[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
                  WATCHING THE WATCHERS: THE NEED FOR
                  SYSTEMIC REFORMS AND INDEPENDENCE OF
                 THE STATE DEPARTMENT INSPECTOR GENERAL

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 5, 2011

                               __________

                            Serial No. 112-8

                               __________

        Printed for the use of the Committee on Foreign Affairs


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

                                 ______



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                      COMMITTEE ON FOREIGN AFFAIRS

                 ILEANA ROS-LEHTINEN, Florida, Chairman
CHRISTOPHER H. SMITH, New Jersey     HOWARD L. BERMAN, California
DAN BURTON, Indiana                  GARY L. ACKERMAN, New York
ELTON GALLEGLY, California           ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
DONALD A. MANZULLO, Illinois         DONALD M. PAYNE, New Jersey
EDWARD R. ROYCE, California          BRAD SHERMAN, California
STEVE CHABOT, Ohio                   ELIOT L. ENGEL, New York
RON PAUL, Texas                      GREGORY W. MEEKS, New York
MIKE PENCE, Indiana                  RUSS CARNAHAN, Missouri
JOE WILSON, South Carolina           ALBIO SIRES, New Jersey
CONNIE MACK, Florida                 GERALD E. CONNOLLY, Virginia
JEFF FORTENBERRY, Nebraska           THEODORE E. DEUTCH, Florida
MICHAEL T. McCAUL, Texas             DENNIS CARDOZA, California
TED POE, Texas                       BEN CHANDLER, Kentucky
GUS M. BILIRAKIS, Florida            BRIAN HIGGINS, New York
JEAN SCHMIDT, Ohio                   ALLYSON SCHWARTZ, Pennsylvania
BILL JOHNSON, Ohio                   CHRISTOPHER S. MURPHY, Connecticut
DAVID RIVERA, Florida                FREDERICA WILSON, Florida
MIKE KELLY, Pennsylvania             KAREN BASS, California
TIM GRIFFIN, Arkansas                WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina
ANN MARIE BUERKLE, New York
RENEE ELLMERS, North Carolina
VACANT
                   Yleem D.S. Poblete, Staff Director
             Richard J. Kessler, Democratic Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Mr. Harold W. Geisel, Deputy Inspector General, U.S. Department 
  of State.......................................................     8
Ms. Jeanette M. Franzel, Managing Director, Financial Management 
  and Assurance Team, U.S. Government Accountability Office......    25

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Ileana Ros-Lehtinen, a Representative in Congress 
  from the State of Florida, and chairman, Committee on Foreign 
  Affairs: Prepared statement....................................     4
Mr. Harold W. Geisel: Prepared statement.........................    11
Ms. Jeanette M. Franzel: Prepared statement......................    27

                                APPENDIX

Hearing notice...................................................    62
Hearing minutes..................................................    63
The Honorable Gerald E. Connolly, a Representative in Congress 
  from the Commonwealth of Virginia: Prepared statement..........    65


 WATCHING THE WATCHERS: THE NEED FOR SYSTEMIC REFORMS AND INDEPENDENCE 
               OF THE STATE DEPARTMENT INSPECTOR GENERAL

                              ----------                              


                         TUESDAY, APRIL 5, 2011

                  House of Representatives,
                              Committee on Foreign Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 o'clock a.m., 
in room 2172 Rayburn House Office Building, Hon. Ileana Ros-
Lehtinen (chairman of the committee) presiding.
    Chairman Ros-Lehtinen. The committee will come to order.
    After recognizing and the ranking member, my friend, Mr. 
Berman, for 7 minutes each for our opening statements, I will 
recognize any other members that want to seek recognition for a 
1-minute opening statement. We will then hear from our 
witnesses, and I would ask you to summarize your prepared 
statements for 5 minutes before we move to the question and 
answer with members under the 5-minute rule.
    And without objection, the witnesses' prepared statements 
will be made part of the record, and members may have 5 days to 
insert statements and questions for the record, subject to the 
length limitation in the rules.
    And the chair now recognizes herself for 7 minutes. Thank 
you.
    A robust and effective Office of Inspector General is 
Congress' first line of defense against waste, fraud, abuse, 
and mismanagement. This committee and the State Department's 
Inspector General must have a shared interest in ensuring that 
the State Department is managed effectively and efficiently to 
achieve our nation's foreign policy goals.
    Now more than ever, given global developments and emerging 
threats, combined with economic challenges facing our nation, 
we must have a State Office of Inspector General that 
challenges State Department management to function with 
transparency and accountability.
    For over 30 years, the General Accountability Office has 
raised concerns about the independence and reliability of the 
Office of Inspector General for the Department of State. GAO 
first questioned the structural independence of the State OIG 
in 1978 when it pointed out the problem with appointing Foreign 
Service officers as inspectors general who then leave the State 
OIG office to become ambassadors for the Department. In short, 
how can they be trusted to provide objective, unbiased reviews 
of State Department operations when their career advancement 
hinges on the type of assessment they give to programs or 
peers?
    GAO noted that the revolving door was also an issue, even 
for lower level positions in which active Foreign Service 
officers are assigned to lead Embassies and consular post 
positions. Congress intended to remedy this problem in 1986 
when the Inspector General position was made a Presidential 
appointment and when career members of the Foreign Service were 
specifically excluded from the pool of eligible candidates. 
However, as GAO noted in its 2007 report, this restriction has 
often been circumvented for extended periods when no permanent 
IG is chosen to serve and, instead, a Foreign Service officer 
holds the position in an acting capacity.
    Our committee has received a number of whistleblower 
complaints through our new Web site feature where 
whistleblowers alleged that, due to the revolving door 
relationship between State OIG and state management, adverse 
findings regarding contract management have been whitewashed, 
and managerial decisions regarding promotions, awards, 
assignments, and grievances were susceptible to arbitrary 
adjudications.
    The Project on Government Oversight (POGO), an independent, 
non-profit organization that investigates government 
misconduct, directly calls into question the objectivity of the 
State Department's Inspector General's office and of its 
leadership. Among other things, POGO questions the Ambassador's 
personal times to Department management.
    Citing various e-mails it has obtained, POGO asserts that 
the Ambassador was doing just enough regarding state operations 
in Iraq to try to avoid losing jurisdiction to the Special 
Inspector General for Iraq Reconstruction, but not enough to 
identify and address the problems.
    This committee also received separate evidence of 
disturbing misconduct in State OIG criminal investigations. The 
committee's review was triggered by a March 2010 referral sent 
by a Federal District Court judge who was disturbed by evidence 
that a State OIG investigation connected with a case before him 
had been seriously compromised.
    Our staff continues to look into these allegations. Whether 
real or perceived, compromise of independence is a serious 
problem for State OIG. In addition, GAO has long criticized 
State OIG for overreliance on inspections as an oversight 
mechanism.
    In its previous reports, GAO found State OIG inspection 
reports to be superficial and thin, lacking in quality 
assurance normally required of an OIG. Acknowledging that State 
OIG has had a requirement periodically to inspect every post, 
GAO recommended fuller use of audits instead.
    As our GAO witness will describe during her testimony, 
audits require more stringent requirements than inspections for 
documentation to support findings, and are subject to external 
peer review. This makes a significant difference regarding 
quality assurance.
    The recent reclassification of all audits conducted by the 
State OIG's Middle East Regional Office provides a case in 
point. An external peer review conducted by the OIG of the 
National Aeronautics and Space Administration found numerous 
reporting deficiencies that caused State OIG to reclassify all 
Middle East Regional Office audits from January 2008 to 
September 20, 2009, as inspections.
    State OIG has indicated that the Middle East Regional 
Office will be folded into its larger audit unit. However, the 
fact that the Middle East Regional Office performed so poorly 
in such a high-risk area is deeply troubling.
    I am particularly concerned with adequate oversight in this 
area, given the billions of dollars that will be at stake as 
operations in Iraq are transitioned from the Department of 
Defense to the Department of State. In preparation for this 
hearing, we asked GAO to determine whether State OIG is making 
progress toward implementing its longstanding recommendations. 
Your report indicates that actions are underway, but more needs 
to be done. We need confidence in the State OIG, and we will be 
vigilant in making sure that they continue to improve.
    And with that, I would like to yield time to my friend, my 
ranking member, Mr. Berman of California, for his opening 
remarks.
    [The prepared statement of Chairman Ros-Lehtinen follows:]

