    [House Hearing, 113 Congress]
    [From the U.S. Government Publishing Office]

      EXAMINING SOLUTIONS TO CLOSE THE $106 BILLION IMPROPER PAYMENTS GAP

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

                                    HEARING

                                   before the

                     SUBCOMMITTEE ON GOVERNMENT OPERATIONS

                                     of the

                             COMMITTEE ON OVERSIGHT
                             AND GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  JULY 9, 2014

                                   __________

                               Serial No. 113-123

                                   __________

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

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

                                     ______

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                  COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                     DARRELL E. ISSA, California, Chairman
    JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland,
    MICHAEL R. TURNER, Ohio                  Ranking Minority Member
    JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
    PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of
    JIM JORDAN, Ohio                         Columbia
    JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
    TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
    JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
    JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
    PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
    PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
    SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT,
    TREY GOWDY, South Carolina               Pennsylvania
    BLAKE FARENTHOLD, Texas              TAMMY DUCKWORTH, Illinois
    DOC HASTINGS, Washington             ROBIN L. KELLY, Illinois
    CYNTHIA M. LUMMIS, Wyoming           DANNY K. DAVIS, Illinois
    ROB WOODALL, Georgia                 PETER WELCH, Vermont
    THOMAS MASSIE, Kentucky              TONY CARDENAS, California
    DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
    MARK MEADOWS, North Carolina         MICHELLE LUJAN GRISHAM, New Mexico
    KERRY L. BENTIVOLIO, Michigan        Vacancy
    RON DeSANTIS, Florida

                       Lawrence J. Brady, Staff Director
                    John D. Cuaderes, Deputy Staff Director
                        Stephen Castor, General Counsel
                           Linda A. Good, Chief Clerk
                     David Rapallo, Minority Staff Director

                     Subcommittee on Government Operations

                        JOHN L. MICA, Florida, Chairman
    TIM WALBERG, Michigan                GERALD E. CONNOLLY, Virginia
    MICHAEL R. TURNER, Ohio                  Ranking Minority Member
    JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
    THOMAS MASSIE, Kentucky              MARK POCAN, Wisconsin
    MARK MEADOWS, North Carolina

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on July 9, 2014.....................................     1

                                   WITNESSES

    Mr. Beryl Davis, Director, Financial Management and Assurance,
      U.S. Government Accountability Office
        Oral Statement...............................................    10
        Written Statement............................................    13
    Ms. Beth Cobert, Deputy Director for Management, U.S. Office of
      Management and Budget
        Oral Statement...............................................    33
        Written Statement............................................    35
    Mr. Mark Easton, Deputy Chief Financial Officer, Office of the
      Under Secretary of Defense (Comptroller), U.S. Department of
      State
        Oral Statement...............................................    40
        Written Statement............................................    42
    Shantanu Agrawal, M.D., Deputy Administrator and Director, Center
      for Program Integrity, Centers for Medicare and Medicaid
      Services, U.S. Department of Health and Human Services
        Oral Statement...............................................    48
        Written Statement............................................    51
    The Hon. John Koskinen, Commissioner, U.S. Internal Revenue
      Service
        Oral Statement...............................................    58
        Written Statement............................................    61

                                    APPENDIX

    Improper Payments Rate from 2008-2013 from OMB, Submitted by Mr.
      Mica...........................................................   122
    Improper Payments Chart for 2013, Submitted by Mr. Mica..........   123
    Republican Guidance 8/2/13 Govt.Ops Hearing ``Examining the
      Skyrocketing Problem of Identity Theft Related Tax Fraud at
      IRS''..........................................................   124
    Staff Report: Oversight of Conference Spending Saves Taxpayers
      Hundreds of Millions of Dollars................................   126

      EXAMINING SOLUTIONS TO CLOSE THE $106 BILLION IMPROPER PAYMENTS GAP

                                  ----------

                            Wednesday, July 9, 2014

                      House of Representatives,
                 Subcommittee on Government Operations,
                  Committee on Oversight and Government Reform,
                                                       Washington, D.C.
        The subcommittee met, pursuant to call, at 1:39 p.m., in
    Room 2154, Rayburn House Office Building, Hon. John Mica
    [chairman of the subcommittee] presiding.
        Present: Representatives Mica, Meadows, Massie, Issa, and
    Connolly.
        Also Present: Representatives Jordan, DeSantis, and Clay.
        Staff Present: Ali Ahmad, Professional Staff Member;
    Melissa Beaumont, Assistant Clerk; Molly Boyl, Deputy General
    Counsel and Parliamentarian; David Brewer, Senior Counsel;
    Caitlin Carroll, Press Secretary; Katelyn E. Christ,
    Professional Staff Member; Drew Colliatie, Professional Staff
    Member; John Cuaderes, Deputy Staff Director; Adam P. Fromm,
    Director of Member Services and Committee Operations; Linda
    Good, Chief Clerk; Tyler Grimm, Senior Professional Staff
    Member; Jennifer Hemingway, Deputy Policy Director; Christopher
    Hixon, Chief Counsel for Oversight; Michael R. Kiko,
    Legislative Assistant; Mark D. Marin, Deputy Staff Director for
    Oversight; Jeffrey Post, Senior Professional Staff Member;
    Laura L. Rush, Deputy Chief Clerk; Jessica Seale, Digital
    Director; Andrew Shult, Deputy Digital Director; Katy
    Summerlin, Press Assistant; Peter Warren, Legislative Policy
    Director; Rebecca Watkins, Communications Director; Eric Cho,
    Detailee; Tamara Alexander, Minority Counsel; Meghan Berroya,
    Minority Deputy Chief Counsel; Jaron Bourke, Minority Director
    of Administration; Aryele Bradford, Minority Press Secretary;
    Portia Brown, Minority Counsel; Devon Hill, Minority Research
    Assistant; Jennifer Hoffman, Minority Communications Director;
    and Cecelia Thomas, Minority Counsel.
        Mr. Mica. Good afternoon. I'd like to welcome everyone to
    the Subcommittee on Government Operations, a subcommittee of
    the House Government Oversight and Reform Committee. Pleased to
    welcome Members.
        And the title of today's hearing is ``Examining Solutions
    to Close the $106 Billion Improper Payments Gap.''
        The order of business will be today that we'll have opening
    statements by Members, and we have one panel of witnesses.
    We'll recognize them, swear them in, and they will provide the
    committee with their statements. And then we'll go to questions
    after we've completed hearing from the witnesses assembled
    today.
        Again, I thank everyone for participating and attending.
    This is an important topic and actually part of the oversight
    committee's mission, and that's to accomplish two fundamental
    responsibilities. A lot of hardworking Americans send their
    taxpayer dollars here to Washington. They deserve to know how
    that money is spent. They need to make certain that our
    government operates efficiently, economically. And our
    responsibility in this committee and its predecessors back to
    their early 1800s is to protect those citizen rights and hold
    folks accountable in the Federal Government.
        So that's the reason we're here today. And the purpose of
    this hearing is one in a series of hearings that we've had on
    improper payments, and this is an update hearing.
        I'll start by yielding to myself, and I have some opening
    comments. Then we'll go to, as I said, the other Members.
        First of all, again, we're going to discuss the very
    serious and, unfortunately, a very persistent problem of
    improper payments across the Federal Government.
        Now, listen to this. The amounts here are absolutely
    staggering. But just in fiscal year 2013, agencies reported
    over $100 billion in improper payments. I asked the staff to go
    back and see how consistent this has been, has it changed much.
    And, actually, it's over $100 billion each of the last 5 years.
    That's a staggering half-a-trillion dollars in improper
    payments at a time when we're running trillions of dollars of
    deficit and that we're scrambling to try to do the best we can
    to make, again, Federal fiscal ends meet. It's an incredible
    amount of money that has been misappropriated and mispaid with
    improper payments.
        Let me take just a minute and review some of the staggering
    statistics. The sheer number award has to go to CMS, the
    Centers for Medicare and Medicaid Services, which paid out,
    again, a huge amount of money. I think about $60 billion of the
    $100 billion is just an--let's put this little chart that we've
    got up here.
        This chart says it all, and the chart shows Medicare
    Advantage and Medicaid. You add them up, and you have about $60
    billion total improper payments out of about $100 billion. So,
    in sheer dollars alone, one of the areas that concerns me and
    every American is health care and the staggering cost of health
    care. And here we have improper payments to the tune of over
    $60 billion in just those programs.
        Now, that sets the dollar record. However, one of my major
    concerns is the improper-payment error rate. And the chart
    here, the red shows the error rate. And soaring off the charts
    is the error rate for Earned Income Tax Credit, and that is
    overseen by IRS. So it's about 25 percent error rate in the
    Earned Income Tax Credit area. That's astounding.
        A quarter of these improper payments are done through,
    again, error. The error rate is less than in the health care.
    That's the only thing, I guess, we could say good about, again,
    the huge amount of dollars going out from that area.
        So IRS--and we've asked them to join us today, talk about
    their progress, or lack of progress, where they are in trying
    to get this huge error rate under control.
        There are many examples, and I'll put some of them in the
    record. I won't cover all of them today. But, for example, if
    you want to go back to health care, CMS has paid individuals
    who are incarcerated in correctional facilities, so individuals
    in prison, behind bars, who are generally not eligible for
    healthcare benefits, they paid some $33 million between 2009
    and 2011 to people behind bars. That's just the Medicare
    program.
        If we look at some of the other areas where money is going
    out the door, in my State, a mother of three with a sixth-grade
    education defrauded the Federal Government out of at least $3
    million with an identity-theft tax fraud scheme. She was caught
    because she announced on her Facebook page that she was, ``the
    queen of IRS tax fraud.'' And I've also conducted hearings on
    the issue of identity theft and tax fraud that occurs through
    that scheme.
        Improper payments are one of the most important areas in
    our committee's jurisdiction and one of which Congress has been
    very active. It's not like Congress hasn't acted on the issue
    of improper payments.
        Now, listen to this. Twelve years ago, we passed the
    Improper Payments Information Act, which requires agencies to
    do basic reporting to the White House Office of Management and
    Budget to address the so-called improper payments, which
    included overpayments, underpayments, payments to the wrong
    individuals, and payments where there's no documentation.
    That's 12 years ago.
        Four years ago, we passed the Improper Payments Elimination
    and Recovery Act, which requires agencies to produce plans to
    reduce the payment errors and attempt to recoup improper paid
    funds.
        Two years ago, we passed the Improper Payments Elimination
    and Recovery Improvement Act, which created a Do Not Pay
    initiative to prevent fraud and payments to deceased
    individuals and strengthen agencies' abilities to recover
    improperly paid taxpayer dollars.
        In fiscal year 2013, the total estimated improper payments
    were over $105 billion, according to the GAO's review of agency
    reports. So, today, we're going to hear from GAO and OMB.
    Unfortunately, the picture hasn't gotten much better, even with
    the passage of a number of laws that I cited.
        The Department of Defense, let's talk about them for a
    second. While DOD does a report and they have found that a
    relatively small number of improper payments are made, it's
    important to note that GAO's total improper-payments figure
    does not include the Department of Defense. GAO has grave
    reservations even about DOD's ability to track and accurately
    report its improper payments.
        Now, back to Medicare and Medicaid and CMS, which is
    responsible, also, for many high-error programs, including the
    program with the highest amount of improper payments, and
    that's Medicare Fee-for-Service. In fiscal year 2013, roughly
    10 percent, or $36 billion, of payments were made by Medicare
    Fee-for-Service, and those were improper payments that were
    made.
        The IRS, again, administers the Earned Income Tax Credit.
    They do have one of the highest rates, as I said, about 25
    percent, and the second-highest number of improper payments in
    total dollars--again, a smaller number of dollars but a higher
    error rate. Their improper payments were $14.5 billion in last
    fiscal year.
        IRS also faces the grappling problem with increased
    identity theft, and I mentioned that before. And, again, the
    estimates we have from IRS indicate that that could run as high
    as $21 billion in fraudulent tax returns through 2017.
        Finally, I am pleased to see all of our witnesses,
    particularly pleased to see IRS Commissioner Koskinen. I had
    actually invited Debra Holland, the head of IRS Wage and
    Investment Division, to testify today. Mr. Koskinen, who heads
    IRS, has agreed to come at his own volition, and pleased to
    have him here.
        I may, in fact, call Debra Holland back; want to put her
    and the agency on notice. And while I'm glad he's here, we'll
    have an opportunity to question him, but I may, again, continue
    this hearing with her at a future date. And given the
    Commissioner's broad responsibility, he does open himself to
    questions not only about this but a whole host of IRS issues
    that have been before this committee.
        So I look forward to hearing from IRS, CMS, GAO, OMB on how
    best we can tackle this problem that seems to be eliminating
    resolution and not getting better. In fact, the dollars are
    very concerning.
        So, with that opening comment, I'll yield to the gentleman
    from Virginia, Mr. Connolly.
        Mr. Connolly. I thank my friend.
        Before I start, if the chairman of the full committee has
    an opening statement, I would certainly defer to him.
        Mr. Mica. He does. And we can, with your permission----
        Mr. Connolly. I would defer to the chairman.
        Mr. Mica. He came in late. And we're going to recognize Mr.
    Issa, the chairman of the full committee.
        Mr. Issa. Well, thank you, Mr. Connolly.
        Commissioner, welcome.
        Ms. Davis, I want to signal you out for an excellent
    report, that I know these take time and they're hard to put
    together.
        What I got out of your report, what I hope the Commissioner
    is prepared to talk about today, is an amount of money that the
    American people cannot begin to understand. More than 100 years
    of giving away a million dollars a day, somehow, you know,
    causes people--or more than 1,000 years of giving away a
    million dollars a day, it represents such a large amount of
    money that nobody can really understood what it would be like
    to just stack up those bills that long.
        But normally when we have these kinds of hearings, everyone
    comes in and everyone says, if you just gave us more money, we
    could fix that. Commissioner, consider it said that if we gave
    you lots more money in addition to the $11 billion budget, $1.8
    billion for IT, and 90,000 employees, with more people, you
    could, in fact, reduce some of this.
        One of the challenges is, ultimately, that slide that
    Chairman Mica put up represents self-inflicted wounds in
    addition to fraud. There is no reason that earned income
    credit--basically, people with relatively small--have such a
    huge amount of fraud. That is a system failure.
        CMS and Medicare, which sadly or happily fall under your
    purview, have, in fact, built a system that is rampant with
    fraud.
        And I'll just briefly remind the committee of something
    that our committee was very proud of. During the spending of
    the stimulus, we had authorized the RAT Board and the oversight
    that went on. And what we discovered was that it wasn't very
    expensive, a few million dollars, to set up a team that, in
    fact, was able to find, for example, doctors in Kansas who
    suddenly made new applications to have offices in Los Angeles
    and then proceeded to send large amounts of billing to
    Medicare.
        The system that they put in place looked through the data,
    saw it as a red flag. Discovering that it was an improbability
    that so many doctors would suddenly be in L.A., they did two
    things. They called the doctors' offices, and before they got
    past the receptionist, they were very quickly put to the
    doctor, who was immediately available to say, ``Heck, no, I
    don't go to California, and I'm not there.''
        They did the second thing, which is they went to Google
    Earth and they looked at the building that was being applied
    for, and they quickly saw that it was a strip mall with no
    appropriate space for medical offices. They flagged it in
    realtime and very quickly were able to get to a fraud before
    large disbursements went out.
        That is proven technology that cost a fraction of what the
    portion of the budget that deals with fraud at the IRS spends.
    With the passage of the DATA Act, with the help of the ranking
    member, many of the procedures are in place and sit at Treasury
    today. These are leverageable technologies that are not about
    how much money; they're about a willingness to employ them.
    Money may be needed to scale, but that money certainly would be
    easy to justify if, in fact, the tools were used.
        So what I'm hoping to hear today is not a request for more
    money, but it's a statement, hopefully by both DOD and IRS,
    about how you can use modern technology to work smarter, not
    harder. If there are systems that need to be in place or
    changes, hopefully you'll be proactive in suggesting them.
        But I think, Ms. Davis, you've done a few of these before,
    so this isn't new work for you. Doing these reports year after
    year and seeing the numbers substantially similar--$100
    billion, $100 billion, $100 billion, and pretty soon it's
    heading toward a trillion--tells us that they have a system
    failure.
        And, Commissioner, I know you understand that it takes
    system changes to make large changes, tens or twenties of
    billions of dollars in changes. Simply plussing up the number
    of people to do the same work will get you, at best, an
    incremental increase and very hard to quantify as worth the
    taxpayers' money.
        So, again, I've used my 5 minutes. I've used it to say that
    I'm hoping this hearing will very much be about the proactive
    system changes that the largest single areas of improper
    payments in our government are sitting before us today, the
    Department of Defense and the IRS, under their offices.
        So, Mr. Connolly, I want to thank you.
        This is an important hearing. This is one of those hearings
    that the committee does that is always the same no matter which
    party sits in the chair.
        And I thank the chairman and yield back.
        Mr. Mica. I thank you, Chairman Issa.
        I now recognize Ranking Member Connolly.
        Mr. Connolly. I thank you, both chairmen.
        And Chairman Issa makes a good point; this can't be all
    about money. Money isn't everything when it comes to resources
    for, you know, fulfilling our missions.
        On the other hand, money is not nothing. And this Congress
    has certainly take the precept that money isn't everything to a
    very logical but harmful conclusion, especially when it comes
    to resources for the IRS.
        But I remember Ms. Davis, the head of GAO, testifying about
    the lack of resources at GAO and how there's a return on
    investment. You know, when we invest in investigative and audit
    functions, the recovery rate is fairly high. Likewise, when we
    invest in collection rates and investigative resources for the
    IRS, there is a return on that investment, which I will return
    to in just a little bit.
        I think it's important to keep both in mind. Money is not
    the solution to everything, but that isn't the argument for
    stripping bare the resources so that we can't really do or
    can't perform our mission and our function.
        I want to thank Chairman Mica, especially, for holding the
    hearing. As Chairman Issa has said, actually, this subject has
    been, sort of, the purview of this committee for a long time.
    And we did some really, I thought, thoughtful and
    groundbreaking work under Todd Platts, who was a previous
    subcommittee chairman of this committee. Because this is
    something where it seems to me we can find bipartisan common
    ground. We're not going to agree on everything, but I think,
    actually, we might agree certainly on the goals we want to set
    for ourselves.
        It's important to know the Federal Government has reduced
    the reported government-wide improper-payment rate by 35
    percent over the last 4 years, down from 5.42 percent in fiscal
    2009 to 3.53 percent in fiscal 2013. That tells me the Federal
    Government is taking this issue seriously, and I think this
    committee can take some credit for that.
        However, Federal agency improper-payment estimates still
    add up to at least $106 billion a year as of last year, which
    is, as the chairman said and the chairman of the subcommittee
    said, unacceptable by any standard.
        And when I think about the magnitude of that, when we talk
    about numbers involving sequestration over a 10-year period or
    debt-reduction plans or the big deal, this one item is over a
    trillion dollars in a 10-year time period and probably more. So
    the payoff for whittling it down is really important, and it's
    something I'm glad the Federal Government is taking seriously,
    but we need to make more progress.
        Despite the imposing magnitude of the problem, I'm
    confident we can bring the figure under control, because, as
    the chairman showed in that chart, five programs account for
    $82.9 billion or 78 percent of the amount we're talking about.
    So it's not something so scattered over thousands of agencies
    and divisions that it's going to be hard to get our arms around
    it.
        Actually, the chart the subcommittee chairman put up there
    really kind of gives us the scope of the problem, which means
    it is something manageable. While no silver bullet exists, a
    targeted approach, to me, on those concentrated areas, I think,
    could have high payoff.
        Further, having examined the issue in depth, I'm also
    convinced that when it comes to combating improper payments,
    we'd be wise to take heed of Ben Franklin, ``An ounce of
    prevention is worth a pound of cure.'' Antiquated pay-and-chase
    approaches that seek to recover improper overpayments after the
    fact are labor-intensive, time-consuming, and they're going to
    have diminishing returns.
        And, finally, successfully bolstering the Federal
    Government's ability to prevent improper payments requires two
    to tango, and Congress itself is not off the hook. As Deputy
    Director Cobert's written testimony notes, there is compelling
    evidence that investments in administrative resources can
    significantly decrease the rate of improper payments.
        From the Social Security Administration saving taxpayers an
    estimated $9 in avoided improper payments for every dollar
    spent on disability review, to the Health Care Fraud and Abuse
    Control Program recovering $8.10 for every dollar spent on
    healthcare fraud and abuse investigations over the past 3
    years, it's indisputable to me that investing taxpayer dollars
    wisely, maybe even modestly, into administrative resources can
    significantly reduce this deficit and yield to much better
    rules.
        And yet, when Members seek to offset amendments in
    appropriations acts, it's invariably these same valuable
    administrative tools that are the first in line for the
    guillotine.
        As Commissioner Koskinen can attest, Congress' pennywise
    and pound-foolish approach sometimes to management is not
    limited to improper payments. Consider the independent National
    Taxpayer Advocate 2013 annual report that said, for every
    dollar appropriated to the IRS in fiscal year 2013, the IRS
    collected an astounding $255 in legally owed taxes. In fact,
    the amount of tax money probably left on the table every year
    uncollected but properly owed far exceeds the dollar amount
    ascribed to improper payments.
        If the chief executive officer of a Fortune 500 company
    were told that each dollar he or she allocated to his or her
    company's accounts receivable department could generate many
    multiples of dollars in return, it's awfully difficult to see
    how a corporate board would allow that CEO to escape that
    investment.
        However, the revulsion sometimes expressed for the IRS here
    in Congress is so deeply engrained culturally that, since 2010,
    we've relinquished a golden opportunity to strengthen
    enforcement of our laws to catch tax cheats and reduce the
    deficit by a substantial amount of money. By my rough back-of-
    the-envelope calculation, we're talking well over $3 trillion,
    potentially, on the table over a 10-year period. That's a very
    significant chunk of money. So I believe that investments make
    a difference.
        And I'd also add one other thing, Mr. Chairman, that
    sometimes gets overlooked because we focus so much on the IRS,
    but one of the partners here for CMS and the IRS, when we look
    at Medicare and Medicaid fraud, is the U.S. Attorneys' Office.
    Last year, for example, the Boston U.S. Attorney's office, if I
    got my numbers right, helped identify and recover $3.5 billion
    in Medicare fraud. That's one U.S. Attorney office; there are
    99.
        So working with the Department of Justice is also
    important. We need the U.S. attorney in every office across the
    United States to take this issue of fraud and waste seriously
    and make it a priority. Because when we have their support and
    their active machinery at work, Commissioner Koskinen has a
    very powerful ally in trying to undertake his mission. So I
    think that's an important part of this, too, that we want to
    keep in mind.
        With that, Mr. Chairman, I look forward to the testimony of
    our friends at the panel, and I thank you so much for holding
    this hearing.
        Mr. Mica. Mr. Meadows?
        Mr. Meadows. Thank you, Mr. Chairman. And I'll keep my
    remarks very brief.
        I'm looking forward to hearing from each one of you, but to
    give your staff, really, some prep time, what I would ask each
    of you is, you can satisfy the ranking member, Mr. Connolly,
    and myself if you can quantitatively give, if we invest more
    money, where it's actually going to provide a return.
        Now, Mr. Koskinen, I've read your testimony, and I've got
    your return on investment. And as a business guy, that's what I
    look for, is a return on investment. But I can tell you that I
    looked at the details, in terms of money spent, number of
    employees, with regards to the Earned Income Tax Credit, and I
    see no correlation between employees and money in terms of
    recoupment.
        And so I look forward to you answering in a quantitative--
    and that's what I'm looking for, each one of you, really a
    matrix, if we invest another billions dollars, what will we
    see, in terms of reducing this number.
        Because it is systemic; it is not a new problem. And,
    honestly, as Mr. Connolly said, when we're dealing with these
    kind of numbers, $106 billion, eventually it adds up to real
    money.
        And so I look forward to hearing from each one of you, and
    I'll yield the balance of my time back to the chairman.
        Mr. Mica. Well, thank you.
        Mr. Mica. And thank you for yielding to me for just a
    second to just put a couple of things in the record.
        Now, first of all, this is one of the smallest
    subcommittees in Congress. We have a very limited, just
        over----
        Mr. Meadows. Mr. Chairman, I would say most efficient.
        Mr. Mica. Yeah, but--well, it's smallest in numbers, but
    let me just say that the savings from this subcommittee are
    substantial.
        I just, you know, I heard this about--this commentary that,
    just give us more money, that Chairman Issa talked about that.
    I asked them to pull the report that we did in January of this
    year on just conference spending. This is on IRS. And I just
    don't tell these agencies to come in here and give them a hard
    time and not expect some results.
        But in conference spending alone, and through the work of
    our subcommittee, we reduced expenditures in IRS, from 2010 to
    2012, 87 percent in conference spending. They went from $37.6
    million in fiscal year 2010 to $4.9 million after we hammered
    them, again, about--I have no problem with people going to
    conferences. I represent one of the best conference areas in
    the world, Orlando, and some great deals. But the spending was
    out of control, and you can save money.
        So whether it's improper payments, then--and I just pulled
    the improper payments. Now, something's rotten in Denmark, and
    something sure as hell is rotten in Washington. If you go from
    2008 back to 2004, you've got totals of improper payments, $38
    billion, up to 2008, $73. Most of them in the $30s, low $40s.
    And then you jump from 2009 to last year, $106, $116--these are
    billion dollars. I just was doing quick math when I finished
    that. Again, over half a trillion in 5 years, and a relatively
    small amount.
        So something has got to be done to get this under control,
    period. And we passed laws, and something is not happening. I
    cited at least four laws that we passed. So this hearing, or as
    many hearings as we have, we're going to figure out a way to
    stem this.
        And the ranking member just said, over a 10-year period,
    trillions of dollars. You could balance the Federal budget just
    by some of this.
        Excuse me for getting a little bit intense about this, but
    this is serious, and we're going to follow it through.
        Okay----
        Mr. Connolly. Mr. Chairman?
        Mr. Mica. Yes.
        Mr. Connolly. Could I also just ask unanimous----
        Mr. Mica. And, oh, I ask unanimous----
        Mr. Connolly. Yeah.
        Mr. Mica. --consent to put--that was what I started with--
    both this little chart--it's not identified, but it's the rate
    from 2013 to 2009 and then 2004 to 2008 on improper payments.
        Without objection, so ordered.
        Mr. Mica. And the improper-payments 2013 chart in the
    record, without objection.
        Mr. Connolly. And, Mr. Chairman, I'd just--to be fair to
    the IRS, I want to note, the four primary legislative requests
    are not for money. They're actually for expanded authorities,
    and they list them here. And I would just ask that we enter
    that into the record.
        Mr. Mica. Yes.
        Mr. Connolly. I want to be fair. I was talking about more
    resources, not the IRS.
        Mr. Mica. All right.
        Mr. Connolly. Thank you, Mr. Chairman.
        Mr. Mica. Thank you.
        And, without objection, those items will also be noted in
    the record at this point.
        Okay. There being no further opening statements--and
    Members will have 7 days to submit opening statements for the
    record, Members that are not here.
        And we may be joined by some other members. There's, I
    think, at least one classified, or possibly two, Member
    briefings going on simultaneously.
        So, without objection, so ordered.
        Now, I would like to first introduce our panel of
    witnesses. We have first, Ms. Beryl Davis is the Director for
    Financial Management and Assurance at the Government
    Accountability Office; Ms. Beth Cobert is Deputy Director for
    Management at the Office of Management and Budget; Mr. Mark
    Easton is Deputy Chief Financial Officer at the Department of
    State; Mr. Shantanu Agrawal is Deputy Administrator and
    Director of the Centers for Medicare and Medicaid Services'
    Center for Program Integrity; and Mr. John Koskinen is the
    Commissioner of the Internal Revenue Service.
        Some of you have been here before; some of you have not.
    This is an investigative panel. We do swear in all of our
    witnesses. If you'll stand, please. Raise your right hand.
        Do you solemnly swear or affirm that the testimony you're
    about to give before this subcommittee of Congress is the whole
    truth and nothing but the truth?
        And all of the witnesses, the record will reflect, have
    answered in the affirmative.
        Have a seat. Again, you're welcome.
        And, first, I will recognize--and, again, those who haven't
    been here, we try to limit you not exactly, but we try to keep
    it close to 5 minutes. If you have written testimony,
    additional data, through the request of the chair, it will be
    included in the record.
        So, with that, let's recognize and start off with Ms. Beryl
    Davis, Director of Financial Management and Assurance at the
    Government Accountability Office.
        Welcome, and you're recognized.

