[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


.                                    
                         [H.A.S.C. No. 115-56]

                                HEARING

                                   ON

                   NATIONAL DEFENSE AUTHORIZATION ACT

                          FOR FISCAL YEAR 2018

                                  AND

              OVERSIGHT OF PREVIOUSLY AUTHORIZED PROGRAMS

                               BEFORE THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                   SUBCOMMITTEE ON READINESS HEARING

                                   ON

                       CONTINUED OVERSIGHT OF THE

                      TRANSFER OF EXCESS MILITARY

             EQUIPMENT TO CIVILIAN LAW ENFORCEMENT AGENCIES

                               __________

                              HEARING HELD
                             JULY 27, 2017

                                     
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                     
  


                       SUBCOMMITTEE ON READINESS

                  JOE WILSON, South Carolina, Chairman

ROB BISHOP, Utah                     MADELEINE Z. BORDALLO, Guam
AUSTIN SCOTT, Georgia                JOE COURTNEY, Connecticut
STEVE RUSSELL, Oklahoma              TULSI GABBARD, Hawaii
MIKE ROGERS, Alabama                 CAROL SHEA-PORTER, New Hampshire
VICKY HARTZLER, Missouri             A. DONALD McEACHIN, Virginia
ELISE M. STEFANIK, New York          SALUD O. CARBAJAL, California
MARTHA McSALLY, Arizona, Vice Chair  ANTHONY G. BROWN, Maryland
SCOTT DesJARLAIS, Tennessee          STEPHANIE N. MURPHY, Florida
TRENT KELLY, Mississippi             RO KHANNA, California
MIKE GALLAGHER, Wisconsin
                Andrew Warren, Professional Staff Member
                Brian Garrett, Professional Staff Member
                          Jodi Brignola, Clerk
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page

              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Bordallo, Hon. Madeleine Z., a Delegate from Guam, Ranking 
  Member, Subcommittee on Readiness..............................     2
Wilson, Hon. Joe, a Representative from South Carolina, Chairman, 
  Subcommittee on Readiness......................................     1

                               WITNESSES

Merritt, Zina, Director, Defense Capabilities and Management, 
  Government Accountability Office; and Wayne McElrath, Director, 
  Forensic Audits and Investigative Service, Government 
  Accountability Office..........................................     3
Scott, Mike, Deputy Director of Logistics Operations, Defense 
  Logistics Agency; and Mike Cannon, DLA Disposition Services, 
  Defense Logistics Agency.......................................     5

                                APPENDIX

Prepared Statements:

    Merritt, Zina, joint with Wayne McElrath.....................    25
    Scott, Mike, joint with Mike Cannon..........................    40
    Wilson, Hon. Joe.............................................    23

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    [There were no Questions submitted during the hearing.]

Questions Submitted by Members Post Hearing:

    [There were no Questions submitted post hearing.]
                 
                 
                 CONTINUED OVERSIGHT OF THE TRANSFER OF

                 EXCESS MILITARY EQUIPMENT TO CIVILIAN

                        LAW ENFORCEMENT AGENCIES

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                                 Subcommittee on Readiness,
                           Washington, DC, Thursday, July 27, 2017.
    The subcommittee met, pursuant to call, at 10:37 a.m., in 
room 2118, Rayburn House Office Building, Hon. Joe Wilson 
(chairman of the subcommittee) presiding.

  OPENING STATEMENT OF HON. JOE WILSON, A REPRESENTATIVE FROM 
      SOUTH CAROLINA, CHAIRMAN, SUBCOMMITTEE ON READINESS

    Mr. Wilson. Good morning. This hearing will come to order. 
Ladies and gentlemen, I welcome you all here today and call 
this hearing of the House Armed Services Committee, Readiness 
Subcommittee, on ``Continued Oversight of the Transfer of 
Excess Military Equipment to Civilian Law Enforcement 
Agencies'' to order.
    I would like to begin by recognizing the dedicated service 
of our Readiness Subcommittee clerk, Ms. Brignola. This will be 
Jodi's last official event for our subcommittee and I want to 
personally thank her for her contributions to our efforts over 
the past year. I wish her the best of luck as she moves forward 
in her future endeavors.
    [Applause.]
    One of the objectives of this subcommittee is to bring 
attention to matters that impact on the overall readiness of 
the Department of Defense. This includes programs or activities 
which face management challenges, present budget implications, 
or could be administered more efficiently. Whatever the root 
cause, it is our goal to provide necessary oversight in order 
to ensure our Armed Forces achieve the highest levels of 
readiness possible.
    Given the current threats facing our Nation and the 
budgetary pressure place on the Department of Defense, 
accountability is paramount and every dollar counts. Vigorous 
oversight can help ensure that mistakes don't happen and when 
they inevitably do, we learn lessons from these missteps.
    For this reason, I am pleased to convene this hearing today 
on the recent Government Accountability Office [GAO] report 
highlighting deficiencies found with the management and 
operation of the Law Enforcement Support Office, LESO, within 
the Defense Logistics Agency [DLA].
    The LESO is responsible for the ``1033 Program'' which has 
provided tremendously valuable resources to our Federal, State, 
and local law enforcement agencies since 1991. These necessary 
items have contributed to law enforcement's ability to conduct 
counternarcotics, counterterrorism, and border security 
missions throughout the United States and ensure that items 
already paid for by the taxpayer continue to ``protect and 
serve'' the citizens of the United States.
    Earlier this month, the GAO report stated that the DLA-
managed LESO program inappropriately assigned more than 100 
controlled items with an estimated value at $1.2 million. This 
revealed deficiencies in the process for verification and 
approval of Federal law enforcement applications and in the 
transfer of controlled property. The Department of Defense, 
DLA, and the LESO program must improve its monitoring, 
management, and administration of this critical program. I read 
the GAO recommendations very carefully and applaud DLA for 
taking a very proactive approach to addressing the shortfalls 
and immediately acknowledging the problems identified.
    I look forward to hearing what progress DLA has been made 
in continuing to remedy these various deficiencies. Our 
oversight intends to ensure taxpayer dollars are used 
responsibly, security is maintained for sensitive items, and 
accountability of equipment is never taken for granted.
    Our panel will address the findings and recommendations of 
the GAO report as well as the actions taken by DLA to correct 
identified deficiencies.
    I now turn to our very valued ranking colleague, 
Congresswoman Madeleine Bordallo of Guam, for her introductory 
comments.
    [The prepared statement of Mr. Wilson can be found in the 
Appendix on page 23.]