    
    
    
    

    Mr. Berman. Well, thank you very much, Madam Chairman. I 
appreciate your calling this hearing. Your opening testimony 
started out by referring to the State Department's Inspector 
General as the first line of defense. My opening statement 
starts out referring to the Inspector General as the last line 
of defense against waste, fraud, and abuse at the State 
Department. Maybe it is an intermediate line of defense, but it 
is supposed to be a line of defense.
    Foreign Service officers, civil service employees, and, of 
course, the U.S. taxpayers should have absolute confidence that 
the IG's office serves as an unassailable mechanism of 
accountability in the State Department. And, to my way of 
thinking, the office has often performed this function 
admirably.
    Nonetheless, as described by the chairman, a 2007 
Government Accountability Office report flags a number of 
systematic concerns with the IG's office. First, the rotation 
of Foreign Service officers in the IG's office, a statutory 
legacy of the Foreign Service Act of 1980, raises questions 
regarding the independence of the organization.
    One could argue that FSOs bring unique expertise to State 
Department oversight, including an intimate knowledge of the 
way our overseas missions work--or don't work--as the case may 
be. But this must be weighed against the concern that reliance 
on senior State Department personnel to conduct oversight 
creates both the image and the possibility of a conflict of 
interest. I would welcome the views of our witnesses on the 
role of FSOs in the IG's office.
    Second, I am also interested in the views of our panelists 
regarding the balance between audits--the standard product of 
most IG offices--and inspections, the traditional focus of the 
State IG, based on its historical mandate to inspect foreign 
posts.
    The GAO report indicates that the State IG generally 
conducts about two inspections for every one audit. It also 
found that key management challenges, such as counterterrorism 
and information security, were overwhelmingly subject to 
inspections rather than audits.
    I understand that the IG incorporates elements of an audit 
into many inspections, but in many ways they are distinct 
products with different methodologies. Especially as the State 
Department assumes unprecedented roles and responsibilities in 
both Iraq and Afghanistan, including the management of massive 
contracts, to what extent should the IG place a greater 
emphasis on audits?
    Finally, the GAO expresses concerns about inadequate 
resources for the IG, a concern that I share. If this Congress 
is serious about eradicating waste and abuse, if it really 
wants to ensure effective oversight over funds, and if it 
genuinely wants to foster greater accountability over taxpayer 
dollars, we must ensure adequate resourcing of the IG's office.
    I would note that the Continuing Resolution passed by my 
colleagues a few weeks ago would cut the State IG's budget 17 
percent below current operating levels, which will result in a 
hiring freeze and curtain oversight of operations in Iraq and 
Afghanistan, if that level of cut were to pass. I don't 
understand why my colleagues would insist on cutting the budget 
of the very organization intended to ensure funds are well 
spent.
    Incidentally, and somewhat ironically, the CR also cuts the 
funds for the GAO, the organization that authored the report 
upon which this hearing is based.
    I commend the chairman for holding this hearing and look 
forward to the witnesses' comments. And in an unprecedented 
act, I yield back the balance of my time, thereby making the 
first effort to cut waste. [Laughter.]
    Chairman Ros-Lehtinen. Very well done, Mr. Berman.
    I would like to recognize Mr. Marino, if he would have a 1-
minute opening statement.
    Mr. Marino. Thank you, Madam Chair, but I have no 
statement.
    Chairman Ros-Lehtinen. Thank you, sir.
    Mr. Rohrabacher.
    Mr. Rohrabacher. Well, I guess I am here to talk about the 
middle line of defense, seeing that we have the first line and 
the last line.
    I think that a careful look at why the American people are 
disillusioned is not necessarily because of corruption and some 
misappropriation of funds. I think that what we have, Madam 
Chairman, instead is disillusionment because of policy. Policy 
leads us to a position.
    I think that a certain amount of corruption and a certain 
amount of waste and fraud is expected in any major operation in 
the midst of conflict. I have seen it since I was a young 
person in Vietnam, and I have seen it in every conflict I have 
been in since, just as collateral damage and the loss of 
civilian life is part of what happens in those type of 
deployments.
    But that doesn't mean we should accept them, and we have to 
work against it. But it goes with the territory, and it is up 
to us to minimize that type of collateral damage and waste and 
fraud. But most important, it is up to us to have the right 
policy of government, to have the right policies, and I believe 
the United States Government has been engaged in economy-
building instead of emergency and crisis aid. And that goes 
down to the very heart of the reason the American people are 
disillusioned, because that strategy cannot be successful, and 
it hasn't been.
    So with that said, thank you, Madam Chairman.
    Chairman Ros-Lehtinen. Thank you, Mr. Rohrabacher.
    Mr. Rohrabacher. Looking forward to the hearing.
    Chairman Ros-Lehtinen. Thank you.
    Mr. Higgins is recognized.
    Mr. Higgins. I don't have an opening statement, Madam 
Chair. I will have questions during the question and answer 
period.
    Chairman Ros-Lehtinen. Thank you, sir.
    Mr. Higgins. Thank you.
    Chairman Ros-Lehtinen. Mr. Gallegly. Mr. Gallegly, if I 
could have your minute?
    Mr. Gallegly. I will yield to the gentlelady.
    Chairman Ros-Lehtinen. Well, thank you. Just because my 
good friend, the ranking member, spoke about H.R. 1 and the 
cuts that we are making, and I just want to--and I hope we have 
some charts that are coming out soon about our plan for 
reviving the economy, which is straightforward.
    We are cutting job-destroying programs to help the economy 
grow, to empower employers to create jobs. We have had historic 
debt that is leading to historic tax increases, and we have got 
to stop that. And that is going to lead to historic high 
unemployment.
    And we have got--we are going to address this spending-
driven debt crisis now. There is a lot of resistance to making 
sure that we don't do it, but we are determined to. And I don't 
think it is a coincidence that our national debt, our Federal 
spending, our bureaucratic regulatory costs, and unemployment 
have climbed to record heights at the same time.
    So we hope to create jobs, we hope to save our children 
from national bankruptcy, and so the way to do that is to stop 
spending money that we don't have. And we hope to shrink the 
Federal budget, so that we don't have to shrink the family 
budget.
    And with that, I would now like to recognize our witnesses, 
unless Mr. Deutch has an opening remark to make on the----
    Mr. Deutch. Near perfect.
    Chairman Ros-Lehtinen. Thank you very much. Pithy, great 
statement. We like that.
    And the chair and the ranking member, we are pleased to 
recognize and welcome today's witnesses. Ambassador Harold 
Geisel is the Deputy Inspector General for the Department of 
State and Broadcasting Board of Governors. Ambassador Geisel 
has more than 25 years' experience in senior management with 
the State Department. He joined the Department in 1970 and has 
since completed tours all across the globe, including Brussels, 
Oslo, Bern, everywhere, Rome, South Africa, Moscow.
    In '94, he served as Acting Inspector General for the 
Department of State, and then, in '95, held the position of 
Deputy Assistant Secretary of State for Information Management. 
In '96, he went abroad again as Ambassador until '99. And 
following his retirement from Foreign Service in 2001, the 
Ambassador served as Acting Deputy Assistant Secretary for 
Logistic Management.
    In 2008, he assumed the position of Deputy Inspector 
General, and has held that position ever since, which brings 
him to this meeting today.
    And next we will hear from Ms. Jeanette Franzel, the 
Managing Director for the U.S. Government Accountability 
Office, Financial Management and Assurance Team. She heads 
GAO's oversight of financial management and auditing issues 
across the Federal Government.
    Ms. Franzel is an expert on the topic of audits and 
independence, oversees GAO's work in developing and issuing 
government auditing standards, also known as the Yellow Book. 
The Yellow Book standards are widely used by the U.S. 
Government and also serves as a model for both private sector 
and governments around the world.
    Ms. Franzel also leads the development of GAO positions on 
proposed standards for the U.S. Auditing Standards Board, the 
Public Company Accounting Oversight Board, the International 
Auditing and Assurance Standards Board, and the Institute of 
Internal Auditors.
    Additionally, she provides technical expertise to GAO teams 
and external audit organizations on issues involving auditor 
independence, engagement design, methodologies, quality 
assurance, internal inspections, peer review, internal control 
and governance, in the public sector programs.
    We are glad to have you here. And I kindly remind our 
witnesses to summarize your statements for 5 minutes, and we 
will put your written statements into the record without 
objection.
    Ambassador, please proceed.