                           WITNESS STATEMENTS

                        STATEMENT OF BERYL DAVIS

        Ms. Davis. Chairman Mica, Ranking Member Connolly, Chairman
    Issa, and Mr. Meadows, I am pleased to be here today to discuss
    the issue of improper payments in Federal programs.
        My testimony will focus on Federal agencies' reported
    estimates of improper payments, remaining challenges in meeting
    requirements to estimate and report improper payments, and
    strategies for reducing improper payments.
        In fiscal year 2013, Federal agency estimated improper
    payments totaled nearly $106 billion. This estimate was
    attributable to 84 programs spread among 18 agencies. The five
    programs with the highest dollar amounts accounted for almost
    $83 billion or 78 percent of the government-wide total.
        This same year, OMB reported a government-wide improper-
    payment error rate of 3.5 percent of total program outlays when
    including DOD's Defense Finance and Accounting Service
    Commercial Pay program. However, in May 2013, GAO reported
    major deficiencies in DOD's process for estimating improper
    payments for this program in fiscal year 2012. Consequently,
    the 2013 estimate may not be reliable. When excluding the DFAS
    Commercial Pay program, the reported government-wide error rate
    was 4 percent in 2013, compared to a revised estimate of 4.3
    percent the year before.
        In fiscal year 2013, Federal agencies reported improper-
    payment error rates for seven risk-susceptible programs that
    exceeded 10 percent. These seven programs accounted for more
    than 50 percent of the government-wide estimate.
        Federal agencies have continued to identify new programs as
    risk-susceptible and report improper-payment amounts. A net of
    10 additional programs were added by OMB in the 2013
    government-wide estimate when compared to the prior year. The
    most notable addition was the Department of Education's Direct
    Loan Program, with an estimate of approximately $1.1 billion.
        Despite progress in reporting improper payments, in GAO's
    fiscal year 2013 audit of the Financial Report of the United
    States Government, we reported the issue of improper payments
    as a material weakness in internal control because the Federal
    Government is unable to determine the full extent to which
    improper payments occur and reasonably assure that appropriate
    actions are taken to reduce them.
        We found that four Federal agencies have not yet reported
    estimates for four risk-susceptible programs. For example, HHS
    has cited statutory limitations for its State-administered
    Temporary Assistance for Needy Families program which kept it
    from requiring State assistance in developing an improper-
    payment estimate. In addition, two programs that did report
    estimates were not included in the government-wide total
    because their estimation methodologies were not approved by
    OMB.
        As GAO has previously reported, there are a number of
    strategies that can help agencies to reduce improper payments,
    including analyzing the root causes of improper payments and
    designing and implementing effective preventive and detective
    controls.
        Regarding root causes, identifying and analyzing the root
    causes of improper payments is key to developing corrective
    actions. While some agencies reported the causes of improper
    payments last year in three general categories, as required by
    OMB, more robust root-cause analysis may help to identify
    needed corrective actions and thus assist in developing and
    implementing effective preventive controls.
        Regarding preventive controls, strong preventive controls
    serve as the frontline defense against improper payments. This
    can increase public confidence and avoid the pay-and-chase
    aspects of recovering improper payments.
        Preventive controls involve a variety of activities, such
    as upfront validation of eligibility through data shared among
    agencies. One example of such data-sharing is agencies' use of
    the Do Not Pay initiative. Other preventive controls include
    predictive analytic technologies to identify patterns of high
    risk for fraudulent activities, program design reviews and
    refinements, and training programs for providers, staff, and
    beneficiaries.
        Finally, regarding detective controls, agencies need
    effective detection techniques to quickly identify and recover
    improper payments that do occur. Detection techniques include
    data mining and recovery auditing. For example, in fiscal year
    2013, the Medicare Fee-for-Service Recovery Audit Program
    reported recovering $3.7 billion.
        Another area for further exploration is a broader use of
    incentives for States to implement effective preventive and
    detection controls in State-administered programs. Designed and
    implemented effectively, these strategies could help advance
    the Federal Government's efforts to reduce improper payments.
        Chairman Mica, Ranking Member Connolly, Chairman Issa, and
    Mr. Meadows, thank you very much for the opportunity to be
    here. This completes my prepared statement, and I'd be happy to
    answer any questions.
        Mr. Mica. Thank you.
        [Prepared statement of Ms. Davis follows:]

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        Mr. Mica. And we'll have questions when we've heard from
    all the witnesses.
        We recognize now Ms. Beth Cobert, and she is the Deputy
    Director for Management at OMB.
        Welcome, and you're recognized.

                        STATEMENT OF BETH COBERT

        Ms. Cobert. Thank you. Thank you, Chairman Mica, Ranking
    Member Connolly, Mr. Meadows, for inviting me today to discuss
    the Federal Government's efforts to stop improper payments. I
    appreciate the opportunity to update the subcommittee on this
    topic.
        When the President took office in 2009, improper-payment
    rates were on the rise, with the fiscal year 2009 rate coming
    in at 5.42 percent, the highest figure to date. We are pleased
    to report that, since 2009, the administration, working
    together with Congress, has significantly reduced improper
    payments.
        As a result of this concerted effort, the government-wide
    improper-payment rate has dropped steadily for 4 consecutive
    years, from 5.42 percent in fiscal year 2009 to 3.53 percent in
    fiscal year 2013. And, as noted, the fiscal year 2013 measure
    does include DOD commercial payments.
        Over the past year, we reduced improper-payment rates in
    major program areas, including Medicaid, Medicare Advantage
    Part C, unemployment insurance, the Supplemental Nutrition
    Assistance Program, Pell grants, and the Social Security
    Supplemental Security Income program and the Retirement,
    Survivors, and Disability Income program. Furthermore, agencies
    recovered more than $22 billion in overpayments through payment
    recapture audits and other methods.
        In programs administered at the State and at the local
    level, the Federal Government has been working directly with
    States to ensure that appropriate corrective actions are put in
    place to reduce improper payments.
        In other instances, Federal agencies have implemented
    innovative techniques to ensure that benefit payments are
    accurate. For example, the Supplemental Security Income program
    has been integrating the Access to Financial Institutions, AFI,
    bank verification process. AFI electronically verifies bank
    account balances with financial institutions so SSI can ensure
    that beneficiaries do not exceed program asset thresholds.
        While we are pleased to see progress, we acknowledge that
    more work needs to be done. There are areas where we did not
    see progress in fiscal year 2013. For these and for all areas,
    we will continue to work closely with agencies to find the root
    causes of improper payments and address them.
        To build on our progress, we are working on a number of
    fronts. We are conducting a careful analysis of program-
    specific corrective actions to identify those with the highest
    return on investment or potential for substantially reducing
    improper payments.
        We are also focused on leveraging technology and sharing
    data to address improper payments, as exemplified by the Do Not
    Pay initiative. Do Not Pay uses data-matching and predictive
    analytics to prevent improper payments before they occur.
        The budget includes proposals to build on congressional and
    administrative action to further reduce improper payments. The
    fiscal year 2015 budget includes a number of program integrity
    proposals aimed at improving government efficiency, which is a
    core focus of the overall President's management agenda.
        For example, the budget strengthens Medicare, Medicaid, and
    the Children's Health Insurance Program by providing tools and
    funding to fight fraud, waste, and abuse. It also supports the
    Internal Revenue Service efforts aimed at improving enforcement
    of current tax laws and reducing the tax gap.
        These proposals will provide additional savings for the
    government and taxpayers and will support government-wide
    efforts to improve the management and oversight of Federal
    resources.
        There is compelling evidence that investments in program
    integrity can significantly decrease the rate of improper
    payments and recoup many times their initial investments. As
    was noted earlier, for every dollar spent by the SSA on
    disability reviews, the government saves an estimated $9 in
    avoided benefit payments.
        To help bolster the value of the Do Not Pay system, the
    President's fiscal year 2015 budget reproposes providing the
    Treasury Do Not Pay system access to the SSA full Death Master
    File, which includes the most timely information available on
    death information received from State sources.
        We look forward to continuing to work with Congress on
    other matters, including the Improper Payments Agency
    Cooperation Enhancement Act, IPACE, which includes many
    administration priorities on sharing data to prevent improper
    payments.
        I'd like to close by emphasizing that stopping improper
    payments remains a priority for this administration. We have
    taken an aggressive approach to attacking waste, fraud, and
    abuse within Federal agencies, and we will continue to seek out
    new and innovative tools to help us in this fight. While we are
    proud of the progress we have made, we know there is much more
    work to be done to improve the accuracy and integrity of
    Federal payments.
        I look forward to continuing to work with this subcommittee
    and other committees, as well as the GAO, the inspectors
    general community, and agencies, to make more strides in
    reducing improper payments. All of these stakeholders are our
    partners in this endeavor, and they all play a critical role in
    holding the Federal Government accountable for reducing
    improper payments.
        Thank you for inviting me to testify. I look forward to
    answering your questions.
        Mr. Mica. Thank you.
        [Prepared statement of Ms. Cobert follows:]

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        Mr. Mica. And I'll now recognize Mr. Mark Easton. He's the
    Deputy Chief Financial Officer at the Department of Defense.

                        STATEMENT OF MARK EASTON

        Mr. Easton. Thank you.
        Chairman Mica, Ranking Member Connolly, Congressman
    Meadows, thank you for the opportunity to discuss the actions
    the Department of Defense is taking to reduce improper payments
    and achieve full compliance with IPERIA.
        I submitted a statement for the record and will summarize
    it briefly.
        As the Deputy Chief Financial Officer of DOD, I am
    responsible for financial policy, systems compliance, internal
    controls governing the financial and accounting aspects of all
    business operations across the Department. I am proud to have
    served in the Department for over 40 years, both in uniform and
    as a civilian.
        I'm also very mindful of our stewardship responsibilities
    and am keenly aware that the Department of Defense financial
    management remains on the GAO's high-risk list and that we are
    the only Federal agency without a positive financial audit
    opinion. I'm also convinced that this status will change over
    time, and remain committed to our broader improvements in
    financial management, including the improper payments.
        Most importantly, I should add that Secretary Hagel, Deputy
    Secretary Work, my new boss, and the Chief Financial Officer,
    Mike McCord, and other senior leaders throughout the Department
    are equally committed.
        In short, we feel we have a sound and active program in
    place to identify, report, eliminate, and, if need be, recover
    improper payments. We estimate that less than 1 percent of all
    of our payments meet the definition of ``improper.'' That is
    low compared to the government-wide rate of a little over 3-1/2
    percent for fiscal year 2013. And, moreover, the nature of many
    of our improper payments allow us to resolve them quickly.
        Our record of minimal improper payments is particularly
    noteworthy considering the size and complexity of the
    Department's business operations. Consider that, last year, the
    Defense Finance and Accounting Service, or DFAS, handled nearly
    90 percent of our total payments and disbursed nearly $580
    billion, including 162 million pay transactions, 6 million
    travel payments, and nearly 10 million commercial invoices.
        Of course, there is always room for improvement. We
    constantly strive to reduce improper-payment rates where we can
    cost-effectively do so. Our overall financial improvement and
    audit readiness effort, more commonly known as the FIAR Plan,
    will continue to provide increased confidence and credibility
    in the numbers we report. These efforts, plus our collaboration
    with OMB, GAO, and the Congress, help us to sustain this focus.
        In my larger statement, I described five broad categories
    of payments that we used as reporting elements. These are
    commercial payments to vendors, civilian and military payrolls,
    travel payments, retired annuitant pay, and the similar
    payments by other organizations outside DFAS. I described our
    approach to controlling improper payments for each of them and
    will be happy to provide additional details this morning if you
    wish; otherwise, they are made a part of the record.
        I have also provided an update on recent audit results from
    GAO and the DOD Inspector General, who provides an annual
    compliance assessment. Each report helps to identify additional
    opportunities to strengthen financial management and improve on
    our improper-payment reduction program.
        Many of the issues and challenges highlighted in the
    reports are the same ones that affect our financial reporting
    and audit capabilities. We concur with those issues and
    recognize that, until solved, they will continue to limit the
    confidence that you have in our efforts to accurately report
    improper payments.
        We also appreciate their recognition of the progress we are
    making.
        Mr. Chairman, in conclusion, I'd emphasize that we have a
    fundamentally sound improper-payment program at DOD that
    minimizes improper payments to very small levels. Our more
    comprehensive efforts to improve financial information and meet
    financial reporting requirements and audit standards will also
    improve the efficiency of our improper-payment efforts as well
    as reinforce the completeness and credibility of our improper-
    payment rates report. I will further--it will further improve
    our attempts to minimize improper payments while also
    establishing an infrastructure that will greatly improve
    efficiency.
        Less than 2 weeks ago, Bob Hale, the DOD's longest-serving
    CFO, left office for a well-deserved retirement, but, most
    importantly, he left a legacy that assigned a high priority to
    improving DOD financial management over the long term. Our
    current CFO, Under Secretary Mike McCord, is equally committed
    to improving the quality of our financial information and
    achieving auditability, and that includes full compliance with
    IPERIA.
        Elimination of improper payments is and will continue to be
    an important and visible part of financial management
    stewardship at DOD.
        That completes my statement, and I welcome your questions.
        Mr. Mica. Thank you. And, as I said, we'll hold them.
        [Prepared statement of Mr. Easton follows:]

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        Mr. Mica. Now let me introduce and welcome Dr. Shantanu
    Agrawal, who's the Deputy Administer and Director at the
    Centers for Medicare and Medicaid Services' Center for Program
    Integrity.
        Welcome. You're recognized, sir.

