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


 
      PREVENTING STIMULUS WASTE AND FRAUD: WHO ARE THE WATCHDOGS? 

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 19, 2009

                               __________

                            Serial No. 111-7

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN M. McHUGH, New York
DENNIS J. KUCINICH, Ohio             JOHN L. MICA, Florida
JOHN F. TIERNEY, Massachusetts       MARK E. SOUDER, Indiana
WM. LACY CLAY, Missouri              TODD RUSSELL PLATTS, Pennsylvania
DIANE E. WATSON, California          JOHN J. DUNCAN, Jr., Tennessee
STEPHEN F. LYNCH, Massachusetts      MICHAEL R. TURNER, Ohio
JIM COOPER, Tennessee                LYNN A. WESTMORELAND, Georgia
GERRY E. CONNOLLY, Virginia          PATRICK T. McHENRY, North Carolina
ELEANOR HOLMES NORTON, District of   BRIAN P. BILBRAY, California
    Columbia                         JIM JORDAN, Ohio
PATRICK J. KENNEDY, Rhode Island     JEFF FLAKE, Arizona
DANNY K. DAVIS, Illinois             JEFF FORTENBERRY, Nebraska
CHRIS VAN HOLLEN, Maryland           JASON CHAFFETZ, Utah
HENRY CUELLAR, Texas                 AARON SCHOCK, Illinois
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
------ ------
------ ------
------ ------

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director




















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 19, 2009...................................     1
Statement of:
    Devaney, Earl E., chairman, Recovery Act Accountability and 
      Transparency Board.........................................    12
    Holland, William G., auditor general of Illinois, National 
      Association of State Auditors, Comptrollers, and 
      Treasurers; David P. Gragan, chief procurement officer for 
      Washington, DC, National Association of State Procurement 
      Officials; Jerome Heer, director of audits for the county 
      of Milwaukee, Association of Local Government Auditors; and 
      Jerry Brito, senior research fellow, Mercatus Center at 
      George Mason University....................................    53
        Brito, Jerry.............................................    85
        Gragan, David P..........................................    59
        Heer, Jerome.............................................    77
        Holland, William G.......................................    53
Letters, statements, etc., submitted for the record by:
    Brito, Jerry, senior research fellow, Mercatus Center at 
      George Mason University, prepared statement of.............    88
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............   248
    Devaney, Earl E., chairman, Recovery Act Accountability and 
      Transparency Board:
        Letter dated April 6, 2009...............................    51
        Prepared statement of....................................    16
    Gragan, David P., chief procurement officer for Washington, 
      DC, National Association of State Procurement Officials, 
      prepared statement of......................................    62
    Heer, Jerome, director of audits for the county of Milwaukee, 
      Association of Local Government Auditors, prepared 
      statement of...............................................    79
    Holland, William G., auditor general of Illinois, National 
      Association of State Auditors, Comptrollers, and 
      Treasurers, prepared statement of..........................    56
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California, prepared statement of.................     7
    Towns, Chairman Edolphus, a Representative in Congress from 
      the State of New York:
        Binder for the record....................................   123
        Prepared statement of....................................     4


      PREVENTING STIMULUS WASTE AND FRAUD: WHO ARE THE WATCHDOGS?

                              ----------                              


                        THURSDAY, MARCH 19, 2009

                          House of Representatives,
                            Committee on Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m., in room 
2154, Rayburn House Office Building, Hon. Edolphus Towns 
(chairman of the committee) presiding.
    Present: Representatives Towns, Maloney, Cummings, 
Kucinich, Tierney, Clay, Watson, Lynch, Cooper, Connolly, 
Norton, Davis of Illinois, Van Hollen, Cuellar, Hodes, Welch, 
Foster, Speier, Driehaus, Issa, Burton, Platts, Duncan, 
McHenry, Bilbray, Jordan, Chaffetz, and Schock.
    Staff present: Ronald Stroman, staff director; Michael 
McCarthy, deputy staff director; Carla Hultberg, chief clerk; 
John Arlington, chief investigative counsel; Joanne Royce and 
Steven Rangel, investigative counsels; Katherine Graham, 
investigator; Jenny Rosenberg, director of communications; Adam 
Hodge, deputy press secretary; Lawrence Brady, minority staff 
director; John Cuaderes, minority deputy staff director; 
Frederick Hill, minority director of communications; Dan 
Blankenburg, minority director of outreach and senior advisor; 
Adam Fromm, minority chief clerk and Member liaison; Seamus 
Kraft, minority deputy press secretary; Tom Alexander and 
Christopher Hixon, minority senior counsels; Ashley Callen, 
minority counsels; and Jill Schmalz, Brien Beattie, Molly Boyl, 
and Mark Marin, minority professional staff members.
    Chairman Towns. Good morning. Thank you for being here.
    Our Nation is at a pivotal point in history as we endure 
the greatest economic crisis in more than a half century. 
Millions of jobs have been lost. Companies are failing. 
Americans are losing their homes. States, cities, communities, 
and families desperately need help. This is the greatest 
financial crisis since the Great Depression.
    Answering the call, Congress recently passed the American 
Recovery and Reinvestment Act, known as the Recovery Act, which 
provides $787 billion in tax cuts and Federal spending to 
preserve and create jobs, assist those most harmed by the 
recession, and reinvest in our great country.
    I was a proud original cosponsor of the Recovery Act 
legislation, but along with the opportunity to heal our ailing 
economy, we have the monumental challenge of ensuring that the 
American taxpayers' dollars are used wisely and not squandered. 
The risk of fraud increases when billions of dollars go out of 
the door quickly. This is the painful lesson of Iraq War 
spending and spending in response to Katrina where billions 
were lost to fraud. Fraud experts estimate that U.S. 
organizations lose 7 percent of revenues to fraud and waste. 
When applied to the stimulus package, this amounts to a 
whopping $55 billion in American taxpayers' dollars.
    Mindful of this history, the Recovery Act provides for an 
unprecedented degree of oversight and accountability, and it 
remedies two of the major problems with Iraq and Katrina 
funding. The law mandates the use of competitive contracting 
and the use of fixed price contracts. Further, the newly minted 
Recovery Accountability and Transparency Board, known as the 
Recovery Act Board, is designed to provide transparency on how 
Federal recovery money is spent.
    I applaud the President for his support of these critically 
important reforms. However, these reforms are not enough. We 
need to take steps to ensure that problems are fixed before 
they arise. Two weeks ago we held a hearing on the Excluded 
Parties List of businesses that should have been suspended and 
debarred but that were still receiving Federal contracts.
    Last month the Inspector General of the Department of 
Transportation issued a report which documented that in 2003 
executives were paid $73 million, including the payments of 
expenses that should have been unallowable, including spa 
resort bills, alcohol bills, and 45 automobiles including 
Mercedes, BMWs, and other luxury brands. Most disturbingly, 
just yesterday the committee learned that several of the very 
first contracts awarded using stimulus funds may have been less 
than transparent and/or contain paperwork errors. At least one 
of these contracts may have had no competition.
    Today I will ask that Mr. Devaney conduct a comprehensive 
examination of this first set of 11 stimulus related contracts 
to determine whether the contracts are transparent and if 
taxpayers' money was spent efficiently, and to report back to 
the committee within 2 weeks with a full report. I will also 
ask that this report contain an assessment of the fraud 
prevention programs that are in place at each agency receiving 
Recovery Act funding. The sad truth is once fraudulent dollars 
go out the door, the Federal Government historically is only 
able to collect pennies on the dollar.
    I also am concerned that States are already beginning 
Recovery Act spending. However, States have not been told 
exactly what information to collect. This needs to be fixed and 
it needs to be fixed immediately.
    In order to assess the adequacy of fraud prevention 
programs, I will ask Mr. Devaney to report back to this 
committee within 2 weeks his views on whether each executive 
branch agency receiving Federal funds has an adequate fraud 
prevention program.
    I also have major concerns about the administration's 
primary transparency tool, Recovery.gov. The fact of the matter 
is that Recovery.gov is currently not a usable data base. I 
fully recognize the difficulty confronting the administration 
in this task with the need to track funding from each Federal, 
State, and local agency involved and the need to determine how 
many jobs have been created. In order for this to work, we need 
to have uniform standards for collecting and reporting 
information.
    In view of the need to immediately resolve this issue, 
today, I will be sending a letter to Vice President Biden 
urging him to convene a high tech roundtable of Federal, State, 
and private sector IT leaders to come up with a uniform 
approach to track and account for Recovery Act funding. We need 
to come up with a workable solution to what information is 
needed, in what form that information is needed, and how that 
information should be displayed.
    The national outrage over AIG's decision to give $165 
million in bonuses to its employees after receiving Federal 
bailout money underscores the need for a thorough plan for the 
tracking and accounting of stimulus funds and preventing waste, 
fraud, and abuse under the Recovery Act. I look forward to 
today's hearing for a thorough examination of the problems that 
our Federal, State, and local watchdogs must overcome. And let 
us all work with speed and diligence in the greater spirit of 
cooperation and bipartisanism and everything else to make 
certain that we are able to do the job that the American people 
are calling for.
    I want to thank all of the witnesses for appearing here 
today. And I look forward to hearing your testimony. And at 
this point I yield to the ranking member from California, Mr. 
Issa, for his remarks.
    [The prepared statement of Chairman Edolphus Towns 
follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Issa. Thank you, Mr. Chairman. And I would ask 
unanimous consent that my entire opening statement be placed in 
the record.
    Chairman Towns. Without objection, so ordered.
    Mr. Issa. Mr. Chairman, Mr. Devaney, I am delighted to be 
here today. I am delighted to be sitting next to the chairman 
and to endorse and to echo each and everything he just said. We 
do have a tough job and we look to you to be the spearhead for 
this.
    During the questioning today, I am going to ask you some 
tough questions. I am going to ask you are you willing to stand 
up to the Vice President as the IG and say that perhaps he is 
not overseeing properly his job? Are you willing to stand up to 
each and every Cabinet officer who received huge amounts of 
money with little or no guidance and say that, in fact, either 
follow-on legislation or additional internal regulations are 
going to be essential? And the list will go on. I have known 
you for a number of years; I am confident that your answers 
will be good and that your efforts will be phenomenal.
    I have great confidence in you but I don't have great 
confidence in the body that I serve in here today. The money 
that you oversee was rushed through in large pots or perhaps 
puddles of money. One of the first articles that we are going 
to be talking about that the chairman referred to here today is 
quick spending by the Forest Service, an organization that 
received about half a year's worth of extra money and unlikely 
will be able to spend it wisely in 18 months.
    Additionally, you are going to oversee whether these funds 
are stimulative in their use whenever possible. It is very 
clear that there is a spending spree going on by government. 
Some of it will not be stimulative. Certainly, although the 
chairman was right to note the tax relief that was included in 
the stimulus package, certainly many of the dollars sent out 
were sent out knowing that they would not be spent.
    Additionally, if the government spends its money poorly or 
if the consistent message of the stimulus package is Katrina-
like, if I can use that term, the American confidence in our 
recovery and in the fact that stimulus is being used well will 
slow the overall economic recovery. Mr. Chairman, today we are 
looking at $787 billion worth of spending. As you noted in your 
opening remark, and I think rightfully so, we really do begin 
here and clearly go to TARP funds, government guarantees, and 
all of the many trillions of dollars that are currently 
committed and more to be committed because they are 
interrelated.
    Mr. Chairman, our working relationship has been good in the 
short time that we have been working together. I expect it to 
continue being extremely good. And I would note that when you 
quote President Obama's demand for transparency and you do 
things like this hearing today to ensure that we begin 
fulfilling both what he legislatively did when he was a Senator 
and what he is calling for as a President, we work in the way 
the American people expect us to work.
    So I look forward to all the panels here today. I yield 
back the balance of my time and thank the chairman.
    [The prepared statement of Hon. Darrell E. Issa follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Towns. I thank the gentleman from California. I 
agree with him and I look forward to working very closely with 
him in terms of getting rid of waste, fraud, and abuse. Thank 
you for your kind words.
    Are there any other Members seeking recognition? Yes, the 
gentleman from Ohio, Mr. Kucinich.
    Mr. Kucinich. Mr. Chairman, I want to thank you for 
fulfilling the commitment of this committee for effective 
oversight. It is appropriate that we have a meeting today on 
this stimulus package so that we can not only review what is 
being set in place to assure that taxpayers' money is not 
misspent but also send a message across this country that we 
take very seriously our oversight role and that we are going to 
be watching how the money is being spent.
    The actual spending component of the stimulus package apart 
from the tax breaks is over a half trillion dollars. It is an 
extraordinary amount of money. We are at a time in our 
country's history where we have an economic emergency and it is 
important that we spend the money and get it into circulation. 
Government spending is stimulative. But at the same time, we 
want all those who are out there to understand that this money 
is precious.
    American taxpayers are putting their faith in us to make 
sure that we see that money is being spent wisely. And I join 
with the committee chairman and ranking member in an insistence 
on transparency, that we be able to get the details about how 
the money is being spent and get it quickly. I like the idea of 
Web pages being used to post information and keep it in real 
time so that people have the ability to get the information as 
quickly as they can. But this is our function as an oversight 
subcommittee.
    And I want to thank the chairman for reminding the American 
people that this Congress does care how their money is being 
spent and that we are going to insist on accountability. I 
thank the chairman and I yield back.
    Chairman Towns. Thank you very much. I thank the gentleman 
for his statement. The gentleman from Utah?
    Mr. Chaffetz. Thank you. Mr. Chairman, I applaud you for 
holding this hearing. I think this is core to the function of 
what we should be doing in the U.S. Congress as a check and a 
balance, as a true oversight into what is happening in the 
executive branch. So I applaud you for holding this hearing, 
the first of what I believe will be many.
    And Mr. Devaney, I appreciate you being here. You are a 
brave man; you are a brave soul to take this on. This is a very 
difficult and contentious issue. No doubt you will be tossed 
around and beaten like a punching bag at every step of the way. 
But please know that the American people are rooting for you. 
We need you to do your job despite all the pressures, all the 
input that can be coming from a variety of angles. And I just 
hope and pray that you will remain strong and true to the task 
at hand in making sure that we hold people accountable and that 
there is a maximum of transparency.
    I am a freshman here. I didn't create this mess but I do 
intend to help clean it up. I voted no on the stimulus package 
because I do not believe that it fundamentally solves the 
challenges and things that we were trying to accomplish, as it 
was reported to be about jobs, jobs, jobs. I find that it is 
not. And immediately, right out of the chutes, we are already 
dealing with literally hundreds of millions of dollars that are 
going to go out the door that the American people fundamentally 
know is not right.
    We have effectively, with the stimulus and bailouts and 
those sort of things, gone into every single American's pockets 
and pulled money out and then started to distribute it to 
individual companies and organizations and who knows where. I 
fundamentally have a problem with that because I think it is 
wrong in principle. But at the same time, the decision has been 
made. I just want to make sure that we do the very best job to 
make sure that those funds are used wisely and that there is 
maximum transparency.
    I cannot imagine how long we are actually going to be after 
this because undoubtedly there will be fraud and there will be 
waste. And I want to make sure that the U.S. Government is 
tracking every single dollar and is making sure that we give 
the American people all the information they deserve about 
where their money is being spent. And with that, Mr. Chairman, 
I yield back my time. Thank you.
    Chairman Towns. I would like to thank the gentleman for his 
words. Let me yield now to the gentleman from Maryland.
    Mr. Cummings. Thank you very much, Mr. Chairman. Mr. 
Chairman, I want to thank you and the ranking member for this 
hearing. The timing could not be better.
    As you know, Mr. Chairman, what we have done on this 
committee over the past many years is that we have a lot of 
times conducted oversight after the fact. Here we are up front. 
This money is just being distributed, just being laid out 
there. And whether one agrees with the stimulus bill or not, 
the fact is, it is like the last gentleman said, it is here. I 
think holding this hearing sends a powerful message, and this 
series of hearings that this committee is about to do--because 
what it says is that we will do our job to make sure that we 
look over the shoulders of every agency and every person who 
may have anything to do with this.
    But the fact still remains that right now the Obama 
administration is in a very difficult situation. They are 
trying to right an economic situation in our country, and as a 
matter of fact in our world, which is pretty bad. And we need, 
Mr. Chairman, right now to restore a trust of Government and a 
trust in our economy. And in order for the President to do 
that, it is like pushing, as I have said many times, a boulder 
up a steep hill. When we have situations like AIG, the bonuses 
that were paid out and the lavish parties and whatever, that 
simply is like putting a piece of ice, while the Obama 
administration is trying to provide economic reform, like 
putting ice on that hill.
    Hearings like this give us a grip to get up there so that 
not only is the money used for what it is supposed to be used 
for, but it is also done in a transparent manner and is done in 
a manner with accountability. But most significantly, it leads 
to the American people knowing and believing that every dime of 
their tax dollars is being spent in an effective and efficient 
manner and one which will in the end, Mr. Chairman, benefit 
them.
    And so I applaud you for this. Mr. Devaney, we look forward 
to working with you. I thank you for taking on this role. I 
know it is going to be a challenge but I know, from everything 
I have read about you, I know you are up to the task and more. 
May God bless you and I yield back.
    Chairman Towns. Thank you very much. I thank the gentleman 
from Maryland. At this time, I yield to the gentleman from 
Virginia.
    Mr. Connolly. Thank you, Mr. Chairman. Like my friend from 
Utah, I am also a freshman. But unlike my friend from Utah, I 
was proud to vote for the stimulus bill. We did inherit an 
economic mess and something had to be done. And unlike the 
previous administration that wanted no accountability or 
transparency in the TARP program, this administration put the 
Vice President of the United States in charge of oversight, 
implementation, transparency, and accountability. I applaud the 
Obama administration for that and I welcome Mr. Devaney being 
here today.
    Mr. Chairman, as you have ably stated, oversight and 
accountability of stimulus money is of paramount importance. In 
that regard, I was pleased that the American Recovery and 
Reinvestment Act included specific funding set aside for 
management and oversight.
    However, I believe the manner in which these set-asides 
were defined leaves much to be desired. First and foremost, the 
set-asides do not apply to States and localities, the very 
entities to whom much of the ARRA funding will go, despite the 
fact that States and localities face numerous reporting and 
accounting requirements. ARRA does include language that allows 
agencies to adjust awards to help defray the cost of 
administration recordkeeping but only after going through the 
formal rulemaking process. This will place unfunded mandates on 
State and local governments that are already in dire fiscal 
straits.
    Second, the fact that oversight set-asides are only done on 
a program by program basis does not make much sense, it seems 
to me. Unless there is a comprehensive enterprise component, 
the end result will be numerous unnecessary stovepipes of the 
kind this committee has worked to eliminate in the past. 
Agencies should be encouraged to take a comprehensive approach 
to oversight of awards granted under the act.
    I am eager to hear what our witnesses have to say about 
these matters. In my view, based on 14 years in local 
government, the need for oversight and accountability at the 
State and local level is just as pressing as it is at the 
Federal level. This is truly where the rubber meets the road. 
Thank you for holding this hearing, Mr. Chairman and ranking 
member.
    Chairman Towns. Thank you very much. Now I yield to the 
gentleman from Illinois, Mr. Davis.
    Mr. Davis of Illinois. Thank you very much, Mr. Chairman. 
And let me be very brief. As I listened to my colleagues this 
morning, I was reminded of having a group of eighth graders in 
my office. They wanted to know what our job was. What are we 
really supposed to do?
    And I said to them that we are supposed to do four things. 
One, of course, is to legislate, to make laws, to determine 
what is legal, illegal, right and wrong, appropriate, 
inappropriate. Then I said we appropriate. That is, we decide 
how to spend money and how much of it we are going to spend.
    But then we also have the responsibility to investigate, 
and that is to make sure that the laws are carried out the way 
we intended for them to be carried out and that the money is 
being spent the way we intended for it to be spent, that the 
American people have a way to trace that money and to actually 
find out whether or not it is going for the purposes that we 
originally stated. And I must confess that is very challenging.
    There are times when my constituents will ask me what 
happened to the money. And I will have to say, well, I know 
what was supposed to happen with it, but I am not sure that I 
can always tell you. And so, Mr. Chairman, I commend you for 
holding this hearing. I look forward to working with Mr. 
Devaney and trying to make sure that the American people have 
the information and the answers that they are seeking. So I 
thank you very much and yield back the balance of my time.
    Chairman Towns. I would like to thank the gentleman from 
Illinois, Mr. Davis. At this time I yield to Mr. Tierney from 
Massachusetts.
    Mr. Tierney. I yield my time so that we can move on to the 
witnesses.
    Chairman Towns. Thank you very much. At this time we would 
like to swear in our witness.
    [Witness sworn.]
    Chairman Towns. Let the record reflect that he answered in 
the affirmative. You may be seated.
    Mr. Earl E. Devaney is chairman of the Recovery Act 
Accountability and Transparency [RAT] Board. [Laughter.]
    The RAT Board was created under the American Recovery and 
Reinvestment Act of 2009, Recovery Act, to provide coordination 
and oversight of Recovery Act funds which have an estimated 
cost of $787 billion. The RAT Board is mandated to audit and to 
review spending of Recovery funds.
    And, of course, I will ask you to summarize your testimony 
which will allow us to have a period of time to raise questions 
with you. I am sure you know the routine. The yellow light 
means you have a minute left and the red light means stop. Some 
folks don't get that. Sometimes we have problems with that. But 
I know you have been around a long time and you understand how 
important that is. And then, of course, we will have a time to 
answer questions and raise questions with you.
    We are delighted to have you here. So you may proceed.

