[Senate Hearing 115-202]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 115-202
 
  PRUDENT PLANNING OR WASTEFUL BINGE? ANOTHER LOOK AT END OF THE YEAR 
                                SPENDING

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON FEDERAL SPENDING
                   OVERSIGHT AND EMERGENCY MANAGEMENT

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 20, 2017

                               __________

                   Available via http://www.fdsys.gov

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs
                        
                        
                        
                        
                        
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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona                 CLAIRE McCASKILL, Missouri
ROB PORTMAN, Ohio                    THOMAS R. CARPER, Delaware
RAND PAUL, Kentucky                  JON TESTER, Montana
JAMES LANKFORD, Oklahoma             HEIDI HEITKAMP, North Dakota
MICHAEL B. ENZI, Wyoming             GARY C. PETERS, Michigan
JOHN HOEVEN, North Dakota            MAGGIE HASSAN, New Hampshire
STEVE DAINES, Montana                KAMALA D. HARRIS, California

                  Christopher R. Hixon, Staff Director
               Margaret E. Daum, Minority Staff Director
                     Laura W. Kilbride, Chief Clerk
                    Bonni Dinerstein, Hearing Clerk


  SUBCOMMITTEE ON FEDERAL SPENDING OVERSIGHT AND EMERGENCY MANAGEMENT

                     RAND PAUL, Kentucky, Chairman
JAMES LANKFORD, Oklahoma             GARY C. PETERS, Michigan
MICHAEL B. ENZI, Wyoming             MAGGIE HASSAN, New Hampshire
JOHN HOEVEN, Montana                 KAMALA D. HARRIS, California
                      Greg McNeill, Staff Director
                Zachary Schram, Minority Staff Director
                      Kate Kielceski, Chief Clerk
                      
                            C O N T E N T S

                                 ------                                
Opening statement:
                                                                   Page
    Senator Paul.................................................     1
    Senator Peters...............................................     2
Prepared statement:
    Senator Paul.................................................    21
    Senator Peters...............................................    23

                               WITNESSES
                     Wednesday, September 20, 2017

Jason J. Fichtner, Ph.D., Senior Research Fellow, Mercatus Center 
  at George Mason University.....................................     5
Hon. Allan V. Burman, Ph.D., Commissioner, Section 809 Panel.....     7
Heather Krause, Director, Strategic Issues, U.S. Government 
  Accountability Office..........................................     9

                     Alphabetical List of Witnesses

Burman, Hon. Allan V. Ph.D.:
    Testimony....................................................     7
    Prepared statement...........................................    66
Fichtner, Jason J. Ph.D.:
    Testimony....................................................     5
    Prepared statement with attachment...........................    26
Krause, Heather:
    Testimony....................................................     9
    Prepared statement...........................................    73


                  PRUDENT PLANNING OR WASTEFUL BINGE?



                ANOTHER LOOK AT END-OF-THE-YEAR SPENDING

                              ----------                              


                     WEDNESDAY, SEPTEMBER 20, 2017

                                 U.S. Senate,      
                        Subcommittee on Federal Spending,  
                    Oversight and Emergency Management,    
                    of the Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:30 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Rand Paul, 
Chairman of the Subcommittee, presiding.
    Present: Senators Paul, Peters, and Harris.

              OPENING STATEMENT OF SENATOR PAUL\1\

    Senator Paul. I call this hearing of the Federal Spending 
Oversight Subcommittee to order, exactly at 2:30, not a second 
before or a second after, which is unusual to start on time.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Paul appears in the Appendix 
on page 21.
---------------------------------------------------------------------------
    Today we are looking at a phenomenon known as ``use it or 
lose it'': the practice of going on a spending binge at the end 
of the year before funds expire and go back to the Treasury.
    We had a hearing on this same subject two years ago, and 
what we heard was shocking. Our witness then, Dr. Fichtner, who 
is back to testify today, told us that September spending 
nearly doubles as compared to August, which is already higher 
than average.
    Another study showed, on average, spending jumps nearly 500 
percent in the last week of the fiscal year (FY) as compared to 
the preceding 51-week average. Not only that, we have seen data 
indicating that on the last day of the fiscal year, money 
actually moves to the West as the sun sets and they continue to 
spend it as 5 o'clock approaches on the west coast.
    That is the data, but the stories we have heard may be even 
more telling. We have been told of the military hovering 
aircrafts at the end of runways just to burn off fuel and 
soldiers sent to the shooting range sometimes for an entire day 
just to expend ammunition.
    Of course, I cannot forget when we took over this 
Subcommittee we found toner cartridges for an obsolete printer 
stacked to the ceiling of the Subcommittee's office space 
because the Chairman preceding had said, ``We have to expend 
it, we have to spend it, we got this money, we got to get rid 
of it.'' So I am not sure exactly what happened to those 
cartridges, but I know that they were a waste of money.
    There is no question this happens, but some argue it is 
solely caused by continuing resolutions (CR) and that the 
purchases really are not bad, just delayed. I do not like 
continuing resolutions and have never really voted for one, and 
I agree they play a part in the end-of-the-year spending, but 
the data does not support that this is ``good'' spending that 
is just simply delayed to the end of the year.
    Studies have shown that the quality of contracts written at 
the end of the year are of almost five times lower quality than 
those written during the rest of the fiscal year.
    We discovered that while the State Department and the 
United States Agency for International Development (USAID) 
spend roughly 25 percent of their budget in September, more 
than a third of the waste we found in these agencies seemed to 
be found in September. This includes funding for such things as 
Ultimate Frisbee in China, a bird-watching strategy for 
Honduras, and something called ``Skateistan.'' You do not want 
to know what that is, I do not believe. None of these can be 
simply chalked up to delays caused by late appropriations. 
These have been going on decade after decade.
    How do we fix this problem? I think a part of the solution 
could be the Bonuses for Cost-Cutters Act. This is a bill that 
I have put forward that is a bipartisan bill that simply gives 
bonuses to Federal employees that find wasteful spending that 
can be eliminated.
    In the last Congress, this bill passed out of Committee 
with bipartisan support. The House version passed out of the 
Government Oversight Committee on a voice vote.
    It would seem like a simple, noncontroversial bill that 
should sail through Congress and save the taxpayers money.
    Reining in and controlling end-of-the-year spending binges 
should be a bipartisan priority. Hopefully, our hearing today 
will renew interest on both sides of the aisle to address 
accelerated wasteful spending at the end of the fiscal year.
    With that, I would like to recognize Ranking Member Peters 
for his opening statement.