                  STATEMENT OF SHANTANU AGRAWAL, M.D.

        Dr. Agrawal. Thank you.
        Chairman Mica, Ranking Member Connolly, Congressman
    Meadows, thank you for the invitation to discuss the Centers
    for Medicare and Medicaid Services' efforts to reduce improper
    payments. CMS shares this subcommittee's commitment to
    protecting the Medicare Trust Fund and ensuring taxpayer
    dollars are spent on claims that are accurately paid.
        Each year, CMS estimates its Medicare Fee-for-Service
    improper-payment rate using the Comprehensive Error Rate
    Testing, or CERT, process. In fiscal year 2013, the Medicare
    Fee-for-Service improper-payment rate was 10.1 percent.
        It's important to understand what improper payments are and
    what they are not. Like other large and complex Federal
    programs, Medicare, Medicaid, and CHIP are susceptible to
    payment, billing, and coding errors. Improper payments do not
    always represent an unnecessary loss of funds. They are not
    also necessarily fraudulent, nor are they necessarily payments
    for services that should not have been provided. Improper
    payments can also represent either overpayments or
    underpayments on billed claims.
        Medicare Fee-for-Service improper payments can result from
    a variety of circumstances, including: first, services with no
    documentation; second, services with insufficient
    documentation; third, incorrectly coded claims; fourth,
    services provided that were not medically necessary; and, five,
    any other errors, such as payments for noncovered services.
        The vast majority, over 60 percent, of Medicare Fee-for-
    Service improper payments are a result of insufficient
    documentation. For example, if an end-stage renal disease
    facility submitted a claim for 1 month of dialysis services for
    a beneficiary but the submitted documentation did not include
    the physician's order for dialysis and medications, as required
    by Medicare policy, the CERT program would score the claim as
    an improper payment.
        Another example would be, if a physician submitted a claim
    for an office visit with a Medicare beneficiary but the office
    visit note lacked enough identifying information about the
    beneficiary, the CERT program would score the claim as an
    improper payment.
        The factors contributing to improper payments are complex
    and vary from year to year. For example, the leading drivers of
    the improper-payment rate in fiscal year 2013 were hospital
    outpatient departments, skilled nursing facilities, and home
    health providers.
        A contributing factor to the Fee-for-Service error rate was
    the implementation of new home health policies requiring
    documentation of a face-to-face encounter prior to initiating
    home health services. This policy change will ultimately
    strengthen the integrity of the program. However, since it
    takes time for providers and suppliers to fully implement new
    policies, especially those with new documentation requirements,
    it's not unusual to see increases in error rates following
    implementation of otherwise-warranted program integrity
    policies.
        CMS is committed to paying claims in an accurate and timely
    manner and has a comprehensive strategy in place to address the
    improper-payment rate.
        First, CMS has put critical safeguards in place to make
    sure that only legitimate providers are enrolling in the
    Medicare program to make sure we do not allow bad actors to
    bill the program and generate improper payments.
        The Affordable Care Act required CMS to screen all existing
    1.5 million Medicare suppliers and providers under new risk-
    based procedures. Since March 25th, 2011, more than 930,000
    providers and suppliers have been subject to the new screening
    requirements. We have deactivated over 350,000 providers and
    suppliers and revoked over 20,000 providers and suppliers,
    meaning they are no longer able to bill the Medicare program.
        CMS has demonstrated that provider enrollment actions
    result in cost avoidance. For example, by revoking just 48
    providers identified by our advanced predictive analytics
    technology, CMS prevented $81 million in improper payments.
        Second, CMS has designed its claim-processing systems to
    detect anomalies in claims--for example, preventing payments
    for services such as a hysterectomy for a man or prostate exam
    for a woman.
        Medicare pays about $3.3 million Fee-for-Service claims
    each day. Due to the volume of claims processed by Medicare
    each day, CMS relies heavily on automated edits to identify
    inappropriate claims. The National Correct Coding Initiative
    stops claims like these that never should be paid in Medicare
    Part B and Medicaid. This program saved the Medicare program
    over $500 million in fiscal year 2013 alone.
        Third, CMS develops medical review strategies using the
    improper-payment data to ensure that we target the areas of
    highest risk and exposure. The review strategies range from
    issuing comparative billing reports that educate providers
    about their billing practices by showing the provider in
    comparison to his or her State and national peers, to targeted
    medical review of specific providers. Medical review resulted
    in $5.6 billion in savings for fiscal year 2013.
        As required by law, CMS also uses other contractors to
    perform medical review on a primarily post-pay basis. These
    contractors have returned $3.7 billion in the same time period.
        Fourth, CMS is implementing prior authorization processes
    used by the private sector to prevent potential improper
    payments before they are made. To help address the high
    improper-payment rate for power mobility devices, CMS
    implemented the Medicare Prior Authorization of Power Mobility
    Device Demonstration in seven high-risk States and has
    announced plans to expand the demonstration to an additional 12
    States. We are seeing real results from this demonstration.
        CMS is committed to paying claims in an accurate and timely
    manner and has a comprehensive strategy in place to address the
    improper-payment rate. I look forward to answering this
    subcommittee's questions on how we can improve our commitment
    to ensuring the accuracy of payments made by CMS's programs.
        Mr. Mica. Thank you.
        [Prepared statement of Dr. Agrawal follows:]

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        Mr. Mica. And we'll hear from our last witness, Mr. John
    Koskinen, and he is the IRS Commissioner.
        Welcome back. And you're recognized.

                  STATEMENT OF THE HON. JOHN KOSKINEN

        Mr. Koskinen. Thank you, Chairman Mica, Ranking Member
    Connolly, and Congressman Meadows, for the opportunity to
    discuss the work being done by the IRS to reduce improper and
    erroneous payments in the programs we administer.
        These are important issues to the IRS to which I have
    personally devoted substantial time. The IRS views improper and
    erroneous payments as a very serious problem and one where we
    continue to devote a significant amount of time and resources.
        One of our major areas of focus is refund fraud, especially
    fraud caused by identity theft. I'm pleased to report that, in
    this area, over the last couple of years, the IRS has made
    important progress. In 2013, we suspended or rejected 5.7
    million suspicious returns worth more than $17.8 billion.
    Through the end of May of this year, more than 3.7 million
    suspicious returns have been suspended or rejected. We have
    also opened more than 800 new investigations into identity
    theft and refund fraud schemes thus far this year, bringing the
    total number of active cases to more than 1,900.
        Despite the progress, we realize that more needs to be
    done. Fighting refund fraud caused by identity theft is an
    ongoing battle for the IRS, as we must remain vigilant given
    the propensity of identity thieves to develop new and more
    complicated schemes.
        And even with the progress we've made so far, I've recently
    asked our senior leadership team to reevaluate everything we're
    doing in this area and to consider additional steps we could
    take related to refund fraud. For example, we are consolidating
    employees working on identity-theft victims assistance across
    the agency into a single office. We will also be limiting to
    three the number of refunds that can be electronically
    deposited into a single bank account or debit card.
        We're also working to reduce improper payments by improving
    compliance with regard to refundable tax credits, particularly
    the Earned Income Tax Credit Program. Our programs that focus
    on EITC combine to protect approximately $4 billion annually,
    but we are concerned that the improper-payment rate for the
    EITC remains unacceptably high, along with the dollar volume of
    the payments that are made improperly.
        As noted, this program--this problem has existed in a
    steady state for several years, and when I began as
    Commissioner, I advised our senior team that we need to make
    improvements in these rates.
        We again have pulled together what I call everybody who
    knows anything about EITC in the agency into a working group
    that is assessing all of our past and current efforts in this
    area and exploring new possibilities for improving the EITC. I
    view this as one of the most important areas of our activities.
        One thing we've already done is disaggregate the problem
    and see where most of the noncompliance is. We found that EITC
    errors fall under three main categories. The first involves
    claims for dependent children that people are not entitled to
    claim. The second is misreporting of income. And the third is
    improperly claiming the head of household or single filing
    status.
        Mr. Koskinen. We believe having made this more detailed
    background study about EITC enforcement problems will help us
    develop better compliance programs going forward.
        But, as Congressman Connolly noted, we have advised that we
    cannot do this alone. We need the help of Congress, which can
    greatly assist our efforts both on the EITC and on refund fraud
    by enacting several proposals in the administration's fiscal
    2015 budget.
        One would accelerate the due dates of third-party
    information returns, which would allow us to match these
    documents against income tax returns earlier in the filing
    process and allow us to more quickly spot errors and potential
    fraud.
        Another legislative proposal would provide the IRS with
    greater flexibility to address what are called correctable
    errors, which would allow us to automatically fix more areas on
    return--errors on returns prior to paying the refund than we
    can do now.
        Now, if we see an error, the only way we can correct it is
    through an audit. We do on the average of 500,000 audits a
    year, but we are not going to be able to audit our way out of
    this problem.
        The administration has also proposed expanding IRS access
    to information in the National Directory of New Hires to cover
    general tax administration purposes, which would include such
    things as data matching and verification of taxpayer claims
    during return processing.
        We would hope that Congress would enact these proposals to
    explicitly authorize us to regulate paid tax preparers as well.
    Given that more than half of returns for EITC refunds are done
    by paid preparers, this proposal would be an important addition
    to our efforts to improve compliance in the area.
        This is the first time we have pulled these legislative
    proposals together as a package. Some of them have been out for
    some time. But all of them would allow us to improve our
    ability to deal with EITC refund fraud.
        Even with those changes, which would be extremely helpful,
    a major challenge to our efforts to reduce improper payments
    remains our ongoing lack of resources. Without sufficient
    funding, our ability to proceed with any new initiatives in the
    area will be constrained.
        I agree with Congressman Meadows. I am a believer, after 20
    years in the private sector, in what do you get for what you
    pay.
        We have noted that, with the President's proposed budget
    and increase in funding for the IRS of about $1.3 billion, we
    would produce back to you over $2 billion in enforcement
    revenues.
        Our estimate is that, with the legislative proposals and
    the resources, we would protect an additional $4 billion in
    EITC improper payments from going out and we would improve
    customer service levels, which we think this year are going to
    fall to 53 percent.
        With the budget resources, we would improve our taxpayer
    services to 80 percent. We stand behind those numbers and would
    be willing to be held accountable for them.
        I also have a prepared statement that I am happy to submit
    for the record.
        We will continue to look forward to working with Congress
    to find a solution to the problems we face in the improper
    refund area.
        Thank you very much.
        [The statement of Mr. Koskinen follows:]

