[Senate Hearing 112-670]
[From the U.S. Government Publishing Office]
S. Hrg. 112-670
ASSESSING GRANTS MANAGEMENT PRACTICES AT FEDERAL AGENCIES
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HEARING
before the
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
INFORMATION, FEDERAL SERVICES, AND
INTERNATIONAL SECURITY SUBCOMMITTEE
of the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
JULY 25, 2012
__________
Available via the World Wide Web: http://www.fdsys.gov
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri ROB PORTMAN, Ohio
JON TESTER, Montana RAND PAUL, Kentucky
MARK BEGICH, Alaska JERRY MORAN, Kansas
Michael L. Alexander, Staff Director
Nicholas A. Rossi, Minority Staff Director
Trina Driessnack Tyrer, Chief Clerk
Joyce Ward, Publications Clerk and GPO Detailee
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SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION,
FEDERAL SERVICES, AND INTERNATIONAL SECURITY
THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan SCOTT P. BROWN, Massachusetts
DANIEL K. AKAKA, Hawaii TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
CLAIRE McCASKILL, Missouri RON JOHNSON, Wisconsin
MARK BEGICH, Alaska ROB PORTMAN, Ohio
John Kilvington, Staff Director
William Wright, Minority Staff Director
Deirdre G. Armstrong, Chief Clerk
C O N T E N T S
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Opening statements:
Page
Senator Carper............................................... 1
Senator Coburn............................................... 4
Senator Brown................................................ 4
Prepared statements:
Senator Carper............................................... 37
Senator Brown................................................ 40
WITNESSES
WEDNESDAY, JULY 25, 2012
Hon. Daniel I. Werfel, Controller, Office of Federal Financial
Management, Office of Management and Budget.................... 6
Hon. Elizabeth M. Harman, Assistant Administrator, Grants Program
Directorate, Federal Emergency Management Agency, U.S.
Department of Homeland Security................................ 8
Nancy J. Gunderson, Deputy Assistant Secretary, Office of Grants
and Acquisition Policy and Accountability, U.S. Department of
Health and Human Services...................................... 10
Stanley J. Czerwinski, Director, Strategic Issues, U.S.
Government Accountability Office............................... 12
Alphabetical List of Witnesses
Czerwinski, Stanley J.:
Testimony.................................................... 12
Prepared statement........................................... 63
Gunderson, Nancy J.:
Testimony.................................................... 10
Prepared statement........................................... 59
Harman, Hon. Elizabeth M.:
Testimony.................................................... 8
Prepared statement........................................... 50
Werfel, Hon. Daniel I.:
Testimony.................................................... 6
Prepared statement........................................... 43
APPENDIX
The chart referenced by Senator Carper........................... 77
Questions and responses for the Record from:
Mr. Werfel................................................... 79
ASSESSING GRANTS MANAGEMENT PRACTICES AT FEDERAL AGENCIES
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WEDNESDAY, JULY 25, 2012
U.S. Senate,
Subcommittee on Federal Financial Management,
Government Information, Federal Services,
and International Security,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:30 p.m., in
Room SD-342, Dirksen Senate Office Building, Hon. Thomas R.
Carper, Chairman of the Subcommittee, presiding.
Present: Senators Carper, Brown, and Coburn.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. Welcome one and all. I call the hearing to
order. We are glad you all could be all with us today.
This hearing, as you know, will focus on some challenges
related to Federal agencies' grant management practices and the
opportunities that exist for addressing those practices.
Each year, the Federal Government allocates, as you know,
billions of dollars, actually hundreds of billions of dollars
through grants to State and local governments, to educational
institutions, to medical researchers, and to others. Effective
management of those grants involves, among other things,
ensuring that the funds are spent appropriately and are
actually achieving the intended results for taxpayers. Now more
than ever, it is important that we ensure strong, effective
oversight over grant money.
From Fiscal Years (FY) 1990 through 2010, Federal grant
spending increased from about $135 billion annually, to over
$612 billion, almost one-quarter of the Fiscal Year 2010
Federal budget. This money went out through more than 1,600
Federal grant programs managed by 23 Federal grant-making
departments and agencies.
These programs help first responders and State and local
government improve their ability to withstand disasters. They
fund efforts to find cures to cancer and other diseases. It is
our responsibility in Congress and in the Administration to
ensure that all this money is spent as intended and that, at
the end of the day, we see real results.
As everyone in the room knows, both the Federal Government
and most State and local governments have struggled with record
budget deficits in recent years. Today, our national debt
stands at more than $15 trillion, well over double what it was
just a decade ago when we actually had a balanced budget, if
you can believe that. The last time our national debt was this
high was at the end of World War II. That level of debt was not
sustainable then. It is certainly not sustainable today. In
order to address the burden that this debt places on our
country, we need to look in every nook and cranny of the
Federal Government with programs large and small and make
certain that the resources we are investing in are being spent
efficiently and effectively. We need to demand results and
focus the scarce resources the taxpayers entrust us with on our
highest priorities as a country and on solutions that are
proven effective in addressing the many challenges that we
face.
Across the Federal Government, program managers need to
sharpen their pencils and stop making the kind of expensive,
avoidable mistakes that lead to improper payments. According to
the Government Accountability Office (GAO), Federal agencies
made an estimated $115 billion in improper payments in 2011. We
have seen this before. Actually, we have seen more of this
before. A year ago it was $119 billion. We are making a little
progress.
Senator Coburn, you will be happy, I just learned from
Peter Tyler who sits behind my left shoulder, that we are going
to hotline our Improper Payments Bill, the latest version of
the Improper Payments Bill, grandson of the original improper
payments bill I think, and try to get that done in the next few
months--there you go. Version 3.0.
But Federal grants are not the whole cause of improper
payments. We know that error and fraud unfortunately occur in
all categories of Federal spending.
But, improving management and accountability in grant
spending is one important piece of the puzzle when it comes to
curbing waste and fraud. Success in doing so will help us as we
work to curb our national debt, and in the case of Federal
grants, it will help us get better results, we hope, both for
grant recipients and the public at large. Ultimately all of us,
that includes the Congress, that includes the Administration,
State and local governments, grant recipients large and small.
We want to improve the way that grants are managed and need to
work together to do so.
Our witnesses today will describe some important progress
that has been made during the last few years, maybe even in the
last few days, in improving the oversight and management of
Federal grants. We will also be looking today at additional
steps that the Federal Government ought to take.
One stark example of the need for improved Federal grants
management is the problem of money remaining in expired grant
accounts. After a grant is awarded, the recipient has a
specific amount of time to complete the grant requirements and
to spend those funds.
The grants must then be closed out, a process which
includes an audit of the spending. In effect, the grant
recipient has to show the receipts for the money that has been
spent.
However, according to GAO, at the end of Fiscal Year 2011,
almost $1 billion in undisbursed funding remained in expired
grant accounts.
We have a chart\1\ here that shows the amount of money in
expired grants within one grant management system called the
Payment Management System, and the chart shows the levels and
the ages of expired Federal grants.
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\1\ The chart referenced by Senator Carper appears in the appendix
on page 77.
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It shows about $794 million of grant funds remaining in
accounts after the expiration date, sometimes going back as
long as 5 or 10 years.
GAO has also identified an additional Federal grant
management system with $126 million in expired grant amounts of
money. This is just not acceptable.
Our GAO witness today will describe how a lack of a timely
grant close out will lead to a higher risk of waste and fraud.
The second problem we will discuss today is that of
drawdown or ensuring the grant recipients spend their award of
money in a timely manner. Unfortunately, problems have been
identified in this area as well.
For example, since its formation, the Department of
Homeland Security (DHS) has provided State and local
governments with over $35 billion in grant funding to help
prepare for disasters and acts of terrorism.
However, for a variety of reasons, the Department and its
stakeholders have struggled to draw down some of this money and
put these funds to work in our communities, and this could be
due to sloppy bookkeeping or problems with how the grant
program is structured. It could even be a sign that some of the
unspent funds are not needed and could have been put to better
use elsewhere. For whatever the reason, though, this is another
issue that needs to be addressed.
Finally, we will discuss the importance of measuring
performance in our grant programs. As I have said earlier, we
have got to work smarter with our limited resources, and this
includes finding better ways to look at what we got for the
grant money that has been spent.
We look forward today to hearing from Danny Werfel, the
Controller of the Office of Management and Budget (OMB) about
how the Administration intends to build on what has worked so
far in grant management oversight and also improve the
performance of those initiatives that have not worked as well
as we would like.
We also look forward to hearing from officials from two of
the largest grants making Federal agencies, the Department of
Health and Human Services (HHS) and the Department of Homeland
Security about grants management within their agencies.
We are here today in large part, though, because we have a
moral imperative to ensure that grant dollars are spent wisely
and have proper oversight; and at the same time, we also need
to ensure that scarce taxpayer resources are invested and spent
as effectively as possible and that they show good measurable
results.
I am happy to turn it over to Senator Brown for any
comments for any comments he wants to make or if he would he
like to yield to Dr. Coburn.
Senator Brown. I will yield.
Senator Coburn. I thank my colleague
Senator Carper. Dr. Coburn has another conference. I am
glad that you are here and you are recognized.
OPENING STATEMENT OF SENATOR COBURN
Senator Coburn. I thank my colleagues for recognizing me
early. Unfortunately, I have a meeting at 2:45.
As most of you know, I am keenly interested in this issue
and have been through the testimony, and I am very pleased with
the Controller alert that went out this week on grant
management.
Not all of this is the Administration's problems because a
lot of the problems we find are from earmarks that were written
improperly, than the money went out and there is no way to get
it back. The grant funds are sitting there in limbo. This is
what we need to fix.
So, take my comments with a grain of salt but I would note
a couple of things, and I have some questions for the Hon.
Danny Werfel that we will submit for the record in terms of how
you plan to follow up with the Controller alert.
But, I would make a comment and just a little example. The
city of Nederland, Texas, just got a $2.1 million grant for
port security that was allegedly to renovate its city hall.
The first story to be published in the paper said this was
for the city hall. The corrected paper that was printed after
that said, ``oh, well, we are going to build a new city hall,''
but the port security funds are for an emergency operations
center for a land-locked city, even though it is close to Port
Arthur.
It just shows you when we have needs to deepen ports in
South Carolina and to deepen the Kerr-McClellan navigation
system to 12 feet all the way to Arkansas so we can ship the
bread basket of wheat and corn that comes out of the middle of
the country, we are spending $2.1 million to renovate a city
hall. I know that is the instruction from the Secretary to
spend the money. I understand that. I am not sure it is a wise
use of the money.