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

    Mr. Devaney. Thank you very much, Mr. Chairman and members 
of the committee. I want to thank you for the opportunity to 
testify today.
    And although I have had the honor of testifying before this 
committee before, I appear before you today in my new role on 
behalf of the Recovery Act Accountability and Transparency 
[RAT] Board, a name on which I had no input. My testimony today 
will address the current status and mission of the Board. 
Following my prepared remarks I will gladly answer any 
questions you might have, and I am sure you have plenty.
    The status of the Board is what you might expect 30 days 
after the act was signed into law. Specifically, the Board is 
still trying to acquire staff, get our equipment, phones, 
computers, trying to acquire space which we haven't managed to 
get yet, and just trying to keep our heads above water in 
ensuring that the Board fulfills its responsibilities under the 
Recovery Act. Our first official Board meeting will actually be 
held next week.
    Regarding the Board's purpose, I view the Board as having a 
dual mission. First, the Board is responsible for establishing 
and maintaining a Web site, ``Recovery.gov,'' the purpose of 
which is to foster an historic level of transparency of 
Recovery funds, but to do so, and this is very important, in a 
user friendly manner. Second, the Board will coordinate and 
conduct oversight of Recovery funds to prevent fraud, waste, 
and abuse.
    Regarding the Web site, I have some information to report. 
Even before the Recovery Act was signed, OMB and GSA had begun 
designing the architecture and implementing the plan for the 
Web site. A great deal of credit needs to be extended to them 
for their efforts. Because of those efforts, all Americans 
today can go on the Web site, Recovery.gov.
    As you know, the Recovery Act invests the Board with the 
authority to maintain and run the Web site. Going forward, I am 
eager for the Board to assume control and administration over 
the Web site, which I don't have today, in order to fully 
maximize its use as a transparency and accountability tool. 
Transition of the Web site's control from OMB to the Board's 
control is expected to take another 30 to 45 days. Although the 
Web site is still in its infancy, the Recovery funds will 
have--and the Recovery funds have only just begun to flow--I 
truly believe the opportunity to achieve a remarkable level of 
transparency never before realized coupled with unprecedented 
citizen participation.
    Let me give you some of my thoughts about transparency. And 
I think to shorten up my testimony I will just say that I have 
always agreed that sunlight is the best disinfectant. And those 
words lead me to conclude a few things about this Board. The 
information on Recovery.gov must be easily retrievable and 
understood by taxpayers, lawmakers, and watch groups alike. We 
have to find that balance between having all the information 
that is required to follow the dollars and to make it simple so 
that the average citizen can go on this Board, maneuver around, 
and hopefully be attracted to come back in again. And the 
public must be given an opportunity to provide feedback and be 
heard.
    I have been in this business for a long time and I 
understand that when you build something they will come. And if 
you are not prepared to listen to what the citizens have to 
say, that is actually worse than not having the process in the 
first place. And then finally, barring some certain exceptions 
of national security and personal privacy, I believe all 
Inspector General reports, and for that matter GAO, State, and 
local government reports ought to go up on this Web site and be 
periodically updated to ensure the transparency and 
accountability that the act envisioned is actually achieved.
    And, regarding the Board's other mission, accountability, 
there is encouraging news. Even as the Recovery Act was making 
its way toward final passages, IGs across the Federal 
Government were meeting to develop strategies to prevent fraud, 
waste, and abuse of these moneys. The committee may have 
noticed that I have been using the word ``prevent'' to describe 
the Board's mission of accountability.
    That is very deliberate on my part. Most IGs, including 
myself, generally spend considerable time detecting fraud and 
waste and then using either a traditional audit or criminal 
investigation. It strikes me that although those tools will 
undoubtedly come into play later on, IGs may be better able to 
maximize their value to the accountability goal of the Recovery 
Act by concentrating their efforts on prevention.
    The language of the Recovery Act strongly suggests that IGs 
and other oversight entities are being asked to minimize the 
risk inherent in distributing such an extraordinary amount of 
money and to maximize the opportunities to prevent fraud or 
waste in the first instance before it actually happens. Some of 
those strategies my fellow IGs have been working on include 
evaluating as yet unimplemented IG or GAO recommendations, 
evaluating their agency's spending plans and performance 
measures, conducting evaluations to ensure that proper controls 
are in place to receive and dispense these funds, providing 
fraud awareness training to both grant administrators and 
grantees, developing risk-based analysis tools as an essential 
part of a preventative work, and conducting outreach to the 
State and local audit community to provide technical 
assistance, best practices, and training where needed.
    I want to assure each of you that the Board will strive to 
be as helpful as possible to State and local governments. To 
that end, the Board staff will include audit, investigative, 
procurement, and intergovernmental professionals who, as part 
of their job descriptions, will be responsible for fostering a 
close working relationship with all levels of government.
    I look forward to beginning the Board's mandated role of 
coordinating with all the other IGs, some 20 plus who will be 
more directly responsible for stimulus oversight. I foresee the 
Board actively detecting fraud trends, identifying best 
practices for conducting reviews, and designing risk-based 
strategies to help focus all of our limited resources. The IG's 
well regarded task force in response to Hurricane Katrina 
should serve as an excellent model for the new challenge. That 
effort, which is still ongoing, involved $149 billion and 
engaged 22 separate IG officers.
    Finally, I would like to present some of the impending 
challenges that I see as having the most impact upon the Board 
and its mission of transparency and accountability. First and 
foremost is the issue of data quality. Simply stated, the 
Federal Government's systems have never been fully successful 
at producing timely and reliable data. Add to that problem the 
difficulty of transmitting and reporting data up through 
multiple levels of government as this act contemplates and you 
will begin to understand the basis for my concern.
    Second to data quality is the lack of adequate numbers of 
procurement professionals at all levels of government. Federal 
agencies in particular have a great difficulty attracting and 
hiring enough procurement professionals to minimize the risks 
associated with moving this amount of money quickly and to 
accomplish the act's goals. And finally, I am concerned that 
there may be a naive impression that, given the amount of 
transparency and accountability called for in this act, little 
or no fraud or waste will occur.
    I am afraid that my 38 years of Federal enforcement 
experience informs me that some level of waste or fraud is 
regrettably inevitable. Obviously the challenge for all of us 
charged with oversight will be to significantly minimize any 
such loss. My promise to the committee today is that my staff, 
the members of the Board, and I will work tirelessly to reduce 
those losses to the lowest level possible.
    Mr. Chairman, that concludes my prepared remarks. Thank you 
for the opportunity. And I do look forward to answering any 
questions you might have today.
    [The prepared statement of Mr. Devaney follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Towns. Thank you very, very much. I will start 
with the questioning.
    What are some of the specific measures the Recovery Act 
Board can take to lend a hand to State and local officials to 
help assure that stimulus funds coming into their communities 
are not wasted? For example, does your mandate include 
providing anti-fraud training to State and local officials?
    Mr. Devaney. Mr. Chairman, I have been speaking the last 2 
weeks to State and local officials from around the country. I 
am doing a lot of listening and I have been hearing a lot of 
concern about their ability to perform their oversight role. 
Lack of funding is obviously a major issue for everybody.
    But what I also hear is that they are looking to this Board 
to provide exactly what you just talked about, a level of 
training, fraud awareness training, to help them develop risk 
analysis models that might help them focus their limited 
resources, and procurement training. And as I mentioned in my 
opening remarks, one of the charges I am going to have to 
everybody that works for me on this Board is that a major part 
of the responsibility is State and local interaction. I have 
been doing this sort of thing for all my career and I have 
always had a good, healthy working relationship with State and 
local law enforcement and audit folks. I don't intend to change 
that now.
    Chairman Towns. Well, let me just say that I must admit 
that you have a tremendous, positive reputation in terms of 
being able to get the job done. Someone said to me the other 
day that if anybody could do this job, it is you. So I was 
happy to hear that.
    But according to the 2008 report of the Association of 
Certified Fraud Examiners, occupational fraud is much more 
likely to be detected by tip than by audits, controls, or other 
means. Do you have a broad plan on how to harness citizen and 
whistleblower involvement in keeping an eye on stimulus 
spending? And also, I guess, along with that, if you do, how do 
you plan to publicize this so that people will feel comfortable 
coming forth with information?
    Mr. Devaney. As you may know, this Web site is getting an 
average of about 4,000 hits per second so citizens are tuning 
into this Web site already. And we do need to harness the 
collective wisdom that comes from this. I think the beauty of 
this transparency and the concept behind this Web site provide 
all of us in the audit or enforcement arena an opportunity to 
hear and see things that we probably never would find unless 
citizens called in and told us about it.
    So we will have to build a process where we can sort of 
sift through the frivolous kinds of things that are always 
going to come in to the real nuggets. And I believe that with 
the fact that citizens are going to hopefully be attracted to 
this Web site and be on it all the time, that we are going to 
find things and hear about things that we never would have 
found or heard about in the traditional processes that we have 
all used over the years.
    Chairman Towns. The Recovery Act requires your Board to 
submit flash reports to the President and Congress. I guess, 
first of all, what is a flash report and why are they 
important?
    Mr. Devaney. Well, I think I may be a pioneer in that area. 
I actually designed flash reports at the Department of Interior 
to notify the Secretary of some immediate need for their 
concern, something that might involve potential loss of life or 
a security issue.
    And so I would use flash reports in this circumstance as 
providing both Congress and the administration with something 
they needed to hear right away, to not wait for a quarterly 
report or a weekly report but just to get it out right away and 
get that out to whatever department. For instance, if we have 
money that might have gone missing or wasted, get that out 
immediately and not wait for the routine reporting process.
    Chairman Towns. Senator Claire McCaskill of Missouri has 
introduced a proposal whereby State auditors who historically 
do single audits every year as required by the Single Audit Act 
of OMB, Circular A-133, would instead do audits directly 
related to the Recovery Act stimulus money for the next couple 
of years. She proposes that the initial round of audits would 
focus on the mechanisms in place at the State and local levels 
and the second round of audits would be about how effective 
these mechanisms have been. Would you please explain the 
concept of single audits in IG's use in terms of how this helps 
you?
    Mr. Devaney. Well, first of all, I would commend Senator 
McCaskill for coming up with that idea. I know she was State 
auditor before she was a Senator so it is an interesting 
proposition. I know the audit community, which would include 
all the IGs and the GAO and their State and local counterparts, 
have been talking about this in the last few weeks. And I don't 
think we have actually arrived at a recommendation about this.
    But single audits are used typically to provide audit 
coverage of moneys where typically over $500,000 has been 
expended by an entity. I think there are a few States that 
actually have their State auditors do this kind of work but 
most entities are required to hire an outside accounting firm 
to do those audits. They are funneled into a central 
clearinghouse at the Federal Government level and then, if 
there is a problem, the individual IGs that oversee those areas 
get involved or get to look at that and followup.
    Chairman Towns. Thank you very much. I now yield to the 
ranking member.
    Mr. Issa. I thank you, Mr. Chairman. As the chairman said, 
Mr. Devaney, we have known of your work at Interior and we are 
counting on you to do a lot of what you did there. I think the 
difference at Interior was very well established programs. The 
failures at MMS and some of the areas that you and I have 
worked on in the past, these were failures in which the rules 
were very specific. They were either violated or we found 
circumvention through various means or, in some cases, just 
misconduct by individuals.
    In the case of these funds, isn't one of your problems the 
fact that without a common set of terms and data base, if you 
put the information in and then try to search--if a term for a 
similar expenditure or term for a use of funds is not identical 
throughout the data base--although you can maybe get some 
visibility, you are not going to be able in an automated 
fashion to search it?
    Mr. Devaney. Well, I think that is absolutely correct. As I 
mentioned, I have been listening for the last 2 weeks to 
principally State and local officials and that is one of the 
major concerns that they raise. You know, I need to get control 
of the Web site.
    And while I said earlier I think a great deal of credit 
should be extended to OMB and GSA for getting this Web site up, 
it has taken me some time to hire the appropriate amount of 
staff to take control of the Web site, particularly the Web 
site's content, and then trying to understand the definitions 
that have already been sent out to States and Federal entities. 
I sort of arrived at the train station and found that the train 
had already left. And it was a pretty fast train and it was 
going down the track. So I am going to get my hands around 
that. I have heard the concerns.
    And I want to, as I mentioned earlier, try to strike that 
balance between having the system complicated enough so that we 
can watch the dollar flow from the Federal pot down to the 
local entity, but yet simple enough so that, and I have been 
using Mr. and Mrs. Smith from Ohio.
    Mr. Issa. As a former Ohioan, I thank you.
    Mr. Devaney. Yesterday I was asked and I told them that Mr. 
and Mrs. Smith who live in Columbus, OH can go on that Web site 
and maneuver around it and be attracted enough to come back to 
it. Quite frankly, I am interested in making sure that this is 
a totally impartial, apolitical kind of site that is also 
attractive. I don't want to put up sort of a CPA or audit kind 
of site that wouldn't be attractive enough to get people to 
come back in. And I want to take advantage of the citizen 
participation. I look at that, as I mentioned earlier, as an 
opportunity to learn things we never would learn otherwise.
    Mr. Issa. Well, Mr. Devaney, the Washington Post has 
reported that, at least in their estimate, it will be a year 
before that site is searchable based on estimates that they are 
being given. Last week, this committee held hearings in which 
XBRL technology and its roll-out at FDIC and now at SEC was 
underway. Are you able to in your current position explore--
that happens to be a not-for-profit--groups that could leverage 
existing knowledge to maybe increase the speed with which, from 
a year to substantially less, you would be able to roll out 
standards that would make this thing searchable?
    And I appreciate the fact that you want to make this Web 
site look good. I will say that the people I am most interested 
in seeing this is not John Q. Public. It is, in fact, the 
person who didn't get a contract, the person who thinks they 
should have gotten funds and who will search analytically to, 
in fact, uncover perhaps the misspending or the redirection of 
funds that they thought they could have been awarded. I really 
need that kind of person. And that kind of person is probably 
more interested in a green eyeshade site than they are in 
something pretty.
    Mr. Devaney. It is a balancing act. I am going to have to 
find that balance. I want to listen to as many innovative 
technology folks as possible. I mean, second only to the room 
where I am keeping all of the resumes that have flowed in is 
the room where all the vendors have lined up to meet with me.
    Mr. Issa. Good. There is a lot of good technology out there 
and we need to take advantage of it.
    Last, when Congress passed this stimulus, and it is too 
late for us to point fingers, we did not adhere to certain 
truisms, if you will. One of them was now President Obama's 
legislation that called for greater transparency and laid out 
some of it. We have only gone part of the way. Do you need 
follow-on legislation or some kind of rulemaking authority that 
would allow you to get properly through the Government, the 
Government, the government, the contractor, the subcontractor, 
and the sub-subcontractor?
    Mr. Devaney. I don't know the answer to that question right 
now but I will tell you that as soon as I figure that out, I am 
going to come back to you and tell you the answer to that.
    Mr. Issa. Thank you. Thank you, Mr. Chairman.
    Chairman Towns. Thank you. Thank you very much. Now I yield 
to the gentleman from Maryland, Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman. Mr. 
Devaney, I am chairman of the Subcommittee on the Coast Guard 
and one of the biggest fiascos is this Deepwater Project where 
we are producing boats that don't float. We have straightened 
it out now, I think, but one of the biggest problems were 
people who had experience with regard to acquisitions in the 
Coast Guard.
    I am just wondering, when you look at the stimulus Web 
site, the question is first of all do States need a Web site? 
And I am going to go back to acquisitions in a moment. Do 
States need a Web site? Do they need a stimulus czar to oversee 
this stuff?
    Mr. Devaney. I don't know if they actually need one.
    Mr. Cummings. Do you recommend one?
    Mr. Devaney. I have been telling folks--and I have been 
asked that question a lot--that if you can afford to do that, I 
think it is a good idea. I am of the opinion that the more 
transparency and oversight the better.
    Mr. Cummings. Are the States telling you that while they 
want to provide oversight, they may not have everything they 
need to do it? Is that what you said a little bit earlier?
    Mr. Devaney. They are telling me that.
    Mr. Cummings. And what can you do, if anything, to help 
them with that? Are there funds in the budget to help them? 
Because one of the things that I fear is that we will have 
people, States trying to do the right thing but when we 
consider the fact that States are in bad shape--in Maryland we 
are sending people on furloughs and things of that nature, 
reducing the budget substantially--and I am just wondering, we 
are quickly trying to get money out and it seems that is 
fraught with all kinds of possibilities of problems.
    So I am just wondering, what is available, if anything, on 
the Federal level to help the States?
    Mr. Devaney. Well, the answer to that is literally almost 
nothing. And while the act I think appropriately and generously 
funds oversight for Inspectors General, it did not provide the 
similar kind of moneys for our State and local counterparts. 
And I view them as counterparts. I don't think there is a day 
that should go by without us trying to leverage our resources, 
our joint resources, and work together. The last thing we need 
to do is be redundant.
    So, we need those State and local authorities, whether they 
are auditors or investigators or prosecutors, we need them to 
be in a position to work jointly with us. And I am hearing that 
they don't have the money. We have looked at the act a number 
of different ways but we don't see a way where we can get them 
the kind of money they need. So, it may take some sort of 
legislative action.
    Mr. Cummings. In the ``Frequently Asked Questions'' on 
Recovery.gov it is noted that OMB is not planning to issue 
guidelines to States but suggested agencies do so. Is there a 
timeline on issuing these guidelines? Are they required? Should 
OMB issue uniform guidelines for managing stimulus accounting 
and reporting instead of on an agency-by-agency basis?
    Mr. Devaney. Well, OMB has issued guidelines and they 
continue to try to refine those guidelines and publish 
supplemental guidelines. And I think they are using, in an 
effort to get those guidelines out as quickly as possible, the 
traditional manner that guidelines are proffered. Those are 
traditionally done through the agency that manages the funds 
that are going out.
    So, they have used that traditional approach, and my sense 
is that they are going to continue, that none of those 
guidelines are cast in concrete. And, they are going to be 
refining them and figuring out if they were the right 
guidelines or if more is needed or less is needed.
    Mr. Cummings. I am picking up on something that the 
chairman asked about whistleblowers. It is my understanding 
that the stimulus bill goes a little bit further with regard to 
whistleblowers in that they actually protect the employee of 
the contractor. Certainly, I am sure you may get some 
disgruntled employees, some subcontractors or whatever who 
aren't getting paid.
    I am just wondering what mechanism do you have or will you 
have to effectively and efficiently take in those calls, screen 
them, and do what is necessary to be done? And if somebody 
calls, where does it go from there? And I see this is my last 
question, but I appreciate if you answer.
    Mr. Devaney. Well, we are going to have to develop a 
process to do that very thing. And I think I have a very good 
history of protecting whistleblowers. I, for instance, have had 
when I was Inspector General of Interior whistleblower 
protection officers. I was probably one of the first IGs to do 
that. So I am very sensitive to this issue. I am very 
protective of whistleblowers.
    And quite frankly, with the amount of transparency and 
accountability we have on this table, we are going to get more 
not less whistleblowers. I will work with the other IGs on the 
Board and the other IGs that are not on the Board to ensure 
that gets treated appropriately.
    Mr. Cummings. Thank you, sir.
    Chairman Towns. I thank the gentleman from Maryland. Mr. 
Burton from Indiana?
    Mr. Burton. I yield my time.
    Chairman Towns. Mr. Chaffetz from Utah?
    Mr. Chaffetz. Thank you. I appreciate it. There have been 
some spectacular assertions as to the number of jobs that would 