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        Mr. Mica. Thank you.
        And, without objection, your entire statement will be made
    part of the record.
        We will now turn to questions. And, actually, I will start
    first with the IRS Commissioner.
        Right now about 25 percent of the Earned Income Tax Credit
    requests that are put into IRS are improperly paid. It is 24-
    point-something percent. Is that correct?
        Mr. Koskinen. That is the number. Yes.
        Mr. Mica. Yeah. You outline some measures of spending some
    more money and, also, asking for some more authority.
        In the improper payments that we are talking about, we are
    not also including fraudulent returns.
        Mr. Koskinen. They are included. No. They----
        Mr. Mica. They are?
        Mr. Koskinen. Part of the EITC problem are fraud, fraud by
    tax preparers, fraud by applicants. As I noted, one of the
    reasons we want to have authority to regulate tax preparers----
        Mr. Mica. Okay. Let me be a little bit more specific, then.
        We didn't include identity theft in that category. Right?
        Mr. Koskinen. No. Identity theft and the refund fraud
    generally are erroneous payments, but they are not categorized
    in the EITC improper payment category. But within the EITC
    area, the improper payments do include fraud as well as
    mistakes.
        Mr. Mica. Have you had any outside consultants look at what
    is going on? I mean, this is a staggering rate. Nearly a
    quarter of all of these returns receive an improper payment,
    for billions of dollars.
        Has there been someone that has looked at this and analyzed
    the--sort of the errors of your way or audited to come up with
    suggestions? Is this an internal set of recommendations?
        Mr. Koskinen. These are recommendations that are based on
    the experience we have had over the 8 to 10 years thus far, not
    very successfully dealing with this problem.
        Mr. Mica. But, again, I come from the private sector and,
    when you have got a--I couldn't function. I would have to close
    down my business if I had a 20--close to 25 percent error rate
    on payments.
        Almost any business would go out of business. The
    difference here is you have an unlimited resource, and that is
    taxpayer dollars.
        But has there been anyone outside that has been retained to
    look at this problem, that you know of? And I know, John, you
    have only been there since the beginning of the year.
        Mr. Koskinen. No. We have had a series of audits by the
    Inspector General, reviews by GAO. We have not, to my
    knowledge,had anyone outside of the Agency actually look at
    this. But we have had, as I say, a lot of experience.
        The legislative proposals being pulled together results
    from, as I say, the working groups we have had over the last 6
    months saying, ``If you needed''--``If you are a blank slate,
    what would it take to actually begin to attack the problem?''
        Mr. Mica. Let me ask you another question.
        Mr. Connolly and I have done a lot of work on IT. He has
    actually done a lot more. About half of this $84 billion they
    spend every year is wasted.
        Part of your detecting this fraud is also done through
    electronic means. Is that not correct?
        Mr. Koskinen. That is correct.
        Mr. Mica. Okay.
        Mr. Koskinen. We have filters and analyses that we make.
        Mr. Mica. Exactly.
        Well, something isn't catching a huge number. 25 percent is
    just off the chart. And it is a pretty technical operation.
        Again, you are looking at electronic review of these
    returns and money going out and--like water over Niagara Falls.
    But there is something--some disconnect.
        Mr. Koskinen. Yes. And part of it is we identify----
        Mr. Mica. Are you asking for more money for personnel or
    more money for technical equipment? And what----
        Mr. Koskinen. As I say, we----
        Mr. Mica. What is the mix?
        Mr. Koskinen. The mix is--the amount of money we need for
    EITC fraud is relatively modest. We do need continued support,
    but it is, you know, a couple hundred million dollars for the
    return review program that we have been trying to get----
        Mr. Mica. But that is a tactic--that is a tactical
    improvement?
        Mr. Koskinen. Yes.
        Mr. Mica. Software----
        Mr. Koskinen. Technical improvement would allow us to
    improve our thing.
        But what we really need--we already----
        Mr. Mica. See, again, I think--again, I just don't believe
    that this solution that you are bringing to us is really going
    to do it.
        Mr. Koskinen. Well, let me explain a little more, if I
    could.
        Mr. Mica. Yeah.
        Mr. Koskinen. The correctable error authority would allow
    us where we see an error in the refund, which is just
    legislative authority----
        Mr. Mica. This is just legislative language. That costs
    nothing. We can pass that.
        Mr. Koskinen. I understand. No. No. That is what my point
    is.
        Mr. Mica. I don't see a problem with those requests.
        Mr. Koskinen. Right.
        Mr. Mica. I am talking about personnel versus the technical
    equipment that it is--I mean, you can't possibly do these
    returns and some guy, you know, with his spectacles looking
    at----
        Mr. Koskinen. Exactly. Our view is exactly that, that there
    is no way for us to audit our----
        Mr. Mica. And you are saying that is a couple-hundred-
    million-dollar solution versus a multi-billion-dollar solution.
        Mr. Koskinen. We already----
        Mr. Mica. And I don't--I don't have a problem there. But,
    again, I don't have the greatest faith, based on our most
    recent hearings, in your technical capability as far as
    computers and data and all of that and even retaining it.
        A simple question: How long do you keep the records--the
    electronic records on this data?
        Mr. Koskinen. The electronic records for taxpayers are kept
    for years. We have some records for States that go back 50
    years.
        Mr. Mica. Okay. And--well, again, we have had our issues
    with emails and other communications. Records can go back to 50
    years. These you have pretty accurate information and it is
    entered electronically.
        Mr. Koskinen. Yes. We save each exam file. Every taxpayer
    record is saved separately. It is preserved. And those go back
    so that we can audit 3 to 6 years' worth of returns.
        Mr. Mica. Uh-huh.
        Again, I am very skeptical about spending billions. I think
    it may take some money to upgrade software and the technical
    equipment that will, you know, help us reveal these fraudulent
    and, also, improper payments.
        But, again, I have no problem. I think Mr. Connolly and I
    would be glad to look at the other legislative remedies that we
    have.
        Mr. Koskinen. Those are the significant part----
        Mr. Mica. I don't want to take too much time.
        Quick question for DOD. DOD--most people don't realize it,
    but I understand it is not till 2017 that you'll even be
    capable of an audit.
        Mr. Easton. We will--the statutory requirement is to be
    audit-ready by 2017. By the end of 2017, we intend to go into
    full financial statement audit----
        Mr. Mica. So I would have every reason to believe that some
    of the improper payment data that you are bringing forward is
    not totally correct or valid.
        Mr. Easton. We stand behind the numbers that we report. The
    fact that we don't have a clean financial opinion--in the
    control environment that we have, we acknowledge why those
    numbers are not believable, people are skeptical. We have gone
    to great lengths to make sure that we have done as much as we
    can.
        Mr. Mica. And your improper payments wouldn't include--we
    did a hearing here. I just about fell off the chair. The guy
    that got the contract in Amsterdam. He wasn't an American.
    Remember that one?
        $800-million contract to supply fresh fruits and vegetables
    in--I think it was Afghanistan or one of the conflict areas. He
    milked that into almost a $5-billion improper payment.
        Is that included--that kind of thing included here?
        Mr. Easton. We--it depends on the circumstances. But I
    understand----
        Mr. Mica. But that is a specific one. You go back and
    look----
        Mr. Easton. Yes, sir.
        Mr. Mica. --at that one. That one knocked me off my chair
    when I heard that.
        And there were questions raised about even his eligibility
    as a proper vendor. I mean, it was just astounding how he
    milked the taxpayer with an improper or fraudulent payment.
        I would like a response from DOD on that one because I just
    don't--again, all the information I have is your--your auditing
    capability is very limited.
        The information you have, financially reporting to Congress
    is not what we can put our faith and trust in. And we still
    have a long way to go before we get the accurate information.
        With that, I yield to Mr. Connolly.
        Mr. Connolly. Thank you, Mr. Chairman. Actually, let me
    pick up on where you just left off.
        Mr. Easton, if you can't provide an unqualified audit until
    2017--and we have reason--given the long history of the
    Pentagon that, you know, you have got the biggest budget and
    often, therefore, you have the biggest problems, but the idea
    that you stand by your numbers makes many of us queasy on both
    sides of the aisle, frankly.
        I hope you won't stand too strongly behind your numbers
    because there is every reason to believe you are understating
    your improper payments, not deliberately, but given the fact
    that you really can't provide an unqualified audit till 2017.
        Do you want to comment?
        Mr. Easton. There is a--there is a lot of reasons that make
    a financial audit difficult in DOD, and I am convinced that we
    are doing a lot right. There is clearly exceptions.
        The control environment, I think, will continue to improve.
    Next year we will begin to conduct audits of our budgetary
    execution.
        When we have made changes--for example, GAO pointed out the
    statistical sampling for our commercial payments--and that has
    been raised before--we were using a sampling methodology that
    was not appropriate. We have made those adjustments.
        I think that GAO's review in 2013 identified our
    statistical sampling has been accurate in other areas. And so
    we have reason to believe that the numbers are sound, but we
    certainly understand why the skepticism exists with the
    financial audit.
        Mr. Connolly. Well, in 2012, that same GAO noted that two
    of your programs were excluded from OMB's estimation of
    improper payments.
        Those two programs, the Defense Finance and Accounting
    Service commercial pay and the U.S. Army Corps of Engineers
    commercial pay, combined were worth $400 billion.
        Are they now included in the improper payments estimate?
        Mr. Easton. Yes. They are included. They were included. I
    think that the decision GAO made is because of the statistical
    sampling anomalies that they found, which have been corrected,
    that they excluded them in their reporting calculation.
        Mr. Connolly. Right.
        But if we just simply applied--this is going back to Mr.
    Mica's point.
        If we simply applied, you know, the rough rounded
    percentage of improper payments of the total, 4 percent, and
    400 billion was excluded for those reasons, perhaps we were
    understating improper payments if it averaged out by $16
    billion. You take the point.
        Mr. Easton. Understand.
        Mr. Connolly. Okay. So I just--I worry a little bit that we
    may actually be understating, not deliberately--I am not one
    who's conspiracy minded--but just because of the methodology
    and the lack of qualified data and sometimes excluding it for
    those reasons--good reasons, but that means we are not actually
    getting the whole picture of improper payments.
        Dr. Agrawal, I mentioned in my opening statement about the
    role of U.S. attorneys. And my impression has been that, when
    it comes to Medi---no.
        We understand Medicare fraud is a subset of improper
    payments. When we talk about improper payments, some of it is
    simple clerical error.
        Sometimes the data gets, you know, mixed up. ``We thought
    you were 66 1/2 and eligible for full Medicare or Social
    Security and, whoops, you are actually only 65'' or whatever it
    may be. So--but given a big country and big numbers, that adds
    up.
        But in the case of Medicare, there is a subset of very
    substantial fraud. And I cited the Boston U.S. attorney's
    Office, which I happen to know about, which I think was number
    1 in the country last year in uncovering fraud to the tune of--
    and prosecuting and pursuing about $3-1/2 billion.
        Now, there are--I think there are 99 U.S. attorneys in the
    United States. Is it your sense that every one of those U.S.
    attorneys is taking this issue seriously and is making it one
    of their priorities? Because, if they are, our ability to
    whittle down this part of the improper payment could be
    considerable.
        Dr. Agrawal. Yeah. Thank you for the question.
        I couldn't comment on every U.S. Attorney's Office. But I
    can tell you that OIG and DOJ are extremely focused on
    healthcare fraud, and we work very closely with them on
    investigating issues as well as taking action, initially,
    administrative action on our end and then law enforcement
    action on their end.
        And I think, you know, for evidence of that, you just have
    to look at the HCFAC numbers that show an 8 to 1 ROI for all
    the HCFAC funding. That really is a combination of both the
    administrative actions that I mentioned and all the law
    enforcement work that is conducted as well.
        Mr. Connolly. Okay. I would just plead with you, your
    office and those in the position to exhort, continue to put the
    pressure on the U.S. Attorneys.
        Because, I mean, it is easy for somebody--I mean, they have
    a lot of independent authority and they can set their own
    priorities. This needs to be one of them.
        And they are a powerful tool in helping us whittle down
    that number and, frankly, putting perpetrators where they
    belong who are defrauding the U.S. taxpayer.
        With that, Commissioner Koskinen, first of all, I want to
    clarify something because I think it was a little confusing.
        Refund fraud that you cited, a subset of improper payments
    or are you considering it a separate subject entirely?
        Mr. Koskinen. It is a separate subject. We track it. We
    treat it seriously. But it is not treated as an improper
    payment, per se.
        Mr. Connolly. Okay. If I can just stay on that, even though
    it is not actually the subject, then, of this hearing, given
    what you just said.
        But this committee has also dealt with this issue of refund
    fraud, and I seem to recall a few years ago somebody from IRS
    talking about the exponential growth in this category in just a
    brief 4-year period.
        And if I heard you correctly, we are not talking about you
    setting aside suspicious returns to the tune of millions a
    year.
        Mr. Koskinen. Yes. We stopped last year. Over $17 billion
    in suspicious refund claims.
        Mr. Connolly. Is this a relatively recent phenomena?
        Mr. Koskinen. It exploded, really, in 2009 to 2012. Started
    in Florida, Georgia, and, oddly enough, the District of
    Columbia. But Florida was really the epicenter of it, and it
    was overwhelming law enforcement. It overwhelmed the IRS.
        More recently, in the last couple of years, we have made
    significant progress in dealing with it.
        Mr. Connolly. Yeah.
        And, of course, if it happens--I have constituents this has
    happened to.
        And trying to recover the money they are legitimately owed,
    once the fraud occurs, is a very complicated process; is it
    not.
        Mr. Koskinen. It is. We have made progress there. It used
    to take almost a year to deal with an identity theft victim. We
    are now down to about 120 days to resolve their accounts. And
    our backlog is down to about 120,000.
        Mr. Connolly. If the Chairman will indulge me, one last
    question?
        Mr. Mica. If I might.
        Mr. Connolly. Yeah.
        Mr. Mica. If you would yield to me for a second.
        Mr. Connolly. Of course.
        Mr. Mica. I just--we were talking about the hearing that we
    held August 2nd, 2013, identity theft tax fraud. And, actually,
    from fiscal year 2011 to 2012, IRS saw a 78 percent increase in
    identity theft cases.
        Now, listen to this. Taxpayer Advocate--I am sorry--
    Taxpayer Advocate Service, which provides assistance to
    victims, has seen a 650 percent increase in cases from 2008 to
    2012. We will put that in the record, as we cited that.
        Mr. Connolly. I thank the chairman for his intervention.
        And, as he knows, the--our committee in another category of
    bipartisan identification of problems I hope we can do
    something about, this problem has been highlighted by this
    committee.
        And I appreciate Commissioner Koskinen's comment because I
    can just tell you--and I know my colleagues, if you have had
    similar casework, it can--the impact of this can range from
    very inconvenient to devastating, depending on the size and
    magnitude of the refund we are talking about and the financial
    circumstances of the family involved.
        So a very important issue and, unfortunately, because of
    technology, just growing exponentially. Willie Horton once
    said, ``I rob banks because that is where the money is.'' Well,
    today's version of that is----
        Mr. Mica. IRS.
        Mr. Connolly. --I go after refunds because----
        Mr. Koskinen. Let me simply stress that, over the last 2
    years, with the assistance of U.S. attorneys, interestingly
    enough, we have begun to make serious inroads into this. We
    have, as I say, cut the backlog down of identify theft.
        Mr. Connolly. Good.
        Mr. Koskinen. We are stopping more with technology. More
    filters are more effective. But we are basically--as somebody
    said, we have drivenmost of the amateurs out. We are dealing
    with organized crime here and around the world.
        Mr. Connolly. Yeah. Well, it is a growing problem, and I am
    glad you highlighted it. Thank you.
        Mr. Chairman, I don't wish to impose. I just had one more
    question.
        Mr. Mica. Go right ahead. I have got extra time.
        Mr. Connolly. Okay. I thank my chairman.
        And my last question has to do with EITC. Mr. Koskinen, do
    you know the genesis of the Earned Income Tax Credit program.
        Mr. Koskinen. I----
        Mr. Connolly. That is to say, who thought it up.
        Mr. Koskinen. Well, it has been historically supported by--
    on a bipartisan basis, my understanding is that President
    Reagan, for instance, maintained that it was his favorite job
    creation program, poverty program.
        Mr. Connolly. Yeah.
        Mr. Koskinen. It helps the working poor. It encourages
    people to work.
        Mr. Connolly. That is exactly right.
        It was actually a conservative idea. It was not a liberal
    idea. And it was a good one because it is not only well-
    intentioned, but it is designed to end dependency and to get--
    but to help lift people out of poverty.
        But it is a complex program; is it not?
        Mr. Koskinen. Yes. Part of the problem is every time
    somebody tinkers with it, it gets more complex, in terms of
    which children count, where they live, who has responsibility
    for them.
        Mr. Connolly. Who qualifies.
        Mr. Koskinen. Part of the error rate is it is very
    complicated for preparers and tax preparers--taxpayers to even
    figure out what they are entitled to.
        Mr. Connolly. In fact--correct me if I am wrong--but my
    understanding is 57 percent of the returns--the EITC returns
    filed are actually prepared by tax return preparers. Is that
    correct?
        Mr. Koskinen. That is correct.
        Mr. Connolly. Yeah.
        That tells you a lot about the complexity. I mean, that
    wouldn't be happening if it were simple in determining
    eligibility.
        Mr. Koskinen. And most of those preparers do a good job.
    But there is a significant amount of error rate, and some of it
    intentional on the part of preparers----
        Mr. Connolly. Yeah.
        Mr. Koskinen. --some of whom take the refunds for
    themselves.
        Mr. Connolly. If we are worried about improper payments and
    we hear that statistic, it requires a tax preparer in 57
    percent of the cases--or at least it is preferred or required--
    you have to ask yourself, ``Well, what could go wrong with
    that?'' And, of course, the error rate is going to be high----
        Mr. Koskinen. Right.
        Mr. Connolly. --even inadvertent.
        Mr. Koskinen. Correct.
        Mr. Connolly. And I just wanted to stress that because this
    is a conservative idea that I think actually is--does work, but
    it is full of complexity that leads to an unintended
    consequence, which is improper payment.
        Mr. Koskinen. As I said, when I started, I looked at the
    history and advised people that it is an unacceptable rate of
    payment--improper payments, an unacceptable rate of dollars out
    the door, and we need to do whatever we can to make a dent in
    it.
        Mr. Connolly. Thank you.
        And I thank you, Mr. Chairman.
        And I thank my colleagues for their indulgence.
        Mr. Mica. Thank you, Mr. Connolly.
        Mr. Koskinen, I can assure you that the late President
    Reagan will be doing back flips in his California tomb if he--
    if and when he learns today of a 25 percent--well, nearly 25
    percent error rate in an IRS program which he championed, the
    Earned Income Tax Credit.
        With that, the gentleman from California, the----
        Mr. Issa. Thank you, Mr. Chairman.
        Mr. Mica. --Chairman of the full committee.
        Mr. Issa, I want you to check the tomb when you go out
    there.
        Mr. Issa. Okay.
        Mr. Commissioner----
        Mr. Connolly. I want to second that motion, Mr. Chairman.
        Mr. Mica. That was a--I don't know if you heard that. Were
    you here, also?
        Mr. Issa. I think you better read that one again. Once we--
    --
        Mr. Mica. Reagan is doing back flips in his tomb to find
    out that the program that he championed, Earned Income Tax
    Credit, had a 25 percent error rate.
        And you weren't here either to----
        Mr. Issa. Nixon isn't that keen about what has happened
    with the EPA and OSHA either. So it happens.
        Mr. Mica. The Commissioner informed the committee today
    that taxpayers will be happy to know they keep your records for
    as much as 50 years. They do have a little problem with 27
    months on the----
        Mr. Issa. That part I heard. And----
        Mr. Connolly. Although it is important to note Nixon had a
    lot more experience with the IRS than did President Reagan.
        Mr. Mica. Well, he's probably doing some back flips, too,
    out there in his tomb.
        Mr. Issa. I would now ask unanimous consent my time be
    restored.
        Mr. Mica. All right.
        Mr. Issa. Mr. Commissioner----
        Mr. Mica. I yield to the chairman.
        Mr. Issa. Oh, we are having too much fun for the subject
    being so serious.
        I think I covered what I wanted to cover in the opening
    statement.
        And I want to touch a few areas, Commissioner, since you
    are here and it is an appropriate time.
        The--we have had two large dumps from the IRS in the
    targeting of conservatives that have occurred in the last few
    days, one on the 3rd of July--I was in the air coming; so, I
    didn't read them that day--and then more yesterday.
        Additionally, we have had a response from your office to my
    15 or so questions with lots of subparts, and I want to just
    run through a couple of quick questions.
        Your letter, although was partially responsive, didn't
    respond to most of the specifics, including names of
    individuals and so on.
        Are you going to be responding further to my interrogatory
    questions we gave you at the last hearing?
        Mr. Koskinen. Yes. We will--we will respond to those as
    quickly as we can. As I said in my letter to you, the Congress
    has asked the IG to do an investigation of all of this.
        He's asked us to give that a priority. So we are providing
    as much information to you as we can without interfering with
    that investigation.
        Mr. Issa. Right.
        Mr. Koskinen. But as he winds that up, which I hope will be
    soon, we plan to respond to all of those interrogatories.
        Mr. Issa. Well, oddly enough, both of us have been working
    for 2 years. So concurrent working is part of it.
        And that brings to a specific the producing of the backup
    tapes and so on that, apparently, are at TIGTA. Backup tapes--
    and we have experts in the audience from MIT and Ohio State
    that will tell us that backup tapes can be duplicated.
        We would ask that you go to TIGTA and essentially make
    backup tapes and deliver them to us so that we can concurrently
    work on them.
        Things which are unique and can't be moved, we would
    understand why they can only be in one place, but the others
    certainly we would expect.
        You know, for example, the BlackBerry could be difficult,
    but you can make a backup of a BlackBerry's contents and it can