             OPENING STATEMENT OF SENATOR PETERS\1\

    Senator Peters. Well, thank you, Chairman Paul, for 
convening this hearing to examine end-of-year spending and 
explore options for mitigating wasteful spending. Regardless of 
when it occurs, wasteful spending is simply inexcusable, and I 
appreciate the opportunity to gather experts today to search 
for solutions and to do what we can to protect taxpayer 
dollars.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Peters appears in the 
Appendix on page 23.
---------------------------------------------------------------------------
    I would like to also give a sincere thank you to our 
distinguished panel of guests for taking the time to 
participate in this discussion today. The insights from your 
work are helpful in framing our discussion and allowing us to 
focus on some very central issues.
    Among those central issues is the question of what is 
really happening as agencies routinely ramp up their spending 
volume toward the end of each fiscal year. First, what drives 
this behavior? And, second, are there risks involved that make 
this spending particularly vulnerable to waste and abuse?
    Concerning the high volumes of spending on certain 
purchases in August and September, I think we can all relate to 
the phenomenon of rushing to complete a task before an 
impending deadline. As a Senator, I can certainly relate to 
that fact, and oftentimes my schedule, as I know Senator Paul's 
schedule, revolves around the most time-sensitive issues that 
we are facing on any particular given day. And deadlines serve 
a purpose and create a sense of urgency that we sometimes need 
to finish our work, particularly for long-term projects.
    But deadlines are no reason to become sloppy, or worse, 
negligent. If we find that our year-end deadlines are causing 
agencies to make poor spending decisions, then we need to 
diagnose this problem while we are also ensuring that we 
discipline those responsible for making these poor decisions.
    Of course, there are also outside factors that might 
exacerbate the year-end spending surge, like the continuing 
resolutions that Congress keeps settling on or the hiring 
freeze that the current administration implemented this year. 
Budget uncertainty can hamper an agency's ability to 
effectively plan it's purchases.
    We have to keep in mind that many Federal purchases require 
more than a simple wave of a wand to complete. Depending on the 
purchase, agencies must consider the required specs for the 
service or the product, request and evaluate bids from vendors, 
negotiate prices, obtain managerial approval on purchase 
orders, and draft contracts detailing the terms of the 
agreements.
    A lot of work goes into making purchases before a final 
contract is signed, and this series of steps is not merely for 
show. These steps serve as internal controls to mitigate 
opportunities for individuals to act in bad faith.
    It takes time to go through these steps, which are designed 
to ensure that funds are spent appropriately. If agencies get a 
late start in that process because Congress or the White House 
continually meddles with their appropriations, it could lead to 
delays in completing purchases.
    We should do our part in Congress by passing timely budgets 
that limit the uncertainty agencies face in making spending 
decisions.
    But beyond the factors that might be encouraging end-of-
year spending binges, let us focus on the extent to which these 
binges lead to wasteful spending. We know spending levels for 
some purchases increase at the end of the year, but do we know 
why it might lead to increased levels of waste? Why would our 
internal controls fail to prevent wasteful spending as we reach 
the end of the year?
    Do we see evidence that purchasing rules are put aside in 
September? Are contracts ignored? Do oversight activities 
become more lax? The fundamental question becomes: Are existing 
internal controls sufficient to prevent wasteful spending at 
year's end? And if not, where are those failures taking place?
    If it turns out that agencies do not fully adhere to 
purchasing controls at year-end, we have a much larger issue 
than wasteful spending. And I sincerely hope this is not the 
case, but we need to see definitive evidence one way or the 
other.
    But, please, if any of the witnesses have reason to believe 
that internal controls are weaker at year's end than at other 
times of the year, please share your findings with us today. It 
is very important for us to know that. This would be critical 
information during our discussion.
    Dr. Fichtner's study shows that certain types of spending 
generally increase in most agencies in August and September 
every year, but it does not go so far as to say that the higher 
volume of spending taking place results in wasteful spending. 
So let us talk about the distinction there a little bit and 
what we need to focus on today.
    There is a distinction between, A, a bad spending decision 
and, B, a bad spending decision that was brought about 
specifically by rushed year-end spending. This is an important 
distinction because it speaks to the focus of this hearing: 
Does our existing system of expiring appropriations instigate 
wasteful spending decisions?
    This requires more than just identifying a purchase or two 
that we do not like, and I would rather not focus on something 
as benign as the purchase of a little extra printer paper 
before the end of September. We should spend our time on much 
larger issues than that.
    I would rather focus on the kinds of waste that are 
blatant, where the person responsible for the spending knows 
that what they are doing is simply wrong. I am talking about 
reports of agencies intentionally burning through fuel on 
runways for the sole purpose of being able to spend more money 
later. That is clearly waste, and if it actually happens, we 
should go after these perpetrators to the full extent of the 
law.
    The most complicated purchases to debate will be those that 
go through all of the existing approval channels and still are 
thought to be wasteful. In those cases, management approved the 
purchases and hypothetically gave an appropriate amount of 
consideration in approving them. If managers are to blame for 
poor decisions, it could be that the expiring appropriation is 
not so much the issue as it is the judgment of the officials 
approving those purchases.
    But in instances where we believe that the expiring 
appropriation caused wasteful spending, that is where we will 
need to focus on ways to improve the internal controls in place 
for year-end spending decisions. What should we be doing better 
to prevent poor spending decisions? What has been attempted and 
what has proven successful? Do we need to consider options that 
will lessen the sense of urgency created by an end-of-year 
spending deadline?
    While internal controls ideally will stop wasteful spending 
before it happens, we also have to consider our options for 
catching wasteful spending as it occurs. As a member of the 
Senate Whistleblower Protection Caucus, I co-signed letters to 
18 agencies in March this year asking them to remind employees 
that they are protected when they disclose fraudulent, 
wasteful, or abusive practices and to further remind employees 
and managers that whistleblowers may not be retaliated against.
    The easier it becomes for whistleblowers to report the kind 
of wasteful spending we are concerned about here today, the 
more likely we are to root out such spending. Just as we are 
free to question spending decisions in settings like this, 
whistleblowers should be free to ask questions about and report 
potentially wasteful actions in their workplace without fear of 
retaliation.
    And much like we hope and expect for whistleblowers, I hope 
that all of our witnesses feel welcome and comfortable today in 
sharing your insights and experiences as we work together to 
combat this problem. Please use this forum to give us your 
honest assessment. I look forward to your testimony and, again, 
I appreciate you being here today.
    Senator Paul. Thank you, Senator Peters.
    I think as we begin this hearing, to put it into context, 
we are facing this year a $700 billion deficit. If we eliminate 
all of the end-of-the-year spending and fix the problem 
completely, we are still not going to fix the deficit. Some 
say, ``Well, why bother? It is just one or two percent or three 
percent.'' Well, you have to start somewhere, and we should try 
to spend our money more wisely and less wastefully. It is not 
the whole solution, but it could be a stepping stone toward 
trying to be more fiscally responsible.
    With that, I would like to begin by introducing our first 
witness, Dr. Jason Fichtner. He is a senior research fellow at 
Mercatus Center at George Mason University (GMU). He holds a 
Ph.D. from Virginia Tech, a Master's in Public Policy from 
Georgetown, where he is now an adjunct professor, and did his 
undergrad work at the University of Michigan. Dr. Fichtner has 
studied end-of-the-year spending extensively. He is one of the 
first academics to use online Federal spending data to study 
this phenomenon and testified about his research before this 
Subcommittee two years ago. I think it is safe to say that he 
is one of the foremost experts on this subject, and we are 
happy to have him back. At this point we would like to hear 
from Dr. Fichtner.