STATEMENT OF HON. MADELEINE Z. BORDALLO, A DELEGATE FROM GUAM, 
           RANKING MEMBER, SUBCOMMITTEE ON READINESS

    Ms. Bordallo. Thank you very much, Mr. Chairman, for 
calling this important hearing on the recent GAO report on the 
DOD [Department of Defense] Excess Property Program, also known 
as the 1033 Program. And thank you also to our four witnesses 
for being with us today for what I expect to be an insightful 
discussion.
    Let me begin by stating that I understand the value of the 
1033 Program. It allows Federal, State, and local law 
enforcement agencies to fill critical equipment shortfalls at 
little to no additional cost to the taxpayer, leveraging excess 
DOD property. Now many of these items are noncontrolled, can be 
purchased at any office supply or furniture store, and help 
alleviate budgetary stress, particularly on local agencies.
    However, this equipment can also be controlled property, 
items that are sensitive in nature and cannot be released to 
the general public, such as firearms and military-grade imagery 
technologies.
    And that is what makes the GAO report particularly 
concerning. Not only does it highlight the negligence with 
which DLA treated property procured with taxpayer dollars, but 
it demonstrates a dangerous vulnerability that could compromise 
the safety of the American people.
    So I am particularly appreciative that GAO conducted this 
operation and delivered this report because it brings to light 
these vulnerabilities and allows us to conduct critical 
oversight on the handling of equipment to ensure reforms are in 
place to better secure the transfer program.
    I am deeply disturbed, however, by the prospect that a 
malicious individual or organization could procure DOD 
property, especially controlled items. Understanding that this 
is likely a result of a combination of issues, including 
inadequate protocols and safeguards, insufficient training, and 
potential cultural errors, I expect to dig down on how this 
program needs to be reformed.
    So I do look forward to the discussion here this morning 
and hope that we can come away with clear objectives and steps 
forward to ensure this program has the proper safeguards and 
accountability in place.
    Mr. Chairman, I thank you again for holding this important 
meeting, and I yield back.
    Mr. Wilson. Thank you, Congresswoman Bordallo.
    We are pleased to recognize our witnesses today. I want to 
thank them for taking time to be with us. We have Ms. Zina 
Merritt, Director of Defense Capabilities and Management of the 
Government Accountability Office; Mr. Wayne McElrath, the 
Director of Forensic Audits and Investigative Services of the 
Government Accountability Office; Mr. Mike Scott, who is the 
Deputy Director of Logistics Operations of the Defense 
Logistics Agency; and Mr. Mike Cannon, the Director of the 
Defense Logistics Agency Disposition Services.
    We will begin with statements from each organization. We 
will begin, very appropriately, with the Government 
Accountability Office.
    Mr. Wilson. Ms. Merritt.

 STATEMENT OF ZINA MERRITT, DIRECTOR, DEFENSE CAPABILITIES AND 
    MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE; AND WAYNE 
McELRATH, DIRECTOR, FORENSIC AUDITS AND INVESTIGATIVE SERVICE, 
                GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Merritt. Chairman Wilson, Ranking Member Bordallo, and 
members of the subcommittee, thank you for the opportunity to 
be here today with my colleague, Wayne McElrath.
    Our testimony today summarizes key findings from our July 
2017 report on DOD excess controlled property, and addresses 
one--how Federal, State and local enforcement agencies reported 
using and benefiting from the transferred property.
    And two--the extent to which Defense Logistics Agency, or 
DLA, has taken actions to enhance processes, including internal 
controls, related to the transfers of such property.
    DOD has the authority to transfer excess personal property 
to Federal, State, and local enforcement agencies. DLA 
Disposition Services administers the Law Enforcement Support 
Office, or LESO program, for DOD. During calendar years 2013 
through 2015, DOD has reported transferring approximately $1.1 
billion of excess controlled property to law enforcement 
agencies.
    Controlled property typically involves sensitive equipment 
and items that cannot be released to the public, such as 
detonation robots, small arms, and Mine-Resistant Ambush 
Protected vehicles, or MRAPs. Law enforcement officials that we 
surveyed and interviewed cited a number of ways in which they 
had benefited from the program, with several reporting that the 
transfers of controlled property allowed them to save money. 
The reported uses included enhancing counterdrug and 
counterterrorism activities, search and rescue, natural 
disaster response, and police training.
    DLA has taken actions to enhance processes for the program 
in response to past recommendations made by GAO, as well as DOD 
and DLA offices of Inspector General. DLA has taken some steps 
to address previously identified weaknesses and its processes 
and procedures mostly at the State and local levels. In our 
July report, we noted weaknesses at the Federal participant 
level in three areas: one, verifying and approving 
applications; two, transferring property; and three, the 
assessment of risk.
    Through creating a fictitious Federal agency, we gained 
access to the program and obtained over 100 controlled items 
with an estimated value of $1.2 million, including night vision 
goggles, simulated rifles and simulated pipe bombs, which could 
be potentially lethal if modified with commercially available 
items. Images of these items are pictured on the graphic boards 
here in the hearing room today.
    Specific weaknesses highlighted in our report include DLA's 
internal controls for verifying and approving Federal agency 
applications and enrollment in the program were not adequate; 
specifically, LESO's reliance on electronic communications 
without verification does not allow it to properly vet 
applicants.
    Second, our testing identified deficiencies in the transfer 
of controlled property, such as DLA personnel not routinely 
requesting and verifying identification of individuals picking 
up property.
    Third, while DLA has taken some steps to address identified 
deficiencies in the program, DLA lacks a comprehensive 
framework for instituting fraud prevention and mitigation 
measures at all stages of the process. DLA officials 
acknowledge that they have not conducted a fraud risk 
assessment.
    Overall, we concluded in our report that DLA's internal 
controls did not provide reasonable assurance in preventing 
fraud. Therefore, we made four recommendations to DLA.
    One, review and revise policy or procedures for verifying 
and approving applicants.
    Two, ensure Disposition Services officials verify that 
persons picking up items have valid credentials.
    Three, issue guidance that requires Disposition Services 
officials to verify the quantities and types of items being 
picked up beforehand.
    And, lastly, conduct a fraud risk assessment to design and 
implement a strategy with specific internal control activities 
to mitigate assessed fraud.
    DOD concurred with all of our recommendations and 
highlighted actions to address each one. Chairman Wilson, 
Ranking Member Bordallo, and members of the subcommittee, that 
concludes my prepared statement.
    My colleague and I would be happy and pleased to respond to 
any questions that you may have.
    [The joint prepared statement of Ms. Merritt and Mr. 
McElrath can be found in the Appendix on page 25.]
    Mr. Wilson. Thank you very much, Ms. Merritt, and indeed, 
your professionalism is very, very impressive.
    Mr. McElrath, would you like to make a presentation?
    Mr. McElrath. Sir, I have provided a combined statement.
    Mr. Wilson. Thank you very much, and we now proceed to the 
Defense Logistics Agency, Mr. Scott.

