innovation and the 
Chief Information Officer of Onvia Incorporated, which has 
created the private stimulus watch web site Recovery.org.
    As you know from having been here before, you will each 
have five minutes for your spoken testimony. Your written 
testimony will be included in the record. When you have 
completed your spoken testimony, your oral testimony, we will 
begin with questions, and each Member will have five minutes to 
question the panel.
    It is the practice of the Subcommittee to take testimony 
under oath. Do any of you have any objection to taking an oath? 
No--all witnesses appear to nod that they had no objection. If 
not, do you have--you also have the right to be represented by 
counsel. Do any of you have counsel here? And all the witnesses 
nodded that they did not.
    As I said before, we ask you these questions to put you at 
ease. Please stand now and raise your right hand. Do you swear 
to tell the truth and nothing but the truth? Each of the 
witnesses took the oath.
    We will now begin with President Newsome.

     STATEMENT OF DR. CLARENCE G. NEWSOME, PRESIDENT, SHAW 
                           UNIVERSITY

    Dr. Newsome. Good afternoon, Mr. Chairman.
    Chairman Miller. Dr. Newsome, I think you need to turn your 
microphone on.
    Dr. Newsome. Okay. I will start again then. Good afternoon, 
Chairman Miller and Members of the Subcommittee on Science and 
Technology. I thank you for hosting this hearing to learn about 
how historically black colleges and universities, HBCUs as we 
call them, predominantly black institutions--PBIs--and other 
intended beneficiaries of the Recovery and Reinvestment Act 
funds are faring in accessing those dollars.
    I am delighted to be here as the President of Shaw 
University, a United Negro College Fund, UNCF, institution, and 
I am delighted to be here as a member of the Board of Directors 
of the National Association for Equal Opportunity in Higher 
Education, NAFEO.
    Shaw is the first, we claim, of the HBCUs to have been 
founded in the South; two colleges, one school, ten 
departments, employ 120 faculty members to serve approximately 
2,800 students by providing a variety of academic offerings 
that are geared towards today's employment market.
    With the initial phases of the work of Congress completed 
on the Recovery Act, the legislation states that the goals of 
the Recovery Act include, and I quote, ``To provide investments 
needed to increase economic efficiency by spurring 
technological advances in science and health.''
    The HBCU community, particularly through NAFEO, has at all 
times suggested that one critical measure of success in 
achieving this goal is the extent to which HBCUs and other 
under-resourced institutions are able to access Recovery funds 
to make improvements to their infrastructures and enhance and 
expand research capabilities.
    With this in mind I would like to share with you some of 
the challenges that Shaw University has experienced in seeking 
to access Recovery Act funds. While I refer to specific 
instances at Shaw, I can assure you that other institutions 
around the Nation like Shaw have had similar experiences in 
trying to access these funds.
    One of the largest challenges facing Shaw or any private 
institution in North Carolina is the lack of a mechanism for 
independent institutions to receive funds through the Recovery 
Act. The State of North Carolina thus far has limited funding 
to State institutions and State agencies, leaving Shaw 
University and many others unable to receive even the slightest 
assistance from these funds.
    Moreover, it is not clear at this point whether private and 
independent colleges will be able to participate in any 
meaningful way in the stimulus funding that has been made 
available to the state.
    In reaching out to federal institutions in order to seek 
assistance from Recovery Act funding, Shaw has continuously 
been met with uncertainty on the part of the agencies as to a 
process or procedure to direct these monies to private 
institutions. In addition, many agencies impose time 
constraints that make those funds all but inaccessible to such 
institutions.
    One instance of this is the requirement that funds be spent 
within too narrow of a timeframe after receiving them, or even 
after applying for them. For many private institutions of 
higher learning it is nearly impossible to get the three 
estimates on each portion of the job as required by federal 
law, sign the contracts, and schedule construction or other 
work before the time limit has expired.
    All of these challenges are made more difficult by the fact 
that many of the institutions seeking these funds are not 
planning to use them to begin a new program but to take a 
heretofore isolated program and expand it to improve 
infrastructure and vastly improve academic programs by 
institutionalizing them so they can be studied more extensively 
and more inclusively than the current arrangement allows.
    I want to share with you one example along that line, Mr. 
Chairman, at this point in order to stay within my timeframe. 
We have a wonderful program going on in Bertie County, North 
Carolina, with an experiment producing biodiesel fuel by way of 
growing canola seed oil. I want to just flash a picture up here 
right quick and show you how we are--this is the canola plant 
that is mostly grown in Canada. We are paying farmers in Bertie 
County to grow this plant, we are using the oil to produce 
biodiesel fuel. We are even putting fuel in the Bertie County 
buses. There is the machine that we are using. There is the 
bus. We are able to expand this program--we will be able to 
expand this program significantly with the help of some of 
these Recovery Act funds if they are made--not only made 
available to the NSF, but made available to us by way of a 
process that allows those funds to reach us.
    I have some recommendations that I would like to share 
perhaps upon the time that we come upon the question and answer 
session, but at this point in time I would say thank you very 
much for giving me an opportunity to come and share with you.
    [The prepared statement of Dr. Newsome follows:]
               Prepared Statement of Clarence G. Newsome
    Good afternoon Chairman Miller, Ranking Member Sensenbrenner, and 
Members of the Subcommittee on Science and Technology. I thank you for 
hosting this hearing to learn about how Historically Black Colleges and 
Universities (HBCUs), Predominantly Black Institutions (PBIs) and other 
intended beneficiaries of the Recovery and Reinvestment Act funds are 
faring in accessing those dollars targeted for providing ``investments 
needed to increase economic efficiency by spurring technological 
advances in sciences and health.''
    I am delighted to be here as the President of Shaw University, a 
United Negro College Fund (UNCF) institution, and as a member of the 
Board of Directors of the National Association for Equal Opportunity in 
Higher Education (NAFEO).

Background and Contextual Information

    Shaw University is located in Raleigh, North Carolina, in the 2nd 
Congressional District, represented by Congressman Bob Etheridge, and 
adjacent to the 13th Congressional District served by the distinguished 
Chairman of this subcommittee. Shaw is the oldest and, I believe, the 
best private co-educational liberal arts historically black university 
in the South. Founded in 1865, by Missionary Henry Martin Tupper, Shaw 
University is affiliated with the Baptist Church. Its former Leonard 
School of Medicine was the first four-year medical school to train 
black doctors and pharmacists in the South. Today, the primary mission 
of Shaw University is teaching with a commitment to maintaining 
excellence in research and academic programs that foster intellectual 
enhancement and technological skills. Two colleges, one school, and ten 
departments employ 120 faculty members to serve approximately 2,800 
students by providing a variety of academic offerings that are geared 
toward today's employment market.
    The University offers thirty (30) undergraduate majors and is 
accredited by the Commission on Colleges of the Southern Association of 
Colleges and Schools to award the Associate, Bachelor's and Master's 
degrees. Three of its academic programs also have national 
accreditation. The Shaw Divinity School is one of only a handful of 
divinity schools in the State of North Carolina to earn full 
accreditation from the Association of Theological Schools (ATS) in the 
United States. The kinesiotherapy program is accredited by the American 
Kinesiotherapy Association and the teacher education program is 
accredited by the National Council for Accreditation of Teacher 
Education. The latter program is also approved by the North Carolina 
Department of Public Instruction. The University's science program 
attracts funding from major donors interested in increasing the number 
of minority students in scientific research.
    In addition to its emphasis on teaching, Shaw University stresses 
character development, which includes religious, cultural, social, and 
ethical values.
    Shaw University in one of the Nation's 103 mission-based, equal 
educational opportunity institutions federally designated as 
Historically Black Colleges or Universities (HBCUs).
    HBCUs, as a class of diverse institutions, were established in 
America in the mid-1800s to welcome, nurture, and develop the progeny 
of the slave system. Unlike nearly all other American colleges and 
universities, however, from their inception, HBCUs have been open to 
students, faculty, and administrators of all races, colors, creeds, 
ethnicities, religions and both genders, except in student bodies of 
institutions whose expressed mission was to provide education to 
exclusively males or females. HBCUs have, through the years, 
collectively offered academic and employment opportunities and 
attendant benefits and privileges to all without regard to non-bona 
fide criteria or considerations, except where State law prohibited the 
same. They have been and to this day, are menders and healers for 
wounded minds and restless souls. They have produced, and continue to 
produce, sterling talent that has benefited the Republic immeasurably, 
not only in material contribution, but also in intellectual, cultural, 
moral, and spiritual offerings. These institutions have backgrounds of 
perpetual service to all people, with missions and goals of making 
educational opportunities a reality rather than an empty 
expectation.\1\ They are providing students with the intercultural, 
interpersonal, and political skills with which to compete and thrive in 
a diverse yet still Balkanized world.
---------------------------------------------------------------------------
    \1\ Baskerville, Lezli, President & CEO, National Association for 
Equal Opportunity in Higher Education (NAFEO) initially included these 
observations in Supreme Court briefs in The Regents of the University 
of California v. Allan Bakke (No. 76-811, October Term, 1976) and later 
in United Steel Workers of America, AFL-CIO, Kaiser Aluminum & Chemical 
Corporation, United States Equal Employment Opportunity Commission v. 
Brian Weber (Nos. 78-432, 78-435, 78-436, October Term 1978). They have 
been republished in several reports and publications since then with 
the author's permission.
---------------------------------------------------------------------------
    America's black colleges and universities remain at the creative 
forefront of American education, offering the tools and skills 
necessary to prepare students to promote peace at home and abroad; 
secure our communities and our homeland; meet pressing global and 
community health care needs; and fight injustice with the power of 
ideas, and by closing the achievement gap and opening doors of 
opportunity to those who are ill-served by many of the systems in our 
communities and the Nation. They are continuing to do more for students 
with fewer resources than any other higher education institutions.
    Most HBCUs are the economic engines in their communities. According 
to a 2006 report by the National Center for Education Statistics, the 
short-term economic impact of HBCUs is $10 billion. Short-term economic 
impact was defined in that report by the expenditures of the colleges 
and universities on salaries and other institutional expenditures, and 
the expenditures of undergraduate, graduate, and professional students 
attending the institution in the communities in which the institutions 
are located. This figure does not capture the vast other multipliers 
for out years.
    In testimony before the National Association for Equal Opportunity 
in Higher Education, April 3, 2009, in Atlanta, Georgia, on ``Ending 
the Cradle to Prison Pipeline, Establishing a Cradle to College and 
Career Pathway,'' Lynn Huntley, Esquire, President of the Southern 
Education Foundation (SEF), cited Department of Commerce data that also 
substantiate the major economic benefits provided by HBCUs to the 
communities and states in which they are located. Huntley noted that 
the economic impact of HBCUs ``is evident not only in the job creation 
and community investment terms, but in upgrading the skills, earning 
potential, and taxpaying capacities of their students.'' Huntley cited 
a U.S. Department of Commerce study that found ``The total employment 
impact of . . . [101 HBCUs] included 180,142 total full and part-time 
jobs . . .. To put that into perspective, the rolled-up employment 
impact of the Nation's HBCUs exceeds the 177,000 jobs at the Bank of 
America in 2006, which is the Nation's 23rd largest employer.''
    HBCUs foster innovation, economic growth and social mobility for 
disproportionate percentages of low-income and middle-income students, 
and they remain the primary source of new knowledge that will fuel the 
Nation's economic engine in the future.
    These richly diverse institutions, that are stimulating the 
economies in their service areas and producing excellent, diverse 
students in disproportionate numbers in the teaching profession as well 
as in other high need disciplines and growth disciplines (health, the 
sciences, engineering, technology), are provided voice with public and 
private policy-makers and policy shapers across the country by the 
National Association for Equal Opportunity in Higher Education (NAFEO).
    NAFEO is the 501(c)(3) not-for-profit, national membership 
association of the diverse class of institutions known as HBCUs and the 
new Predominantly Black Institutions (PBIs) added to the constellation 
of American colleges and universities by the Higher Education 
Opportunity Act of 2008.
    Founded in 1969, by a group of presidents of Historically Black 
Colleges and Universities, NAFEO is ``the voice for blacks in higher 
education.'' The association represents the presidents and chancellors 
of the Nation's black colleges and universities: public, private and 
land-grant, two-year, four-year, graduate and professional, 
historically and predominantly black colleges and universities in 35 
states, the District of Columbia and the Virgin Islands, and the 
500,000 students, 53,000 faculty and five million alumni represented by 
NAFEO member institutions.
    The 39 private black colleges and universities that belong to UNCF 
are members of NAFEO, including Shaw University and Saint Augustine's 
College, the other HBCU located in Raleigh, North Carolina, as well as 
Bennett College, Johnson C. Smith University, and Livingstone College, 
the other accredited private HBCUs located in North Carolina. Elizabeth 
City State University, Fayetteville State University, North Carolina 
A&T State University, and Winston Salem State University, North 
Carolina's public HBCUs, are among the 47 public colleges and 
universities that belong to the Thurgood Marshall College Fund, and are 
also NAFEO member institutions. The NAFEO membership also includes the 
18 HBCU land-grant universities, black two-year institution that belong 
to the American Association of Community Colleges and other equal 
educational opportunity institutions that belong to the new class of 
Predominantly Black Institutions (PBIs).
    NAFEO was founded to provide an international voice for the 
Nation's HBCUs; to place and maintain the issue of equal opportunity in 
higher education on the national agenda; to advocate policies, programs 
and practices designed to preserve and enhance HBCUs; and to increase 
the active participation of blacks at every level in the formulation 
and implementation of policies and programs in American higher 
education.

HBCU Championship of Inclusion of Higher Education Institutions in 
                    Recovery Act

    Having established the reason and context for my appearance before 
you today, I thank you Chairman Miller and Members of this Oversight 
and Investigations Committee for holding this important hearing. Your 
examination of how different groups are faring in accessing and using 
Recovery Act funds at this juncture is especially important because it 
gives Congress time before all of the Recovery Act funds are disbursed, 
to make recommendations for any adjustments that may be suggested by 
what you learn from these hearings and your other investigative and 
oversight work.
    Shaw University and NAFEO were pleased to be among the early 
champions of the inclusion of America's colleges and universities in 
the American Recovery and Reinvestment Act. Speaking before four 
Presidential Transition Team work groups on behalf of HBCUs and PBIs, 
NAFEO President Lezli Baskerville talked about the immediate research 
and infrastructure needs of disproportionate numbers of HBCUs and PBIs 
that reported deferred maintenance needs in the billions of dollars, 
and that had large numbers of shovel-ready infrastructure projects, 
campus greening and sustainability projects. NAFEO proposed the 
establishment of a higher education infrastructure initiative to 
support campus infrastructure projects that would provide jobs 
immediately, strengthen the academic capacity of colleges and 
universities, and stimulate the economy of the service areas of the 
colleges and universities.
    In making the case to Members of Congress and the Presidential 
Transition Team for the proposed HBCU infrastructure grant program, and 
for additional research dollars, NAFEO made a clear and compelling 
nexus between the strengthening of HBCUs and stimulating the economy. 
Among other things, we cited findings from NAFEO's signature 
publications, The State of America's Black Colleges: Expanding Access, 
Ensuring Success, Promoting Global Competitiveness (Beckham 
Publications Group, 2008) and The State of Blacks in Higher Education 
(Beckham Publications Group, 2009)--copies of which have been provided 
to every Member of this committee. These publications respectively 
describe the strengths, accomplishments, challenges and promise of 
HBCUs, and make a compelling economic case for additional investments 
in HBCUs. They document the tremendous progress that blacks have made 
in attaining college degrees, disproportionate percentages of whom 
receive degrees in high need and growth fields from HBCUs. The State of 
Blacks in Higher Education notes, for example, that HBCUs lead the 
Nation in awarding degrees in the sciences, technology, engineering, 
and mathematics (STEM): From 1996-2005, HBCUs accounted for seven of 
the top ten institutions awarding life and medical science degrees to 
black women and nine of the top ten institutions warding life and 
medical science degrees to black men. In 2006, 18 percent of all black 
Ph.D.s in the life sciences received their Bachelor's degrees from 
HBCUs. We argued additionally that given that HBCUs compose roughly 
three percent of all institutions, they are doing a disproportionate 
share of the work in preparing black students for positions and 
research in the sciences. They must be afforded an adequate level of 
public funding to shore up their laboratories, other facilities, and 
their infrastructures to enable them to continue their great work and 
keep pace with increasing demands.
    The fact that an increasing number of students in the traditional 
age group of 18-24 years old seek to finish a degree or to learn new 
skills when the economy stumbles; because an increasing number of 
persons in the workforce are expected to return to colleges and 
universities to retool during these austere times, and large numbers of 
Veterans will be returning to the civilian workforce and look to our 
colleges and universities to assist in transferring military skills to 
the civilian labor force as well as learning new skills; and because 
the cost of a private HBCU is $10,000 less than its traditionally white 
counterpart on average, according to The College Board's ``Cost of 
College'' report, enrollments are likely to surge at HBCUs in the 
coming months. Our institutions must be prepared.
    For all of the above reasons, NAFEO appealed to Congress as it was 
acting to shore up our economy and stimulate future prosperity and 
productivity, to include America's colleges and universities in the 
plan, especially HBCUs, PBIs, and other Minority-Serving Institutions 
(MSIs).
    We appealed for support for TRIO and GEAR UP programs--pipeline and 
retention programs for many of our students. We urged an increase in 
the Pell maximum, a refundable education tax credit, to assist students 
during this economic downturn, and an increase in work-study dollars. 
Along with the Hispanic Association of Colleges and Universities 
(HACU), we appealed for support for the Minority-Serving Institutions 
Digital and Wireless Technology Opportunity Act of 2008, enacted by the 
110th Congress in the Higher Education Opportunity Act.
    Recognizing the importance of science and research to promoting 
short- and long-term economic growth, we urged support for increased 
funding for science and technology programs targeted at HBCUs, MSIs, 
low-income, first generation, traditionally under-served students, 
including the Course, Curriculum, and Laboratory Improvement (CCLI) 
Program at the National Science Foundation, and an NSF instrumentation 
acquisition focused on education in the STEM areas, and other targeted 
stimulus programs.
    We worked indefatigably to include a separate line item for 
educational infrastructure and within that provision, for an 
infrastructure program for HBCUs that would provide funding to be 
distributed within 90-days to public and private, two-year and four-
year, non-profit institutions of higher education to support ``shovel 
ready'' projects to modernize, renovate, repair or construct academic 
and research facilities and student housing; and for campus greening 
and sustainability projects. We additionally sought funding for the 
HBCU Historic Preservation program, administered by the Department of 
Interior, and for the suspension of the matching funds requirement for 
that program. We submitted to Members of Congress and the 
Administration documentation that the HBCU community has hundreds of 
millions of dollars of infrastructure, greening, and historic 
preservation projects ready to go, ``but for'' the funding.
    The HBCU Community also sought funding in the stimulus bill for 
loan subsidies for the HBCU Capital Financing Program (Title III, Part 
D of the Higher Education Act) that would allow the Secretary of 
Education and the Secretary of the Treasury to guarantee an additional 
$61 million in loans, including those in the pipeline for FY 2009.
    As with all education and legislative processes, the American 
Recovery and Reinvestment Act, as passed, included some of the 
priorities of the HBCU and PBI communities and not others. We were 
pleased to get HBCU ``Recovery Act'' Preservation Grants that included 
the suspension of the funding matching requirement; a $500 increase in 
the Pell Grant maximum; funds for higher education institution 
modernization, renovation, repair of facilities used for instruction, 
research, student housing, for both public and private college 
facilities (the letter in the State Fiscal Stabilization Funds for 
Government Services in DOEd). We were also pleased to have included in 
the Recovery Act funds for a number of new or enhanced targeted health, 
math, science, engineering, and teacher preparation programs.

HBCU Skepticism About the Award of Recovery Funds Through States

    NAFEO underscored that including HBCUs and PBIs in the American 
Recovery and Reinvestment Act could assist HBCUs and MSIs to become 
equipped to play a central and vital role in stimulating the economy, 
putting our nation on the path to economic prosperity and returning it 
to global eminence. We admonished, however, that many in the HBCU 
community were concerned that if the Recovery Act funds were 
administered by the states, HBCUs and other institutions and 
communities of least advantage, that have historically been ill- or 
under-served by their states, might not fare well in accessing the 
Recovery dollars. We argued:

         ``. . . that the higher education programs not be funded 
        through the states. HBCUs and other institutions and programs 
        serving disproportionately large percentages of low income, 
        first generation, traditionally under-served populations 
        historically and to this day have not fared well in receiving a 
        fair share of public dollars distributed through the sovereign 
        states. In the context of the economic stimulus bill, grants to 
        the states for the benefit of HBCU/MSIs are unnecessary and 
        they introduce a level of bureaucratic decision-making that is 
        unlikely to serve the best interests of our institutions. 
        Existing federal programs can be used to provide funds to HBCUs 
        and to MSIs. We urge you to adopt this approach in your bill. 
        HACU shares our view that this would be in the best interest of 
        the HBCU and MSI communities . . ..''

    With funding in the final bill provided through the states, and 
with no separate line item for educational infrastructures, (although 
stabilization funds could be used for higher education infrastructure 
needs), we worked to assist in shaping the report language, procedures 
and regulations for accessing the Recovery funds that would flow 
through the states. We urged specifying that in distributing funds the 
governor shall allocate all funds between public and private higher 
education institutions, giving priority to those institutions that 
educate disproportionate percentages of low-income, first generation, 
traditionally under-served students; those which the have the smallest 
endowments; and those located in geographic areas of highest distress.