   TESTIMONY OF JASON J. FICHTNER, PH.D.,\1\ SENIOR RESEARCH 
       FELLOW, MERCATUS CENTER AT GEORGE MASON UNIVERSITY

    Mr. Fichtner. Thank you. Good afternoon, Chairman Paul, 
Ranking Member Peters, and Senator Harris. Thank you for 
inviting me to testify today, and, Senator Peters, it is good 
to be here with a fellow Detroiter. So thank you for having me.
---------------------------------------------------------------------------
    \1\ The prepared statement of Dr. Fichtner appears in the Appendix 
on page 26.
---------------------------------------------------------------------------
    My testimony focuses on two key issues: first, the extent 
to which perception of a year-end spending problem is reality; 
and, second, how various reforms would improve the efficiency 
of spending by Federal Government agencies and departments.
    From this discussion I hope to leave you the following 
takeaways:
    First, while anecdotes and media stories of year-end 
spending surges are widespread, empirical evidence for year-end 
spending surges and ``use it or lose it'' spending--or the 
motivation behind this spending--is significantly less 
available. However, my research and recent research by other 
scholars is beginning to demonstrate empirical evidence that a 
year-end spending phenomenon is real and potentially wasteful.
    Two, allowing Federal agencies limited rollover or 
carryover authority could reduce wasteful year-end spending 
surges. Similar reforms at the State level and internationally 
have shown promise, but, again, more research is still needed. 
Additionally, programs providing cash bonuses to agency 
employees whose identification of unnecessary expenses results 
in cost savings for the agencies may hold promise. But, again, 
further research is needed.
    The ``use it or lose it'' phenomenon refers to the 
propensity of U.S. Government agencies to spend unused fiscal 
resources toward the end of the fiscal year. This spending is 
allegedly driven by fear that leftover resources will be 
returned to the Department of the Treasury and will prompt 
future congressional budget cuts for the agency. My research 
analyzed publicly available data from USASpending.gov related 
to spending on prime contracts awarded by executive 
departments. My analysis focused on this type of spending--
which comprised roughly 11 percent of total Fiscal Year 2015 
Federal spending--because the data are readily available. My 
research shows that a remarkably large percentage of Executive 
Branch contract spending occurred near the end of the fiscal 
year. If an agency were to spread its contract spending evenly 
over a 12-month period, roughly 8.3 percent of spending would 
occur in each month. However, in the last month of fiscal year 
2015, the Department of State spent 34.9 percent of its 
contracting expenditures, and the Department of Housing and 
Urban Development (HUD) spent 32.6 percent.
    Not all agencies exhibited a year-end spending surge. For 
example, the Department of Energy spent only 5.7 percent of its 
annual contract expenditures. But as the data show, most 
Federal agencies were well above eight percent, and over one-
half of all agencies were above 16 percent. Between 2003 and 
2015, across all executive departments, 16.3 percent of 
obligated contract expenditures occurred during the last month, 
September--more than twice what we would expect if spending 
were evenly split over 12 months.
    Focusing on the fiscal year 2015 data, the number of 
contracts signed steadily increases throughout the month of 
September. In the last three days of September, agencies signed 
2.5 percent of their contracts, and 0.9 percent were signed on 
the last day. If contracts were evenly distributed, one would 
expect to see 0.5 percent of contracts signed each day. Now, 
while 0.9 percent of contracts may not appear excessive, for 
some agencies this number amounted to a lot of dollars. For 
example, the State Department signed 2.18 percent of its total 
contracts on the last day of the fiscal year; this accounted 
for 7.75 percent of the agency's total obligated contract 
dollars for the year.
    It is important to point out that the pattern of year-end 
spending surges is evident across all fiscal years analyzed and 
is not unique over the past few Congresses or administrations. 
Year-end spending surges have become the norm, regardless of 
administration, party control of Congress, or delays in 
finalizing agency appropriations.
    Academic research and some anecdotal evidence suggest that 
the current budget rule of ``use it or lose it'' is not optimal 
and may be encouraging wasteful spending of taxpayer dollars. 
The question remains, as Senator Peters points out: If such 
spending is indeed wasteful, what can be done to reduce it?
    One idea is to allow agencies limited rollover authority--
also known as ``carryover''--for funds not spent by the end of 
the fiscal year. The Federal Government could begin with a 
pilot exercise to test the merits of limited rollover 
authority. Within certain Federal departments, agency 
subcomponents could be given the authority to roll over up to 
five percent of contracting budget authority into the next 
fiscal year. To avoid lengthy delays in the spending and to 
discourage large accumulations, such funds should be spent 
within two years.
    Departments or agencies that wish to participate in the 
pilot could request Congress to do so and could direct the 
Government Accountability Office (GAO) to oversee, audit, and 
evaluate the program. A pilot program that gives limited 
rollover authority to several departments, combined with 
congressional and GAO oversight of rollover accounts, would be 
a useful experiment to see whether these changes to the Federal 
budget process would reduce wasteful year-end spending.
    Another potential reform is to create a cash bonus program, 
as Senator Paul has recommended, for agency employees who 
identify savings and return the unspent budget authority to the 
Treasury. A program for bonuses for waste reduction could be 
included in a limited rollover pilot program to test the 
efficacy of the new initiatives.
    Thank you again for your time and for this opportunity to 
testify today. I look forward to your questions and the 
continued discussion.
    Senator Paul. Thank you, Dr. Fichtner.
    Our next witness is Dr. Allan Burman. He is Commissioner of 
the Section 809 Panel. He was also Administrator for Federal 
Procurement Policy for the U.S. Government under Presidents 
Reagan, Bush, and Clinton. The 809 Panel, on which he serves, 
was created as part of last year's defense authorization bill 
and is tasked with finding ways to streamline and improve the 
defense acquisition process. I am very interested to hear from 
you what you have been finding, and we hear from former 
soldiers all the time about the military hovering helicopters 
or driving trucks around in circles to burn fuel and all sorts 
of other wasteful exercises designed to artificially create a 
justification for September spending. So we are very interested 
in hearing from you about your findings at the Department of 
Defense (DOD).
    Dr. Burman, you are recognized.