     STATEMENT OF MIKE SCOTT, DEPUTY DIRECTOR OF LOGISTICS 
  OPERATIONS, DEFENSE LOGISTICS AGENCY; AND MIKE CANNON, DLA 
         DISPOSITION SERVICES, DEFENSE LOGISTICS AGENCY

    Mr. Scott. Chairman Wilson, Ranking Member Bordallo, 
distinguished committee members, thank you for the opportunity 
to be here today to discuss the Defense Logistics Agency's 
administration and execution of the 1033 Program, also known as 
the Law Enforcement Support Office program, or LESO program.
    I am Mike Scott, Deputy Director, DLA Logistics Operations. 
With me today is Mr. Mike Cannon, the Director of DLA 
Disposition Services. We appreciate the opportunity to discuss 
the July 2017 GAO report on Department of Defense excess 
property and to advise you of the actions we have taken to 
further strengthen our processes.
    DLA Disposition Services, a field activity of DLA, is 
responsible for the final disposition of excess property 
received from the military services. DLA Disposition Services 
also administers and executes the 1033 Program through their 
LESO. About 7,500 Federal and State law enforcement agencies 
across 50 States and U.S. territories actively participate in 
the program.
    Thirty Federal agency headquarters are currently enrolled. 
These are the higher headquarters to the 345 Federal law 
enforcement activities participating in the program. DLA has 
worked extensively over the last several years to improve the 
State and local side of the program, which is 96 percent of 
total participation.
    While the GAO's recent review did validate enhancements 
made in the State and local program, it also highlighted 
vulnerabilities in the Federal program. DLA takes the findings 
very seriously, and is actively addressing and correcting the 
deficiencies.
    In September 2015, DLA began a focused improvement effort 
to strengthen our Federal program. We have implemented robust 
controls in our Federal program, which already exist in our 
State program. Specifically, we have addressed our--revised our 
procedures for verifying and approving Federal agency 
applications for enrollment.
    First, DLA now requires an executive level representative 
in the Federal agency designate a point of contact in writing. 
This POC will serve as the agency's Federal coordinator, who 
will validate and endorse all enrollment applications and all 
equipment requests for their field activities.
    Second, DLA now requires the POC to sign a memorandum of 
understanding, outlining and accepting their responsibilities 
for management of their program. We have sent all 30 current 
Federal agency headquarters this MOU and 12 agencies have 
already signed and returned the MOU.
    Third, DLA will visit each Federal agency headquarters and 
meet with their POC to confirm eligibility. As of today, DLA 
has visited 22 Federal agency headquarters.
    Additionally, DLA has strengthened the internal approval 
process for enrolling Federal agencies.
    First, we have designated a Federal LEA [law enforcement 
agency] liaison to manage the application process. Second, DLA 
will utilize the FBI's [Federal Bureau of Investigation's] 
National Crime Information Center, or NCIC, database to verify 
the legitimacy of all organizations. Finally, the LESO program 
manager is now required to approve all Federal applications as 
a second-level internal review.
    With regard to the GAO findings on process weakness for 
verification of customer identity and the type and quantity of 
property issued, we have taken the following actions.
    First, we immediately conducted remedial training at the 
sites GAO visited. Second, we mandated reinforcement training 
at all 103 of our disposition sites. We are 50 percent complete 
on this aggressive effort, and are on track to finish 2 months 
ahead of schedule. Third, we added this topic as an emphasis 
item to our existing compliance program, which includes, among 
other things, no-notice spot inspections, and a DLA 
headquarters management review.
    In response to the GAO recommendation to conduct a fraud 
risk assessment as outlined in GAO's fraud risk framework, DLA 
headquarters, specifically, our DLA Inspector General Office 
and my Logistics Operations directorate, will lead this effort 
with participation by DLA Disposition Services.
    DLA has made significant enhancements to improve its 
policies, procedures, and internal controls in the 1033 
Program. We remain committed to continuous process improvement 
to ensure we provide the best possible support to law 
enforcement agencies and their critical mission.
    Chairman Wilson, Ranking Member Bordallo, and members of 
the committee, we thank you for the opportunity to discuss this 
important issue here today, and are prepared to answer any 
questions you have.
    [The joint prepared statement of Mr. Scott and Mr. Cannon 
can be found in the Appendix on page 40.]
    Mr. Wilson. And, Mr. Cannon.
    Mr. Cannon. Sir, Mr. Scott spoke on behalf of the agency.
    Mr. Wilson. Thank you, and I want to--it really is 
remarkable that an agency acknowledges that an error occurred 
and has taken a positive response, so we appreciate your 
service.
    I am really grateful, today we have really talented members 
of the subcommittee here, people who are really dedicated to 
the American people and so many are here that we are going to, 
very strictly, follow the 5-minute rule. And we have somebody 
very talented, Drew Warren, who is going to keep the 5-minute 
rule beginning with me. And so we will proceed right away.
    Ms. Merritt or Mr. McElrath, could you--how did you 
determine the specific vulnerabilities you assessed that led to 
the decision that the LESO control measures by using a 
fictitious agency? How did you determine that? Again, we 
appreciate you being proactive.
    Ms. Merritt. I will start the response.
    While we were actually conducting some of our fieldwork in 
some of the States, we were reviewing the names of the 
applicants. And, as we were reviewing the names of those 
particular applicants, we noticed one applicant that had a 
title that did not seem to be a legitimate agency.
    While doing that, we questioned DLA, and they acknowledged 
that that was an entity in which they had been investigating--
and continues to investigate. So, that was one of the key 
triggers for this, as well as, we had made a number of 
recommendations over the years to tighten controls. And so we 
wanted to ensure that some of these recommendations were 
properly implemented.
    My colleague probably will have a little bit to add to that 
response.
    Mr. McElrath. Based on the information that we received 
from our defense capabilities team, we actually formulated a 