We are going to request that the city council and their
planning commission show us that this was, in fact, for an
emergency operations center and not for a new city hall.
Grant management is key to making sure we are following
what we want to do. I appreciate the efforts from all of you,
and how you are trying to do this right.
I think we are making some progress. I am really excited
about some of the things that are happening, and I know it is
slow, but I appreciate your dedication to do that. We will have
questions for the panel through the questions for the record
(QFRs), if we could, Mr. Chairman.
Again, I thank my colleague from Massachusetts for yielding
to me.
Senator Carper. You are welcome. Thank you so much for your
comments, and thanks for your steadfast work on these issues
too. Thank you.
OPENING STATEMENT OF SENATOR BROWN
Senator Brown. Thank you, Mr. Chairman.
And, thank you to Senator Coburn.
As you know, grants are important not only to other States
but to Massachusetts. We have world class research facilities:
MIT, Northeastern, UMass, WPI, and others. We are second in NIH
funding and fourth on a per capita basis. I have heard anywhere
from first to fourth. That is pretty impressive for a State our
size and it drives an information based, 21st Century economy
that serves as a model for our Nation. I support the increase
in NIH funding and ensuring consistency in that funding, not
just to create jobs in the Bay State, but more importantly to
save and improve people's lives.
I have learned in my brief time in Washington that throwing
more money at a problem without adequate oversight and
management is a recipe for waste, fraud, and abuse.
Unfortunately, the current grants management system is beset by
longstanding problems. For example, GAO recently reported that
some 3,700 grant and contract recipients receiving $24 billion
in Recovery Act money collectively owed more than $750 million
in Federal taxes. The government also improperly pays many
grants, for example, 5 of the top 10 government programs making
improper payments were grant programs. These grants programs
represent approximately $40 billion of the $115 billion total
of government improper payments. This hearing will focus on the
government's failure to properly disperse grant dollars and GAO
reports at the end of Fiscal Year 2011, $794 million remain in
expired accounts as was referenced by Senator Carper.
The lifecycle is also characterized by many other problems,
from not assessing the capability of prospective grantees to
account for funds, to poor monitoring of grantee performance,
to grants that are not closed out in a timely manner. Simply
put, the grants management system is broken. We need to fix it.
Grants now account for more Federal outlays than contracts, yet
the grant management system is woefully behind the Federal
contract management system. To achieve these grants and the
grants reform that we need, there must be robust governance
structure that effectively incorporates input from all of the
stakeholders. It is our role as leaders to make sure that we
fix this right away. The taxpayers have a right to expect
better management.
We cannot continue to waste money, Senator Carper, as you
have referenced. We have to do it better. We just have to. I am
looking forward to the testimony and I have some questions and
go and do some votes. Thank you.
Senator Carper. Thank you so much, Senator Brown. Thanks
for being here.
I want to thank our staffs, for the work that they continue
to do here and help us to our oversight jobs.
Danny Werfel is, I think this is the first time you have
been before us, Mr. Werfel. I was kidding. Somebody the other
day said if we had to pay him on the basis of every appearance,
the Federal deficit would be a lot larger. We are glad you come
for no extra charge.
But our first witness today is Daniel Werfel. He is the
Controller at the Office of Management and Budget. Mr. Werfel
is responsible for OMB's efforts to improve financial
management in all areas of the government, including financial
reporting, improper payments, real property management,
financial accounting standards, grant management, and financial
systems, a lot of which are things we worked on in this
Subcommittee.
Mr. Werfel generously testifies in front of our
Subcommittee quite frequently. We thank him for being with us
today. So welcome.
Elizabeth M. Harman, Assistant Administrator for the U.S.
Department of Homeland Security. She is our second witness and
has served in this role since 2010. She is responsible for the
development, the administration, the implementation, award, and
close out of more than 50 different grants and financial
assistance programs.
Ms. Harman has over 20 years of experience in the emergency
management community, starting at the age of 12--is that right?
I do not know if that is right or not--where she has held
positions as an administrator, an academic, a volunteer and a
career firefighter. That is pretty impressive.
We want to thank you for appearing before this
Subcommittee. Welcome.
Ms. Nancy Gunderson, U.S. Department of Health and Human
Services. She is the Deputy Assistant Secretary for the Office
of Grants and Acquisition Policy and Accountability at the
Department of Health and Human Services.
Her office is responsible for department-wide leadership in
the areas of grants and acquisition. Ms. Gunderson joined the
Department of Health and Human Services in 2009. She was also
the one-time Director of Acquisition Operations for the Federal
Emergency Management Agency (FEMA). And has also held several
key positions within the Department of Defense. We look forward
to your testimony. I want to thank you for joining us today.
And finally Mr. Stanley Czerwinski, who was the Director on
the Strategic Issues Team for GAO. He is responsible for
leading a broad range of evaluations concerning Federal, State,
and local governments. Prior to coming to GAO, Mr. Czerwinski
worked for both the Congressional Research Service (CRS) and
the Congressional Budget Office (CBO). He has testified
numerous times before Congress. We thank him for being with us
today.
One of the sounds that people most enjoy hearing is the
sound of their own name correctly pronounced. So, we try to get
it right and excuse us when we do not please.
Mr. Werfel, you are in the leadoff spot.
Mr. Czerwinski, you get to bat cleanup. In between we have
these two ladies. A good lineup. Please proceed.
TESTIMONY OF HON. DANIEL I. WERFEL,\1\ CONTROLLER, OFFICE OF
FEDERAL FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET
Mr. Werfel. Thank you, Chairman Carper, Ranking Member
Brown, Dr. Coburn, and Members of the Subcommittee, for the
invitation to discuss with you today how the Federal Government
can improve our management of Federal grants.
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\1\ The prepared statement of Mr. Werfel appears in the appendix on
page 43.
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In response to the President's charge to build a 21st
Century government that operates efficiently, effectively, and
accountably, this Administration is taking transformative steps
to improve the oversight and accountability of funds awarded
through Federal grants.
We are doing this by targeting oversight resources on the
risk of waste, fraud, and abuse and by reducing administrative
burden on recipients to improve grants delivery.
To meet these goals, OMB has worked over the past year to
review our policies on the single audit tool to ensure that we
are best focusing our oversight resources where they can be
most targeted on addressing the risk of waste, fraud, and
abuse.
Similarly, we are reviewing our cost allocation and
administrative requirements to ensure that we are minimizing
the administrative burden and resources associated with
compliance so that recipients can focus their efforts on
achieving outcomes.
Consistent with our belief that successful resolution of
policy questions requires strong input from those who may be
affected, OMB began by engaging with both Federal and non-
Federal stakeholders to generate ideas for reform.
Last October, we created the Council on Financial
Assistance Reform (COFAR), an interagency council to provide a
unified governance voice to the grants community and coordinate
grants policies across the government.
The COFARs first assignment has been to work with OMB to
further develop these ideas for reform while also charting its
own path for further ongoing stakeholder engagement.
In order to provide all interested stakeholders with an
opportunity to formally and transparently provide their input
at the formative stages of this process, OMB published an
advance notice of proposed guidance in the Federal Register
last February.
For each reform idea discussed, we looked for new and
creative ways to ensure that our grants policies best serve the
Federal Government, grant recipients, and ultimately the
taxpayer.
We received more than 350 public comments through this
process, including views from State, local, and tribal
governments, institutions of higher education, organizations,
and the audit community.
Since then, OMB has worked with the COFAR to review the
feedback and develop concrete reform proposals for
consideration. We intend to publish a notice of proposed
guidance for public comment in the coming months.
Beyond this effort, OMB is also improving the financial
stewardship of Federal grants through verification of recipient
eligibility using a new do-not-pay tool which I know you are
aware of.
And, as I discussed in a hearing last week, we are also
working to increase the transparency of Federal spending of
which grants is a major component.
I would also like to specifically address GAO's recently
issued report on the timeliness of grant closeout actions. We
fully agree with GAO that timely closeout of grants can be
improved. Failure to close out these accounts in a timely
fashion may, in some cases, represent a worthy opportunity to
improve our financial management and grants management
practices, and I commend this Subcommittee and GAO for drawing
attention to this issue and calling on Federal agencies to act.
We are committed to working with agencies to ensure that
appropriate steps are taken to improve accounting and other
controls in this area.
Having said that, we believe there are a few important
caveats to the GAO report that I have highlighted in my written
remarks. Most critical of these caveats, the prolonged period
for closeout in some cases may reflect deliberate agency
controls to ensure that proper grant recipient documentation is
provided prior to disbursement of grant funds that closeout.
Caveats aside, we fully agree with GAO that there are
opportunities to improve the timeliness in the closeout of
grant awards.
To that end, yesterday I issued an alert on this topic to
all agency chief financial officers (CFOs) that include
specific strategies that agencies should explore for improving
this process, including establishing strong linkages between
the program and the CFO shop to determine what timely closeout
means for programs and how to achieve it, focusing first on
closing out expired grants that are several years past their
end dates and have no remaining funds, establishing policies
and procedures describing when it is appropriate for the agency
to unilaterally close out grants, establishing annual or
semiannual performance targets for timely grant closeout,
leveraging internal control procedures to mitigate risks
associated with not closing out grants in a timely manner, and
monitoring closeout activity and tracking progress in terms of
reducing our closeout backlog.
As you will hear from HHS and DHS today, they are already
engaging on these types of actions in their improvement
efforts.
Through these and other steps, we look forward to
continuing to work closely with agencies, GAO, and this
Subcommittee to ensure that the financial management policies
governing Federal grants are delivering the high standard of
accountability appropriate for an efficient, effective, and
accountable 21st Century government.
Thank you again for the opportunity to testify today. I
look forward to answering your questions.
Senator Carper. Thank you so much. Ms. Harman.
TESTIMONY OF HON. ELIZABETH M. HARMAN,\1\ ASSISTANT
ADMINISTRATOR, GRANTS PROGRAM DIRECTORATE, FEDERAL EMERGENCY
MANAGEMENT AGENCY, U.S. DEPARTMENT OF HOMELAND SECURITY
Ms. Harman. Good afternoon. Chairman Carper, Ranking Member
Brown, Dr. Coburn, and other Members of the Subcommittee. My
name is Elizabeth Harman. I am the Assistant Administrator for
the Grant Programs Directorate (GPD) at the Federal Emergency
Management Agency, part of the Department of Homeland Security.
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\1\ The prepared statement of Ms. Harman appears in the appendix on
page 50.
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On behalf of Secretary Napolitano and Administrator
Fugate--
Senator Carper. I would just ask, do not call it GPD.
Ms. Harman. OK.
Senator Carper. I am not big on acronyms, just so you know.
Ms. Harman. We will go with Grant Programs Director.