HBCU Challenges and Successes Accessing Recovery Act Resources

    With the initial phases of the work of Congress completed on the 
Recovery Act, the legislation stated that the goals of the Recovery Act 
as passed include, ``. . . to provide investments needed to increase 
economic efficiency by spurring technological advances in science and 
health.'' The HBCU Community has at all times suggested that one 
critical measure of success in achieving this goal is the extent to 
which HBCUs, MSIs, and other under-resourced institutions that are 
preparing disproportionate percentages of the growing populations in 
the labor force are able to access Recovery funds, to make improvements 
to their infrastructures and enhance and expand research capabilities.
    With this in mind, I would now like to share with you some of the 
challenges that Shaw University has experienced in seeking to access 
Recovery Act funds. While I will refer to specific instances at Shaw 
University, I can assure you that private institutions, HBCUs, MSIs, 
and PBIs around the Nation have had similar experiences in trying to 
access these funds.
    One of the largest challenges facing Shaw, or any private 
institution in North Carolina, is the lack of a mechanism for 
independent institutions to receive funds through the Recovery Act. The 
State of North Carolina, thus far, has limited funding to State 
institutions and State agencies, leaving Shaw University and many 
others unable to receive even the slightest assistance from these 
funds. Moreover, it is not clear at this point whether private and 
independent colleges will be able to participate in any meaningful way 
in the Stimulus Funding that has been made available to the state.
    In reaching out to federal institutions in order to seek assistance 
from Recovery Act funding, Shaw has continuously been met with 
uncertainty on the part of the agencies as to a process or procedure to 
direct these monies to private institutions. In addition, many agencies 
impose time constraints that make those funds all but inaccessible to 
such institutions.
    One instance of this is the requirement that funds be spent within 
a certain amount of time after receiving them, or even after applying 
for them. For many private institutions of higher learning it is nearly 
impossible to get the three estimates on each portion of the job as 
required by federal law, sign the contracts, and schedule construction 
or other work before the time limit has expired.
    All of these challenges are made more frustrating by the fact that 
many of the institutions seeking these funds are not planning to use 
them to begin a new program, but to take a heretofore isolated program 
and expand it to improve infrastructure, and vastly improve academic 
programs by institutionalizing them so they can be studied more 
extensively and more inclusively than the current arrangement allows.
    For instance, Shaw University has a history of success in 
developing programs through federal grants. In particular, Shaw 
University has pioneered in the research of photovoltaic/solar energy 
and in the production of biodiesel fuel. Our work in the area of 
photovoltaic/solar energy has been funded by a Department of Defense 
contract, which was awarded to the University to develop third-
generation photo cells for military drones. This contract, however, 
allows only enough funds to complete the specific project, and not 
enough to integrate ongoing study or future development into our 
science curriculum.
    Additional funds would allow Shaw to take these findings and 
developments and create a solar energy infrastructure on its main 
campus that would all but nullify the need for external power sources. 
This would save the institution a great deal of money and possibly 
generate revenue by selling excess energy to the local power companies. 
Just as importantly, it would provide instructional opportunities for 
students throughout our math and sciences programs to help design, 
implement, monitor, and study a working solar plant of a significant 
size.
    Obviously, with the growth of Green Energy technology throughout 
the Nation and the world, this educational experience would afford our 
students a remarkable head start on a new career, and set the stage for 
powerful advancements in the field in the years to come.
    Another example is the University's biodiesel project funded by the 
National Science Foundation. This program has received over 2.5 million 
dollars in NSF funding not tied to the Recovery Act. It is beginning to 
produce results that could revolutionize the energy industry and the 
farming industry, while helping to economically revitalize Bertie 
County.
    Currently, farmers in Bertie County, a county that has been 
economically depressed for generations, are being paid out of the grant 
to grow canola plants. These plants can be used to manufacture canola 
oil, a healthy cooking oil. Currently, 90 percent of all canola oil 
consumed in the United States is imported from Canada.
    Even more importantly for this nation's environmental, economic, 
and energy production future, these crops have been converted into a 
biodiesel fuel that is currently being used to power cars and, quite 
cost-effectively, some Bertie County school buses. This fuel could one 
day power a large energy production plant. In fact, it is Shaw 
University's intention to expand this program in order to create the 
first zero-waste power plant in the State of North Carolina.
    This means that farmers who had formerly been totally dependent, 
for example, on tobacco, cotton, and peanut farming in order to make a 
scant living, can possibly grow a new cash crop, and play an important 
role in energy production.
    But the program does not end there. This project has also begun to 
look into the use of biowaste for energy purposes, and is reaching out 
to many of the same farmers, as well as expanding to involve other 
farmers in the Roanoke/Chowan region of the state, to identify possible 
waste streams and begin to look at new ways to use these materials for 
energy production.
    For example, chicken waste is a known carcinogen and an 
environmental hazard. Our project is researching ways to convert 95 
percent of this material for energy production, thus all-but-negating 
the cancer risk, and vastly reducing its adverse environmental impact.
    This program is exactly the type of program the Federal Government 
appears interested in funding, and it has had successes well worth the 
investment made by the government. Recovery Act funds, if accessible to 
Shaw University, would allow us to expand the program. We could involve 
more farmers, create more renewable energy, and make new strides in 
developing biowaste applications. In addition, we could partner with 
the agricultural high school in the county to improve their access to 
the project for study, enable more Shaw students to have hands on 
experiences, and improve the distance education facilities of our 
satellite campus in Bertie County.
    In addition, our Institute for Health, Social, and Community 
Research could connect to the biodiesel fuel project in order to study 
the health challenges and needs of minority and impoverished farm 
communities. This research could help to identify and address some of 
their particular concerns. In addition to addressing the need for 
better diagnosis, treatment, and care of diseases such as hypertension, 
diabetes, etc., the IHSCR could also explore the unique health needs of 
the farming community, such as the one in Bertie County, including 
possible environmental factors that could be creating health issues.
    Many institutions are not asking to start programs, but merely to 
expand and institutionalize them. Without access to these, or other 
similar, funds, these projects could grow, blossom, and then run the 
very serious risk of dying on the vine.
    Other institutions in the HBCU community have experienced similar 
challenges to accessing the Recovery Act funds. In the few days since 
we received the invitation to appear and testify this afternoon, we 
learned from NAFEO members that, because of the 90-day expenditure 
requirement, in order to learn about the funding opportunities and 
respond in a timely manner, institutions have had to reassign staff 
members so that one person monitors multiple web sites several times, 
weekly. For many member institutions, including Shaw, the economic 
downturn has forced layoffs of many staff, meaning that there is no one 
to track down funding opportunities, so these resources prove to be 
unavailable to them.
    Because of the tremendous needs and breadth and scope of 
disciplines spanning many federal and State agencies, staff with a 
clear understanding of the mission and priorities of the colleges and 
universities, and ideally with expertise in institutional advancement 
and government relations must monitor their State web site and multiple 
web sites of federal agencies. They report that the State stimulus 
accountability web sites and www.Recovery.gov web site are helpful. Our 
members have found very useful the regional briefings provided by 
NAFEO, UNCF, TMCF, and the White House Initiative on HBCUs, none of 
which would have been effective without close collaboration with front-
line administrators in a wide range of federal agencies and their 
regional colleagues.
    Our members report challenges in communicating with the states 
because, in many instances, there is only web site access or access to 
information through the respective congressional districts, all of 
which are overwhelmed by the volume of activity in the abbreviated 
timeframe. Without sufficient staff persons to assign a full- or even 
majority-time staff member to the function of reviewing information on 
the various web sites and culling from the information sufficient 
details to make a recommendation as to whether their institution is 
eligible to participate and if the solicitation is aligned with the 
priorities of the institution, several NAFEO members reported missing 
funding opportunities. Our members are relying on our membership 
services associations to augment the work of our staffs in tracking and 
reviewing Recovery Act opportunities. These include not only NAFEO, 
UNCF, and TMCF, but also CIC, NAICU, NASULGC, and ACC, each of which 
was reported as being helpful by one or more NAFEO members. Several 
noted that their congressional offices and the web sites and 
newsletters of their Members are helpful.
    Some members who are able to track and identify opportunities 
online or through other channels in time to make use of them reported 
other barriers to participation, including the short turnaround time 
between the posting of the opportunity and the required submission of 
the proposal. A common concern was the lack of adequate time to prepare 
competitive submissions. Those colleges and universities in which the 
personnel in the Office of Sponsored Programs ``wear several other 
hats,'' as is true in most HBCUs, are at a particular disadvantage in 
this accelerated information dissemination/gathering and grant-making 
process.
    The gravest concerns appear to be related to the processes by which 
some states are notifying constituent institutions about the 
opportunities. Many report that the traditional notification and 
publication requirements appear to have been dispensed with or 
abbreviated in an effort to move resources rapidly. This truncated 
process could only be equitable in this economic crisis if there were a 
concurrent affirmative outreach and notification requirement to those 
communities and institutions in targeted stimulus communities, 
including communities of highest distress and institutions that serve 
disproportionate percentages of people from distressed districts.
    We received a report from the State of Arkansas that one NAFEO 
member institution was included in the state's plan because a member of 
the board happened to be in the governor's mansion at the time the 
finishing touches were being added to the plan. Another, which has 
fared especially well in recent years in strengthening the institution 
and its service area and garnering both public and private resources, 
was not aware of the time or process for decision-making. In 
Mississippi, one institution was incorrectly informed that as a private 
institution, it did not qualify for any State Recovery funds. The 
Department of Education's web site clearly indicates that under the 
State Fiscal Stabilization Funds for Government Services provision, 
modernization, renovation and repair funds are available for both 
public and private college facilities.
    One university that has adequate staff to be positioned well in 
this process, and which prepared 25 submissions for funds under the 
Recovery Act, has made no headway at the federal or State level, 
despite being vigilant, and maintaining continuous connections via 
telephone, e-mail, and pounding the pavement.
    One of the large, two-year public college systems reported faring 
well in accessing Recovery dollars. They received $1.5 million for a 
seven-week summer program to train WEA certified, inner city youth ages 
19-24 years old, for jobs the city needs to fill immediately. While 
training, the students will work on the campuses in positions not 
covered by union agreement. The students will earn between $9 and $12 
dollars per hour. This system was also included in the Community 
Development Dislocated Worker plan. Even in this instance, concern was 
raised about the level of bureaucracy as a barrier to securing the 
grant. The institution had to seek inclusion at the State level, in the 
city plan, and in the plan of the workforce board to ultimately access 
the resources.
    In the two days provided us to gather information from our members 
for this hearing, we received no reports about efforts to access NSF 
funds. We anticipate forthcoming reports that we will forward to the 
Subcommittee. The National Science Foundation (NSF) has a long history 
of making limited awards of research, facilities and program dollars to 
HBCUs. For example, according to data from NSF, six of the top 20 
predominantly white universities received more federal funds for 
research than 79 HBCUs combined. (Richard J. Bennof, ``FY 2005 Federal 
S&E Obligations Reach Over 2,400 Academic and Nonprofit Institutions; 
Data Presented on Minority-Serving Institutions,'' National Science 
Foundation NSF 07-326 (revised), Directorate for Social, Behavioral, 
and Economic Sciences, October 2007).
    The NSF report shows that despite a clear and quantifiable record 
of success at educating African American scientists and engineers, 
HBCUs continue to receive disproportionately fewer federal dollars. The 
data show that among public four-year colleges, 31.1 percent of black 
students are majoring in engineering or science compared to 25.9 
percent at non-MSIs. At private not-for-profit four-year colleges, 27 
percent of black students at HBCUs major in engineering and science 
compared to 20.8 percent at non-minority-serving institutions. (William 
E. Spriggs, ``Major Trends Facing Historically Black Colleges and 
Universities'' in The State of America's Black Colleges (NAFEO, 2008. 
Beckham Publications Group, p. 2). The data also demonstrate that 
roughly 50 percent of black students who receive a four-year degree in 
the natural and physical sciences, do so from an HBCU. The State of 
Blacks in Higher Education (NAFEO 2009, Beckham Publications Group, p. 
vii).
    We are eager, therefore, to determine how HBCUs fared at accessing 
NSF funds for research grants. While we had no member reports at the 
time we submitted this testimony, NAFEO was disappointed to learn from 
a review of the NSF web site that while NSF will receive an additional 
$2 billion for Research and Related Activities, the Foundation plans to 
primarily fund proposals that are already in house. ``[T]he Foundation 
does not anticipate a substantial increase in proposal submissions or 
requests to review proposals beyond what has already been put in place 
for FY 2009.''
    Relative funding priorities, the NSF notes on its web site, 
``Funding of new Principal Investigators and high-risk, high-return 
research will be top priorities. With the exception of the Academic 
Research Infrastructure Program, the Science Masters Program, and the 
Major Research Instrumentation Program, the majority of proposals 
eligible for Recovery Act funding include those that are already in-
house and will be reviewed and/or awarded prior to September 30, 2009. 
NSF also will consider proposals declined on or after October 1, 
2008.'' We hope that in spite of these public pronouncements, NSF will 
use some share of its additional funding to expand opportunities and 
funding to institutions like HBCUs, that can serve as incubators for 
research on eliminating all of the major disparities in this nation in 
order to restore it national eminence. These institutions have also 
developed models of excellence in health and wellness, greening and 
sustainability, teacher preparation, and in so many other fields that 
are central to stimulating our economy and strengthening our 
communities.
    We urge and encourage NSF to set aside some of its Recovery funds 
for science instruction instrumentation purposes at HBCUs. This 
proposal was advanced by Congresswoman Eddie Bernice Johnson as an 
amendments to the American Recovery and Revitalization Act of 2009. It 
would have been inestimably helpful to HBCUs, many of which are not 
major research institutions, but which, nonetheless, prepare 
disproportionate numbers of African American students to pursue 
advanced and terminal degrees in the sciences, technology, engineering 
and mathematics. These funds would permit HBCUs to purchase sorely 
needed science instrumentation for instruction, not research.
    We eagerly await the results of the solicitations under the NSF 
Math and Science Partnership Program. NSF Targeted Partnerships seek to 
improve student achievement in math or the sciences. Its Institute 
Partnerships seek to meet the national needs for ``teachers who have 
deep knowledge if disciplinary content and are school-based 
intellectual leaders in mathematics and science.'' Given the record of 
HBCUs in preparing disproportionate numbers of diverse students in math 
and the sciences, and its record of graduating 50 percent of African 
American teachers, we anticipate that our members will fare well in 
this competition.
    NSF funds are especially important to HBCUs to assist them to 
continue to attract, retain, adequately train, and graduate highly 
talented students in the growth and high need disciplines.
    HBCUs also have special interests and capabilities in securing 
their communities and our Homeland; greening their campuses and 
communities; championing resource management and conservation; 
promoting energy conservation, energy efficiency and renewable energy 
and the range of issues relating to the sustainability of our campuses, 
communities and our planet. We would like to be a good and long-term 
partner with the Federal Government, the states and our service 
communities in these regards. We have the will and many of our 
institutions are today poised to lead in some of these efforts. We need 
adequate resources.

Recommendations

    To provide HBCUs a better opportunity of accessing the Recovery Act 
dollars they need to make the investments in their infrastructures and 
research capabilities, and to better position these equal educational 
opportunity institutions that are serving disproportionate percentages 
of the growing populations of the states to better meet the education, 
training, economic, research, civic, social, ecumenical, health and 
human services needs of the communities in which they are located, we 
propose the following:

        1.  Because large numbers of HBCUs and MSIs may not be able to 
        participate fully in playing their important role in 
        stimulating the economy and preparing the next cohort of 
        scientists, teachers, health professionals, engineers and 
        others using the State funding processes, we recommend 
        requiring federal agencies to set aside funding for the 
        Nation's historically black colleges and universities and other 
        minority-serving institutions and provide Recovery funds for 
        these institutions and their constituents directly to eligible 
        institutions via programs already authorized by Congress to 
        benefit these institutions and the communities they serve;

        2.  Require federal agencies to encourage and reward states 
        that establish a goal of including HBCUs, MSIs and other 
        institutions of higher learning that educate disproportionate 
        percentages of low-income, first generation, traditionally 
        under-served students, and students that are under-represented 
        in high need and growth industries in the states and the Nation 
        in their Recovery activity;

        3.  Because the federal agencies over which this committee has 
        jurisdiction (NSF, the Department of Energy, Environmental 
        Protection Agency, NASA, Homeland Security, Federal Aviation 
        Administration, Federal Emergency Management Agency, and 
        National Oceanic and Atmospheric Administration) are central to 
        the scientific and technological advancement of this nation, 
        and because some of the agencies have an especially poor record 
        of supporting HBCUs and MSIs, require these agencies establish 
        goals and take affirmative outreach actions to include HBCUs, 
        PBIs, HSIs, TCUs and other MSIs among grantees, contractors, 
        and partners for the important stimulus and recovery work, and 
        the long-term work of these agencies.

    The above are just a few recommendations. We welcome the 
opportunity to continue dialogue with Members of this committee and 
your committee staffers about other ideas and ways in which we can be 
of assistance to you.
    Mr. Chairman and Members of this subcommittee, I thank you once 
again for hosting this important hearing and for inviting me to 
participate. I hope that my comments today, and my written testimony, 
provide you a snapshot of some of the challenges incurred and 
opportunities created for Shaw University and other HBCUs as the result 
of passage of the American Recovery and Reinvestment Act. I hope that I 
was also able to put in clearer perspective for some Members of the 
Committee and to underscore for others the vitally important role of 
HBCUs in shoring up the economy, stimulating future prosperity and 
productivity, returning the Nation to eminence and achieving the 
national goal of having 60 percent of Americans hold a two- or four-
year degree by 2020.





























                   Biography for Clarence G. Newsome

    Dr. Clarence G. Newsome, 13th President of Shaw University, blazed 
trails throughout his life. Born in Ahoskie, NC, Dr. Newsome went to 
Duke University on a football scholarship, being named to the Dean's 
list, and becoming one of the first Black football players honored by 
being named to the Atlantic Coast Conference All-Academic team.
    He also became the first Black commencement speaker at Duke 
University, speaking at his graduation ceremonies, and sharing the 
stage with retired newscaster Walter Cronkite. In addition to his 
undergraduate degree, he received his Master of Divinity (magna cum 
laude) and Doctor of Philosophy degrees from Duke University. He 
interrupted his theological school studies for a year to serve as 
Acting Dean of the Office of Black Affairs (later Minority Affairs) and 
Director of the University's Summer Transitional Program.
    For eight years, Dr. Newsome served on the Duke Divinity School 
faculty, teaching in the areas of American Christianity and Black 
Church History. He left Duke University to take a position at the 
Howard University School of Divinity, being named the Dean there in 
1992. While Dean, he guided the School through two accreditations, 
began an international program with South Korean Seminaries, and 
increased fundraising by over 100 percent during his tenure.
    In 2003, Dr. Newsome was named Shaw University's 13th President. 
While at Shaw University, he has initiated a partnership program with 
three universities in China; overseen the construction and opening of 
the Shaw University Center for Childhood Education, Development, and 
Research and the Institute for Health, Social, and Community Research; 
and has increased fundraising significantly--including the acquisition 
of a five million dollar gift from The Christy and John Mack 
Foundation--the largest Shaw has ever received from a foundation.
    Dr. Newsome serves on the Board of Trustees at Duke University, and 
his name was read into the Congressional Record as being one of the top 
religious educators in the United States. He also serves on the North 
Carolina State Ethics Commission.
    Dr. Newsome is married to the former Lynne Platt of Charlotte, and 
is the proud father of Gina Lynn, a psychiatrist, and Brittany Ann, a 
filmmaker; and the very proud grandfather of Kendellyn Marie.

    Chairman Miller. Thank you, Dr. Newsome. I should say that 
part of the history of Shaw University is that Shaw University 
was where the Student Non-Violence Coordinating Committee was 
founded in 1960, by among others our colleague, John Lewis----
    Dr. Newsome. That is right.
    Chairman Miller.--shortly after the Greensboro sit-ins that 
were led by students at A&T, North Carolina A&T.
    Dr. Bass.

STATEMENT OF DR. GARY D. BASS, FOUNDER AND EXECUTIVE DIRECTOR, 
                           OMB WATCH

    Dr. Bass. Thank you, Mr. Chairman, Mr. Bilbray. After 
hearing the witnesses so far today I think--from an OMB Watch 
perspective I think it is safe to say that a remarkable job has 
been done so far in the two and a half months since the law has 
been signed into action, but it is not all we want, and I think 
that is what we are hearing today.
    The transparency is a high priority, but it is not the end 
game. Transparency is simply a tool to get us to the 
accountability that we have been talking about today.
    In that context I want to summarize the written testimony 
by raising five challenges we have.
    The first challenge is who reports. If we don't get sub-
recipient reporting, if we don't get down to the lowest level 
or the smallest denominator, we will not achieve true 
accountability.
    The second question is related to the testimony we just 
heard, how is the money to be obtained and allocated. We have 
grants.gov, we have fedbizopps.gov, we have State web sites, 
but it is not clear how groups can actually apply and get that 
money. So--and there is a great fear. This law was designed 
around both recovery and reinvestment, that one of the 
objectives is to ensure equity, and so we have to make sure 
that the money is reaching those areas where it was intended to 
go.
    The third question is what is going to be reported? We have 
heard a fair amount about how data is going to come in. I want 
to talk about three kinds of data. A lot of emphasis has been 
put on the jobs data, which we need not only greater definition 
of jobs as was mentioned by the previous panel, but I think we 
need related information, including what are the wages being 
paid, what kinds of benefits, what are the demographics of the 
people getting the jobs?
    Beyond the jobs comes performance data. I think all of us 
will be greatly interested in knowing precisely whether or not 
we are actually achieving the objectives of what the Recovery 
Act really is. This model, this new model that we are talking 
about in recovery, presents a whole new opportunity, not just 
simply to find out who is getting how much money, but we can 
now start talking about has it been--is the money being used 
properly, and we can talk about that in terms of performance.
    The third kind of data that we need is going to be the 
request for proposals and the actual contracts that were used. 
Now, OMB has put out guidance saying they are going to have 
summaries of contracts from the Federal Government, but as we 
all know the bulk of the money right now is the formula money 
going out to the states. There is nothing that is going to 
require clarity about ensuring competitive award systems or 
that those contracts are going to be disclosed in any way for 
the public to see.
    So who reports, how is the money allocated, what is being 
reported? The fourth one is--where is it going to be reported? 
We need to have a centralized system where all of the sub-
recipients and recipients report. Not only do we need a 
centralized system, but we are going to have to have--make sure 
it is apples to apples in comparison. That means we are going 
to have to have the right kind of language for standardizing 
the content as well as the mechanical, the machine-readable 
format of this. We are going to have to have something that 
makes it accessible to everyone.
    That--there are many models for this. There is something, 
extensible mark-up language is one example. There is a variant 
on XML called XBRL. We can go into all kinds of technical 
language, but the point is we need these standards if we are 
going to be able to compare from state to state or even within 
states or within program areas.
    And that leads me to the final challenge and question, and 
that is, how will the public get access to any of this? And it 
seems to me it is more than just an issue of what kind of web 
site Recovery.gov is going to be or what colors or what search 
or what zip code you can put in. It seems to me that we have 
got to create the structure that has not only people access, 
but machine-to-machine readable access. If we do this right, if 
we do it right, the data that comes into the centralized 
reporting should be available not only to states, to Congress, 
to agencies, but to all of us on this panel and beyond this 
panel in terms of the public.
    We can do the value added as well as the government can do. 
So we have to create a new kind of democratic system with newer 
technologies to achieve meaningful public access.
    Let me just conclude by saying that the frame on Recovery 
Act right now is about waste, fraud, and abuse, and we need to 
have that frame. That is essential. There is a lot of money 
going out the door. The hope and the opportunity of all of this 
debate, if we get this right, if we get it right now and we 
build the longer-term beyond Recovery Act to talk about all 
federal spending down the road, is to create a new kind of 
dialogue, a new kind of opportunity for sharing information to 
improve the quality of programs that the government is funding. 
Instead of always the ``gotcha'' politics, we should be 
starting to talk about how we can make communities better and 
really do what the Act called for, which is reinvesting in our 
country.
    Thank you.
    [The prepared statement of Dr. Bass follows:]

                   Prepared Statement of Gary D. Bass

Chairman Miller, Ranking Member Broun, Members of the Subcommittee:

    My name is Gary Bass and I am the Executive Director of OMB Watch--
an independent, nonpartisan watchdog organization. Thank you for 
inviting me to testify today on what we all can agree is a crucial 
cause--making our government the most effective and responsive it can 
absolutely be through transparency and accountability of Recovery Act 
spending.
    OMB Watch was founded in the early 1980s and has spent over twenty-
five years advocating for government accountability, transparency and 
access to government information, and citizen participation in 
governmental processes. OMB Watch believes citizens must take an active 
role in holding their government accountable, and Recovery Act 
transparency will do much to enable this.
    Our development of FedSpending.org, a web site that provides access 
to information about most of the Federal Government's spending, 
demonstrated how the web can be used for greater accountability. We 
also co-chair with Good Jobs First the Coalition for An Accountable 
Recovery (CAR) that calls for greater transparency and accountability 
with regard to federal recovery efforts. In other words, we have both 
policy and practical experience with disclosure of federal spending 
information. OMB Watch does not receive any government funding and, 
therefore, would not be financially affected by actions taken with 
regards to improved transparency and accountability of the Recovery 
Act.
    President Obama has been emphatic that he wants Recovery Act 
expenditures to be transparent and accountable. While transparency is 
laudable for its own sake, it should not be forgotten that transparency 
is a means to an end; it makes accountability possible. And it is 
accountability, after all, that makes government spending more 
effective and efficient.
    The challenge in creating such a system for the implementation of 
the Recovery Act is to make a simple structure by which recipients of 
stimulus funds answerable to taxpayers. To create such a system, those 
recipients must be able to enumerate what services or goods they 
provided to the Nation, the state, and the local communities in which 
they work while explaining the degree of success of the projects they 
undertook. The government has the obligation to taxpayers to ensure 
that recipients are efficient in the delivery of the services or goods 
they were trusted to deliver.
    Without a system that creates incentives that aligns the goals of 
the Recovery Act with those of who receive funds to implement it, it is 
quite likely this effort will fall short. And without knowing what 
every recipient is doing with the funds that they receive, it is 
impossible to find instances of waste, fraud, and abuse. Nor is it 
possible to discover those recipients that are exceptional stewards of 
the Nation's resources and deserve recognition for their work and 
additional opportunities to serve their country.
    It may be necessary to place criminal and civil penalties in place 
to reduce waste, fraud, and abuse. The Recovery Act does not specify 
any such penalties beyond those existing prior to the enactment of the 
Act. Conversely, it is worth considering ways of rewarding the most 
efficient entities receiving Recovery Act funds, either through public 
praise or monetary bonuses in order to encourage good behavior.
    This is all easier said than done. The concept of transparency in 
Recovery Act spending is rather easy to articulate but quite difficult 
to implement. In order to ensure that Recovery Act spending is fully 
transparent, the government and the public should not only have access 
to data about who is getting money and what they are doing with it, but 
also be able to easily access and understand that information. I 
believe there are three essential elements of spending transparency 
necessary for the Recovery Act:

1) Information about Who Receives Recovery Act Funds

    Americans have a right to know how and where public dollars are 
being spent. Reporting and oversight are necessary to ensure the honest 
and ethical use of public funds. Without sufficient transparency, pay-
to-play scandals and corruption are endemic to large, federal 
expenditures. Additionally, understanding which communities, companies, 
and individuals are supported by Recovery Act funds is a basic fairness 
issue. Without it, some communities or sectors could be systematically 
excluded from support, while well-connected entities may get special 
deals. Proper transparency mechanisms for tracking spending will help 
mitigate this.

2) Information about Effectiveness of Recovery Act Spending

    Only by carefully tracking expenditures will public officials be 
able to judge the effectiveness of public investments and be able to 
fine-tune or shift spending to achieve maximum results. As with all 
federal spending, decisions on whether to fund similar programs, 
contractors, or grantees in the future should be informed by the 
effectiveness of their performance during the Recovery Act 
implementation.

3) Accessible, Understandable, and Usable data on Recovery Act Spending

    Information flows from agencies to OMB should take place though 
publicly visible channels. Recipient data transmission that is hidden 
from public view raises concerns about the timeliness and information 
fidelity of recipient reports. Aggregated data, for example, obscures 
the fine-grain details of spending data that enable assessments by 
program advocates, government watchdogs, and the press. Data made 
available through machine-readable feeds represent an ideal way to 
accomplish this. Through feeds, the public can obtain important 
disclosures directly from the source, mitigating distrust that may 
emerge from more filtered data.