be created or saved through this. Would you be willing to 
commit to providing a detailed methodology for the 
administration's method for calculating jobs saved and created 
on Recovery.gov so that Americans can check the math for 
themselves?
    Mr. Devaney. Well, Congressman, I am going to try and 
ensure that whatever the administration's guidelines are for 
getting information up on that Web site gets up on that Web 
site. With regard to the issue of jobs, with the definition of 
jobs created or jobs saved, that is sort of the 
administration's call to do that. I am going to encourage them 
to do that.
    But, I am probably not going to be involved in the 
decisionmaking in that because it is an administration call. 
And, I really don't think this Board and my role is to get 
involved in that kind of policy sort of thing. I think, though, 
that it is clearly a metric that has been thrown out there. I 
have no idea the methodology behind it. But it is a metric that 
I think is expected to be tracked on this Web site.
    Mr. Chaffetz. But the information that is going to be used 
to calculate those types of conclusions would be the 
information that we would find on that Web site, correct?
    Mr. Devaney. Correct.
    Mr. Chaffetz. Who is in charge? Is it you or is it the Vice 
President?
    Mr. Devaney. Well, I think the President has designated the 
Vice President as being in charge of the Stimulus and Recovery 
funds. And in turn, I am acting as the chairman of this Board 
and reporting to the Vice President, but doing so in an 
independent way.
    Mr. Chaffetz. How often have you met with the Vice 
President thus far?
    Mr. Devaney. Three or four times.
    Mr. Chaffetz. He, the Vice President, said, and we're going 
to do this once a week as we kick this thing off to make sure 
we know exactly what we're doing. Is that happening?
    Mr. Devaney. My understanding is I am now on his calendar 
once a week.
    Mr. Chaffetz. Is that happening?
    Mr. Devaney. It is going to start next week. But I have 
certainly seen him as much as I needed to. And I have been 
given assurances that if I need to see him at any time, I can.
    Mr. Chaffetz. And what happens? We heard that nobody messes 
with Joe. How does that work from your perspective dealing with 
this?
    Mr. Devaney. I think it is working rather well.
    Mr. Chaffetz. No, I mean projecting forward. How is that 
going to work?
    Mr. Devaney. We need to figure out whether once a week is 
right. Do we want once every 2 weeks? We are going to try it 
once a week. I am going to try to do what I have always done 
with my Secretaries, which is try to have a sort of no surprise 
policy.
    But I have made it very clear that my intention is to tell 
him what he needs to know, not necessarily what he wants to 
know. I am not bashful and haven't been in the past about 
telling people things that they don't particularly want to 
hear. I told him that in the first meeting I had with him. And 
I got the answer that I had hoped for, that is what he wants 
and expects. And we are going to go forward with that.
    Mr. Chaffetz. Will all announcements of contracts and grant 
competitions and awards be posted online? Speaker Pelosi has 
promised us that would be the case. Is that your understanding?
    Mr. Devaney. That is my understanding.
    Mr. Chaffetz. Very good. And I noticed that the Department 
of Defense Inspector General is not part of the Board, yet they 
are receiving funds. What is your understanding of that 
situation?
    Mr. Devaney. Well, I have been asking now for 3 weeks who 
it was that made up the composition of the Board. I can't find 
that person. But it is true, in fact, that people that have 
money like the Department of Defense IG are not on the Board. 
Some people that are not on the Board have more money to 
oversee than people that are on the Board. Some people on the 
Board don't have any money to oversee. So I really couldn't 
tell you.
    What I do know is that each and every one of these Board 
members has--and I have talked to them each personally; we are 
going to have our first meeting next week--is committed the 
same as I am to doing as much oversight as we need to protect 
the public's money.
    Mr. Chaffetz. What is your No. 1 concern?
    Mr. Devaney. My No. 1 concern is that we be able to respond 
to the amount of citizen information that we are going to get 
on this Web site and that we do that in a way that ensures that 
we can get on top of everything that I think we are going to 
find out. I mean, the citizen participation in this is going to 
allow IGs and State and local oversight entities to learn a lot 
more than they would through the normal processes. And do we 
have the capacity? Do we have the investigative or audit 
capacity to look at all this stuff? It is a lot of money.
    Mr. Chaffetz. When do you anticipate actually finding a 
location at which you can be housed?
    Mr. Devaney. I am told I am going to go look at one Friday. 
So I would like to get an address. I would like to get some 
phones and computers and start taking control of this.
    Mr. Chaffetz. Very good. Thank you, Mr. Chairman.
    Chairman Towns. Thank you very much. I now yield to the 
gentleman from Ohio, Mr. Kucinich.
    Mr. Kucinich. Thank you very much, Mr. Chairman. Mr. 
Devaney, part of your charge, of course, is to make sure that 
the money is being spent properly. Do you have any charge with 
respect to the money being spent? In other words, if this is a 
stimulus package and this money is being distributed, do you 
know how much money remains unspent? And are there any metrics 
established for seeing that this money does get spent in a 
timely manner to, in fact, be a stimulus?
    Mr. Devaney. Congressman, my understanding is the 
information that is going to be flowing into this Web site 
will, in fact, give us that kind of information. I don't know 
that we have been seeing it yet but it is coming.
    Mr. Kucinich. So how much has been spent so far?
    Mr. Devaney. A lot. The first day----
    Mr. Kucinich. Can you quantify ``a lot?''
    Mr. Devaney. No, I can't really.
    Mr. Kucinich. Well, this is my question, Mr. Devaney.
    Mr. Devaney. A lot of money went out under formula; that 
type of money went out very early on. Agencies were able to get 
money out the door quickly to programs that they normally put 
money into every year. So from a risk perspective, that is 
probably OK because those are programs that have processes and 
people in place to receive that money, albeit it is more money 
than they normally do.
    Mr. Kucinich. It is going out. Is it being spent? You know 
the problem that we have with these TARP funds. The money goes 
out but the banks hoard the money. Is this money being spent? 
Is it stimulating the economy? Do you know?
    Mr. Devaney. I don't know today, but I do know that the 
amount of information that OMB is requiring folks to get back 
to us with will talk about those issues.
    Mr. Kucinich. You know, this committee needs to know.
    Mr. Devaney. Yes.
    Mr. Kucinich. We need to know that the money is being 
spent. How it is spent is, of course, our oversight 
responsibility. But that it is being spent relates directly to 
whether or not it is a stimulus.
    Now I want to talk to you about the general contracting 
process. Can you explain why the Recovery Act's emphasis on 
fixed price contracts will help contain fraud and waste?
    Mr. Devaney. Well, in general terms, there is an incentive 
to contractors under fixed price contracting to come in with a 
realistic price and we keep the cost overruns down. 
Historically, if it is not a fixed cost contract, contractors 
have little incentive to make sure those costs stay within a 
certain number.
    Mr. Kucinich. Are you going to be examining contracts to 
see if people are low-balling in terms of competitive bidding?
    Mr. Devaney. I think that would be part of an audit process 
that we at the Federal level, all of the IGs, and our State and 
local counterparts will be doing.
    Mr. Kucinich. Are you increasing, does the Recovery Act 
increase mandates for competitive bidding of contracts?
    Mr. Devaney. It has in place criteria for contracts. And 
because it does, because we are going to be able to watch that, 
we are going to have a quicker response time and be able to 
respond quicker to those that deviate from those rules.
    Mr. Kucinich. Will there be fewer exceptions or waivers 
granted?
    Mr. Devaney. I think that the act contemplates that if 
there are waivers or exceptions, that they be posted on the Web 
site.
    Mr. Kucinich. I have another broad policy question that I 
would like you to address. I come from a community, Cleveland, 
OH, and was mayor of a city where there is a substantial number 
of minority entrepreneurs. Our African American community in 
the city of Cleveland is now pretty close to about half the 
population of the city itself.
    Now, a lot of these entrepreneurs are really not given 
opportunities to get in on these Federal bids. What is being 
done as part of your charge? And if you are not, who is making 
sure that minority contractors who are established and part of 
a community are given an opportunity to be part of this bidding 
process so that the benefits of the stimulus really get to 
communities where the help is needed the most, where people 
have been established, and making sure the money gets into the 
neighborhoods?
    Mr. Devaney. Well, it is not in the Board's mandate to do 
that. My assumption is that the agencies are going to be 
working very hard to make sure that happens. So it would be the 
agencies that are giving the money out and the State agencies 
as the money flows down to the States.
    Mr. Kucinich. So are you keeping track at all to see if 
there is any minority contracting going at all? Do you look at 
that? Are you going to keep statistics so that we can know, in 
terms of a gross amount of money that might be spent in this 
country, how much is going to minority contractors?
    Mr. Devaney. I don't know the answer to that but I will get 
back to you on that.
    Mr. Kucinich. I would like to know. Thank you. I yield 
back. I thank the gentleman.
    Chairman Towns. I thank the gentleman from Ohio. At this 
time, I yield to Mr. Burton of Indiana.
    Mr. Burton. Thank you, Mr. Chairman. In a Wall Street 
Journal interview, you stated that the experts, the people who 
work in the fraud areas say there will be significant fraud, 
around 7 percent lost to fraud in most cases. That stimulus 
bill was $787 billion plus interest. And if you put a pencil to 
that 7 percent that is about $55 billion, 55 thousand thousand 
dollars. Seven percent seems like a very high number. I mean, 
can't that be improved upon?
    Mr. Devaney. Well, I think that is the challenge. I think 
the challenge is that we need to obviously minimize those 
percentages. I think those percentages, there are very few 
organizations, but the Certified Fraud Examiners is where that 
comes from. They annually give out those statistics and it goes 
up and down in a given year. I think that is the 2008 
statistic. And the first time I took a pencil and figured that 
out, I was horrified to see that it was $55 billion. So 
obviously the challenge is to try to minimize those losses.
    But it would be naive to think that there won't be, with 
that kind of money around, people who will come and try to 
defraud the Government or State and local entities. So I think 
we have to expect it. I think we have to have a coordinated 
effort between law enforcement at the IG level and the State 
and local law enforcement with prosecutors all over this 
country and to basically take sort of a zero tolerance attitude 
about fraud.
    Mr. Burton. Well, I think that is great but I presume this 
percentage has been fairly constant over the years. And if it 
is 7 percent of something like $700 billion or $800 billion, 
you are talking about big money. And the American people, I 
mean everybody is raising Cain right now about $165 million 
that was given executives at AIG. If they found out that $55 
billion is going out in fraud almost every year when you have 
that kind of an expenditure, they would march on the Capitol. I 
mean, it seems in your position that you and your compatriots 
over there ought to be able to figure some way to get that down 
to a much lower figure.
    Mr. Devaney. Well, we are going to try real hard, 
Congressman. I mean, I think that is an unacceptable level of 
fraud and we are going to try to do our very best to keep it at 
a minimum. And I think trying to send as quickly as possible as 
many deterrent messages as we possibly can is one way to try to 
minimize those risks. The other thing is, as I mentioned 
earlier, it is important for IGs and oversight authorities to 
get on the front-end of this pipeline as opposed to simply 
waiting until that fraud or waste occurs and then doing an 
audit or an investigation.
    Mr. Burton. You have a tough job.
    Mr. Devaney. Yes.
    Mr. Burton. We have what is called the Weekly Waste Watch, 
and this is kind of humorous. It says that the town of Union, 
NY, is getting $578,661 in Federal Recovery Act funding for a 
homeless problem that does not exist within its borders. 
``Union did not request the money and does not currently have 
homeless programs in place in the town to administer such 
funds,'' said the town supervisor. ``We hope and encourage 
these new grantees to develop creative strategies for the 
funding.''
    In other words, they want them to create a program that 
doesn't exist because they gave them the money. Will you guys 
be perusing and checking these sorts of things out as well?
    Mr. Devaney. One of the things, quite frankly, that I 
mentioned to the administration is that, sort of the reverse 
side of transparency, is that people will come and look at this 
Web site every day. There is probably not a reporter in America 
that won't wake up and click on that Web site. And we are going 
to have to deal with literally thousands of these kinds of 
examples. The good news is that if we didn't have the 
transparency and we didn't have the Web site, we wouldn't have 
found those things in the ordinary course of business.
    Mr. Burton. Well, I have one more question regarding the 
transparency. Are you aware that the recent guidance from the 
administration to Federal agencies tells them that they only 
have to follow the money they dole out as far as the State and 
municipal level and after that the money trail runs cold. Under 
this plan there will be zero accountability for any 
contractors, lobbyists, or special interests that get 
taxpayers' money.
    And I think that the ranking member here in his opening 
statement used the example of Chicago receiving stimulus 
funding from Illinois. Under this plan, the current guidance, 
we wouldn't find out about any sweetheart deals. Now this Web 
site, how is it going to deal with things that go beyond the 
State and local level, State and community level?
    Mr. Devaney. Well, I am going to, when I get a chance to 
get my hands around this thing, my goal, and what I believe the 
stated goal is, is to follow the dollar from the Federal 
Government out to the entity that ultimately ends up with it. 
And I am going to do my very best. If the guidance hasn't been 
issued yet to do that, I will be encouraging folks to do that.
    Mr. Burton. So you will want to extend it past the State 
and municipality level?
    Mr. Devaney. If it is possible and it is legal, yes.
    Mr. Burton. Well, with this 7 percent problem--and thank 
you, Mr. Chairman--but with this 7 percent problem in waste and 
fraud, I hope you go as far as you can. Thank you very much.
    Chairman Towns. Thank you very much. I recognize the 
gentleman from Virginia, Mr. Connolly.
    Mr. Connolly. Thank you, Mr. Chairman.
    Mr. Devaney, as I indicated in my opening statement, the 
act provides set-asides on a program by program basis for 
oversight and accountability. But these only apply to Federal 
agencies, not States. In your response to Mr. Cummings just a 
little while ago, you indicated that maybe we would need some 
legislative relief. Does it make sense legislatively for, say, 
this committee perhaps, to amend the act to allow for set-
asides for States so they can do what they need to do?
    Mr. Devaney. I would be supportive of anything that gives 
State and local governments the opportunity to participate 
fully in this oversight challenge that we all have. So I think 
the answer is yes.
    Mr. Connolly. Mr. Chairman, I think that is an issue we may 
want to revisit as a committee in terms of the idea of a set-
aside for our States to be able to comply with the full panoply 
of auditing functions.
    Let me ask you a question. Are you concerned about the fact 
that by going program by program, unintentionally we may be 
creating the kind of stovepipe oversight that actually hasn't 
been all that useful in the past?
    Mr. Devaney. Well, I would be perhaps more concerned if we 
were trying to create a new paradigm in that area because of 
the speed that the money is going out. If it is going out in 
the traditional way, I think the risk is less than if we had 
tried something new. Now, that is the guidance that was issued 
and that is the way it has gone out. And I suspect that there 
has been some push back on that and OMB may be reconsidering 
that. I don't know.
    Mr. Connolly. Let me ask, Mr. Devaney, what Federal 
requirements currently apply to States in connection with the 
stimulus funds? What are they required to do?
    Mr. Devaney. They are required to tell us to whom they gave 
the money, for what purposes those moneys are being used and, 
to the extent possible, an idea of whether or not that created 
or saved jobs, and a host of about 80 other things.
    Mr. Connolly. Among those 80 other things would be some 
kind of certification that they have some kind of process in 
place to ensure against waste, fraud, and abuse?
    Mr. Devaney. Yes, at the outset. Right.
    Mr. Connolly. Are State stimulus Web sites required?
    Mr. Devaney. No, they are not required but, as I said 
earlier, I think it is a good idea. I am certainly going to try 
very hard to have a Web site that links to any of those kinds 
of Web sites so that if a citizen comes on the Federal Web site 
and wants further information, they can simply click on and go 
to those sites that have been set up.
    Mr. Connolly. Yes. If we were to revisit the issue of 
legislation for set-asides, it seems to me Web sites would also 
be another way of underscoring the importance of the 
transparency we have been talking about on a bipartisan basis.
    Would you recommend, well, first of all, are States 
required to appoint stimulus czars?
    Mr. Devaney. No.
    Mr. Connolly. Do you think they should be?
    Mr. Devaney. I think that, from what I can tell, most 
States have created some position. Whether they call it a czar 
or not may be an issue. But somebody in every State, and they 
have already come to Washington, is nominally in charge of 
Recovery funds for that State.
    Mr. Connolly. In the Frequently Asked Questions on 
Recovery.gov, it is noted that OMB is not planning to issue 
guidelines to States but suggests that agencies do so. Is there 
some kind of timeline to your awareness on issuing such 
guidelines?
    Mr. Devaney. I would hope that if the Federal Government is 
releasing moneys to States that guidance is getting out the 
door at about the same time.
    Mr. Connolly. But right now you are not aware of any 
timeline?
    Mr. Devaney. I am not aware that there is a specific 
timeframe mandated.
    Mr. Connolly. Are the guidelines mandated?
    Mr. Devaney. The guidelines are issued by OMB in the normal 
way all kinds of guidelines are issued by them. And it is a 
requirement that they follow those guidelines.
    Mr. Connolly. But the guidelines are being issued by the 
agencies, are they not, not by OMB?
    Mr. Devaney. They are both. There are some general 
guidelines from OMB and there are specific guidelines from the 
agencies.
    Mr. Connolly. OK. Depending upon the program?
    Mr. Devaney. Right.
    Mr. Connolly. Right. In most cases, Federal stimulus funds 
will flow directly to Federal agencies, which in turn pass them 
on to State governments. In some cases, stimulus funds will be 
disbursed directly to community institutions. Can you explain a 
little bit the circumstances in which money goes directly to 
community institutions and whether those institutions have the 
resources to oversee and audit stimulus funds?
    Mr. Devaney. Well, there may be a requirement, as I 
mentioned earlier, if those institutions are getting over 
$500,000. There probably is a single audit requirement and in 
most cases they would have to go out and hire a CPA firm to do 
that.
    Mr. Connolly. But there are no requirements for them to do 
that right now?
    Mr. Devaney. There are requirements in place that if it is 
over $500,000 they have to get a single audit done.
    Mr. Connolly. OK, so they are required?
    Mr. Devaney. Right.
    Mr. Connolly. Thank you, Mr. Chairman.
    Chairman Towns. Thank you very much. Now we recognize the 
gentleman from Tennessee, Mr. Duncan.
    Mr. Duncan. Well, thank you very much, Mr. Chairman. In 
some of the recent legislation the Congress voted to raise the 
national debt limit to $12,104 billion, which is an 
incomprehensible figure. And some of us, or most of us on this 
side, had a problem with the fact that in this stimulus we are 
spending money that we don't have. That was the main problem.
    But since we are past that one now, I read recently in the 
Washington Post--they had an article the day before we voted--
and it said that the stimulus, and they were for it, was going 
to mean a ``massive financial windfall for Federal agencies.'' 
Those were the words they used, ``massive financial windfall 
for Federal agencies.'' And then a couple days later the Post 
had a front page story that said they were going to hire tens 
of thousands of additional Federal workers.
    I noticed, Mr. Chairman, that some were concerned about 
some of the excessive claims about job creation. Last week 
there was a story in a Montana newspaper. The two Montana 
Senators had apparently put out a press release claiming that a 
$1.3 million grant to an agency in Montana was going to create 
40 new jobs. And the paper went to that agency and they said, 
no, actually they were only going to hire two new people. They 
were going to give raises to the people that were already there 
and pay other expenses. And so some of us have concerns about 
this, about how many jobs this thing is going to actually 
create.
    And another concern is that the night before last on CNN 
they said that the private sector lost 4 million jobs last year 
while Government created 131,000 new jobs. So while individuals 
and families in private businesses are having to cut way back, 
the Government keeps expanding. And what I am concerned about 
is that most of this stimulus money is going to be a massive 
financial windfall for Federal agencies first and then State 
agencies. It seems that every business, every private, every 
charitable agency in the country is lining up hoping to get 
stimulus money. And all the schools are hoping to get stimulus 
money.
    What I am wondering is, is there going to be some way to 
track how much of this stimulus, if any--apparently some of it 
will but I am afraid it is going to be a very small 
percentage--is actually going to end up in the private sector? 
And that is where it is needed the most because, for instance, 
to hire tens of thousands of people in this area as the Post 
said was going to happen, this is already one of the wealthiest 
areas in the country. Are we going to be able to tell how much 
has actually gone to the private sector as opposed just to 
Federal and State bureaucrats? Because it appears that they are 
the ones that are going to benefit the most from this stimulus 
package.
    Mr. Devaney. Congressman, I would hope that the Web site 
eventually is able to talk about jobs created and jobs saved 
and give us some idea of where that occurred. I am a little bit 
skeptical of the notion that Federal agencies are going to be 