Senator Carper. That is great or just call it the
Directorate.
Ms. Harman. Thank you.
On behalf of Secretary Napolitano and Administrator Fugate,
it is my pleasure to appear before you today to discuss the
grant management practices within FEMA. FEMA grant programs
have significantly contributed to the security and
preparedness--
Senator Carper. If you could slow down just a little bit.
If you use 6 minutes that is OK.
Ms. Harman. OK.
Senator Carper. If you use 16 minutes, that is another
problem.
Ms. Harman. I will not go to 16 minutes. I promise.
Over the past 10 years, these programs have provided more
than $35 billion in Federal funds to enhance the capabilities
to plan, prepare, prevent, respond to, and recover from both
natural and terrorist events. Over the past 10 years, we have
also made progress in how these grants are managed and
administered.
Since its creation, the Directorate has matured as an
organization. In the past 2\1/2\ years, we have made
significant strides and improvements to our operations,
focusing heavily on the development, management, and oversight
of FEMA grant programs.
These improvements include managing grant closeouts,
enhancing grant management information technology (IT) system,
and expanding our monitoring activities both programmatic and
financial. The ultimate responsibility for management and
oversight of FEMA grant programs rests with the Grant Programs
Directorate.
As of Fiscal Year 2011, the Grant Programs Directorate was
experiencing delays in processing grant closeouts for FEMA's
grant programs. These delays resulted in significant backlog of
open grants which were several years past their period of
performance end date.
Our Directorate identified solutions to address the
immediate closeout of awards as well as to establish long-term
goals to support ongoing sustainability of closeouts that would
mitigate future delays.
Our Directorate conducted a current State assessment of the
grant closeout process, evaluated our universe of open and
closed grants, coordinated with related stakeholders to
identify process improvements, and developed and implemented a
closeout manual to detail the process and enhance stabilization
and standardization.
Through a phased approach, our Directorate initially
focused its efforts on grants awarded in Fiscal Years 2005 and
prior; and within the first 3 months of 2011, we effectively
closed out 588 grants. To date, we have successfully closed
8,000 of 14,000, going back as far as 1997.
Moving forward, we are currently concentrating our closeout
efforts on the closeout of all Fiscal Year 2007 by March 31,
2013, in conjunction with all eligible Fiscal Year 2008 through
2010 grants.
Our Directorate has taken a proactive approach in ensuring
that all current and future grants are closed in a timely
manner. To sustain and maintain continued progress on this
effort, we have implemented a tracking system designed to
identify grants nearing closeout within the 30-day period as
well as developed a grant closeout guide defining roles,
responsibilities, and processes for stakeholders.
To fulfill FEMA's strategic initiative of consolidating and
automating the entire non-disaster grants management lifecycle
into a single system, we have developed and implemented the
Non-Disaster Grant Management System. This system further
enhances the grant management infrastructure of FEMA
preparedness grant programs.
We began accepting applications in the system in Fiscal
Year 2011 and we currently use it to manage approximately 20
different preparedness programs. When fully implemented, the
system will consolidate all of FEMA's non-disaster grant
programs into one comprehensive system that covers the entire
grant management lifecycle.
The expansion of this system and its improved functionality
will provide FEMA with a flexible system that can quickly adapt
to changing business needs, reporting requirements, and
performance metrics.
With regards to financial and programmatic monitoring, FEMA
has launched a long-term solution. This approach implements
risk management principles to direct scarce monitoring
resources to grantees and programs with the most need.
As part of a multiyear process, FEMA has refined criteria
for deciding which programs to monitor, standardized regional
financial and program monitoring activities and expanded
ongoing oversight activities to ensure early identification of
any issues.
This methodology builds upon the established monitoring
approach and will drive FEMA toward continuously advancing his
grants management capability.
The Fiscal Year 2012 monitoring plan lays the foundation
for future risk-based monitoring which supports DHS's risk
management philosophy.
FEMA plans to continue to further refine this approach. We
will begin focusing our efforts on the development of a unified
financial and programmatic monitoring plan for Fiscal Year
2013.
The purpose of this integrated approach will be to
encourage and promote the coordination of activities and
communication between financial and programmatic monitoring
staff and build the foundation for robust integration into
Fiscal Year 2014.
Over the last several years, FEMA has strived to improve
how our grants have been managed and administered fiscally and
programmatically. I believe we have made significant progress
and improvements in that area and will continue to do so moving
forward.
Mr. Chairman, Ranking Member Brown, and other Members of
the Subcommittee, this concludes my statement and I am happy to
answer any questions you may have.
Senator Carper. Good. Thanks for that statement.
Ms. Gunderson, you are recognized.
TESTIMONY OF NANCY J. GUNDERSON,\1\ DEPUTY ASSISTANT SECRETARY,
OFFICE OF GRANTS AND ACQUISITION POLICY AND ACCOUNTABILITY,
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
Ms. Gunderson. Chairman Carper, Ranking Member Brown, and
Members of the Subcommittee, thank you for this opportunity to
discuss the Department of Health and Human Service's grants
management policies and practices.
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\1\ The prepared statement of Ms. Gunderson appears in the appendix
on page 59.
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As the Deputy Assistant Secretary for Grants and
Acquisition Policy and Accountability, I am responsible for
providing department-wide leadership in the area of grants and
acquisition management. My office oversees and supports the
Department's 13 grants management offices and 10 procurement
activities as they award and administer grants and contracts in
fulfilling the Department's mission to enhance the health and
well-being of Americans.
As the largest Federal grant making organization and one
that manages a great variety of grant programs, the Department
is often called upon for leadership and advice in the area of
grants management.
We proudly serve as a managing partner of grants.gov, the
Federal-wide site used to find and apply for grants
opportunities.
As co-chair of the Council on Financial Assistance Reform,
we are engaged in the Office of Management and Budget's
Federal-wide efforts to streamline existing grants
administration policies.
Our grantees provide vital services and conduct important
research, all for the benefit of the public; and therefore, it
is in the Department's and the public's best interest that our
grantees succeed. And, I would like to highlight some of our
grants management practices and policies.
Our agencies provide technical assistance to facilitate
grantee performance and their compliance. They also monitor
grantee progress over the project's lifecycle. Grantees are
required to submit financial reports, quality performance
measures, and annual and final progress reports, all of which
provide assurance that the grant funds are expended in
accordance with the original purpose and intent of the grant
program.
With regard to grant closeout, this process reflects the
culmination of the business relationship between the Federal
grant program and the grantee and is a vital step in ensuring
accountability of the grantee and the financial integrity of
the program expenditures. When the financial reporting and
expenditure information come together, the grant may be closed
out in our payment management system.
As reported by the Government Accountability Office, the
Department has made progress in its closeout effort. It was
noted that the total amount of undisbursed balances and expired
Federal grant accounts was over $200 million less in 2011 than
the amount previously reported in 2006, while during this time
the overall amount of grant expenditures and disbursements
increased by 23 percent.
In 2011, at the Department, we identified 60,000 grants as
eligible for closeout compared to 64,000 in 2006 and closed
approximate 26,000 of the eligible grants in 2011.
Additionally, the Government Accountability Office also
reported on grants that remained undisbursed more than 5 years
past the grant end date, and we recognize that more work
remains to close out grants that have long expired and to keep
up with the overall workload.
My office led an accelerated closeout effort last year to
get ahead of grants closeout and prevent a sizable backlog from
occurring. In addition to focusing on closeout efforts on
grants facing funds cancellation, which generally occurs five
Fiscal Years after the funds were appropriated, we asked our
agencies to concentrate also on Fiscal Year 2008 funded grants
that had more recently expired.
This effort resulted in the de-obligation of $116 million
from a total of 2,700 grants and also revealed some of the
systemic problems and challenges we have between our grants
systems, the payment management system, and our grantees'
financial reports.
We plan to keep this accelerated closeout initiative
moving, update our grants policies by the end of the calendar
year, resolve the system challenges within 24 months and
supplement our agencies initiatives to dedicate staff to grants
closeout by establishing an intradepartmental grants closeout
task force.
Finally, as part of the Secretary's commitment to program
integrity, we are collaborating across the Department to
further improve our grants closeout practices. Incorporating
grants closeout into our program integrity initiative will
ensure that closeout remains a departmental priority,
facilitate a consistent method to assess on a program-by-
program basis the challenges associated with closeout, and
provide an opportunity to share the agency's risk mitigation
practices across the Department.
I have spoken with the agencies reflected in the report
that have aged grants expirations. The challenge they have in
closing these grants primarily involved discrepancies between
the authorized, expended, and disbursed amounts recorded in the
grants and financial and payment management systems.
These grants require significant analysis and coordination
to ensure that all accounts are equal and that the grants may
be closed out. The agencies are taking steps to closeout these
grants.
The Department strongly agrees with the need to protect
taxpayer dollars and is committed to doing so as we work to
support our mission.
Thank you for the opportunity to appear before the
Subcommittee about this important topic, and I am glad to
answer any questions you may have.
Senator Carper. Thank you, Ms. Gunderson.
Mr. Czerwinski, all yours.
TESTIMONY OF STANLEY J. CZERWINSKI, DIRECTOR,\1\ STRATEGIC
ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Czerwinski. Thank you, Chairman Carper and Ranking
Member Brown, Dr. Coburn, Members of the Subcommittee.
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\1\ The prepared statement of Mr. Czerwinski appears in the
appendix on page 63.
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Thank you both for asking us to be here as well as asking
us to do the work that we are here to talk about. One of the
themes that I am going to touch on today is the importance of
congressional oversight in achieving results.
Back in 2008, you asked us to look at undisbursed grants.
What we found was over $1 billion sitting in one payment
system, the one that HHS runs, and these funds had not been
disbursed even though their grants had expired. You
subsequently asked us to take another look at this situation in
2011. This time we looked at the grant accounts that HHS has
along with the 12 agencies that it services. That is about 70
percent of all grants. This time we also added in the
Department of Treasury that services their own grants as well
as those for other agencies for about 10 percent.
The story at Treasury was really interesting because we had
not looked at Treasury last time, and this time when we went in
there 4 years later, they said, we have been waiting for GAO to
come for 4 years.
What they had said was that you have been asked by Senator
Carper and Coburn and we know they will be asking you to come
back. And, when you did your report in 2008, we thought that
you would be here to ask and we wanted to be doing some things
that we could actually show improvement on.
At that point in 2008 Treasury set up a dormant account
report. They also went to all the agencies they service and
said that GAO will be here to ask questions and we want to be
able to show improvement.
We looked at what happened from 2008 to 2012 and we saw
roughly about $100 million improvement over that 4-year time. I
can tell you that would not have happened without congressional
oversight.