    be restored to a new BlackBerry.
        So if you would look into that, I would appreciate it.
        The--I am going to be brief. You know, it is 2 years into
    an investigation. You are the third commissioner since this
    thing got rolling, maybe fourth to a certain extent.
        And we find it interesting that, on the 3rd of July, in the
    documents that were provided to us, we only learned of
    something--and Mr. Jordan's going to primarily ask some
    specific questions of you--but of the existence of a system
    called OCS.
        Are you familiar with that?
        Mr. Koskinen. OTS, I may be, but I don't recognize the
    initials.
        Mr. Issa. ``OCS.''
        OCS is your internal communication. It is an IRS chat.
    Maybe some of the people behind you could raise their hands and
    say they know about how, in fact, you have a system that
    circumvents email and allows you to talk to each other, sort of
    like an in-house text.
        Are you familiar with it?
        Mr. Koskinen. No. I have never used it. I didn't know we
    had that.
        Mr. Issa. Well, I am going to let Mr. Jordan go through the
    series of question. I really think it should--deliver a time.
        I am going to ask that the staff deliver the emails to you
    during the intervening questions because I don't want you to be
    blindsided, but I want it to be very clear.
        Lois Lerner knew about that system. Lois Lerner asked and
    wanted to make sure that it wasn't being tracked and traced.
        And, most importantly, you have had--your Agency has had a
    subpoena that would have covered the delivery--the preservation
    and delivery of information on this alternate email system and,
    to our knowledge, we have received no discovery from it.
        So it is a serious concern. I am going to ask, for
    efficiency, that they give you the documents. And then Mr.
    Jordan, after you have had a chance to look at them, will--and
    maybe let the people that are here with you be aware of them.
        Because it is critical to us that we are only finding out
    on the 3rd of July, 2 years into an investigation, that, in
    fact, there is an entire other way to communicate, that Lois
    Lerner very carefully wanted to make sure, just after--just
    about the time that this whole thing erupted, she wanted to
    make sure that it wasn't tracking and that it was a way to talk
    between her colleagues.
        Mr. Koskinen. As I say, I am not familiar with OCS. All I
    can say is I have been assured numerous times that there has
    been a search through every system in the IRS to make sure we
    provided you all the Lois Lerner emails we can find.
        Mr. Issa. It is not email. You have another communication
    system, and it is one that is--the tracking is turned off even
    though the default for the tracking is turned on.
        It is a Microsoft system that you have within--within your
    communication, and we are obviously opening a new track of
    wanting to know more details about that.
        Mr. Koskinen. We would be delighted to provide that.
        Mr. Issa. Okay. I will close quickly. Because, like I say,
    I want you to have full understanding. I want Mr. Jordan to
    actually cover the point by point.
        Since we last were together, Lois Lerner's attorney has
    changed his position on Lois Lerner's compliance and basically
    said that she printed out some, but not all, and that he was
    misunderstood in the case--in the case of printing out emails
    related to the Presidential Records Act.
        And, again, this investigation is not about the President--
    or the--I am sorry--about the Federal Records Act. It is about
    targeting of conservatives.
        To your knowledge, have you delivered the printed-out
    copies of Lois Lerner's emails? And, if so, how do we tell the
    difference between the ones she printed out that you took from
    a file and ones you recovered from somewhere else?
        Mr. Koskinen. To the first question, I have asked that
    question myself some time ago as to whether there were hard
    copies.
        And I was told there were hard copies and they were all
    produced to you in the ordinary course of our production. I
    can't tell you whether all of her official records were printed
    out and are included in that or not.
        Your second question? I am sorry.
        Mr. Issa. Well, the second question is, in fact, a favor.
        In order for us to not look through what seemed to be
    identical documents and we can't tell which ones were printed
    out in hard copy and you took them and scanned them in to give
    us tips and which ones were, in fact, documents that you got
    from somewhere else, can you have your people give us either
    the Bates numbers or a duplicate copy of the files that were
    delivered that were specifically printed out by Lois Lerner in
    compliance with the Federal Records Act so that we can separate
    ones gotten from one source, which would have been Lois
    Lerner's compliance, and the others? Because we have no way of
    knowing where you got which papers from.
        Mr. Koskinen. That is fine. I don't either, but we would be
    happy to go back and determine that and send you up-to-date
    details so you will know which we were found--which were found
    as hard copies and which were found as emails.
        Mr. Issa. That would be very appreciated.
        I thank the chairman, and I yield back.
        Mr. Mica. Mr. Clay.
        Mr. Clay. Mr. Chairman, thank you.
        Commissioner Koskinen, thank you for being here today.
        Again, you just testified before this committee on June
    23rd about Lois Lerner's computer crash. After that hearing,
    Chairman Issa sent you a letter basically suggesting that you
    made false statements about whether Lois Lerner printed out her
    emails to comply with the Federal Records Act.
        He wrote:``Ms. Lerner and the IRS are not being truthful
    about her lost emails, in violation of federal law. Although
    accusations of lying to Congress are common around here, they
    are very serious.'' And so I want to give you a chance to
    respond.
        At a previous hearing, you testified: ``My understanding is
    every employee is supposed to print records that are official
    records on hard copy and keep them.''
        And, in fact, the Internal Revenue manual, which sets forth
    the policies governing the Internal Revenue Service has a
    section entitled ``Emails as Possible Federal Records.''
        That section states: ``If you create or receive email
    messages during the course of your daily work, you are
    responsible for ensuring that you manage them properly. The
    department's current email policy requires emails and
    attachments that meet the definition of a federal record be
    added to the organization's files by printing them.''
        So according to the manual, IRS employees were required to
    print out emails that qualified as federal records. Is that
    right?
        Mr. Koskinen. That is correct. As I--go ahead.
        Mr. Clay. Okay. In your testimony at our last hearing, you
    also said that Ms. Lerner: ``printed hard-copy emails.''
        Has the IRS provided those printed hard-copy emails to
    Congress?
        Mr. Koskinen. Yes, we have.
        Mr. Clay. Oh. You have provided those. I am curious as to
    why we are still inquiring about them.
        Today, Ms. Lerner's attorney issued a statement informing
    the committee that, during her tenure at the IRS, Ms. Lerner
    did print some emails.
        His statement continues, ``The facts are that Ms. Lerner
    did not destroy any records subject to the Federal Records Act.
    She did not cause the computer assigned to her to fail, and she
    made every effort to recover the files on the computer.''
        And, Mr. Chairman, I ask that this statement be placed in
    the hearing record.
        Mr. Mica. Without objection, so ordered.
        Mr. Clay. Thank you, Mr. Chairman.
        Mr. Mica. Let me just do a quick housekeeping.
        Mr. Clay. Sure.
        Mr. Mica. I am sorry, Mr. Clay, because I failed to do this
    at the beginning.
        I ask unanimous consent that Mr. Clay, the gentleman from
    Missouri; Mr. Jordan, the gentleman from Ohio; Mr. DeSantis,
    the gentleman from Florida, who are not on the subcommittee,
    be--without objection, be allowed to participate fully in the
    subcommittee proceedings. Without objection, so ordered.
        I didn't do that, and I apologize. And we have been joined
    by other members of the full committee and we want to give them
    full access.
        Thank you.
        Mr. Clay. Thank you so much.
        Commissioner, at our last hearing, when you discussed Ms.
    Lerner's computer crashing, you said this: ``I don't know
    whether anything that was lost was an official record or not.''
    Is that correct?
        Mr. Koskinen. That is correct.
        Mr. Clay. But in Chairman Issa's letter to you, he claimed
    that you testified to something different. He wrote that you
    testified that Ms. Lerner fully maintained her official records
    pursuant to the Federal Records Act. And I cannot seem to find
    that statement.
        Was that your testimony.
        Mr. Koskinen. No. As I said in my letter to the chairman in
    responding yesterday, I appreciated the opportunity to review
    the record.
        There is nothing in my statement that I would change. But
    if I can provide any clarification, I am happy to do that, but
    I have not suggested any changes in my testimony in the record.
        Mr. Clay. Thank you for that response.
        And before I conclude, I want to emphasize an important
    fact. Lois Lerner's hard drive crashed on June the 13th, 2011.
        16 days later, on June the 29th, was the first time she was
    first informed that the IRS employees in Cincinnati were using
    inappropriate search terms. And that is according to Inspector
    General Russell George.
        Is that correct, Mr. Commissioner?
        Mr. Koskinen. That is my understanding.
        Mr. Clay. And, with that, Mr. Chairman, I yield back. And I
    thank you for your indulgence.
        Mr. Connolly. Mr. Chairman. Mr. Chairman.
        Mr. Mica. Yes.
        Mr. Connolly. Just a unanimous consent request.
        I propose this line of questioning. I would ask unanimous
    consent that John Koskinen's letter addressed to Chairman Issa
    dated July 8th be entered into the record.
        Mr. Mica. Without objection, so ordered.
        Mr. Connolly. I also would request that the statement by
    William W. Taylor issued today, clarifying Ms. Lerner's
    printing out of emails, brief statement, be entered into the
    record.
        Mr. Mica. Without objection, so ordered.
        Mr. Connolly. I thank the Chairman.
        Mr. Mica. Thank you.
        Let me recognize Mr. Meadows, the gentleman from North
    Carolina.
        Mr. Meadows. Thank you, Mr. Chairman.
        Ms. Cobert, I am going to come to you first because you
    were saying that we have made great progress. I think you were
    saying you had a lower percentage in this administration. You
    have been able to cut this--improper payments way down. Is that
    correct?
        Ms. Cobert. We have. Yes.
        Mr. Meadows. You went from 5.42 percent down to 3.53. Is
    that your testimony?
        Ms. Cobert. That is correct.
        Mr. Meadows. All right. I am a little troubled because it
    gives--if we talk percentages, it sounds a whole lot better
    than reality.
        And so I guess my question is: In terms of real dollars, I
    am showing that we have really made no significant change,
    that, in 2009, your percentage was--it was $106 billion in
    improper payments. Would you agree with that?
        Ms. Cobert. I believe that is correct.
        Mr. Meadows. Okay. So the only reason the percentage came
    down is because we are spending more. So 106, as it relates to
    a higher number that we are spending, but we are still sending
    out $106 billion in terms of improper payments. Is that
    correct?
        Ms. Cobert. The figure last year was $106 billion in
    improper payments. $97 billion of that was the overpayment
    portion. Yes.
        Mr. Meadows. Okay. And so--and that is exactly the number
    that it was in 2009, is that correct, in terms of total number?
        Ms. Cobert. I believe that is correct.
        Mr. Meadows. All right. So your testimony to say that we
    are making good progress and all of us should be excited
    doesn't really do anything to go to what Mr. Connolly said
    about $106 billion being real money?
        Ms. Cobert. We believe $106--we take the responsibility to
    reduce both the percentage and the absolute dollars of improper
    payments very seriously.
        Mr. Meadows. Okay.
        Ms. Cobert. We believe that we need to continue to work on
    this issue. We are doing that accurately. We want to be----
        Mr. Meadows. But to say we are making progress when we
    still are wasting $106 billion, don't you think that that is an
    inaccurate narrative?
        Ms. Cobert. We have made progress in reducing the
    percentage. We think that is important. And we think we need to
    continue to focus on both of these issues.
        Mr. Meadows. All right. So I am a numbers guy. So let's go
    back to 2008.
        What was the total in improper payments then?
        Ms. Cobert. I don't have the exact figure in front of me.
        Mr. Meadows. Well, I do. And that is why I asked the
    question. It is $73 billion. And so we--we had an increase of
    some $26-, $27 billion.
        In a very short period of time between 2008 and 2009,
    what--what caused that, in terms of improper payments?
        Ms. Cobert. So as you look at the improper payments, one of
    the ways we look at it is look at it program by program.
        Some programs, as we have discussed, have higher rates than
    others. Unemployment insurance, for example, has a higher rate
    than DOD commercial payments.
        So some of that is due to the change in mix. That still
    means we have to keep looking at each one of those program
    elements and say, ``What can we do to bring the level down and
    the percentage down?''
        Mr. Meadows. All right. So, in terms of level, in terms of
    real numbers, most of these across--if you look at all the
    payments, most of them haven't really gone down other than
    unemployment insurance.
        It had a decrease--a significant decrease of improper
    payments of about $6 billion. Some have suggested it is just
    because we have made it more inclusive in terms of being able
    to get those benefits.
        But how--how can we celebrate this in terms of improper
    payments when we are really not making any progress in terms of
    payments going to different people?
        Ms. Cobert. What we are trying to do when we go through
    each of these programs is to continue to say, as you said, how
    can we take specific actions to reduce improper payments from
    all different sources, to understand what is driving those, and
    to look at the underlying root causes in conjunction with the
    GAO, in conjunction with the IG. As----
        Mr. Meadows. So do we give out bonuses based on people
    making progress on this?
        Ms. Cobert. We do hold senior account---senior officials in
    agencies--there is a senior accountable official for each
    program identified as the person responsible for making
    progress on improper payments.
        Mr. Meadows. So those officials in those agencies where we
    didn't make progress shouldn't have gotten bonuses. Would you
    agree with that?
        Ms. Cobert. I believe that people need to be held
    accountable for program performance.
        Mr. Meadows. That is not the question I asked.
        So should they have gotten a bonus if they didn't perform,
    if this was one of the matrix of performance?
        Ms. Cobert. The performance--their bonuses are based on the
    specifics of their performance plan.
        Mr. Meadows. Right.
        And so, if they went the wrong way, do you think they
    should have gotten bonuses? Your opinion. Nobody else's. Just
    your opinion. Should they have gotten a bonus?
        Ms. Cobert. I think they all are accountable.
        Mr. Meadows. ``Yes'' or ``no.''
        Ms. Cobert. That is why they are there.
        Mr. Meadows. Just a ``yes'' or ``no.''
        Ms. Cobert. You know, there is a----
        Mr. Meadows. Well, obviously, you think they should. All
    right. So let me--let me go on a little bit further.
        Mr. Koskinen, what is your target this year for EITC in
    terms of where you believe that we should be percentage-wise?
    What is your target?
        Mr. Koskinen. The target--pardon me.
        Our target this year is to make an improvement. If you look
    at----
        Mr. Meadows. What is your number target?
        Mr. Koskinen. Right now, on the basis of what we are doing,
    unless we can change the way we are doing it--my concern is,
    for the last 6 to 8 years, it has been at an unacceptable
    level.
        And one of the reasons we are asking for legislative
    support to change the way we deal with it is that, if--as I
    told our executives, if we keep doing the same thing the same
    way, we should expect the same----
        Mr. Meadows. So you don't have a number?
        Mr. Koskinen. So I do not have a better number.
        Mr. Meadows. All right. So let me ask you this question.
        If the Chair will indulge me, and I will close with this.
        You have a law on the books passed in 2002, amended in
    2010, that says that you are required to have a target and you
    are required to publish it.
        And the Inspector General's report says that you haven't
    done it for the last 3 years and, obviously, still today you
    are not doing it.
        So if you are not willing to follow the law in terms of
    what is already passed, how will a new law help you accomplish
    that?
        Mr. Koskinen. Well, as I said earlier to your target, I
    expect, if we don't have additional resources in terms of the
    legislative support, that our target will be--we are going to
    be right where we are and where we have been.
        Mr. Meadows. But that is not what the law says.
        Mr. Koskinen. Well, like I said, let's have a target. I
    will say that our target then has to assume----
        Mr. Meadows. So when can we expect you to publish it?
    Because that is what the law says. So is there any
    justification for not following the law, Mr. Koskinen?
        Mr. Koskinen. None at all. We will publish our target. You
    are exactly right. There is no reason not to--not to do that.
        Mr. Meadows. All right. I will yield back.
        Mr. Connolly. Would my friend yield?
        Mr. Meadows. I am out of time, but I would be glad to yield
    if the chairman will----
        Mr. Connolly. If we could operate under the Darrell Issa
    rules, you get a lot of time. Could you yield?
        Mr. Meadows. I would be glad to yield to the----
        Mr. Connolly. I meant that in a loving way.
        I just--I wonder if my friend would ask the same question
    of Ms. Davis from GAO that he put to Ms. Cobert because I think
    he was making a very good point.
        We have reason to believe we are understating the actual
    amount of improper payments. I just wonder if we could just
    give GAO an opportunity, if my friend would ask that question,
    since it is his time allotment.
        Mr. Meadows. Consider it asked, Ms. Davis.
        Ms. Davis. Thank you.
        As I also mentioned in my testimony, the GAO, when it
    looked at the consolidated financial statements of the United
    States Government, identified improper payments as material
    weakness in internal controls due to the fact that we at this
    point in time cannot estimate the full extent of improper
    payments first and then assure that there are actions--
    reasonable actions that are being taken to reduce them.
        I will make a point that, while the goal is, of course, to
    reduce improper payments and we did put forward some strategies
    to do that, there are instances, of course, where an addition
    to the improper payment figure is a good thing.
        To be specific, this past year a net of 10 programs were
    added to the improper payment government-wide estimate. It was
    actually, I believe, about 12 programs that were added, and
    then 6 came off, and there were 4 that were split.
        But, in total, there was a net increase of improper--a net
    increase of 10 programs that were added to the estimate of
    improper payment.
        So to the extent--the first point, as I made earlier about
    having--knowing the extent of improper payments, that is a
    positive thing.
        Mr. Mica. Thank you.
        Gentleman from Kentucky, Mr. Massie.
        Mr. Massie. Thank you, Mr. Chairman.
        Mr. Koskinen, I have a--I think, a simple question about
    the tape backups at the IRS.
        I think you testified earlier that the tape backups are
    recycled every 6 months----
        Mr. Koskinen. They are----
        Mr. Massie. --at the time.
        Mr. Koskinen. They are kept for 6 months and then the tapes
    are put back into being recycled.
        Mr. Massie. So the tapes are reused?
        Mr. Koskinen. They are reused. Yes. They are reused until
    they don't work.
        Mr. Massie. So how long of a period is that? How many times
    can you reuse the tapes? And how long do they last?
        Mr. Koskinen. I don't know.
        Mr. Massie. Does the IRS still recycle tapes, overwrite
    them every 6 months, as a policy?
        Mr. Koskinen. No. Ever since the start of the investigation
    and the release of the IG's report, all backup tapes have been
    saved. So we have the 6 months up to May of 2013 and everything
    since then.
        Mr. Massie. Here's what confuses me, because I had a chance
    to talk to an expert in tape backups.
        These tapes hydrolyze after about 6 years. In fact, they
    are not guaranteed. And the manufacturer doesn't advise you to
    recycle them.
        In fact, their admirable qualities are their storage
    density, transportability, and low cost, but not the length of
    time that you can keep data on them.
        So this expert was surprised that you are at the IRS
    recycling what is something that is so cheap that it is
    actually cheaper to use new material instead of recycling.
        Can you confirm that these tapes were recycled and not
    destroyed?
        Mr. Koskinen. I can't tell you that off the top of my head,
    but I would be happy to be checked.
        I have been told sometime ago when I first started being
    involved with this that the tapes were used and recycled and
    they are recycled until they are no longer useable and then
    they are disposed of.
        But with regard----
        Mr. Massie. But when they are no longer useable, they fail,
    and the purpose is to prevent failures. That is what confuses
    me.
        Mr. Koskinen. I will be happy to get you information about
    that.
        Mr. Massie. So it is your understanding that these tapes
    were recycled for reasons of economy.
        Mr. Koskinen. That is my understanding.
        Mr. Massie. Not to cover--to make sure that there were
    never more than 6 months of data.
        Mr. Koskinen. I never had any indication of that.
        Mr. Massie. All right. Thank you very much.
        I am going to yield the balance of my time to the gentleman
    from Ohio.
        Mr. Jordan. I thank the gentleman.
        Commissioner Koskinen, 3 weeks ago in front of the Ways and
    Means Committee you testified--we have actually got it on the
    screen here--``Lois Lerner was not trying to destroy email. In
    fact, she was working very hard to restore her emails.''
        Do you stand by that statement?
        Mr. Koskinen. As far as I know, yes.
        Mr. Jordan. Okay. Then, I want to--I want to show you a few
    emails that you have had a chance to review now. We got these
    on July 3rd, 4 o'clock. And I want to show you three emails out
    of 15,000 that you dumped on us on July 3rd.
        Let's go first to this one. This is to--Lois Lerner to
    Maria Hooke. ``I had a question today about OCS''--what the
    chairman was asking you about earlier--``I was cautioning folks
    about email and how we have had several occasions where
    Congress has asked for emails and there has been an electronic
    search for responsive emails. So we need to be cautious about
    what we say in emails because Congress might get ahold of them
    and the American people might actually find out what the IRS is
    doing.''
        But then she quotes, ``Someone asked if OCS conversations
    were also searchable.''
        Now, your response to the chairman was you don't know
    anything about OCS. Is that--that true? You have no idea what
    this system is?
        Mr. Koskinen. Correct.
        Mr. Jordan. It is our understanding, after our staff did
    some background work, that this is an intra-office instant
    messaging chat-type system that you have in place at the
    Internal Revenue Service.
        And this was followed up by a response from Ms. Hope--or
    Hooke--excuse me. So, remember, Ms. Lerner says, ``I had a
    question about OCS.''
        And then Ms. Hooke responds--Ms. Hooke responds back, ``OCS
    messages are not set to automatically save as the standard.''
        You follow me, Mr. Koskinen?
        Mr. Koskinen. Right along with you.
        Mr. Jordan. I appreciate it.
        And then, of course, the response from Ms. Lerner is,
    ``Perfect.'' So now I want to show you one more timeline. I
    have one more slide, and it is actually the timeline from the
    Inspector General.
        March 28, 2013, discussion draft report was issued to the