 STATEMENT OF MR. HAROLD W. GEISEL, DEPUTY INSPECTOR GENERAL, 
                    U.S. DEPARTMENT OF STATE

    Ambassador Geisel. Thank you, Madam Chairman, Ranking 
Member Berman, and members of the committee, for the 
opportunity to testify today.
    Since being appointed by Secretary of State Rice during the 
summer of 2008, I have often told OIG employees that we have 
the best jobs in the Federal Government because we get paid to 
tell the truth. Our reports are the true objective measure of 
our independence and effectiveness. Our inspections of 
Embassies Baghdad, Kabul, and Luxembourg, plus our audits of 
the new Embassy construction in Baghdad, passport snooping, and 
the Christmas bomber, clearly show that OIG is independent, 
thorough, and responsive.
    The GAO report was issued in 2007. By the close of FY2010, 
the number of reports issued annually on my watch increased 
from 107 to 157. Open investigations increased from 36 to 101. 
Subpoenas increased from zero to 25, and contractor suspension 
and debarment actions increased from zero to five.
    OIG has substantially expanded its oversight in critical 
areas, particularly in Afghanistan. We now have boots on the 
ground at five overseas locations. The Office of Investigations 
has 26 active investigations in the Middle East and Southwest 
Asia, 10 related to Afghanistan.
    President Bush nominated an IG several weeks after I 
arrived in June 2008. Although he was not confirmed, my top 
priority was to continue building OIG's oversight capability 
and morale. I read GAO's report and kept it on my desk because 
I valued its input.
    We have complied with GAO's recommendations to establish an 
MOU with Diplomatic Security and include IT reports in our 
internal quality review process. Also, the Foreign Service 
Deputy Inspector General, DIG position, was abolished by me in 
January 2011. Thus, any future DIG who becomes Acting IG will 
be a civil servant, not an FSO.
    However, we believe not considering civil servants with 
management careers would unduly exclude highly qualified 
candidates. OIG has reassessed the mix of audit and inspection 
coverage. Our methodology for investing resources now includes 
a risk management approach that ensures all congressional 
executive mandated audits and inspections are performed, and 
that our remaining audits and inspections cover high cost 
programs, key management challenges, and vital operations.
    Our Office of Audits reorganized in January 2010 to gain 
functional area expertise, contribute to an audit planning 
process that included high-risk/high-cost programs, and operate 
in a more efficient and accountable manner.
    In October 2011, our Middle East Regional Office, MERO, 
will be merged into the Office of Audits, easily making Audits 
the largest component of the State IG with more than 90 full-
time employees. We anticipate that the number of audits will 
substantially increase after MERO is incorporated into Audits.
    Our inspections cover three broad areas that are consistent 
with Section 209 of the Foreign Service Act--policy 
implementation, resource management, and management controls. 
The IG community has long recognized that inspections are 
uniquely suited to provide timely feedback to program managers 
and to review highly technical matters.
    The inspection function is growing in number and size 
within the IG community, and the 2008 IG Reform Act 
acknowledges the inspection role of OIGs as separate from 
audits.
    Our mix of oversight coverage is effective because our 
offices complement one another's efforts in an efficient 
manner. During each inspection cycle, teams examine a wide 
cross-section of issues at multiple posts and bureaus. When a 
team discovers an area that requires a drill-down audit or 
investigation, it is referred to those offices.
    For example, the Embassy Baghdad inspection team discovered 
an overtime issue that required additional oversight. An audit 
team followed the inspection and produced major findings and 
recommendations leading to better controls at the Embassy.
    Finally, there is an overriding need to use inspectors with 
the requisite experience, expertise, and Senate-confirmed 
ambassadorial status to lead inspections of overseas posts.
    Any potential concern is also mitigated by OIG's 
transparency, vetting procedures, and recusal policies. Few of 
the inspection teams are led by active duty Foreign Service 
ambassadors, and inspection team leaders report to, and are 
rated by, the AIG for inspections, a member of the Senior 
Executive Service. Just 17 of the 64 direct hire staff members 
currently employed in inspections are FSOs, and most retire 
after their assignments with OIG.
    In short, as Congress previously recognized, FSOs play an 
invaluable role in our inspections, which together with checks 
and balances outweigh any theoretical appearance of lack of 
independence. In sum, we believe OIG is in substantial 
compliance with GAO's recommendations.
    Once again, thank you, Madam Chairman and Ranking Member 
Berman, for the opportunity to appear today. I would be pleased 
to take any questions you have at this time.
    [The prepared statement of Ambassador Geisel follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman Ros-Lehtinen. Thank you so much, Mr. Ambassador.
    Thank you, Ms. Franzel.