plan to develop a false or fictitious law enforcement entity 
and created an online presence.
    After that, we submitted an application to DLA for 
approval. We went through their online enrollment process and 
then actually went on their online ordering system to actually 
acquire goods.
    Mr. Wilson. And that is amazing, but I appreciate again, 
your being--we all appreciate you being proactive. 
Additionally, how do you assess the Defense Logistic Agency's 
current administration of the 1033 Program, and how does this 
compare to what you initially found during the beginning of 
your investigation last year in 2016?
    Ms. Merritt. As noted, we briefed DLA continuously on the 
progress of our work, including their Inspector General's 
Office. In May, we had a formal meeting with them where we 
fully disclosed our findings to them. At that point in time, 
they told us about some respective actions that they had 
started relating to the application.
    For example, they had modified their application. As the 
review continued, they also had begun developing the 
memorandums of understanding at that time. So, in short, a 
number of actions were already commencing as we continued and 
got closer to the end, and they realized that we had, in fact, 
posed as a fictitious organization and obtained items.
    Then, they also noted that there were additional actions 
that they were going to take in order to close those particular 
gaps in their processes.
    Mr. Wilson. Thank you.
    And for Mr. Scott, your service for security of the 
American families is very important with the 1033 Program. What 
is the process for a law enforcement agency to obtain 
controlled items? What additional steps in the authorization 
process for obtaining the items has been considered in light of 
the Government Accountability's Office investigation?
    Mr. Scott. So, Chairman, as the GAO said, our process 
previous to finding out what they were able to accomplish 
required that Mr. Cannon's organization work directly with the 
Federal law agencies. There was an application that had to be 
filed; they had to provide statutes of authority; special 
agents, senior agents in charge had to sign those applications 
to be able to get into the program.
    But as you have heard that our controls were not adequate. 
We recognize that. We had started our efforts to improve the 
Federal program prior to the GAO starting their effort. And, I 
will say, immediately, I think the first meetings we had with 
them were in March of 2017, when we learned of what they were 
able to do in their investigation, by April 3rd we had 
implemented those additional things that you have heard about.
    And those include now that we get an executive level 
sponsorship from the Federal agency. We have a POC identified 
going forward. We visit those organizations to validate. We are 
now going to use the FBI database to ensure that their 
organization is correctly loaded there and they are legitimate. 
Those are all things we have added, and we believe those 
processes will prevent this from happening in the future, 
Chairman.
    Mr. Wilson. And they are very responsible safeguards. I 
believe there were three recommendations; there is still one 
pending, is that being acted upon?
    Mr. McElrath. Yes, it is. As Mr. Scott mentioned, they are 
scheduling with the OIG [Office of Inspector General) and my 
headquarters to do the fraud risk assessment.
    Mr. Wilson. Thank you very much.
    Congresswoman Bordallo.
    Ms. Bordallo. Thank you, Mr. Chairman.
    Mr. Cannon and Mr. Scott, the GAO recommendations included 
strengthening internal controls and reviewing identification 
authorization protocols. Now, given what we know now, what is 
your level of confidence that such a violation will not happen 
again?
    And, secondly, recognizing that only 4 to 7 percent of 
transfers are controlled, should DLA temporarily suspend the 
transfer program for controlled items until the problems are 
fixed? You state that changes have already been made, but then 
we wouldn't be here if there wasn't still a problem. So, will 
it happen again, or should we suspend the program until changes 
have been made?
    Mr. Cannon. Ma'am, I will take that.
    First of all, the control measures that we have in place I 
am confident will preclude this from happening again. As Mr. 
Scott alluded to or mentioned, we now require a very similar to 
the tight controls we had implemented in the State and local 
procedures, a Federal executive appointment of their POC, a 
face-to-face visit to ensure that they are compliant, and then, 
as a backup, a national--the NCIC database check to verify they 
are a valid agency.
    With those controls in place, I am confident that this 
won't happen again.
    Ms. Bordallo. All right, second part of my question?
    Mr. Cannon. Yes, ma'am.
    In March, when we got an out-brief and discussed this with 
the GAO, I immediately suspended release of all property to 
Federal agencies until we could put these controls in place.
    Those controls included a memorandum of understanding which 
we had began developing over a year ago. That memorandum of 
understanding was finalized in DLA in December of 2016. And 
until the agencies complete the new requirements, I do not 
release any additional property.
    Ms. Bordallo. So, you don't think you--the program should 
be suspended? Is that what, in essence, what you are saying?
    All right, Mr. Cannon, DOD responded to GAO recommendations 
number two by stating that, and I quote, ``DLA currently has 
policy requiring on-site officials to request and verify 
identification from all customers.''
    What, if any, disciplinary actions have been taken against 
the individuals and the supervisors responsible for oversight 
and training who approved the fictitious application for 
enrollment in the Law Enforcement Support Office program, 
approved the request to property, or conducted the transfer of 
the property, without following proper procedures? How is DLA 
determining who is responsible?
    Mr. Cannon. Ma'am, we are looking at our records to 
determine the type--the property that was released and where it 
was released, so we can determine, as best we can, the 
individual or individuals responsible.
    Prior to that, as soon as we identified the locations that 
the property came from, we immediately conducted remedial 
training for every person at that site for the control measures 
we already had in place that were not followed.
    Since then, we have also added additional emphasis on our 
controls when we do our semiannual self inspection, when we do 
our biannual compliance reviews, when I do my no-notice site 
visits, and when the headquarters comes down to do their 