able to go on a massive hiring binge because this money runs 
out. The last thing that I personally would want to do running 
an organization is hire somebody and then have to let them go 2 
or 3 years later.
    So I think there might be a lot of retired annuitants that 
might come back for a while or people that take temporary jobs 
that have certain expertise. But we will see. And I would 
imagine that we would be able to tell where those jobs were 
created or saved.
    Mr. Duncan. Well, I was just quoting what the Washington 
Post had said. But I can tell you that there is a real concern 
there among a lot of us that not much of this is going to 
trickle down to the businesses and areas that need it the most. 
And I think there is going to have to be a major effort made to 
make sure that most of this money is not just spent in areas 
like this area and other areas of high Federal employment, that 
really the main beneficiaries of all this are not just the 
Federal and State bureaucracies when actually they are doing 
far better than businesses in the private sector as CNN pointed 
out the night before last.
    Thank you very much.
    Mr. Issa. Would you yield your time?
    Mr. Duncan. Yes, I will yield.
    Mr. Issa. Thank you. Mr. Devaney, just a followup. Both 
sides have talked about the no specific funds for oversight for 
the States and local government. Isn't it true that in many, 
many, many cases these contributions are cost shifting? In my 
own district, they picked a fully funded route, they 
Federalized it so they could use stimulus money, and then they 
moved those funds to other projects.
    So in every State, as far as you know and if you don't know 
I would appreciate a response later, aren't there funds that 
are being put into programs that otherwise would have been 
funded, otherwise were funded? Doesn't that give the States the 
ability to, instead of moving a road project funding--fully 
funded in my district--to another road, they could move it to 
oversight?
    I just want to make sure that we understand that all money 
is fungible and that we not have any chance that a State 
literally doesn't have the money, is not shifting any money 
whatsoever from a project, and as a result would have no money 
to do oversight.
    Mr. Devaney. Congressman, as I have been listening, as I 
mentioned, to State and local officials for the last couple of 
weeks, they don't think they can do that. And I haven't heard 
OMB tell them that they can. So I don't think that they can 
shift that kind of money to oversight. I don't think there is 
an ability to do that.
    Mr. Issa. Mr. Devaney, following up, if they can shift 
money into a project that was already fully funded and they can 
shift money out, then the money they shifted out, which is 
their money, not Federal money, could be used for oversight. Is 
that correct?
    Mr. Devaney. I think, yes. I am sorry I misunderstood. I 
think that could be used. But there is a lack of people out 
there that can be hired quickly that can do this kind of work. 
That is another challenge.
    Mr. Issa. Sure. Mark McCormack in one of his leadership 
books said, any problem that money can solve is just a business 
decision. So I wanted to concentrate on the money because we 
can't necessarily solve the business. But if you find any State 
which literally doesn't have an example like mine in 
California, so that there is no ability to make the choice to 
pay for people if they can be bought, I know this committee 
would be very interested in making sure that we find a way to 
get additional funds to that State but only if there are no 
examples where funds are essentially being alleviated.
    I thank you and yield back.
    Chairman Towns. Thank you, gentlemen, for yielding back.
    At this time, I recognize Mr. Davis of Illinois.
    Mr. Davis of Illinois. Thank you very much, Mr. Chairman. I 
was just thinking that there are probably other States that do 
a little Valentine decisionmaking every once in a while when I 
heard the reference to Illinois and Chicago relative to some 
contracting. So I am sure that Valentine's Day exists 
throughout the country.
    But, Mr. Devaney, let me first of all thank you again for 
being here. My comfort level was greatly enhanced as we were 
debating and discussing this legislation by all of the 
conversation about transparency and how we are going to make 
sure that people knew what was going on, that we were going to 
make sure that we were watching, that we were going to make 
sure that the candy store didn't get broken into.
    But we always tell people that. I mean, every legislature 
that I have ever been in, every time we get ready to pass some 
legislation that relates to spending money, we say that we are 
going to do it. What do you see different or do you see 
anything different about this effort than perhaps we have seen 
in the past?
    Mr. Devaney. Well, Congressman, I have been in this 
Government for 39 years and I have never seen an attempt made 
to be as transparent with the money as this act envisions. I 
actually think if we do this right, it will serve as a model 
for the future. And I want to dedicate myself to, sort of in 
the autumn of my career, to leave government with something 
like this in place that can be used for future spending.
    And so we have an effort here that I think is historic in 
its complexity and trying to do it at the Federal level. Some 
cities have done it; some States have done it. But it has never 
really been tried at the Federal level for certainly this 
amount of money. So we need to get this right. Undoubtedly it 
won't be right in the beginning, but as we go forward we will 
refine this. And, once again, I want it to be a model for the 
future.
    Mr. Davis of Illinois. Let me ask, do you envision your 
role as being different than that of the Inspectors General 
that we have for all of the agencies?
    Mr. Devaney. Well, I think that I am going to, I have 
decided that I am going to act like an Inspector General. I am 
still one. I am on a leave of absence. But in this role, I am 
not going to come before Congress or come before the 
administration and act any differently than I have the last 
decade as an Inspector General: candid, straightforward, call 
it like I see it, be responsive to both parties.
    Mr. Davis of Illinois. Let me ask, are you going to review 
the work of agency IGs or State auditors, other individuals and 
agencies that are looking at the expenditures?
    Mr. Devaney. I don't think I would use the word review. I 
think the role of the Board is more of a coordination to take 
the work of those IGs and to follow it, to take the work, to 
discern fraud trends, to develop best practices. If one IG is 
doing something that is really smart and really innovative, I 
would like to be in a position to suggest to the other IGs that 
they adopt that kind of work and on down through government. 
So, it is more of a coordination role than a review role.
    Mr. Davis of Illinois. I note that the duties of the RAT 
Board include reviewing whether acquisitions and grant 
personnel are qualified and have sufficient training, which is 
kind of an interesting addition. If personnel are found not to 
be trained, what steps would the Board pursue?
    Mr. Devaney. Well, I think we would first have to do that 
study and get it out. So that is one of the first things the 
Board, I am sure, will be trying to get done. I think at that 
point it would be helpful to have a discussion with OPM to see 
if there is any sort of waivers that can be given to retired 
annuitants as a good example of being able to bring people 
back. I mean, we are going to be essentially sunsetting in 
2013, so there are about 4\1/2\ years here. And there is a lot 
of experience out there that can be tapped into. So things like 
that.
    Mr. Davis of Illinois. Thank you very much.
    And let me just say, Mr. Chairman, if I might, I know that 
Mr. Kucinich raised the issue of minority hiring, purchasing. 
Mr. Connolly raised the issue of set-asides. I have never been 
in a place where we actually did what we said we were going to 
do in relationship to either one of those. And so I would 
really appreciate you looking hard at that issue and having a 
way to examine it.
    Mr. Devaney. OK, I will.
    Chairman Towns. Thank you very much, the gentleman from 
Illinois.
    Let me yield to Mr. Schock. And let me just say that we 
have a vote on the floor. And what we will do is just return to 
the committee 10 minutes after the last vote. Yes, Mr. Schock.
    Mr. Schock. Thank you. I will be very quick, Mr. Chairman. 
Mr. Devaney, thank you for being here; thank you for your 
efforts to help establish this Web site and the transparency 
that comes along with it.
    Help me understand. It would seem to me that as a part of 
this act, the information that we require from the States and 
local governments in order to get the money, we should already 
have some kind of a central data warehouse that has all of the 
information that members on this committee and the general 
public are really asking for. Is that the case and if so who is 
the keeper of those documents?
    Mr. Devaney. Well, I think the vision here is that 
Recovery.gov will become that place that all people can go 
including legislators. So it is my hope that it will sort of be 
one stop shopping at the end of the day.
    Mr. Schock. But I mean, it seems to me a function of 
establishing the Web site is already having the information in 
a data warehouse. And so I guess I am asking does that data 
warehouse already exist or does that need to be created?
    Mr. Devaney. It is being created and the data will be 
flowing in, a massive amount of data. As I mentioned earlier, 
sort of a historical amount of data is being collected in one 
place. So, it has to be created and it will eventually house 
all of the data that is going to come into this Web site under 
the requirements.
    Mr. Schock. So all of the information that we are requiring 
the State and local agencies to submit to the Federal 
Government will then be posted on this Web site for individuals 
like myself and my constituents to be able to review?
    Mr. Devaney. That is the theory and it is my hope that will 
be the actual result.
    Mr. Schock. What would stop the theory from becoming 
reality?
    Mr. Devaney. I think that there are challenges here. The 
Federal Government has never really tried this before. The 
usaspending.gov site was a pioneer work that happened a few 
years ago when it was tried. And it is up and running well, but 
it didn't involve this amount of money or this complexity. So 
there are a number of challenges.
    And as I mentioned earlier, I am concerned about data 
quality. The Federal Government has never been particularly 
good at getting timely and reliable data into their systems, 
nevermind sending it to one centralized location. So, it may be 
that we get the data in, but the data needs to be scrubbed and 
looked at with a fine-toothed comb.
    Mr. Schock. Part of the act requires that State and local 
governments--there seemed to be some question here this morning 
about beyond the State government, what information we are 
going to be able to provide on the Web site and to the 
taxpayers--part of the act requires that when a local 
government receives funds from a State government that they 
submit paperwork that says where the money is going, why it is 
being spent, what the project is being used for, specifically 
how many jobs will be created and so on, and even list a 
contact name in the agency who is overseeing the project.
    So, if we are going to get that information, again it is 
required in the statute, I am assuming that information then 
will be on this site as well?
    Mr. Devaney. It will.
    Mr. Schock. OK. OK, thank you very much.
    Chairman Towns. Thank you. I recognize the gentleman from 
Illinois, Mr. Foster.
    Mr. Foster. Mr. Devaney, the RAT Board's Web site is 
supposed to provide a means for public feedback on the 
performance of the contracts. And I was wondering whether there 
will be transparency with regards to the actual public 
feedback? For example, will there be the equivalent of a 
moderated blog attached to each contract award?
    Mr. Devaney. Yes, I think we are going to have to. I don't 
know exactly what that is going to look like, but I certainly, 
that would be my hope that we could do that. But the volume is 
terrific here and I think we are going to have to figure out: 
can we do that and not have to hire 400 people to do it? So, we 
are going to have to figure out how that is done but that is 
certainly a goal.
    Mr. Foster. OK. And you had indicated that in addition to 
transparency for the actual disbursements, there would be 
transparency for the grant applications process so the public 
can see not only the grants that got funded but those that 
didn't. Is this going to include the actual grant application 
material, the full application, or will there be limits to 
that? And also will it include, for example, letters of support 
from elected officials and very interesting objects such as 
those?
    Mr. Devaney. I don't know the answer to that. I can 
certainly get it for you.
    Mr. Foster. OK, because I think that would be very valuable 
if it is possible. It has to do with transparency in 
decisionmaking.
    Let us see, another thing is while I understand the 
benefits of an attractive user friendly interface, will you 
also be providing the ability for sophisticated parties to just 
pull down the entire data base so that they can make an 
independent search engine on this or so perhaps third parties 
make even more user friendly access to your data?
    Mr. Devaney. Yes, I think as it evolves over a period of 
time there will be that capacity. There are a lot of 
visualization tools out there today that are very innovative 
and I want to look at some of those tools because I think it 
will provide exactly what you are talking about, rather than 
sort of a standard dashboard where you see charts and graphs 
and pies, the ability to click on, for instance, a map of a 
State and drill down and get down to the very end of the 
pipeline where that money is.
    Mr. Foster. Yes, I am suggesting that by making the entire 
data base available for mirroring that third parties may beat 
you to this by making really cute ideas.
    Mr. Devaney. I think we need to get a grip on the 
governance of this Web site. And there isn't quite yet a 
governance document that is going to govern it. And that would 
be part of it as to whether or not we would make that 
available. I suspect, I am open minded to that.
    Mr. Foster. Yes. Well, I mean the alternative is that 
people will design robots to go and mine your entire data base 
in a very inefficient manner.
    Mr. Devaney. Right, right.
    Mr. Foster. OK, my next question has to do with 
subcontractor reporting. I was wondering how State and local 
governments have handled the reporting requirements for 
subcontractors, sub-subcontractors, and so on? Are there States 
and localities that meet the Federal reporting requirements and 
does the Recovery Act require additional reporting requirements 
all the way down to the sub-subcontractor? And second, what 
action will the RAT Board take if these standards are not met?
    Mr. Devaney. Well, let me answer the second half of that 
first. If there is a standard or rule or regulation or whatever 
that is not being adhered to, we will make sure that the 
appropriate party, be that the agency or OMB, knows about that 
and gets some action taken about it. I think it is still up in 
the air about exactly how far down this thing can go and should 
go. And so I know there are discussions going on about that and 
we are going to have to make some decisions in the near term 
about it.
    Mr. Foster. Right, well, it is an obvious opportunity for 
fraud to set up a shell company that is the only thing that 
appears on the Web site and then have the real work being done 
by someone who is not visible.
    Mr. Devaney. Sure. And I would love to think that a citizen 
or a reporter or somebody like that would tell us about that if 
they could see it.
    Mr. Foster. You can only know it if you can see it.
    Mr. Devaney. Right.
    Mr. Foster. OK, thank you. I yield back.
    Chairman Towns. Thank you very much. Let me indicate that 
we have three votes and we will actually adjourn and come back 
10 minutes after the last vote.
    [Recess.]
    Chairman Towns. The committee will resume. We recognize Mr. 
Tierney from Massachusetts.
    Mr. Tierney. Thank you very much, Mr. Chairman. Sir, I want 
to thank you for taking this responsibility. First of all, I 
think it is an enormous undertaking. And I like your attitude 
about how you are going to approach it and put your arms around 
things. I see it, as I think you do, as an incredible 
opportunity to try something new here and extensive. And I am 
particularly interested in the whole crowd-sourcing aspect on 
that and the benefit it might do for that.
    But first let me start by asking you there, has been a lot 
of discussion here today about drilling down all the way from 
the Federal money as it goes all the way down to the final sub-
subcontractor at the local level. That is has all been 
conversation relative to what the computer will show. What do 
you see as the Board's responsibility for tracking the Federal 
moneys? How far down should the Board drill, just to the State 
level, to the municipal level, or beyond?
    Mr. Devaney. I would say that, as I mentioned earlier, I 
want to go as far as we possibly can both legally and if it is 
possible to get there. If it is not, there is going to be a 
significant amount of auditing being done. And a Federal 
auditor, for instance, can go all the way down. And we will 
have the benefit of any report or any review that they do; it 
will be published on the Web site. So that is another way you 
get down to the lowest level.
    Mr. Tierney. So a State auditor or a city auditor's reports 
will be available to you to put out there?
    Mr. Devaney. Sure. Right, right.
    Mr. Tierney. Because you are going to have to leverage your 
resources, I assume. You are not going to have the capacity to 
do all that?
    Mr. Devaney. There is no capacity to do all that. I think 
we have to be smart about how we deploy our resources. I think 
I need to use risk-based models that suggest that this kind of 
money is a little bit more risky than this kind of money and go 
over here first. So we have to be smart about it. We have to 
try to get out in front of it and not just wait for the 
inevitable to happen.
    Mr. Tierney. I think this Congress for about 8 years was in 
a coma when it came to oversight or whatever. And I am a little 
bit amused about some of my colleagues now being so intent on 
it. But I hope they are serious about it as we go forward.
    I think part of the issue is going to be municipalities and 
States having capacity as well to do it. Do you have presently 
in your design of what is going on at the Federal level the 
ability and the capacity to help train their people up to 
preventative sorts of measures or do you need more resources or 
more legislation for that?
    Mr. Devaney. I think time will tell but I am definitely 
going to make that one of the first goals of the organization--
to develop that capacity to train, to distribute best 
practices, to do everything we can for our partners not only at 
the Federal but the State and local levels to help them get on 
the front end of this money. And that, I think, is a major 
mandate of this Board.
    Mr. Tierney. Do you see any substantial differences between 
the way that States and municipalities now have to report to 
the Federal Government with respect to non-Recovery and 
Reinvestment moneys that are allocated to them and with the 
Recovery money itself?
    Mr. Devaney. I think there are. I think it could be argued 
fairly that there are some additional reporting requirements 
being imposed. Whether or not they are so burdensome that it 
clogs the system down, just time will tell. I am sure we will 
hear about it.
    Mr. Tierney. Did you have an opportunity to read Mr. 
Brito's testimony? The gentleman will be testifying on the 
second panel from George Mason University.
    Mr. Devaney. I did.
    Mr. Tierney. You did?
    Mr. Devaney. I did, yes.
    Mr. Tierney. You did or did not? I am sorry.
    Mr. Devaney. I did.
    Mr. Tierney. OK, thank you. It is my hearing thing on this. 
I also think our microphones need some oversight here from 
time-to-time. You can't hear.
    Do you have any objection or are you comfortable with doing 
the types of things he is recommending in terms of working with 
people that are into this type of activity and making the data 
as useful, Web-friendly, machine-readable, aggregated, 
standardized, and all those things that he is talking about?
    Mr. Devaney. No, I have no problem with it at all. I would 
love to sit down with him.
    Mr. Tierney. I agree. That is great because I think if we 
can do that and if you are willing to work in that direction, 
we have not only our resources but theirs as well.
    Mr. Devaney. Right.
    Mr. Tierney. And I agree with you. I am just going to close 
out with this. I agree with you. This could be a model for 
every government expenditure all the way down the line where we 
get the eyes of all the citizens out there and we get rid of 
the gotcha stuff. It is no longer going to be just like, 
gotcha, you are doing something wrong. Every company that 
spends money has people that are looking to do abuse, waste, 
and fraud.
    We wouldn't have the Wall Street situation going on that we 
have today if that weren't true. Every time there is Government 
money expended, somebody is going to try it. Every time an 
individual has money, somebody is going to try it. If we can 
get all the eyes on it and get rid of the gotcha stuff, we can 
just have a good, active joint effort here where citizens get 
involved. We can be on the front end of this.
    So, I congratulate you again on your attitude for this. I 
wish you all the luck and I look forward to working with you on 
the committee for this venture.
    Mr. Devaney. Thank you.
    Mr. Tierney. I yield back, Mr. Chairman.
    Chairman Towns. Thank you very much. I recognize the 
gentleman, Mr. Van Hollen from Maryland.
    Mr. Van Hollen. I thank you, Mr. Chairman. And Mr. 
Chairman, thank you for holding this series of hearings on 
oversight. As we know, we put oversight protections in the bill 
to create the oversight mechanisms but obviously Congress has a 
very important role as my colleague, Mr. Tierney, and you have 
said. And thank you for taking on this responsibility.
    I had a couple of questions based on your experience in 
oversight, generally. And one of them relates to whistleblower 
protections. The chairman of this committee and I, Mr. Platts, 
Mr. Braley, and others have been pushing for greater 
whistleblower protections at the Federal, State, and local 
levels. The bill we passed, the economic recovery bill, does 
strengthen whistleblower protections at the State and local 
levels.
    We have some protections already in place at the Federal 
level. We were trying to strengthen those. We thought it made 
sense as part of a bill that contained $790 billion in taxpayer 
money--some in the form of tax relief, obviously, but the other 
in investment--that we strengthen the ability of those Federal 
employees on the front lines to report waste, fraud, or abuse 
if they see it without fear of reprisal. Because you can't be 
everywhere; the Inspectors General can't be everywhere.
    So just, I know you may not have seen the legislation, but 
just as a general rule, do you think it is important to ensure 
that Federal employees and other public officials who see 
wrongdoing and are wanting and willing to come forward and 
report wrongdoing are protected against any kind of 
retaliation? And how important is that in oversight?
    Mr. Devaney. I think it is very important, Congressman. And 
as I mentioned a little earlier, I have been somebody who has 
designed whistleblower protection programs within my 
organization. I have not been bashful when I have seen 
retaliation to go directly to the Secretary. So my attitude 