Similarly, what we have found in our work is when the
inspectors general, GAO, or internal auditors look at an
agency, it raises the visibility of what is going on and we see
actions taken.
This is similar to what Ms. Gunderson talked about with
HHS. The Inspector General for HHS did four reports looking at
grants that should have been closed out. Their internal auditor
in their performance of accountability report identified grant
closeout as an ongoing, lasting management challenge.
As a result, HHS took action, and the results that Ms.
Gunderson talked about today are really a good indication of
that.
This goes back to a point that you and Senator Coburn
mentioned at the hearing that Comptroller General Gene Dodaro
did on the Data Act. You only get improvement when agencies
step up, take individual accountability and carry out what they
are supposed to be doing.
In terms of grant closeout, there is essentially a process
that they have to follow step by step, grant by grant; and the
work that you asked us to do this time around really gives a
good roadmap for how to do that.
You asked us to look at the oldest. You asked us to focus
on the biggest. And, as the chart\1\ that you have up there
shows, over $100 million sits in accounts that had been dormant
for 5 years or longer.
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\1\ The chart referenced appears in the appendix on page 77.
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What we also found, looking at the biggest, was that about
1 percent of the grants in terms of numbers are over $1
million. Yet, they account for one third of the monies sitting
there unspent.
If agencies follow the roadmap that you laid out and focus
on the oldest and biggest, they will get a good leg up on going
forward the way they should on this.
It is really important that agencies close out the grants
because it allows for more efficient and effective use of the
Federal funds.
Right now that money is sitting there; and if they can
collect it, it can either go back to Treasury or agencies can
redirect it for other purposes.
Now, grant closeout is just one step in the grant making
process but it shows the importance of grants. Chairman Carper,
as you mentioned in your opening statement, over $600 billion
in grants went out this past year.
That goes out in over half a million individual grant
awards. Also, there are about 1,000 different grants programs.
We are talking about one in almost every five Federal dollars
going out through grants. This is a really important process.
In your oversight agenda for next year, we are hoping to
help you out. We are doing some work at your request, Chairman
Carper, and your request, Ranking Member Brown, to look at a
number of grant issues. I just want to lay those out for a
moment before I close my statement.
First, we are looking at streamlining grants. Second, as
you mentioned in your statement, Chairman Carper, we are
looking at performance measurement. What are we getting with
grants? And finally, internal controls.
On streamlining, in 1997 Congress passed PL 106-107 and PL
106-107 was aimed at improving the way we apply for grants, the
way we manage them, and the way we oversee them; and we know
that, 15 years later, we are not where we should be.
And so, at your request what we are going to be looking at
where we stand on streamlining efforts to date and hopefully
come up with recommendations to improve.
Now, one of the questions that people always ask is, What
are we getting out of our grants? And that is probably one of
the hardest answers to come up with--How do you measure
performance?
But, there are some grantees and some grantmakers who have
done some very innovative things trying to measure performance.
What we are going to do, at your request, is to look at those,
see what has worked, see what has not and hopefully have some
best practices for others to draw on.
Finally, as you know, there have been a number of reviews
raising a lot of problems with how we go about either managing
or overseeing grants. Often that comes back to internal
controls.
So, once again at your request, we will be looking at how
internal controls can be improved on by grant makers.
Going forward, we hope this will help you with your
oversight agenda. And, I have to tell you, I have done a lot of
hearings and I have worked with a lot of committees--we love
working for people like you.
What you have is a dedication to accountability that we
share, what you have is a discipline for carrying out oversight
over the long haul, and a determination to make change. And
frankly, that is what we at GAO live for.
We look forward to helping you all the way through.
Senator Carper. What we also have is really dedicated
Subcommittee staff on both sides and we are grateful for the
terrific work that they do and we see you as a real partner,
OMB as a real partner, the IG as a real partner, and the
agencies as well. We are in this together and I think we are
making some progress and that is encouraging. Senator Brown.
Senator Brown. Thank you, Senator Carper.
I guess in listening to the testimony, one of the questions
I have, I think I will start with FEMA, at what point do you
terminate the grant if it has not been disbursed? I mean some
of them go for 10 plus years, number one.
If you cannot verify how the money is spent, is there any
mechanism to, and you believe that there is a fraud perpetrated
or just there is some type of negligence, actual, per se, what
do you do?
Ms. Harman. Thank you. Those are excellent questions.
With regards to termination of the grants, the majority of
our grants are really focused on preparedness and preparing our
Nation to build capabilities so that we can respond to and take
care of any events.
Many of those come in the form of target allocations and
are driven through a risk formula that is in statute of the 9/
11 Act. There area lot of grants over the years that have been
proscribed with statutory minimums going to each stakeholder.
Other grants, we are now moving to more of a competitive, more
of a bottom-up needs approach.
I think you are going to see some changes as we move to
that with regards to un-obligated bounces that are out there.
We have more of a request for funding that is needed as opposed
to a dollar amount that has been calculated, based off risk for
stakeholders to spend within a defined period of time.
Traditionally, our period of performance is a policy
decision. In the past years, it has been a 36-month period of
performance. We are moving more to have a 24-month period of
performance effectively this year as we roll grants out the
door.
We work very closely with our stakeholders to ensure how
that money is being spent. It has to tie currently to their
State homeland security strategies. In the future, it will be
tied to their threat hazard identification risk assessment.
You may have heard the term THIRA thrown around. It is an
acronym. However, if you have heard of that, that is what they
should be spending that money toward.
With regards to terminating grants, we have terminated
grants in cases of fraud or waste or things that have been
identified; but with regards to spending the dollars, it takes
a long time to build capabilities and build preparedness.
Senator Brown. Does it take over 10 years?
Ms. Harman. Well, what I can tell you is from the FEMA
preparedness grant programs that we have obligated more than
$35 billion over the last 10 years. Of those dollars, our
average return to the Treasury after closeout is roughly 1
percent.
There are some grant programs that a little bit more goes
back for a variety of reasons. I can chat with you about
whether it is matching funds or other constraints in the
program.
Senator Brown. I just want to make sure you have in place a
mechanism in the event that it is clear that they are not going
to fulfill their grants request. If you find out that there is
a fraud or some type of negligence that there is recourse.
Ms. Harman. Absolutely.
Senator Brown. We can follow up on that off-line because I
do want to shift gears just a little bit, I am going to ask the
same question to Health and Human Services.
Mr. Werfel, thank you for coming back. One of the things
that is always perplexing to me is that we are awarding grants
of substantial money to people that owe us a tremendous amount
in delinquent taxes.
How do we address that? How is that allowed? How do we know
that, when they get their grant, a portion of that money is
actually going to paid back, the money that they owe us anyway?
Should there not be just a straight prohibition on those
types of awards? If you owed taxes to the Federal Government
you are not getting any grants until you pay it off.
Mr. Werfel. Thank you for the question, Senator. It is a
very straightforward question. Unfortunately, there is not a
straightforward answer.
Senator Brown. Of course.
Mr. Werfel. Let me amplify why.
The status of our taxpayers and all the elements of that,
who they are, their household size, their adjusted gross
income, and their delinquency status is all protected
information. Section 6103 of the tax code provides significant
constraints on the IRS's ability to release that information,
not just publicly but within and among Federal agencies as
well. We certainly do not have unconstrained access.
Senator Brown. It does not need a congressional fix then?
Mr. Werfel. It potentially could. But it is a trade-off.
There is a trade-off. There is a balance there in terms of
privacy and protection of data versus sharing that information
for program integrity purposes.
As the world exists today, Federal agencies do not have
real-time access or a way of gauging a recipient's tax status
in terms of whether they are delinquent or not.
Senator Brown. What about if there is a Federal lien? Would
these agencies check for a Federal lien or State liens?
Mr. Werfel. When you get into certain levels of
delinquency, the more severe delinquencies, others certain
public indicators start to emerge such as--
Senator Brown. I think $750 million is kind of severe.
Obviously, it is just not one entity.
Mr. Werfel. Right.
Senator Brown. At what point, I guess is what I am getting
at. I think you know the problem. I think you know my concerns
and probably Senator Carper's.
I would love a suggestion as to how you feel we should
address and fix it, whether it is through Executive Order, a
legislative fix, an administrative fix. I just want to fix it.
Mr. Werfel. Right. There was legislative action recently.
Several appropriations bills required that agencies consider
suspension and debarment for issues where we have a recipient
that is either a convicted felon or has an outstanding tax
liability, and we are currently working on guidance to
articulate how agencies will do that. Again, I just want a
caveat that the constraint we have here is getting access to
the information on who is delinquent or not and that makes the
process a little bit more clumsy in terms of us executing to
make sure that--
Senator Brown. Right. I want to find a way to streamline
it, though, and maybe we can work with your office.
Mr. Werfel. Something to work on.
Senator Brown. Thank you.
Then, getting back to you, Ms. Gunderson, I know it is kind
of the same question, but Health and Human Services has a large
percentage, $794 million in undisbursed grant money.
While there may be reasons why these accounts have not been
closed out in the short-term, why have they not closed out
expired accounts that are 3 years or older? Kind of the same
question I asked earlier.
I mean, at what point do you say, OK it is clear that they
are not going to fulfill the grant award and we need to get the
money back. Also, it is clear that there was some type of fraud
or negligence.
Do you have a mechanism to recoup the money?
Ms. Gunderson. Thank you. Of the $795 million, about $595
million of that was reported by the GAO to be accountable to
HHS's programs.
Senator Brown. Thank you for that correction.
Ms. Gunderson. We are a portion and subset of that, but
again a large subset of that, and it is a significant amount of
money. We believe the amount is slightly overstated because we
have since found, through our own analysis, that some of those
grants had actually been extended and performance was not yet
completed.
Senator Brown. Well, it says $400 million.
Ms. Gunderson. Even in that case, it still is a significant
amount of money. We are engaged in closing out that effort.
We have since focused, as I mentioned earlier, a lot of our
closeout effort on the more recently expired grants and this
audit brought to light the need to close out those ones that
have long been expired.
As one of the examples, one of our agencies has closed out
over 17,000 of those aged grants this Fiscal Year, and 8,000 of
those were funded from Fiscal Year 2007 or prior. So, we are
making progress.
Senator Brown. What about the earlier ones? The ones that
are 10 years and over.
Ms. Gunderson. Those ones are the Fiscal Year 2007 prior,
about 8,000 from one agency alone have been closed out. We are
making progress and putting our attention towards this.
Senator Brown. I do not want to take Senator Carper's time.
I may come back to this. Thank you.
Senator Carper. Did you want to finish your sentence?