visits, as well.
    Any time an individual is found who is, either behavior or 
performance, is not up to standards, we take appropriate 
corrective actions, depending on the circumstances.
    Ms. Bordallo. What kind of disciplinary action would you 
take? Are you releasing the people? Changing their positions, 
or what?
    Mr. Cannon. I have a range of actions I could take, 
depending on the circumstances and the situation, and I have 
taken actions for infractions everywhere from a letter of 
counseling, to dismissal. So the range is open, depending on 
the situation, ma'am.
    Ms. Bordallo. Okay, I have one quick question.
    Ms. Merritt, while the majority of your report focused on 
the application approval and transfer of excess property, can 
you provide insight into what you observed with respect to 
accountability and tracking of controlled property, both at the 
disposition sites, as well as once transferred to a Federal, 
State, or local law enforcement agency? And I don't have much 
time left.
    Ms. Merritt. Sure. At the Federal level, we did observe one 
case in which one Federal organization, in DC, was not aware of 
how much property had been transferred to that agency or to its 
respective activities in the field. That was quickly remedied 
when they contacted LESO, they were able to obtain a list, and 
they temporarily halted any approvals at that time.
    At the local and State sites themselves, that actually went 
pretty well because they had a State coordinator. A lot of the 
processes were being double-checked. And so, unlike the Federal 
level, there were more checks and balances at the State and 
local level.
    Ms. Bordallo. Thank you. Thank you very much, and I yield 
back.
    Mr. Wilson. Thank you, Congresswoman Bordallo.
    We now proceed to Congressman Austin Scott, of Georgia.
    Mr. Scott of Georgia. Thank you, Mr. Chairman. My questions 
are predominately for the DLA. You said that you recognized the 
problem prior to the GAO examinations, is that correct?
    Mr. Scott. That is correct.
    Mr. Scott of Georgia. When did you first recognize the 
problem?
    Mr. Scott. We first started our efforts to improve the 
Federal program in September of 2015. We began by bringing in 
Federal agencies for more training to ensure they knew how to 
properly work with the program, and that quickly led to the 
beginning of the development of the memorandum of 
understanding.
    And, at the point when we heard in March of 2017 the 
investigative--what had happened, as you heard, we quickly 
moved to implement additional procedures.
    Mr. Scott of Georgia. But you said your efforts began in 
2015. When did you first recognize that you had a problem?
    Mr. Cannon. Sir, we recognized that the control measures in 
place for the Federal agencies were not as robust as those for 
the State and local agencies in late 2015. As we discussed 
the----
    Mr. Scott of Georgia. Okay so it was----
    Mr. Cannon [continuing]. The program with the Federal 
agency participants.
    Mr. Scott of Georgia. Okay, so you first recognized the 
problem in 2015?
    Mr. Cannon. Late 2015.
    Mr. Scott of Georgia. You were taking corrective actions, 
but you did not expedite those actions until the GAO report?
    Mr. Cannon. Correct.
    Mr. Scott of Georgia. So, most of the items that are on 
these boards are not lethal items. Would the controls have been 
different if they had been firearms or a lethal item?
    Mr. Cannon. We have additional application process in place 
for items such as weapons, and for armored vehicles and 
aircraft, so there is a more thorough application process that 
they would have had to gone through for those items.
    Mr. Scott of Georgia. So the difference in the threshold, 
is it based on the lethality or the cost of the item? What 
leads to the additional measures?
    Mr. Cannon. When we did our risk analysis, internally, we 
determined, in conjunction with guidance from the White House 
Committee and the White House Review Permanent Working Group, 
that extra controls were in place. We have always had extra 
controls in place for weapons and armored vehicles and 
aircraft. So, it is based on the type of equipment and the 
potential use of that equipment.
    Mr. Scott of Georgia. Okay, and so it would be--potentially 
somebody used something fake to obtain something from the 
government and then turn around and sell it on eBay or at a 
pawn shop or something along those lines? Do we have any idea 
what happened to the items or the value of the items?
    Mr. Cannon. The items from the GAO report, sir?
    Mr. Scott of Georgia. No, the ones that occurred prior to 
you recognizing that--something happened for you to recognize 
that you had a problem. Did items go to--was there a 
misrepresentation, was there a theft of items----
    Mr. Cannon. No, sir.
    Mr. Scott of Georgia [continuing]. Effectively, through 
misrepresentation?
    Mr. Cannon. As we looked at our control measures in place 
for the Federal program, we noticed they were not as stringent 
as the control measures we had in place for the State and local 
program. So our efforts were to make the programs more similar 
in the levels of control, not that anything had gone out, but 
to prevent things from going out, sir.
    Mr. Scott of Georgia. But you do not believe that anybody 
misrepresented something to obtain something for free, or at a 
discount, from the Federal Government and then turn around and 
sell it for profit?
    Mr. Cannon. I have no knowledge of that happening.
    Mr. Scott of Georgia. Do we know where the items are?
    Mr. Cannon. We know where all the items from the GAO report 
are, yes, sir.
    Mr. Scott of Georgia Okay. With that said, Mr. Chairman, 
that pretty much answers the questions that I had. I am happy 
that we know where all of the items are, and certainly 
appreciate the additional measures that are being put in place; 
it is an important program.
    I will tell you, I know a lot of the discussions around the 
program revolve around some of the larger equipment. I happen 
to know a sheriff's deputy, fairly well, that stepped out of a 
BearCat, and as he stepped out of it buckshot hit the window, 
and had it not--had he been in a normal squad car, he wouldn't 
be with us today, so I hope that we will continue this program, 
and making sure that we get our law enforcement officers the 
equipment they need to do their job.
    Mr. Wilson. Thank you very much, Congressman Scott, for 
your insight and your personal view, too, which I agree with. 
Thank you.
    And we are grateful now to proceed to Congressman Anthony 
Brown, of Maryland.
    Mr. Brown. Thank you, Mr. Chairman, and I appreciate that 