basically is this: we normally learn a lot from whistleblowers.
    It strikes me that the transparency piece of this will 
result in many more whistleblowers than we normally see and we 
have to be very careful not to send any bad messages out there. 
And so I am going to be vigilant about that. When I see it, 
let's say it happened in the Department of Education, I am 
going to make sure that the IG knows about it and we will work 
together to try to cut it off. I want people to come forward.
    Now, having said that, it is sometimes labor intensive to 
sift through the complaints and the concerns of whistleblowers 
to find that nugget. But that is a process and people that know 
how to do that can be very helpful in this circumstance. I hope 
to hire some of those.
    Mr. Van Hollen. Thank you. The other area I wanted to ask 
you about had to do with procurement officers in the Federal, 
State, or local government. My view is that even before the 
economic recovery plan was passed we were stretched very thin 
when it comes to Federal procurement officers. You have one 
individual that has to oversee lots of contracts. Even the best 
trained and best intentioned individuals can have a difficult 
time monitoring all that, even to the point where we started 
contracting out the responsibility for overseeing contracts 
which creates a whole host of conflict of interest problems and 
other issues.
    Do you think it is important as we go through this process 
to try and bring on more procurement officers at the Federal 
level so they can ably and effectively deal with the huge 
increase in contracts?
    Mr. Devaney. Absolutely. And I think you are right, it is a 
major challenge. The capacity is just not there. I think around 
9/11 we were at $200 billion of contracts a year and now we are 
doing $500 billion, not to mention anything about the stimulus 
funds, and yet the increase in procurement specialists has 
remained flat.
    So this puts an extra strain that we obviously have to 
address. So the act calls for the Board to look into that 
matter, to publish a report at some point. But I know that the 
Departments are aggressively looking for people, whether or not 
we will find them or not. Ironically, the economic situation 
might help us find those kinds of people. But there will never 
be enough to handle this kind of money.
    Mr. Van Hollen. Well, thank you. Mr. Chairman, I hope we 
can as a committee focus on that. This was, as you know, a 
problem even before we had the additional funds from the 
stimulus package, economic recovery package. And that has only 
added to the burden. And as I said, you can have very qualified 
and well intentioned people who just get more work than they 
can possibly follow in a responsible manner.
    Chairman Towns. The gentleman raises a very good point 
which I am very sensitive to as well. We will be looking at it 
further. Thank you very much.
    Mr. Van Hollen. Thank you.
    Chairman Towns. Does the gentleman yield back?
    Mr. Van Hollen. I do.
    Chairman Towns. I yield now to the gentleman from 
California, Mr. Bilbray.
    Mr. Bilbray. Thank you, Mr. Chairman. Mr. Chairman, God 
bless you. You obviously have been dropped right into a, I 
guess it was like an old movie, The Volcano. Look, I am at a 
great position. I didn't support the Bush administration to 
spend a trillion and I didn't support this administration's 
action on having to vote on this upfront. And as somebody who 
has been in Government oversight since I was 25 in 1976, I 
think that we didn't do our due diligence.
    Was it 9 hours from the time we saw it until we started 
debating it? That means now we have to do due diligence. Now 
the oversight after the fact is going to be absolutely central 
in this issue. And I hope we can work together in a bipartisan 
effort to make sure that we avoid the pitfalls with this 
legislation as we are seeing today on the House floor with the 
Bush administration emergency spending that has created so much 
uproar among the taxpayers.
    I have some questions to you. I just came from Oversight in 
Science and Technology so basically I have talked to the people 
that you will be working with over at the other side. One of 
the things that the chairman and I are really trying to work on 
is to make sure this administration doesn't fall into the 
pitfalls that the previous administration did and the mistakes.
    One of the big things that has not been talked about yet 
that I think we are going to hear in future months--though we 
have talked about the contracts in Iraq to for-profit 
organizations and abuses there; we have not even scratched the 
surface of what happened in Afghanistan, especially with non-
profits--is that non-profits traditionally do not get the type 
of scrutiny and oversight that for-profits have had.
    My question to you is that when we get down this line, are 
we willing to concentrate and make sure that when we allocate 
moneys to non-profits the oversight is as strict and diligent 
as we have hopefully done with for-profit contracts?
    Mr. Devaney. Well, as an IG, I would never have 
differentiated between the amount of oversight I gave to a non-
profit versus a profit company. So as I sit here today, I can't 
think of why we would want to be any less vigorous in moneys 
going to non-profits as to other entities.
    Mr. Bilbray. Well, I will give you one. One is the fact 
that we talk about cracking down and not giving contracts to 
those who are under criminal investigation, where the business 
has at least been indicted or investigated for wrongdoing. And 
when it comes to a private company, I think there has been an 
outroar about that.
    But then we have non-profits. And I will be very blunt with 
you. A California organization called ACORN is really under 
investigation for major voter problems and for certain criminal 
activity. How are we going to continue to move forward with 
contracting with non-profits that are under criminal 
investigation even though we would not do that with a private 
for-profit organization?
    Mr. Devaney. Well, without addressing a specific company or 
organization, I think that in any sort of a risk model, 
somebody that had those kinds of problems would rise to the 
top. And if you were going to allocate resources to look at the 
universe, you would focus in on something like that.
    Mr. Bilbray. OK. I only say this because I want to make 
sure we avoid that. And I guess seeing the mistakes that were 
made, people thinking, well, because they are a non-profit, we 
make assumptions. And people are still pocketing money one way 
or the other. There is no physical barrier from that.
    Let me sort of shift around and get onto something I think 
the chairman would be more comfortable with. [Laughter.]
    It is a big concern and I just want to give you the heads 
up as you go down there because, as we talked about in Science, 
we are moving forward on this energy independence issue and 
clean technology being tied into this. I hope you get your guys 
working for you to really take the time to touch base with the 
Secretary of Energy and talk about what are really going to be 
energy independent and environmentally friendly technologies.
    I just want to say for one, as somebody who comes from 
serving on the Air Resources Board in California, that there 
are a lot of people who are going to be proposing contracts 
with you to use this money to perpetuate technologies. One of 
them that has been really touted in the past is the use of 
ethanol as an environmentally friendly fuel. And I would ask 
that you get your experts to look at the fact that Duke 
University just came out with a report that said from a 
greenhouse point of view, it would be better never to plant the 
crop at all than to grow corn for ethanol.
    The other issue is the new Air Resources Board report--the 
No. 1 air pollution people in the world--that says that ethanol 
has no environmental benefit over regular gasoline. And I bring 
this up so that when these proposals come out we draw the line 
and say, wait a minute, this does not fall under green fuel. 
The only thing green about ethanol is the money being made from 
it. And I know those are harsh words. But it is absolutely 
essential that we don't keep following that line.
    And I will remind you that even if we talk about cellulosic 
ethanol, there is not the market and the ability to use the 
ethanol that is being produced today. Right now, the industry 
is asking the EPA to waive the 10 percent maximum in our fuel 
stream and the EPA is stopping it because of environmental and 
operational difficulties on that.
    So I just want to say there is great opportunity for 
genetically altered enzymes to produce true green fuels. But 
please, put it up. If you see ethanol, take a second look at it 
and say, even with all the political pressure we can get, we 
don't want to have to line up in front of the Science Committee 
or the Government Oversight Committee and answer why we gave 
these grants out for a technology that the experts in 
California, the experts in the universities are saying are not 
a green fuel. Is that understood?
    Mr. Devaney. I understand what you are saying. I think, 
maybe, that is better addressed to the EPA or the Energy 
Department. I am not representing the administration here. I am 
representing the Board that oversees to prevent fraud or waste. 
And if it arises in that arena, we will be very actively 
engaged.
    Mr. Bilbray. And as a former mayor and council member, you 
sit like a council doing oversight to the city manager and the 
department heads. And that is why I want you to say that it is 
fraud and it is a waste if we take money that is specifically 
earmarked for green, clean fuels and because we are not well 
informed end up sending money into a technology that is an 
environmental dead end and an economic disaster on the long 
run.
    Now, I am being the squeaky wheel so later I don't come to 
you and say, why did you spend money on this when you had all 
the scientific people coming out saying that this was a bad 
track to go. And I just want to say there are some great 
environmental opportunities out there. I hate to see us waste 
one dollar on a technology that is not environmentally friendly 
when there are all kinds of them lining up to do it.
    And I appreciate your allowing me to pontificate on this 
issue. Thank you very much, Mr. Chairman.
    Chairman Towns. Thank you very much. And just before we 
call on the gentlewoman from Washington, DC, let me just say--
investigate--I don't have a big, big problem with that because, 
I mean, investigations happen all the time. I think that what I 
am really having problems with, my good friend from 
California--we have worked on many issues together and worked 
together for a long, long time--is when we have situations 
where people are being debarred and they still get contracts. I 
mean, that is a problem.
    And, of course, where you have the CEO of a company that is 
being convicted and then the company still gets contracts from 
the Government; those are the areas I have problems with. I 
don't feel uncomfortable if you say that somebody is being 
investigated. That happens all the time. So I just wanted to 
share that with you to let you know that doesn't bother me. I 
think that sometimes when that happens, then it means that the 
job is being done.
    And I think that, you mentioned ACORN but I must admit that 
ACORN has done some great things in terms of voter registration 
and, of course, being involved in the community. So I just want 
to sort of share that with you. And of course many people feel 
that it is an organization that deserves support.
    I yield to the gentlewoman from Washington, DC.
    Ms. Norton. I thank the chairman for yielding.
    Just a word about the ethanol. I am not sure that was 
directed to the right party. And some of us have a lot of 
trouble with the current source of ethanol because it has us 
eating gas. And there are food shortages all over the world 
because corn is being eaten. It is a food in many places and 
now it is out of reach whereas here, of course, it has been so 
plentiful that we have been willing to drive on it. So I am not 
sure the IG can say until after the fact, perhaps, what is 
right. And I certainly don't know what the right place is to 
look for biofuels. All I know is we have to look for some place 
other than corn.
    But my question really goes to what I am sure are your 
responsibilities because the Recovery Act does authorize--in 
fact, it caught my attention--that the Recovery Act in 
particular authorizes the IG to look at the contracts, the 
subcontracts, the grantees, and all of that is done by local 
officials. It caught my eye because I see the Vice President 
calling out and telling people he is going to call them out if 
he goes and he sees that people are building swimming pools and 
other things that nobody would expect stimulus money to be used 
for.
    But many programs, not just the stimulus money, many 
programs of the Federal Government get what, 50 percent, 80 
percent? I mean, some get even that much, for example, for the 
Medicaid share. So I would like to know if this is a new 
authority or if the IGs have always had access to such records 
of contractors and grantees and subcontractors who share in 
State and local funds?
    Mr. Devaney. I think the answer to that is IGs have always 
had the ability to follow the Federal dollar to wherever it 
went. And to that extent, these are not new authorities.
    Ms. Norton. Have you known that to be done by IGs?
    Mr. Devaney. Absolutely.
    Ms. Norton. Can I ask you how you think this will be done 
and whether this is beginning under this authority? It looks 
like what the Congress wants here is something pretty 
systematic.
    Mr. Devaney. Well, I think that we had a discussion earlier 
about our need and just being smart about being redundant. So 
we don't want to have five different entities showing up the 
same day to look at the same money.
    Ms. Norton. Agreed.
    Mr. Devaney. So we are going to have to be in a mode where 
we leverage our resources and make sure that there is a 
division of labor here that is appropriate between State, 
Federal, and local. But the fact of the matter is, Federal IGs 
have always had the ability to follow that money from its 
source down to its lowest level, and they often do in audits or 
investigations.
    Ms. Norton. Yes, well, we would certainly like to find it 
before the newspapers do. Thank you very much. Thank you, Mr. 
Chairman.
    Chairman Towns. Thank you very much.
    I now yield to the gentlewoman from California, Ms. Speier.
    Ms. Speier. Mr. Chairman, thank you. Sir, I just read a 
story about you that was quite flattering about how over many 
years you uncovered a lot of fraud, I guess in the Department 
of Interior. And it went unabated, I guess is a good word to 
describe it. And eventually you left, is that correct?
    Mr. Devaney. Actually, I have been in the fraud field for 
28 or 29 years. I started in the Secret Service and eventually 
I was in charge of all the fraud for the Secret Service. Then I 
went into EPA and ran their criminal program. And then I have 
been an IG for 10 years. And fraud has always been a part of 
the portfolio and is always present when there is money around.
    Ms. Speier. I guess my question is, at some point were you 
frustrated where action wasn't being taken on issues that you 
had uncovered? If so, to make sure that doesn't happen again? 
What do we need to make sure is in place--whether it is more 
whistleblower protection, more subpoena power--what do we need 
to do based on your previous experience where some of your 
efforts to uncover fraud were not addressed?
    Mr. Devaney. I don't think that I was hampered in any way 
by not having the tools to uncover fraud. Sometimes on 
occasions at the Department of Interior when I would uncover 
misbehavior, whether there was fraud or any other kind of 
misbehavior, I became frustrated and quite frankly rather noisy 
about my frustration. And got the attention of the appropriate 
people and eventually things happened.
    But sometimes that is necessary. Sometimes it is necessary 
to have a congressional hearing and have an IG come in and talk 
about what he has uncovered and then have the department 
officials come as well as sort of the second panel. So I don't 
think there is a lack of tools. I think IGs have the tools. I 
think this act gives them the appropriate amount of money--you 
never have enough, I suppose--but a good chunk of money to do 
oversight.
    And they have set about smartly to get this done. I am very 
impressed with their willingness to try to get on the front end 
of the pipeline and prevent fraud as opposed to simply waiting 
for the inevitable and then going in to detect it.
    Ms. Speier. In the financial services arena, we saw a lot 
of bad actors in the sub-prime market. And we recently had a 
hearing in which we found that in the Federal Housing 
Administration, many of those bad actors had just moved over to 
provide FHA loans. And the Director of FHA said he just didn't 
have the resources at the time to preclude them from 
participating. Now we have since put language into one of our 
bills that we have moved this year to address that.
    But I guess my question is, when you have a volume of bad 
actors out there, when they have done business with the Federal 
Government and we found out they were bad actors--many of them 
are in a position where they just change the name of their 
company and come right back to try and do business with us--do 
we have a data base of bad actors out there that we can rely 
on? Should we have one? Could you comment on that?
    Mr. Devaney. Well, most departments as you probably know 
have suspension and debarment programs and they get put on a 
list. But it has been my experience that people who commit 
fraud sort of follow the money. And there is no doubt in my 
mind that with this amount of money on the table, they will 
come. The challenge for all of us is to leverage our resources 
in a way that allows us to get at the fraud that will 
undoubtedly occur.
    I view the transparency piece of this act as a big help to 
investigative bodies because we are going to have hundreds of 
millions of eyes and ears that we don't currently have in the 
traditional process. So we are undoubtedly going to hear more 
from citizens about fraud or reporters that have uncovered 
fraud by looking at the Web site and by understanding that 
contract does belong to somebody's brother and telling us about 
it then we would under the traditional way which is sort of we 
stumble upon it or we go out and we find a small amount of it.
    Ms. Speier. Well, I would agree with you and I think the 
transparency in this process is unlike any transparency we have 
seen ever. It should be that transparent because it is so much 
money. So I just commend you. I just want to as one Member to 
suggest that if it is time to raise the red flags, whether you 
need more resources or you believe a hearing would be helpful, 
that you call upon us so that we can be helpful to you. I yield 
back.
    Chairman Towns. Thank you very much. We now yield to the 
gentleman from Missouri, Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman. I will attempt to be 
brief.
    Mr. Devaney, the RAT Board's Web site is supposed to 
provide a means for the public to provide feedback on the 
performance of contracts relating to the stimulus funds. Can 
you explain whether there will be transparency on the actual 
public feedback itself?
    Mr. Devaney. Well, we don't actually have control of the 
Web site yet but when we do we will be looking at the comments 
that come in. And I suspect we will have a process which 
involves perhaps not providing notification of all the feedback 
that we have gotten--I think I mentioned earlier we are getting 
3,900 hits a second on this Web site--but we will have a 
process where if we see a systemic problem that is developing, 
I am going to want to be very proactive about getting that out 
there so that not only my fellow IGs and colleagues at the 
State and local levels know about it, but so the citizens can 
see that it is becoming a problem and that we are addressing 
it.
    Mr. Clay. Well, let me ask you about the States, local 
communities, and independent organizations. Are they aware that 
the Recovery Act put emphasis on targeting this money toward 
economically distressed communities and also some emphasis on 
involving small businesses? I mean, are these communities and 
States aware of that? Just how will they be apprised of the 
emphasis that the act puts on economically distressed 
communities and small businesses?
    Mr. Devaney. Congressman, I was asked that question earlier 
today and I responded by saying that I am not really fully 
aware of how the act addresses that issue and I would get back 
to that person. I would be glad to include you in that 
response.
    Mr. Clay. OK, all right. Well, I thank you and I have no 
further questions.
    Mr. Chairman, I yield back.
    Chairman Towns. Thank you very much. Let me just say this 
to Mr. Devaney before we conclude. Will you be able to report 
back to this committee within 2 weeks with a full report on 
both the initial set of stimulus contracts and an overview of 
the fraud prevention programs in place? Could you do that?
    Mr. Devaney. I certainly heard that request at the 
beginning of the hearing and as I have been thinking about it, 
I think the fraud prevention aspect of that is an easier 
response than the other one. I would ask your indulgence if I 
can't do it within 2 weeks, I will let your staff know about it 
and we can maybe work on that. The second one is a little bit 
more comprehensive. It is also one where we would have to go to 
the agencies themselves as opposed to just the IGs.
    Chairman Towns. Right. Well, thank you. If you can, we 
would appreciate that.
    Mr. Devaney. Thank you.
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    Chairman Towns. And let me just say that we are delighted 
that you are where you are. As indicated earlier, everyone is 
saying that if it can be done and done properly, you can do it. 
So I want to let you know that whatever we can do here from 
this committee's standpoint, we stand ready to do that. If it 
is fight for more resources, we stand ready to fight for more 
resources with you. Because quite often people in a position, 
will not have the tools to be able to do the job that they are 
called upon to do.
    We want you to know that we stand with you to try to make 
certain that you have the resources because we want to really 
deal with this whole waste, fraud, and abuse. As it was pointed 
out earlier, $55 billion wasted, not going and doing what it is 
supposed to do. We want to assure you that we want to bring 
that number down. And with your help, I am confident that we 
can bring it down. So thank you very, very much for your 
testimony and we look forward to working with you.
    Mr. Devaney. Thank you, sir.
    Chairman Towns. No further questions? Thank you.
    We now call upon the second panel. Mr. William Holland, 
auditor general of Illinois, is here on behalf of the National 
Association of State Auditors. Mr. David Gragan, chief 
procurement officer for Washington, DC, is here on behalf of 
the National Association of State Procurement Officials. 
Welcome. Mr. Jerome Heer is the director of audits for the 
county of Milwaukee and is here on behalf of the Association of 
Local Government Auditors. Mr. Jerry Brito is senior research 
fellow. Of course, we are delighted to have all of you here.
    And, of course what we will do is that, as you know, in 
this committee we swear everybody in. So we would like for you 
to stand and raise your right hands.
    [Witnesses sworn.]
    Chairman Towns. Let the record reflect that all of them 
answered in the affirmative.
    So Mr. Holland, we will begin with you. And, as you know, 
you have probably heard me say it, that you have 5 minutes. 
Then after that, we will have time for questions and answers. 
For your statements, we will just go right down the row. Thank 
you very much.
    Mr. Holland.