   STATEMENT OF MS. JEANETTE M. FRANZEL, MANAGING DIRECTOR, 
   FINANCIAL MANAGEMENT AND ASSURANCE TEAM, U.S. GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Ms. Franzel. Madam Chairman Ros-Lehtinen, Ranking Member 
Berman, and members of the committee, thank you for the 
opportunity to be here today to discuss the Department of State 
OIG.
    The State OIG has a critical responsibility to provide 
independent and objective oversight of the State Department. In 
2007, we reported concerns about State OIG's independence and 
effectiveness. Today, I will discuss our previously reported 
concerns and the current status of those concerns based on our 
follow-up work.
    In 2007, we reported concerns with two independence issues 
and three effectiveness issues. Regarding independence, our 
first concern dealt with the use of State Department management 
officials as Acting IGs. In order to help ensure the 
independence of the IG Office, we recommended that the State 
OIG work with the Secretary of the State to develop succession 
planning to help ensure independence in appointment of acting 
IGs.
    And in response, as Ambassador Geisel has said, the Acting 
IG recently abolished the Deputy IG position for Foreign 
Service, which will help ensure that any future Deputy IGs 
moving into an acting IG position will not be Foreign Service 
officers.
    The State Department has relied on acting IGs to provide 
oversight for over five of the last 8 years, since January 
2003. Three of the acting IGs returned to significant 
management positions within the State Department. We realize 
that the appointment of a permanent IG is not within the 
control of State OIG. Nevertheless, the use of management 
officials as acting IGs is a concern, as one of the 
independence protections in the IG Act is that the IG is to be 
appointed by the President and confirmed by the Senate.
    Our second independence concern was with the use of Foreign 
Service officers to lead inspections of the department's 
bureaus and posts. State OIG inspections are led by ambassador-
level Foreign Service officers who often move through the OIG 
on rotational assignments, and then back into Foreign Service 
positions.
    We recommended that the IG develop options so that State 
OIG inspections are not led by Foreign Service officials. The 
State IG has stated that having Foreign Service officials with 
the rank of ambassador as team leaders is critical to the 
effectiveness of the inspection teams. Although the IG has put 
some safeguards in place, we continue to believe that a 
fundamental, structural, independence problem exists with this 
arrangement.
    As I mentioned, we also reported on three effectiveness 
issues. A serious effectiveness issue that we noted in our 2007 
report was the State IG's reliance on inspections, rather than 
audits, to provide oversight of the Department. By design, 
inspections do not provide the level of assurance or rigor that 
audits provide.
    State IG's reliance on inspections resulted in gaps in the 
audit coverage of State Department's high-risk areas and 
management challenges, including counterterrorism and border 
security, public diplomacy, and human resources. We recommended 
that the State IG reassess the mix of audit and inspection 
coverage, and in our recent update we have found that State IG 
is taking actions to strengthen its audit practice. But we 
recently continued to identify gaps in audit coverage in key 
areas, including foreign assistance, public diplomacy, and 
human resources.
    As I mentioned, the good news is that State IG has taken a 
number of steps to strengthen its audit practice and to plan 
for additional audit coverage. It has increased its resources 
dedicated to audits and reorganized the Office of Audits to 
align its oversight efforts with the Department's mission and 
strategic priorities.
    Finally, State IG took actions to implement our two other 
recommendations, as Mr. Geisel explained, in the area of 
including IT inspections and its internal quality review 
process and developing a written agreement with the Bureau of 
Diplomatic Security to coordinate departmental investigations.
    In summary, we commend the OIG for the steps it is taking 
to build and strengthen its audit practice. We continue to 
emphasize the need for OIG to continually assess its mix of 
audit and inspections of the Department's high-risk and 
management challenge areas. Frankly, this is a measure of the 
effectiveness of the audit practice on an ongoing basis, so we 
would encourage a continual reevaluation based on facts and 
circumstances and risk of the mix of audit and inspections on 
an ongoing basis.
    Second, we believe it is important for State Department to 
be headed by a permanent IG, appointed by the President, and 
confirmed by the Senate as envisioned by the IG Act.
    Finally, State OIG's unique requirement to provide 
inspections of the Department's bureaus and posts, and its need 
to use ambassador-level Foreign Service members as team 
leaders, presents both independence and resource problems for 
the OIG. There may be opportunities to revisit this particular 
requirement, which is in law, and whether some of these 
functions should be performed by State Department with more of 
an audit and oversight function of the inspections being 
performed by State OIG.
    So I think there is a tremendous opportunity here to 
revisit the requirements and perhaps develop a mechanism where 
OIG can be providing effective oversight, but perhaps State 
Department can take over some of the management function 
portions of the inspections.
    Madam Chairman, Ranking Member Berman, and members of the 
committee, this concludes my statement, and I would be happy to 
respond to any questions that you have.
    [The prepared statement of Ms. Franzel follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman Ros-Lehtinen. Well, thank you very much. You have 
both made some very good recommendations to our committee in 
order to streamline this process.
    Mr. Geisel, I wanted to ask you about the Horne v. Huddle 
case. And the U.S. Government recently spent 3 million tax 
dollars to settlement the Horne v. Huddle case. This has been a 
long-running lawsuit against a former senior U.S. diplomat who 
was accused of illegally eavesdropping on a DEA agent when they 
were both stationed in Burma.
    Because the Federal Judge in that case was disturbed by the 
evidence that the IG investigation into that matter had been 
compromised, he required that the congressional committees be 
notified before he would finalize that settlement.
    And there are serious allegations that the IG's 1996 
investigative report was altered and the investigator's 
signature was forged in order to obscure the investigator's 
original conclusion that the accused diplomat was guilty of 
eavesdropping, perjury, and obstruction of the IG 
investigation. And even the edited report notes that the 
accused diplomat's contradictory statements were refuted by 
numerous Embassy employees and concludes that OIG investigation 
is ``unable to dispel the suspicion of his misconduct.''
    So, Mr. Geisel, I would like for you to explain how the 
defendant, in that contentious $3 million illegal eavesdropping 
case, who was the subject of an OIG Inspector General 
inspection, investigation, that pointed toward possible 
perjury, who had been accused of unlawfully obstructing an OIG 
investigation, and who appears on OIG's name check system as 
having been the subject of a special inquiry, gets hired to 
lead investigations for the Inspector General's office in 2005, 
and stays on the payroll until after this committee began 
asking questions about these matters last summer? Would he ever 
have been hired for that position had he not been a senior 
Foreign Service officer? And doesn't his employment at OIG 
indicate a problem overall?
    Ambassador Geisel. Thank you, Madam Chairman. Of course, 
Mr. Huddle was hired in 2005, before I got to OIG. And my only 
direct----
    Chairman Ros-Lehtinen. I don't mean this as a question 
about you. I am saying about the process of----
    Ambassador Geisel. Yes.
    Chairman Ros-Lehtinen [continuing]. Who gets hired, who is 
doing the investigation. I am not saying it directs to you.
    Ambassador Geisel. Thank you, Madam Chairman, and I 
appreciate that. He was hired in 2005 because a name check was 
done, and there was--he got a positive endorsement. All of 
that, I don't want to guess what my predecessors did, because 
when I heard about the Judge's memorandum I said he was never 
to be used again.
    And at the same time, as you mentioned, I referred the 
matter to your committee, and to the Senate's committee, and my 
counterpart at the CIA did the same thing with her committees.
    Chairman Ros-Lehtinen. If I could follow up, now, you, in 
your capacity, possess an extensive investigative record 
raising numerous doubts about this gentleman's veracity. And 
the D.C. Federal Circuit Court noted in 2007 a seemingly 
impossibility that he acquired his information through legal 
means, as well as his apparent lie to OIG investigations. Does 
this case compel you to review what you had been doing and how 
it should not be done in the future?
    And within 48 hours of the Horne v. Huddle settlement 
hitting the press, you had e-mail exchanges with the defendant 
and with a former OIG investigative supervisor who had been 
involved in that case. Would you be willing to provide your e-
mail to and from these individuals to the committee, working 
with the committee, so that we could give parameters to our 
request, which I hope would be considered?
    Ambassador Geisel. Madam Chairman, subject to our lawyers 
speaking to your lawyers, if there is any information that 
belongs to another agency, yes, we would be glad to show your 
staff those e-mails.
    Chairman Ros-Lehtinen. Thank you very much. Thank you for 
that and that spirit of cooperation.
    I now would like to yield to Mr. Carnahan, the ranking 
member on the Subcommittee of Oversight and Investigations.
    Mr. Carnahan. Thank you, Madam Chair, for this hearing. It 
is I think very timely. I want to specifically raise the issue 
of our Government's capacity to effectively oversee post-
conflict reconstruction operations, given the significance of 
their funding, their deeply complex and challenging nature, and 
State's principal and escalating role in Iraq and Afghanistan, 
respectively. With this shift from military-led operations in 
Iraq to State, State has taken on unprecedented size and scope 
of responsibilities.