Implementation of the Recovery Act to Date

    OMB Watch has been intently monitoring the implementation of the 
Act and is very encouraged by what we have seen so far. But as of 
today, the Federal Government's efforts to make Recovery Act spending 
fully transparent and accountable still have a long way to go.
    This is not to say the task is easy or there hasn't been 
significant progress. The task which the Administration has 
undertaken--the tracking of hundreds of billions of dollars that are 
being rapidly disbursed to thousands of recipients--is unprecedented 
and enormous. The Administration has made great strides within a very 
short time frame and is already making some data available to the 
public. While Recovery.gov and the recipient reporting requirements 
that will drive what data are available remain less than ideal, I am 
cautiously optimistic that the system will continue to substantially 
improve.
    The willingness of the Administration to solicit feedback from the 
public on its designs has been very helpful in improving Recovery.gov 
and I am hopeful that they will continue to implement the advice and 
recommendations of the Coalition for an Accountable Recovery (CAR). The 
CAR coalition is co-chaired by OMB Watch and Good Jobs First and is 
comprised of some 30 politically diverse organizations. It was founded 
on the eve of passage of the Recovery Act to design and advocate for a 
Recovery Act spending tracking system that will provide the 
unprecedented level of transparency and accountability in federal 
spending as articulated by President Obama. As a coalition we have 
communicated to the Obama Administration our ideas and have commented 
on guidance issued by OMB. Indeed, we are encouraged by more recent 
interim guidance from OMB to the federal agencies issued on April 3 
that we believe incorporated some of CAR's recommendations.
    Despite an open dialogue and receptive officials within the Obama 
Administration, there are still major obstacles to full transparency 
and accountability in the current rules for Recovery.gov and recipient 
reporting. These obstacles fall into six main areas: Multi-Tier 
Reporting; Direct Recipient Reporting and Registration; Solicitations 
(RFPs), Bids, and Contracts; Jobs Data; Performance Data; and Data 
Access.

Multi-Tier Reporting

    The first major obstacle is the Act's (and OMB's) definition of 
``recipient.'' This is critical because it is recipients that are 
required to report on their use of and Recovery Act funds. Both the 
Recovery Act and OMB consider a recipient to be ``any entity that 
receives Recovery Act funds directly from the Federal Government 
(including Recovery Act funds received through grant, loan, or 
contract) other than an individual and includes a State that receives 
Recovery Act funds.'' \1\ While the current reporting requirements 
apply to prime non-federal awardees only, they also require that prime 
recipients report on any sub-awards (i.e., sub-grants, subcontracts, 
etc.) they make. These requirements are problematic for two reasons:
---------------------------------------------------------------------------
    \1\ OMB memo M-09-10.

    First, Recovery Act funding remains visible only to the first tier 
of sub-awards. For large projects, it is likely that there will be 
several tiers of sub-awarding. For example, the Department of Energy 
has allocated $132 million to North Carolina for its Weatherization 
Assistance for Low-Income Persons program.\2\ If North Carolina hires a 
contractor to implement the program, information reported by that 
contractor would be made available by the Department of Energy through 
Recovery.gov according to current reporting requirements. However, if 
North Carolina gives some of those funds to Raleigh, and Raleigh hires 
a contractor to implement the program, then we would not, under current 
reporting requirements, be able to see which contractor was hired nor 
would we be able to see how well it executed the program. Limiting 
reporting requirements to only the first two layers will obscure basic 
information--such as to whom the money went and on how that entity 
employed it--on billions of dollars of Recovery Act spending.
---------------------------------------------------------------------------
    \2\ FormulaBlockGrants Allocation--April 14, 2009.
---------------------------------------------------------------------------
    Second, sub-awardees do not themselves report on their use of the 
funds. The prime recipient has responsibility to report on any sub-
awards made, hiding from the public much of the details on Recovery Act 
activities by State hired contractors. So, in this example, North 
Carolina would report to the Department of Energy on its use of funds, 
and it would report that it sub-awarded the funds to Raleigh. The 
Department of Energy would then submit a report to OMB. So not only can 
we not see what happened to the funds after they were sub-granted to 
Raleigh, we have access only to the Department of Energy's report--not 
Raleigh's nor North Carolina's. Although spending and performance 
information (such as jobs data) may be included in State government 
reports, performance information of those contractors will not be 
available to the public, nor will any information on Recovery Act funds 
that were used to hire subcontractors.
    There is reason for optimism however. In its April 3 interim 
guidance (M-09-15), OMB stated that it intends to eventually ``expand 
the reporting model in the future to also obtain . . . information [on 
awardees beyond first-level awards], once the system capabilities and 
processes have been established.'' \3\ OMB Watch is eager to see the 
details of such a model and we are withholding judgment until then. But 
it is essential that all recipients of Recovery Act funds--possibly 
with a de minimis level of, say, $25,000 that allows some exclusion--
report directly to the Federal Government.
---------------------------------------------------------------------------
    \3\ OMB memo M-09-15.

Direct Recipient Reporting and Registration

    Another chief area of concern with Recovery Act transparency 
related to the definition of ``recipient'' is the means by which 
recipients report on the use of their funds. Data from prime recipients 
are reported directly to the federal agency that disbursed the funds, 
with the disbursing agency making that information available on 
Recovery.gov. Not only would the public not be able to directly view 
these recipient reports, recipients of Recovery Act funds that are sub-
awardees (e.g., subcontractors and sub-grantees) would not be required 
to report on the use of their funds. The use of tens of billions of 
Recovery Act dollars by thousands (perhaps tens of thousands) of 
Recovery Act funds recipients would be hidden from public scrutiny.
    Direct reporting by recipients, rather than reporting back up 
through the chain of funding, will eliminate the possibility that data 
will be manipulated or delayed by agencies or companies higher in the 
chain. There will still be some level of ``cleansing'' of data 
necessary to identify and correct errors or to standardize names of 
companies and State agencies (e.g., to standardize ``Dept. of 
Transportation'' vs. ``Department of Transportation''). But when data 
are ``cleaned,'' the raw reported data should also be preserved and 
made available. A system that collects spending and program performance 
data directly from all recipients ensures the raw data are actually raw 
and not manipulated before the Federal Government receives it.
    Again, the April 3 OMB interim guidance shows the government is 
moving in the right direction in this respect. OMB states that it is 
``moving aggressively'' to develop a central collection system for 
recipient reports.\4\ Agencies are to instruct recipients to begin 
submitting recipient reports (those specified in Sec. 1512 of the 
Recovery Act) on Oct. 10 of this year, and that they ``should assume 
the central system capability will be online and available no less than 
45 days before the October 10, 2009 statutory quarterly reporting 
deadline.'' \5\ However, the guidance remains unclear about which 
recipients will report what data. By requiring first-hand reporting 
directly from recipients, the data will likely be more accurate, 
comprehensive, and timely.
---------------------------------------------------------------------------
    \4\ Ibid.
    \5\ Ibid.
---------------------------------------------------------------------------
    In order to facilitate accurate reporting directly from all 
recipients, the government should require all recipients (this includes 
all sub-recipients) of Recovery Act funds to register with OMB's 
proposed central reporting system prior to receipt of Recovery Act 
awards. The April 3 OMB interim guidance would require first-tier sub-
grantees to register with Central Contracting Registration (CCR) system 
but exclude first-tier subcontractors of prime contractors from this 
requirement. This bifurcated registration requirement would 
significantly hinder OMB's efforts to centrally collection information 
on all sub-awardees. By excluding subcontractors and additional tiers 
of sub-awardees from CCR registration, potentially thousands of 
recipients of Recovery Act funds would not be identified as such. If 
OMB expanded its definition of ``recipient'' to include all tiers of 
sub-awardees and required all recipients to register with CCR, OMB 
Watch would strongly support this area of OMB's interim guidance for 
the Recovery Act implementation.
    For a centralized registry and centralized reporting system to work 
there must be standardized formats in how data are reported. There are 
various standards, such as eXtensible Markup Language (XML), for 
transport and storage of data. One type of XML schema is eXtensible 
Business Reporting Language (XBRL), which gives each data element its 
own identity tag, thereby creating a taxonomy that is easily readable 
by computer data processors. If done correctly, data can easily move 
from registry to reporting systems, from federal agencies to State 
agencies, or to any public source. The data is also easier to compare 
and analyze.

Solicitations (RFPs), Bids, and Contracts

    While transparency in the use of Recovery Act funds is essential, 
the decision-making process by which those funds are awarded must also 
be transparent. Because billions of dollars of federal Recovery Act 
funds will be awarded through State and local governments, 
solicitations for contracts at the State level should be advertised as 
widely as possible to ensure that a large pool of potential bidders are 
aware of such projects. Without access to requests for proposals 
(RFPs), bids, and all of the language of attendant awarded contracts, 
it will be difficult for outside stakeholders to assess the performance 
of any contractor using Recovery Act funds.
    The first step to enabling transparency in the Recovery Act 
contract award process is to require that State and local governments 
report to the Federal Government as quickly as possible any Recovery 
Act project RFPs they may be offering. The next step is to make 
available online all bids received for all Recovery Act RFPs. If this 
presents a confidentiality problem, it would be reasonable to adhere to 
the guidelines surrounding disclosures of bids as articulated in the 
Strengthening Transparency and Accountability in Federal Spending Act 
of 2008 (S. 3077) as introduced in the 110th Congress by then Sen. 
Barack Obama.
    Lastly, but most importantly, current Recovery Act law and OMB 
guidance\6\ requires agencies to post to the agency web site and to 
Recovery.gov summaries of contracts or orders (or modifications to an 
existing contracts or orders) over $500,000, or any contract was not 
fixed-priced and competitively awarded. There are two problems with 
this requirement.
---------------------------------------------------------------------------
    \6\ OMB memo M-09-10.
---------------------------------------------------------------------------
    First, contract summaries will not offer the quality of data that 
will enable the public to assess whether a given contractor did, in 
fact, faithfully carry out its fiduciary duties. Nor will the public be 
privy to assessing whether the awarded contract adheres closely to the 
RFP under which it was granted. This is critical to developing true 
accountability in the Recovery Act contracting process. Access to all 
contract agreement language is an essential element to any effort to 
oversee governmental spending. While some will argue information 
contained within contracts can contains confidential business 
information, allowing for limited redactions in contracts can help to 
alleviate those concerns.
    The second problem with existing contract posting requirements is 
that the contract reporting threshold is too high. There could be 
thousands of contracts below $500,000 that would escape public scrutiny 
and congressional oversight. Substantially lowering that threshold, say 
to $200,000, would allow the public to see much more information on how 
Recovery Act funds are distributed without creating an overly 
burdensome reporting requirement.

Jobs Data

    Congress crafted and President Obama supported the Recovery Act as 
a means to stimulate the economy with the express purpose of creating 
or saving millions of jobs. To ascertain the effectiveness of the 
package, Congress appropriately built into it a requirement that 
funding recipients and federal agencies report the number of jobs 
created or saved by Recovery Act projects. While this provision is 
certainly welcome, the law and OMB guidance could be substantially 
improved in two respects: The method of counting the number of jobs 
created or saved and the type of data collected on those jobs.
    Current employment data will be collected by federal agencies from 
prime recipients only. Prime recipients are responsible for ``reporting 
on their use of funds as well as any sub-awards (i.e., sub-grants, 
subcontracts, etc.) they make.'' \7\ In cases in which a federal agency 
gives money to a state, the state would be required to report 
employment data on each project that it has undertaken with those 
Recovery Act funds. Aggregation of employment data by prime recipients 
will hinder transparency and accountability by obscuring the 
performance and results of individual organizations that receive 
Recovery Act funds at the end of the funding chain.
---------------------------------------------------------------------------
    \7\ Ibid.
---------------------------------------------------------------------------
    OMB interim guidance states that recipients are to report a brief 
description and an estimate of the jobs created or retained. Job 
creation and retention figures are to be based on aggregate hours 
worked converted into a figure for full-time-equivalent (FTE) 
positions. Yet it leaves it up to each recipient to determine how many 
hours equal a FTE, which will lead to substantial inconsistencies 
across all job data that is reported. It would be advisable to require 
recipients to report the aggregate hours figure as well as the FTEs, so 
that analysts and watchdogs can make valid comparisons.
    While it is encouraging that the procedures for employment 
reporting include the collection of data on the types of jobs created 
(``job titles or broader labor categories''), it is disappointing that 
the guidance does not also provide for gathering information on the 
quality of those jobs, especially wage levels and availability of 
health coverage. Without such information, it will not be possible to 
safeguard against the use of Recovery Act funds in the creation of 
substandard jobs. To assess of the quality of jobs created by the 
Recovery Act, OMB Watch believes the OMB should require employers 
should report: type of work; wage levels; health care coverage; and 
demographic characteristics of Recovery Act project workers.

Performance Data

    In addition to the collection of the number of jobs saved and 
created as called for in the Recovery Act and OMB interim guidance, 
there are a host of data that need to be collected to allow the 
government and the public to discover how well or how poorly Recovery 
Act programs are being implemented. Information on who receives funds 
needs to be combined with information about what those recipients did 
with the money. For example: How many homes were weatherized by the 
Energy Department's Weatherization Assistance program? How many acres 
of marine habitat were restored under NOAA's Habitat Restoration 
project? What new research did NSF undertake? How many and which NIST 
facilities were repaired?
    Such information could be used to demonstrate the accomplishments 
of government funding just as easily as it could be used to draw 
scrutiny to waste, fraud and abuse. This performance data also could be 
used as a valuable data set to help improve the quality and 
effectiveness of federal programs. Those involved in the delivery of 
government services seem to draw public attention only for failures. 
Yet a good monitoring system doesn't just give out grades, it also uses 
interim goals and benchmarks so that self-correction and improvement 
can be undertaken. Moreover, as federal funds move farther from the 
Federal Government through sub-awards, the Federal Government has less 
and less control. This type of monitoring system mitigates against this 
loss of control by creating new opportunities for dialogue and 
openness.
    OMB Recovery Act interim guidance requires that agencies submit 
specific plans for each Recovery Act program. One of the elements 
required in this plans is ``expected quantifiable outcomes consistent 
with the intent and requirements of the legislation.'' \8\ The guidance 
also notes that the terms and conditions that are to accompany Recovery 
Act grant awards leaves ``significant discretion to federal agencies'' 
on how and what performance data awardees must report as part of their 
quarterly recipient reports.
---------------------------------------------------------------------------
    \8\ Ibid.
---------------------------------------------------------------------------
    This flexibility is a necessary provision to allow for collection 
of agency- and program-specific performance data, but OMB needs to 
ensure that all federal agencies will obtain sufficient data necessary 
to measure the impact of Recovery Act projects. While flexibility and 
discretion with respect to measuring each agency's programs is 
desirable, OMB should immediately engage federal agencies to quickly 
devise their Recovery Act performance data requirements to ensure that 
sufficient, relevant, and comparable data are collected from the 
beginning. OMB should also require federal agencies to seek public 
input on the performance data to be collected. While providing the 
flexibility already mentioned, OMB should also issue guidance to the 
agencies on core principles, such as equity, to incorporate in the data 
to be collected.
    While a comprehensive list of such data has yet to be compiled, the 
CAR coalition has developed some examples of what performance 
benchmarks should include:

    For general State funds:

          Total general fund expenditures, and expenditures 
        specifically in elementary and secondary education (K-12), 
        higher education, Medicaid/SCHIP, human services, 
        transportation, corrections, and other areas;

          Per-pupil State K-12 expenditures as well as 
        distribution by school districts;

          Changes in Medicaid eligibility and services with 
        2008 as a baseline.

    For transportation projects:

          Net number of new lane miles, if any, generated by 
        projects;

          New transit capacity should be tracked via new 
        service mileage for fixed guideways and expanded fleet capacity 
        for all transit modes (in comparison to replacement fleet 
        purchases);

          Reporting on whether funds have been ``flexed'' over 
        to other programs such as public transit, inter-city rail, or 
        pedestrian improvements as allowed by law.

    For school construction projects:

          The name of the school district (including school) or 
        college/university, along with the code assigned from the 
        Common Core of Data, which is the Department of Education's 
        primary database on public elementary and secondary education 
        in the United States;

          Expected life of improvement;

          Whether matching funds were involved, how much, and 
        source of the matching funds.

    OMB should also be clear that the requirements for performance data 
collection will follow Recovery Act funds so that any level of sub-
awardee must collect the performance data specified by the agency for 
the project.

Access to Data

    Even if the law was changed today to collect the information as 
described above, these data would remain essentially useless unless 
they were made available in such a way that the public could not only 
understand but also manipulate the data. In terms of helping the public 
understand Recovery Act data, Recovery.gov will have to present the 
collected data in a way that novice and experienced can access and make 
sense of it. At the most basic level, a user should be able to search 
the data on Recovery.gov for Recovery Act projects located in her 
state, zip code, city, or congressional district. She should be able to 
sort the data from largest expenditure to smallest; from most jobs 
created to least; by entities receiving money, and by which federal 
agency authorized each project. These are just a few examples of the 
kind of elementary searching and sorting functionality Recovery.gov 
should provide, but does not currently have. There are knowledgeable 
and talented people working on Recovery.gov right now, who no doubt see 
the value in these tools, but I cannot emphasize enough that it is this 
basic database functionality that will provide the sort of transparency 
envisioned by Congress and President Obama.
    Analysis and presentation of the data should not be the sole 
province of the Federal Government, however. There are many outside 
organizations that could make use of Recovery.gov data for many 
purposes--some as yet unimagined. To accomplish this, these groups must 
have access to Recovery Act data in a machine-readable format, such as 
through a data feed like RSS (Real Simple Syndicate) or Atom. These 
feeds should not be an option, but a requirement for every source of 
information (e.g., the central registry, the central reporting system, 
agency web sites).
    OMB Watch's database of federal spending, FedSpending.org, is a 
perfect example of the importance of making data available in an 
understandable and accessible format. Before the creation of 
FedSpending.org, data on trillions of dollars in Federal Government 
spending were nominally accessible to the public, but the presentation, 
search, and sorting tools were abysmal, rendering the data difficult to 
understand and virtually useless to the public. However, because these 
government data sets were public, we were able to download the data and 
build a user-friendly, easily-searchable web site that opened up the 
data for millions of people. Since its launch in October, 2006, 
FedSpending.org has attracted well over a hundred thousand unique 
visitors a month, processed over ten million searches, and has been 
cited hundreds of times in media reports. With the increased attention 
and scrutiny of the Recovery Act spending, there are many more 
organizations--large and small, for- and nonprofit--that would no doubt 
invent novel ways to add value to Recovery Act spending data and work 
to make it more accessible to the public. This will only work if the 
data are made available in the proper, ``machine-readable'' formats.
    It is also essential that Recovery Act data be transmitted in such 
a way so as to maximize access to as much unfiltered data as possible. 
Reporting data should be available as close to the source of Recovery 
Act reporting as possible. Additionally, OMB Watch's experience with 
federal contract and grant data throughout the FedSpending.org project 
has taught us there is certainly a need for some data ``cleaning,'' 
such as standardizing the name of funding recipients or ensuring 
address and zip code fields match on individual entries. Ideally, a 
``cleansed'' data set would be available in addition to the ``raw'' 
data.
    These feeds do not negate the importance of a robust Recovery.gov 
web site as many in the public will want an easy to use, searchable web 
site run by the government.

Recovery Act Transparency and the States

    So far I have discussed elements of Recovery Act transparency that 
are in the domain of the Federal Government. However, State governments 
are already beginning to allocate hundreds of billions of dollars of 
federal funds for Recovery Act projects. States will also add their own 
money to Recovery Act projects, the details of which will not be 
reported on Recovery.gov. Many citizens, local media, and local 
government watchdogs, therefore, will look to State Recovery Act web 
sites to learn about their state's implementation of the Recovery Act. 
My own review of State Recovery Act web sites has revealed a 
substantially uneven landscape.
    As people query their state's web site to find out how to receive 
Recovery Act funds, how the funds will be allocated, who has received 
them already, and what did they do with them, Americans will find that 
there is not a single State web site that can provide the answer to all 
these basic questions of spending transparency. For example, the 
Maryland and Washington State Recovery web sites have interactive maps 
showing county-by-county breakdowns of Recovery Act funding by category 
(health care, infrastructure, education, etc.). Yet one can't perform a 
simple search such as typing in a ZIP code to find a list of all 
Recovery Act projects within a given neighborhood.
    Washington State's web site has information describing the kinds of 
grants that are available to the state. It also has a useful list of 
programs that are providing funding for State projects, but is thin on 
details about how to apply for funds. Rhode Island's site has only a 
detailed list of proposed Recovery Act projects per agency, in PDF 
format, with no aggregate data, like the county-by-county summaries 
that appear on Maryland's site. When looking at State Recovery web 
sites last week in preparation for this testimony, Virginia's web site 
was experiencing technical errors. And while we have yet to see the 
quality of spending data that may be available on these sites, our 
experience so far indicates that it will vary as much as the quality of 
information today. It is here that the Federal Government should take 
the lead and offer not only funds to assist states in enabling Recovery 
Act transparency, but it should also provide technical assistance and 
advice, including minimal functional requirements that must be 
achieved.
    Another problem is its unclear how concerns about waste, fraud, and 
abuse on State and local projects should be reported. While there are 
established hotlines for waste, fraud, and abuse at the federal level, 
the same is not immediately apparent for State and local governments. 
There is a lot of potential for abuse, especially at the local level, 
and since these are federal funds that could be wasted, the Federal 
Government should establish a clear reporting system for waste, fraud, 
and abuse allegations for State and local Recovery Act projects.

Current Effort Is Unprecedented, But More Is Still Needed

    It is clear what the Obama Administration is trying to accomplish 
with Recovery Act transparency is unprecedented for our Federal 
Government. This is not to say that the level of transparency as 
articulated by President Obama can never be achieved. Implementing that 
degree of visibility will be an iterative process in which the 
reporting model and collected data improve over time--and should extend 
well beyond the Recovery Act to all future government spending. As the 
Recovery Accountability and Transparency Board implementing team learns 
more and more about the challenges they face, better and better 
versions of Recovery.gov--and the data reporting structure that 
supports the web site--will emerge. OMB Watch continues to be guardedly 
optimistic about the efforts of the Obama Administration to promote 
transparency and accountability in Recovery Act spending. But there is 
still much work to be done. The attention this committee is directing 
at Recovery Act transparency in this hearing is a critical step on the 
path to a better accountability system for Federal Government spending.

                       Biography for Gary D. Bass

    Gary D. Bass is the founder and Executive Director of OMB Watch, a 
nonprofit research and advocacy organization established in 1983 that 
promotes greater government accountability and transparency and 
increased citizen participation in public policy decisions.
    An expert on federal budgetary, program management, regulatory and 
information policy issues, Dr. Bass has published extensively, 
testified before Congress, appeared on national television and 
presented to groups across the country. A specific area of expertise is 
his understanding of the apparatus of government, particularly the 
executive branch of the Federal Government. Dr. Bass has also been 
selected as one of the NonProfit Times Power and Influence Top 50 every 
year since 1999. In 2008, he received the Public Access To Government 
Information Award from the American Association of Law Libraries.
    Dr. Bass is a strong advocate for strengthening government 
transparency and using newer technologies to empower citizens and 
community groups to challenge unchecked institutional power. In 2006, 
he successfully championed passage of a law that required the 
government to create a searchable web site providing information about 
government spending. At the same time, OMB Watch launched 
www.FedSpending.org, which has proven invaluable to journalists, public 
interest organizations and citizens looking for information on more 
than $16.8 trillion in government spending--and serves as a model for 
how the government should implement its requirements to create a 
searchable web site. Data from FedSpending.org has been cited in news 
stories nationwide, and Dr. Bass was selected as one of the Federal 
100--the top executives from government, industry, and academia who had 
the greatest impact on the government information systems community--
for his work on FedSpending.org in 2007. And back in 1989, Dr. Bass 
created www.RTKNET.org, (the Right-to-Know Network), a free online 
service that provides the public access to government environmental 
data, including the Toxics Release Inventory.
    With the rapid increase in government secrecy following September 
11, 2001, Dr. Bass has spoken out against the erosion of the public's 
right to know. He helped form a powerful coalition, 
www.OpenTheGovernment.org, that includes journalists and advocates who 
are pursuing more democracy and less secrecy. Honoring his role in 
protecting public access to government information, the Freedom Forum 
inducted him into the National Freedom of Information Act Hall of Fame 
in 2006.
    In addition to his role at OMB Watch, Dr. Bass is an affiliated 
Associate Professor at Georgetown University's Public Policy Institute 
and also teaches in the Nonprofit Management Executive Certificate 
program at Georgetown's Center for Public and Nonprofit Leadership. 
Prior to founding OMB Watch, Dr. Bass was President of the Human 
Services Information Center. He also served as Director of Liaison for 
the International Year of Disabled Persons; worked as a consultant on 
several projects in special education and the mental health of children 
and youth; and served as special assistant to Wilbur Cohen, then 
Chairman of the Michigan Governor's Task Force on the Investigation and 
Prevention of Abuse in Residential Institutions.
    Dr. Bass received a combined doctorate in psychology and education 
from the University of Michigan, along with the University's highest 
award for graduate student teaching and several awards for academic 
excellence.