STATEMENTS OF WILLIAM G. HOLLAND, AUDITOR GENERAL OF ILLINOIS, 
   NATIONAL ASSOCIATION OF STATE AUDITORS, COMPTROLLERS, AND 
  TREASURERS; DAVID P. GRAGAN, CHIEF PROCUREMENT OFFICER FOR 
   WASHINGTON, DC, NATIONAL ASSOCIATION OF STATE PROCUREMENT 
 OFFICIALS; JEROME HEER, DIRECTOR OF AUDITS FOR THE COUNTY OF 
MILWAUKEE, ASSOCIATION OF LOCAL GOVERNMENT AUDITORS; AND JERRY 
BRITO, SENIOR RESEARCH FELLOW, MERCATUS CENTER AT GEORGE MASON 
                           UNIVERSITY

                STATEMENT OF WILLIAM G. HOLLAND

    Mr. Holland. Thank you. Chairman Towns, Ranking Member 
Issa, and members of the committee, I am pleased to be here 
today on behalf of the National Association of State Auditors, 
Comptrollers, and Treasurers to discuss oversight related to 
the American Recovery and Reinvestment Act of 2009. While I may 
draw upon my experience as a State auditor in Illinois, I am 
here to represent public servants and financial officials 
nationwide who take pride in ensuring that taxpayer dollars are 
monitored and used for their intended purposes.
    Accountability is always our No. 1 priority. However, the 
challenges of our current economy coupled with the rapid 
spending authorized by the Recovery Act make accountability 
more critical than at any other time in our government. We 
believe accountability can be achieved by clearing defining 
responsibilities and coordinating the various participants.
    The Recovery Act and the initial implementing guidance 
issued by OMB specifically give Federal departments and 
agencies such as the Federal Inspector Generals, the GAO, and 
the Recovery Act Accountability and Transparency Board primary 
responsibility for maintaining accountability over Recovery Act 
funds. Substantial dollars are appropriated to each of these 
entities for that singular purpose.
    The Recovery Act provides neither direct responsibility nor 
direct funds for oversight efforts at the State and local 
level. Nonetheless, management of these dollars once they leave 
the Federal Government's hands--as well as the cost associated 
with that effort--is of utmost concern for to our 
organization's members.
    State auditors already bear significant responsibility for 
oversight of Federal spending programs by State agencies 
pursuant to the Single Audit Act and its amendments. These 
audits are generally conducted annually and provide assurance 
to the Federal Government as to the management and use of such 
funds by recipient States and their sub-recipients.
    OMB's initial implementing guidance recognizes the 
importance of the single audit process in two key ways. First, 
in developing risk mitigation plans, Federal departments and 
agencies are required to consider prior audit findings 
involving Federal programs through which Recovery Act funds 
will be disbursed. Second, single audits are specifically 
identified in the guidance as an audit tool integral to 
promoting accountability over Recovery grants.
    Clearly, the importance of the single audit process is 
magnified rather than minimized by the Recovery Act's emphasis 
on accountability. Nonetheless, during this period of rapid 
spending, there may be a desire at the national level to 
increase or alter some existing accountability processes. It 
will be important to define and communicate any changes in the 
single audit process in a timely and expeditious manner to the 
State audit community. We had been fortunate that both the GAO 
and OMB had been reaching out to the entire accountability 
community to discuss implementation of Recovery Act 
requirements. However, we are still uncertain as to our 
specific roles and what the cost and funding sources for 
fulfilling our roles will be.
    Staffing and other necessary resources in our offices 
throughout the Nation are at an all time low. Due to the influx 
of stimulus money to the States, fulfilling our single audit 
functions will certainly encompass more Federal programs. This 
in turn will cause us to incur additional audit hours and 
perform more tests than in previous years. We believe the 
appropriated dollars would be better spent by the Federal 
agencies on efforts to mitigate risk at the front end of the 
process, for instance, by conducting tests and reviewing prior 
audit findings to ensure that recipient agencies have a strong 
internal control process in place prior to their receipt and 
expenditure of Recovery Act funds. To the extent that Recovery 
Act funds flow through existing Federal programs, these dollars 
will already be subject to audit in accordance with the Single 
Audit Act and OMB Circular A-133.
    I should also note that financial officials other than the 
independent external auditor are very important to this 
discussion. Specifically I am referring to State comptrollers 
and treasurers that are responsible for the disbursement and 
reconciliation of funds. I can tell you that the comptrollers 
are very concerned about the reporting requirements and how 
that information will be gathered and reported. While much of 
the financial information is housed in the State's accounting 
system, some of the information is actually gathered at the 
State agency level.
    This dichotomy brings up concern regarding reconciliation. 
We wonder at the State level whether the Federal Government is 
going to require central State reporting directly to 
Recovery.gov, individual State agencies reporting directly to 
Recovery.gov, or individual State agencies reporting to a 
Federal agency which is then responsible for assuring that the 
information is posted at Recovery.gov. We await further 
guidance, timely and expeditious, from the Federal Government 
in regard to the reconciliation as it will be extremely 
important. We stand ready to work with our Federal counterparts 
to assure the most efficient and effective method for reporting 
is established.
    I should also point out the important role that internal 
auditors will play within individual agencies or at the 
statewide level in assuring that pre-disbursement internal 
controls are functioning properly and effectively.
    I am happy to join here today with the Chair of the 
Recovery Board and other important organizations. Individually 
and collectively, our groups have long been at the forefront of 
ensuring public accountability. In a talk at the White House 
Recovery and Reinvestment Act Implementation Conference last 
week, the President emphasized his commitment to 
accountability. And he said if we see money being misspent we 
will call it out. I can assure you that the accountability----
    Chairman Towns. Your light has gone red. Will you sum up?
    Mr. Holland. Oh, it did?
    Chairman Towns. Yes.
    Mr. Holland. I didn't see it. You got to the end of my 
comments. Thank you for the opportunity to speak.
    [The prepared statement of Mr. Holland follows:]

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    Chairman Towns. Thank you. Thank you very much.
    Just before we go to you, Mr. Gragan, I would like to yield 
to the gentlewoman from New York.
    Mrs. Maloney. I thank the chairman for granting me a point 
of personal privilege. I am literally on the floor with 
Chairman Rangel with the AIG Accountability and Bonus Act that 
we had been working on all week.
    But I wanted to place my remarks in the record. I will send 
my questions to the individuals. And I complement the 
leadership of our chairman and ranking member for a careful, 
sharp pencil in oversight on the Recovery moneys. 
Congratulations. Thank you. And I have to go back to the floor.
    Chairman Towns. Thank you very much. I would like to thank 
the gentlewoman for her support as well. Mr. Gragan.