Ms. Gunderson. I did not know if you wanted me to address
the other half of your question.
Senator Carper. Go ahead.
Senator Brown. Yes, please thank you. I did not want to
take the Chairman's time.
Ms. Gunderson. That is OK. We do have mechanisms and
processes to be able to terminate a grant if need be when a
grantee is not performing or is underperforming. A great
majority of our grants.
Senator Brown. How about fraud and negligence, though?
Ms. Gunderson. And in those cases as well, and having those
issues referred either to our Office of Inspector General for
action as well.
A great majority of our grants are awarded to State and
local governments. We do work in partnership with them to
ensure that they are performing against the grants that we do
award with them.
Senator Brown. Do you have a mechanism though? For example,
I just told my staffer, hey, I want you to go through and see
how many are outstanding in Massachusetts because I want to
write them and call them and say, did you know there may be a
turn over with personnel so we can get that grant out the door.
It is about jobs. It is about obviously maximizing the
grant opportunities in your State so you are not falling
behind.
Is there something that you all have that you can let us,
as legislators, know that your State has $300 million that has
not gone out the door yet. I am sure you would like to know
that, right, Tom?
Ms. Gunderson. We can provide that information through our
payment management system and we can provide information about
all the awards that your States received through our Tracking
Accountability in Government Grant System.
Senator Brown. Thank you.
Senator Carper. Let me direct my first question to Mr.
Werfel.
I understand from Peter Tyler, who is the fellow sitting
over my left shoulder here, that yesterday your office put out
an important document to the Federal agencies, controller
community, that specifically addresses the issue of expired
grants.
In your alert, I am told, your alert to agencies
highlighted the importance of closing out grants in a timely
manner, the subject that we are talking about here today; and
it specifically mentioned the importance of curbing waste and
fraud which we have talked about here again today.
And, we believe that this is an excellent example of the
Administration taking positive, proactive action when a problem
becomes known as this one has.
We understand the communication I mentioned also described
the many issues and recommendations that came out of GAO. And,
I just wondered if you might comment for us on yesterday's
alert, and also describe any specific additional steps that the
Administration is contemplating taking to further improve the
timeliness of agencies in performing grant closeouts and the
associated audits.
Mr. Werfel. Thank you, Senator.
I think it is an example of this entire hearing and the GAO
report and our response I think is an example of how sometimes
in small ways and through small steps we can make significant
progress in terms of understanding the nature of deficiencies
that are occurring in financial management and work
collectively to close them out.
GAO's report, I think, prompted by this Subcommittee
highlighted and area that we did not have full insight on. On
an individual agency basis I think they did; but collectively
across the community whether it be the CFO council or the
grants council that we recently created, looking at that issue
in its entirety, we are able to say, OK, cross government we
have varying levels of performance.
I think you are hearing from two witnesses today whose
agencies are very actively engaged in this issue with or
without OMB issuing directions or alerts.
But, we have other agencies that self reflective can say
this is an area that we have not focused on and the fact that
it is being raised, whether it is by our Inspector General or
GAO, there is something we can do about it.
So, we get our communities together. We just, for example,
met yesterday with every CFO, had a robust discussion on a
whole host of issues probably all important to this
Subcommittee.
Senator Carper. Give us a couple of examples.
Mr. Werfel. Of what we talked about?
Senator Carper. Yes.
Mr. Werfel. Well, we talked about the implementation of do-
not-pay, its importance, and made sure that every agency was on
track in terms of thinking about their signing up for that
solution. And, we talked about--
Senator Carper. How was the reaction? That is something
that is obviously of great interest to us.
Mr. Werfel. I think the reaction is very positive. The way
we talked about it, just to share with you, we consider the use
of data and leveraging the information age in new and effective
ways as the major game changer in the area of improper
payments; and the issue is how well the agency is positioned to
move from being in an embryonic phase of using data to a more
sophisticated one. We have a few agencies that are off and
running at 40 yards down the football field and they are doing
excellent work. HHS is certainly one of them with their CMS
fraud lab and all the forensics they have going on.
Senator Carper. They have a lot of money at stake there.
So, good to hear.
Mr. Werfel. Yes. It is the right agency to be advancing
down the football field ahead of everyone.
The other agencies are not in that same place; and the
point is that, by signing up for the do-not-pay solution, it is
kind of a, we are going on the journey together; and Treasury
and OMB are helping agencies lead because we are taking them on
a journey to start with some very basic data matches against
the death master file, against the occluded party list.
But we are building on that to say there are more
sophisticated analysis that can take place. And, Treasury is
going to house that data analytics center for the agencies. If
they do not have the wherewithal right now to get 40 yards down
the football field on their own, the do-not-pay solution is
kind of a collective amongst the Federal agencies to move them
along.
And, I think there is a lot of excitement and energy around
the help that the do-not-pay solution will provide agencies in
helping them along. So, that is an example.
But, we also talked about grants closeout. I talked about
the elements of the Controller alert that was issued. This fell
into a category of an area where the agencies felt like, with
many GAO reports, let us know the problem, highlight it for us
so that we can understand the nature of its, and then talk to
us about the different types of strategies that are at play.
So, looking at, for example, tracking, performance targets,
the right times and places to unilaterally close out grants
just when certain criteria are hit, all of those things are
things that, in response to the Controller alert, that agencies
are reviewing and we will continue that dialogue going forward.
Senator Carper. OK. Mr. Czerwinski, let me just ask how
would you react, if you will, to the news that Mr. Werfel and
his team put out the document yesterday to the Federal agency
controller community that specifically address these expired
grants?
Mr. Czerwinski. Thank you, Chairman Carper, and we are very
pleased to see that.
As you will recall, this is stemming from a recommendation
that we made in 2008 to you. So, to have the action taken now
is very gratifying to us. And, going back to my statement, I
think this is testimony to essentially congressional oversight.
In terms of the actual content of the alert, we agree
completely with the concept; and that is, by raising the
attention, that you will get better performance; and then
again, the implementation, the kind of things that I talked
about emphasizing those that are most at risk, the oldest,
largest.
So, we are in very much agreement with where OMB is going
with this.
Senator Carper. OK. Good.
This is a question, to some extent you all have already
spoken to this but I am going to ask you just to drill down a
little bit more, just reiterate what you have already said.
But, I am going to ask Ms. Gunderson and Ms. Harman, if you
would just comment a bit more on the steps that you all are
taking to address within your own Departments the expired
grants.
Ms. Gunderson. We have issued department-wide guidance to
accelerate the close out initiative; and as I mentioned, my
office engaged in an accelerated closeout team effort last year
and really had our agencies focus in on the Fiscal Year 2008
funded grants that had recently expired.
Senator Carper. What was the catalyst for that, for you all
doing that?
Ms. Gunderson. It was again as a result of some of the OIG
reports that we had seen, our auditor's reports reflecting a
concern with it in our financial statements, and just a need to
move forward and again breakdown that backlog that creates the
cumulative effect of these grants having expired and being
added to the pool to be closed out.
So, we wanted to get them ahead of the game in addition to
the efforts that they took to focus in on the grants that were
having funds canceled or those older ones. So, that was one
main initiative.
We've asked our agencies to dedicate staff to this and many
have already done that, or done that on their own, several in
those cases. I personally have this in my performance plan to
ensure that our Department increases grants closeout and
several of our agencies have also taken that same initiative.
Senator Carper. That is good. Ms. Harman.
Ms. Harman. With regards to FEMA, the need for closeouts
was really identified through our Internal Controls Branch that
was created also in January of last year. I realigned our
Directorate to create an Internal Controls Branch to sort of
highlight what do we really need to be working on.
Closeouts was one of the biggest ones. So, although we did
not get to a full branch, we did put together a task force to
sort of do an assessment and say, what are we dealing with
here?
Our grants have a very big spotlight on them. Everyone is
very interested in what are we doing with preparedness and how
much money is going there; and as such, we send those financial
documentation to the Hill on quite a regular basis, quarterly.
The drawdown issue was sort of coupled and hiding in there
and a lot of the discussion was never on drawdown. It was
really, well, we cannot really deal with drawdown.
When we look at the numbers that we were sending and what
we were reporting, it was, wait a second, some of that money
has already gone back to the treasury. We need to take a look
at this.
So, coupled with closeout and internal controls, it really
highlighted a lot of concerns for us. So, that task force was
able to do an internal assessment; and as I mentioned, we have
already closed out 8,000 of 14,000 awards.
All of those awards of 2007 which will be closed, this will
be that 5-year mark where money goes back to Treasury as of
September 30. Those grants will be closed. Our mark is March
30, 2013, and all open grants that are eligible and expired to
closeout will be closed by the end of the Fiscal Year 2013.
Senator Carper. Mr. Werfel and Mr. Czerwinski, would you
say that these two agencies are good examples of what is going
on across the Executive Branch or are they agencies that are
doing an especially good job or are they the laggards?
How would you characterize the job they are doing in this
regard?
Mr. Czerwinski. I would say they are probably on the
leading-edge at this point by the focus they are placing on it.
They may be very well leading-edge because their risks were the
greatest to start with.
Senator Carper. OK. Mr. Werfel.
Mr. Werfel. Those are my exact sentiments. I think the work
that HHS and DHS are doing are commendable. In some ways in
terms of the directions that OMB has issued yesterday, these
agencies are on top of many of those elements in terms of
tracking and understanding.
But, they are driven in some cases by risk; and in
particular I think HHS being the largest grant making agency,
there is a lot of focus from their OIG and from oversight
entities on their grants portfolio and some issues have
surfaced over the years and they have organized themselves to
prioritize the grants management. They look at these indicators
and they delve deeper into them to understand what do these
accounts and their hold over balances mean, and both of these
agencies are evaluating them.
I think it is now incumbent upon the rest of the community,
as generated by the GAO report and in this hearing, to follow
suit, understand the data better, and figure out where there is
need for improvements.
Senator Carper. OK. Good. Senator Brown.
Senator Brown. I just want to go backwards just for a
minute, Mr. Werfel.
So, there is no sharing. I know the privacy issues. Why
then do the agencies as part of their format when they are
putting up their grant application say, let us know, do you
have any tax arrearage and/or under the pains and penalties of
perjury? I hereby certify that I have paid all State and
Federal taxes and no outstanding monies are owed to any
entities thereof.
Why can we not do something like that?
Mr. Werfel. That is definitely an option that is under
close consideration. I mentioned earlier that the legislation
that was recently issued requires us to have at least some
basis of knowledge of taxpayers status in order to consider
suspension and debarment. The self-certification of the
recipient comes out first and foremost as a major and
significant option.
Senator Brown. We just did insider trading in the STOCK
Act, and we are signing our documents when we are doing our
ethics documents. We are signing under the pains and penalties
of perjury.