    IRS. And so here is what I see. Now, maybe--maybe you see
    something different, but this is what I see, and my guess is
    the American people see this.
        At our last hearing, we learned that, on June 3rd, 2011,
    Chairman Camp sent a letter to the Internal Revenue Service
    saying, ``Hey, we are concerned about what we think may be
    targeting of conservative groups.''
        10 days later, June 13th, 2011, a bunch of computers
    mysteriously crash, including Lois Lerner's computer.
        Now we jump forward. March 28th, 2013, the Inspector
    General gives the Internal Revenue Service the discussion draft
    report, his audit.
        And you all learn--well, you weren't there at the time, but
    the IRS learns, and specifically Ms. Lerner learns, that you
    have been caught with your hands in the cookie jar and that, in
    fact, targeting was going on and now the Inspector General
    knows it.
        And so 12 days later we get this email exchange that we
    just went through where Ms. Lerner says, ``Wow, I know I have
    gotten rid of the emails''--when the computer crashed 2 years
    earlier--``but I better double-check on this intra-office
    instant messaging capability we have here at the Internal
    Revenue Service.'' And she says, ``Perfect'' when she learns
    that it is not traceable, not trackable, not stored.
        And so my question to you--I mean, we know Ms. Lerner is
    not being square with the American people. Remember, it was
    just 31 days after this email exchange right here.
        31 days later she went to a Bar Association speech here in
    town and told the whole world Washington had nothing to with
    it.
        Even though she's trying to make sure her tracks are
    covered, she told the whole world Washington didn't have
    anything to do with it, it is a couple rogue agents, a couple
    of line agents in Cincinnati. So we know she can't be trusted.
        But what I want to know is: Why did it take us this long to
    get these emails? We have been after these for 6 months and you
    dump them on us on July 3rd.
        Mr. Koskinen. First of all----
        Mr. Jordan. Have you ever seen this--have you ever seen
    this stuff before?
        Mr. Koskinen. No. And I don't see anything in here where
    Lois Lerner says, ``Wow, I got rid of my earlier emails and now
    I have got to check on them.''
        Mr. Jordan. I am not saying that. I am focusing on the
    pattern.
        Mr. Koskinen. I am sorry----
        Mr. Jordan. I am focusing on the pattern.
        Mr. Koskinen. I am sorry. You said, for the record, that
    Lois Lerner had written----
        Mr. Jordan. No, I didn't.
        I said Dave Camp sent her a letter. 10 days later her
    computer mysteriously crashes and seven other important people
    at the IRS. And then I am saying here's the pattern again.
        She learns that there is--oh, the Inspector General is
    going to issue a report that says the IRS was, in fact,
    targeting conservative groups and now, 12 days after that, she
    says, ``We better make sure this OCS system doesn't track
    anything, is not traceable, and Congress and, more importantly,
    the American people can't get access to what we were talking
    about.''
        Mr. Koskinen. I understand you might----
        Mr. Mica. Let me just interrupt a second.
        Mr. Massie's time has expired. I am recognizing Mr.
    Jordan----
        Mr. Jordan. Thank you, Mr. Chairman.
        Mr. Mica. --for his 5 minutes at this point.
        Mr. Jordan. Thank you, Mr. Chairman.
        Mr. Koskinen. I don't see anything in here about Congress--
    using the OCS system or not helping Congress. It says, ``The
    recommendation is to treat the conversation as if it is been
    saved somewhere because it is possible''----
        Mr. Jordan. Okay. Okay.
        Mr. Koskinen. --``that somebody else did it.''
        Mr. Jordan. All right. Fair enough.
        Let's look at the first sentence in each email.
        Lois Lerner says to Ms. Hooke, ``I had a question today
    about OCS.''
        First sentence Ms. Hooke says, ``OCS messages are not set
    to automatically save as the standard.''
        Lois Lerner's response, ``Perfect.''
        That is what I see.
        Mr. Koskinen. Well----
        Mr. Jordan. Now, here's the point.
        Mr. Connolly. Would my friend yield?
        Mr. Jordan. When I am--I will be happy to yield here in a
    second.
        Mr. Connolly. I thank you.
        Mr. Jordan. Have you made these emails--have you given
    these emails to the FBI?
        Mr. Koskinen. We provide all of the emails we provide to
    all the investigators. So I am assuming this went to all six
    investigators.
        Mr. Jordan. Well, now, just a couple of weeks ago, when I
    asked you did you tell the FBI that you--when you knew that you
    had lost Lois Lerner's emails, you said you did not.
        But now you are saying you have sent this--this information
    to the FBI?
        Mr. Koskinen. We send all of the--for the tax-writing
    committees--and the FBI has 6103 for that--we have sent 960,000
    documents, and we have sent those to everybody doing an
    investigation, including the Justice Department.
        Mr. Jordan. Have you or anyone at the IRS sat down with the
    FBI and talked to them about the lost emails of Lois Lerner
    and/or this email chain that we just discussed?
        Mr. Koskinen. I have no understand--not to my
    understanding.
        Mr. Jordan. You have not. You personally have not.
        Mr. Koskinen. I have personally not.
        Mr. Jordan. The FBI has not talked to you about the lost
    emails of Lois Lerner?
        Mr. Koskinen. They have not.
        Mr. Jordan. Has anyone at the Justice Department talked
    with you or anyone at the Internal Revenue Service about Lois
    Lerner's lost emails?
        Mr. Koskinen. I don't know.
        Mr. Jordan. So the FBI has not talked to you. And you don't
    know if they talked to anyone in your Agency about----
        Mr. Koskinen. I have no idea whether the Justice Department
    has talked to anybody at the Agency. They have not talked to
    me.
        Mr. Jordan. The Justice Department--so, for the record, the
    FBI and Justice Department have not talked to you about the
    lost Lois Lerner emails?
        Mr. Koskinen. That is correct.
        Mr. Jordan. And they have not talked to you about this
    email exchange right here?
        Mr. Koskinen. That is correct.
        Mr. Jordan. Okay.
        Mr. Connolly. Would my friend yield?
        Mr. Jordan. In just a second.
        Let me go to one other thing--one other thing we noticed on
    this email exchange between Ms. Lerner and Ms. Hooke.
        It is--it is copied to Nanette Downing. Do you know who
    Nanette Downing is?
        Mr. Koskinen. I do not.
        Mr. Jordan. Do not? Well, we do. She's the head of the
    exams division at the Internal Revenue Service.
        Any idea why the person who's head of the exams division is
    getting copied on email that says, ``We want to make sure that
    intra-office communications aren't tracked?''
        I mean, particularly in light of the fact we also just
    learned in the past few weeks that Ms. Lerner was hoping Mr.
    Grassley, Senator Grassley, was going to be referred for an
    exam, any idea why Nanette Downing is listed on this email
    exchange, Commissioner?
        Mr. Koskinen. I have no idea why.
        Mr. Jordan. No idea?
        Mr. Koskinen. None.
        Mr. Jordan. Okay. Has the FBI talked to Nanette Downing? Do
    you know that?
        Mr. Koskinen. I do not know.
        Mr. Jordan. All right.
        Mr. Connolly. Would my friend yield?
        Mr. Jordan. I would be happy to yield.
        Mr. Connolly. I thank my friend.
        I just want to point out, keeping that graphic up on the
    screen, we have got to be real careful about not taking this
    out of context.
        Lois Lerner's answer, ``Perfect'' is not to this lower box
    in red. It is to the last paragraph that says, ``My general
    recommendation''--this is from Maria Hooke--``is to treat the
    conversation as if it could be''--or ``is being saved
    somewhere, as it is possible for either party of the
    conversation to review the information.''
        Mr. Jordan. You--after she said, ``I have already cautioned
    people about what they say in emails'' after her computer's
    crashed, after--after she's nervous about the OCS system and
    ``what we are going to say because it might be traceable and
    trackable,'' you expect us and, more importantly, the American
    people to believe that, ``Oh, yeah. Perfect. Now we know we
    need to save these.''
        That is the most ridiculous interpretation. There is no one
    with any common sense who would reach that interpretation that
    my colleague reached. No one would reach that--but if you want
    to stick to it, God bless you.
        Mr. Connolly. Well, I would just say to my friend----
        Mr. Jordan. Notice the first line--this is what I said to
    the Commissioner.
        Mr. Connolly. I would just say to my----
        Mr. Jordan. I had a question today about OCS. Suddenly here
    is--here's how it plays out.
        Mr. Connolly. I would----
        Mr. Jordan. It is my time. It is my time, Mr. Chairman.
        So suddenly Lois Lerner learns----
        Mr. Connolly. Mr. Chairman, as a matter of personal
    privilege----
        Mr. Jordan. No. No. Wait.
        Mr. Connolly. --I would caution our colleague----
        Mr. Jordan. I will yield back. I will yield back.
        Mr. Connolly. --that he not characterize another member as
    ridiculous. What is----
        Mr. Jordan. I didn't characterize you as ridiculous. I said
    it is a ridiculous interpretation.
        So notice the first sentence, ``I had a question about
    OCS.'' Here is what happened. March 28th, the IRS gets a heads-
    up the Inspector General caught them. Because we asked the
    Inspector General to do the audit, he caught them targeting
    conservative groups.
        And now Lois Lerner says, ``You know what? I better double-
    check and make sure this intra-office instant messaging''--that
    that can't be traced, that can't be tracked.
        And all I want to know is why the Commissioner took 6
    months to get us this information.
        We have been asking for this stuff forever and it is--Mr.
    Commissioner, is there anything--here's a good question.
        This one email where Lois Lerner says, ``Perfect,'' is
    there any 6103 violation in that email? Why in the heck did it
    take us 6 months to get this email chain?
        There is not one chance there is any 6103 information
    contained in these three emails, and, yet, that is what you
    hide behind, ``Oh, we have got to check it off for 6103.''
        There is no way. We could have had this 6 months ago, when
    we first issued the subpoena when you took over. And we don't.
    And we are supposed to believe----
        Mr. Koskinen. We are working----
        Mr. Jordan. We are supposed to believe she's saying, ``Oh,
    perfect. We have''----
        Mr. Koskinen. We are working our way through and have
    completed the production for tax-writing committee----
        Mr. Jordan. Yeah. So you give us----
        Mr. Koskinen. Sixty-three times----
        Mr. Jordan. July 3rd, 4 o'clock, the day before a holiday,
    is when you give us 15,000. We see them.
        Mr. Koskinen. Right. And you're going to get more, because
    the----
        Mr. Jordan. Well, let's hope we----
        Mr. Koskinen. This committee has got 40,000. You've got
    23,000 more to go--27,000 more to go. And I'm sure in those
    27,000 there will be some other interesting email you'll have
    to read, and it won't be because we didn't give it to you in
    February. We're giving them to you as fast as we can.
        And it's a significant volume of evidence. As I say, it's
    almost a million pages of documents that have gone to the tax-
    writing committee.
        Mr. Jordan. All I'm saying is there's no 6103 problem with
    these three, and we should've had them a long time ago. But
    because, whoa--Lois Lerner is talking about, ``Be careful what
    you say in emails. Make sure this OCS system is not
    traceable.''
        Mr. Koskinen. Remember----
        Mr. Jordan. Six months, we get them on July 3rd at 4:00
    p.m. With 15,000 other documents.
        Mr. Koskinen. If I could note for the record, our first
    request by the investigators was to go through the custodians
    with search terms that had to do with the determination
    process, not with the email process. Therefore, when we went
    through, we pulled them by subject matter, and the first
    email----
        Mr. Jordan. That is simply not true. We asked clear back
    last summer for everything. I asked Mr. Werfel in a committee
    hearing just like this, ``I want every single piece of
    correspondence Lois Lerner sent to anybody. We want all of
    them.'' So this has been over a year that we've been asking for
    this.
        Mr. Koskinen. Right. And the prioritization was we would
    produce to you all the emails that had a subject matter having
    anything to do with the determination issue, which was the IG
    report.
        Mr. Jordan. Mr. Chairman?
        Mr. Koskinen. Those are the first emails we produced. Then
    we went back and searched to find all the other Lois Lerner
    emails, and they're coming forward. And you're going to get
    more. The tax writers have all 67,000. You'll get another
    24,000 or 27,000. And I'm sure some of those will be
    interesting to people, but it's not because we delayed them,
    it's because that's the process we've had to produce them.
        Mr. Mica. I thank the gentleman.
        And I think we have another Member waiting, Mr. DeSantis,
    the gentleman from Florida.
        Mr. DeSantis. Thank you, Mr. Chairman.
        I'll yield some time to the gentleman from Ohio.
        Mr. Jordan. I thank you.
        Here's the takeaway: Nine days after the IRS knows they're
    in trouble, Lois Lerner is trying to cover her tracks. That's
    why we've got the mail exchange here. She already knows her
    emails are gone because the computer crashed back in 2011, 10
    days after Dave Camp asked about it. So 9 days after the IRS
    knows they're in trouble, she's trying to cover her tracks.
        Thirty-one days after this email happens, she goes to a Bar
    Association speech and blames some good public servants in
    Cincinnati, says that's where the problem is, lies to the
    American people. And we don't get that information after we've
    been asking for it for a year.
        And this guy tells us he hasn't even talked to the FBI.
    What kind of investigation is going on when the FBI won't even
    talk to the head of the agency that has this kind of stuff
    going on with their email exchange and won't talk to the agency
    that lost key evidence in an investigation that's about
    people's First Amendment rights being targeted?
        And we get these flippant answers from the Commissioner.
        Mr. Koskinen. I----
        Mr. Jordan. That's what just bothers----
        Mr. Koskinen. I wouldn't----
        Mr. Jordan. --that's what bothers every single American,
    Mr. Chairman.
        Mr. Koskinen. I wouldn't say there----
        Mr. Jordan. With that, I would yield to my----
        Mr. Koskinen. I wouldn't say there----
        Mr. Jordan. --I'd yield to my colleague.
        Mr. DeSantis. Well, I thank the gentleman from Ohio.
        And----
        Mr. Connolly. Mr. Chairman, I must say----
        Mr. DeSantis. --these emails----
        Mr. Connolly. --I object to this badgering of a witness. At
    least the witness is entitled to respond after having his
    comments characterized.
        And this is not the standard of the subcommittee you and
    I've set, Mr. Chairman.
        Mr. Mica. Well----
        Mr. Connolly. Characterizing Members of Congress and
    abusing and badgering witnesses, that is not the standard this
    subcommittee has set.
        Mr. Jordan. Mr. Chairman, I did not mischaracterize----
        Mr. Mica. Okay.
        Mr. Jordan. --my colleague.
        Mr. Mica. Okay.
        Mr. Jordan. I characterized his interpretation as one that
    I don't think very many Americans are going to reach. I did not
    disparage my colleague. I have a great deal of respect for my
    colleague.
        Mr. Mica. I would rule that, again, I don't think he
    disparaged the witness, but I think he spoke to, again----
        Mr. Koskinen. I would just----
        Mr. Mica. --a situation.
        And we do want all the Members to be respectful of the
    witnesses. He is not under a subpoena, and he came here
    voluntarily. And, again, there are differences of opinion as to
    what occurred, and our job is to get to the facts.
        Mr. Koskinen. Right. And----
        Mr. Connolly. I thank the chairman.
        Mr. Koskinen. --I appreciate that, but I would just----
        Mr. Mica. Did you want to respond, Mr. Koskinen?
        Mr. Koskinen. Yes, I would appreciate that. Thank you very
    much.
        My only response was to disagree with the characterization
    that my responses have been flippant. I've tried to be
    responsive in any way that I can, both in my previous hearings
    and now. I understand these are important matters, and any
    information we can provide we will. But----
        Mr. Jordan. How is it responsive when you wait 2 months to
    tell the United States Congress that you lost Lois Lerner's
    emails? How is that responsive? That's what the American people
    want to know, Mr. Commissioner.
        Mr. Koskinen. Yes. And----
        Mr. Jordan. And you did not tell the FBI you lost Lois
    Lerner's emails. How is that responsive? Tell me that.
        Mr. Koskinen. Well, I can----
        Mr. Jordan. You waited till you knew in April, and you
    didn't tell us.
        Mr. Koskinen. As I have testified to in two previous long
    hearings, when we knew in April that there had been----
        Mr. Jordan. You knew in April, and you told us in June.
        Mr. Koskinen. And told you in June, and the reason was
    because----
        Mr. Jordan. Why'd you wait 2 months?
        Mr. Koskinen. Can I answer this question?
        Mr. Mica. Yes, you can. And go ahead.
        Mr. Koskinen. Can I--thank you.
        As I testified in two previous hearings, when I learned
    about the situation in April and we began to collect the
    information on how many other emails could we reproduce, my
    judgment was at the time that we should produce and discover
    exactly what the full context of the situation was and report
    it.
        Mr. DeSantis. Were you advised of that, Mr. Commissioner,
    advised to keep quiet?
        Mr. Koskinen. I was absolutely not. Nobody----
        Mr. DeSantis. Okay. Can we play your clip of your testimony
    in front of this committee last----
        [Video shown.]
        Mr. DeSantis. Okay. So you said you were advised, and now
    you're saying you were not advised.
        Mr. Koskinen. Sorry. It's a good question. I was advised by
    the people in the organization working on the production of
    documents. And I was advised----
        Mr. DeSantis. So you were advised.
        Mr. Koskinen. You asked me if I was advised not to say
    anything. I was not advised by anyone not to say anything. I
    was advised--in that clip, I noted I was at advised by our
    people doing the research----
        Mr. DeSantis. Okay, but that's----
        Mr. Koskinen. --that there was a problem.
        Mr. DeSantis. --what we're saying. Because, to us, that's a
    distinction without a difference, because we're looking for the
    truth. And your organization has not provided us with the truth
    in a timely fashion.
        What I'm seeing with Lois Lerner's emails is really a
    culture of obstruction at the IRS. I mean, for her to be
    worried right on the heels of this draft IG report that
    Congress may search her instant messages, ooh, perfect that,
    you know, the settings aren't like that, that is very, very
    troubling. Because she wants to be able to conduct her
    operations according to her ideology without oversight from the
    American people on behalf of the Congress. So that is very,
    very troubling to me.
        And, you know, she's copying Nanette Downing, who is the
    head of the Exams department, which is very much troubling.
        So what you've told us--last hearing, you said the hard
    drive crashed; well, these things happen. The odds of that
    happening innocently right on the heels of Dave Camp's letter
    are astronomical based on the hard-drive failure rate you gave
    us, based on the fact that it was those 10 days right after
    Camp, and based on the fact that it was totally unrecoverable.
    They recovered data from the Challenger explosion from 9/11. So
    somehow Lois Lerner's emails was totally unrecoverable.
        So that is a coincidence of absolutely inexplicable
    proportions. And I think that's why the American people, 75
    percent, do not believe the explanation that the IRS has
    provided.
        Let me ask you this: Why are we just now hearing about this
    OCS system? We've supposedly had the FBI investigating this for
    a year. No one at the IRS ever told the FBI that there were
    communications using this system?
        Mr. Koskinen. I didn't----
        Mr. DeSantis. Why didn't anyone at the IRS ever tell the
    Congress----
        Mr. Koskinen. I never----
        Mr. DeSantis.--that there were these? The subpoenas are
    written very broadly, and they would absolutely have included
    this, not simply the email. So what is the reason for
    withholding that from Congress?
        Mr. Koskinen. You asked a lot of questions. If I could
    answer them.
        I have no information as to whether anybody told the FBI or
    not or who was interviewed by the FBI about the OCS system. So
    I have no basis of saying one way or the other. So I don't
    think it's fair to say nobody told them. We don't know whether
    anybody told them.
        Secondly, we've produced the information to you, and you
    now have--the tax writers have all 67,000 Lois Lerner emails.
    You will soon have----
        Mr. DeSantis. With OCS, you've produced that?
        Mr. Koskinen. And OCS, as they noted, at this point--the
    first I've heard about it; I'll look at this--says the OCS
    system, whatever it is, by itself does not get retained. But,
    as it's noted, you should assume--Lois Lerner is advised, you
    should assume that it's retained because it's easy to turn it
    into an email.
        And I would also note, I have no--I'm not here to defend
    Lois Lerner. I've never met her. But in terms of getting rid of
    emails, it should be noted there were 43,000 Lois Lerner emails
    from April 2011 until May of 2013 that have been produced. So,
    in terms of getting rid of emails, there were 43,000 that she
    didn't get rid of after the hard-drive crash.
        Mr. DeSantis. Well, but that number is meaningless if there
    are critical emails that have not been produced, that have:
    ``been destroyed.'' That means the American people aren't being
    given the whole truth.
        And I yield back.
        Mr. Mica. Okay. Well, we've finished one round. I have some
    additional questions; then I'll yield to other Members.
        Well, we've gotten into a whole array of subjects. We
    started with a 25 percent error-rate payments, which is, I
    guess, the highest in government for Earned Income Tax Credits
    under IRS, and we've come around to some of the issues relating
    to the IRS probe.
        I just read this Wall Street Journal article. I'd heard
    about it just a few minutes ago. It raises some questions with
    me. I guess the FBI began investigating, or at least told
    Congress June 11th, over a year ago, that they were conducting
    an IRS investigation.
        Has this been going on over a year? Is that correct?
        Mr. Koskinen. That's my understanding.
        Mr. Mica. Yeah. And you came the end of last year, John; is
    that----
        Mr. Koskinen. I started on December 23rd.
        Mr. Mica. Yeah. Okay. And it said in January the Justice
    Department assigned the IRS probe to an Obama donor, Barbara
    Bosserman, an attorney in the Civil Rights Division. So, since
    January, basically since the time you took over IRS, she took
    over the investigation.
        So you have not had any conversation with Ms. Bosserman?
        Mr. Koskinen. I've had no conversation with anybody at
    Justice about this investigation.
        Mr. Mica. Or FBI?
        Mr. Koskinen. Or the FBI. I've had, actually, no
    conversations with any of the staff investigators or----
        Mr. Mica. You see, I mean, this raises a lot of questions.
    Maybe some of them you don't know the answer to. But it's
    startling that a supposed investigation that's been going on
    for over a year, you're the new IRS Commissioner sent in to
    clean up the mess, and, in fact, you have not spoken to them.
        Mr. Koskinen. Well----
        Mr. Mica. Is there any of your--have any of your folks that
    have been involved in this--can you name someone who has talked
    to the FBI?
        Mr. Koskinen. I can't, but if the FBI----
        Mr. Mica. Can you provide us with information as to who--I
    mean, there must be some record of some contact. This
    investigation supposedly has been going on since June 11th.
    Congress notified over a year ago. You came in. They haven't
    talked to you.
        Mr. Koskinen. But they wouldn't talk to me because this
    investigation goes from 2009 to 2013 and I wasn't there.
        Mr. Mica. Well, I know, but, again--and you don't know who
    they've talked to. But can you provide us with who they talked
    to when?
        We're trying to figure out who knew what when, to quote the
    late Howard Baker, and some of the pieces to the puzzle don't