    Chairman Miller. Thank you, Dr. Bass.
    Dr. Ellig.

STATEMENT OF DR. JERRY ELLIG, SENIOR RESEARCH FELLOW, MERCATUS 
                CENTER, GEORGE MASON UNIVERSITY

    Dr. Ellig. Thank you, Chairman Miller, Mr. Bilbray. I am 
delighted to be here this afternoon. I want to thank you for 
the invitation.
    My name is Jerry Ellig. I am a Senior Research Fellow at 
the Mercatus Center at George Mason University, and the reason 
I responded so quickly to the invitation to testify here is 
because for more than a decade I have been involved with 
colleagues at the Mercatus Center in various projects to try to 
encourage the development, the adoption, and the use of 
performance measurement and performance information by the 
Federal Government.
    Our biggest project just today, in fact, we released the 
results of our 10th annual performance report scorecard, which 
examines the quality of the performance reports that federal 
agencies produce under the Government Performance and Results 
Act. We have been doing this for 10 years. I can tell you we 
have seen a lot of improvement in the quality of reports that 
are produced, a lot of improvement in the quality of the 
performance information that agencies are producing. We have 
seen some evidence in some other research that agencies that 
produce better performance reports under GPRA are also more 
likely to have more managers say they actually have and use 
performance information in their programs.
    Our third goal, though, was to try to encourage folks in 
Congress to make use of performance information for oversight 
and for appropriations, and quite frankly, we have seen less 
evidence of that in past Congresses, and for that reason we are 
delighted that this subcommittee is taking an interest in 
Recovery Act accountability because we think this is a great 
opportunity to match up performance information with spending 
information.
    I would like to make three points this afternoon. First 
off, the Obama Administration in its guidance to agencies has 
said that agencies' Government Performance and Results Act 
measures and goals should be used to account for the results of 
Recovery Act spending. I think this is a great idea, and you 
are not going to get the word but followed by a contradictory 
statement from me on that, either. I sincerely believe it is a 
great idea. If I had written the guidance, I would have said 
the same thing.
    I have a couple of suggestions that would, I think, make 
this even more effective. One would be that agencies in some 
way, either by OMB guidance or prodding from their oversight 
committees, ought to be urged to report performance information 
along with the spending information so that the public, the 
media, other folks can find out, you know, what they are 
getting in exchange for the spending.
    The other point that I think would help improve the way 
this would work is if agencies were explicitly required to do 
some rigorous program evaluation in order to control for other 
factors that affect outcomes so that we know how much of the 
reported outcome really was caused by the program spending and 
how much of the outcome really was caused by the additional 
spending that occurred as a result of the Recovery Act. Sort of 
basic application of the scientific method. Great thing for a 
subcommittee of the Science and Technology Committee to be 
looking into.
    Again, if the Administration doesn't require agencies to do 
that, it would be great to have Congressional oversight 
committees asking for the same type of information from 
agencies and making it public.
    Second point. Although I think it is a great idea for 
agencies to use their GPRA goals and measures to account for 
Recovery Act results, some of the goals and measures still need 
to be improved. I mentioned earlier that we released our 10th 
annual performance report scorecard this morning. We compared 
the results in that scorecard with Recovery Act appropriations 
in Division A of the Recovery Act. We found that only about 14 
percent of the appropriations are going to agencies that got 
very good scores on our performance report scorecard and about 
a third of the appropriations are going to agencies that got 
below satisfactory scores.
    So this suggests that there is still a lot of room to 
improve the GPRA measures and the GPRA goals before we have 
the--we fulfill the promise of full transparency and 
accountability for the Recovery Act spending.
    Finally, just a word on measuring the other thing that 
people are interested in out of the Recovery Act, in addition 
to the program outcomes, which is creation of jobs and the 
employment effects. I just want to emphasize that in order to 
understand the Recovery Act's effects on employment, what we 
need is macro-economic analysis that takes into account the 
effect of the spending as well as the effect of the borrowing 
and that the numbers that are reported in a database as jobs 
created or preserved by the Recovery Act are only giving us 
part of the picture, which is the number of people hired or 
that weren't fired because of the Recovery Act spending. We 
need to net that against the employment effects of the 
borrowing in order to figure out the actual effect of the 
Recovery Act on employment. So to figure that out, keep your 
eye on the macro-economic analysis rather than the numbers 
reported in the database.
    And this is where I will stop.
    [The prepared statement of Dr. Ellig follows:]
                   Prepared Statement of Jerry Ellig

Mr. Chairman and Members of the Committee:

    Thank you for the opportunity to testify today on Recovery Act 
oversight.
    I am a research fellow with the Mercatus Center, a 501(c)(3) 
research, educational, and outreach organization affiliated with George 
Mason University.\1\ Along with several colleagues at the Mercatus 
Center's Government Accountability Project, I have spent more than a 
decade working to encourage the development, adoption, and use of 
outcome-based performance measures in federal agencies.
---------------------------------------------------------------------------
    \1\ This testimony reflects only the views of the author and does 
not represent an official position of George Mason University. I would 
like to thank Stefanie Haeffele-Balch and Christina Forsberg for 
research assistance.
---------------------------------------------------------------------------
    Reliable performance measurement requires application of the 
scientific method to control for various factors that affect desired 
outcomes. Only by controlling for other variables can we determine how 
much of an observed result was actually caused by a federal program or 
a change in federal spending. Consequently, it is especially gratifying 
to see the Oversight and Investigations Subcommittee of the House 
Science and Technology Committee taking such a strong interest in 
Recovery Act oversight.
    Outcome-oriented performance measurement isn't just a good idea; 
it's the law. The Government Performance and Results Act of 1993 (GPRA) 
requires federal agencies to produce strategic plans with performance 
measures, annual performance plans with performance goals, and annual 
performance reports that measure progress toward those goals. Measures 
are supposed to track the agencies' ``outputs, service levels and 
outcomes.'' \2\
---------------------------------------------------------------------------
    \2\ GPRA Sec. 1115. Emphasis added.
---------------------------------------------------------------------------
    Just this morning, we released the results of the Mercatus Center's 
tenth annual Performance Report Scorecard, which evaluates the 
transparency and quality of disclosure in agencies' annual GPRA 
performance reports.\3\ The Scorecard evaluates the GPRA reports 
produced by the 24 agencies covered by the Chief Financial Officers' 
Act, according to 12 criteria derived from GPRA. Our evaluation 
produces a ranking, and some of the agencies at the top have become 
quite competitive over the past ten years. (Individual agency scores 
and rankings are available at www.mercatus.org/scorecard.) But we did 
not produce the Scorecard just because people like to read about 
rankings. Our work on government accountability seeks to:
---------------------------------------------------------------------------
    \3\ The Mercatus Performance Report Scorecard is available at 
www.mercatus.org/scorecard

        1.  Prompt federal agencies to improve the quality of 
        information they provide about outcomes--the tangible benefits 
---------------------------------------------------------------------------
        they produce for the public.

        2.  Promote the use of this performance information in federal 
        agency decision-making.

        3.  Encourage Congress to use GPRA performance information for 
        oversight and budgeting.

    There is ample evidence that the quality of performance information 
produced by federal agencies has improved a great deal. Based on the 
change our Scorecard has documented during the past decade, we estimate 
that the quality of federal agencies' GPRA reports has improved, on 
average, by at least 75 percent.\4\
---------------------------------------------------------------------------
    \4\ Maurice McTigue, Henry Wray, and Jerry Ellig, 10th Annual 
Performance Report Scorecard: Which Federal Agencies Best Inform the 
Public? (Arlington, VA: Mercatus Center at George Mason University, 
2009), pp. 12-13, www.mercatus.org/scorecard
---------------------------------------------------------------------------
    Similarly, there is evidence that GPRA has encouraged federal 
agencies to use performance information. After controlling for other 
factors, agencies with higher Scorecard scores have higher percentages 
of managers who say they have outcome, output, or efficiency measures 
for their programs when surveyed by the Government Accountability 
Office (GAO). Agencies with higher Scorecard scores also have higher 
percentages of managers who say that they use performance information 
to manage their programs and activities.\5\
---------------------------------------------------------------------------
    \5\ Jerry Ellig, ``Has GPRA Increased the Availability and Use of 
Performance Information?,'' Mercatus Center Working Paper No. 09-03 
(March 2009). http://www.mercatus.org/PublicationDetails.aspx?id=26478
---------------------------------------------------------------------------
    Unfortunately, there is less evidence that previous Congresses used 
GPRA performance information for oversight and budgeting purposes. For 
this reason, we welcome this subcommittee's focus on using performance 
data for Recovery Act oversight.
    I would like to make three points in my testimony today:

        1.  The use of GPRA goals and measures to account for results 
        of the Recovery Act, as the Administration plans to do, is 
        highly desirable. This increases the odds that taxpayers will 
        get the maximum possible value for their dollars. The current 
        approach would be improved if all agencies were explicitly 
        required to (1) report outcome information for each program 
        alongside cost information and (2) identify the amount of 
        change in program outcomes caused by Recovery Act funding, 
        either by devising measures that isolate the effects of the 
        additional spending or conducting program evaluations that 
        control for other factors that might affect outcomes.

        2.  Despite the substantial progress we have seen in GPRA 
        reporting, many agencies' GPRA goals and measures still need 
        substantial improvement if citizens are to receive a full, 
        fair, and accurate accounting of what their Recovery Act 
        dollars accomplish. Only 14 percent of Recovery Act 
        appropriations went to agencies whose reports received a ``very 
        good'' score on the Mercatus Center's Performance Report 
        Scorecard for fiscal 2008. Congress can play a significant role 
        in improving agencies' GPRA goals and measures by actually 
        using GPRA performance information for oversight of both 
        Recovery Act spending and all other federal spending. This 
        would increase the incentive for agencies to produce and use 
        good information, and it would reallocate scarce resources 
        towards more effective programs.

        3.  Estimating the Recovery Act's effects on employment 
        requires serious macroeconomic analysis that takes into account 
        both the immediate and obvious employment effects of the 
        spending and the not so obvious employment effects of the 
        borrowing. Macroeconomic analysis of the Recovery Act's net 
        effect on employment plays the same role that program 
        evaluation plays in determining how much of the observed 
        outcome was actually caused by a federal program. Calculating 
        the net effect is important because some people may just switch 
        jobs toward one created by federal spending. For this reason, 
        it would be extremely inaccurate to portray only the employment 
        created by the spending as the full effect of the Recovery Act 
        on employment.

1.  GPRA goals and measures are desirable for Recovery Act oversight

    Office of Management and Budget (OMB) Director Peter Orszag's April 
3 memo on Recovery Act implementation directs agencies to use their 
GPRA goals and measures for Recovery Act planning and reporting to the 
maximum extent possible.\6\ Agency Recovery Act implementation plans 
must identify outcomes and outputs. Agencies are to report the 
program's targets for each measure with and without the Recovery Act 
funding, along with the difference--the incremental change in 
performance expected to result from the Recovery Act funding.\7\ They 
must also ``specify the length of the period between measurements 
(e.g., monthly, quarterly), the measurement methodology, and how the 
results will be made readily accessible to the public.'' \8\
---------------------------------------------------------------------------
    \6\ Peter R. Orszag, Memorandum for the Heads of Departments and 
Agencies, Updated Implementing Guidance for the American Recovery and 
Reinvestment Act of 2009 (April 3, 2009), p. 18: ``To the extent 
possible, Recovery Act goals should be expressed in the same terms as 
programs' goals in departmental Government Performance Results Act 
strategic plans.''
    \7\ Orszag memo, p. 78.
    \8\ Orszag memo, p. 18.
---------------------------------------------------------------------------
    OMB also expects agencies to collect performance information from 
entities who receive funding: ``To the extent possible, agencies should 
instruct recipients to collect and report performance information as 
part of their quarterly submissions that is consistent with the 
agency's program performance measures.'' \9\ Finally, the agency must 
explain its ``plans to organize program cost and performance 
information available at applicable recipient levels.'' \10\
---------------------------------------------------------------------------
    \9\ Orszag memo, p. 22.
    \10\ Orszag memo, p. 19.
---------------------------------------------------------------------------
    This focus on linking Recovery Act expenditures with GPRA goals and 
measures is crucial to ensuring that taxpayers receive full value for 
their dollars. In particular, GPRA requires agencies to establish goals 
for outcomes. Outcomes are the actual benefits created, or harms 
avoided, for citizens. ``Outcomes are not what the program did but the 
consequences of what the program did.'' \11\ Outcome measurement is 
necessary if congressional and agency decisions are to be based on 
actual evidence of the effects of Recovery Act spending.
---------------------------------------------------------------------------
    \11\ Harry P. Hatry, Performance Measurement: Getting Results 
(Washington, DC: Urban Institute, 1999), p. 15. Emphasis added.
---------------------------------------------------------------------------
    Full transparency requires accurate disclosure to the public of 
outcomes actually achieved. The most informative outcome indicators 
isolate the government agency's direct effect on the outcome from other 
causes and indicate how much of the change in the outcome was due to 
the government's action.
    When such an indicator cannot be constructed, it is still often 
possible to measure outcomes and then assess the effects of government 
actions through comparisons of ``treatment'' and ``control'' groups, 
field trials, or statistical analysis that attempts to separate the 
effects of various factors.\12\ This is the role of program evaluation. 
A program evaluation is defined as ``an assessment, through objective 
measurement and systematic analysis, of the manner and extent to which 
federal programs achieve intended objectives.'' \13\ Under GPRA, agency 
strategic plans must identify program evaluations used to reevaluate 
goals and objectives and set forth a schedule of program evaluations. 
The agency's annual performance report must summarize the results of 
program evaluations concluded in that fiscal year.
---------------------------------------------------------------------------
    \12\ Office of Management and Budget, ``What Constitutes Strong 
Evidence of a Program's Effectiveness?'' http://www.whitehouse.gov/omb/
part/2004-program-eval.pdf
    \13\ 31 U.S.C.  1115(f)(2).
---------------------------------------------------------------------------
    A simple example illustrates why program evaluation is essential 
for true accountability. Suppose the Department of Transportation 
quickly uses Recovery Act money for road and bridge repairs that are 
completed in time for the summer driving season, and then we observe 
that there are fewer accidents on the roads during the ensuing summer 
months. It's plausible that the repairs contributed to the reduction in 
accidents, because previous DOT research finds that accidents are 
indeed correlated with the condition of roads. But we cannot simply 
assume that Recovery Act road projects caused all of the observed 
improvement in safety. Perhaps there were fewer cars on the road due to 
the recession, or maybe mild weather helped reduce accidents. Or maybe 
lower gas prices led to a big surge in summer driving compared to last 
year, so that the change in accidents between the previous year and the 
current year actually understates the improvement in safety caused by 
the road repairs. Accurate measurement of the effects of the spending 
requires a comparison of the actual observed results to a baseline--the 
results that would likely have occurred in the absence of the spending.
    If we do not control for other factors that affect outcomes, we 
will not really know whether the Recovery Act projects caused the 
outcomes, or how much of the outcome they caused. Reported data on 
outcomes could either overstate or understate the effects of the 
Recovery Act on program outcomes. This insight is, of course, nothing 
more than Scientific Method 101--control for other factors that could 
affect the observed results. But it sometimes gets ignored when 
agencies report performance data and then presume the agency's actions 
are the only thing that caused the progress captured by the performance 
measures.
    Mirroring GPRA, the OMB Recovery Act memo requires agencies to use 
GPRA's outcome goals and measures wherever possible, disclose results 
to the public, and explain plans for program evaluation. These are all 
positive steps that will promote accountability for results.
    I can think of two possible improvements that would further promote 
accountability and transparency.
    First, the OMB memo appears to leave agencies with the 
responsibility of deciding how they will inform the public about the 
GPRA outcomes produced by Recovery Act spending. One highly useful 
format would clearly juxtapose expenditures with results. There are 
several ways to accomplish this. One would be to require agencies to 
report outcome data alongside the expenditure data to be posted on 
Recovery.gov; spending and results would then be available from the 
same database. Another option would be to require agencies to report 
annually on how Recovery Act funding affected each outcome in their 
annual performance reports required under GPRA. If the Administration, 
or individual agencies, decline to report on Recovery Act outcomes in a 
way that is linked to costs, then oversight committees could of course 
request that information from the agencies under their jurisdiction and 
make that information public.
    Second, although the OMB memo mentions program evaluation, it does 
not underscore the central role program evaluation plays in determining 
how much of the change in an observed outcome was actually caused by a 
federal program rather than other causes. Agencies are required to 
explain their plans for program evaluation of Recovery Act spending, 
but they are not explicitly required to do program evaluation. More 
reliable estimates of the effects of Recovery Act funding would be 
available if agencies were required to perform program evaluations--
perhaps for any program for which Recovery Act spending exceeds some 
defined threshold. Again, if the Administration does not require 
agencies to do this and they do not choose to do soon their own, 
requests from oversight committees could prompt action.

2.  GPRA goals and measures still need improvement

    Although the quality of agencies' GPRA reporting has improved 
substantially during the past decade, there is still a great deal of 
variation. For some agencies, reporting the effects of Recovery Act 
spending on GPRA goals and measures provides ready-made accountability. 
Other agencies, however, must significantly improve their GPRA goals 
and measures if they are to provide the ``full transparency and 
accountability'' promised on an early version of the Recovery.gov web 
site.
    Figure 1 classifies the Recovery Act's $334 billion in 
appropriations (listed in Division A of the legislation) according to 
the scores each agency received on the Mercatus Performance Report 
Scorecard for fiscal year 2008. An expert team evaluates each report on 
12 criteria derived from GPRA. On each criterion, the report receives a 
score that can range from 1 (no useful content) to 5 (best practice 
that other agencies should adopt). The maximum possible score is 60, 
with a minimum of 12. An average of 3 points on every criterion yields 
a score of 36, which could be considered ``satisfactory.''
    Reports with scores in the ``very good'' range (48+ points) are 
most likely to achieve ``full transparency and accountability.'' But as 
Figure 1 shows, only 16 percent of the appropriations in the Recovery 
Act go to agencies whose reports met this standard in fiscal year 2008.



    About 55 percent of appropriations go to agencies whose reports 
received a ``satisfactory'' score of 36 or better in fiscal year 2008. 
Almost one-third of Recovery Act appropriations go to agencies who 
achieved unsatisfactory scores. Thus, a substantial portion of Recovery 
Act funding goes to agencies whose GPRA goals and measures do not yet 
provide adequate accountability for results.
    Congress could play a helpful role in improving the quality of 
performance reporting. Between fiscal year 1999 and fiscal year 2008, 
the quality of GPRA reports tended to improve more at agencies where 
lower percentages of managers surveyed by the Government Accountability 
Office (GAO) identify ``lack of ongoing congressional commitment and 
support for using performance information'' as a hindrance to 
performance management.\14\ If oversight committees express a clear 
interest in obtaining accurate, valid, outcome-oriented GPRA measures 
to evaluate program results, then agencies will likely respond by 
improving the quality of their GPRA measures.
---------------------------------------------------------------------------
    \14\ McTigue, Wray, and Ellig (2009), pp. 30-31.

3.  Ascertaining the Recovery Act's effects on employment requires 
---------------------------------------------------------------------------
serious macroeconomic analysis

    The Recovery Act seeks to promote economic recovery in addition to 
accomplishing specific program goals. The Act proposes to measure 
recovery in two different ways. First, the Council of Economic Advisers 
is responsible for measuring the effects of the Recovery Act on 
``employment, estimated economic growth, and other key economic 
indicators'' in quarterly reports to congressional appropriations 
committees.\15\ Second, recipients of funds are supposed to report the 
number of full-time equivalent jobs created or retained as a result of 
Recovery Act spending.\16\
---------------------------------------------------------------------------
    \15\ Recovery Act, Sec. 1531a.
    \16\ Orszag memo, p. 23.
---------------------------------------------------------------------------
    There are some practical problems with measuring how many jobs are 
created or retained as a result of the spending. The April 3 Peter 
Orszag memo provides definitions for ``created'' and ``retained,'' but 
it simply says recipients of funds are to provide estimates of jobs 
created or retained without providing guidance on how to calculate a 
credible, accurate, and verifiable estimate. It is not clear how 
Congress and the public are to know whether the jobs recipients claim 
they created or retained really were created or retained because of the 
Recovery Act spending.
    In contrast, GPRA has a much stronger requirement for agency 
performance measures. The law does not simply assume Congress and the 
public must take it on faith that the reported measures accurately 
reflect results. Rather, agencies must ``describe the means to be used 
to verify and validate measured values.'' \17\ Ideally, agencies should 
provide sources for all performance data and the underlying analysis 
that produced it so that Congress, inspectors general, GAO, auditors, 
and interested members of the public can ascertain for themselves 
whether the performance data are accurate.
---------------------------------------------------------------------------
    \17\ GPRA Sec. 1115.
---------------------------------------------------------------------------
    Several steps are needed to apply this principle to job data 
reported by recipients of Recovery Act funds. First, agencies should 
require recipients to present credible explanations of how the Recovery 
Act funding caused the jobs to be created or retained, rather than just 
reporting their estimates. Second, agencies should explain how they 
verify and validate the jobs data reported by the recipients. Third, 
the Recovery Accountability and Transparency Board should use random 
audits to confirm the accuracy of the reported information. Fourth, the 
Administration should make all of this information available for public 
scrutiny via Recovery.gov. If agencies and the board do not do these 
things, oversight committees could prompt action by asking for this 
information.
    Those steps would help ensure the accuracy and verifiability of the 
job data reported by funding recipients. However, data on the number of 
people the funding recipients hired or retained does not tell us the 
net effect of the Recovery Act on employment, for two reasons.
    First, nothing in the legislation or the reporting process 
guarantees that the people hired as a result of the spending are people 
who would otherwise have been unemployed. It is quite possible that 
some of the people hired with Recovery Act funds will simply be 
switching from some other job. If a person switches jobs as a result of 
Recovery Act funding, total employment does not increase unless the 
person's former employer hires a replacement. We will not know whether 
this happens, because there is no provision for it in the reporting 
process.
    Second, the money borrowed to fund the spending and tax breaks in 
the Recovery Act is not ``free''; it has alternative uses. Since the 
Federal Government will borrow an additional $787 billion to fund the 
Recovery Act, there is $787 billion less available in the capital 
markets to be used for other public or private purposes. To understand 
this, we need not venture into the economics jargon about 
``multipliers'' and ``crowding out.'' Deep down, we all know that using 
money for one purpose means that the same dollars cannot be used for 
some other purpose. The reason the Recovery Act was limited to $787 
billion, instead of $1 trillion or $5 trillion, is that all responsible 
decision-makers know we give up something when we decide to spend money 
for one thing instead of something else.
    Pulling $787 billion out of the capital markets will have some kind 
of effect on U.S. employment and economic growth. Economists who 
specialize in macroeconomics will hotly debate whether this effect is 
large or small. The better ones will analyze the data as it comes in to 
figure out what's actually happening. I am not here today to argue that 
this effect will be large or small, because macroeconomics is not my 
area of specialization. My only point is that we will not know the true 
effect of the Recovery Act on employment unless we take into account 
the effect of the borrowing on economic growth and employment.
    This is information that the recipients of the funding cannot be 
expected to know or report. Therefore, it is inevitable that the data 
on jobs created and retained will overstate the effects of the Recovery 
Act on employment even if the data truthfully and accurately reflect 
the number of jobs created or retained as a result of the spending. 
This point is worth emphasizing because it will be very tempting to 
assume that the raw data on jobs measures the full effect of the 
Recovery Act on employment. In fact, the numbers generated by this 
reporting will not tell the whole story.
    As an economist, I do not have much confidence in economists' 
prediction--particularly macroeconomic attempts to make predictions 
about the overall economy. But I'll offer a two-part macroeconomic 
prediction that I'm willing to stand behind: America will have an 
economic recovery sometime, and the recovery will be caused by a 
variety of factors. Just as program evaluation helps determine how much 
of the observed outcome was caused by a federal program, so too is 
macroeconomic analysis necessary to determine how much of the recovery 
is caused by the Recovery Act and how much is caused by other factors. 
I presume this is why Congress chose to require those quarterly reports 
from the Council of Economic Advisers in addition to the jobs reporting 
requirements for funding recipients.
    The bottom line: To assess the Recovery Act's effects on 
employment, keep your eye on the macroeconomic analysis.

Conclusion

    It is especially appropriate for the Oversight Subcommittee of the 
Science and Technology Committee to concern itself with accountability 
for results under the Recovery Act. Full and accurate accountability 
for results requires application of the scientific method to determine 
how much of the change in outcomes was actually caused by federal 
programs and Recovery Act spending.
    The Administration's proposal to use GPRA goals and measures to 
evaluate the effects of Recovery Act spending is an excellent one. 
Accuracy and transparency would be improved if agencies reported 
outcome information along with cost information and OMB explicitly 
required agencies to assess how much of the change in outcomes is 
directly attributable to Recovery Act spending. Many agency GPRA goals 
and measures still fall short of providing full accountability for 
outcomes, and agencies need to improve these to ensure full 
accountability for program outcomes affected by Recovery Act spending. 
Finally, both the Administration and Congress should apply the same 
fundamental program evaluation principles to assess the Recovery Act's 
effects on economic recovery and employment. Accurate assessment of the 
Recovery Act's effect on employment requires valid and verifiable job 
data combined with macroeconomic analysis to determine how much of the 
employment change was actually caused by the Recovery Act rather than 
other factors.