you and the ranking member have convened this hearing and to 
look into this very important issue.
    My question really goes to a little bit of a broader look 
at the 1033 Program. In response to protests in Ferguson, 
following the killing of Michael Brown, President Obama issued 
an executive order that included the creation of a DOD and 
Justice Department working group to ensure oversight of this 
program.
    According to the Constitution Project, that group is not 
meant--has not met since January of this year with the new--or 
under the new administration. In fact, President Trump has 
indicated that he intends to rescind the previous 
administration's executive order that ensured vital training 
for equipment acquisition, and that is of concern to me.
    I am also concerned that the transfer of armored vehicles 
and high-powered firearms, as well as many other controlled 
items, makes our police stations look more like forward 
operating bases. It would unsettle me to see Mine-Resistant 
Ambush Protected armored vehicles patrolling the streets of 
Prince George's and Anne Arundel County.
    I do get the importance of the program; it is all about 
proportionality. So my question is, does the agency take into 
account the actual or potential threat that a community faces 
prior to delivering these military style equipment?
    Mr. Scott. So, Congressman, we actively support that 
permanent working group for DLA; our vice director of the 
agency is our lead on that group. As you may know, that group 
looked very closely at the categorization of items: which 
things would be prohibited, which things should be controlled.
    They completed another look at that in September of 2016, 
going into this fiscal year, and we take that very seriously. 
When we get the applications, we apply the decisions that were 
made from that permanent working group on what is allowed for 
us to execute, we execute the program.
    But that group, when they made those determinations in 
those categories, they brought in a number of different folks 
to have those discussions that included experts on the use of 
those type of weapons.
    It included civil liberties leaders, it included law 
enforcement leaders, folks from all----
    Mr. Brown. If I can just jump in because I don't have too 
much time. Can the small city of Seat Pleasant in Prince 
George's County with, I don't know, 12,000 residents, acquire 
the same type equipment that the city of Baltimore can obtain?
    Or do you do some sort of--again, risk assessment, 
potential threat, training, capabilities of the local 
enforcement agency?
    Mr. Scott. So all requirements have to first pass through a 
State coordinator, then Mr. Cannon's group also reviews that. 
They review it also against the size of that force and the 
number of items that they are allowed to have.
    The training for the items is--that goes back on the law 
enforcement community, DOD does not provide the, kind of, use 
of training for what is issued.
    Mr. Brown. Do you require the training though?
    Mr. Scott. We require that they show and state that they 
have done that training. Yes, sir.
    Mr. Brown. Thank you. A follow-up, I just have a little bit 
of time left. What efforts, if any, I think you may have 
touched on this, is the DLA taking to work not only with local 
law enforcement, but also alongside community members, I heard 
you mention community members in your response, through the 
1033 transfer process.
    Mr. Cannon. Sir, one of the requirements that we have 
levied on the program for the State and local agencies is that, 
before they receive property from us, before they enroll in the 
program, they must be approved by their governing body.
    So, whether that is the State or county, but whoever 
oversees that body, must approve not only their participation 
in the program, but their withdraw of property.
    Mr. Brown. So, like the Seat Pleasant city council?
    Mr. Cannon. Correct.
    Mr. Brown. Okay.
    Mr. Cannon. If Seat Pleasant is in the program.
    Mr. Brown. Right.
    Mr. Cannon. They would have----
    Mr. Brown. One final follow-up. Are there any restrictions 
on transferring equipment, under the 1033 Program, when the 
local enforcement agency is under investigation by the DOJ 
[Department of Justice] for any violation of civil rights? And 
is that addressed in consent orders--that the handful that are 
currently in place?
    Mr. Cannon. We coordinate with the Department of Justice, 
and anytime they have concerns with the department, we restrict 
the transfer of property to that department until they tell us 
otherwise.
    Mr. Brown. So, it is not a--you evaluate whether it ought 
to be restricted or if there is a violation, you restrict?
    Mr. Cannon. DOJ evaluates and then advises us to restrict.
    Mr. Brown. Thank you, Mr. Chairman. I yield back.
    Mr. Wilson. And thank you, Congressman Brown.
    And we now proceed to Congresswoman Vicky Hartzler, of 
Missouri.
    Mrs. Hartzler. Hi. I appreciate both--the good work from 
the GAO as well as the DLA in addressing this real issue here. 
So, please discuss the process for a law enforcement agency to 
obtain controlled items.
    What other steps, in the authorization process for 
obtaining these items, are being considered in light of the 
GAO's investigation?
    Mr. Cannon. The process that we have in place for our 
States and locals is a similar process we have already 
implemented for the Federal Government. But anytime somebody 
wants to withdraw a piece of controlled property, first that 
has to go through their State or Federal coordinator to approve 
that they need it.
    We also have some apportionment rules. We do give 
preference to counterdrug, counterterrorism, and border patrol 
responsibilities, but for things like MRAPs, we also look at a 
local ability for law enforcement agencies that provide mutual 
support. And if there is mutual support available from another 
close-by law enforcement agency, we won't apportion them, for 
example, an MRAP.
    So we won't give the county and the city both an MRAP if 
they are in the same location. For weapons, we authorize one 
per paid officer, and for vehicles, it is typically one vehicle 
unarmored, or like a Humvee, for every three officers.
    Mrs. Hartzler. Okay. That is very good. Given the GAO 
created a fictitious law enforcement agency that was approved 
for the program, how does DLA plan to review and revalidate the 
law enforcement agencies that are currently enrolled in the 
program to ensure each enrollment is verified as being 
legitimate and an eligible law enforcement agency, and how long 
will this process take? And what impact will it have on 
approving new applications?