      TESTIMONY OF THE HONORABLE ALLAN V. BURMAN, PH.D., 
                COMMISSIONER, SECTION 809 PANEL

    Mr. Burman. Thank you very much, Chairman Paul, Ranking 
Member Peters, and Senator Harris. I am pleased to be here 
today to speak on end-year spending surges. I would like to 
submit my statement for the record\1\ and briefly summarize it, 
if I may.
---------------------------------------------------------------------------
    \1\ The prepared statement of Dr. Burman appears in the Appendix on 
page 66.
---------------------------------------------------------------------------
    Senator Paul. Without objection.
    Mr. Burman. As you said, the 809 Panel has been charged to 
provide recommendations on defense acquisition reform, 
including ways to maintain Defense's technological edge, and we 
have formed a number of research teams to look at key issues in 
trying to achieve those objectives, including eliminating 
unnecessary regulations, identifying barriers to entry for 
high-tech firms, and improving budgeting practices, and I lead 
the budgeting team. Of course, a key topic of our team is what 
the subject of this hearing is today, incentives that produce 
end-year spending and their effects on acquisition 
effectiveness and efficiency. I will present some of the issues 
that the panel is considering. We are in the process of looking 
at these, so this is still an ongoing effort on our part.
    Just to put defense spending in context, in Fiscal Year 
2016 Defense spent $568 billion, and of that, $298 billion was 
obligated for the purchase of goods and services, products and 
services.
    Now, if you were obligating money evenly throughout the 
year, you would expect that you would be obligating about eight 
percent, a little more than eight percent of your funds every 
month. Instead, in our research on what is happening with 
Defense, we find more than 14 percent of the total was spent in 
2016 in September, and in the final week of the fiscal year, 
seven percent of the funding. So it is very much in line with 
what we have heard from Dr. Fichtner.
    The surges appear to be concentrated in certain areas, for 
example, information technology (IT) and building construction 
and maintenance. The three key questions that we are addressing 
are: Are these surges bad? Why do they happen? And what can be 
done about them?
    Some of the preliminary findings we are getting from our 
data analysis and interviews are: With regard to are they bad, 
we have had some stakeholders say no, they do not see any 
issues with regard to quality. Others say, yes, you are buying 
lower-priority things at the end of the year, but these things, 
these goods and services, are still something that is needed 
and it is prudent to hold off spending in case there should be 
some kind of an emergency. Many, however, including the work 
that Dr. Fichtner has done, suggest that you get less efficient 
acquisition outcomes as a result of that end-year spending.
    There was another major study done on this subject a couple 
of years ago that shows a very clear correlation between lower-
quality IT products and end-year spending. We have heard 
anecdotal comments from many people that support this point.
    What causes these surges? We need to look at the many tiers 
of obligation authority going from Congress to Office of 
Management and Budget (OMB) to service comptrollers, and these 
various spending organizations put constraints on when people 
can spend. But the key result, though, is that people want to 
spend that by the end of the year, or they fear that those 
funds will be taken or they will be lost.
    How have we responded in the past to these kinds of surges? 
There are two mechanisms that have traditionally been 
used--among others. First, multiyear appropriations. For 
example, for research and development (R&D) and procurement 
accounts, there you can obligate money beyond the end of the 
first year, so you are not seeing the same kind of effects that 
you might see in one year money. There is also the 80/20 rule, 
which says that you should spend no more than 20 percent of 
your operations and maintenance funds in the last two months of 
the fiscal year. That appears to just more or less push the 
spike back a couple of months but not necessarily deal with the 
problem itself.
    So other measures for addressing end-year surges include:
    The Bonus for Cost-Cutters Act that you mentioned, Chairman 
Paul, that directly targets wasteful spending. Here we would 
want to make sure that the incentives between leadership and 
employees are aligned, but we are definitely looking at that as 
a factor to consider;
    Using working capital funds, which allow an activity to 
operate more like a business, and in that case funds are not 
tied to end-year deadlines, and some agencies have used those, 
and Defense has a number of them;
    And then, finally, carryover authority, similar to what Dr. 
Fichtner has mentioned, and, in fact, there was an opportunity 
to do that in the Defense Health Agency last year, and it 
appears that it is reducing spikes.
    So we are looking at all of these areas and approaches in 
terms of the recommendations that our committee will be making 
to the Congress.
    This concludes my prepared remarks, and I am happy to 
answer any questions the Committee might have.
    Senator Paul. Well, thank you, Dr. Burman.
    Our final witness today is Heather Krause, who is Director 
in the U.S. Government Accountability Office, Strategic Issues 
team. In this role Ms. Krause is responsible for developing and 
leading portfolio work on cross-cutting agency budget, 
regulatory, and intergovernmental relations issues. Of interest 
to us today is her work on continuing resolutions and 
uncertainty in the appropriations process. Ms. Krause holds an 
M.A. in Public Policy from the University of Minnesota and a 
B.A., also from the University of Minnesota. Ms. Krause.