I would think that somebody applying and getting millions
of taxpayer dollars, the least they could do is certify that
they are in compliance with all applicable tax laws.
I would suggest whomever is making that decision, let us
get it done.
Mr. Werfel. It is definitely under consideration as a
component.
Senator Brown. All right. Also, the agency gave notice,
thankfully yesterday, as you were just discussing.
Did you put in penalties or suggestions of penalties if
you, in fact, do not do it? For example, you are sending out a
notice to the agencies of the things they need to do. Is there
anything that, if you do not do it, this is what is going to
happen, your budget is going to be cut, or you are not going to
be eligible to issue any grants, or is there some type of
penalty?
Mr. Werfel. Not at this stage and that is something we can
talk about as an approach, as a strategy. The approach that we
tried to take at OMB in working with the agency is to do things
in stages, and particularly we get a lot of feedback from the
agencies in our relationship with them.
They often tell us, tell us what the issue is, not the how,
and allow us to fix the issue and defer to our expertise.
So, yesterday what you saw us telling them what the issue
was, making sure that we are a community looking last at what
the issue is, making suggestions on how to do it, but not
necessarily dictating the exact procedures that the agencies
will take.
If that does not work and we move forward now that this
issue is squarely on our radar screen, we would move to a next
stage of development of the process with the agencies of more
directive, maybe a little bit more, I hate the term, but
micromanagement. Whatever term you want to use, but much more
specific requirements would be put in place as we grow and
develop on the issue.
Senator Brown. So, what time frame is that, like, at what
point do you say, this is not really working. The thing that is
kind of gnawing at me is that we are talking, about a lot of
money, and at some point we have to kind of get off our duffs
and just move forward and get it back into the system.
I know Massachusetts and Delaware, we would love to have
that money back in the system to look for other ways to spend
it or use it to pay down our debt.
Maybe I am too anxious. I just want to get it done. However
you can do that to basically light a fire with the agencies who
are obviously, now that you are bringing it to their attention,
now that we have a hearing and, they are making better efforts.
I think it is a collective effort, us pushing it on our end,
you guys hearing about it, you guys pushing it.
Everyone is doing their job. I understand that. I want to
take it a step further now and really I want to close out the
accounts. There should be a working balance within these
things, but not hundreds of millions of dollars. It just does
not make sense.
That being said, I would like to go back to Ms. Harman.
What performance metrics do you have in your agency, or your
agencies, or at the program level to evaluate how effective the
grant was in achieving its purpose. As Senator Coburn
referenced, they have a port emergency response, but they do
not have a port.
How do you figure out if somebody is actually doing what
they are saying they are going to do?
Ms. Harman. That is a really good question.
We have a variety of grant programs as I mentioned earlier.
Some of them are target allocations where there is a given
amount of money that comes to a State and that is intended to
be used on your State's strategic plan.
During the application process, there is a review where
they will submit investment justifications or projects and then
there are milestones that are measured throughout the
monitoring process for that.
Other programs that are competitive programs similar to the
port and transit programs undergo a significant review process;
port in particular, those projects have to be reviewed by the
captain of the port in addition to having a national review
panel.
If those dollars, through monitoring, are being used for
anything other than what was approved, we usually know about it
pretty quickly and steadfast.
There was concern, I realize, with the memo and the
direction that came out earlier in the year to allow greater
flexibility with some of the open dollars that are out there.
We are ensuring, as we work with our stakeholders one on one,
that those dollars under those individual grant programs are
respective of the integrity of that grant program.
If it is a port grant program, any of those dollars being
spent need to be focused on port and maritime security, not
other things.
There are mechanisms there that are in place for that. With
regards to what we know outside of the administrative factors
of monitoring the grants and the performance and the
stakeholders know what we are doing, holistically performance-
wise we know exactly what we have purchased, who has purchased
what at what State level, at what FEMA region to look at the
capabilities that has been built.
Senator Brown. So, is there anything that you all, I am
talking about you two in the middle, is there anything that you
need us to do? Do you have enough bodies to do the job? Is it a
personnel thing that you need? More processors or you need more
computers? What is it that is kind of leading up to a good
effort but maybe we could make a better effort?
Ms. Harman. It is a variety of issues that go on with
managing grants. We have approximately 20,000 open grants
within FEMA that we manage. That does not include disaster
grants. I am talking sort of preparedness, mitigation types of
grants.
Senator Brown. Yes.
Ms. Harman. So, there is a large work load there.
We are using currently sort of risk factors or key
indicators to determine where should we be doing the monitoring
and where should we not. Obviously, we cannot monitor every
single one of those grants so there has got to be some
indicators that are going to lead us to monitor some more so
than others.
So, we are doing a lot of that. But, there is a capacity
there that is needed with regards to personnel, with regards to
funding.
Currently, the funding that supports FEMA is a percentage
of the overall amount of grants that are appropriated each
year. That amount fluctuates year to year.
We had a $4 billion budget at one point. I have a $1
billion budget this last year at the Secretary's discretion to
allocate. It is still the same number of grants that go out the
door that need to be monitored. So, it still continues to build
up.
I think our biggest challenge that we have which we are
making progress on is to move to a consolidated grant
management system, the IT system that we use.
The grant programs Directorate within FEMA is a combination
from DHS programs, Justice programs, and legacy FEMA programs.
With that combination back in 2007, came the people, the
business processes, and the systems with that.
In order for us to extract information when you or your
staff are requesting, what did so and so do with this grant
dollar, we are searching multiple systems to ensure that the
query was correct.
Systems for us is a critical portion of what we do, and we
are making progress there but that is dependent on available
funding and the capacity of the contractor and everyone else to
consolidate all of these systems into one.
Senator Brown. OK. The same question.
Ms. Gunderson. I would add to what was said and as an ask
associated with what we would need and it goes to what is
required to report on progress.
We had several programs that are similar, but the
authorizing legislation requires different types of reporting
and often those are among the same grantee community.
We are confusing the grant community with the types of
reports that we want. As an example of that, we have recently
aligned 2 of our programs, related to FEMA's work, our hospital
preparedness program and our public health emergency
preparedness program. We have brought those programs together
so they can align their programs, understand the types of
reports that were required by the authorizing statutes and
design a combined strategy to help facilitate a better
demonstration of what the outcomes were of those programs.
I guess I would emphasize, as these programs are authorized
and put forward, an emphasis on some of the standard data that
we can collect so that we do not create disparate reporting
systems and have that duplication.
Senator Brown. Yes, you are not duplicating your efforts.
Ms. Gunderson. Right.
Senator Brown. You just want to keep it simple.
Ms. Gunderson. Right. Exactly.
Senator Brown. Well, thank you all for your testimony.
Mr. Chairman, I have to head out.
Senator Carper. Thanks for being a part of this very much.
I am going to give our audience a chance to take a nap if
they want and I am going to ask a question of Mr. Werfel that
no one else in the room might be interested in but I am.
In my briefing materials that I read, Mr. Werfel, the term
Single Audit Act came up, and that was actually something I
worked on in my first year as a freshman member of the House of
Representatives a while back.
I remember once my State auditor, a fellow named Dennis
Greenhouse, said to me, ``We need a Single Audit Act, and we
need somebody to be the champion for the Single Audit Act in
the House of Representatives.''
I was looking for something to champion as a new guy, a new
kid on the block, so that was one of the things I championed.
My briefing materials indicated that the Single Audit Act
needs a refresher. Could you just explain for us sort of the
rationale, Mr. Werfel, for why we have a Single Audit Act, what
has worked well, what has not, and why we need that refresher?
Mr. Werfel. Absolutely. The history here is that, as a
recipient of Federal dollars, before the Single Audit Act
framework was in place, there was a lot of auditors descending
from the Federal Government into State and local governments,
universities, and elsewhere to do their audit work, we are the
auditors from HHS, we are the auditors from Education, et
cetera.
And, there was a concern that there was a lot of overlap
and stepping on each other's feet in terms of trying to figure
out what the right audit footprint was.
So, the notion was that we needed a framework to reconcile
all of these various audit streams that were flowing down out
of the Federal Government, recognizing that the dollars need to
be audited, there needs to be strong oversight scrutiny and
accountability but maybe there is a more rational way to do it
in the single audit framework; and the Single Audit Act was
born.
And, OMB is charged with the responsibility essentially for
issuing the regulations, although we call them circulars, that
affect how the single audit framework plays out.
In terms of a couple of different key questions, for
example, who gets a single audit, in terms of how much money
they get from the Federal Government, we set thresholds, and
then what types of questions they are asked in their single
audit framework.
And, over the years there has been a whole host of
different concerns raised about the single audit framework. One
of the ones that we are very focused on is that the single
audit is not always asking the question that is most central to
the taxpayers bottom line.
That is very important to me. I have gotten some feedback
over the years from those that are in the field doing the work
and in particular program managers or State comptrollers
saying, oftentimes I read my single audit results from my State
and there is a lot of, hum, I do not know really what to do
with this information, it is not all that helpful to me as a
manager versus in some cases I read the results and I say this
is huge, it is significant, it is impactful, and it changes the
way I am going to do my work.
And, our response at OMB was we wanted to make sure that
the questions that were being asked and the resources that were
being deployed were more around the significantly relevant
issues and less around the ones that were not eating helpful.
So, when the President issued his Executive Order on
improper payments in 2009, one of the things that is in that
Executive Order is he asked OMB to explore the audit of dollars
in the field and how they can be improved, and that led us to
the single audit and it led us to some fundamental questions
which is, are we asking the right questions in the single audit
to get at that fundamental bottom line question of whether the
dollars are being spent correctly, are we auditing the right
entities, are we auditing where the risks are, because for
every minute we spend auditing a low risk entity it is a minute
not spent and a deeper dive not being done into an entity with
a higher risk.
And so, what we issued last February as part of our reform,
and I do not think we need the law to change per se, it is more
of our regulations that have to change, is how can we refine
the process to get after this bottom line question more
aggressively and how can we continuously improve this model.
And, we floated three different ideas essentially. One was
should we raise the threshold so that this block of audit
resources that are in place are placed more squarely on higher
dollar grantees than lower dollar grantees. That was one
question we asked. We got a lot of diverse feedback on that.
The second question we asked is should we narrow the set of
questions that we are asking so that there are more at the
bottom line of improper payments and so we can go deeper with
that same audit footprint into the area of whether the money
was spent correctly or not versus some of the other tangential
questions that are being asked. We got a lot of good feedback
on that.
And the third is are we doing enough to be transparent and
aggressive in follow-up and resolution of all the audit
findings that surface under single audit, and there was clear
consensus in the comments received that is an area of
significant area of improvement.
