[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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