    Mr. Scott. So, for the Federal side of the program as we 
discussed earlier, all of those are suspended until they come 
forward and comply with our new procedures with the MOU, the 
POC, our visit to see them, and our confirming their identities 
in the FBI database.
    We think those requirements are both sound, to ensure 
integrity to the program, and they are also reasonable for a 
Federal agency to comply with.
    On the State side of the program, we also intend to be 
proactive and go back and retroactively look at every single 
one of those organizations against that FBI database, as well, 
just to ensure that we don't have anything else there.
    Mrs. Hartzler. Great. And the GAO report mentions an annual 
training conference for State coordinators, and Representative 
Brown talked about the training and that the State coordinator 
take this training within the State.
    If this training is provided, why are law enforcement 
agencies reporting the need for more training on LESO program 
policies, and why did you feel the need to develop an online 
training tool? Why does this training vary within the States?
    Mr. Cannon. So, we do an annual conference, it is actually 
next month in Norfolk, Virginia, where we train and advise the 
State coordinators on the policy, and then the State 
coordinators are responsible to train the trainer--to train 
their LEAs.
    Some States do that better than others. To augment that, we 
have developed some online training to assist the LEAs. We 
offer over-the-phone or Skype-based training if an LEA needs 
training on how to--how to get into the program, how to work 
the program, how to account for property. We also have what we 
call job aids, which are basically checklists to help them do 
the step-by-step procedures.
    As we do our program compliance review, we go to--every 
other year to every State to review their program, and to 
inventory a large number of their property. We provide training 
as required, as requested, while we happen to be there visiting 
that LEA.
    Mrs. Hartzler. Will the online training qualify to replace 
the additional--the training that the State may have? Is it 
either/or, or is it just supplement?
    Mr. Cannon. It is to supplement, ma'am.
    Mrs. Hartzler. Okay.
    Mr. Scott. I think, Congresswoman, we are also going to 
take when we conduct the fraud risk assessment, this is--we 
noted the number of LEAs that asked for more training. We are 
going to make that part of what we look at, under that review, 
as well, and go to the furthest extent of DOD's capability to 
provide additional training.
    Mrs. Hartzler. Very good. Thank you very much, sounds like 
you are taking very proactive steps, and we appreciate you 
doing that. I yield back.
    Mr. Wilson. Thank you very much, Congresswoman Hartzler.
    We now proceed to Congresswoman Carol Shea-Porter, of New 
Hampshire.
    Ms. Shea-Porter. Thank you very much.
    I am deeply concerned, like everybody is here, about this, 
but I am also very puzzled, because it seems to me--excuse me--
there is more red tape to open up a donut shop than there is to 
get this equipment or that there was.
    And I am puzzled as to how the rules and regulations could 
have been so loose that they were able to create this 
fictitious agency to receive this material. So, can you please 
walk me back to the beginning? Who drafted these regulations 
that allowed?
    Because as I listen to you now and you say and I am--you 
know, I am glad that you are doing that, that now you have 
identified a point of contact and you have all these steps 
there. But common sense says they should have been there at the 
beginning.
    And so, I would like you to walk me back to the very 
beginning. Who drafted this? Obviously, with so many holes in 
it, that it was possible for the GAO to do this and who knows 
who else. And I also would like to see that the people who 
drafted this clearly are not competent enough to handle this 
work.
    And so, I am not comfortable with the answer of, well, you 
know, we are going to go back and we have several 
possibilities. This is a question of competence; this was a 
serious job, and they failed the people of this country. And 
so, I would appreciate your comments on that.
    Mr. Cannon. The 1033 Program management was transferred to 
Defense Logistics Agency's Disposition Services in very late 
2008, through--and we completed the transfer in 2009. And we 
are following procedures from there, I--the procedures that we 
had in place requiring the LEAs to complete a thorough 
application, to have a regional special agent in charge 
required to sign the application, and have the statute of 
authority, was identified as being insufficient by the GAO, and 
we have since made improvements.
    As a note, the application wasn't immediately approved; 
there was some back and forth between GAO and my staff, and it 
took several months before the application was approved, but it 
was, in fact, approved, and should not have been. We have 
tightened up those procedures since then.
    Mr. Scott. And I will add, Congresswoman, again, we view it 
just as seriously. The other things that have been reviewed 
here, and again, our view of those controls was that, with Mr. 
Cannon's group working directly with those Federal 
organizations and the things he went through, that we did have 
the controls in place.
    That clearly is not the case. But the program has also been 
reviewed by other external folks, as well. There have been 
previous GAO reports. We have had an independent review of the 
program by the RAND Corporation.
    It doesn't make it any better, but the external reviews 
also did not identify these deficiencies. Now that we know 
them, we are all over it to make sure it never happens again.
    Ms. Shea-Porter. I appreciate your honesty in your comment, 
but it still doesn't cover the basic problem here. Now, I read 
something about now they are going to have to show an ID. So 
can you tell me what was meant by that, that they didn't have 
to show an ID?
    Mr. Cannon. Ma'am, when someone comes to a Disposition 
Services site to pick up property, to--they are not an employee 
of Disposition Services, everyone is required to present an ID 
and follow proper sign-in procedures.
    We have always had those measures in place. In this case, 
those measures were not adequately followed. So, what I have 
done since then, is I immediately, at the three locations 
because I don't know the specifics because the GAO report 
didn't identify them, but we were able to figure out the 
locations they went to.
    We immediately conducted remedial training on everybody 
there to ensure they were following the protocols that are 