So, here is where we stand. We issued the notice. We have
gotten public comment, and we are now getting ready to issue a
more formal proposal, not the final, but a formal proposal for
a second public comment period and then we will go final.
And, we are currently grappling with those comments and
trying to determine should we raise that threshold to gather
the higher dollar grantees or is our risk distribution better
the way it has been with the lower dollar grantees still
covered by a single audit.
And, the second question that we are grappling with is how
much and whether to narrow the question footprint so that it is
more centrally, and what are the trade-offs of taking away some
of the other areas of inquiry.
And, I think we have a huge game changing opportunity. I
mentioned data analytics earlier as a game changer. Also, the
strength of the audit, making sure that it is more risk-based
and more targeted on what I believe to be a more bottom-line
question from the taxpayer is another opportunity that we are
going to see help in the battle against improper payments.
Senator Carper. Let me just make this comment. I thought
that was a great response to a rather obscure question and
issue.
The Olympics are underway in London. Not so much in the
Summer Olympics but in the Winter Olympics they have judges and
they raise up scorecards.
I am just going to ask the other three judges here, we will
just say this is the Olympics and Mr. Werfel, you have just
been one of the athletes. And, if you were to take your name
tags and turn them over and write a score between 1 and 10,
what score, Ms. Harman, would you give Mr. Werfel for his
response on that?
Did he knock it out of the park? What do you think?
Ms. Harman. Yes, I am fairly certain I would go with a 10.
[Laughter.]
Senator Carper. Ms. Gunderson, I know you are pretty tough
grader but what do you think?
Ms. Gunderson. I would go with 10 maybe, 9.9, yes.
Senator Carper. Mr. Czerwinski, what do you think?
Mr. Czerwinski. Well, he oversees their budgets.
[Laughter.]
Senator Carper. You can be the honest broker here.
Mr. Czerwinski. But also remember I am from GAO so we
always say more can be done.
Senator Carper. OK. All right.
Mr. Czerwinski. It was a really good answer and I was
thinking it was a really good primer to hear. I do have two
other points to add to it, though--
Senator Carper. Go ahead.
Mr. Czerwinski [continuing]. Coming out of the Recovery
Act, because the Recovery Act stressed a lot of systems and it
showed us there are two lessons that appeared to me had to do
with single audit.
One is timing. Timing of the audit is essential because if
you get the audit out there too late, it does not do anybody
any good. So, whatever we do, and I think Dan has got it
exactly right, and the context too, it has to be with the
concept of improving the timing in mind also.
The second is, looking at the State and local fiscal
condition, their resources have been stressed worse than ours
at the Federal level. What we saw during the Recovery Act were
when States that fiscal stress, they tended to make cuts to
people like me.
They cut the State and local audit functions, and so, what
you are talking about is asking State and local auditors to
look at more, do it more quickly, do it with less.
Where Danny gets a really high mark, and I probably give
him a 9.5, is that you do it by targeting better, by what you
look at and how you go about it, and I thought his answer was
fabulous.
Senator Carper. OK. All right. Good work.
I have a question. I want to return to an issue that has
been raised already but I want to really pose this for the
entire panel.
When the issue of performance metrics comes up, I am often
reminded of the saying by I think it was Vince Lombardi, who
used to say, if you are not keeping score, you are just
practicing.
In 2010, Congress, with the help of this Subcommittee,
passed a law requiring the use of measures that would help the
Federal Emergency Management Agency keep better score of its
grants and called on the National Association of Public
Administration to assist the agency in studying and developing
and implementing performance metrics to assess the
effectiveness of the grants.
It is my understanding that FEMA is already implementing
several of these recommendations and is developing an
implementation timeline for some of the remaining measures.
And, I would just say to, Ms. Harman and Ms. Gunderson,
could you just describe for us some of these specific ways that
your agencies are implementing quantifiable performance metrics
to measure the effectiveness of your grants?
And, do you have any best practices that you would like to
share with the rest of us, the other panelists, and with me?
Ms. Harman. Sure. I can talk a little bit to that. That is
a great question. We obviously hear that a lot, critically from
FEMA. You have invested $35 billion over the last 10 years,
what are we getting for it?
We did work very closely with NAPA on that report. We
partnered within FEMA, one of our partner Directorates is the
National Preparedness Directorate where really smart people
with really big brains analyze all of this data that we collect
from our stakeholders.
So, as we work with them, we have worked very closely, what
information are we collecting, why are we collecting it, and
what do we need.
There are a lot of reporting requirements, everything from
financial reporting requirements, tell us what you are doing
with your money, tell us how you are progressing on your
investment justification.
It, at times, can be overly burdensome to a stakeholder to
do that. So, we have had to really step back and think, with
the help of NAPA, saying what should we be collecting and why.
So, we are in the process of making some enhancements with
that.
We have also looked at individual grant programs such as
the Emergency Management Performance Grant Program that is out
there. That is roughly $350 million a year. You hear some folks
who like that program, it is great, and others that do not like
it say what are we doing with this, what are we getting for it.
We instituted some very specific measures to show that this
grant program is not just paying for people, for local
emergency managers, they are paying for people that meet
certain knowledge, skills, and abilities.
So, we have performance metrics with regards to the types
of training that is required for these emergency managers, the
types of activities they should be performing each year with
regards to participation and exercises. When they are writing
plans, they should be writing their plans to a certain level.
So, all of that has been incorporated, and this is just one
program out of a multitude of programs that we have. So, we are
making a lot of progress with that.
But, with the intel and the data that we currently have we,
as I mentioned earlier, we know exactly what was purchased and
where we purchased it.
But, I think the true metric of performance and the
capabilities that we have built over time is nothing beats
through performance. When you look at the performance of the
events last year in Joplin and Tuscaloosa, those events were
handled very swiftly, very quickly and efficiently at a local
level.
FEMA did not have to deploy one Federal urban search and
rescue team down there because it was already handled at a
local level. So, these dollars are making a difference.
By 2010, 75 percent of States and urban areas had emergency
operation plans that they were comfortable with to say we can
deal with a catastrophic event here.
We have more than 10 million stakeholders trained in the
incident command system across the board. That was sort of
unheard of. Incident command prior to 9/11 not a lot of folks
really knew what that was.
So, we have data that can show us what they are capable of,
what they are comfortable of, what training they have taken,
but nothing beats the true performance that we have seen in
some of the recent disasters.
Senator Carper. Ms. Gunderson.
Ms. Gunderson. At the Department level, we do not have a
singular set of performance metrics to apply to all of our
programs. We manage over 300 programs across the Department.
I do have some examples of what our agencies do at the
program level. In our Health Resources Services Administration,
for an example, under their HIV-AIDS Bureau, something that is
near and dear to our heart given the conference that is
occurring this week in Washington, they have created a set of
performance measures which comprise indicators that the
providers can use to monitor the quality of care that they are
providing based on a core set of data and reporting metrics.
So, we are able to capture that data and understand it.
They have also recently begun to introduce language into their
funding opportunities announcements that have let them open the
door to consider that performance information in making future
funding decisions.
Senator Carper. Mr. Czerwinski, do you want to add anything
or, Mr. Werfel, anything on this point?
Mr. Czerwinski. One thing I was thinking about is that you
have a great staff.
Senator Carper. Me?
Mr. Czerwinski. Yes. You have a great staff.
Senator Carper. You are right. I know.
Mr. Czerwinski. The kind of questions that they are asking
are really helpful to us as we do our work. Our Assistant
Director who is going to be doing the performance report that
we talked about in my statement, I am sure he is taking a lot
of notes based on what you are asking. So, thanks for helping
us.
Senator Carper. I saw somebody back there writing a lot.
[Laughter.]
OK. Thank you. Mr. Werfel, anything on this particular
point?
Mr. Werfel. I think it is a really good question and it
goes to, I think, the appropriate evolution of grants. And,
right now if you look where our metrics are, they are in the
nuts and bolts issues. We have lots of metrics on improper
payments and outstanding debts as an example.
We have audit on the findings, whether in the single audit
or the financial statement audit. We have a bunch of metrics
that go at the heart of these financial management issues, and
those are all important.
Where we do not have a global framework is on performance
metrics across the government, and I think that with the
enactment of the GPRA Modernization Act and other efforts, it
seems to me that this is where we are evolving to, to grow from
nuts and bolts metrics on the money and the timing of the
money. These are all really important questions, but what we
are getting for the money I think is the next evolution of
metrics and definitely in grants there is a huge opportunity
there.
Senator Carper. Anything? Anybody else? Ms. Harman.
Ms. Harman. Well, I will just add. The other important
thing for us at DHS, and I know we have partnered with HHS in
aligning some of our grant programs, is the overall what we are
trying to accomplish with performance metrics and where are we
going as a Nation with regard to capabilities.
So, the other thing that has helped guiding us, of course,
is Presidential Policy Directive Number 8, and the national
preparedness goal and everything else that fits within that
with the strategy and the framework and the core capabilities
that now all of our grant programs are aligning to, to help us
get to sort of a single fashion and a goal in mind.
So, that is an overarching strategy for us.
Senator Carper. OK. Good. Thank you.
Maybe one more question for you, Mr. Werfel.
As some of you know, I often like when I get to the end of
hearing, sometimes I will ask the panelists to kind of reflect
back on what has been said, what you have said, what others
have said, questions that have been asked. Just maybe make a
closing statement. You always get to give an opening statement
but I am going to give you an opportunity to make a closing
statement if you like.
Before we do that, though, I want to ask one more question,
if I could, of Mr. Werfel, and this deals with the new Federal
Grant Management Council.
I understand that the Administration has established a new
council--I am sure there is an acronym for it--for the
oversight of grants--and, yes there is, we talked about it
earlier--grants across the Federal Government.
And, there are a lot of issues, questions, and concerns
that need to be addressed by the Council on Financial
Assistance Reform. Please do not call it COFAR but I know that
is what it is. You may just call it the Council.
But, Mr. Werfel, what are the top priorities for the new
oversight body--you talked a little bit about this earlier--for
the Council on Financial Assistance for the next, we will say,
calendar year?
Mr. Werfel. Well, at the Council we focused on three main
areas and then a high-level burden reduction, error reduction,
and transparency. That is where we have started.
And, part of that comes from making sure we know and are in
touch with our stakeholders, and we have a couple of big ones.
The grantee community, I will put them in blocks of State and
local governments, colleges and universities, and nonprofits;
and they certainly are extraordinarily vocal, and as they
should be, on places where they see a lot of unnecessary
administrative activity.