  TESTIMONY OF HEATHER KRAUSE,\1\ DIRECTOR, STRATEGIC ISSUES, 
             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Krause. Thank you, Chairman Paul, Ranking Member 
Peters. Thank you for the opportunity to discuss our work on 
agency responses to budget uncertainties and the effects on 
year-end spending.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Krause appears in the Appendix on 
page 73.
---------------------------------------------------------------------------
    Congress exercises its power of the purse by appropriating 
funds and prescribing conditions governing their use. Federal 
funding may be available to obligate for one year, multiple 
years, or have no time limit. For example, expenses like 
payroll generally must be obligated in one year, while capital 
investments such as IT modernization efforts can involve funds 
available for multiple years.
    As funds approach the end of their period of availability 
for obligation, a ``use it or lose it'' mentality, as my fellow 
panelists have talked about, can set in among agencies. This 
can create an incentive to rush to obligate funds. Agencies may 
also fear that if they do not use all the funds in a given 
year, it could reduce the next year's appropriation.
    On the other hand, there may be good reasons, including 
reasons intended by Congress, for agencies to have higher 
levels of spending in the fourth quarter. Our prior work on 
year-end spending emphasized the importance of accurate and 
available data to effectively monitor how agencies execute 
their budget. Our body of work on Federal budgeting has 
continued to stress the need for quality and available data as 
agencies manage their budgets and Congress oversees them.
    My statement today focuses on: first, how agencies spend 
their funds in response to budget uncertainty; and, second, on 
the legal and other considerations managers must balance in 
spending funds throughout the year.
    Our prior work has shown that agency spending patterns are 
affected by budget uncertainty and disruptions. For example, in 
all but four of the last 40 years, Congress has passed 
continuing resolutions, when all regular appropriation bills 
have not been enacted on time. In many cases CRs have extended 
past the first quarter of the fiscal year into February or 
March. While CRs allow agencies to continue operations until 
their final appropriations are determined, in 2009 we reported 
agencies changed their spending patterns during the CR period.
    For example, agencies limit their spending early in the 
year because the final funding may be less than anticipated. 
Also, agencies delayed hiring or contracts during a CR. Such 
delays reduced the level of services agencies provide and 
increased costs.
    Longer CRs in particular can contribute to agencies rushing 
to obligate funds at the end of the year. Agency officials told 
us that, following a lengthy CR, they can end up spending funds 
on lower-priority items that can be procured quickly if they do 
not have enough time to spend funds on higher priority needs.
    There are also important legal constraints on agencies as 
they manage their funds throughout the year. When Congress 
provides funding to agencies, they put certain requirements on 
those funds. Such requirements include: what agencies can spend 
their funding on, how much funding they will receive, and when 
they have to use those funds.
    In addition, an agency may not obligate money from the 
current year for the needs of future fiscal years. Commonly 
referred to as the ``bona fide needs rule,'' an agency must 
point to a genuine need for the expense in that year, not just 
use up dollars before the end of the fiscal year.
    It is also important to recognize that some factors 
affecting the timing of spending are within the agency's 
control and some are not. For example, agencies may choose to 
award contracts or grants annually at the end of the fiscal 
year. Conversely, an agency may be compelled to spend at the 
end of the fiscal year due to external events beyond their 
control, such as natural disasters.
    In close, there is always a delicate balance in budgeting 
between offering agencies sufficient flexibility to operate 
efficiently while also ensuring adequate oversight and 
accountability. In an era of increasingly constrained Federal 
resources, the need to manage agency budgets prudently has 
become even more critical to the success of Federal agencies 
and the missions that they support.
    This concludes my statement. I look forward to answering 
your questions.
    Senator Paul. Thank you all for your testimony.
    I think we will let Senator Peters start, if you are ready.
    Senator Peters. Well, that is fine. Thank you, Chairman 
Paul. I appreciate that. Thank you for the testimony, all three 
of you. I appreciate that.
    Dr. Burman, your studies of DOD spending I believe also 
indicate some spikes in spending both in March and September 
2016, and for that matter, it looked like December and June 
also appeared to be a little higher than other months in the 
year as we looked at it tracked out. It appears that the DOD 
has a variety of deadlines throughout the year that lead to 
corresponding spikes in spending at those various times. My 
concern is whether that increased volume might be comprised of 
wasteful spending as well in those periods.
    My question is: Does the DOD have an epidemic of wasteful 
spending in March every year similar to what we are hearing may 
be happening in September?
    Mr. Burman. I do not think so, Senator. I think what is 
happening is that people are concerned about the end-of-year 
spikes, and particularly for the Navy and the Air Force, we are 
seeing that some of these funds, it appears, have been moved 
forward where they can do that, where they can take into 
account the overall needs for whatever the system is that they 
are procuring or working on to try to avoid this end-of-year 
issue. The Army, on the other hand, has a very much higher 
spike, something like 20 percent at the end of the year. So I 
think we are seeing some policy actions taking place to try to 
address the problem. You still have the question of what is the 
overall value of what it is that you are buying.
    Senator Peters. Dr. Fichtner, how did August and September 
spending volumes compare to March spending in your study? And 
were there other months that showed spending spikes as well?
    Mr. Fichtner. That is an excellent question, Senator 
Peters. Generally, we saw some spikes throughout agencies, some 
here, some there, but not necessarily consistent with what we 
saw with the year-end spending. But to your point that you 
asked Dr. Burman, I think it is very important. One of the 
things he pointed to in his testimony and you mentioned in your 
opening statement was whether or not the process is designed in 
some ways that we are forcing people to rush to the end. I do 
not know if that is something we should look into, but OMB 
apportions money sometimes on a quarterly basis. So if there is 
an apportionment issue from OMB that is forcing agencies to 
spend up to the end of the quarter to get the next 
apportionment, that could also be an issue. Whether that is 
wasteful spending or just rushed spending is a good question. 
But to your point at the beginning of the hearing was: Is the 
process set up in a way that is creating a perverse incentive 
and not giving folks enough time to make proper decisions and 
allocation of resources? That is a very good question which we 
are all starting to look at, too.
    Senator Peters. Well, I guess to follow up on that point, 
in your analysis in your study, do you know approximately what 
percentage of purchases would have been subjected to a long-
term planning procedure such as developing requirements, 
requesting bids, negotiating prices, which is something you 
cannot do overnight, obviously? Do you know what percentage 
that may have been?
    Mr. Fichtner. I do not, Senator, and it is a very good 
question because when we started looking at the data, we were 
looking first at whether there is an issue, is there something 
we can point to. Again, as my testimony points out, there are a 
lot of anecdotal evidences, but we do not want to make policy 
by anecdote. We were one of the first, my colleagues and I, 
looking at this issue empirically, and we were not able to dive 
into each contract specifically to figure out whether it was 
even a wasteful spending, a good spending. We had to sort of 
let the data sort of drive the aggregates, and that creates the 
results. But your point is very valid and important. If a lot 
of these contracts require long-term planning, whether it is 
several months or more, just having a year-end deadline without 
having any carryover authority could force a decision to be 
made or not made that we would not want otherwise.
    Senator Peters. So that is going to be part of future 
studies that you are going to do going forward, because just 
thinking it through, if you know you have to get this stuff out 
by the end of the year, you start a contract process in 
February, and you say, it has to be done by the end of 