    fit. Again, it raises a lot of questions.
        Mr. Koskinen. To the extent I'm able, I'm happy to see if
    we can provide you that information.
        I do know, from having spent a lot of time with inspectors
    general my last time around in the government in the 1990s,
    that investigators sometimes are very hesitant to have their
    witness list known, the people that they've actually talked to
    who they're investigating. But to the extent that that
    information is available, I'm sure we can provide it to you.
        Mr. Mica. Okay. It, again, raises some very serious
    questions.
        Back to the payments, we'll look at your legislative
    suggestions, Mr. Connolly and I. Maybe we can address those.
        Tell me, physically, where do they process the Earned
    Income Tax Credit returns? Is that done around the country?
    At----
        Mr. Koskinen. Yes.
        Mr. Mica. --one location?
        Mr. Koskinen. No. Basically, we have processing plants all
    around the country, so it depends where you are.
        Mr. Mica. Yeah.
        Mr. Koskinen. And they are--they come in just like regular
    returns.
        Mr. Mica. And, again, John, you've been around a long time.
    I just come from a business background. If I was losing 25
    percent in improper payments, I would have someone come in and
    give me an analysis. There are a lot of good firms around you
    have the ability to contract. I think--and asking for billions
    just doesn't cut it. I think you've got a technical and a
    software, electronic evaluation issue. And it's astounding, the
    amount of money that's involved here and----
        Mr. Koskinen. Yes.
        Mr. Mica. --again, the percentage of errors. But I think we
    need to get someone in there immediately, if not sooner, and
    see if that can't be corrected.
        Mr. Koskinen. It would be helpful. As I say, we've had
    several GAO reviews, several inspector general reviews over
    time, independently making recommendations.
        Mr. Mica. And Mr. Connolly and I have discussed, we held
    one hearing in August on identity-theft-related tax fraud
    issues. We haven't gotten into a lot of that. We put some
    things in the record, but that doesn't seem to be clearing up
    the way it should. And that's a multi----
        Mr. Koskinen. That one I think we're making more progress
    on.
        Mr. Mica. Well, again, the information we had last August--
    and that's why we'll hold another hearing.
        Mr. Koskinen. I'd be happy to come back and talk with you
    in more detail about that.
        Mr. Mica. And we will definitely have that.
        Mr. Koskinen. As I've told our people, I think we have a
    good story on identity theft and refund fraud. And I have been
    unhappy and I don't think we have a good story thus far on EITC
    improper payments. I think it's----
        Mr. Mica. Well----
        Mr. Koskinen. --been there too long at too high a level.
    And we need to actually--so I've asked people to go back to the
    drawing board and rethink everything we do in that area.
        Mr. Mica. Well, I just came back from a week in the
    district, and I can tell you, Mr. IRS Commissioner, that there
    is a canyon of disbelief and a lack of credibility the size of
    the Grand Canyon when it comes to the general public and the
    IRS operations right now. It's huge. And people are not buying,
    again, some of the information that's been put out there.
        Let me yield to Mr. Connolly.
        Mr. Connolly. Thank you, Mr. Chairman. I'm glad we're
    returning to the subject matter of the hearing.
        Ms. Davis, I'm not sure I understood your answer to my
    question through Mr. Meadows.
        The suspicion up here is that probably the number we're
    using right now, $106 billion a year in improper payments,
    understates the extent of the problem. Given the fact that DOD
    does not yet have an unqualified audit, by definition, their
    numbers could be squishy--hopefully they're not, but they could
    be; given the fact that Mr. Koskinen does not include refund
    fraud as an improper payment, even though, in the case of Dr.
    Agrawal, Medicaid fraud is a subset of improper payments.
        So please elaborate. Because we kind of have the impression
    we're understating the number, and I couldn't quite understand
    your answer, which seemed to be, no, it's pretty accurate. Did
    I misread you?
        Ms. Davis. We have stated in our audit of the financial
    statements, the consolidated financial statements in the last
    fiscal year that there's material weaknesses in internal
    control government-wide because of the inability, at this point
    in time, to actually get a handle of the number, to actually
    determine the full extent of improper payments and, of course,
    to ensure that appropriate actions are taken to reduce them.
        You know, there are so many facets in this. As you are
    aware, this coming year, in 2014, the definition of
    ``significant improper payments'' is actually going to change.
    The rate is going down from 2.5 percent to 1.5 percent, and $10
    million and/or still, you know, the ``million'' as being the
    criteria. We think that there is a possibility, certainly, of
    additional programs being added as the requirements for
    addressing and assessing and identifying improper payments
    change.
        There are so many facets. As I mentioned just a few minutes
    ago, the fact that additional programs are being recognized and
    are coming onto the government-wide estimate, that's positive,
    in the respect that now additional estimates are being, you
    know, shown, identified. And, therefore, one would assume
    programs can take appropriate action, now that they have
    identified these additional, you know, internal control issues
    related to improper payments and take actions to reduce them.
        So, you know, the bottom line is that we are--the Federal
    Government in total is unable to really identify the amount,
    and, as time progresses, we will see changes in that amount.
        It is important to note, I will say, that, you know--and
    this has been mentioned before, but improper payments includes
    errors or insufficient documentation of errors. So it doesn't
    necessarily mean that money has been inappropriately spent.
        Mr. Connolly. That's right.
        Ms. Davis. And, also, the total includes underpayments as
    well as overpayments.
        It's a very complicated issue. It's not simple.
        Mr. Connolly. Of course.
        Ms. Davis. We'd like to see the numbers go down. We'd
    absolutely like to see the rate go down. That's a very positive
    aspect of the program.
        Mr. Connolly. Is it GAO's view that some infusion of
    targeted strategic resources could make a big difference?
        Ms. Davis. You know, that's a difficult question to answer,
    but let me--let me say that there are certain areas where--and
    I think that, you know, as the subcommittee has noted, there
    are certain areas that really need more attention. The
    healthcare areas, as was mentioned, you know, looking at the
    two Medicare programs, the Medicaid--and, actually, if you add
    the prescription drug program, which is around $2.8 billion,
    close to $3 billion, you're talking about $64 billion in
    improper payments, you know, compared to the government-wide
    total of $106 billion. So you're talking about over 60 percent
    of the government-wide total, you know, is attributable to this
    area.
        So, to the extent that we can focus on areas--as, you know,
    learned through this discussion here today at the subcommittee,
    EITC has a very high rate. And what is of concern, too, is the
    fact that this rate has actually increased. It was a little
    under 23 percent last year; it's now 24 percent.
        But, also, one of the big healthcare programs, Medicare
    Fee-for-Service, that rate has gone up. It's now 10.1 percent.
    It used to be, I think, 8.5 percent the year before. So you're
    looking at, you know, issues related to programs increasing
    their rates, you know, which is something that needs to be
    addressed.
        Mr. Connolly. Well, but my question was not whether it
    needs to be addressed. We agree on that. I'm actually asking
    you to go out on a limb. Would targeted resources make a
    difference, in GAO's opinion? Or have you even looked at that?
    ``We can solve this problem without a dime extra''; is that
    your position?
        Ms. Davis. I don't think we've done any work that could
    specifically address your question, and----
        Mr. Connolly. Well----
        Ms. Davis. --I would be hesitant for that reason to answer
    it specifically with a ``yes'' or ``no.''
        But, as you can see, because there are areas of concern,
    you know, there needs to be attention. Now, whether that can be
    accomplished with existing resources or additional resources
    are needed, I would turn to the agencies to address
    specifically those questions.
        Mr. Connolly. Well, I would just respectfully say to you,
    Ms. Davis, that once in a while Congress actually looks to GAO
    to give recommendations, not just analysis of problems.
        And your own agency has been before this committee and
    testified as to the efficacy of additional resources for it. So
    if we are to assume that some more resources for some more
    investigators and auditors at GAO can really save us money, can
    help uncover problems that, you know, could make us more
    efficient and less wasteful, it might follow that these other
    agencies could benefit from that, too.
        Not to say money is the answer, but, as I said in my
    opening statement, you can't take the position that money is
    never the answer. I mean, sometimes targeted investments can
    really have big payoffs. And that's my point, and I look to the
    GAO someday to actually comment upon that in a meaningful way.
        Thank you.
        Mr. Mica. I thank the gentleman.
        Mr. Meadows?
        Mr. Meadows. Thank you, Mr. Chairman.
        Let me follow up a little bit on that, in terms of numbers,
    Mr. Koskinen, because I looked at the numbers. And I want to
    give you the resources to do the job that you need to do to get
    this 30 percent, 25 percent, whatever it is, under control.
        Mr. Koskinen. Right.
        Mr. Meadows. I'm not convinced--and what I guess I need you
    to respond to--I'm not convinced that people or dollars make a
    difference.
        And the reason I say that is that, in fiscal year 2010,
    when your budget was higher and your employees were higher, the
    improper payments were also higher. Can you explain how that
    would happen?
        Mr. Koskinen. Actually, you probably have the numbers. When
    I looked at them, over the last 6 to 8 years, what concerned me
    was the numbers have been more or less flat. So they've been
    the same, as you say, whether we had more people or not.
        And that's why, when I asked people to go back to square
    one and meet with me several times to figure out what is it
    that we need to do, the focus came on the legislative issues,
    that we need more authority to be able to stop refunds earlier,
    that we see that, otherwise, to make those corrections, we have
    to go out and do an audit, but each one is small enough that,
    as you say--my judgment and ours is that we can't audit our way
    out of this. We can't be tracking down each one. We've got to
    be able to, when we see the error against our other databases,
    be able to correct it right then, rather than send it out and
    then have to do an audit and track people down.
        So I do think the legislative changes--I think the taxpayer
    regulation will help. As noted, 57 percent of the returns are
    by tax preparers----
        Mr. Meadows. Okay. And I knew you were going to go through
    there, and so let me ask you--and I'm sorry to interrupt you.
        Mr. Koskinen. No, that's okay.
        Mr. Meadows. I'm trying not to be rude. I know you get
    interrupted a lot.
        So let me just, since you're going there, how is regulating
    preparers that want to abide by the law going to fix the fraud
    and those who--really, 30 percent, some of it is error, but
    we've had testimony from your predecessor that would indicate
    sometimes we had a thousand payments going to one particular
    address, and you know that's accurate.
        And so how would additional regulators on preparers, who
    are well-intentioned, maybe make an error, actually
    substantially reduce this? Because I read your testimony, and
    that one was like nails on a chalkboard to me.
        Mr. Koskinen. It's a good question. The regulation is
    relatively straightforward. It requires basically passing a
    minimum competency test and taking continuing education. So for
    preparers----
        Mr. Meadows. Yeah, but that just--I mean, listen, I was in
    the real estate business, and you know what?
        Mr. Koskinen. If you pass the basic course, you'll be in
    there. And what it'll do----
        Mr. Meadows. But this is not about basics.
        Mr. Koskinen. But what it will do, is our judgment, is we
    won't--the fraudsters, the people who are actually out keeping
    the refunds----
        Mr. Meadows. But that's what this is really about, is
    fraudsters.
        Mr. Koskinen. But it will allow--so the question is, if
    you're a taxpayer, how will you be able to distinguish--if
    you're in a moderate-income community, an immigrant community,
    or any community, what this will allow, you would get a
    certificate that said you've registered with the IRS, you've
    taken the courses, you've tried to become informed. And I
    suspect the fraudsters aren't going to do that.
        And so what it will do is it will allow taxpayers to be
    able to have a more----
        Mr. Meadows. So like a Good Housekeeping Seal of Approval.
        Mr. Koskinen. A Good Housekeeping Seal of Approval.
        Mr. Meadows. Okay. All right.
        Let me go on. I'm limited on time, but I'll listen to
    further discussion on that.
        Dr. Agrawal, I know that in a May 20th hearing you were
    asked for some information from Mr. Chaffetz and Mr. Lankford,
    and you were given a time to respond by June 19th. And that was
    almost 3 weeks ago, and we've received nothing with regards to
    that response.
        Can we expect a response to their questions with regards to
    the Medicare mismanagement by the end of the week? Are you
    working on that?
        Dr. Agrawal. We are working on it. And I'll check
    immediately after this to make sure that you get a response as
    soon as possible.
        Mr. Mica. So what kind of timeframe do you need?
        Dr. Agrawal. I think a week or 2 would be great.
        Mr. Mica. Okay. So in 2 weeks, no later than 2 weeks, we
    can have your response?
        Dr. Agrawal. Sure.
        Mr. Meadows. All right. Thank you.
        I want to also go back, in my last remaining time, Mr.
    Koskinen, since it's been illuminated that we have this record
    problems with this new system that we just found out about,
    that's not news to your staffers, is it, that they would have
    an internal communication that is not email?
        That is probably not even news to you. You may not have
    known the name, but you've certainly seen people communicating
    in your agency via a messaging system that is not email; isn't
    that correct?
        Mr. Koskinen. No, I've actually never seen that.
        Mr. Meadows. You've never seen that?
        Mr. Koskinen. No, I have not seen that in operation.
        Mr. Meadows. You've never seen anybody communicating in
    your agency----
        Mr. Koskinen. I've never gotten anything that was----
        Mr. Meadows. Okay. Well, you've got a couple of staffers.
        Have you guys seen that, behind--I mean, have they seen it?
        Mr. Koskinen. I don't know.
        Mr. Meadows. Yeah.
        Mr. Koskinen. They said they have. They've been doing it
    for a while.
        Mr. Meadows. It's like instant messaging. I mean, I know
    that----
        Mr. Koskinen. I don't do instant messaging either, so I'm
    probably out of touch.
        Mr. Meadows. Yeah, me either. But let me tell you my
    concern, is the OMB--and we've got Ms. Cobert here today--gave
    guidance in 2012 to have a senior official, a special person
    within each agency to make sure that we have compliance with
    regards to records.
        Who's your senior person within the IRS or Treasury that
    you would've appointed according to that guidance?
        Mr. Koskinen. There's a man, whose last name I don't know,
    who is in charge of the records. We have 2,000 information
    resource counselors----
        Mr. Meadows. That's not what I--it says that you're to
    designate a senior agency official. So who is that?
        Mr. Koskinen. I don't know his name, but there is one.
    Actually, he just wrote a letter to NARA. Maybe I have a copy
    of the letter. Hold on.
        No, I don't. But we just----
        Mr. Meadows. But when you found out, the last hearing, that
    you didn't comply with the laws, the Federal records, did you
    go back to that person and say, you know what, you messed up?
        Mr. Koskinen. No, what I--actually, even before then, I've
    gone back and said, we have to have a better----
        Mr. Meadows. So you've talked to him; you just don't know
    his name or her name.
        Mr. Koskinen. I did not talk to him personally. But I do
    know that, actually, ironically, I did go back and ask for more
    information. And it turned out, when NARA did a review in 2011,
    we got a score of 93, and when they did a review of our record
    management system in 2012, we got a score of 99. So I think
    it----
        Mr. Meadows. So did it include those instant messages in
    that scoring?
        Mr. Koskinen. I have no idea.
        Mr. Meadows. Can we find out?
        Mr. Koskinen. I'm sure we can.
        Mr. Meadows. Okay.
        And I'll close with this, Mr. Chairman.
        We have been denied access, the Oversight Committee, to
    your senior official in terms of technology, the people that
    are providing all these documents. I can't imagine why, if you
    had nothing to hide, we would be denied access to those types
    of people.
        Can I have your commitment here today that you're willing
    to make them available for us to ask questions, both the
    majority and the minority?
        Mr. Koskinen. Yes. As I've said, we've told the IG we're
    not going to interfere with his----
        Mr. Meadows. But that wouldn't interfere. Would you be
    willing to commit to the committee today that we can have
    access to those individuals to ask them questions? Yes or no?
        Mr. Koskinen. Yes. We've already--actually, you've already
    had a briefing from----
        Mr. Meadows. So we can call them, you will identify them
    today----
        Mr. Koskinen. No----
        Mr. Meadows. --and let us go ahead and start interviewing.
        Mr. Koskinen. No. I should make it clear, and I thought I
    had made it clear, that we've agreed to the IG's request that
    we not do anything to interfere with his investigation----
        Mr. Meadows. Well, that's not what the IG--the IG didn't
    say that.
        Mr. Koskinen. IG has asked us----
        Mr. Meadows. The IG asked you to cooperate. He didn't say--
    --
        Mr. Koskinen. No, that's----
        Mr. Meadows. --to not provide information or cooperate with
    us, did he?
        Mr. Koskinen. The IG asked us----
        Mr. Meadows. I mean, we have information that would
    indicate he didn't say that.
        Mr. Koskinen. What the IG asked us was to give priority to
    his investigation and not do anything that would interfere with
    it, including talking to anyone that he was going to be talking
    to.
        So we have not pursued--we have told him, as soon as he
    finishes his investigation, we will provide--and you can have
    discussions with anybody you would like. We will do that.
        Mr. Meadows. I'll----
        Mr. Koskinen. We're committed to that.
        Mr. Meadows. I'll yield back. I thank the patience of the
    chair.
        Mr. Mica. Okay.
        Mr. Clay, the gentleman from Missouri, is recognized.
        Mr. Clay. All right. It's Mr. Clay of Missouri, Mr.
    Chairman. You remember. You're thinking of Bill Gray, but----
        Mr. Mica. I apologize. I did that----
        Mr. Clay. You served with Bill Gray, I understand.
        Mr. Mica. --twice today, and I know you very well.
        Mr. Clay. I know.
        Mr. Mica. I had us in a different place. Thank you.
        Mr. Meadows. He is looking at the ranking member's hair as
    he looks by you.
        Mr. Mica. That's the second time.
        Mr. Clay. It always helps to have levity in here.
        Mr. Easton, according to a 2012 GAO report, two DOD
    programs were excluded from OMB's estimation of government-wide
    improper-payments amount. These two programs, the Defense
    Finance and Accounting Service Commercial Pay and U.S. Army
    Corps of Engineers Commercial Pay, spent nearly $400 billion in
    2011.
        The reason for the exclusion was that those programs were
    still developing their estimating methodologies. In other
    words, they didn't know how bad their improper-payment problem
    was.
        Mr. Easton, have they figured that out yet?
        Mr. Easton. They did. And, in fact, we did report both of
    the numbers for the Commercial Pay program and for the Army
    Corps of Engineers. The decision was apparently made to exclude
    the numbers that we reported because of questions about the
    statistical sampling estimation methodology. And there was one
    in place in both of those programs.
        Since then, at the recommendation of the GAO, we've gone
    back and in both cases implemented an adequate--and we would
    welcome GAO to come back and validate that--program for both of
    those.
        Mr. Clay. Okay. So are these programs' expenditures able to
    be included in the next OMB government-wide estimation?
        Mr. Easton. Yes, sir.
        Mr. Clay. Yeah. Okay.
        And I do understand that the DOD's estimating processes for
    these programs is different from methodologies it uses for
    other programs. Why is that the case?
        Mr. Easton. In the case of the Commercial Pay program--that
    was the specific program that was identified by GAO--there was
    some concern about the variability of the payments. We can make
    very, very small payments to very, very large payments.
        And we were using, when we initiated the methodology, more
    of a simple statistical sampling methodology. And my
    understanding is that they recommended, and we implemented, a
    stratified sampling methodology. So that was the distinction.
        Mr. Clay. Okay.
        And, Ms. Cobert, could you comment on the estimation
    methodologies used for these two programs?
        Ms. Cobert. We, in our oversight role, have worked with DOD
    and incorporated the feedback from GAO and believe that the
    sampling methodology, improved sampling methodology that Mr.
    Easton described is now a sound one. That's why we've included
    those numbers in this past year.
        Mr. Clay. Okay. Thank you.
        On another subject, my colleagues on the other side of the
    aisle have spent a significant amount of time today focusing on
    whether or not Lois Lerner has tried to hide information from
    Congress. They have suggested that Ms. Lerner has done so by
    intentionally crashing her hard drive and by using an intra-
    office chat system at the IRS called ``OSC'' to avoid leaving
    records on email.
        I have just a few follow-up questions relating to this
    topic. One, Mr. Commissioner, does the IRS have a policy to
    withhold information from emails in order to obstruct
    congressional information?
        Mr. Koskinen. No.
        Mr. Clay. Is the IRS policy to comply fully with all
    congressional document requests and subpoenas?
        Mr. Koskinen. It is.
        Mr. Clay. Has the IRS been complying fully with all
    congressional document requests and subpoenas that it has
    received to date?
        Mr. Koskinen. We are. It takes longer than people expect
    and longer than we would like. We've spent about $18 million
    doing it. But we are doing our very best to be totally
    compliant.
        Mr. Clay. And about how many documents have you supplied to
    Congress to date since you got there?
        Mr. Koskinen. Tax-writing committees overall have just a
    little less than a million documents. Since I've been here,
    we've probably provided 300,000 or 400,000 of those.
        Mr. Clay. Do you think we're going to read all of that, Mr.
    Chairman?
        Are you aware of any IRS employee intentionally withholding
    information in order to obstruct any congressional information?
        Mr. Koskinen. I am not.
        Mr. Clay. And I thank you very much for----
        Mr. Connolly. Would my friend yield?
        Mr. Clay. If the chairman would let me.
        Mr. Mica. You have plenty of time. Go ahead.
        Mr. Clay. Yes, I yield.
        Mr. Connolly. I thank the chair, and I thank my friend.
        Is it my friend's understanding, my friend from Missouri,
    that--with respect to the issue of did somebody deliberately
    crash their hard drive, maybe the inference to be drawn from
    that might be, well, it's otherwise a rare event in the IRS
    that a hard drive crashes.
        And is it my friend's understanding that at our previous
    full committee hearing the statistic was 3,000 hard drives in
    the IRS alone have crashed so far this year, with almost half
    the year still to go?
        Mr. Clay. That is the testimony----
        Mr. Koskinen. I think it's actually 2,000.