                  STATEMENT OF DAVID P. GRAGAN

    Mr. Gragan. Good afternoon, Chairman Towns and members of 
the committee. I am David Gragan. I am the chief procurement 
officer of the city of Washington, DC. I am also representing 
today the National Association of State Procurement Officials, 
the organization of the 50 State procurement directors as well 
as the city of Washington and the U.S. territories. We really 
thank you for this opportunity to comment on the role of the 
government procurement professional in preventing fraud, waste, 
and abuse in the implementation of the American Recovery and 
Reinvestment Act.
    It is our view that State chief procurement officers or 
CPOs are uniquely positioned to assist in the development of 
guidelines regarding use, timelines, and transparency of 
purchases we make as a result of this act. NASPO recognizes 
that the effectiveness of a State's CPO is clearly linked to 
his or her ability to engage with policymakers at the highest 
levels in government and that this engagement is critical to 
ensuring effective direction, coordination, and control over 
public expenditures.
    Additionally, State CPOs are charged with protecting all 
public funds from conflicts of interest, anti-trust violations, 
fraud, and abuse and have already developed controls to address 
these concerns. Therefore, in order to proactively prevent 
fraud, waste, and abuse under the Recovery Act, it is 
imperative that central procurement be given the opportunity 
from the outset to help in developing strategies for properly 
spending stimulus funds.
    In your invitation to NASPO to participate in this hearing, 
the committee asked that we address three specific questions. 
First, what proactive steps are State procurement officials 
taking to prevent wasteful spending? It is imperative that we 
no longer wait for annual external audits to identify waste, 
fraud, and abuse. Audit, in my opinion, is continuous. In D.C., 
we post information about every purchase--including purchase 
card transactions--on a Web site for public scrutiny. That is 
the sort of transparency that I believe that this act envisions 
and that we all, as procurement professionals, embrace. The 
eyes of the public are the most powerful tool against improper 
contracting behavior.
    In terms of developing specific safeguards and processes 
for stimulus funds, and in anticipation of these projects, 
NASPO members are developing and using a variety of strategies 
to aid their staff and customer agencies in spending the act 
stimulus money efficiently, effectively, and, most importantly, 
properly. Closer collaboration with our oversight partners in 
government--the auditors, the comptrollers, the Inspectors 
General--that is No. 1 among the tools that we are using right 
now, communicating more aggressively.
    State central procurement offices must communicate guidance 
and expectations as well as best practices to user agencies and 
localities. Most States are issuing guidance to agency 
customers to promote uniformity of requests and reporting while 
other States are creating data collection forms for customer 
agencies to help identify and track stimulus funds.
    Many of us are creating focused procurement teams, which we 
have done here in Washington, DC, to ensure that the stimulus 
contracting, which is on a unique timeline for public 
procurement, is still effectively managed. We recognize that 
the need to aggressively and proactively search out the needs 
of our customers as opposed to waiting for a requisition is 
different from the way procurement professionals typically do 
business.
    And finally, we are using early identification of 
appropriate existing contracts. CPOs are encouraging their 
staffs to identify viable cooperative and preestablished 
contracts for internal use. Cooperative purchasing is an 
effective tool and popular because it can save significant time 
with existing, already competed contracts for those commonly 
used needs. Many of the stimulus funds, I think, will be spent 
on existing needs.
    No. 2, you asked, what plans do States have for audits and 
investigations to identify and prosecute fraud in stimulus 
programs? As discussed in almost all of the opening remarks of 
this committee this morning, transparency is a cornerstone of 
the act and is an essential element of procurement strategies 
to identify waste, fraud, and abuse. NASPO and its partner 
organizations are currently in discussions with OMB, with GAO, 
and with related agencies to identify the recommended flow of 
information as it relates to act reporting. And State CIOs are 
working closely with State CPOs and the stimulus teams to 
develop those reporting chains.
    The third question you asked was, what oversight challenges 
are State governments facing as we prepare to properly expend 
this stimulus funding? The overarching concern in central 
procurement and among the NASPO members as well as NIGP, the 
National Contract Management Association, and all professional 
procurement associations is the rapidity with which we are 
expected to expend these funds. Generally, our concerns are 
related to the way we are going to manage data and the actual 
procurement operation.
    For data management, I will be very brief. It is about 
knowing what information we need, when we need it, when and how 
to report it. That has already been brought up and I won't 
belabor that. More important are the procurement operations. 
Government procurement typically does not respond well to 
compressed timelines. The process is built to be deliberative 
and methodical in seeking best value awards for every customer 
need. Our process was developed to deliver value while 
preventing fraud, waste, and abuse and, perhaps most 
importantly, to instill public confidence in the way that their 
money is being spent. Requiring States to perform to 
accelerated timelines and procedures countervails the fair, 
open, and transparent goals of the act. The rapidity with which 
these funds must be contracted requires unprecedented 
communication, coordination, and standardization across State 
agencies and the central procurement offices.
    In conclusion, with this great opportunity for procurement 
directors for all of the citizens to accomplish the mission 
that our President and the Congress have given us, I would make 
three final points. As procurement professionals, we must plan 
carefully, we must execute flawlessly, and we must do so in a 
manner that is respectful to the public trust.
    We cannot forget nor forego our responsibility to uphold 
the public integrity that is the fundamental underpinning of 
Government contracting. On behalf of NASPO, NIGP, NCMA, and all 
the other public procurement professional organizations, I want 
to thank you for holding this hearing and for inviting us to be 
a part of this.
    [The prepared statement of Mr. Gragan follows:]

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    Chairman Towns. Thank you very much for your statement.
    Mr. Heer.

                    STATEMENT OF JEROME HEER

    Mr. Heer. Chairman Towns, Congressman Bilbray, I am honored 
to be here today as a founding member of the Association of 
Local Government Auditors [ALGA], to speak with you on behalf 
of ALGA and to give you a broad overview of local governments' 
efforts to ensure accountability for the use of Federal 
stimulus funds disbursed under the American Recovery and 
Reinvestment Act.
    First I would like to say a little bit more about our 
organization. ALGA was founded in 1989 to support and 
strengthen local government auditing. We provide training and 
information sharing for members and assist local governments in 
establishing and maintaining independent audit functions. ALGA 
also provides a peer review program to assure the public that 
auditors meet professional standards. We currently comprise 
about 300 organizational members representing more than 2,000 
local government auditors in cities, counties, school 
districts, and authorities.
    Nearly 60 percent of our members are in the States that 
will be covered by the GAO in their longitudinal study of the 
long range use of Recovery Act funds. ALGA is well positioned 
to coordinate with the GAO in its mandate to monitor local use 
of the funds because local government auditors possess in-depth 
knowledge of our operations, our organizations, and our 
management controls.
    To that end, we have recently sponsored a teleconference 
with Acting Comptroller General Gene Diderot to discuss how the 
Recovery Act will affect local governments and to coordinate 
oversight efforts. We have also invited GAO to speak at our 
annual conference for a more in-depth discussion of the role 
local government auditors will play as we move forward.
    We have been asked about proactive steps local officials 
are taking to prevent wasteful spending. Some of our member 
organizations have already started monitoring the requirements 
under the act and communicating expectations to management. And 
some members are already providing fraud prevention training 
with special emphasis on Federal requirements.
    But you should have some comfort in the notion that our 
existing oversight infrastructure will also be very helpful in 
providing assurance that the Recovery Act funds are well spent 
and that the process is indeed transparent. These include the 
Single Audit Act, the performance audits that we conduct, our 
hot lines, and our longstanding, strong relationship with 
auditors at different levels of Government.
    With regard to the Single Audit Act, due to the size and 
scope of the Recovery Act, we anticipate that much of the newly 
available Federal assistance will indeed be subject to the 
single audit requirements. Our members either assist in 
conducting those audits or contract for them. As to performance 
audits, more than 80 percent of our members conduct performance 
audits. These are designed to assess whether a program is 
achieving the intended benefits at a reasonable cost.
    But another important tool is our hot lines. Many local 
government audit organizations operate hot lines to receive 
information from vendors, employees, and the public about 
waste, fraud, and abuse. These audit organizations have 
established policies and procedures for investigating 
complaints and ultimately for referring cases for prosecution 
or other disciplinary action. We publicize our hot lines and we 
use them to vigorously pursue fraud in partnership with State 
and Federal prosecutors.
    Another key strength is our coordination with auditors at 
different levels of government. Local government auditors 
interact with Federal and State auditors in our work and 
through the National Intergovernmental Audit Forum and its 11 
regional forums. The mission of the forums is to improve 
cooperation among its members to enhance Government 
accountability and transparency and to increase the public 
trust.
    We were also asked to describe our plans for audits and 
investigations to identify and prosecute fraud in stimulus 
programs. Most of our member organizations have not yet 
scheduled specific audits of programs funded by the Recovery 
Act because we are still learning how our governments will be 
affected. However, we anticipate that many of these high 
profile programs are already an existing part of our audit 
plans.
    Additionally, most of our member organizations base their 
audit plans on risk analysis. Because Federal funds carry 
inherent compliance risks, we anticipate that local governments 
and audit organizations will add audits of these projects to 
their plans. Most importantly, the large majority of ALGA 
members follow standards that require us to pursue potential 
fraud when we do conduct our audits.
    The final topic we were asked to address is the challenges 
we face in meeting our oversight obligations. While we 
recognize the potential benefits that the stimulus funds 
provide for our local economies, we do face three significant 
challenges. First, despite our efforts, we estimate that fewer 
than 20 percent of the Nation's larger cities and counties have 
an independent audit function.
    If I could offer one suggestion to improve accountability 
nationwide, it would be that you craft a way to encourage more 
local jurisdictions to create audit functions. Ultimately every 
taxpayer would benefit with better oversight of Federal dollars 
spent at the local level.
    The second challenge is resources. The majority of our 
local government audit organizations are very small in 
comparison to the resources that we audit. One third of our 
members have only one or two staff. Finally, most local 
governments have experienced budget reductions in the current 
economic downturn. Many of our member organizations have cut 
positions or implemented furloughs.
    But let me close by saying that despite these challenges, 
we welcome the opportunity to work closely with the GAO, with 
the Inspector General community, and with State auditors to 
provide oversight of local governments's use of the Federal 
stimulus funds. Thank you.
    [The prepared statement of Mr. Heer follows:]

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    Chairman Towns. Thank you.
    Mr. Brito.

                    STATEMENT OF JERRY BRITO

    Mr. Brito. Thank you, Mr. Chairman, members of the 
committee. My name is Jerry Brito and I am a senior research 
fellow at the Mercatus Center at George Mason University and an 
adjunct professor of law at George Mason University School of 
Law. I want to thank you for inviting me to testify on 
preventing stimulus waste and fraud.
    This committee knows why it is so important to keep close 
tabs on the nearly $800 billion of spending contained in the 
American Recovery and Reinvestment Act. The question is how do 
we do it. Dozens of Inspectors General and official auditors 
around the country will follow the stimulus money. They will do 
commendable work but they can't possibly look at every payment 
and every transaction.
    While we might want to, we can't hire an army of auditors 
charged with tracking every single dollar. However, we can 
supplement a very small number of professional auditors with a 
very large number of small contributions from citizens. That 
is, we can crowd-source accountability the same way that 
Wikipedia crowd-sources the writing of an encyclopedia.
    In fact, this very testimony that I am reading was crowd-
sourced. I published a draft of it on a wiki Web page and 
alerted other transparency enthusiasts and academics of its 
existence. In the 24 hours that the Wiki was online, over a 
dozen persons made edits and additions to these words, all of 
them adding value.
    If the Government requires clear, timely, and profound 
reporting of how every dollar is spent, everyone, not just 
Government auditors, could keep track of the money. Millions of 
citizens around the country would be able to look at the 
transactions related to Recovery funded projects in their 
neighborhoods. How would Government enlist the help of citizens 
to keep Recovery spending accountable? It doesn't have to. It 
just has to provide the data.
    If the Government makes the raw spending data available, a 
strong community of transparency enthusiasts and scholars will 
build tools that allow citizens to search, sort, and report it. 
It doesn't have to be just one Recovery.gov. If we make the 
data available, citizens can take that data and make many 
Recovery.govs with different focuses and different sorts of 
presentations of the data.
    Earlier this year I launched a Web site, StimulusWatch.org, 
with the help of two very talented volunteer software 
developers, Peter Snyder and Kevin Dwyer. The site presents the 
nearly 20,000 ``shovel ready'' projects that the U.S. 
Conference of Mayors reported as candidates for stimulus 
funding. Citizens can easily find a list of projects in their 
hometown and then rate, discuss, and add factual context to 
each project.
    Now that you have passed the Recovery Act, we want to 
expand the capabilities of our Web site to allow citizens to 
track the projects that will be funded in their communities. I 
know that other Web developers would like to make similar 
tools, including applications that track job creation and plot 
stimulus dollars on maps coded with unemployment and other 
statistics.
    There is no limit to the number of useful and innovative 
presentations that public-minded netizens can create. However, 
before we can make useful tools for the American public, the 
community of transparency innovators needs the raw spending 
data in full. To make sure we have that, we need you to clarify 
and strengthen existing data disclosure requirements. There are 
two key issues that need clarification that I would like to 
bring to your attention today: the depth of disclosure and 
standardization.
    The first is a question of how deeply disclosure will go. 
While the Recovery Act requires that recipients of Federal 
stimulus funds report to the awarding agencies how the funds 
are spent, there is no clear instruction that every level of 
subcontract or subgrant must be disclosed. The OMB guidance 
interpreting the act states that only the ``prime non-Federal 
recipients of Federal funding and the subawards'' are on the 
hook for reporting to Recovery.gov. This is very troubling.
    If the Government wants to ensure meaningful 
accountability, then we must have transparency at every level 
of transaction. It is not enough for citizens to know that the 
EPA made a grant to Florida which in turn made a subgrant to 
Miami, where I am from. We also need to note that Miami made a 
payment to ACME concrete, which a citizen with local knowledge 
could recognize and flag as a firm owned by the council 
member's son-in-law. Right now it is not clear that we will get 
this information.
    The second key issue is standardization. At this point, the 
OMB guidance does not explain what data elements we should 
expect Recovery.gov to publish. By data elements I mean such 
things as project name, contractor, amount spent, purpose of 
the project, jobs created, street address, city, State, etc. If 
you think of the raw data as a spreadsheet, we would like to 
know what the column headers will be. We also don't know in 
what format the information will be presented. As I explain 
more thoroughly in my written testimony, ideally the data would 
be published in a structured format such as Extensible Markup 
Language [XML].
    In his first day in office, the President signed a 
Memorandum on Transparency and Open Government. The three 
central themes of the memorandum to which the President 
committed the administration are transparency, participation, 
and collaboration. A community of interested and knowledgeable 
parties wants to participate and collaborate with the 
government to make online disclosure of Recovery spending data 
succeed. For example, a wide range of groups and individuals 
from all parts of the political spectrum have formed a 
Coalition for an Accountable Recovery. I commend to you and the 
administration the Coalition's vision statement and proposed 
online transparency architecture, which I have attached to my 
written testimony.
    I am happy to report that so far the administration has 
been quite good at listening to suggestions from those of us 
who are interested in Recovery data. Unfortunately, it has not 
been as good at sharing information in return, a necessity in 
true collaboration. Ideally the folks building Recovery.gov 
would be allowed to talk with us so we can learn what they are 
planning and we can tell them what we would like to see 
included.
    We are willing to help track the stimulus money and take 
part of the responsibility for seeing it well spent. But to do 
so, we need the data.
    Thank you.
    [The prepared statement of Mr. Brito follows:]