September, then you do another one in March, it has to be done 
by the end of September, it continues, and it can build up. I 
do not know what that number is, but we have to figure that out 
because that is going to be a part of analyzing what we may 
have here.
    Mr. Fichtner. Yes, Senator, that is correct, and I am 
hoping also Dr. Burman's panel starts looking at this, too, 
because they have a nice bigger team than just me to look at 
the data. But the point you make is very valid, and I think we 
want to just hit something home that--I do not want to speak 
for my fellow panelists, but I think they would agree no one 
here is saying there is malintent going on or it is evil 
intentions of civil servants. The infrastructure, the process, 
the incentives right now are misaligned. If there are projects 
that take several months to plan, the ones that take less time 
are going to naturally be put off to the end. And that was Dr. 
Burman's point as well.
    So if you get to the point where you are planning for all 
the ones that take a lot of your time and attention, then you 
get down to, say, September and you have still got all this 
extra money you have to spend, well, I do not have time for the 
three or four month planning process anymore, but I have to 
spend this money or it goes back to the Treasury. Now I am 
going to fill in those blanks with the smaller, less time-
consuming--they still may be relevant and important contracts, 
but that is where the attention goes; whereas, if we allow for 
some sort of rollover, at least we would have more time to make 
decisions past the fiscal year.
    Senator Peters. Well, I know you do not want to speak for 
the other panelists, so I am going to ask them to speak for 
themselves based on Dr. Fichtner's comments. Dr. Burman, then 
Ms. Krause afterwards.
    Mr. Burman. Sure, Senator Peters. In the contracting field, 
there is something called procurement administrative lead time 
(PALT). It is the time that you need to actually conduct the 
entire procurement. Once a requirements package has been given 
to the contracting folks--and when you are talking about open 
market procurements, we are looking at taking 150 days or more 
actually for some major contract actions. So anything that 
disrupts that process or where you get a CR that comes late in 
the year where you have some uncertainty as to whether you can 
proceed, then you could end up pushing folks to make judgments 
and make contract awards by the end of the year, if it is one 
year money, or otherwise they may be waiting two years because 
of the budget process. You have to put these things in the 
budget well in advance of when you are actually going to be 
able to provide the obligations.
    So that is another issue that causes people perhaps to do 
things that they should not be doing in terms of rushing, using 
a different kind of a contract type, or perhaps going sole-
source, using less competition so that you can move that 
process and make that award by the end of the year so the money 
does not expire and then you have to wait another 18 months 
before you can get back into pursuing that project again.
    Senator Peters. Thank you. Ms. Krause.
    Ms. Krause. Thank you. I would just add you mentioned the 
carryover balances and when we have done different work looking 
at budget uncertainty in terms of whether it is the CRs or 
sequestration, we have certainly heard agencies say that having 
some of that carryover balance and flexibility when in a CR 
environment does help address some of those incentives.
    But I guess one of the things--and we have looked at 
carryover balances--is really thinking about as I was saying, 
the tension between sort of giving them flexibility but making 
sure you have adequate oversight over that kind of authority, 
asking them, what are your plans for the balances you are 
carrying over, what kind of--especially looking at what kind of 
changes over time for that kind of money and spending that you 
are holding, whether the agencies have capacity to use that 
money. So I think in that context of carryover balances, the 
oversight piece is really important.
    Senator Peters. Great. Thank you.
    Senator Paul. Well, thank you all, and thank you, Senator 
Peters.
    We have talked about increased spending at the end of the 
year, and so I think there are sort of, I guess, two 
possibilities. One is that government, which often has a 
reputation for not doing things very well, just cannot spend 
the money fast enough, and so they have a bunch left because 
they did not spend it fast enough because they just could not 
get to what they were doing. But the other possibility is maybe 
we gave them too much, and so they spend it to get rid of it to 
make sure they get it the next year. And I think there is 
probably some truth to both of those, that procurement and 
deadlines and wait periods, and uncertainty add to the fact 
that it takes a long time to get to September, then they have 
to spend it all. But it could also be the argument we have 
appropriated too much, and that ought to be at least one of the 
considerations.
    So when we look at sort of the idea of rolling over, I 
think it does address the idea that you get rid of hurried 
decisions and that maybe buying the wrong stuff or just buying 
something--we have to buy something, we have to do something 
with the money, you might get rid of that and you might get rid 
of some waste. But I think there is an equally bigger picture 
when you have a $700 billion deficit every year that maybe we 
have appropriated too much.
    We talked about the cost-cutter bill a little bit, the idea 
that we could give incentives to people who can find cost 
savings that still allow the agency to do what it is supposed 
to do but are able to find savings. That would be sort of a 
positive thing to give to workers. Let us comment first on 
that, and then I will ask you maybe about the opposite, whether 
we should have some punishment for people who are actually 
spending it unwisely and if there would be a way we could do 
that.
    First, the idea of bonuses, and I know you all mentioned 
it, but if you could each give a comment. We will start with 
Heather and work our way down.
    Ms. Krause. I think in the context, I have not seen your 
current bill that you have introduced, but looking at other 
similar bills or prior bills, I think the one important element 
of that in terms of from a congressional standpoint would be 
really that Congress has visibility over how that program is 
being implemented and that the agencies are actually 
demonstrating that there are savings that are occurring and 
sort of having thoughtful evaluation on the types of savings, 
and also just that, the other aspect of it, that, employees are 
being rewarded if that is what is occurring.
    Senator Paul. Dr. Fichtner.
    Mr. Fichtner. Let me answer this in two parts.
    First, regarding the cost-cutters, I think it is a 
fantastic idea that also should be done as part of a pilot; and 
not to throw my GAO colleague under the bus, but GAO is the 
right organization that can do an evaluation of pilots in the 
government to let us know whether they are designed properly, 
working properly, and what the effects are, and also what we 
could learn from these type of pilots.
    Second, in the spirit of bipartisanship, let me sort of 
square the circle with you and Senator Peters. Senator Peters 
has made the point again in some ways that it is hard for some 
agencies to make the decisions. If you have a CR, you are 
pushing some things back. If you do not have political 
appointees in place, no one is going to stick their neck out to 
make a spending decision that costs a lot of money over a few 
years without a manager or a political appointee there to give 
them cover. There is also rollover authority you could do that 
does not have to last one or two years. You could make it two 
or three months, especially if you have a CR. Right now if you 
do not have a budget passed until the end of December, why not 
add three months of carryover and do that as part of a pilot 
with cost-cutters. You give people the incentive to say, ``I do 
not have to rush anymore to spend this, and I have some 
carryover. But if there is wasteful spending, then I actually 
can now get an incentive to save money for the government and 
get some bonus at the same time.'' I think we can merge these 
two incentives into one pilot program, and that would be very 
effective.
    Senator Paul. Dr. Burman.
    Mr. Burman. I think that the issue is, again, incentives 
and aligning incentives in the organization to make sure that 
the organization itself sees that there is real benefit here 
and makes the point that we are not looking for spending money 
on wasteful things and making it clear that that is a goal and 
a motivation of the organization, so people who are rewarded 
for doing these kinds of things are actually recognized for 
doing good things as well.
    There are lots of opportunities over the course of a year, 
presumably, for leadership and staff to be looking at what are 
they spending their money on. Are they spending it on the right 
things? Are they getting value for what they are spending on?