                       Biography for Jerry Ellig
    Dr. Jerry Ellig has been a senior research fellow at the Mercatus 
Center at George Mason University since 1996. Between August 2001 and 
August 2003, he served as Deputy Director and Acting Director of the 
Office of Policy Planning at the Federal Trade Commission. Dr. Ellig 
has also served as a senior economist for the Joint Economic Committee 
of the U.S. Congress and as an Assistant Professor of Economics at 
George Mason University.
    Jerry has published numerous articles on government regulation and 
business management in both scholarly and popular periodicals, 
including the Journal of Regulatory Economics, Managerial and Decision 
Economics, Journal of Politics, Business & Politics, Antitrust 
Bulletin, Competitive Intelligence Review, Federal Communications Law 
Journal, Texas Review of Law & Politics, Wall Street Journal, New York 
Times, Barron's, and Washington Post. His co-authored/edited books 
include Dynamic Competition and Public Policy, New Horizons in Natural 
Gas Deregulation, and Municipal Entrepreneurship and Energy Policy. He 
is a co-author of the Mercatus Center's annual Performance Report 
Scorecard, which evaluates the quality of the annual performance 
reports produced by 24 major federal agencies.
    Jerry is a native of Cincinnati, Ohio and a graduate of St. Xavier 
High School. He received his B.A. in Economics from Xavier University 
and his Ph.D. and M.A. in Economics from George Mason University in 
Fairfax, VA.

    Chairman Miller. Thank you, Dr. Ellig.
    Ms. Brian, was POGO the cartoon character who said, ``We 
have met the enemy and he is us?''
    Ms. Brian. Absolutely. That is not a mistake----
    Chairman Miller. Okay.
    Ms. Brian.--that is our acronym.
    Chairman Miller. Ms. Brian is recognized for five minutes.

STATEMENT OF MS. DANIELLE BRIAN, EXECUTIVE DIRECTOR, PROJECT ON 
                  GOVERNMENT OVERSIGHT (POGO)

    Ms. Brian. Thank you very much, Chairman and Mr. Bilbray, 
for inviting me to speak today. I am not only speaking on 
behalf of the Project on Government Oversight, but we are also 
as an organization a member of the Coalition for an Accountable 
Recovery, as is OMB Watch, and so I am just ascribing to those 
recommendations that Dr. Bass made in terms of the transparency 
for contracts. That is something that is terribly important to 
us as well, and I am going to be limiting my testimony to 
focusing on improving resources for auditors, investigators and 
whistleblowers.
    I view the level of protection against waste, fraud, and 
abuse in the Recovery Act with mixed feelings. On the one hand, 
certain provisions provide a terrific opportunity to finally 
crack open the opaque world of government contracting, so we 
could see this as a changed world for the future and not just 
limited to the Recovery Act.
    On the other hand, some of the essential protections are 
insufficient and others are simply non-existent. Due to those 
weaknesses, the velocity and magnitude of the Recovery Act 
spending makes me very anxious.
    One weakness that could be improved to stem losses is the 
significant lack, as we heard Mr. Devaney speaking specifically 
to, of funding for State and local auditors and investigators. 
For every dollar IGs investigate, for example, in audits, there 
is an average return of more than $9, according to a recent GAO 
study.
    Chairman Towns has introduced recently legislation\2\ that 
we believe is an essential step in trying to help provide 
adequate oversight of spending of these funds for those under-
funded State and local auditors.
---------------------------------------------------------------------------
    \2\ H.R. 2182, the Enhanced Oversight of State and Local Economic 
Recovery Act.
---------------------------------------------------------------------------
    Whistleblowers will also be essential to minimizing losses. 
According to a study last year by the Association of Certified 
Fraud Examiners, nearly half of the initial detection of 
occupational fraud, 46 percent, came from whistleblower tips 
rather than from internal auditors. It was an extraordinary 
study, I thought.
    For that reason I am distressed to testify that one of the 
most significant weaknesses of the Recovery Act is in Section 
1553, the section protecting whistleblowers. While it provides 
meaningful protections for State, local, and contractor 
whistleblowers, federal employees are yet again left out in the 
cold. This is simply absurd. Without solid protection it is far 
less likely that a federal employee with knowledge of 
wrongdoing will come forward.
    The good news is there is now a lot of activity to report--
to repair that damage, and I can report that yesterday there 
was--I was a member of a four-hour meeting at the White House 
discussing the need for federal protection--protection for 
federal whistleblowers, and there is discussion in both the 
House and Senate and having hearings soon. So maybe this 
fundamental deficiency in the Recovery Act could be resolved 
soon with stand-alone legislation. I certainly hope so.
    For those whistleblowers who are already protected by the 
Recovery Act, though, I want to focus on what needs to happen 
for the process to work effectively. First, potential 
whistleblowers need to know what their protections are and 
where to go with their disclosures. An individual in their 
hometown who comes across misconduct is unlikely to know to 
which web site to turn. They may not even know which federal 
agency has awarded the original contract.
    In light of this, clear language should be on Recovery.gov, 
on State and local web sites, and on the web sites of each of 
the inspector general what whistleblower protections there are 
or are not and how to report waste, fraud, and abuse.
    IGs especially need to make a concerted effort to encourage 
people to come to them with their disclosures. Some IG offices 
are already doing a good job of this. However, POGO just 
released in March our analysis of the IG, federal IG system and 
their accountability for how they do their work, and we found 
that many IGs are simply not effective at working with 
whistleblowers. In fact, I was just speaking with the Council 
of IGs about two weeks ago where a few IGs argued quite 
forcefully that they do not see it is appropriate for their 
offices to proactively reach out to whistleblowers.
    To make 1553 work effectively, it is imperative for IGs to 
make a concerted effort and sometimes change their culture to 
encourage people to come to them with their disclosures.
    Although the Council of IGs has recently announced a cross-
cutting review of their hotline system, the results from that 
review may come too late, and so I believe it is essential that 
interim steps be taken closer to immediate than anything else 
to implement more effective systems than those that are in 
place now.
    The next problem is also on the IG side, handling the 
volume of intake responsibly. Currently Recovery.gov simply has 
a page that says, tell us your story. That is it. There are no 
explanations for whistleblowers about what kinds of information 
to report, how they are or are not protected, or how the 
information will be used. This is an invitation for problems. 
We know from our own experience you need to have very clear 
directions, a tracking system, and a way to communicate further 
with the whistleblower for this to work at all. Given the 
volume of intake they will be receiving, this is an enormous 
but essential task.
    Finally, when there is a successful case of a whistleblower 
disclosure identifying a problem, the IG needs to herald this 
as a case well done. But even if the systems were to work 
perfectly, serious and sustained oversight from both the Board 
chaired by Mr. Devaney and the Congress are essential. The 
discretion given IGs in the Recovery Act regarding when they 
will or will not investigate disclosures is so broad as to be 
very worrisome, and this is where oversight will play an 
essential role.
    Another area that requires Congressional oversight, and 
where this committee in particular has shown great strength, is 
in overseeing the IGs themselves. For example, it is in large 
part because of this committee's terrific work that the NASA IG 
was finally forced to resign after his poor performance, and 
this committee deserves credit for sticking with that issue 
over the last few years.
    At the moment, the stars are not in complete alignment for 
taxpayers to benefit from whistleblower disclosures, audits, 
and investigations of misconduct in the Recovery Act spending, 
but the weaknesses are fixable. We just need to fix them now, 
and I look forward to working with the Committee to accomplish 
that goal.
    [The prepared statement of Ms. Brian follows:]
                  Prepared Statement of Danielle Brian
    Thank you for inviting me to testify today. It is terrific that the 
Science and Technology Committee is conducting oversight of the way in 
which science and technology-related agencies will manage the American 
Recovery and Reinvestment Act (Recovery Act). POGO, as a member of the 
Coalition for an Accountable Recovery (CAR), supports the 
recommendations in OMB Watch's testimony, which would improve Recovery 
Act provisions for contract transparency, recipient reporting, and 
public access to data, as he lays out in his testimony. Thus, I will 
limit my comments today to improving resources for auditors, 
investigators, and whistleblowers.
    I view the level of protection against waste, fraud, and abuse in 
the Recovery Act with mixed feelings. On the one hand, certain 
provisions provide a terrific opportunity to finally crack open the 
opaque world of government contracting. On the other hand, some 
essential protections are insufficient, and others are simply 
nonexistent. Due to those weaknesses, the velocity and magnitude of 
Recovery Act spending makes me very anxious. In fact, Earl Devaney, 
Chairman of the Recovery Act Transparency and Accountability Board (RAT 
Board), recently noted that it is ``inevitable'' that taxpayer dollars 
will be lost to waste, fraud, and abuse.
    One weakness that could be improved to stem those losses is the 
significant lack of funding for State and local auditors and 
investigators. This is a case of penny-wise and pound-foolish. For 
every dollar IGs invested in audits, there is an average return of more 
than nine dollars, according to a GAO study last year of all IGs. 
Chairman Edolphus Towns has introduced the Enhanced Oversight of State 
and Local Economic Recovery Act, which we believe is an essential step 
to helping provide adequate oversight of the spending of these funds.
    Whistleblowers will also be essential to minimizing losses. 
According to a study last year by the Association of Certified Fraud 
Examiners, nearly half of the initial detection of occupational fraud--
46 percent--resulted from whistleblower tips. Whistleblowers are 
clearly a vital source of information about fraud.
    For that reason, I am distressed to testify that one of the most 
significant weaknesses of the Recovery Act is in Section 1553, the 
section protecting whistleblowers. While it provides meaningful 
protections for State, local, and contractor whistleblowers, federal 
employees are yet again left insufficiently protected. This is simply 
absurd given the important role federal whistleblowers play as the 
first line of defense--they are the eyes and ears for taxpayers. This 
defect is not the fault of the House. The House has repeatedly passed 
with almost no opposition, protections for federal whistleblowers. And 
in the case of the Recovery Act, Representatives Chris Van Hollen (D-
MD) and Todd R. Platts (R-PA) introduced an amendment to cover federal 
whistleblowers that was quickly passed by the House and incorporated 
into the language that was sent to the Senate. However, the Senate 
objected to allowing federal whistleblowers access to jury trials and 
to including protections for national security whistleblowers without 
having held Senate hearings first. The White House remained silent on 
this question, and as a result the House language protecting federal 
employees was stripped. And without solid protection, it is far less 
likely that a federal employee with knowledge of wrongdoing will come 
forward with that knowledge.
    The good news is that there is now a lot of activity to repair that 
damage. The White House is engaged, and both the House and Senate are 
planning hearings to explore providing the missing protections to 
federal employees--so maybe soon this fundamental deficiency in the 
Recovery Act will be resolved with stand-alone legislation? I certainly 
hope so.
    For those whistleblowers who are protected by the Recovery Act, I 
want to focus on what needs to happen for the process to work 
effectively.
    First, potential whistleblowers need to know what their protections 
are and where to go with their disclosures. This may be harder than you 
would think. An individual in their hometown who comes across 
misconduct in the spending of recovery dollars is unlikely to be so 
immersed in the minutiae of the rules to know which web site to look 
at--they may not even know which federal agency awarded the contract. 
In light of that, clear language should be on Recovery.gov, on State 
and local web sites, and on the web sites of each of the Inspectors 
General about what the whistleblower protections are and how to report 
waste, fraud, or abuse.
    IGs especially need to make a concerted effort to encourage people 
to come to them with their disclosures. Some IG offices are already 
good at doing this. However, POGO just released a report on the 
Inspectors General system in which we found that many IGs are not 
effective at working with whistleblowers. In fact, I was just speaking 
with the Council of IGs last week where a few IGs argued quite 
forcefully that they do not see it as appropriate for their offices to 
proactively reach out to whistleblowers. Yet, the Recovery Act places 
this responsibility squarely in the hands of the IGs. So to make 
Section 1553 work effectively for those whistleblowers who are 
protected, the culture in some of those IGs' shops must change to one 
in which they recognize that they should be proactive in that regard.
    It will take a concerted and cooperative effort by agencies and 
their IGs to inform recipients of Recovery Act funds of their 
whistleblower protections and that they need to go to the IGs with 
disclosures of waste, fraud, and abuse.
    The next problem is also on the IG side--handling the volume of 
intake responsibly. Currently, Recovery.gov simply has a page that says 
``Tell us your story.'' There are no explanations for a whistleblower 
about what kinds of information to report, how they are or are not 
protected, or how the information will be used. That is an invitation 
for problems. We know from our own experience you need to have very 
clear directions, a tracking system, and a way to communicate further 
with the whistleblower for this to work at all. Given the volume of 
intake they will be receiving, this is an enormous but essential task, 
and one I know Earl Devaney is taking very seriously as he prepares to 
take over the site.
    In that regard, I am happy to report that the Council of IGs has 
announced a cross-cutting review of all their hotline systems, I 
believe in part because POGO identified a number of weaknesses. While 
that review will be valuable for improving many of the tip-intake 
systems in the future, it may come too late to help protect Recovery 
Act funds from waste, fraud and abuse--the money is going out the door 
now and whistleblowers have already begun submitting tips. Because of 
the magnitude of funds being distributed, it is essential that interim 
steps be taken to implement more effective systems than those in place 
now. IGs should meet with representatives from the whistleblower 
community now in order to hash out best practices for outreach and tip 
intake. This is a terrific opportunity, not only to get it right for 
the purposes of the Recovery Act, but also to strengthen the capacity 
of many IGs to more effectively handle whistleblower cases.
    Finally, and this will also mean a cultural change for some IGs, 
when there is a successful case of a whistleblower disclosure 
identifying a problem, the IG needs to herald it as a case well-done. 
Recently SIGTARP Neil Barofsky made a point in his testimony of saying 
that nearly one-third of his investigations were initiated because of 
tips coming to him through whistleblowers. This is the kind of positive 
reinforcement that will encourage others to come forward with 
disclosures of wrongdoing.
    But even if the systems were to work perfectly, serious and 
sustained oversight from both the RAT Board and the Congress are 
essential. It is most likely that this oversight will be necessary to 
ensure the discretion clause included in Section 1553 is not abused. I 
want to be clear here. The clause is important: without it, IGs would 
have been required to investigate every single complaint received. As a 
person who runs an organization that receives such complaints, I can 
assure you such a requirement would have wasted valuable time and 
energy. However, the discretion given IGs regarding when they will or 
will not investigate disclosures is so broad as to be very worrisome. 
You can't legislate judgment, but I do think this is where oversight 
will play an essential role.
    Another area that requires congressional oversight, and where this 
committee in particular has shown great strength, is in overseeing the 
IGs themselves. For example, it is in large part because of this 
committee's great work that the NASA IG was finally forced to resign 
after his poor performance, and the Committee deserves credit for 
sticking with that issue over the past several years.
    At the moment, the stars are not in complete alignment for 
taxpayers to benefit from whistleblower disclosures, audits, and 
investigations of misconduct in Recovery Act spending. But the 
weaknesses are fixable--we just need to fix them now. I look forward to 
working with the Committee to accomplish that goal.

                      Biography for Danielle Brian
    Since 1993, Danielle Brian has been the Executive Director of the 
Project On Government Oversight (POGO), a nonprofit government watchdog 
organization. She frequently testifies before Congress, and often 
appears in major national media.
    Under Ms. Brian's direction, POGO has conducted numerous 
investigations that have resulted in major public policy reforms, 
including:

          Cutting Wasteful Defense Contracts. Her 
        investigations have led to the cancellation of some of the 
        largest government contracts, including the Boeing tanker 
        leasing scandal, the $13 billion Superconducting Supercollider, 
        the $11 billion Army Crusader, and the Army's Sergeant York 
        Division Air Defense Gun.

          Exposing Oil and Gas Industry Fraud on Public Lands. 
        Her groundbreaking investigations into oil and gas industry 
        fraud on public lands led to the Justice Department's recovery 
        of nearly half a billion dollars, and to rule changes that 
        generate an additional $70 million annually.

          Increasing Nuclear Security. Her investigations into 
        lax nuclear power plant security led the Nuclear Regulatory 
        Commission to order its contractors responsible for security to 
        improve training and working conditions for guards. Her 
        investigations into the U.S. nuclear weapons complex have also 
        successfully led the government toward consolidating nuclear 
        materials and making the complex more secure.

          Fighting Excessive Government Secrecy. Her 
        investigations have uncovered and helped address excessive 
        government secrecy. For instance, she filed and won a lawsuit 
        against then-Attorney General John Ashcroft for retroactively 
        classifying FBI documents.

    Under Ms. Brian's leadership, POGO has also been working to 
strengthen the oversight infrastructure of the government itself, 
through such programs as:

          POGO's Congressional Oversight Training Series, 
        monthly bipartisan seminars teaching Capitol Hill staff the art 
        of congressional oversight.

          Evaluating the federal Inspectors General (IG) 
        system, and working to strengthen both the independence as well 
        as the accountability of IGs.

    Ms. Brian serves on the Board of Taxpayers for Common Sense and 
HALT: Simple, Affordable, Accountable Justice for All. In 2006, Ms. 
Brian was inducted into the Freedom of Information Act Hall of Fame; 
and in 2008, Ethisphere magazine ranked her among the top 100 most 
influential people in business ethics. Ms. Brian earned her Master's 
degree in International Relations from the School of Advanced 
International Studies at Johns Hopkins University in 1990, and her 
Bachelor's degree in Government from Smith College in 1985.

    Chairman Miller. Thank you. I did not get a Christmas card 
from Mr. Cobb this year.
    Mr. Gillespie.

   STATEMENT OF MR. ERIC GILLESPIE, SENIOR VICE PRESIDENT OF 
  PRODUCTS, TECHNOLOGY, AND INNOVATION AND CHIEF INFORMATION 
                      OFFICER, ONVIA, INC.

    Mr. Gillespie. Chairman Miller, Mr. Bilbray, and Members of 
the Committee, thank you for inviting me to testify today with 
such a distinguished panel about oversight of the Recovery Act.
    Simply stated, our business provides a comprehensive view 
of government to businesses that want to do business with the 
government. We track all goods and services that are procured 
around the country, across every industry; infrastructure, 
architecture, engineering, water, energy, information 
technology.
    There are a variety of issues that create a transparency 
barrier which limits visibility into how funds are spent 
between the Federal Government and State, local, and education 
agencies around the country. The situation that everyone wants 
to avoid is one in which Recovery Act money will have been 
spent and untold amounts will have been lost, particularly at 
the State and local level, before anyone is fully aware of the 
loss.
    Mr. Devaney has previously testified that in his experience 
a seven percent number is a good metric to use for fraud in 
spending. That equates to $55 billion in the Recovery Act, 
which makes the stimulus fraud the 60th largest economy in the 
world according to the IMF. It is effectively the size of the 
GDP of Ecuador.
    As a challenge, this market is highly fragmented. There are 
more than 89,000 State, local, and education agencies around 
the country and an estimated 20,000 of those are going to 
receive some level of Recovery Act funding.
    In addition, at those agencies there are hundreds of 
thousands of people procuring goods and services, and there are 
more than three million companies that are qualified to bid on 
Recovery Act projects.
    As you can see from these numbers, the sheer magnitude 
quickly creates an intractable problem when it comes to 
tracking, especially when you compress it into a very 
aggressive timeline.
    One more example to highlight that transparency barrier. 
Several weeks ago the Administration held a press conference 
touting the 2,000th transportation project that was undertaken 
as a result of the Recovery Act. That same day we had actually 
tracked almost 5,000 transportation projects that had been 
funded by the Recovery Act. So there is a significant delta in 
the data as it exists today.
    We set up our web site, Recovery.org, to primarily provide 
timely information to businesses in the marketplace, the 
businesses that create jobs with recovery funding. But an 
interesting user group has emerged at Recovery.org. We are 
seeing the government come and use Recovery.org. At the federal 
level, federal agencies are registering to get a comprehensive 
view of how the states are using the dollars. States are 
registering to see how counties and cities are using the 
dollars, and cities are registering to see how the other cities 
are using the dollars to make sure they are getting their fair 
share.
    It took us about two weeks to develop and launch the site, 
and it has a fairly simplistic interface which allows a user to 
select a state, a country, or a city and see the projects in 
that geographic area. Search engines, user interfaces, 
infrastructure are all things that are key to a successful 
product like Recovery.gov, but the primary reason why we were 
able to launch Recovery.org in such a short period of time, in 
two weeks, was the underlying standardized taxonomy and the 
data that we have. Without the data that sits underneath it, 
none of the technology would have made it possible.
    Representatives from OMB have previously testified that 
Recovery.gov receives hundreds of millions of hits, even 
reaching 3,000 hits per seconds at one point, and by any 
measure even those of online commercial enterprises, it has 
been wildly successful. The incredible volumes of traffic are, 
I think, emblematic of the intense public interest in engaging 
with their government via technology. And in my opinion it not 
unreasonable to think Recovery.gov could have live searchable 
data in 30 to 45 days so that those hundreds of millions of 
visitors and hits don't go to waste. And they will if the data 
is not available soon.
    I have made a series of recommendations in my written 
testimony that I believe will help Recovery.gov, and without 
getting into deep technical details--Dr. Bass touched on this--
suffice it to say that in order to maximize use and adoption 
the data has to be available in formats that have low barriers 
to use. There are many excellent, free, non-proprietary formats 
and standards that can be leveraged, including the ones that 
Dr. Bass mentioned.
    With that I will conclude by saying that while this may 
presently feel like an impossible task, there is an enormous 
opportunity to use Recovery Act tracking to usher in a new era 
of transparency, accountability, and performance, and it will 
set the stage for generations to come in terms of engaging in 
civic discourse with their government. Recovery.gov can be the 
flagship for government transparency and accountability. We 
fully support the goals that Congress and the Administration 
have outlined and will continue to serve in any way we can to 
that end.
    Thank you for inviting me to testify here today, and I look 
forward to answering any questions you might have.
    [The prepared statement of Mr. Gillespie follows:]
                  Prepared Statement of Eric Gillespie

Introduction and Overview

    Chairman Miller, Ranking Member Broun, and Members of the 
Committee, thank you for inviting me to testify today with this 
distinguished panel about oversight of the American Recovery and 
Reinvestment Act of 2009 (ARRA). My name is Eric Gillespie and I am the 
Chief Information Officer at Onvia, a 12-year-old, NASDAQ-traded 
information services company based in Seattle, Washington.
    Simply stated, our business model provides a comprehensive view of 
government spending to companies that desire to sell their goods and 
services to agencies around the country. We were purpose-built to track 
government purchasing events in the State, local and education 
marketplace and are the widely recognized leader in this space.
    Our business at Onvia is comprised of two distinct parts. On one 
side, we facilitate procurement and vendor management for State, local 
and education agencies through an eProcurement portal. We have more 
than 6,000 government users and more than 50,000 business users, and we 
drive procurement compliance via both technology and process. As an 
aside, this part of our business was started with a small Department of 
Commerce grant many years ago to help disadvantaged business gain 
access to government contracts.
    On the other side, we have a data subscription product that is 
designed to assist companies that do business with the government. In 
total, we cover more than 89,000 State, local and education entities 
and have more than 8,000 paying subscribers. We also partner with 
organizations such as local Chambers of Commerce to provide government 
contract visibility for their members.
    Our products contain information about government spending, built 
up from millions of goods and services transactions from across every 
industry vertical--from construction, engineering, and architecture to 
health care, energy, water, and information technology.
    As draft versions of the stimulus bill were being published by the 
House and Senate at the beginning of the year, my team and I recognized 
that Recovery Act funds would be primarily distributed through existing 
programs, from federal agencies to states, counties and cities, and 
these funds would ultimately end up in the hands of contractors and 
subcontractors who would create jobs outside the beltway.
    Based on our experience we believed then as we do today that we 
have a unique perspective to offer about filling the visibility gaps in 
the current flow of capital from D.C. out to the thousands of 
government agencies that perform various functions in the communities 
in which we all live.
    To that end, over the past four months we have met with a variety 
of agency and Administration officials at the Office of Management and 
Budget, the TIGER team at the Department of Transportation, the Small 
Business Administration, many Members of Congress and their staff, and 
government watchdog groups here in D.C., among others.
    Throughout this journey we have attempted to serve as a resource to 
Federal, State and local governments, offering advice, consulting, data 
and information, and technology solutions to help solve the seemingly 
intractable problem of knowing where every dollar of Recovery funds is 
being spent.