    Last year, I chaired hearings on reconstruction efforts in 
both Iraq and Afghanistan. SIGIR Bowen's testimony raised 
serious concerns about U.S. management and oversight practices, 
estimating at least $4 billion had been wasted in our 
stabilization and reconstruction programs alone. And in later 
testimony he emphasized organizational transitions in Iraq that 
have been the occasions of significant waste.
    As SIGIR draws down in its oversight efforts in Iraq, and 
as the U.S. prepares for similar military and civilian 
transitions in Afghanistan in the coming years, I would like to 
ensure that our oversight mechanisms are prepared to maintain 
strict audit and investigation efforts.
    Ms. Franzel, with State taking on these increased 
responsibilities, can you give your assessment of the State 
IG's capacity to take on these added oversight tasks?
    Ms. Franzel. Well, first, let me just comment on the need 
for very good coordination between the various oversight 
entities involved. We have the Special IG for Iraq 
Reconstruction, Special IG for Afghanistan Reconstruction, the 
State IG, and the DoD IG. There is going to need to be some 
very seamless coordination between the oversight mechanisms in 
place to help ensure adequate coverage and adequate audit 
activity in these areas.
    I do find it disturbing what happened with the Mideast 
Regional Office within the State Department IG in that the 
audits all had to be reclassified to inspections, because those 
audits were found to be unreliable. Basically, in the peer 
review that occurred, in some of the OIG reports, the 
conclusions could not be supported. There wasn't sufficient 
evidence backing up the conclusions in the audit reports.
    The IG office did acknowledge that and did convert the 
audits to inspections, which requires a much lesser standard 
for documentation and evidence, but, those offices need to be 
doing audit-level work. There is going to need to be 
significant cultural change and training to be sure that those 
offices are up to the task.
    Mr. Carnahan. Let me follow that up. Over 30 years GAO has 
expressed concerns over State IG's insufficient independence 
from the Department. Have any of these issues of independence 
affected the IG's ability to conduct effective oversight of 
operations in Iraq and Afghanistan?
    Ms. Franzel. We did not specifically look at that question, 
but I will say that the inspection load that is taken on by the 
State IG office does use a tremendous amount of resources, 
which then are not available to do audit work. And so we are 
thinking that there is probably a good opportunity at this 
point to take a look at that inspection function, which over 
the years has been debated.
    Is this a management function or an IG function? And 
perhaps there are certain aspects of that function that would 
be better done by management, because of the independence 
issues, but that at the same time would help free up resources 
for a stronger audit function within the OIG. And there are 
some specific legislative fixes that could be done to take 
this--I will call it a burden--from the IG. This can be done 
based on risk and where the IG needs to be placing resources 
based on what is happening around the world and within the 
State Department.
    Mr. Carnahan. I certainly would like to share those 
legislative ideas, but I want to get a question in to 
Ambassador Geisel. And that is, what is the IG doing to 
evaluate the effectiveness of the transition to state control 
in Iraq? How would you evaluate the transition so far? And how 
will these assessments be formulated into meaningful lessons 
that we can learn from going forward in Afghanistan?
    Ambassador Geisel. Thank you very much for that question, 
sir. We have had an inspection, a compliance follow-up review, 
and I would say at least four major audits covering areas--
audits and evaluations covering these same areas of concern in 
Iraq.
    I would note on inspections that 35 out of 64 of the 
independent offices of Inspector Generals have the inspection 
function. And I think the inspection function is extremely 
useful in identifying areas that our investigators and our 
auditors then drill down on, as I mentioned specifically in 
Iraq.
    Chairman Ros-Lehtinen. Thank you very much, Mr. Carnahan.
    Mr. Marino of Pennsylvania.
    Mr. Marino. Thank you, Madam Chair.
    Welcome, guests. Appreciate you being here. Ms. Franzel, I 
have at least 18 years of criminal investigation experience, 
civil, and also internal affairs. And I found out in my 
experience that I personally have a basic problem with 
investigating those individuals with whom I worked or had the 
slightest relationship with.
    Do you find that inherently dangerous in the situation that 
we have now where IG from State is investigating situations 
where there could be a compromise, there could be a bias? And 
not intentionally. Now, I have seen it, though, done 
intentionally, but we, as human beings, have a natural 
predilection to, how may I say, when we are on the fence, to 
protect our own. Could you respond to that, please?
    Ms. Franzel. Certainly. This situation inherently has a 
number of threats to the independence and integrity, and, 
again, not necessarily that this would be done intentionally by 
the people involved. In professional auditing literature that 
has really been accepted worldwide, there are a number of 
threats that are articulated, which I see coming out in this 
situation.
    The first is a self-interest threat. So if you have 
somebody moving through an IG office and back into another 
position, the threat that an interest will inappropriately 
influence an auditor's judgment or behavior is there, because 
that inspector or team leader is looking for the next career 
opportunity. So there is a self-interest threat.
    There is also a self-review threat of reviewing offices and 
programs that an auditor or inspector was previously involved 
in. A recusal policy can be a safeguard, but not always a fully 
effective safeguard. There is a bias threat because of the 
familiarity of an auditor or an inspector with operations of an 
office.
    There is a familiarity threat, which is really the threat 
that due to a long or close relationship with management or 
personnel of an audited entity, an auditor will be too 
sympathetic to their interests, or simply too accepting of 
their work. And that is something that can happen 
unconsciously.
    There is an undue influence threat, again, which can come 
into play here, as well as a structural threat in terms of, 
what is the audit organization attempting to do? Is it part of 
a management function? And where is the placement of this 
function? So I see all of these threats coming into play in one 
fashion or another with this arrangement.
    Mr. Marino. Ambassador, then, hearing what Ms. Franzel just 
stated, what do we do about these threats? What do we do to 
prevent this appearance of impropriety and make sure that we 
avoid these pitfalls?
    Ambassador Geisel. Well, it depends on whether we are 
talking about inspections, audits--well, inspections and audits 
or criminal investigations. And as you pointed out, from your 
experience as a criminal investigator, that is the number one 
concern.
    Now, what I would say there is that our criminal 
investigators, once they find evidence of criminal wrongdoing, 
their work is thereupon directed by an assistant U.S. attorney, 
and everyone else is out of it.
    I would also say that, in general, we are--our 
investigators are really separated.
    Mr. Marino. Please.
    Ambassador Geisel. Yes. Our head of investigations is a 
long-time officer from DoD. The vast bulk of our investigators 
are from outside of the State Department, but even those that 
served in the Bureau of Diplomatic Security, they are 
completely separated.
    Now, for the inspectors and the auditors, we require them, 
and we train them to take it extremely seriously. We require 
them to sign a statement of independence before they begin any 
work. And when it comes to inspections or audits, we carefully 
choose members of the teams that have had no relationship with 
the post or the office. We have specific guidelines.
    And I know that for--we will not have a team leader who 
ever served at the Embassy or Bureau where she or he may have 
worked, if they are in the Foreign Service. The same is true of 
civil service, because where the vast bulk of our members of 
our office of inspections come from, if they have ever worked 
at an office that we are inspecting or auditing, they will not 
get the job period, and they will not be on the review of the 
job either.
    Chairman Ros-Lehtinen. Thank you very much.
    Mr. Marino. Thank you.
    Chairman Ros-Lehtinen. Mr. Higgins of New York.
    Mr. Higgins. Thank you, Madam Chair.
    Ambassador, the municipal clerk offices throughout the 
nation has provided passport services to the State Department 
for many years, and as far as, you know, the record shows, 
without any problems relative to efficiency and relative to 
security.
    The Inspector General of the State Department has now 
issued a mandate to municipal clerk offices that the issuance 
of birth certificates and passports have to be done in separate 
facilities and separate personnel. Can you enlighten us as to 
why this is occurring?
    Ambassador Geisel. I would be very glad to, sir. It is a 
matter of fraud prevention. Our July 2009 report of the 
inspection of passport services noted concerns about the 
vulnerabilities to fraud inherent in the passport application 
acceptance programs at acceptance facilities country-wide, as 
well as quality of the source documentation.
    The report also noted variation in the quality of the 
Department's customer service manager's oversight and training 
of acceptance agents. We made a series of recommendations to 
improve oversight and support of acceptance agencies, including 
closing an acceptance agency where an acceptance agent also 
issues birth certificates as soon as viable alternative 
locations for submitting passport applications exists.
    And the reason for that is a birth certificate is prima 
facie evidence of citizenship. If the same person--so there is 
no double-check. If the same person who issues the birth 
certificate can also accept the application for a passport, be 
that as it may, the vast bulk of acceptance facilities have 
separate windows and personnel for these two functions, 
although there may be a very few that cannot separate these 
functions.
    But I would be glad to offer, because our inspectors are 