    I would say the one thing that would be important is trying 
to figure out a way to make sure that those interests are 
aligned and those incentives are aligned.
    Senator Paul. We have legislation on the bonuses. I do not 
have legislation on this other idea, but the opposite side of 
the coin would be could we or do we have any way of punishing 
people who make terrible decisions on wasteful things. The 
thing that frustrates both me and other taxpayers is I can 
remember as a kid reading William Proxmire's Golden Fleece 
Awards, and you know what? My staff still finds all of that 
stuff. I mean, Ultimate Frisbee in China, I do not know why we 
are sending any money to China. All right? We trade with them. 
They are doing great. They are growing at 7 to 10 percent a 
year. We should not be sending them any money. And somebody who 
is sending money for Ultimate Frisbee ought to be fired.
    There has to be somebody reviewing the spending decisions. 
Do we have something in place where someone reviews it and 
says, ``That is outrageous''? In a company, if they found that 
you spent $1 million going to Las Vegas on September 30th, you 
might be fired, particularly if the company did not do very 
well. This company is the country. It is not doing very well, 
$700 billion in the hole, low growth rates. Someone should be 
fired for the waste. Is anybody accountable? Is there a way of 
making people accountable where someone looks back up here and 
says, ``Why did you do that?'' and there is some 
accountability?
    We will start with Ms. Krause.
    Ms. Krause. I think as there has been some discussion, I 
mean, internal controls are really important in terms of having 
those processes in place to identify wasteful spending 
throughout the year. Again, I think you do have to create, as 
we found from some of our organizational transformation work, a 
culture that encourages employees to bring these types of 
issues to the forefront that they, really the employees are the 
ones that know their agencies, and they know where there are, 
ideas and opportunities for improvement. It is really important 
that agencies are sort of setting up programs and cultures that 
help encourage that kind of behavior from employees.
    Senator Paul. All right. We had a study--and a lot of these 
are from the National Science Foundation (NSF) which I am upset 
with almost on a daily basis: $300,000 spent studying Japanese 
quail to see if they are more sexually promiscuous on cocaine. 
All right. I use that in speeches across the country because it 
brings a guffaw and then laughter and then anger at government. 
But we have been doing this since the 1970s. I can point to a 
similar study from the 1970s, the same kind of stuff, that 
nobody in their right mind with any common sense thinks we 
should spend a penny on. But are we fixing any of it? I know 
you try to do a good job. You are looking at waste in 
government. You are trying to make us accountable, so I do not 
blame you. But I think we have to do something different 
because year after year we keep seeing this waste. Dr. 
Fichtner.
    Mr. Fichtner. Thank you, Senator. This is a very important 
question, and I want to try to answer this in a nuanced 
fashion.
    First of all, I think there are also some agencies that 
have problems with leadership. It starts at the top. If an 
agency head or the political appointees are not actually taking 
care and sending the right message that they do not want 
wasteful spending, then they are going to get wasteful 
spending. It starts at the top. So when you have Commissioners, 
Secretaries up in front of you testifying, you should ask them 
about wasteful spending and what they are doing about it. Make 
it something that if you care, they care, then the agency is 
going to care.
    The second is the Inspectors General (IG). That is part of 
their role and their job. If there is wasteful spending that we 
are identifying, whether it is anecdotal or evidentiary, we 
should have the IGs looking at it.
    And we should probably have some sort of reform to the 
civil service rules to make it easier to fire people that are 
actually wasting money in a nefarious manner.
    On the flip side of my third point--because I want to make 
sure that I put this forward because Senator Peters mentioned 
and it is very important about culture--we have to protect 
whistleblowers. There is no way around this. The front-line 
people for protecting the taxpayers' dollars are our civil 
servants. They are the face of the public. They are our Social 
Security representatives. They are the ones you talk to when 
you have the Internal Revenue Service (IRS) problems. They are 
the ones who are identifying fraud, waste, and abuse. If we do 
not stand by them, they are not going to come forward. We have 
to make sure we protect them.
    Senator Paul. What do you think is the idea--it has been 
said--and I am not sure if this is absolutely true or not, but 
contractors are not covered under the whistleblower? Is that 
true or not true?
    Mr. Fichtner. I do not know, but if they are----
    Senator Paul. Because a lot of government is whistleblower, 
and I know you are interested in it. I just throw it out as an 
idea that maybe we should think about whether contractors ought 
to be, because contractors are spending a lot of the money, 
too. And they actually might be a little freer to give us 
information, but they are also worried about the next contract, 
whether we could include them under the whistleblower statutes.
    Mr. Fichtner. That is good to look into, Senator.
    Senator Paul. Dr. Burman.
    Mr. Burman. There are provisions, qui tam provisions, that 
would allow someone who identifies waste as a contractor to go 
and bring that to the Department of Justice (DOJ) and be able 
to address that issue under protection. That is something that 
actually does already occur.
    I agree with my fellow panelists that you need to hold 
leadership accountable for making good decisions, and when they 
are not making good decisions, then hold them accountable again 
for that result. As a procurement administrator, frequently 
when these kinds of issues would come up for me, I would ask 
the IG to look into them, and I would use the IG as the 
appropriate agency to try to get to the bottom of these kinds 
of problems.
    Senator Paul. And you think people in--civil servants have 
a sufficient--I do not know is ``fear'' is the right word, but 
respect for the IG when they come into the situation and they 
are addressing it, that it is not just seen as, ``We do not 
really care''? Do you think people are concerned when the IG 
comes and investigates?
    Mr. Burman. I think they are. I think they are definitely 
concerned if the IG is looking into an issue or a problem.
    Senator Paul. I have one more question, but if Senator 
Peters has another question, I will let you go again. Do you 
have anything?
    Senator Peters. Just a couple of follow ups, and then I 
will let you wrap it up, Mr. Chairman.
    Back to the whistleblower idea, which I think is one that 
we have to make sure we are looking at for the reasons that 
were mentioned by the witnesses here, we have to make sure they 
are protected. I am just curious, from your studies or working 
in this area, do you believe that people are not adequately 
protected now, that there is a culture that people are still 
concerned about coming forward? And are there things that we 
need to be thinking about that we should be doing to strengthen 
that? Dr. Fichtner.
    Mr. Fichtner. So, again, and I hate to have anecdote drive 
policy, but there has been enough anecdotal evidence that 
people say they are fearful of retaliation. Just having those 
anecdotes be spread in the media, be spread in public, creates 
a culture of fear. So my answer would be, even if it is not a 
problem, if people think it is a problem, then it is a problem. 
So, yes, this is something the Committee should look into. How 
to strengthen that, I am not a lawyer. I am not sure what 
should be done. But I am all in favor of strengthening 
whistleblower protection so they are not fired, facing 
retaliation, and they have protections and, if possible, if 
they need anonymity in forwarding things on fraud, waste, and 
abuse, that they have that as well.
    Senator Peters. Any other comments?
    Mr. Burman. Again, I would say on these kinds of issues, 
for trying to promote what we are looking for is for people to 
get rid 
of--not do unnecessary spending or wasteful spending, it makes 
sense to make sure that they are in line with a leadership that 
says that is what they want to do as well.
    Senator Peters. Ms. Krause.
    Ms. Krause. I would just say--we have not looked 
specifically at sort of whistleblowers' cost savings, but 
definitely support strong programs to allow employees to come 
forward.
    Senator Peters. Because as we are looking at the 
differences that we have talked about, the example that the 
Chairman mentioned of just burning fuel on the tarmac, 
obviously that would be a case ripe for a whistleblower saying 
this is ridiculous that this kind of thing is happening, which 