already in place. And then since--and then we started, I 
actually brought my six field leaders to Battle Creek, 
Michigan, to my headquarters, to talk to them about this face-
to-face in the first--second week of July and gave them 30 days 
to train every single individual, every single employee in 
Disposition Services, on following the proper procedures for 
identification of personnel and kind count and condition of 
property.
    We have about 50 percent of our sites complete, and we will 
be complete next month, retraining everybody and emphasizing 
the need to follow the established procedures.
    Ms. Shea-Porter. And I appreciate that, but again these are 
not toys, and these were rules and regulations that were 
violated and could have wound up in a very serious outcome 
here. And so, I think just speaking to them is not enough; they 
had a responsibility to follow this protocol which was weak 
enough as it was.
    And so, I still want to know what happens besides you guys 
shouldn't have done that?
    Mr. Scott. So the moment Mr. Cannon is able to identify who 
those individuals are, our agency and his organization have a 
precedent and are prepared to take the appropriate 
administrative disciplinary action. And that can be anything 
from suspensions without pay to removal from the position.
    Ms. Shea-Porter. Okay, thank you. And I yield back.
    Mr. Wilson. Thank you, Congresswoman Shea-Porter, we 
appreciate your service.
    And we now proceed to Congressman Don McEachin, of 
Richmond.
    Mr. McEachin. Thank you, Mr. Chairman.
    Many of my questions have been touched on so I am going to 
ask one that might be a little bit more nuanced. And that is 
this, when you-all dispose of controlled property, such as the 
ones--such as the items that we have been talking about, do 
you--and let's assume that you are going to--local law 
enforcements requested it.
    Do you take into consideration what is going on in that 
area at the time? For instance, if there are tensions between 
the local citizens and the police department, or anything like 
that, or do you just, sort of, dispose of the property in 
accordance with whatever guidelines you have in place?
    Mr. Cannon. If we have a request from a law enforcement 
agency, that request for property has to be first approved by 
their local governing body--so the State, city council--then 
that has to go to a State coordinator who has to approve the 
request.
    And then when that request comes to us, we will issue 
property, if the property is available. If property is not 
issued to the Department of Defense, who has first priority, 
and to our special programs who have second priority, and it is 
controlled property, then that equipment is demilitarized and 
destroyed.
    Mr. McEachin. Let me follow up on that and ask the question 
maybe a slightly different way. Assuming that it has been 
approved by the governing body then submitted to you by the 
State liaison, are there any circumstances in which you say 
nope, you know, City of Richmond you are just not going to get 
this property for whatever reasons?
    Mr. Cannon. We give priority of property to counterdrug, 
border protection, and counterterrorism. So, if there are 
multiple requests, that will determine which LEA gets it; but 
we also, if the FBI tells us that they have concerns with an 
LEA, and advises us, then we do not issue to that LEA.
    Mr. Scott. The other thing, Congressman, is we also have 
allocation limits, too, so that in terms of the quantity of 
those types of items that they can have that we look at the 
size of that organization. That is another thing that can limit 
how much of these controlled items a unit can get.
    Mr. McEachin. Right, thank you.
    And Mr. Chairman, I yield back.
    Mr. Wilson. Thank you very much, Congressman McEachin.
    We now have a final question from Congresswoman Bordallo.
    Ms. Bordallo. Thank you very much, Mr. Chairman.
    Ms. Merritt, we have heard the DLA describe the actions 
that they have taken, and that they believe they have taken 
appropriate actions to fix the problem.
    Now, my question to you is, how would you assess DLA's 
actions, both in response to your recommendations and other 
steps that they have taken?
    Ms. Merritt. We have assessed those actions as positive 
steps in the right direction. However, we can't emphasize 
enough that we believe that top leadership and senior level 
leadership at DLA is imperative in order for those 
recommendations to be implemented.
    At GAO, we continuously follow up on the implementation of 
those recommendations, and we will do so, at this point in 
time, and oftentime, in our reporting on programs we do include 
those status reports. Those statuses is also published on our 
public website, as well, so you, as well as the public at 
large, have the opportunity to look at the progress that is 
being made by DLA on those recommendations.
    Ms. Bordallo. So I take it that you are satisfied with what 
they are doing now, but you are going to be closely monitoring 
it in the future, is that correct?
    Ms. Merritt. Yes, the steps that we have asked them, as it 
relates to the four recommendations that we have, are all steps 
that we have proposed and they agreed to. They also established 
timelines in their comments to us on the report, so that is 
also very important as to whether or not they meet those 
milestones, and hopefully those will be immediate milestones.
    And so, with respect there, we do continue to follow, as I 
said, and if there are problems, we duly note that.
    Ms. Bordallo. Good. Thank you, Ms. Merritt.
    And I yield back. Thank you.
    Mr. Wilson. Thank you very much, Congressman Bordallo, and 
as we conclude, the 1033 Program is so important to help 
provide security for American families.
    Mr. Scott, could you tell the American people, that is--how 
many State, local, Federal agencies that you work with, what is 
the value of the surplus equipment that you provide?
    Mr. Scott. So again, we have 8,621 agencies in the program. 
We have the property, on the books of those folks through the 
program, is over 1.5 million pieces of equipment valued over 
$2.4 billion in original acquisition value. That is the--the 
good that we are providing to those law enforcement agencies.
    Mr. Wilson. Well again, thank you for restating that. It is 
so important that the American people know this, and again, the 
GAO, we appreciate the Government Accountability Office, your 
success in working with the DLA.
    We are at this time, we shall adjourn, and we thank all of 
you for being here today.
    [Whereupon, at 11:31 a.m., the subcommittee was adjourned.]

     
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