supposed to work quickly, that the Office of Inspections will 
monitor the response to your letter to the Secretary and the 
impact of compliance with our own recommendations and report 
back to you, sir.
    Mr. Higgins. Yet there was a May 2009 Government 
Accountability Office report that was targeted toward the goal 
of recognizing vulnerability in the current policy relative to 
the issuance of both passports and birth certificates, and 
there was no reference to potential problems with that dual 
role continuing.
    So what was the--you mentioned a July report of the 
Inspector General. Does that reference the May 2009 Government 
Accountability Office report?
    Ambassador Geisel. I will have to take that as a question 
for the----
    Mr. Higgins. Who bears the responsibility for the cost 
associated with providing separate facilities? This would seem 
like a Federal mandate on the localities if the municipal clerk 
offices have to provide separate staffing and separate 
facilities for the issuance of documents where no identified 
problem has occurred previously.
    Ambassador Geisel. Well, when we say ``separate 
facilities,'' we don't literally mean a separate building.
    Mr. Higgins. What do you mean?
    Ambassador Geisel. But we do mean that a separate person 
has to issue a birth certificate from a person who issues a 
passport.
    Mr. Higgins. But a separate facility within the same 
building.
    Ambassador Geisel. A separate facility----
    Mr. Higgins. Well, clarity on that issue----
    Ambassador Geisel [continuing]. Would literally mean 
another window.
    Mr. Higgins. Mr. Ambassador, clarity on that issue is 
pretty important relative to the efficient, secure, continued 
issuance of very important public documents. And these offices 
are typically supported by local taxpayers. And knowing what 
they are required to do by May 1st, and what they are not 
required to do, I think is very, very important. So I would ask 
that, you know, you try to clarify this for us and give us a 
sound basis from which the policy is being advanced, because I 
am not convinced that it is compelling.
    Ambassador Geisel. That is absolutely my commitment to you, 
sir.
    Mr. Higgins. Thank you.
    Chairman Ros-Lehtinen. Thank you, Mr. Higgins. Thank you, 
Mr. Ambassador.
    Dana Rohrabacher, the chairman of the Subcommittee on 
Oversight and Investigations, is recognized.
    Mr. Rohrabacher. Thank you very much, Madam Chairman. And, 
again, I find just the basis for a lot of the problems that we 
face and challenges in this arena that we face are inherent to 
the job that is being done overseas and whether or not the 
policy was right in sending people overseas or not.
    I find that a combination of blood and money, coupled with 
time, always tends to lead to a moral breakdown. And once you 
have a moral breakdown of people in the field, no amount of 
oversight and no amount of investigation is going to cure that. 
And, as I said, I saw that from the time I was very young, and 
I went through different things.
    I was not in the military, but I did spend considerable 
time in Vietnam and saw--I remember a day when the--it was 
reported--I was visiting some doctors in Vung Tao, and it was 
reported that a landing craft had been captured by the enemy. 
And all of the supplies and the landing craft had been captured 
by the enemy, and I was dismayed, and I said, ``Well, how many 
people were captured? Or how many people died? How many of our 
people were lost in this?'' ``Oh, no, and they all got away. 
They all got away. There wasn't any casualties on our side, but 
the landing craft was captured.''
    Well, somebody sold the landing craft and all the supplies 
to the local enemy, and to say that I saw that up and down 
Vietnam was to put it mildly. And what had happened is, once we 
got in there and the corruption was evident on the other side 
at least, it broke down the morals of our own people, 
especially in the middle of seeing gore and blood, which almost 
none of us had seen before anyway, and that tends to shock the 
system.
    And we see the same thing beginning to happen in 
Afghanistan. You are there a long period of time. People are 
being killed. Money is being thrown at the problem, and tell me 
this isn't a formula for the breakdown of any moral standards 
for anybody that we would send there.
    We just lost a man named Bill Young--I would like to put it 
in--Bill Young was a brave, wonderful person, the son of 
missionaries early in the 1950s, served us very, very well in 
Vietnam, and he just passed away a couple of days ago. And Bill 
was operating out by himself, and he had given a certain amount 
of money to do the job, and he was out by himself with the 
mountain yards and the mountain people in that country, in 
Vietnam, and in Laos, I might add. Yet there were no audits or 
Inspector General visits, or whatever.
    Let me get to right now, to what we are facing right now. 
We have a huge challenge in Afghanistan, but yet it seems to be 
getting worse, in terms of heroin, the production of heroin. 
All of us know about it. Okay? Yet over the years the amount--
production of heroin has gone up while we have been there, not 
down.
    And is this due to corruption or is this just part of a 
policy that we have had to let that happen? Yes, Mr. 
Ambassador.
    Ambassador Geisel. You said is it due to corruption, or is 
it due to a policy?
    Mr. Rohrabacher. Right. Would you just let this go on?
    Ambassador Geisel. I think it is due to the fact that it 
has always gone on, as you said. I think that the Department--
and we have audited efforts--the Department is making a great 
effort, but I don't know if there is enough money in the world 
to stop what has always gone on in Afghanistan. I think the 
best we can do is try to control it, but I really am--I have to 
share your pessimism, sir.
    Mr. Rohrabacher. Well, I don't think I am a pessimist. I am 
actually, in the long run, an optimist. But if you have policy 
that puts our people in Afghanistan and says they are going to 
go out, and some of our military guys are out with sickles, you 
know, cutting down some poppies here, well, you know that some 
of the leaders of the government brother--maybe Karzai's 
brother has another group of poppies over the hill that you 
can't touch, if that doesn't lead to moral breakdown, I don't 
know what does.
    But then again, my point is, you can't have a goal that is 
going to take a long time in the middle of a conflict. If it 
takes decades, you are going to have a breakdown in our system. 
Our system is basically on the integrity of our people, people 
like Bill Young and others, to do their job, and oversight and 
inspection, I certainly respect the job that you are doing, but 
sometimes I think you are faced with an impossible task.
    Ambassador Geisel. What can I do except agree with you? 
Except I will be an optimist and say we are trying to do our 
darnedest, so it is not an impossible task. Let us call it----
    Chairman Ros-Lehtinen. Thank you very much.
    Mr. Rohrabacher. Thank you.
    Chairman Ros-Lehtinen. My good friend Ms. Wilson from 
Florida is recognized.
    Ms. Wilson of Florida. Thank you, Madam Chairman.
    Ambassador, how many Foreign Service officers serve in the 
IG's office today?
    Ambassador Geisel. There are 18 all told.
    Ms. Wilson of Florida. And what percentage of these offices 
compose the overall number of employees?
    Ambassador Geisel. Less than 9 percent, ma'am.
    Ms. Wilson of Florida. Is it your view that the Foreign 
Service officers are necessary for inspections?
    Ambassador Geisel. Yes, I believe they are very necessary 
for inspections. And as my colleague testified, their use is 
included in the Foreign Service Act.
    Ms. Wilson of Florida. How about for audits?
    Ambassador Geisel. There are no Foreign Service officers in 
audits.
    Ms. Wilson of Florida. So, in essence, how do you assess 
the overall value of these Foreign Service officers? You assess 
them for us, please, their value.
    Ambassador Geisel. I think that their value is crucial, 
because there are some things that you can't really audit in an 
Embassy--the political interaction with the host country, such 
things as your colleague just brought out on the issue of 
corruption in the local government, their services to American 
citizens, some of which can and are audited, but many which you 
can't attach a number. And you need people who have the 
experience of working overseas to really be able to drill down 
and get evaluations.
    They also do one other thing. You know, I hate to say it, 
but some of these ambassadors overseas think they are pretty 
hot stuff. And the best way to deal with them is to have 
another ambassador walk in and call him or her by her first 
name and just say, ``I know where you are at. I did this, too. 
And guess what? You are wrong.''
    Ms. Wilson of Florida. So, Mr. Ambassador, you feel that 
with the exception of the one, all of the recommendations have 
been complete and that we agree with all of those except for 
the one that deals with Foreign Service officers performing 
inspections.
    Ambassador Geisel. Yes, ma'am. That is correct. We have 
some differences with respect to how much and what resources 
should go into which function, but essentially the only major 
difference of opinion would be the use of Foreign Service 
officers, ma'am.
    Ms. Wilson of Florida. And you truly feel that their value 
is imperative to perform this particular duty.
    Ambassador Geisel. Absolutely. And I would point out that 
similar IGs in other agencies do it the same way. There are 
many retired military officers who work for the DoD Inspector 
General as inspectors.
    Ms. Wilson of Florida. So this is not unprecedented.
    Ambassador Geisel. Hardly.
    Ms. Wilson of Florida. Thank you.
    Chairman Ros-Lehtinen. Good questions. Thank you, Ms. 
Wilson.
    Ms. Ellmers of North Carolina is recognized.
    Ms. Ellmers. Thank you, Madam Chairman, and thank you to 
our guests today.
    Ambassador, I have a question for you. The special 
Inspector General for Iraq is mandated with the oversight 
responsibilities of the Iraqi Relief and Reconstruction Fund, 
and the oversight there. It is slated for termination in 2013. 
Meanwhile, the State Department will assume current DoD 
programs and responsibilities.
    The State Department has requested that DoD allow the State 
Department to continue the use of the logistics civil 
augmentation program while acknowledging that the Foreign 
Service does not have the sufficient experience and expertise 