Current State of Recovery Act Tracking

    The Administration has stated unequivocally that this unprecedented 
spending requires an unprecedented level of accountability and 
transparency. Both the House and the Senate included language in the 
draft Recovery legislation and amendments as they made their way 
through Congress that would have tracked every dollar of spending, 
accurately and in real-time, but key accountability provisions that 
would have tracked theses dollars down to the subcontractor level were 
not included in the final bill.
    The transparency provisions that did survive in ARRA were set in 
motion with the passage of the Federal Funding Accountability and 
Transparency Act of 2006 which laid the basic foundation for collecting 
and exposing information about federal appropriations. Although it has 
taken several years to enforce compliance and coordinate reporting, as 
examples of successful federal data systems the FedBizOpps.gov (FBO) 
web site provides a single view into procurement across agencies at the 
federal level, and the USASpending.gov web site provides online 
transparency into those purchasing events.
    As you well know, there is no parent-child relationship between the 
Federal, State, county, and municipal governments and thus there is no 
comparable FBO-USASpending platform for State, local and education 
procurement. In actuality there are almost as many programs, rules, and 
platforms as there are agencies around the country.
    OMB has now issued two sets of complex, sometimes conflicting, 
directives in an attempt to clarify what information should be tracked, 
to what level of government, and how it should be reported as part of 
ARRA. These directives focus almost exclusively on federal agency 
compliance and ignore the fact that most spending will occur at the 
State and local level by State and local officials.
    Further complicating this, by design the states function 
independently from the Federal Government and that separation of 
governmental powers is core to our Constitution. The states exist in 
part to preserve freedom, and attempts to centralize and control the 
flow of information at the federal level are often met with resistance. 
Constitutional scholars will likely have heated debates about how the 
Administration should track data from the largest spending initiative 
in the history of civilization without setting a precedent of Soviet-
like, centralized information control.
    These combined issues create a ``transparency barrier'' that limits 
visibility into how funds are spent between the Federal Government and 
State, local and education agencies around the county. The situation 
everyone wants to avoid is that in which Recovery Act money will have 
been spent and untold amounts will have been lost, particularly at the 
State and local level, before anyone is fully aware of the loss. The 
Government Accountability Office (GAO) recently pointed out that states 
are already struggling with how to oversee and manage stimulus 
expenditures.

The Transparency Barrier

    Transparency and reporting to both Congress and the public at 
large, with full disclosure of all entities, public and private, 
receiving funding from ARRA, tracking grants and sub-grants, contracts 
and subcontracts, obligations and certifications, and authenticating 
the sources of this data, serves as the backdrop for defining the key 
challenges. Establishing accurate and timely job creation metrics adds 
yet another level of complexity.
    The market is highly fragmented: there are more than 89,000 State, 
local and education entities across the country, and an estimated 
20,000 of these will receive a portion of funds from ARRA. In addition 
there are hundreds of thousands of officials at these agencies who will 
have a role in procuring goods and services with ARRA funds, and there 
are more than three million businesses that are qualified to bid on 
ARRA-funded projects. You can see from these numbers how the sheer 
magnitude quickly creates an intractable problem, especially when 
placed on an aggressive timeline.
    The transparency barrier that exists between the Federal Government 
and State and local government has been exposed with the passage of the 
ARRA and with the speed at which these funds are being approved and 
disbursed.
    Consider the example below of atypical capital flow from Congress 
to local subcontractors in the Recovery Act:



    Congress, the Administration, the States, the Municipalities, and 
the American people are all attempting to track where capital is being 
obligated and spent at the local level; this transparency barrier 
prevents that. Both the legislation and the directives from the Office 
of Management and Budget focus on federal agencies and federal 
contractors, but largely ignore money that is spent at the local level 
and do not provide for tracking the ultimate recipients of the funds--
the contractors and subcontractors. With the burden of tracking 
spending at a local level, Counties and Cities are beginning to feel 
like they will be the scapegoats for misused funds.
    There are four key challenges which must be addressed in order to 
see through the opacity. First, untangling the vast amount of 
unstructured data across these sundry entities is a Herculean task. 
Each entity has its own set of rules and workflow that address 
procurement, formats for solicitations, reporting requirements for 
contract awards, vendor qualification, vendor lists, and data 
persistence among many other areas. The categorization and compliance 
issues faced by the Federal Government in implementing FBO.gov and the 
Federal Procurement Data System (FPDS) over a number of years are 
similar, although given the wide dispersion of the State, local and 
education market the complexity is several orders of magnitude greater 
when attempting to track ARRA funds.
    Once a canonical view of the entities is established, the second 
primary challenge can begin to be addressed: authentication of entities 
and their executives tasked with certifying the ARRA spending. A 
structured registration and validation process is required to ensure 
data integrity, along with a basic support center to handle basic 
compliance questions and simple account issues like password resets. 
Executive certification is compounded by entities mixing stimulus funds 
with general funds at the local level and tracking projects that are 
only partially funded by stimulus dollars, highlighting that self-
reporting by fund recipients is certain to be fraught with inaccuracy 
and latency. A method of objective and independent compliance reporting 
is necessary to ensure stipulations like ``use it or lose it'' are 
followed.
    The third challenge is societal and technological. Ubiquitous Web 
2.0 technologies, principally in the private sector but increasingly in 
the public sector, have raised the expectations of the American people 
in terms of their ability to navigate complex information through 
relatively simple interfaces. Deep datasets and corresponding real-time 
reporting engines are presumed in the case of available government data 
as there is an abundance of information in the government market; the 
public expects the experience they get elsewhere on the web from what 
has been described as ``the most technologically savvy 
Administration.''
    The fourth challenge is the incredibly aggressive timeline on which 
funds are being dispersed. An ``aggressive but realistic'' plan to 
achieve the transparency and accountability goals of the Administration 
is required. The need to get capital moving in local economies, to 
create jobs as rapidly as possible, combined with the unprecedented 
level of spending, presents an opportunity for unprecedented waste and 
fraud. The Chairman of the Recovery Accountability and Transparency 
Board, Earl Devaney, estimated that $55 billion of taxpayer dollars may 
be lost to fraud, which is particularly true at the State and local 
level where the Administration has very limited visibility. That's five 
times the entire GDP of Afghanistan; about the same as the GDP of 
Vietnam, Luxembourg, and Ecuador; and half the GDP of New Zealand, 
Egypt and Iraq.
    According to figures from the World Bank and the International 
Monetary Fund, the fraud alone in our ARRA spending will be the 60th 
largest economy in the world. Eliminating the transparency barrier with 
only a one percent improvement in fraud would save the American 
taxpayers $550 million. With the aggressive timeline there is simply 
not an opportunity to spend months, or compared to some implementation 
cycles years, developing a delivery platform, and there is little 
opportunity to stop waste before it starts rather than relying on 
investigations after spending occurs.

Technology Platform

    We appreciate the scope of the technical challenges associated with 
trying to track Recovery Act spending. There are likely many ways to 
solve this problem technologically. We began solving it over a decade 
ago and have developed a proprietary, dynamic platform with hundreds of 
servers, thousands of custom software programs, deep web search 
technologies, scanning and optical character recognition functions for 
hard copy material, and on-demand Freedom of Information Act (FOIA) 
request processing. Our technologists and researchers have many years 
of experience in this arena and are constantly looking for new and 
innovative ways to meet these tracking challenges. We provide a 
standardized view of the public record with these solutions.
    When looking for a comparable analog for the technology footprint 
required to track spending on a federal scale, consider both the 
``revenue side'' and the ``expense side'' of the federal budget. On the 
revenue side, the Internal Revenue Service (IRS) tracks flows of 
capital in granular detail; every citizen and entity in the country 
reports their income, number of dependents, profits and losses on 
investments, the home they own and interest paid on their mortgage, and 
the taxes paid on the car they purchased, as examples. On the expense 
side where the purchase of goods and services occurs, the government 
marketplace is by far the largest ``industry'' vertical; citizens, 
businesses, non-profit organizations, State and local agencies, and 
schools are involved in spending. However, the level of transparency 
and tracking on the expense side pales in comparison to that on the 
revenue side. From a technology perspective the IRS is able to sift 
through massive amounts of data on the revenue side because they have 
established standardized forms for processing, invested in large data 
centers, and employ countless programmers. For the Federal Government 
the expense side of the equation is no less complex than the revenue 
side, it just isn't tracked and reported with the same veracity.
    Until recently Americans have tolerated a lack of transparency in 
governmental spending. The shift toward intolerance is being driven by 
the advance of technology, the Internet, and the assumption that 
information should be and is easily accessible; the Internet generation 
has a new set of expectations. There has also been a recent groundswell 
of ARRA expectations established with the many statements made by 
President Obama about transparency, accountability, and efficacy.

The Development of Recovery.org

    With the expected beneficiaries of these funds being a diverse 
group of mostly small and medium businesses, economists agree that the 
``flywheel effect'' of job creation from these stimulus dollars will 
happen principally in local communities. Many of these beneficiaries 
are subcontractors to prime contractors who have been awarded a 
contract by a State or local agency.
    Given our subject matter expertise in this area we believed that in 
the short-term it would be difficult to provide visibility to the 
American taxpayers for every dollar of stimulus spending. At the end of 
March we launched a web site called Recovery.org which is principally 
targeted at companies that do business with the government. At 
Recovery.org we post early notices of projects, RFPs, bid documents, 
amendments to these documents, and award information about contractor 
and subcontractor recipients of stimulus funds, and we do this as close 
to ``real-time'' as possible.
    It took us about two weeks to develop and launch the site, and it 
has a somewhat simplistic interface which allows the user to select 
from combinations of State, county and city.
    It produces obligation and spending results as transactions occur 
every day in those geographies.
    We are currently in the process of making the site navigable via an 
interactive map so that users can drill down to their community and see 
the spending that is most important to them via zoom controls.
    Given the time constrained ``use it or lose it'' provisions 
contained in the legislation the bulk of the projects we are currently 
tracking at Recovery.org are related to infrastructure and 
transportation.
    With Recovery.org we have done precisely what the Administration 
has been encouraging with regard to government information: we took a 
large public dataset and turned it into something searchable and 
useful.

The Complexity and Power of Data

    The potential economic and societal impacts of exposing government-
wide data in standard formats are profound. However, the challenges 
with aggregating and presenting vast amounts of unstructured data in 
meaningful ways are many. The Federal Government has made an effort in 
recent years to open some of its data coffers, some successfully and 
some unsuccessfully. While there has been significant progress at the 
federal level as a result of the Coburn-Obama Act and USASpending.gov 
for tracking and reporting, the process of obtaining quick, accurate 
information about federal spending remains difficult at best.
    The most interesting and beneficial information, however, is not in 
the coffers of the Federal Government but in the highly fragmented 
State, local and Education marketplace--data about the communities in 
which we all live. Attempting to add State and local data to the mix 
only serves to magnify current visibility gaps. For State and local 
levels of government, there is no ecosystem of interaction, no inter-
operability, and no single source of truth.
    To further complicate requirements for timely and standardized data 
collection from State and local entities, many of these agencies 
perform a combination of essential services ranging from public safety 
to maintenance of physical infrastructure. Unlike the Federal 
Government's established taxonomies for tracking spending on goods and 
services, there is no universally accepted standard across these highly 
fragmented State and local governments. What initially appears to be a 
relatively simple set of functional spending categories is not easily 
mapped to a common state-by-state, municipality-by-municipality view.
    For the moment let's assume the data aggregation and 
standardization problems can be solved for Recovery fund tracking, or 
for that matter any other dataset such as TARP fund tracking. Consider 
the mash-up possibilities with census data, campaign contribution 
results, crime statistics, or tax information, to name a few views, and 
imagine the level of citizen engagement that might be generated.
    Unleashing data, however, isn't solely about transparency and 
accountability, nor solely about preventing waste, fraud and abuse, 
although much of the discussion has thus far centered around those 
laudable goals. It is also about economic development and prosperity. 
If executed well, the Recovery Act cannot only have the expected direct 
impacts on the economy by infusing capital for stability and job 
creation, but by exposing more actionable data it can also have the 
ancillary benefit of creating new businesses and redirecting capital 
flows to more efficient channels.
    There are good precedents for this and the Administration has 
admirably taken a leading position on promoting widely available data 
feeds with the web site Data.gov. They have used the Human Genome 
Project as a shining example of how unleashing data can lead to the 
greater good. In addition to this powerful National Institutes of 
Health example, other examples include the GPS industry created by the 
Department of Defense unleashing satellite data to the geospatial 
community, and the trillion dollar intellectual property licensing 
industry supported by data unleashed by the U.S. Patent and Trademark 
Office. If successful at democratizing large datasets and giving access 
to the public, Data.gov will likely also set an international gold 
standard for transparency.
    Without getting into deep technical details, suffice it to say that 
in order to maximize use and adoption the data must to be made 
available in formats with low barriers to use. There are excellent, 
free, non-proprietary formats such as XML, JSON, and YAML. There are 
other standards such as XBRL which the Securities and Exchange 
Commission has adopted for electronically collecting financial results 
from companies.
    Search engines, user interfaces, and infrastructure are all key to 
a successful technology-based product like Recovery.gov but the primary 
reason we were able to build Recovery.org in two weeks was our 
underlying, standardized taxonomy and data. Without the data none of 
the other technology would have mattered.

Recommendations for Recovery.gov

    Representatives from OMB have previously testified that 
Recovery.gov receives hundreds of millions of hits, reaching 3,000 hits 
per second at one point. By any measure including those of online 
commercial enterprises it has been wildly successful. This is further 
emphasized by the traffic generated by Mr. Devaney's recent National 
Dialogue on Information Technology Solutions online forum: 1.5 million 
visitors within the first 48 hours. These incredible volumes of traffic 
are emblematic of the intense public interest in engaging with their 
government via technology. Recovery.gov represents an opportunity to 
meld the culture of web innovation with the culture of citizen 
engagement.
    It is difficult at this point to evaluate Recovery.gov as a 
tracking mechanism for stimulus funds because very little data has been 
reported to OMB and the Recovery Accountability and Transparency Board 
thus far. As I have testified, it has taken our company more than 10 
years to perfect the process of collecting large volumes of data in 
various formats and while I wouldn't expect it to take that long to 
track Recovery Act funds, hurdles remain.
    I have several tactical and strategic suggestions for improving 
functionality and transparency on the site:

        (1)  A project impacting so many aspects of the government is 
        not undertaken without some level of risk. Data will never be 
        perfect. Accept that and get on with it. Adopt an 
        implementation framework that is designed for nimbleness, such 
        as Agile Scrum, to facilitate speed.

        (2)  A good user experience is paramount to success. Consider 
        the many needs of the audience and distill them into a few 
        basic, representative personas around which the site can be 
        designed. View transparency and accountability as a leading 
        ``brand'' with constituent touch points, of which Recovery.gov 
        is perhaps the most significant in terms of its appeal.

        (3)  Define a simple common vocabulary for constituents, 
        developers, Congress, the Administration, states and cities. 
        This should include terms like appropriation, obligation, 
        approval, certification and award, among others. Establish a 
        standard corpus of entities and information about them. With 
        the vocabulary and the entities, begin to develop simple data 
        architecture concepts.

        (4)  Choose a basic data format as standard. This doesn't 
        require a significant amount of research as there are many 
        excellent choices available; as long as an open, non-
        proprietary format is chosen it will be hard to go wrong.

        (5)  An initial dataset is requisite. Get a centralized 
        database up and running quickly and begin processing and 
        standardizing larger volumes of data. It doesn't need to be 
        perfect, and the broad interest from the user community that 
        has already been demonstrated will help to hone the approach.

        (6)  Implement a basic search engine so that spending can be 
        filtered by variables like geography, Federal Supply Codes, and 
        program area. Provide businesses with an easy way to access 
        projects on which they can bid; at a time when businesses are 
        struggling, providing details of Recovery-funded projects 
        serves to create and preserve jobs in local communities. With 
        this, government agencies will get more qualified contractors 
        bidding on contracts and as a result taxpayers will get more 
        value for their dollar--a transparent system that is more 
        efficient.

        (7)  Operate a Recovery Act program assistance center to assist 
        federal, State and local agencies with compliance, and assist 
        potential recipients of funds by answering questions about 
        securing grants or contracts. Learnings from this center should 
        be used to inform further development of the site.

        (8)  As the dataset grows, provide raw data feeds via APIs to 
        the public at-large. It is not incumbent on the Federal 
        Government to create unique and interesting views of the data 
        and, instead, by providing data to developers the public at-
        large can create engaging user experiences with the underlying 
        data.

        (9)  Look for best practices and pockets of innovation across 
        the public and private sectors which can be adopted. To be 
        successful this can't be onerous on either State, local and 
        education entities or the private sector contractors and 
        subcontractors. It is also important to not create an 
        inefficient parallel universe of data and systems.

    The benefits of allowing the public to have access to wide range of 
data, the tools to interpret it, and the conduit to build on it, are 
fundamental to achieving the goals of transparency and accountability. 
It is not unreasonable in my opinion to think Recovery.gov could have 
live, searchable data in a 30-to-45 day timeframe but the hundreds of 
millions of hits received at Recovery.gov will go to waste unless the 
data is available soon.
    The communication agency McCann-Erickson's slogan ``Truth Well 
Told'' is an apt description of what I believe the Recovery.gov web 
site can achieve.

Conclusion

    With that, I'll conclude by saying that while this may presently 
feel like an impossible task, there is an enormous opportunity to use 
Recovery Act tracking to usher in a new era of transparency, 
accountability and performance, and set the stage for generations to 
come in terms of engaging in a civic discourse with their government. 
There will also be a significant culture shift for many who work in the 
public sector, and the shift will be particularly pronounced at the 
State, local and education levels of government.
    The technology is available to turn Recovery.gov into the flagship 
for government transparency and accountability. We fully support the 
important goals that Congress and the Administration have outlined, and 
we will continue to serve in any way we can.
    Thank you again for inviting me to testify here today, and I look 
forward to answering any questions that you might have.


                      Biography for Eric Gillespie
    Mr. Gillespie is an accomplished organizational leader and problem-
solver recognized for developing and implementing strategic plans. His 
technology and business development expertise spans a variety of 
industries, with emphasis in data and information services, software 
development, intellectual property and telecommunications. His views on 
data, technology, innovation and patents have been featured by leading 
publications including Fortune, The Economist, the Wall Street Journal, 
the International Herald Tribune, Intellectual Asset Management 
Magazine, and the Chicago Tribune, among others.

                               Discussion

    Chairman Miller. Thank you, Mr. Gillespie.
    We will now have questions from the Members present, and I 
recognize myself for five minutes.

                   Achieving Detail in Data Tracking

    Mr. Bass, Dr. Bass, Mr. Gillespie, you heard my questions 
to, I think it was Mr. Dodaro, about the Department of Energy 
having obligated, contracted for $342 million in funds for the 
Office of Science. It is set out in some detail in the 
appendix, but when you go to the web site for the DOE, you 
can't find anything below the 342 number.
    And I asked how they got that number, and apparently they 
just went in and looked at the written records and coded by 
hand. How is--how difficult a task is it going to be--you 
touched on this in your testimony, to get that level of detail, 
who the contractors are, how much they got, in a way that can 
be on a web site that anybody can see and understand?
    I guess Dr. Bass first and then Mr. Gillespie.
    Dr. Bass. Mr. Chairman, first I would want to clarify that 
there are, in essence, really two different reporting systems 
we are talking about. One is the reporting system from the 
federal agencies that is currently happening, and that is where 
the Department of Energy data is coming on weekly reports to 
Recovery.gov. That is one reporting system.
    The second, which was mentioned in the last panel, starts 
the October, what is it, 7th? Is that the--10th. October 10? 
The first reporting from the recipients, and that will tell us 
how the money is actually being spent.
    And they are two very different systems. They have to come 
together.
    In terms of the first one, which is the agency reporting, I 
think Mr. Gillespie's point is completely on target that there 
already is data that can be made publicly available. It is not 
rocket science on how to make that data available. We have 
weekly reports as you saw from the screen shot you took that 
came out of Excel spreadsheets. What Recovery.gov should be 
gathering today is the detailed information that GAO got, in a 
consistent manner from each of the agencies so that we, the 
public, can get not only access to it through Recovery.gov in a 
searchable format, but access to the underlying data itself 
through various feeds so we can utilize it and do various kinds 
of manipulation.
    But having said that, I have got to be mindful that this is 
going to be an iterative process. We are going to make 
mistakes. I think the first thing I thought of was when OMB put 
out guidance to the agencies initially and told us to have a 
tag number that said ``Recovery.'' It had a number, which is 
great because we could start to identify the dollars. But they 
forgot to say ``put the name of the program,'' and so we had 
all these account numbers and no name, and none of us knew what 
the heck the programs were with the account numbers.
    They are going to learn from mistakes like that, and I 
think we are going to have to have all of us pitch in, and this 
is going to be a bipartisan, it is going to be a non-
governmental, it is going to be a governmental effort to get 
this right.
    Chairman Miller. Mr. Gillespie.
    Mr. Gillespie. Just to build off of what Dr. Bass said, the 
data issue is a significant issue. Not surprisingly, the 
Department of Energy, people at the Department of Energy have 
registered at our web site to look at data and help track data.
    It is a large problem, and it gets larger as you get deeper 
into State and local, and it is a very different animal at the 
State and local procurement level than it is at the federal 
level and gets many orders of magnitude greater as you get down 
lower.
    Chairman Miller. Mr. Gillespie's business has created for a 
different reason, for different motive, a technology that does 
much of what we want to try to do for purposes of 
accountability and oversight.
    Ms. Brian, is it--how helpful to potential whistleblowers 
would it be to have that kind of access to information so they 
could connect dots before blowing the whistle?
    Ms. Brian. Well, it is fantastic because essentially, a 
whistleblower can be a person who walks down the street to see 
whether the bridge is being built, and if it is--nothing is 
going on, that--they need to be able to figure that out.
    So information is the central keystone to being a 
whistleblower, and so they need to have access to that 
information.
    Chairman Miller. I will yield back my last 17 seconds.
    Mr. Bilbray.
    Mr. Bilbray. Yes. Thank you, Mr. Chairman. Mr. Chairman, as 
the Ranking Member on the procurement Subcommittee of 
Government Oversight I am running back and forth between 
hearings, but it is appropriate.
    In fact, one of the things that really has kind of shown up 
that one of the blatant problems we have run into in 
Afghanistan was not the for-profit contracts but for the non-
profit contracts and people claiming to have planted an orchard 
and then showing the picture of somebody else's orchard and 
giving the wrong GPS locations.

                        Monitoring Job Creation

    But I want to get back to the ability to count on some of 
these things, and I would open this up to any of the panels who 
wants to talk about this, but one of the things that is going 
to be asked a lot about the success of this program is to 
calculate how many jobs were created by this investment. How do 
we not only assess it but document the creation of jobs under 
this program?
    Dr. Bass. I think there are several steps. The first is 
that we have to have a better definition of what a job is so 
that we are all talking apples to apples here. That is one 
step.
    I think the second is if we do have sub-recipient 
reporting, Congressman, we will have the real opportunity to 
get information from the horse's mouth, if you will. This is an 
opportunity in this model of Recovery Act to have the 
recipients who actually touch the dollars to report on 
literally what kind of jobs they have either saved or created, 
and instead of it being filtered one level up and up and up and 
up, we have a chance to have it reported directly so we all can 
see it.
    If it is done in the right manner, we can tie that data to 
the originating contract so we can see how that all fits with 
one another. This isn't--as I say, in some respects this is a 
huge task, but we can break it up into smaller parts and think 
about the dollars that are really being dealt with here. We 
heard from the first panel that the bulk of the dollars going 
out the door are really the health care dollars, the Medicaid 
dollars.
    So we could narrow the focus to some very specific areas 
like transportation and other areas to try and tackle this.
    Mr. Bilbray. How do we do this, though, you know, we had an 
instance here where the House tried to at least have a minimum 
standard of disclosure, and that was the verified for everybody 
to participate in the program. Our colleagues on the other side 
of the aisle not only did not accept it, they had it stripped. 
They did not want that level of investigation of just even 
checking that the Social Security number of anybody getting the 
programs or getting the job, be identified.
    With that attitude coming out of, you know, the House of 
Lords on the other side, how do we assure the American people 
that we are going to have the database, we are going to ask the 
questions, we are going to go to the individual who is getting 
the job to make sure that they actually had a job, that they 
were working on? How do we do that, especially under this 
environment that we started off with this thing where you 
actually had sort of a basic program that was 99.6 percent 
successful taken out of the review process from the get-go? Can 
we get that back in? Can we, you know, can we kind of go back 
and try to recapture that mistake?
    Dr. Newsome. Well, Congressman, my response is going to be 
just perhaps a little off from your question, so I am going to 
pass on real quickly, but I want you to know in the HBCU world 
and colleges and universities like ours, we would feel 
ourselves privileged to be in a position to be measured and to 
be----
    Mr. Bilbray. If you could get----
    Dr. Newsome. If we could have access.
    Mr. Bilbray. Uh-huh.
    Dr. Newsome. There is another ``A'' that has to be added to 
this, access, accountability. The first one is access. We would 
count it an honor to be in a position to respond to a question 
like that because we were receiving funds and being asked to 
demonstrate that we were using those funds in the way intended.
    Mr. Bilbray. Now, let me just reinforce the fact--a lot of 
people missed out and didn't realize--not just your 
institution. You have Catholic institutions that do huge 
outreach to disadvantaged, do huge outreach into the 
communities, and because they happen not to fall under the 
public guise, they have been fenced out of the system.
    Dr. Newsome. Absolutely.
    Mr. Bilbray. But let us get back to this data issue. If I 
can't even find out, if I am not even required to check that 
the Social Security number and name matches, how can you 
require me to track this and document it down the line when--
can we add this in after the fact?
    Mr. Gillespie. It is a very difficult data problem, 
Congressman. It has taken us 10 years to figure out how to do 
that. We do it every day, but it is an intractable problem.
    There will be close to $100 billion spent by the October 10 
date that Mr. Devaney spoke of on the previous panel that will 
be out the door, and unless that level of transparency or that 
level of tracking is put in place soon, those funds will be 
gone, and it will be a forensic audit that is required to 
understand it as opposed to being prognostic or preventative.
    Dr. Ellig. As with other kinds of performance information, 
you are going to have to have random audits and other types of 
procedures to make sure that it is actually--to verify that the 
information that is being reported is actually accurate.
    Ms. Brian. I think an additional factor is the deterrent 
effective Congressional oversight, and I think having hearings 
like this on a continuing basis so people will be afraid not to 
be reporting would be a helpful way to keep people honest and 
reporting as much as possible.
    Mr. Bilbray. Well, thank you, Mr. Chairman. To be, and you 
know, not that I will be proactive, but the fact is I think 
there was a strong consensus on both sides of the aisle here 
that the verify and starting off with who was being employed 
was an essential part of our credibility, and it is too bad 
that there are powers that be. And I have a feeling on both of 
sides of the aisle over in the Senate, that specifically did 
not want that kind of accountability, and I think there is 
going to be a question asked again and again, why in the world 
would you not want to check the minimum if you are going to 
promise to be--to check everything else down the line. And I 
think that is a real challenge that we have, and it didn't 
start in the House. It, you know, we ended up having to settle 
for a deal that came from the Senate, but I still question why 
were the people over there so hell bent not to have that 
accountability.
    Thank you.
    Dr. Bass. Could I just chime in on----
    Chairman Miller. Dr. Bass.
    Dr. Bass.--the last point? I think, Congressman, I think 
given what we have today, I think we have to assess the 
situation as it is, and what I think is important to understand 
is that OMB has the authority to request certain types of 
information, notwithstanding the specific statutory issue you 
were referring to, OMB could be collecting information around 
what kinds of jobs are being created, what are the wages being 
paid, what are the benefits that people are getting, where are 
they--where are people who are getting employed, where are they 
coming from.
    These are the kinds of equity questions that many of us 
want to have answered, and I think OMB can collect that.
    Mr. Bilbray. But if you do not know who it is, who got the 
job, you can't audit it. That is the key.
    Dr. Bass. I am just saying you can have the authority to 
get this far that I have just described.