It is that type of feedback that led the President to issue
a directive in, I believe it was, February 2011 for the Federal
Government with emphasis on OMB on looking at the burdens we
impose on our recipients and looking for strategies to reduce
that burden; and that is part of the effort that I described
when I was talking about the single audit.
There are other components of that and burden reduction is
one. And so, before I leave burden reduction, I will just say
the major tension there is that on all the paperwork we are
trying to pull back and say, is it really worth it, are we
getting the bang for the buck in terms of requiring all these
check the boxes.
On the other side of that is the auditor and the Inspector
General community saying, in some cases and in many cases that
paperwork is critical to our investigations.
So, we cannot just, unfortunately there is no easy pull
back on the paperwork and everyone is happy. It has got to be
done very strategically and in concert with the auditor.
And, this Council is having meetings and I have sat in a
few of them that are fascinating where you have the
universities in one chair and the Inspector General community
in the other and they are talking about this paperwork burden
and we are trying to figure out is there a solution set their.
On error reduction, we have been talking about that. It is
do not pay. It is improper payments. It is all the various work
we are doing; and in many cases, it is trying to empower the
State and local governments to be a part of the solution.
So, we have programs like Medicaid and unemployment
insurance where there is 50 different State administrative
solutions. So, it is not like at HHS or at Labor. They can
fashion the solution that is going to solve the problem.
It involves outreach and partnership and best practice
sharing and working amongst the State and local governments in
a way to cultivate solutions and having good things go viral in
terms of what we can do, in terms of error reduction. That is a
clear priority.
And then finally, last week I was here and talking about
transparency; and the big stakeholder there is the public. It
is the sunlight groups. It is this Committee. It is the House
of Representatives as well and it is the President's commitment
that he has had in transparency since he cosigned and
coauthored the Transparency Act in 2006.
And, as we discussed last week, there are important steps
that the grants community needs to take to position our
information, not only to get public more quickly but more
reliably.
And so, the Council is focused on those areas as well.
Senator Carper. Thank you. Just a follow-up for you and
then I just have one related question for Mr. Czerwinski.
I understand that there are no stakeholders, no
stakeholders such as grant recipients, on the Council. Is that
true? And, if that is true, is the lack of stakeholder
involvement a potential problem? And, if it is, how would you
engage grant recipients?
Mr. Werfel. It is a very tough question that I have
wrestled with and lost some sleep over. The answer is there are
no official non-government entities on our Council.
The reason, there are probably two primary reasons for
that. The first is that we feel that there is an appropriate
time and place to have external outreach, an appropriate time
and place to have an internal free exchange of ideas,
collaborative spirit without knowing that everything we say is
public, could end up on the front cover of the New York Times,
that type of thing. And so, we are trying to balance that.
And so, our answer to balance that was to essentially have
a government-only Council by judge us not based on the
structure of that Council. Judge us on whether we are both
actively engaging stakeholders and that active engagement is
resulting in improvements and changes to the manner in which we
are carrying out government programs, because it does not
really matter--I am sure, I am going to make an assumption
here, that if you had the recipient stakeholders community in
here and they were testifying and asked them, what would be
more important, a name and a seat at the table at the Council
with no real change in the direction of Federal policy that is
to your benefit or no seat on the Council but active engagement
in a real dynamic set of changes coming from the Federal
Government in response to your concerns.
I think they would take the latter every time. When I have
talked to them, I have asked them to judge us and judge me on
that frame.
And, I think this first project that the Council has
undertaken, this very transformative change, the Single Audit
Act to administrative requirements, this is a major first test
because the comments that we got back from the community were
filled with passion and concern and energy; and to the extent
we can make sure that we are navigating all of them, I think we
will demonstrate to them that they really do have a voice.
Senator Carper. OK. Mr. Czerwinski, based on the work that
you all are doing at GAO, what would you consider to be some of
the important questions or issues that this new oversight
Council should take up?
Mr. Czerwinski. Well, you started with one and that is the
input from the stakeholders. A second is to take a look at both
the financial and programmatic management of what you want to
achieve with grants.
A third, and this is something that we looked at back when
we were falling on PL 106-107, is setting clear objectives and
clear time frames, and then holding yourselves accountable to
that, that is one issue that we found looking back to the Grant
Executive Board, the Grand Policy Committee, that this was not
quite as clear as what they wanted to achieve and when they
were going to achieve it by. Hence, things have stretched out.
So, I would say that would probably be the other piece is
to really have a very clear objective, a clear plan, clear time
frames.
Senator Carper. OK. Good. Thanks.
OK. What I would like to do now is just ask each of you
help me give the benediction, and just a short statement. Your
opening statements were about 5 minutes. This one should not be
that long.
But, just a point or two that you would like to reiterate.
I think we ought to underline some points before we wrap this
up and I go start voting.
Do you want to go first, Mr. Czerwinski?
Mr. Czerwinski. Yes. I went last the last time so I will go
first this time if that is ok.
Senator Carper. Go right ahead.
Mr. Czerwinski. To me this hearing goes back to the point
that we were talking about congressional oversight and also we
talked about a plan for OMB with its Council. I think there is
a plan for the accountability community and for the oversight
community as to what we want to achieve in the next session of
Congress.
So, I personally was very gratified to hear the line of
questioning that went along the lines of internal controls,
went along the lines of streamlining in performance measurement
because those, I believe, are three central pieces if we are
going to make grant management work better.
And of course, when we talk about grant management, we have
to think about the impact it has not just on the recipient
community but also on the Federal budget, and this is a huge
piece of the budget. It is a very complicated piece, and we
need to get some handle on making it more straightforward and
to work better.
The issue of closeouts is a very specific issue. It is a
small one; but it is also an example of where, when we start to
pay attention and we start to focus efforts, they can get
better.
We talked about reporting in 2008 that we roughly found
about $1 billion. We saw improvement when we came back in 2012.
Assuming that we come back again at another time, we would
expect to see similar or greater improvement.
Senator Carper. OK. Thanks.
Ms. Gunderson, you can repeat, do not hesitate to repeat
some of the same points that Mr. Czerwinski made. If you have
others, that will be fine as well.
Ms. Gunderson. I do want to emphasize the Department is
committed to protecting the taxpayer dollars and serving as a
steward of the public's trust.
We do take grants management very seriously and we really
appreciate the work of the Subcommittee, the Government
Accountability Office and our own Inspector General in
continuing to bring grants management to the forefront because
it is an important part of the way we execute our mission at
the Department.
We did make great success last year in terms of our grant
close out and we did get noticed for that both by the GAO,
which we appreciate, and our own internal auditors.
We have come off the risk list internally in terms of our
audit, and the fear for that is that means we have declared
success and we will move on and will not pay attention.
This work of the Subcommittee and the GAO continues to
emphasize that this is important work to do in terms of closing
out our accounts, managing our ongoing projects.
We appreciate that and the attention that your Subcommittee
gives to these types of initiatives and the resources we need
and systems we need to make these things happen is appreciated.
Senator Carper. Thank you. Ms. Harman, a closing thought.
Ms. Harman. Sure. I would just like to say thank you for
the opportunity to be here. It is not often we get to talk
about grant management with regards to FEMA.
We have talked a lot about our different programs and what
is good, what is bad, which ones are working, what are we
getting for our dollars.
It is exciting for me to be able to share with you what a
lot of our staff are working on. We have a very dedicated staff
at FEMA. They are in the grants world and sometimes they get a
little bit left out of the excitement when it comes to the
response and recovery phases and working directly with victims
of incidents.
I just wanted to throw kudos to them because there are many
times under some of the statutory deadlines that we have to get
the grants out the door that many of them have given up there
summers and there vacations to obligate all of those fun in a
timely manner. So, I want to throw kudos to there.
With regards to things that we need, you are most likely
aware of the President's budget, the request for the
consolidation of 16 different preparedness grant programs into
the National Preparedness Grant Program, one single program.
That most certainly would ease a lot of the things we have
to do. It is difficult enough as a stakeholder, a former
stakeholder myself, but at the State level to manage not only
the funds that we appropriate and allocate to the States but
funds that are coming in from other Federal agencies.
It is a big and heavy workload, and what we have proposed
is a consolidation of 16 programs to achieve the national
preparedness goals. When Ranking Member Brown asked earlier
what do you need, I was a little selfish in the point where I
focused on IT systems and really what our Directorate needs.
But, in the larger scope of things, the streamlining of
these programs and achieving the same goal will also not only
build capability and preparedness but it will also streamline a
lot of the administrative functions behind managing these
grants.
Thank you for the time.
Senator Carper. You bet and thanks for yours.
Mr. Werfel, last statement.
Mr. Werfel. Two quick points. First of all, I want to echo
something that Mr. Czerwinski said earlier about the talent and
dedication of the people sitting behind you.
Senator Carper. On both sides?
Mr. Werfel. On both sides for sure.
Senator Carper. I know.
Mr. Werfel. And I have been working with this Committee and
the Subcommittee coming up on 9 years since I transitioned into
the financial management sphere and this group is especially
collaborative and smart and thoughtful and challenging,
challenging us in the right ways. And so, I just wanted to give
that feedback to the group and to you.
Senator Carper. Thank you.
Mr. Werfel. And, one of the particular areas which is most
encouraging and I am hearing more and more of is outreach and
connectivity that the folks sitting behind you have with the
stakeholders, State and local governments, and particularly
those that are impacted by grants policy, and I encourage that
type of ongoing discussion.
I mean a lot of things get lost in translation. I do not
want to be the voice of the State and local governments or the
universities on these issues. I want to make sure that you are
hearing it directly from them so you can make the best informed
judgment.
I am hearing more and more just in the chatter of this
entity or that entity going up and meeting with the Homeland
Security and Governmental Affairs Committee (HSGAC) staff and I
think that is an enormously positive development and we are
hoping that it continues.
Senator Carper. Well, good. I just want to make one
observation. This, I think, has been a very helpful hearing,
and we appreciate the work that has gone into not just
preparing for what you said here today but literally the work
that has gone on for months, in some cases years, to enable us
to report the sort of progress that is being realized
especially by these two agencies.
This is not a hearing that is maybe as attention-gathering
as Fast and Furious. It is not as riveting as the fiscal cliff
or something along those lines or cybersecurity.
Having said that, Federal grants is important stuff and we
realized that and obviously you know that, and in the end, it
will help us save some money and we need to save a lot of
money. This is not the whole fiscal package but this adds up.
And, I always like to see progress being made. We are
seeing progress being made. I want to congratulate you for that
because we all know everything we do we can do better. We need
to improve more but I am pleased with the progress that we
heard about today. Let us keep it coming.
Thanks so much.
We are adjourned.
[Whereupon, at 4:12 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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