to provide oversight.
    What impact will the SIGIR's termination have on State IG's 
operations in Iraq?
    Ambassador Geisel. Well, I am glad you asked that, because 
the first thing to understand is that the special IG for Iraq 
works with DoD and USAID and State appropriations. The DoD and 
USAID appropriations of course are far larger than the State 
appropriations.
    We have been coordinating with SIGIR, and we feel if there 
is sufficient funding we can absolutely assume the remaining 
oversight of State Department functions that SIGIR presently 
has.
    Ms. Ellmers. Okay. Well, thank you very much. I yield back 
the remainder of my time.
    Chairman Ros-Lehtinen. Thank you very much.
    Ms. Buerkle.
    Ms. Buerkle. Thank you, Madam Chairman, and thank you this 
morning for this timely hearing and for both of our guests to 
be here today.
    My first question has to do with the permanent--finally 
achieving and having a personal Inspector General in the 
office. And I would like to ask Mr. Geisel if you think that--
if the credibility of the office is damaged by not having a 
permanent Inspector General.
    Ambassador Geisel. I think the best way to answer that 
question is twofold. First, I don't have any control over the 
nomination of a permanent IG. That has to come from the White 
House. But, yes, I would like very, very, very much like to see 
a permanent IG. And I think the committee has rightly centered 
its target on the fact that there is no permanent IG.
    I think our work speaks very well for itself. Since I came 
in in 2008, as I gave you the statistics, we have greatly--we 
have trebled our investigations, which--and we have doubled the 
number of investigators we had. But, yes, when all is said and 
done, there should be a permanent IG.
    Ms. Buerkle. And what advantages would there be if we had a 
permanent IG?
    Ambassador Geisel. I think it is what you said. Look, I 
have to tell people to look at the Web site. I would love for a 
permanent IG to say, ``Look at the Web site, and in accordance 
with the law, our statutory Office of Inspector General is 
headed by an independent official who was nominated by the 
President and confirmed by the Senate.''
    I would add one last thing and that is that I hope that 
this time, as my great mentor at OIG was the IG who was 
appointed by President Reagan, he was our first independent IG, 
Sherman Funk, he had previously been the IG at Commerce, I hope 
that whoever is nominated will not be someone who doesn't have 
any idea how the Office of Inspector General works, I hope it 
is somebody who has tremendous experience in the oversight 
community.
    Ms. Buerkle. Thank you. Ms. Franzel, on page 8 of your 
prepared testimony, you detail the length of service by some of 
the acting IGs, since January 2003. Could you explain the 
significance of having seven acting IGs during this period of 
time?
    Ms. Franzel. Well, again, I think it just makes it very 
difficult for continuity of oversight at the Department. Also, 
with so many acting IGs, these acting IGs have been generally 
appointed by the State Department. I mean, certainly not 
appointed by the President and confirmed by the Senate as 
envisioned by the IG Act. So there hasn't been good continuity.
    Some people have stepped up to take on the job, which is 
definitely necessary. But when you start looking at a time span 
of 8 years, and 5 of those 8 years have been without a 
permanent IG, and there have been so many different acting IGs, 
and we certainly did see some operational breakdowns in the 
State IG office back when we were reviewing the time period 
that we were reviewing, and when we put out our 2007 report. So 
it did have a very detrimental impact on the State IG office.
    I think that a lot of actions have been taken to help 
strengthen the office, but it is time to have a permanent IG 
appointed by the President and confirmed by the Senate.
    Ms. Buerkle. Thank you, Madam Chairman. I yield back.
    Chairman Ros-Lehtinen. Thank you. If I could take the 
remainder of your time, Ms. Buerkle, because I wanted to ask 
Ms. Franzel if she could comment on Ms. Wilson's question, 
which the Ambassador answered, but we didn't get to hear from 
your point of view if you shared the Ambassador's enthusiasm 
for the role of Foreign Service officers on the IG inspection 
teams.
    Ms. Franzel. Certainly. I would be happy to comment on 
that. And certainly this has been emphasized over the years, 
that in order to do these inspections in an effective manner 
there is a need for ambassador-level management to go in and 
head up these inspections. And if that is the case, I think it 
is a good argument for moving some of the inspection function 
into management, and then leaving some of the evaluation of the 
effectiveness of inspections to the IG. So I think there is a 
very compelling argument here for splitting out the function.
    IG offices use inspections very effectively, but I think 
that this is a rather unique requirement in that Section 209 of 
the Foreign Service Act requires State IG to inspect every post 
every 5 years. That requirement gets waived every year in the 
appropriations act, but the IG office has to continue with this 
work just in case in a subsequent year it is not going to get 
waived.
    So it is a tremendous workload, first of all. It does not 
give the IG office the flexibility to really do risk 
assessments and do a higher level analysis of the effectiveness 
of inspections of posts. I do think inspections of these posts 
is a very important function, and it probably should be headed 
up with management officials, but then that really begs the 
question of, where should that function be?
    Should it be in an IG office where independence is expected 
and demanded? Or should part of that be handed over to 
management to do their own self-inspections and self-
assessments? It is a very common function for management to 
review the effectiveness of its own policies and inspections of 
policies and procedures through an internal inspection shop. 
And then, the IG could review that shop and the effectiveness 
of that as well as make recommendations going forward.
    So I accept Ambassador Geisel's assertion that these folks 
are absolutely necessary for the leadership. I do, however, 
believe there are such significance structural threats with 
doing that in an IG office that it is probably also time to 
take a look at how this is functioning, and maybe relook at 
that requirement in Section 209 of the Foreign Service Act.
    Chairman Ros-Lehtinen. Yes, I agree with that. Thank you.
    Mr. Connolly of Virginia is recognized.
    Mr. Connolly. Thank you, Madam Chairman. And welcome to the 
panel. A couple of months ago on a party line vote Congress--
the House of Representatives passed H.R. 1, the Continuing 
Resolution for the balance of the fiscal year, which I 
personally believe is one of the most radical documents passed 
by Congress in living memory. I think we considered almost 600 
amendments, and we defunded everything from Planned Parenthood 
to cutting Head Start, one of the most effective preschool 
programs in the country, Public Broadcasting, on and on.
    But one of the cuts involved the function--150 function of 
the government, including I believe, Ambassador Geisel, the OIG 
office. Have you looked at the potential impact of those cuts 
if in fact they became law, and what they would do to your 
ability to function and carry out your mission?
    Ambassador Geisel. Yes, sir, we have. Frankly, in the very 
short run, we could carry on. But overall we would have to 
start cutting back on our oversight, and, fair enough, we can 
do that, but of course OIGs usually pay for themselves quite a 
few times over if they are any good. That is what oversight 
organizations are supposed to do.
    So in the end, I think by cutting back on oversight, it 
might cost more money than was saved by the number of people 
who were cut.
    Mr. Connolly. Well, it does seem a passingly odd thing. If 
we say we are concerned about waste, fraud, and abuse in the 
government, in the public sector, we would cut the very 
function that is charged with ferreting out what----
    Chairman Ros-Lehtinen. If the gentleman would yield. You do 
understand the contention of the chair that I believe that the 
OIG has not been doing a good job. So to throw more money at 
that office, in the way that it is currently structured, does 
not resolve any issues whatsoever.
    The gentleman can continue to make his point, but my point 
is they are not doing the job they are supposed to do. But the 
gentleman can continue.
    Mr. Connolly. As the chairman knows, I respect her 
enormously, but I respectfully disagree with her on this 
matter.
    Ms. Franzel, you were shaking your head in the affirmative. 
Would you care to comment?
    Ms. Franzel. Yes, and I am going to comment on oversight 
activities in general. It is very dangerous to start cutting 
back on oversight activities--GAO, IGs, and others--simply 
because our function is to help identify cost savings for the 
government, assist the Congress, and report on fraud, waste, 
and abuse.
    Last year, for every dollar spent on GAO expenses, we 
brought back $87, so we saved $87 for every $1 we spent. I 
don't think you want to start cutting back on those types of 
returns. And to the extent that we can make oversight in the IG 
community and other offices more effective, those types of 
numbers get even greater. So it becomes very difficult, and the 
effects are seen longer term because, yes, we can all survive 
in the short term, but when you start cutting back on oversight 
activities today, problems can erupt later.
    Mr. Connolly. Well, does GAO believe that OIG is doing a 
bad job?
    Ms. Franzel. Well, as we discussed throughout the hearing, 
there have been some very difficult issues and problems at OIG, 
and we reported on those in 2007. There have been some positive 
activities to strengthen the audit function, which we see as 
positive and we are hoping for continual assessments to measure 
the effectiveness of those actions. They are not there yet, but 
we see some increases in audit oversight.
    There still remains a problem with trying to figure out the 
proper mix of resources dedicated to inspections. The use of 
ambassador-level officials to lead inspections seems to 
indicate that perhaps this is a function that is a management 
function rather than an IG function, and that is something that 
we need to sort out. And it just doesn't seem properly placed 
in the IG office, because of the expectation for independence.