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    Chairman Towns. Thank you very much. Let me thank all of 
you for your testimony. Let me begin with you, Mr. Brito. Since 
you just finished up, I will come right back to you. Would you 
agree that technology is not a barrier to solving problems?
    Mr. Brito. It is not a barrier to solving problems, no. I 
mean, it is a barrier to the extent that there are legacy 
systems in place in Government and at the State level that 
might not be quite at the speed they need to be to report the 
data. To that extent, they could be a barrier. But it is a 
barrier that could be overcome.
    Chairman Towns. Let me put this to you, Mr. Holland, Mr. 
Heer, and also Mr. Gragan. As you may know, there are strong 
provisions in the Recovery Act protecting State, local, and 
contractor employees that report fraud and waste in connection 
with stimulus spending. Do you have a broad plan on how to 
harness citizen and whistleblower involvement in keeping an eye 
on stimulus spending? Do you plan to publicize the new 
whistleblower protections in order to encourage whistleblowers 
to come forward? Let me just go down the row. Let me start with 
you, Mr. Holland.
    Mr. Holland. Mr. Chairman, I think that the best way to 
address the fraud and abuse that might occur is to catch it 
before it begins, which is exactly what I said in my statement. 
And it is probably to rely more upon Mr. Gragan's people, the 
procurement officers, to go back and take a look at what we 
said in our single audits where there were weaknesses in 
internal controls in procurement and in contracting policies. 
Strengthen the procurement policies that might be out there to 
avoid any fraud and abuse that might take place. But as it does 
take place, auditors at the State level are always prepared to 
disclose any fraud, any abuse, any waste that they come across. 
We do so already.
    Chairman Towns. Strengthen the procurement policies, what 
does that really mean?
    Mr. Gragan. I think it means really that the policies 
generally, as I mentioned in my oral remarks, are in place. 
They need to be reemphasized. People need to be, in many cases, 
trained again on the meaning of those policies. I would suggest 
to your specific question, Mr. Chairman, that we have 
whistleblower protections in place. I think that we have very 
good ones in the city of Washington, DC, and the other two very 
large governments that I have had the privilege of being an 
official in. I would say that we need to reemphasize them.
    As we try now, one of our greatest antiseptics to anything 
going wrong here is just massive communication, whether it is 
by Web sites or all the things Mr. Brito said and many others 
of us have said. Let us communicate more aggressively. Let us 
make it so easy for any interested member, whether it is the 
public or the press or any oversight function that has a direct 
role in the process of overseeing the expenditure of funds, let 
us make it ultra easy for them to see where every dollar goes, 
and not only that but to inquire as to the legitimacy of any 
expenditure. So I think now is as good a time as any, a better 
time probably than most, to reemphasize those whistleblower 
protections that I think we do have in place.
    Chairman Towns. Do you think it is easier now to do it with 
Devaney coming in the picture or does that make it more 
difficult?
    Mr. Gragan. I will be honest with you, I don't know the 
specifics of exactly how these roles are going to hash out. I 
think the idea of putting an organization in place to be 
responsible as a single point of information, if you will--a 
single point of truth, I will call it because I love that 
phrase--I think that is the right idea. And we have to make it 
work.
    Chairman Towns. Mr. Heer.
    Mr. Heer. Mr. Chairman, I would agree that this is a time 
to reinforce existing practices dealing with whistleblowers. 
But I would also suggest that it is a time for local 
governments to maybe think about starting up hotlines and 
providing whistleblower protections through their local 
legislation. We started our hotline in 1994. We were not the 
first.
    But there are a lot of governments that have just started 
very recently bringing up hotlines at the local level. The city 
of Milwaukee is only a couple years old. The State of Wisconsin 
just put one up last year. And if you are going to take 
information from people alleging fraud, you need to have well-
positioned whistleblower protection. So I think that we will 
use this opportunity to try and reinforce and expand the use of 
hotlines at the local government level.
    Chairman Towns. One of the things that has been talked 
about a great deal is the inability to communicate. And, of 
course, I suggested to the Vice President to call in and have a 
summit to see in terms of a technology standpoint if we can't 
sort of have everybody on the same page. And, of course, I am 
being discouraged at the fact that they are saying that I am 
being unrealistic. I mean, this is coming from professionals. I 
mean, and I am to the point where I am saying, why can't we do 
this? I would like to just sort of get some opinions on it. Mr. 
Brito, you touched upon it earlier. What do you think would 
stop us from doing it?
    Mr. Brito. Well, I mean, like I said, there are going to be 
some legacy systems. And by that I mean old computers that 
don't have the capability to produce the sort of data formats 
that we need. But aside from that, I think that you can get the 
data out in a useful enough format that others can take and 
aggregate and make it useful on Recovery.gov and other Web 
sites.
    So, I guess to answer your question directly, no, 
technology should not stop us. This is an unprecedented amount 
of money that we are spending. It is the American people's 
money and they have a right to know how it is being spent. And 
the best whistleblowers are the folks that don't know they are 
whistleblowers. If they can go online, look up projects that 
are in their neighborhoods, and say, ``boy, I know something 
about this project,'' that is what is important.
    Chairman Towns. Any other comments before I yield?
    Mr. Holland. I would add to this that at the Federal level, 
rightfully so, you talk in trillions and billions. At the State 
level, we talk in billions and millions. At Jerry's level, they 
talk in millions and thousands. When we start inputting that 
information at the millions and thousands level across the 
country, with lots of different people having responsibility 
for inputting that data--deciding what is a job created, what 
is not a job created--it may be different in Springfield, IL, 
versus Brooklyn. It may be different in Miami or in Chicago.
    It is going to be different all over the place. It is a 
very complex issue with lots of bits of information that at 
some point you are going to want to look at and say, it all is 
the same. And that is a challenge before us, to create all that 
information the same across the country so that the proper 
analysis can be done. And it is not an easy job to do. I 
caution you to have a realistic approach.
    When you start thinking about it, just that people are 
going to put it in, that people are going to say this is the 
spending for this 2 week period, it is going to vary all over 
the country. It is a real challenge at the grassroots data 
entry level. And ultimately it is going to get to you, but you 
want it to be right.
    Chairman Towns. Yes, but the reason I am so concerned is 
that everybody is saying that $55 billion will be wasted if we 
are not careful. And, of course, that to me is very disturbing. 
That is B as in boy, $55 billion. That is a lot of money. I 
feel that we could do a lot of things with that money. If it is 
wasted, then, I think that we are not doing the American public 
the service that we are supposed to be providing if we are 
allowing $55 billion to go out the back door, side door, or 
whatever door. I think that is a real concern. I think it is an 
issue that we need to continue to talk about. I yield now.
    Mr. Bilbray. Thank you, Mr. Chairman.
    Let me first go over and say, Mr. Holland, I want to just 
say that from where you come from and the job you have done in 
the past, you are the meanest SOB I think that has ever counted 
beans. [Laughter.]
    So I appreciate that. And the challenges in D.C. astonish 
me. As a former mayor, I would love to have a shot at this city 
for a few years. But there are real challenges there.
    I have a question for you. When we were bringing this bill 
up, there was a discussion about putting conditions in so we 
made sure to direct these funds in a certain way. And, in fact, 
the Senators kept wanting to strike some of the guidelines 
because they said don't worry, we have oversight. How far does 
the oversight and our hands-on ability go? I guess the way to 
explain it is, when the Federal Government contracts with 
somebody to do a project, we have direct oversight. The 
administration has direct oversight. There is a contractual 
relationship.
    When it goes through the State, and then through down to 
the city and the county, is that contractual relationship 
broken? Or does the contractual or implied contractual 
relationship follow the money as it is going through and thus 
allow the accountability to follow the money as it goes 
through? Or is the nexus separated at the State line and we are 
now at a whole different relationship where our ability to hold 
a contractor at the city accountable has been broken because we 
went through that system?
    Mr. Holland. Well, if I can jump to what I think the answer 
you might be looking for is that under the Single Audit Act, 
when money comes to the State and it is for Federal programs 
being spent, who is responsible for that accountability, at the 
State level, that is me. At the city level, that is Jerry. So 
that accountability, that single audit, that tracking Federal 
funds--and with regard to the stimulus money, it is our 
understanding that the vast majority of the stimulus money will 
go through existing Federal programs--we will be responsible 
under those existing programs and the existing single audit 
program for the accountability for those funds. Does that get 
that question?
    Mr. Bilbray. But let us just say if you do it through a 
city program. Let us just say we are building, construction. We 
have standards that are on the books and are coming onto the 
books that are a Federal minimum for every contractor. When you 
accept those funds, is there an implied contract that you are 
now a contractor and fall under that? Do you have to live like 
other guys do or are you exempt from that to where you don't 
have to follow the same rules as somebody who is a private 
sector contractor with the Federal Government?
    Mr. Heer. Mr. Chairman, in my experience, when we audit 
that dollar spent at the contractor, subcontractor level, we 
audit against the criteria that is established at whatever 
point upstream we got the money from whether it is the State or 
Federal Government. So if you have restrictions on those funds 
as to how they must be spent, those attach to our audit program 
and we follow through on those restrictions.
    Mr. Bilbray. OK, let me just be very frank. There was a 
real concern here that we make sure that when we create jobs, 
we create legal jobs. We are not going to have hundreds of 
thousands of people that are illegal using false documents, 
false social securities, getting these jobs. There were 
Senators that said the condition that we put on at the House to 
require E-Verify was repetitive because the administration was 
now going to require as of March that all Federal contractors 
had to use E-Verify.
    The question is this: Is it understood that part of the 
fraud and abuse part of this is that when you hire somebody 
under these funds, you are going to make sure that they are who 
they claim to be and that they are qualified under Federal law 
to work legally in this country? The big question is, does that 
requirement that this administration is going to apply to 
Federal contractors, will that be followed, will that follow 
the money all the way down to the local level?
    Mr. Holland. Well, we would hope that would be done at the 
front end where the people who were responsible for 
administering that program would follow the law. And then, if 
that is the law, if that is a provision within that contractual 
arrangement, that would be subject to audit by either a State 
auditor or a local auditor.
    Mr. Heer. I would agree with that, Mr. Chairman.
    Mr. Bilbray. So in other words, what you are going to look 
for is specific language in the text of the grant rather than 
the general policy of the Federal Government? You need that 
specifically stated? I am wondering here because there are all 
kinds of fraud and abuse that I don't think is specifically 
stated that you will de facto pick up. I don't know about 
nepotism; I don't know about of conflict of interest. I assume 
in a lot of those contracts they are there.
    But there is a lot of this that I hope you maintain as a 
standard that isn't specifically referred to in the grant but 
as sort of a common sense approach that you are not going to 
give this money to somebody or some group that is in violation 
of the law. But the big question is, will that apply also to 
this segment that the House strongly, overwhelmingly put into 
our bill that, let us make sure that the only people that get 
the jobs or get these grants are people who are legally in the 
country by requiring E-Verify to be used?
    Mr. Holland. I can't speak to any specific program at this 
particular point not knowing what is in each specific program. 
But if there are those restrictions, we will audit against 
those restrictions.
    Mr. Bilbray. Yes, sir?
    Mr. Brito. I can't speak directly to what the requirements 
are on this gentleman right now. But they all seem to agree 
that they are accountable for how the money is spent and that 
they are in charge of making sure the money is spent 
accountably. What I would like to know, and what I would like 
to suggest is important as well as accountability from the IG 
level, is reporting.
    So the question for me would be, does the fact that the 
money goes from the Federal Government to the State to the 
city, does that still carry reporting requirements where the 
city must report what were the contacts that were made, who was 
paid, and what for? And then any sort of interest that you 
might have about how the money is being spent, a citizen in 
that locality can look at that contract and maybe raise a red 
flag directly.
    Mr. Bilbray. Yes, because this is one of the things you do 
if somebody says, oh, I hired this many people. If you don't 
check that the social security number and name are actually 
viable, they could put any person they want. There is no way 
for us to audit the books if there isn't that data available.
    And the way you get that data available is through E-
Verify. You actually go and Social Security says, OK, this guy 
sent us this name, this number and you match it up. That allows 
auditors to say, yes, this was really a person and we can 
verify that because here is the number, here is the name and it 
has been checked.
    Mr. Holland. That should be done by the people who are 
running the program at the front end. Your goal should be never 
to see me again as an auditor because things have been done 
right.
    Mr. Bilbray. OK. Mr. Chairman, I apologize but there is one 
issue. The reference to Recovery.gov not being up and going for 
another year, somebody want to comment on that? Mr. Brito.
    Mr. Brito. Yes, I think that would be a real shame. I mean, 
if the money is being spent now, we need folks looking at the 
dollars being spent now to flag anything that might be 
inappropriate or might be wasteful. And this isn't just about 
gotcha games.
    Mr. Bilbray. That is what we want to avoid, gotcha games.
    Mr. Brito. It is not about gotcha games. It is about 
performance, really, in a large part. And citizens on the 
ground are the best placed to be able to communicate to folks 
in their own local government, in their State government, to 
you that the project that is going down in their neighborhood--
maybe it is a community center, maybe it is a bridge--that it 
is not going very well. Maybe they can't get a job there even 
though there are supposed to be this many jobs available.
    And the only way that you allow them to know what is going 
on is by releasing the data as soon as possible online. And I 
understand that Mr. Devaney is facing many challenges, the 
least of which is taking over the site now after 30 days. But I 
think they need to make that a top priority because that would 
mean enlisting millions of auditors which are called the 
American people.
    Mr. Bilbray. And the chairman has really tried to make this 
get away from the gotcha game, to avoid the problem to start 
with and if the problem shows up, address it while it is small, 
don't wait. And what I worry about with this item is that we 
won't know for a year. And that could be enough time for real 
problems. Then it ends up being a big blow-up rather than a 
little problem we can address. Anybody else want to comment on 
that 1 year timeline problem?
    Mr. Heer. I would agree that is an excessively long period 
of time for us to start getting data. If we are going to have 
to wait that long we will probably rely on other resources so 
we can share information in the audit community and get ahead 
of problems and not wait that long to find them.
    Mr. Bilbray. I just want to followup on this, Mr. Chairman, 
because I think this really shows what we have done in the past 
in the Federal Government. And if we are going to change the 
outcome, we have to change the process.
    And I think this is one place Republicans and Democrats 
ought to be working together to help to keep this 
administration out of the gotcha game by us actually saying we 
need you to do the right thing first so we avoid having to 
point out that you did something wrong after the fact. I 
appreciate it, Mr. Chairman.
    Chairman Towns. Yes, I agree with you. I think that 
transparency is very, very important. And this is what we are 
really talking about. And I think that any way that we can do 
that should be explored. I think is just so important because 
$787 billion is a lot of money. We need to try to make certain 
that it is being spent properly. At this time, I yield to the 
ranking member.
    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Brito, we have been throughout the day concerned and I 
would like your view on the fact that apparently it is going to 
take an estimated year for Recovery.gov to get to a level of 
transparency. Can you take us through how we can reduce that 
down to as close as possible to acceptable level to get 
transparency through the entire process available to either 
search engines or the public?
    Mr. Brito. I think that OMB, or now it seems that Mr. 
Devaney is taking over the Web site so it would be the Recovery 
Act Accountability and Transparency Board, they need to issue 
guidance--and I would hope that my colleagues up here can 
answer this as well--can issue guidance maybe after some 
collaboration where this guidance is developed. Basically, 
issue guidance that will tell cities, contractors, those who 
would actually be receiving moneys and would have to be on the 
hook for reporting, what they need to report so that we in the 
transparency community can know what we can expect coming down 
the pike. And I am talking about what fields need to be added, 
which is: the name of the contractor, the cost, number of jobs 
created, etc.
    Mr. Issa. So you are saying they have to define, somebody 
on the government side has to define the fields so that when 
you answer the question you put them into fields that are 
consistent so they can be searched?
    Mr. Brito. Consistently across the country. And I want to 
emphasize that I hope this is done in collaboration with the 
folks on the ground in the cities and the folks in the 
transparency community who are interested in receiving the data 
and using it. So that is the first thing. The other thing is 
something you all have been doing here today, which is sort of 
clarifying how deep will the reporting go. Because you need to 
clarify that it is going to go down to the ultimate, terminal 
user of the money and that they will be as on the hook as 
anybody else.
    Mr. Issa. As you have gone through the legislation, would 
it be correct to say that nowhere in there does it either 
provide for or require that there be reporting down to the 
contractor and subcontractor nor is there authority for those 
rules to be created?
    Mr. Brito. I think that would be correct as far as saying 
that there is nowhere in the act that specifically says that 
all contractors, subcontractors, subgrantees, etc., are on the 
hook for reporting. I am not sure, neither does it prohibit it, 
so I am not sure that authority is required. Maybe this is 
something that OMB could require on its own. I am not sure.
    Mr. Issa. OK. So I think, Mr. Chairman, that is probably 
the one point we have between Mr. Devaney and here, and I would 
like to get responses from the others, that we don't have a 
clear answer to whether or not they will require it and that 
they believe they have the rulemaking authority. I believe they 
do, by the way. I think by being silent on it, they do have the 
authority. But that may be one for us to jointly ask the entire 
organization headed by the Vice President about whether they 
intend to have those rules and whether they need any further 
action from us. And that may be our best joint followup.
    Chairman Towns. I have no objections to that at all.
    Mr. Issa. OK. I look forward to working something out with 
our staffs. And for the others, I would appreciate sort of your 
further belief on that point. Because to me, this oversight 
which is proactive, which I am very proud the chairman has done 
on this basis, only is some good if we look for these things 
that we need to do now before those data bases are created and 
filled with material that is hard to read. Please?
    Mr. Heer. Mr. Chairman, I would agree that the sooner those 
decisions are made, the better for all of us who are going to 
be involved in reporting and auditing. We need you to be clear 
about what you want and communicate that to us. It many involve 
the need for some further coordination with training or some 
other type of cooperation.
    But the sooner you can identify what you want us to 
provide, the better. We are used to juggling our systems with 
Federal systems. We have a separate system for reporting with 
HUD. We have a separate system for reporting Transportation 
funding. We find a way to integrate that with our own system so 
we can be as efficient and accurate as possible. But we need to 
know what you want.
    Mr. Issa. Mr. Gragan.
    Mr. Gragan. I would like to add, first of all, that I 
consider--and I think it is important to register this--the 
procurement community in the public sector is part of the 
transparency community. And I want to make sure that we all 
understand, in my profession and certainly our partners in the 
U.S. Congress, that we definitely consider ourselves part of 
that community.
    It is a well intended plan right now, but not yet well 
executed. And this is what most concerns me. If this does not 
flow down from the top, what you have, in an attempt to be 
transparent, is 50 different State Web sites, probably 3,066 
county Web sites, and 70,000 city and town Web sites, all of 
whom somewhere are in that chain of expenditure flowing down 
from this great act.
    But you don't have transparency. What you have is an 
impenetrable morass. Any of us who have ever tried to even 
figure out how 50 States do business would find that a 
challenge because there is no single form in which we would 
find the data. So I think I could talk forever on it but that 
would only belabor what we all already know and what we have 
already said.
    Mr. Issa. Mr. Holland, if you have something in closing?
    Mr. Holland. Mr. Gragan is right on. Just the volume of 
information that is out there is going to make it very 
important for us to get clear, consistent guidance at the State 
level to those receiving agencies and those Governors to make 
sure that they are collecting the exact same information across 
the board and that it is filtered back up to the Federal level 
in a consistent manner.
    Mr. Issa. Now, I have just one followup yes or no question, 
if I could, Mr. Chairman. The interesting thing is we are 
holding this specifically on nominally $800 billion worth of 
special funding. Is there any reason in the world that whatever 
we do here should not be the model for what we do on a 
consistent basis with all dollars the Federal Government sends 
out?
    Mr. Gragan. I would like to comment on that, if I may. This 
is challenging for all of us, I think. This is very much 
challenging for my partners to my left and right here at this 
table and everyone else involved, including and maybe 
especially Mr. Devaney and his team.
    But there are great opportunities here. And one is that 
this will force us, this will catalyze, I think, changes that 
have long needed to be made with respect to automatically 
posting every contractual transaction in government to the Web. 
It is public information so why not? Why would we not do that? 
Why would we wait for a Freedom of Information Act to do that 
when anyone might be interested in the public?
    More importantly for me as a procurement professional is 
that not all of us have the ability to administer contracts 
well. We spend all of our time going to the next contract and 
putting contracts in place. Contract administration, that part 
where you assure you are being delivered what you ordered 
whether it is a good or a service, is one of the most important 
areas where fraud can occur and where money can leak. We need 
to have contract administration as part of our profession coast 
to coast.
    And on top of that are internal audits. It is wonderful to 
get annual audits from the Inspector General. It is great to 
get CAFR audits and other audits. It is even better for me to 
be ahead, to have an internal audit capability with procurement 
professionals that I can have help me manage the delegated 
authority that flows through the agency from the chief 
executive, the Mayor of Washington, DC, in my case, through the 
people that I trust to spend public money.
    So I am hoping that this whole thing is really a catalyst 
for some fundamental and foundational changes, to answer your 
question, sir.
    Mr. Issa. Thank you, Mr. Chairman. I think we have really, 
the end has been the best part of the whole hearing. So thank 
you.
    Chairman Towns. That is because you were part of that. 
[Laughter.]
    First of all, let me thank all of the witnesses and Members 
who attended the hearing today. Before we adjourn, let me state 
that America demands that all stakeholders under the Recovery 
Act work in good faith to protect the public's interest and 
safeguard our unprecedented investment in America's future.
    I want to make it crystal clear that this committee will be 
watching and working feverishly to ensure accountability and 
transparency over these funds.
    Let me also thank the ranking member, Mr. Issa, for his 
leadership in standing up with me to demand the strictest 
oversight. I understand that the minority and majority staff 
worked on this hearing in a bipartisan manner and that is the 
way it should be. And I look forward to continuing in this 
spirit of cooperation.
    Finally, please let the record demonstrate my submission of 
a binder with documents relating to this hearing. And without 
objection, I enter this binder into the committee's record.
    [The information referred to follows:]

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    Chairman Towns. And without objection, the committee stands 
adjourned. And thank you again for coming.
    [Whereupon, at 1:55 p.m., the committee was adjourned.]
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]

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