        Mr. Connolly. I thought we heard 3,000 in the testimony,
    but all right, 2,000. That means we're kind of on track to get
    somewhere shy of 4,000; is that correct? Hardly an unusual
    event.
        And was it further my friend's understanding from the
    testimony received that one of the reasons for that is that a
    lot of the computers at IRS have not been updated according to
    industry standards, they're kind of old by technology
    standards?
        Mr. Clay. And my friend from Virginia, and we know why that
    is: Because in the past 4 years there have been dramatic cuts
    to the IRS budget, mostly initiated by this House and the
    appropriators who are responsible for that budget.
        Mr. Connolly. Right.
        And let me finally ask my friend, much has been made of the
    fact that apparently staffers of the IRS resorted to Gmail and
    Gchat and they actually used those private vehicles for
    official business; is that correct?
        Mr. Clay. Yes.
        Mr. Connolly. Can you imagine if we applied the same
    standard here on Capitol Hill to our staff and ourselves?
    Perhaps it'd be embarrassing information, but not necessarily--
    in fact, almost certainly not sinister. Would that be a fair
    characterization, my friend from Missouri?
        Mr. Clay. That would be fair, but I'm glad we have a
    firewall.
        Mr. Connolly. I thank my friend.
        And I thank the chairman.
        Mr. Clay. You're welcome.
        And I yield back.
        Mr. Mica. I thank the gentlemen for their little colloquy
    there.
        I'll go back and tell my folks that they can--I tried to
    explain to them that they keep their records for 50 years but
    they can't keep emails for 27 months. I talked about the
    credibility of--Mr. Jordan?
        Mr. Jordan. I thank the chairman.
        I'll just pick up where Mr. Clay was. It seems to me that
    the IRS had three duties here and they've breached all three.
        First, they have a duty to preserve documents. We know they
    didn't do that. They didn't do that right. They had some 6-
    month tape that recycled, et cetera.
        They had a duty to produce the documents that we actually
    subpoenaed. They can't do that because they lost them; they
    didn't preserve them.
        And then they had a duty to disclose once they knew that
    they didn't preserve and couldn't produce. And they didn't do
    that in a timely fashion.
        So they had three duties. They breached all three.
        And Mr. Meadows, I think, asked an important question. We
    want certain people to come in front of this committee and
    elaborate on the fact that they've breached these three duties
    they had to the American taxpayers, the American citizenry. And
    they're saying they can't because the Inspector General told
    them they couldn't do it.
        So my question to you, Commissioner, is, how is cooperating
    with Congress' investigation going to impede any Inspector
    General investigation?
        Mr. Koskinen. My understanding, the concern of the
    Inspector General is that he is actually talking to everybody
    who knows anything about the email situation and the crash of
    the hard drive. He has asked us not to talk to any of those
    people, asked us to give priority to his investigation----
        Mr. Jordan. And you know what? We'd be happy to work around
    his schedule. If the Inspector General wants to interview one
    of the witnesses we want to interview and he wants to interview
    them at 10:00, we'll say, you know what, we'll do it at 12:00.
        Mr. Koskinen. The Inspector----
        Mr. Jordan. You want to do it at 1:00, we'll do it at 3:00.
        Mr. Koskinen. My----
        Mr. Jordan. We'll do it the next day. We're happy to work.
        What we want from you is a commitment for these people. The
    committee sent you a letter 3 weeks ago. Thomas Kane, Acting
    Deputy Associate Chief Counsel for Procurement and
    Administration, will you commit to letting Mr. Kane come and
    talk to this committee and the American people?
        Mr. Koskinen. I've said that when the Inspector General is
    done----
        Mr. Jordan. No, no, no, no. I mean soon. We want this to
    happen this month. We're not--we want----
        Mr. Koskinen. I didn't ask----
        Mr. Jordan. This has been a year investigation, Mr.
    Commissioner. We want it to happen. You wait 2 months to tell
    us you lost to the emails. We want to get to the truth as
    quickly as possible.
        We've got key witnesses: Thomas Kane; Lillie Wilburn, Field
    Director, Information Technology Division. Will you commit to
    letting her come talk to us this month?
        Mr. Koskinen. I am sure she's one of the people the
    Inspector General is going to talk to. I have told and talked
    with the Inspector General. As soon as he's done talking to a
    witness, we're happy to have them come----
        Mr. Jordan. What does that--what is the big deal?
        Mr. Koskinen. The big deal----
        Mr. Jordan. If the Inspector General wants to talk to him
    Monday, we'll talk to him Tuesday. If he wants to talk to him
    on Tuesday, we'll talk to him on Monday.
        Mr. Koskinen. Because the big deal is everybody, at least--
    --
        Mr. Jordan. How about John McDougal, Senior Trial Counsel,
    Office of IRS Chief Counsel? Will you commit to letting us talk
    to him?
        Mr. Koskinen. My answer is the same. As soon as the
    Inspector General completes his investigation----
        Mr. Jordan. How convenient. How long is that going to take?
    Two months?
        Mr. Koskinen. I didn't ask----
        Mr. Jordan. Three months? One year like the first audit
    took?
        Mr. Koskinen. The Congress asked the Inspector General to
    do this investigation. The Inspector General is committed to
    doing it quickly. Everyone has been interested in an
    independent review, which the Inspector General----
        Mr. Jordan. We're all fine with that, but there is no
    reason we can't run our investigation at the same time he's
    running his.
        Mr. Koskinen. The Inspector General has advised us he
    doesn't think that he can get an independent review of all of
    this if other investigations are going on.
        Mr. Jordan. Let me switch subjects here. I'm actually going
    to try to stay in my--I appreciate the chair's leniency on the
    time earlier.
        Let me ask you this. To your knowledge, have any of these
    instant messages, any OSC messages been turned over to Congress
    in the last year?
        Mr. Koskinen. I assume any of them that is noted in the
    process there that were preserved as emails have all been
    turned over.
        Mr. Jordan. Have any that weren't preserved as emails been
    turned over to Congress? Do you know?
        Mr. Koskinen. All I know about the system is what I see in
    the emails. And, apparently, if you don't save them, they don't
    exist.
        Mr. Jordan. That's a question we need to find out. Well, I
    mean, who knows? You're telling us there's still thousands of
    emails you have to get to us. So even if they've been turned
    into emails, they may not have been turned over to us.
        I'm asking, do you know if any of the OCS messages, whether
    in instant messaging form that are somehow preserved or put
    into emails, have they been turned over to us? And your
    response is you don't know.
        Mr. Koskinen. I don't know. And we'll be happy to let you
    know----
        Mr. Jordan. And we'd like that information soon. Not based
    on when the Inspector General tells you you can give to us, but
    soon.
        Mr. Koskinen. That information we'll give you soon.
        Mr. Jordan. Yeah, like tomorrow if you can get it. You've
    got the guys back behind you who use it. Go find some folks at
    the IRS who understand how quickly this works, and get that to
    us.
        Mr. Chairman, a whole new system--a whole new system that
    this committee didn't know about, the American people didn't
    know about, we find out just a couple days ago exists, and we
    don't know whether we've got any of that information. That's
    the key point.
        And the fact that they also are saying we can't talk to
    witnesses is just unbelievable. But hopefully we can make that
    happen this month, as well.
        With that, I'd yield back, Mr. Chairman.
        Mr. Mica. Let's see. Mr. DeSantis?
        Mr. DeSantis. Thank you, Mr. Chairman.
        Mr. Commissioner, when you see the email with Lois Lerner
    when she writes that, ``We need to be cautious about what we
    say in emails'' because Congress has asked for those emails,
    what is your response to that? Does that bother you in any way?
        Mr. Koskinen. I don't know the background in which she
    wrote that, so my sense is that she was not cautious. She said,
    I was cautioning about them, and then we had several occasions
    where they asked for them, and we need to be cautious because
    they're actually going to be searchable. And so I'm----
        Mr. DeSantis. Yeah. Right.
        So, you know, we have a duty on behalf of the American
    people to exercise oversight over the executive branch. And she
    does not want to be subject to that oversight. So I think a lot
    of Americans would look at that, I think they'd be concerned
    that she would try to conduct her business in a way that was
    not on the up and up.
        And so I'd just--as the Commissioner, you weren't here at
    this time; this doesn't reflect on you, what she wrote. But I
    do want to know now, is this something that you would be
    comfortable with, if this is how high officials underneath your
    command behave themselves?
        Mr. Koskinen. All I would note, as I say--you make a good
    point. I'm not here to defend Lois Lerner, I have never met
    her, she doesn't work at the IRS anymore.
        All I would note is that she composed 43,000 emails, all of
    which at some point you will get very soon. All of them have
    already been----
        Mr. DeSantis. I'm asking you, what does this make you feel?
    Are you comfortable that high Federal officials are talking
    about this, are conducting themselves in this way? Is that good
    or not?
        Mr. Koskinen. My view is that records should be kept, email
    conversations should be preserved. We need a better email
    retrievable system and a better system of record. That's the
    view I have.
        Mr. DeSantis. So you don't think the people who work for
    you at the IRS should change the way they conduct their
    business for the purpose of evading congressional oversight?
    Are you on the record as saying you agree with that statement?
        Mr. Koskinen. I am on the record of saying nobody in this
    organization, any Federal organization, should do anything to
    evade oversight. I'm a big--I spent 4 years working in the
    Senate. The Senator I worked with----
        Mr. DeSantis. No, I understand.
        Mr. Koskinen. --was part of the Oversight Committee, so I'm
    a big believer in oversight.
        Mr. DeSantis. Can I--I just want to clear up a couple
    inconsistencies in your testimony.
        I had showed you your comment about being advised. You
    initially said you weren't advised. Then I referred back to it.
    Then I think you've clarified that to say you were not
    necessarily advised by somebody in the administration; it was
    that the document producers advised you that it would be better
    to turn it all over at once.
        So is that how you reconcile those statements?
        Mr. Koskinen. No. I'm sorry. No, no, no. I was not advised
    by anyone. It was my decision that the best way to proceed,
    once we knew there was a difficulty, was to find out the full
    context so we could make a complete report. I was not advised
    by anyone to do that inside the IRS or outside.
        I think the question being----
        Mr. DeSantis. So you just misspoke in your testimony last--
    --
        Mr. Koskinen. Pardon?
        Mr. DeSantis. So you misspoke in the video clip we played
    when you said you were advised?
        Mr. Koskinen. No, I--I'd be happy to see the clip again. My
    point was that was on a different issue.
        My point has been all along it was my decision--and I
    remember clearly, I think, testifying to that--it was my
    decision that we should get to the bottom of the situation,
    collect all the emails we could find, and give the Congress a
    full report of what the situation was. And that's what we did.
    We published that report and gave it to you.
        Mr. DeSantis. I think we can replay it at the appropriate
    time, but Chairman Issa was asking you about this specific
    issue about why you did not turn it over to Congress for 2
    months.
        Let me ask you this.
        Mr. Koskinen. I'm sorry. My----
        Mr. DeSantis. If the person----
        Mr. Koskinen. My recollection of that is, I was--what I was
    saying was I was advised about the difficulty. I was not
    advised about delaying----
        Mr. DeSantis. In fairness, that clip, you did not say it
    was the difficulty; you just said you were advised and that's
    why you didn't do it. But we can deal with that some other--let
    me ask you this.
        If the person who's currently in Lois Lerner's position
    wrote that email saying that, look, Congress looks for these
    things, we need to be careful what we say over email, let's
    maybe use this other system, would that be something that you
    would be comfortable with, if that individual who is in charge
    of this division right now were conducting themselves in that
    fashion?
        Mr. Koskinen. My advice to anyone working for the IRS now
    is that they should not do anything that would look--appear to
    be, let alone be purposeful, to avoid oversight by the
    Congress.
        Mr. DeSantis. Do you think that you, as the IRS
    Commissioner, if you come before Congress and you testify and
    you either make factual statements that later appear not to be
    the entire truth or maybe you just misspoke, do you believe
    that you, as a high Federal official, as a civil officer of the
    United States, have a duty of candor to us to come back and
    correct the record?
        Mr. Koskinen. I do. I don't know of any misstatements I've
    made, but I would agree totally with you, if there is an
    inconsistency or misstatement, I should come back.
        As I said, I appreciated the chairman's letter to me giving
    me a chance to reconsider, and I reconsidered and thought that
    my statement was fine as stated.
        But I don't know of any problems. But I do think, in all
    candor, if someone has found an issue, I'm happy to come back
    and explain it or discuss it further. As I told the chairman, I
    would stand by and I do stand by my testimony. But if I can
    provide clarification, I'm happy to do that.
        Mr. DeSantis. I yield back. Thank you.
        Mr. Meadows. Would the gentleman yield----
        Mr. DeSantis. Yeah.
        Mr. Meadows. --for just one quick question?
        Mr. DeSantis. I yield to the gentleman from North Carolina.
        Mr. Meadows. You know, you keep using one term. You say,
    I've never met Ms. Lerner, you know, I don't know her. Have you
    communicated, either directly or indirectly, with her or with
    her attorneys, directly or indirectly?
        Mr. Koskinen. I've not directly or otherwise communicated
    with her. I met her attorney on a tennis court. He played on
    the court next to me in the middle of the wintertime. I've
    never talked to him about the case. I've never communicated
    with Ms. Lerner. I wouldn't know how to communicate with Ms.
    Lerner.
        Mr. Meadows. Okay. Thank you.
        I yield back.
        Mr. Mica. We have--Chairman Issa has returned.
        Did you seek time?
        Mr. Issa. Thank you.
        Mr. Mica. You're recognized.
        Mr. Issa. Just briefly--and I apologize that I had to go to
    the other committee--in light of this OCS development, do you
    have an opinion, Commissioner, on how long before we'd be able
    to get an understanding of the capabilities of how much of it
    is preserved on tapes since you began preserving?
        In other words, if you have 6 months of backup, I would
    presume that this communication system would have 6 months, the
    last 6 months' worth of the use of these communications, but
    perhaps not further.
        Are you aware of any of that since you became aware of this
    document?
        Mr. Koskinen. I'm not aware of any of it. All I'm aware is
    we've produced every document we have of Lois Lerner's emails,
    however they were generated.
        Mr. Issa. But OCS is not an email system. It is a
    communication system that has capability of tracking. That's
    what the email tells us.
        Mr. Koskinen. Right. I am happy to get you and the
    committee full information about how the system runs, what its
    backup is, what might exist wherever it might exist. And we'll
    get that to you promptly.
        Mr. Issa. Additionally, we asked for the names and an
    opportunity to interview the individuals who supposedly were
    not able to recover the data on Lois Lerner's disk. The reason
    that that's critical is that expert after expert after expert
    has said to us in very clear terms that there's no such thing
    as a drive that there's no data recoverable on.
        And I might mention that one of them had recovered the last
    17 seconds from the Challenger's disaster after the tape had
    been under water for a year. The fact is, these drives are
    recoverable.
        So it is critical that as you look at prioritizing the
    fairly simple act in our interrogatories of giving us the names
    of the individuals and making them available so we can go
    through that process.
        It's not our greatest desire to go down that road. Our
    greatest desire, obviously, is to get to the bottom and the top
    of who Lois Lerner worked with as she was targeting and
    deliberately treating conservative groups because of their
    values in a different way, an unfair way, to the way other
    entities were treated.
        That has been a decision made by this committee, well-
    staffed. And, ultimately, as you know, the Ways and Means
    Committee has referred criminal prosecution against Lois
    Lerner. So that is the primary target. And what we're looking
    for primarily, of course, is to find out who worked with Lois
    Lerner in her operation to target conservative groups.
        That's our big feature, but, along the way, we certainly
    want to know about the disk drive because it now has become a
    pretty unbelievable statement, that it was completely
    unrecoverable. It may have been unrecoverable through the
    techniques that they were using, but in your testimony you
    talked about extraordinary----
        Mr. Koskinen. Right.
        Mr. Issa. --efforts.
        This email that Mr. Jordan went through with you shows that
    she was very concerned with not being tracked. And that's
    inconsistent with a disk drive that we now understand was on a
    notebook computer, one that went in and out. And if I read the
    statements that we received on the computer she was using at
    the time, that was a computer she took home. So the so-called
    blue screen she discovered was probably a blue screen that she
    came to work with. It was a device that had these records on
    them and went in and out of, you know, your possession.
        So I guess the question is, can we have those names in a
    timely fashion? It certainly doesn't seem like a difficult or
    time-consuming act to give us the names of the people in the
    interrogatories.
        Mr. Koskinen. Exactly. And as I've said, the Congress has
    asked the IG to do an investigation. The IG has asked us to
    give it a priority and not to do anything that would interfere
    with their investigation of this very issue, which they hope to
    conclude promptly.
        As I've said--and I've talked to the IG about it--as soon
    as they are through talking with a witness they're not going to
    have to talk to again, they will let us know, and we'll be
    happy to have that witness able to talk, and we'll provide you
    that information. As soon as the IG is done, we're happy to
    provide you any information you need and discussions you need.
        Mr. Issa. And, Commissioner, I want to be cooperative, and
    I know you want to be cooperative. Names of people is a
    different process from scheduling when we would work with them.
    And we certainly would coordinate with the IG to make sure
    that, if you will, that we deconflict any schedule of when we
    would talk to the same witnesses. But I think it is important
    that we have an understanding of the window, how many people
    we're going to be deposing.
        And, you know, if you prefer, we can work directly with
    TIGTA. But, in the past, we've normally made the request to you
    and to Treasury, rather than working with the IG on the
    specifics. Like I say, we'll work either way.
        Mr. Koskinen. Fine. We can each have our discussions with
    TIGTA.
        Our discussion with TIGTA has been thus far that they
    didn't want us talking to anyone, they didn't want anybody else
    talking to them until they were through. Because, as they
    explained to me, they talk to a person, they talk to somebody
    else, then they want to come back and talk to the first person
    again, and if that person has been out talking to others, it
    begins to muddy the waters.
        And so we've said they can have--the field is open, they
    can have anything they need, any documents they need. We've
    made sure they've always had documents because they're doing an
    investigation anyway, but we've made sure they have all the
    documents you've had. We've told them they can talk to anybody
    they like anytime and that we will stay totally out of the way.
    And that's what we're trying to do.
        Mr. Issa. So I just want to understand one more time. Your
    position is that it would be counter to the investigation being
    done by TIGTA if we were to interview or even know the names of
    any of the individuals related to the disk and the other
    activities we're both investigating. Is that correct?
        Mr. Koskinen. That's correct. That's my understanding.
        Mr. Issa. Okay. We will talk to the IG, obviously,
    directly. I think that would be appropriate----
        Mr. Koskinen. That's fine.
        Mr. Issa. --that we hear it firsthand.
        Mr. Chairman, Ranking Member, I'll take this opportunity to
    mention one interesting thing. I'm often asked by the press,
    when are we going to release all of our work product? When are
    we going to let witnesses basically see what other witnesses
    have seen?
        I think the Commissioner, on behalf of the IG, has made the
    clear point that it is often selected information, limited
    information that's made available, but, clearly, you don't make
    all of the information available until you conclude your
    investigation.
        And I note that because that has been the history of our
    committee, that most information remains unavailable to the
    public even though both sides have it.
        So I respect the need to make sure the IG does have what he
    needs, and we'll work to make sure that we find some common
    middle ground. And I appreciate your willingness to take care
    of the other questions on the interrogatory.
        Thank you, Mr. Chairman, Mr. Ranking Member. I yield back.
        Mr. Connolly. Mr. Chairman?
        Mr. Mica. Mr. Connolly.
        Mr. Connolly. Just a brief comment on the chairman's--I
    really appreciate the chairman's line of inquiry here because
    we don't want to put the Commissioner in an impossible
    position, where we're putting a set of interrogatories to him
    and the TIGTA has sort of put them off-bounds pending the
    investigation.
        So I welcome the chairman's desire to get further
    clarification from TIGTA so that we're not putting the
    Commissioner in an impossible position and we're not
    unwittingly treading on ground that needs to be protected.
        So I thank the chairman for that clarification.
        Mr. Mica. Well, I thank, first of all, the Members for
    their participation.
        Actually, Mr. Connolly, we've done, I think, 23 hearings.
    We should count this as two.
        Mr. Connolly. You know, Mr. Chairman, I want to say this to
    you and Chairman Issa.
        Mr. Mica. We've covered a lot of territory.
        Mr. Connolly. I belong to two committees that apparently
    practice the belief, passionate belief, that no human problem
    cannot be significantly improved with another hearing.
        Mr. Mica. All right.
        Well, again, an interesting, hopefully productive hearing.
    And we covered a great deal of information.
        Most importantly, back to the original purpose, is the
    half-a-trillion dollars in improper payments, a whole host of
    other issues about fraudulent activity, gaming the taxpayers,
    that need to be resolved. And we will hold hearings, as many as
    we need, as I said before.
        And we did divert a bit to some of the current IRS issues,
    but I appreciate everyone coming and participating. I thank our
    witnesses.
        We'll leave the record open for a period of 10 days. You
    may have additional questions submitted from the committee to
    you, and we ask you be respondent and let us include that
    material as part of the record.
        Mr. Mica. There being no further business before this
    Subcommittee on Government Operations, this hearing is
    adjourned.
        [Whereupon, at 4:38 p.m., the subcommittee was adjourned.]

                                    APPENDIX

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