    Mr. Connolly. Real quickly, you gave us a metric that for 
every dollar we invest in GAO, we reap a return of $87 saved in 
some fashion. What is the comparable metric, or do you know it, 
for OIG?
    Ambassador Geisel. I believe the number that we use is $14, 
but I am very, very reluctant to throw out figures. This is one 
of the problems I have with the oversight community is 
sometimes people claim savings that are not really savings, or 
that could be in theory but that don't pan out in reality. But 
I----
    Mr. Connolly. Well, Mr. Ambassador, my time is up. I know 
the chairman will indulge me for 5 more seconds, because of 
her--I have to say to you, if you are that reluctant, then you 
are going to face a 17 percent budget cut. You might want to 
get a lot less reluctant.
    My time is up. Thank you, Madam Chairman.
    Chairman Ros-Lehtinen. I took up your time, Mr. Connolly. 
So if you would like more time----
    Mr. Connolly. No, I think we have had our say. Thank you, 
Madam Chairman.
    Chairman Ros-Lehtinen. Okay. Thank you so much.
    Mr. Sherman of California.
    Mr. Sherman. Thank you. USAID had some reluctance to--the 
way I describe it--put the flag on the bag. That is to say, 
make it extremely clear to the recipients of U.S. aid that it 
was American aid. They wanted to make sure that they would feed 
people, even those who wouldn't want to eat the food if it was 
ours, or those who wouldn't want to distribute it if it was 
ours.
    How good a job are we doing making sure that everyone who 
distributes or receives U.S. aid knows that it is aid from the 
American people? Ambassador?
    Ambassador Geisel. I would have to defer to the USAID IG, 
although I absolutely share your sentiments of course, sir.
    Mr. Sherman. Okay. Perhaps we could arrange to put that 
question to them, because there was such bureaucratic 
reluctance. How is the U.S. Government doing on following Buy 
America principles?
    Ambassador Geisel. From the point of view of the State 
Department, very well. And I note that especially for the large 
contracts it is good. There are of course many circumstances, 
especially in combat zones, where we can't always buy American, 
but, yes, I----
    Mr. Sherman. Buy American principles are not Buy America, 
you know, straitjackets. I thank you for your reassurance on 
that.
    The next issue relates to those who grant visas abroad. 
This is absolutely unchecked ad hoc power without any 
accountability. And I would ask you, what are the statistics 
on, when they let somebody in the United States, does that 
person leave in accordance with their visas? But I know you 
can't give me those statistics because the bureaucracy hates 
the concept of ever generating those statistics.
    So when you leave Disneyland, they know you have left. But 
when you leave the United States, somehow we can't figure out a 
way to swipe your barcode. Is there any system by which visa 
officers are evaluated in terms of, are they being too tough? 
Are they being reasonable? Do most of the folks return 
according to their terms of your visa? Is there any process for 
evaluating those who grant visas?
    Ambassador Geisel. Yes, there is. But as you pointed out, 
it is not adequate, because we are dependent on statistics 
generated by the Department of Homeland Security.
    Mr. Sherman. Or in this case not generated by the 
Department of Homeland Security.
    Ambassador Geisel. I can't comment. I can smile.
    Mr. Sherman. Thank you for your smile, which will be part 
of the record, and I yield back. [Laughter.]
    Chairman Ros-Lehtinen. Let the record note that the 
gentleman had smiled.
    Mr. Rivera of Florida.
    Mr. Rivera. Thank you very much, Madam Chairman. Thank you 
for being here today.
    I will start with Ms. Franzel, and I would like to ask how 
the GAO would characterize the IG's audit coverage of high risk 
oversight areas.
    Ms. Franzel. In our 2007 review, we found some significant 
gaps, which concerned us, frankly. There were a lot of very 
important areas of State Department that were not being covered 
by audits of the State IG. We made a recommendation that they 
reassess the mix of audits and inspections.
    At the time, State Department IG disagreed with that 
recommendation, but since then some steps have been taken to 
increase the audit practice. We are still looking at a fairly 
light mix of audits to inspections, but it has improved. In 
2009 and 2010, we were still seeing gaps in audit coverage in 
areas like coordinating foreign assistance, public diplomacy, 
and human resources.
    Now, in the Fiscal Year 2011 audit plan, we are seeing some 
audits come online in these areas. So I think this is an area 
to watch. There is still a tremendous amount of inspections 
going on. Part of it is because of the requirement that foreign 
posts be inspected every 5 years, but that requirement gets 
waived every year.
    But there still is a tremendous reliance on inspections in 
the Department, and inspections in and of themselves are not a 
bad thing. In fact, they are a very useful tool that IGs can 
use to quickly go out and survey a situation. But they should 
not be used to the exclusion of audits.
    Mr. Rivera. Thank you very much. And a question to 
Ambassador Geisel, according to the project on government 
oversight, Ambassador, you recused yourself from an IG 
investigation of a contract award involving Undersecretary of 
State for Management Patrick Kennedy. Your recusal was 
apparently due to a perceived conflict of interest between 
yourself and Mr. Kennedy. What is the extent of your 
relationship with Undersecretary Kennedy that you elected to 
recuse yourself from this investigation?
    Ambassador Geisel. I recused myself for approximately 3 
weeks in what I would describe as an abundance of caution. I 
was very new to the job, and I was very keen to see--to have it 
seen that we were very independent.
    The fact is, it is the first time in my life that I have 
been criticized for recusing myself, which I always thought was 
doing the right thing. Be that as it may, I have known Mr. 
Kennedy for a very long time. I can't say that we were--we are 
friends. In this 30-some-odd years that I knew him, he has 
never been in my home, and I was only in his home once for the 
wake when his father passed away. But I was being very, very 
cautious. But I can't say we were friends.
    And I think our work speaks for itself. Before I came, 
there were zero--we are talking about the heavy stuff now, 
because this was an investigation that I recused myself for 3 
weeks from.
    We have vastly--we have trebled the number of 
investigations since I came on board. The number of subpoenas 
we have issued went from zero before I was there to 25. So, 
yes, I am glad you asked the question, but I feel very 
confident that I did the right thing, and that my recusal for 
that limited period of time was done in an abundance of caution 
to ensure our good name.
    Mr. Rivera. And making sure, in terms of following up on 
the issue of abundance of caution, does the relationship 
prevent you from carrying out duties going forward?
    Ambassador Geisel. None whatsoever, and, again, I would 
refer you to all of the reports that we submit to the 
committee. We try to be fair, and I like to say that I am the 
Department's best friend, because I tell the Department what it 
needs to hear, not what it wants to hear.
    And so the fact is we have had no problem at all. I rarely 
see Mr. Kennedy, although when I need to speak to him I do.
    Mr. Rivera. Thank you.
    Thank you, Madam Chair.
    Chairman Ros-Lehtinen. Thank you so much. I thank the 
witnesses and the members. In closing, I would like to request 
that GAO provide the committee with the possible legislative 
ideas for addressing the issues raised by your testimony as Ms. 
Franzel mentioned earlier.
    Mr. Rohrabacher. Madam Chairman?
    Chairman Ros-Lehtinen. We would appreciate that. Mr. 
Rohrabacher.
    Mr. Rohrabacher. Would you indulge me one more question?
    Chairman Ros-Lehtinen. I love to indulge you.
    Mr. Rohrabacher. The----
    Chairman Ros-Lehtinen. Indulge others as well, if they 
would like.
    Mr. Rohrabacher. Quite often we have these construction 
programs and chaotic situations and such, and we are--and our 
people are instructed to hire locals, as many locals as you 
can, rather than having American companies come in and actually 
do the work themselves.
    Now, the Chinese have a totally different approach to 
providing someone some assistance. They bring their own people 
in and build the bridge themselves, and they--or the building, 
and, thus, they are--the Chinese are accountable all the way to 
the finished product, where we of course contract with local 
people and try to give people local jobs.
    What is your opinion on that in terms of the--one does lend 
itself to more corruption--our system--but maybe helps the 
local economy. How do we judge this?
    Ambassador Geisel. I am the right person to ask, because I 
negotiated the conditions of construction agreement between us 
and China, where we built our Embassy in China and they built 
their new Embassy in Washington. The answer is, if you give us 
enough bucks, we absolutely and positively should do it the way 
the Chinese do it.
    But we are talking about huge amounts of money if it is 
going to be all Americans. But the reason that it should be all 
Americans, if we can afford it, is we will have much better 
security, which is why the Chinese do what they do.
    Mr. Rohrabacher. Right. And less corruption.
    Ambassador Geisel. Less corruption. But you have got to 
give us the bucks.
    Mr. Rohrabacher. Thank you very much, Madam Chairman.
    Chairman Ros-Lehtinen. Thank you. Would any member like to 
be recognized before I recognize Mr. Chabot, who is our last 
member?
    [No response.]
    Thank you. Mr. Chabot is recognized.
    Mr. Chabot. Thank you. I look forward to reading the 
testimony of the witnesses. I appreciate it very much. Thank 
you for holding this hearing. I had about eight things I just 
got finished doing and wanted to make the hearing here, but 
thank you very much for holding this, and I definitely will 
review your testimony.
    Chairman Ros-Lehtinen. Thank you very much, and I thank the 
members for coming. I thank the panelists and the audience as 
well. And the committee is now adjourned.
    [Whereupon, at 11:29 a.m., the committee was adjourned.]
                                     

                                     

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