is different than the other issues that we have talked about of 
just long-term contracting, they get piled up for all the 
various reasons. We need to get that kind of information as 
well to see how we can refine some of those processes.
    One of the ideas that you have all talked about is granting 
carryover authority and how powerful that is. I understand that 
Congress approved the use of carryover within the Department of 
Defense in Fiscal Year 2016, approved a one year, one percent 
carryover authority for the operation and maintenance spending 
by Defense Health Agency. I do not know if you have looked at 
that in 2016. I am just curious as to what the results were. 
Did we see differences? It looks as if they did see a three 
percentage-point drop in some of that surge spending during 
that time. But if you have had a chance to look at that, if 
there is some qualitative lessons that came out of that one 
percent carryover in 2016?
    Mr. Burman. Senator Peters, we are looking at that, and we 
did see some results. But in terms of the effort itself, it 
seems like it was some sort of a pilot approach to see whether 
or not there might be some success along those lines. Frankly, 
our commission is very much looking at a similar kind of thing 
with a limited amount of carryover money, because we have heard 
lots of people say if you do a large amount, it is basically 
going to cause people to procrastinate; they are just going to 
delay. So, similar to what Dr. Fichtner is recommending, we are 
analyzing that and would likely make some recommendations along 
those lines to the Congress.
    Mr. Fichtner. I have not looked into it directly except for 
Dr. Burman's testimony, but I echo his sentiments.
    Senator Peters. Ms. Krause.
    Ms. Krause. We have not looked at that specifically, but we 
have looked at other agencies' carryover balances. As I said, 
we have a series of questions that, as you are managing and 
overseeing whether it is Congress or agencies themselves asking 
the questions of what are the plans for the amount, rates, 
changes over time, etc, to make sure they are managed 
efficiently.
    Senator Peters. All right. Thank you.
    Senator Paul. On the question of contractors and whether 
they are covered as whistleblowers, it sounds like maybe some 
are, but there have been--the most widely reported one was of 
Edward Snowden, who said that when he saw James Clapper giving 
misinformation or not telling the truth to Congress about the 
bulk collection of our information, the reason he went public 
is he did not feel he was covered by the whistleblower. I think 
we are going to look into it, our staff is going to look into 
it, if there is any interest with Senator Peters on covering 
contractors, not only for waste but also for someone not 
telling the truth in government and they want to expose that 
untruth, protecting them somehow. Obviously, I think we would 
have all been a lot happier if Edward Snowden would have 
reported as a whistleblower instead of going to China or 
Russia. But that is at least one of his arguments, that he was 
not covered as a contractor. So maybe we can look at that some.
    Senator Peters. I would welcome that. In fact, as you know, 
we had in a full Committee hearing talked about the Lifeline 
program and where you have individual companies that were 
claiming that they had customers when, in fact, they did not, 
which is inexcusable.
    Senator Paul. Absolutely.
    Senator Peters. You had contractors there scamming the 
government. I am sure there are employees within those 
companies that saw that and were outraged by it. We want to 
make sure that they are protected to come forward so we can 
take action.
    Senator Paul. I agree completely.
    On one finishing note, and this is kind of a different 
subject, but it goes along the same way of how we make 
government less wasteful or most cost efficient, is the idea of 
auditing, and I think GAO has something to do with audits. If 
you will maybe give us some general information about what you 
do with audits, and then maybe a comment on half of our 
discretionary spending is defense spending, and the fact that 
they do not have an audit, and whether it would be a good idea 
or not. We will start with Ms. Krause, but you can all add to 
the same question. With that, then we will sort of get to a 
conclusion. Thanks.
    Ms. Krause. No, absolutely--the fact that DOD is not in a 
position for GAO to do an audit, keeps us from rendering an 
opinion on the overall audit of the Federal Government. That is 
something that GAO has been working closely on in terms of 
trying to make progress on that or work with DOD to make 
progress on that. It is very important.
    Senator Paul. But the public reports have been that they 
have responded they are too big to be audited, or at least 
someone said that. What is the big hangup right now in doing an 
audit of Defense?
    Ms. Krause. I think it is the data and the systems do not 
support accurate information for doing a financial audit.
    Senator Paul. Dr. Fichtner.
    Mr. Fichtner. I have always been surprised that the 
Department of Defense has a qualified audit. When I was at 
Social Security, we had one every year that was unqualified. So 
I think there is--it is a big agency. There is a lot of money 
that goes through. But to say you cannot tell me where your 
money is going is a bad sign of management.
    One of the things about auditing that I think is very 
important is the word ``transparency,'' and in some ways, we 
the public now have become auditors of government. I need to 
give credit to President Obama and the Obama Administration 
because all the work that I have been doing on this issue is 
because they put information on data.gov and 
Federalspending.gov. We need to make sure that Federal agencies 
continue to put data online available for the public, for the 
researchers, for Members of Congress, for staff, for Senators 
to look at directly because some of these issues do not come up 
until researchers start looking at it and bring it to your 
attention.
    We need to make sure we continue to have agencies put data 
online in a transparent way, and that would also help with, I 
think, generally then pushing agencies toward better audits at 
the same time.
    Mr. Burman. I would support the same points that both Dr. 
Fichtner and Ms. Krause mentioned. I think everybody thinks it 
would make a great deal of sense to make sure that the Defense 
Department can, in fact, go through the same kind of audits 
that any other government agency can. I know that they have 
been trying to do that for a number of years. The number of 
financial systems and the variety of those systems and the 
ability to get them to interact has been a significant problem, 
but it certainly is something that would be a goal that we 
would all support.
    Senator Paul. The only response I would have to that is it 
has been a number of years--I think some have said 17-some-odd 
years we have been waiting for an audit, and there is nothing 
like a mandate, a deadline, or a law to force you to do it that 
might change things. There is--and I am not sure if you are 
aware of the bill, but Senator Manchin and I are on a bill that 
is for auditing the Pentagon. I am also for auditing the Fed. I 
am for auditing all of government to make sure we have more 
transparency. But these are just thoughts of things that we 
might look at. This is already a bipartisan bill to try to---
instead of just waiting for the Pentagon someday to say they 
are going to audit it, we spend a lot of money, and we do have 
to have a strong national defense. But we need to make sure it 
is being spent wisely.
    I think the hearing has been very useful, hopefully, for 
both of us, and for the testimony. I thank you for spending the 
time with us and also feel free to communicate with us or our 
offices at any time if you have ideas or suggestions. The one 
thing I would ask you to look at is whether or not there is 
something we could do legislatively--we are talking about 
giving bonuses for people who come forward, talking about waste 
or savings, but whether or not we could do something 
legislatively to actually change where, when we hear something 
outrageous, we find out, oh, yes, that person no longer works 
there or that person got demoted or that person no longer is 
allowed to make those decisions. This is the frustration of 
taxpayers, is they hear about these terrible, wasteful, crazy 
things that are being done with their money, but they never 
hear that there were any ramifications, that it is getting 
better. It does not seem to get better sometimes. If you can 
think of any solutions or any kind of influence or ideas for us 
on that. I know GAO does that, and they said they have 
recommendations, and then they come back and say a lot of these 
were adhered to. I think it is not completely without that we 
are not changing government. But I think we all want more.
    Thank you all for your testimony.
    Mr. Fichtner. Thank you.
    Mr. Burman. Thank you.
    [Whereupon, at 3:26 p.m., the Committee was adjourned.]

                            A P P E N D I X

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