                   Providing Equitable Funding Access

    Chairman Miller. Dr.--I now recognize myself for another 
five minutes.
    Dr. Newsome, your testimony has hit upon one of the great 
frustrations for me in the six years and four months that I 
have been in Congress and representing the district that I 
represent that includes both, for instance, Greensboro, the 
county of Guilford, and Caswell County and Yanceyville, the 
disparity in the personnel, and the resources to apply for 
funding programs to identify and apply for is enormous and it 
results in an inequity in the funds that actually flow.
    You have identified it as a problem for HBCUs----
    Dr. Newsome. Yes.
    Chairman Miller.--specifically in getting research funding, 
that Shaw is at a competitive disadvantage in that way from--
compared to say, Duke. How can we get out of that? How can we 
provide more, a more equitable way of providing grant funding 
and one that does not give such an advantage to larger units 
that have the personnel, the resources to identify and apply 
for funding?
    Dr. Newsome. Thank you, Mr. Chairman. You are quite right 
in suggesting that other minority institutions share the same 
kind of challenges as Shaw University, and that basically is a 
kind of economy of scale issue.
    I would suggest that one way to begin is by having 
representatives from these institutions participate in some 
very strategic conversations and discussions with State 
personnel in particular, because this is where we are having 
our logjams, our confusion, our bottlenecks, and the like, and 
together work out some ways and means to free these funds up to 
flow to these institutions.
    At the State level, access is made possible primarily by 
way of a web site, and the web site is constantly being 
bombarded with all kinds of requests. In other words, it is 
overused. It is hard to get through. It is hard to get 
responses. We need to come together and have the people who are 
to benefit from these funds work hand in hand with those who 
are charged and have a mandate to make those funds available to 
come up with a very satisfactory resolution and solution. 
Develop the policies, develop the procedures, and then hold 
each other mutually accountable, because accountability comes 
to light at that point as well.
    The states are charged to make funds available. We want to 
make sure those funds get where they should go. The recipients 
ought to participate in the development of processes, 
procedures, and policies to ensure that that happens.
    Chairman Miller. Okay. Thank you. Mr. Gillespie. I am 
sorry. I am calling you when you are reading a note. Maybe your 
note includes the answer to the question.
    The--I said earlier that your web site--you developed your 
web site for reasons that were not the same as the reasons that 
we are trying to develop Recovery.gov as an instrument of 
accountability and transparency--as a management tool for 
government--but to help people who want to contract with the 
Federal Government.
    But its effect is the same, is similar, and you have 
already run the traps, many of the traps that Recovery.gov 
presumably will have to run. Has anyone from Mr. Devaney's 
staff talked to you about how your web site works, what 
problems you have encountered, how you have overcome the 
obstacles, et cetera?
    Mr. Gillespie. I received the first contact from Mr. 
Devaney's office this week and expect to meet with them at the 
end of this week.

                                Closing

    Chairman Miller. Okay.
    I yield back my balance of my time.
    Mr. Bilbray.
    Mr. Bilbray. Thank you, Mr. Chairman.
    Chairman Miller. I think Mr. Bilbray has no further 
questions either.
    Well, as Ms. Brian and others have suggested, this needs to 
be something that we continue. We--when I have heard the 
phrase, ``Bless us hearty,'' it means well. It usually is not a 
compliment, but the first step in providing accountability--as 
I have said before--and transparency is that you need to want 
to provide accountability and transparency. And we have now 
embarked upon that, and we may have obstacles, we may not 
successfully deliver as much accountability as we had hoped, 
but this will not be the last time we spend government funds.
    The obstacles that we encounter and overcome will be 
overcome for the future. So this is a continuing effort, both 
with respect to specifically the stimulus funding, the 500 
billion or so that we are spending, and actually, Mr. 
Gillespie, I think probably the correct figure is more like 35 
billion. It was only 35 billion in waste. I am not sure how 
much comfort we should take in that number being a little lower 
because almost 40 percent of the Recovery funds were actually 
tax cuts.
    But this is something we need to continue, we will continue 
to hold hearings, and we hope we will not have to have hearings 
where we call miscreants to account, to where our beginning 
admonishments that witnesses are entitled to counsel and are 
under oath will actually be pertinent to the testimony we will 
get.
    Dr. Newsome. Mr. Chairman, may I just offer one additional 
word?
    Chairman Miller. Dr. Newsome.
    Dr. Newsome. I serve--thank you. I serve on the North 
Carolina State Ethics Commission, and I certainly am a 
proponent and a champion for accountability, fair play, but in 
the final analysis the end game is results. Results. And this 
is what this initiative is all about.
    The HBCU community has a short-term economic impact of $10 
billion. Our contribution to the job market is around 180,000 
plus, making us the 23rd largest employer collectively in the 
Nation. Our campuses are full of creative and innovative 
energy. We take a little of nothing and turn it into something 
miraculous.
    Who would have thought that an institution Shaw 
University's size would be helping to stimulate the economy in 
one of the poorest counties in the entire country, not just 
North Carolina, through an NSF grant, paying farmers to grow a 
crop that grows during the winter so that we add to their 
growth cycle, reducing their overhead by taking that crop, 
providing them fuel, reducing the overhead of the school system 
so that they can stretch their meager dollars to improve their 
performance. If we had the funds to augment what we do, the 
results would be tremendous, redounding not just to the benefit 
of the HBCUs and the contribution that they make within that 
world, but to the health and well-being fiscally and otherwise, 
socially, of the Republic.
    Thank you very much.
    Mr. Bilbray. Thank you, and Mr. Chairman, for the record, 
we grow our crops in the winter all the time in California, but 
that is different.
    Chairman Miller. I didn't know you had a winter.
    Mr. Bilbray. Just happens to be the largest agricultural 
state in the union there.
    Chairman Miller. All right. Before we bring this hearing to 
a close, I do want to thank all the witnesses for testifying, 
and under the rules of the Committee, the record will remain 
open for two weeks for additional statements from Members, as 
well as for any answers to any follow-up questions the 
Committee may have for the witnesses.
    The witnesses are now excused, and the hearing is 
adjourned.
    [Whereupon, at 4:50 p.m., the Subcommittee was adjourned.]
                               Appendix:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Earl E. Devaney, Chairman, Recovery Accountability and 
        Transparency Board

Questions submitted by Representative Paul C. Broun

Urgency of Funding

Q1.  One of the selling points of the stimulus bill was that action was 
needed immediately.

          How long will it take to spend all of the money 
        directed to agencies?

A1. The Office of Management and Budget (OMB) has provided guidance 
indicating that 70 percent of stimulus funds will be disbursed by the 
fall of 2010. The remaining fluids will be disbursed over the life of 
the program. Some funding is aimed at providing immediate relief to 
local and State economies, according to OMB. Other funding applies to 
longer-term programs. Federal agency plans and programs are now posted 
on the Board's web site, Recovery.gov.

Contract Management

Q2.  At our previous hearing, the DOE IG identified contract 
administration as ``one of the most significant management challenges 
facing the Department.'' Please discuss the current status of the 
Federal Government's ability to issue contracts and manage both grants 
and contracts.

          Does the government have adequate resources to issue, 
        manage, and audit contracts?

          Are its employees adequately trained?

          Are auditing staff levels adequate?

          What can Congress do to help?

A2. In my judgment, Congress provided sufficient funding for these 
activities, but staffing levels overall are not adequate. As required 
by the American Recovery and Reinvestment Act of 2009 (the Recovery 
Act), the Board is reviewing whether there are sufficient qualified 
acquisition and grant personnel overseeing Recovery funds and whether 
they have adequate training. Meanwhile, while I do not believe that 
audit staffing is adequate, I should note that Inspectors General are 
adding personnel to meet the increased demand for reviews, assessments 
and investigations of potential Recovery program abuses. At the State 
and local government level, officials continue to tell us that they 
desperately need funds to adequately carry out their oversight 
functions.

Barriers to Spending

Q3.  In order to get money out the door and into communities quickly, 
have agencies developed streamlined processes to expedite funding?

          Do these processes run the risk of increasing waste, 
        fraud, and abuse?

          How do you, the agencies, or specific Inspectors 
        General plan to prevent this?

          What types of barriers do agencies face when trying 
        to push money out the door? (Davis-Bacon, federal bidding 
        practices, environmental regulations, etc.).

A3. On April 3, 2009, OMB provided guidance to all federal agencies 
issuing federal contracts under the Recovery program to ``expeditiously 
award contracts using available streamlining flexibilities.'' The 
guidance also directed that agencies ``effectively expedite recovery 
expenditures in a manner that does not compromise program objectives or 
increase the risk of unintended consequences (e.g., accounting and/or 
payment errors, waste, fraud, etc.).''
    The risk of fraud and abuse is heightened, of course, when 
streamlined processes are used. All federal agencies must make sure 
that they have rigorous safeguards in place to closely monitor grants 
and contracts awarded under the Recovery Act. These agencies also 
should review their contracting needs and add, as necessary, 
contracting officers and program managers. Among other oversight 
issues, agencies will need to closely monitor contracts to be certain 
that performance, cost and schedule goals are met.
    At the Recovery Board and in the Inspector General community, we 
are focused on detecting and preventing misuse of stimulus funds. I 
foresee the Board actively detecting fraud trends, identifying best 
practices for conducting reviews, and designing risk-based strategies 
to help focus the oversight community's limited resources. When fraud 
is detected, the Board will work closely with the Department of Justice 
to ensure that a swift, coordinated inquiry follows. We have already 
received significant input from the Government Accountability Office, 
and we are a building a productive relationship with the GAO. To be 
successful in combating misuse of Recovery Act funds, the Board 
believes that it must forge close working relationships with our State 
and local oversight partners. We are doing that. Finally, the best way 
to deal with funding barriers is for agencies to put in place 
sufficient numbers of qualified acquisition and grants personnel.

Jobs Creation

Q4-Q8.

A4-A8. The Recovery Act delegates to the Board several critical 
functions, some of which I discussed in the earlier answers. Jobs 
creation questions would be best answered by the Council of Economic 
Advisers. I suggest that you contact Scott Adams, Senior Economist at 
the CEA, at (202) 395-1455.
                   Answers to Post-Hearing Questions
Responses by Gene L. Dodaro, Acting Comptroller General, U.S. 
        Government Accountability Office

Questions submitted by Representative Paul C. Broun

Q1.  One of the selling points of the stimulus bill was that action was 
needed immediately. How long will it take to spend all of the money 
directed to agencies?

A1. The American Recovery and Reinvestment Act of 2009 (Recovery Act) 
is estimated by the Congressional Budget Office (CBO) to cost $787 
billion over the next ten years. As we reported in our first bimonthly 
report on Recovery Act spending,\1\ the timeline of Recovery Act 
spending has been a key issue in the debate and design of the Recovery 
Act because of the elapsed time until the appropriated funds are spent. 
Figure 1 shows that, of the $282 billion appropriated for State and 
local governments, the Federal Government expects to outlay almost 60 
percent of the funds by October 2010. The remaining payments of 
Recovery Act funds drop off rapidly in subsequent years.
---------------------------------------------------------------------------
    \1\ See GAO, Recovery Act: As Initial Implementation Unfolds in 
States and Localities, Continued Attention to Accountability Issues Is 
Essential, GAO-09-580 (Washington, D.C.: Apr. 23, 2009). The Recovery 
Act directs GAO to conduct bimonthly reviews of the use of funds by 
selected states and localities.



    Over time, the programmatic focus of Recovery Act spending will 
change.\2\ For example, about two-thirds of Recovery Act funds expected 
to be spent by states in the current 2009 fiscal year will be health 
related, primarily temporary increases in Medicaid FMAP funding. 
Health, education, and transportation are estimated to account for 
about 90 percent of fiscal year 2009 Recovery Act funding for states 
and localities. However, by fiscal year 2012, transportation will be 
the largest share of State and local Recovery Act funding. Taken 
together, transportation spending, along with investments in the 
community development, energy, and environmental areas that are geared 
more toward creating long-run economic growth opportunities, will 
represent about two-thirds of State and local Recovery Act funding in 
2012.
---------------------------------------------------------------------------
    \2\ For more information about Recovery Act spending time frames, 
see the presentation by CBO's Director entitled Implementation Lags of 
Fiscal Policy to the International Monetary Fund Fiscal Affairs and 
Research Departments Conference on Fiscal Policy on June 2, 2009.

Q2.  At our previous hearing, the DOE IG identified contract 
administration as ``one of the most significant management challenges 
facing the Department.'' Please discuss the current status of the 
Federal Government's ability to issue contracts and manage both grants 
---------------------------------------------------------------------------
and contracts.

          Does the government have adequate resources to issue, 
        manage, and audit contracts?

          Are its employees adequately trained?

          Are contracting staff levels adequate?

          Are auditing staff levels adequate?

          What can Congress do to help?

A2. While we have not conducted a comprehensive review of the Federal 
Government's ability to issue contracts and manage grants and 
contracts, we track a number of federal contracting activities on the 
high-risk list that GAO maintains.\3\ A survey of recent information 
from various agencies' inspectors general (IGs) and previous GAO work 
indicates that contract management will be a challenge for federal 
agencies and State and local governments in the efficient and effective 
delivery of Recovery Act funds.
---------------------------------------------------------------------------
    \3\ GAO, High-Risk Series: An Update. GAO-09-271 (Washington, D.C.: 
Jan., 2009).
---------------------------------------------------------------------------
    The ability of individual agencies to issue contracts and manage 
grants and contracts varies by agency. For example, the National 
Science Foundation (NSF) believes it has qualified grants and contract 
management staff in place. To speed the process for awarding of 
research grants, NSF plans to use more than $2 billion in Recovery Act 
funds to support grant proposals that were previously recommended for 
funding through NSF's peer review process but for which it did not have 
sufficient funds. In addition, on May 11, 2009, shortly after receiving 
approval of its Recovery Act spend plan from the Office of Management 
and Budget (OMB) and Congressional committees, NSF posted solicitations 
for awarding funding of its Academic Research Infrastructure and Major 
Research Instrumentation programs--two of four programs for which it 
did not have in-house proposals. By contrast, the Department of 
Commerce's Inspector General in March 2009 testified that spending 
Recovery Act funds effectively and in a manner that meets the Act's 
economic objectives poses significant risks for Commerce and will put 
significant strain on a number of already stretched resources and 
vulnerable operations. Specifically, the Commerce IG testified that the 
Recovery Act's emphasis on grants and contracts spending puts 
additional pressure on weak management and administrative operations, 
particularly with regards to the department's shortage of qualified 
contracting specialists, technical specialists, and subject matter 
experts.
    We have found examples of agency contract management and 
procurement issues in our work. For example, in June 2006, we reported 
that Commerce's National Oceanic and Atmospheric Administration (NOAA) 
lacked a knowledge-based process for developing and producing complex 
systems--a situation that can increase the risk of cost increases and 
schedule delays.\4\ In April 2009, we reported on the next generation 
of geostationary operational environmental satellites, called the 
Geostationary Operational Environmental Satellite-R series--which are 
under procurement by NOAA along with the National Aeronautics and Space 
Administration (NASA). Specifically, we found that the program's cost, 
schedule, and scope have changed, key milestones are likely to be 
delayed, and improvements are needed in management and oversight of the 
program.\5\
---------------------------------------------------------------------------
    \4\ GAO, NOAA: Next Steps to Strengthen Its Acquisition Function, 
GAO-06-594, (Washington, D.C.: Jun. 7, 2006).
    \5\ See GAO, Geostationary Operational Environmental Satellites: 
Acquisition Is Under Way, but Improvements Needed in Management and 
Oversight, GAO-09-323, (Washington, D.C.: April 2, 2009).
---------------------------------------------------------------------------
    Regarding the adequacy of auditing staffs, our first bimonthly 
review of the use by selected states and localities of Recovery Act 
funds found that many states are concerned about their ability to track 
Recovery Act funds due to State hiring freezes that resulted from 
budget shortfalls. For instance, New Jersey has not increased (1) the 
number of State auditors or investigators, (2) funding specifically for 
Recovery Act oversight, or (3) the Recovery Act oversight efforts by 
many State agencies.\6\ Moreover, State officials expect the Recovery 
Act to incur new regulations, increase accounting and management 
workloads, change agency operating procedures, require modifications to 
information systems, and strain staff capacity, particularly for 
contract management. To address states' needs to meet the Recovery 
Act's increased audit requirements with a reduced number of staff, we 
recommended that the Director of OMB should timely clarify what 
Recovery Act funds can be used to support State efforts to ensure 
accountability and oversight.
---------------------------------------------------------------------------
    \6\ GAO's bimonthly Recovery Act work is focused on 16 states and 
the District of Columbia--representing about 65 percent of the U.S. 
population and two-thirds of the intergovernmental federal assistance 
available through the Recovery Act.
---------------------------------------------------------------------------
    Regarding possible Congressional actions, we believe that 
Congressional oversight hearings have the salutary effect of 
encouraging all parties involved--federal agencies, State and local 
governments, and the auditors--to redouble their efforts to ensure that 
federal funds are effectively and efficiently spent in compliance with 
laws and regulations.

Q3.  In order to get money out the door and into communities quickly, 
have agencies developed streamlined processes to expedite funding?

          Do these processes run the risk of increasing waste, 
        fraud, and abuse?

          How do you, the agencies, or specific Inspectors 
        General plan to prevent this?

          What types of barriers do agencies face when trying 
        to push money out the door? (Davis-Bacon, federal bidding 
        practices, environmental regulations, etc.).

A3. A review of agency responses to us in preparing this testimony show 
the Department of Commerce, the Department of Energy (DOE), and NSF 
have all reported taking steps to minimize the potential for waste, 
fraud and abuse of Recovery Act spending, while trying to meet 
government objectives that funds be spent quickly. Specifically:

          Commerce IG staff responsible for oversight of R&D-
        related Recovery Act funds met with the National Institute for 
        Standards and Technology's (NIST) Deputy Director and Chief 
        Financial Officer (CFO) in early March 2009 to discuss how to 
        approach oversight. At that time, NIST staff gave the IG staff 
        an oversight and spending plan of its Recovery Act funds. In 
        addition, the Commerce IG staff had identified R&D-related 
        high-risk programs that were slated to receive Recovery Act 
        funds and had begun approaching the appropriate programmatic 
        officials to get further details of the agencies' spending 
        plans.

          DOE's CFO has employed a detailed tracking system 
        linked to its existing accounting system that allows DOE to 
        track recovery funds at the individual project level. A DOE 
        official told us that because DOE knew that Recovery Act funds 
        would need to be spent quickly, but in an accountable and 
        transparent way, the department required each program office to 
        prepare two-page summaries of proposals for spending for DOE 
        management review to assess internal controls and risk 
        management as a basis for approving funding. In addition, DOE's 
        IG staff conducted briefings on fraud awareness for DOE 
        employees who oversee Recovery Act funds.

          NSF officials report the foundation has developed 
        formal policies and procedures for implementing the Recovery 
        Act, a framework for allocating funds, and effective management 
        processes, refined over many decades, to ensure that Recovery 
        Act funds are awarded in a timely manner while maintaining the 
        integrity of award management processes. NSF has designated a 
        Senior Accountability Officer to oversee a Recovery Act 
        Steering Committee drawn from across the agency. Many members 
        of the steering committee themselves direct ``tiger teams'' 
        with specific responsibilities aligned with the requirements of 
        the Recovery Act. With regards to awarding funds, NSF has an 
        established merit review process, which relies on a pool of 
        volunteer national and international experts, to evaluate the 
        grant proposals the foundation receives. In addition, NSF 
        believes it can spend the research grant funds quickly without 
        bypassing its established merit review procedures because it 
        has grant proposals totaling more than $2 billion that its peer 
        review panels earlier this fiscal year had judged were worthy 
        of funding; however, NSF could not fund these proposals because 
        grant proposals substantially exceeded its annual appropriation 
        to support research grants.

    In carrying out our responsibilities under the Recovery Act, we 
will continue to evaluate State and local uses of funds and will 
continue to coordinate with the IG and State auditor communities.

Q4.  Since the goal of the stimulus bill is to create jobs, has anyone 
in your office been tasked with verifying the number of jobs a specific 
grant or project will actually create?

A4. The Recovery Act directs GAO to examine the use of Recovery Act 
funds by selected states and localities. The act also expects GAO to 
review and comment on estimates of the number of jobs created and the 
number of jobs retained that states and localities submit in quarterly 
reports under the Act.
    Recipient reporting is required to begin on October 10, 2009, with 
subsequent quarterly reports due thereafter. GAO has formed a team 
internally to review these recipient reports. The team includes 
research methodologists, specialists in intergovernmental relations, 
and GAO's chief economist. Together, this team is developing a 
methodology for commenting on estimates of the numbers of jobs created 
or retained as reported by funds recipients. GAO will review analytical 
efforts to estimate the direct and indirect effects of Recovery Act 
spending on employment, recognizing the limitations of such models in 
predicting Recovery Act effects because of their restricted 
geographical focus and imperfections in representing the complexity of 
economic interactions.

Q5.  A central objective of the stimulus funding is to ``create or save 
3.5 million jobs.'' This has been stated by President Obama numerous 
times and will likely be a key measure through which the success or 
failure of stimulus funding is measured. However, Dr. Ellig notes in 
his testimony that measuring the effect of stimulus spending on 
employment is very difficult to verify and validate, and that agencies 
will need to work with OMB and others to develop methods for obtaining 
credible estimates. In particular, he notes that such efforts must 
account for the net effect of job creation because some people may 
simply switch jobs from their current position to one created by 
federal spending.

          Do you agree with Dr. Ellig's assessment of the 
        difficulties associated with determining jobs ``created or 
        saved?''

          Do you think it is possible to obtain such 
        measurements with intensive efforts?

          Do you believe the existing guidance to agencies on 
        how best to obtain job estimates provides adequate guidance on 
        how to calculate a credible estimate of jobs created or saved?

          How would you suggest we evaluate the success or 
        failure of this goal?

A5. In our first bimonthly report of the use by selected states and 
localities of funds made available under the Recovery Act, we reported 
that OMB took an important step in its April 3 guidance by issuing 
definitions, standard award terms and conditions, and clarified 
tracking and documenting Recovery Act expenditures;\7\ however, we 
recommended that OMB continue to identify methodologies that can be 
used to:
---------------------------------------------------------------------------
    \7\ GAO-09-580.

          assess jobs created and retained from projects funded 
---------------------------------------------------------------------------
        by the Recovery Act;

          determine the impact of Recovery Act spending when 
        job creation is indirect; and

          identify those programs, projects, or activities that 
        in the past have demonstrated substantial job creation or are 
        considered likely to do so in the future. Consider whether the 
        approaches taken to estimate jobs created and jobs retained in 
        these cases can be replicated or adapted to other programs.

    In addition, we noted that one way to develop these methodologies 
is to establish a working group of federal, State, and local officials 
and subject matter experts. OMB concurred with our overall 
recommendations. Furthermore, technical and practical issues about 
recipient reporting are part of an ongoing discussion in which GAO is 
participating--with OMB and representatives from State and local audit 
organizations--during weekly conference calls. OMB is expected to issue 
another round of guidance on recipient reporting in mid-June.
    Requiring recipients of Recovery Act funds to report jobs created 
or retained will focus efforts on spending that creates employment and 
generates income. However, the full impact of Recovery Act spending on 
employment and national income can be tallied only at the aggregate 
level because of the complexity of the economy, which makes it 
impossible to trace the direct and indirect impact of job creation or 
retention from a single project or even a group of projects. Recipient 
reports on jobs created or retained provide one perspective on the 
performance of local, State, and regional economies and can be placed 
in context to allow assessment of the consistency of Recovery Act 
spending impacts with stronger economic growth.

Q6.  Since employment was marketed as a rationale for the stimulus, and 
this committee is tasked with oversight of science, are there any 
difficulties determining employment related to science money?

          Will science money more likely go to experienced and 
        established principal investigators, or newer scientists?

          Does the government currently have a system to 
        monitor and track this sort of information?

          If the money is more likely to go to proposals from 
        more experienced PIs, then how does this affect employment?

          If the money goes to less experienced PI's and spurs 
        employment, then what happens after the money dries up? Have we 
        created an unsustainable system?

A6. GAO identified more than $21 billion in Recovery Act funds that 
will broadly support R&D activities at Commerce, DOE, NSF, and NASA. 
GAO is not aware of any system the government currently has in place to 
monitor and track information about Recovery Act funds received by 
individual principal investigators (PIs) or to determine whether funds 
are being received by established PIs versus newer PIs. Each agency 
receiving Recovery Act funds is establishing its own criteria for 
awarding these funds to applicants who meet these criteria. For 
example:

          NSF officials told us they are giving special 
        consideration to those proposals that would fund new 
        investigators and/or are considered ``highly transformative''--
        high risk, and high payoff research activities.

          A DOE official responsible for standing up the new 
        Advanced Research Projects Agency-Energy (ARPA-E) told us that 
        ARPA-E will focus on high-risk, high-potential, 
        transformational energy technology projects that would not have 
        a place in the rest of DOE.

          Other R&D funds, such as funds for NASA's Earth 
        Science program, are planned for expenditure using contracts 
        rather than grants to individual PIs.

    GAO has not evaluated the extent to which the scientific community 
will be affected by the absence of Recovery Act funds once Recovery 
Act-supported projects are complete.

Q7.  How do you calculate the employment effects of stimulus money 
associated with science?

          In determining the net effect, should we count only 
        the Principal Investigator, or also research assistants and 
        ``downstream'' employment as well?

          How should the government account for a Principal 
        Investigator who already has several grants and receives 
        additional grants through stimulus money?

A7. Small research projects are likely to include the PI and a post-
doctoral student or a graduate student. Large research projects might 
include the PI, research team leaders, post-doctoral associates, 
graduate students, and technicians. A calculation of the employment 
benefits of the Recovery Act should consider only the portion of the 
time that each research team member, including the PI, is scheduled for 
the project. Because a post-doctoral associate or graduate student is 
more likely to work full-time on the grant project, their positions 
could appropriately be counted among new jobs created or jobs retained. 
However, it would seem inappropriate to count a PI who is a university 
faculty member and working on at least one other grant project as a job 
created or retained.

Q8.  How should the government account for stimulus money that ``crowds 
out'' or limits venture capital and private investment? Is there any 
way to determine the amount of private investment prevented by public 
money?

A8. CBO's macroeconomic model incorporates a basic assumption that, in 
the long run, each dollar of additional debt crowds out about a third 
of a dollar's worth of private domestic capital (with the remainder of 
the rise in debt offset by increases in private saving and inflows of 
foreign capital). Because of uncertainty about the degree of crowding 
out, however, CBO has incorporated both more and less crowding out into 
its range of estimates of the long-run effects of the Recovery Act 
legislation.\8\
---------------------------------------------------------------------------
    \8\ CBO letter dated March 2, 2009, to Senator Charles Grassley 
estimating year-by-year economic effects of the Recovery Act.
---------------------------------------------------------------------------
                   Answers to Post-Hearing Questions
Responses by Gary D. Bass, Founder and Executive Director, OMB Watch

Questions submitted by Representative Paul C. Broun

Job Creation

Q1.  How hard is it to determine if a job has been created by the 
stimulus act?

          Do you have any recommendations for how the 
        government should calculate this net total?

A1. While I do not have the expertise to answer how hard it would be to 
determine if a job has been created by the Act, I can say that the 
definition of a ``job'' must first be consistent across all Recovery 
Act reporting.
    OMB guidance on Recovery Act reporting (OMB memo M-09-15) states 
that recipients are to report a brief description and an estimate of 
the jobs created or retained. Job creation and retention figures are to 
be based on aggregate hours worked converted into a figure for full-
time-equivalent (FTE) positions. Yet it leaves it up to each recipient 
to determine how many hours equal a FTE, which will lead to substantial 
inconsistencies. It would be advisable to require recipients to report 
the aggregate hours figure as well as the FTEs, so that analysts can 
make valid comparisons.
    I am also very concerned about OMB's method of job estimate data 
collection. In reference to an April 1, 2009 Federal Register Notice 
``Information Collection Activities: Proposed Collection; Comment 
Request,'' (74 FR 14824), OMB specifies the format of the data that are 
to be collected from Recovery Act fund recipients. In the notice, OMB 
indicates that an estimate of the number of jobs created or retained be 
included in a narrative description of the Act's impact on employment. 
If jobs, or ``full-time equivalents'' (FTEs) are not reported as 
numbers--that is, data that can be added, sorted, compared, etc.--it 
will be next to impossible to assess the total number of jobs created 
or retained per project or for all of Recovery Act spending. For 
example, if FTEs are reported in a separate numbers field, a web site 
database using data from Recovery.gov could show users a summation of 
the FTEs resulting from Recovery Act projects; sort projects by number 
of jobs created; or show just those projects that created more than 100 
jobs. If the number of FTEs appears within a block of text, this sort 
of analysis becomes much more difficult, if not impossible, to execute. 
Additionally, there should be an indicator of whether a job has been 
created or retained so that the data can be sorted in that manner. It 
is likely best to include this in a separate data field that 
corresponds to the jobs data.

Q2.  A central objective of the stimulus funding is to ``create or save 
3.5 million jobs.'' This has been stated by President Obama numerous 
times and will likely be a key measure through which the success or 
failure of stimulus funding is measured. However, Dr. Ellig notes in 
his testimony that measuring the effect of stimulus spending on 
employment is very difficult to verify and validate, and that agencies 
will need to work with OMB and others to develop methods for obtaining 
credible estimates. In particular he notes that such efforts must 
account for the net effect of job creation because some people may 
simply switch jobs from their current position to one created by 
federal spending.

Q2a.  Do you agree with Dr. Ellig's assessment of the difficulties 
associated with determining jobs ``created or saved?''

A2a. Yes. Arriving at reliable estimates of job creation and retention 
is certainly a daunting challenge.

Q2b.  Do you think it is possible to obtain such measurements with 
intensive efforts?

A2b. Although I agree that it will be somewhat difficult to measure job 
creation and retention estimates, I am not skilled enough to say 
whether such efforts are entirely futile.

Q2c.  Do you believe the existing guidance to agencies on how best to 
obtain job estimates provides adequate guidance on how to calculate a 
credible estimate of jobs created or saved?

A2c. As I noted in my answer to the first question, the OMB guidance on 
job estimation is critically flawed: OMB allows recipients of Recovery 
Act funds to determine how many weekly hours comprise a ``full time 
equivalent,'' which certainly create substantial inconsistencies in 
job-creation data. And as I also noted, the form of the data that are 
to be collected will hinder even simple analyses by federal agencies 
and outside stakeholders.

Q2d.  How would you suggest we evaluate the success or failure of this 
goal?

A2d. I do not have the expertise to address this question.

Q3.  Since employment was marketed as a rationale for the stimulus, and 
this committee is tasked with oversight of science, are there any 
difficulties determining employment related to science money?

Q3a.  Will science money more likely go to experienced and established 
principal investigators, or newer scientists?

A3a. I do not have the expertise to address this question.

Q3b.  Does the government currently have a system to monitor and track 
this sort of information?

A3b. OMB guidance leaves this type of data collection requirement up to 
the federal agencies. If, for example, the Department of Energy would 
like track the level of experience of scientists and principal 
investigators working on Recovery Act projects, it could require 
recipients of DOE Recovery Act funds to report that data. However, 
because OMB grants such leeway to federal agencies, there is little 
opportunity, if any, for Members of Congress or the public to comment 
on which types of data should be collected by the federal agencies.

Q3c.  If the money is more likely to go to proposals from more 
experienced PIs, then how does this affect employment?

A3c. I do not have the expertise to address this question.

Q3d.  If the money goes to less experienced PIs and spurs employment, 
then what happens after the money dries up? Have we created an 
unsustainable system?

A3d. I do not have the expertise to address this question.

Q4.  How do you calculate the employment effects of stimulus money 
associated with science?

Q4a.  In determining the net effect, should we count only the Principal 
Investigator, or also research assistants and ``downstream'' employment 
as well?

A4a. I do not have the expertise to address this question.

Q4b.  How should the government account for a Principal Investigator 
who already has several grants and receives additional grants through 
stimulus money?

A4b. I do not have the expertise to address this question.

Crowding Out

Q5.  How should the government account for stimulus money that ``crowds 
out'' or limits venture capital and private investment?

          Is there any way to determine the amount of private 
        investment prevented by public money?

A5. I do not have the expertise to address this question. However, I 
would note that OMB Watch believes federal spending on community 
investments that create sustainable jobs will help the economy as well 
as invest in our future.
                   Answers to Post-Hearing Questions
Responses by Jerry Ellig, Senior Research Fellow, Mercatus Center, 
        George Mason University

Questions submitted by Representative Paul C. Broun

Q1.  How hard is it to determine if a job has been created by the 
stimulus act? Do you have any recommendations for how the government 
should calculate this net total? Do you agree with Dr. Ellig's 
assessment of the difficulties associated with determining jobs 
``created or saved''? Do you believe the existing guidance to agencies 
on how best to obtain job estimates provides adequate guidance on how 
to calculate a credible estimate of jobs created or saved? Do you think 
it is possible to obtain such estimates with intensive efforts? How 
would you suggest we evaluate the success or failure of this goal?

A1. The Office of Management and Budget's April 3, 2009 Recovery Act 
guidance to agencies makes a good start by defining what counts as jobs 
``created'' and ``retained,'' specifying that all jobs should be 
reported as full-time equivalents, and encouraging recipients to 
specifically identify jobs attributable to the Recovery Act as opposed 
to other federal awards.\1\
---------------------------------------------------------------------------
    \1\ http://www.whitehouse.gov/omb/assets/
memoranda-fy2009/m09-15.pdf
---------------------------------------------------------------------------
    But focusing on recipients' reporting to agencies misses a much 
bigger issue. The Recovery Act might create jobs, induce people to 
switch jobs, or do some of both. ``Job creation'' figures reported by 
recipients of funding will include both kinds of jobs. If a goal of the 
Recovery Act is to create more employment than would have existed in 
its absence, then we will not know if this goal was accomplished unless 
we know the net amount of employment created.
    It is impossible for recipients of the money to calculate the net 
number of jobs created or preserved by the stimulus spending. Even if 
the recipients conscientiously do their best to present accurate 
numbers reflecting positions created or retained in their 
organizations, they cannot know whether some of the people they hired 
or retained would have been hired elsewhere. Some of the people hired 
or retained would otherwise have been unemployed for some period of 
time, but others may have moved from another job or would have found 
work elsewhere in the absence of the stimulus spending. We cannot 
correct for this problem simply by instructing recipients to report 
whether they hired unemployed people or retained people they had been 
planning to lay off. It is not enough to know whether someone hired 
with stimulus money was formerly unemployed or would have been 
discharged. We need to know if that person would have been employed 
elsewhere in the absence of the stimulus spending. It is unreasonable 
to expect the recipients of the stimulus money to know this.
    For this reason, even if the job figures reported by recipients of 
the funding really do represent the most accurate estimate of jobs 
created or saved in their organizations, the reported figures will 
inevitably overstate the net number of jobs created or retained. Merely 
reading the numbers reported in the database will, therefore, overstate 
the effects of the Recovery Act on employment.
    The ``intensive effort'' that needs to take place is not placing 
additional job reporting burdens on the recipients of the funding. 
Rather, the intensive effort needs to take the form of rigorous 
macroeconomic analysis that determines how many net jobs were created 
or preserved, after taking into account the effects of both the 
spending and the borrowing. This requires examining how total 
employment responds to changes in spending and borrowing.
    This is not easy and will inevitably be contentious. Policy-makers 
would do well to keep in mind this statement from the Congressional 
Budget Office's preliminary analysis of the President's budget in 
March:

         Even after the fact, it will be quite difficult to assess the 
        impact of ARRA on the economy. Uncertainty is great about both 
        how the economy would perform in the absence of fiscal stimulus 
        and the impact of stimulus. The best estimates of the impact of 
        stimulus will come later, from studies carefully designed to 
        isolate the effects of particular categories of stimulus from 
        other influences on the economy.\2\
---------------------------------------------------------------------------
    \2\ Congressional Budget Office, A Preliminary Analysis of the 
President's Budget and an Update of CBO's Budget and Economic Outlook 
(March 2009), p. 29 available at http://www.cbo.gov/ftpdocs/100xx/
doc10014/03-20-PresidentBudget.pdf

Q2.  Are there any difficulties determining employment related to 
science money? Will science money more likely go to experienced and 
established principal investigators, or newer scientists? Does the 
government currently have a system to monitor and track this sort of 
information? If the money is more likely to go to proposals from more 
experienced PIs, then how does this affect employment? If the money 
goes to less experienced PIs and spurs employment, then what happens 
---------------------------------------------------------------------------
after the money dries up? Have we created an unsustainable system?

A2. Because of the speed with which the money is supposed to be spent, 
money going to scientists will likely go to those who are best at 
getting their grant applications in quickly. This probably provides an 
advantage to more experienced scientists who are already very familiar 
with the application processes and likely have many well-developed 
ideas for research projects. As Dr. Newsome suggested in his testimony, 
the process probably also favors larger institutions with larger grants 
and contracts staffs who have the time to keep track of available 
funding and respond rapidly.
    The question about sustainability is an excellent one, but it is 
not at all unique to science-related spending. The spending in the 
Recovery Act is supposed to occur quickly and temporarily, over the 
course of a few years. It is not supposed to permanently increase the 
size of federal expenditures. It is doubtful that the majority of the 
jobs it directly funds will be sustainable after federal spending 
returns to more normal levels. The theory underlying the Recovery Act 
is that having the Federal Government borrow money to put people to 
work will lead to a more rapid economic recovery. But there is no 
guarantee that the jobs that become available and sustainable as the 
economy recovers are the same ones the government is funding. For 
example, the Recovery Act will fund many road projects, but once the 
economy recovers the available jobs may well be in the airline or hotel 
industries. In short, many of the people who take jobs funded under the 
Recovery Act may find that they have to look for some other kind of 
employment after the Recovery Act spending stops in a few years.

Q3.  How do you calculate the employment effects of stimulus money 
associated with science? In determining the net effect, should we count 
only the principal investigator, or also research assistants and 
``downstream'' employment as well? How should the government account 
for a principal investigator who already has several grants and 
receives additional grants through stimulus money?

A3. In principle, the employment effects of stimulus money associated 
with science should be accounted for in the same way that employment 
effects of other spending are accounted for. If the funding leads a 
principal investigator to hire additional research assistants or other 
staff, then these jobs could be counted as jobs created by the stimulus 
spending.
    If much of the research funding goes to experienced scientists who 
already have grants, then one of several possible effects on employment 
could happen. An experienced PI might simply work longer hours, and 
thus the stimulus money might be said to create ``over-employment''--
the equivalent of working overtime. I do not know whether this was 
anticipated when the legislation was passed. An experienced PI might 
also direct a larger number of grants by bringing in more help and 
delegating more. In this case, the employment effect will not be to 
employ more PIs, but to employ more junior colleagues, research 
assistants, and others to whom work can be delegated. Assuming this is 
new employment, the situation seems no different than that of any other 
government contractor who adds personnel without adding more top-level 
managers.

Q4.  How should the government account for stimulus money that ``crowds 
out'' or limits venture capital and private investment? Is there any 
way to determine the amount of private investment prevented by public 
money?

A4. This question could be interpreted in two different ways. One way 
stimulus money might ``crowd out'' private funding is if the money is 
spent on projects the private sector would otherwise have funded. 
Alternatively, even if the money is spent on projects the private 
sector would not have funded, it is possible that the government 
spending merely displaces private investment or consumption spending. 
In either case, the government spending would not increase the total 
amount of economic activity or employment.
    The best way to prevent stimulus money from displacing projects 
that the private sector would have funded is to ensure that the money 
is spent on projects that economic analysis suggests the private sector 
might under-provide. Basic research, for example, might be under-
provided by the private sector if it is difficult for private firms to 
profit from research results that add to the general stock of human 
knowledge. More applied research that produces knowledge which can be 
protected by patents or trade secrets is less likely to be under-
provided by the private sector. Therefore, the government can minimize 
crowding out of private research by focusing on basic research that the 
private sector is unlikely to fund. Similarly, federal highway funding 
could displace private investment in highways if it is used for 
projects that could be financed by tolls. Federal highway funding is 
less likely to displace private funding if it focuses on projects where 
tolling would not be practical.
    The broader concept of ``crowding out'' stems from government 
borrowing to finance the Recovery Act. Government borrowing displaces 
at least some private investment, because the funds borrowed by the 
government are not available for other borrowers. In the short-term, 
this means that the private sector borrows and invests less, which can 
be expected to have a depressing effect on employment that partly 
counteracts the stimulative effect of the government spending. Over the 
longer-term, the economy may be less productive because there is less 
private capital.
    The Recovery Act might not just crowd out private investment 
spending; it might also crowd out private consumption spending. The 
government spends more, borrows the money from citizens, and citizens 
spend less than they otherwise would have spent.
    The exact size of any offsetting effects on investment or 
consumption spending will be vigorously contested, even by well-meaning 
economists who are not pursuing partisan or ideological agendas. 
Essentially, determining whether the Recovery Act increases economic 
activity and employment boils down to a test of the Keynesian economic 
model, which posits that government can expand GDP and employment in a 
recession by borrowing and spending or cutting taxes. The Council of 
Economic Advisers estimated the employment impact of the Recovery Act 
by using ``multipliers'' to project the effects of the spending and tax 
cuts on Gross Domestic Product, then using rules of thumb to calculate 
the number of jobs the projected increase in GDP would produce.\3\ If 
the CEA uses similar methods to assess the effects of the Recovery Act 
on jobs, the resulting numbers will only be as reliable as the 
underlying Keynesian macroeconomics.
---------------------------------------------------------------------------
    \3\ http://www.whitehouse.gov/administration/eop/cea/
factsheets-reports/


                   Answers to Post-Hearing Questions
Responses by Eric Gillespie, Senior Vice President of Products, 
        Technology, and Innovation and Chief Information Officer, 
        Onvia, Inc.

Questions submitted by Representative Paul C. Broun

Recovery.gov

Q1.  In your testimony you mention a number of recommendations for a 
Representative in Congress from the State of Recovery.gov.

          How early will those recommendations need to be 
        adopted before more reporting starts to flow into the web site?

A1. A majority the recommendations made across panel members should 
have been accounted for immediately following passage of the 
legislation and prior to capital flowing to agencies. In some cases the 
directives issued by the Office of Management and Budget (OMB) have 
clarified reporting requirements, but in others the requirements of 
federal, State and local agencies remain unclear.
    Assumptions have been made by the Recovery Accountability and 
Transparency Board (RATB) about the requisite level and quality of data 
for the Recovery.gov web site. The RATB has spending oversight and 
investigative responsibility using reported data, with the Recovery.gov 
web site as an appendage. The site as envisaged was intended to first 
provide visibility into stimulus spending to the public at-large; the 
approach thus far, however, has been to provide an audit-level standard 
for use by the Inspector General community to root out fraud, waste and 
abuse. While clearly an important and necessary goal, setting the 
standard exclusively at this level creates a latent view of the 
information for an audience that doesn't require such stringent 
standards.
    The recommendations made by panel members should be undertaken 
immediately. Reporting and presenting basic datasets on the web site 
can and should begin immediately. Perfecting the data and standards for 
audit purposes, or for that matter for broader pubic visualizations, 
can occur over time. There is no downside risk, rather only upside 
gain, to immediately exposing the data that is available.

Job Creation

Q2.  Since employment was marketed as a rationale for the stimulus, and 
this committee is tasked with oversight of science, are there any 
difficulties determining employment related to science money?

A2. There are significant issues with determining actual employment 
affected by the legislation, both related to science funds and not 
related to science funds. The original estimations made in the Job 
Impact of the American Recovery and Reinvestment Plan paper authored by 
Christina Romer, Chairman of the Council of Economic Advisors, and 
Jared Bernstein, Chief Economic Advisor to the Vice President, have 
proven to be optimistic, but moreover, the formulaic process used to 
assess jobs ``created or saved'' has been widely challenged.
    Chairman Max Baucus recently stated to Treasury Secretary Timothy 
Geithner during a March hearing of the Senate Finance Committee, ``You 
created a situation where you cannot be wrong. If the economy loses two 
million jobs over the next few years, you can say yes, but it would've 
lost 5.5 million jobs. If we create a million jobs, you can say, well, 
it would have lost 2.5 million jobs. You've given yourself complete 
leverage where you cannot be wrong, because you can take any scenario 
and make yourself look correct.''
    The challenge is particularly pronounced when attempting to 
calculate jobs related to investments in science and technology. By its 
very nature, the economic impacts of research and development capital 
are often seen over very long periods of time, especially when 
considering the many large and seemingly intractable problems often 
addressed by federal agencies such as the National Institutes of 
Health, NASA, or the National Science Foundation. The indirect benefits 
of these investments are many but often immeasurable.

Q2a.  Will science money more likely go to experienced and established 
principal investigators, or newer scientists?

A2a. It is unclear at this point in my opinion. One might assume, 
however, since capital is being allocated through existing programs 
without fundamental changes at the agency level, that the ratio of 
money going to established PIs versus newer scientists will be 
comparable to historical patterns.

Q2b.  Does the government currently have a system to monitor and track 
this sort of information?

A2b. I do not have an opinion on this subject.

Q2c.  If the money is more likely to go to proposals from more 
experienced PIs, then how does this affect employment?

A2c. I do not have an opinion on this subject.

Q2d.  If the money goes to less experienced PIs and spurs employment, 
then what happens after the money dries up? Have we created an 
unsustainable system?

A2d. In a recent presentation to the International Economic Development 
Council, the highly respected economic modeling firm Regional Economic 
Models, Inc. forecasted that the net effect of the stimulus legislation 
on both jobs and GNP will go negative in 2014 and through the outer 
years without additional intervention and assistance by the Federal 
Government.



    Subsequent modeling demonstrated that investments in education, 
with related labor productivity, make job creation more sustainable 
over time. This would argue for more investment in science and 
technology education to create a sustainable model.

Q3.  How do you calculate the employment effects of stimulus money 
associated with science?

A3. For formulaic estimation, which has historically presented a 
grossly inaccurate view of reality, actual performance results are 
required for ``backtesting'' analysis and to estimate current impacts.
    The question, in my opinion, should be ``How do we take actual 
results from stimulus spending and use those results to inform future 
appropriations and spending?'' in order to maximize the return on 
science and technology investments using taxpayer dollars.

Q3a.  In determining the net effect, should we count only the Principal 
Investigator, or also research assistants and ``downstream'' employment 
as well?

A3a. In order to accurately measure the efficacy of stimulus spending, 
both direct and indirect employment should be measured for all funding, 
whenever possible and in as much detail as possible. This is the only 
way to inform future spending decisions and optimally allocate 
resources.

Q3b.  How should the government account for a Principal Investigator 
who already has several grants and receives additional grants through 
stimulus money?

A3b. I do not have an opinion on this subject.

Crowding Out

Q4.  How should the government account for stimulus money that ``crowds 
out'' or limits venture capital and private investment?

A4. The stimulus legislation was not crafted to account for this and 
funding is being routed via agencies through existing programs. The 
priorities and agenda for innovation in areas that align with the goals 
of the Federal Government should continue to be set by the Federal 
Government. The incentives are not there, however, for the public 
sector to fill the market currently served by the private equity and 
venture capital industries, and any attempt to do so poses a high risk 
of sub-optimal capital allocation. The CIA's venture capital arm, In-Q-
Tel, has developed a successful model that encourages private sector 
investment while at the same time incorporates innovation and best 
practices using public sector funds.

Q4a.  Is there any way to determine the amount of private investment 
prevented by pubic money?

A4a. This would, in my opinion, be a theoretical calculation at best 
and be wildly inaccurate.

                                   
