[House Report 104-861]
[From the U.S. Government Publishing Office]



                                                 Union Calendar No. 468

104th Congress, 2nd Session -  -  -  -  -  -  -  - House Report 104-861

 
 FEDERAL GOVERNMENT MANAGEMENT: EXAMINING GOVERNMENT PERFORMANCE AS WE 
                         NEAR THE NEXT CENTURY

                               __________

                           EIGHTEENTH REPORT

                                 by the

                        COMMITTEE ON GOVERNMENT
                          REFORM AND OVERSIGHT

                             together with

                     ADDITIONAL AND MINORITY VIEWS

                                     



 September 28, 1996.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed


              COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

     WILLIAM F. CLINGER, Jr., 
      Pennsylvania, Chairman
CARDISS COLLINS, Illinois            BENJAMIN A. GILMAN, New York
HENRY A. WAXMAN, California          DAN BURTON, Indiana
TOM LANTOS, California               J. DENNIS HASTERT, Illinois
ROBERT E. WISE, Jr., West Virginia   CONSTANCE A. MORELLA, Maryland
MAJOR R. OWENS, New York             CHRISTOPHER SHAYS, Connecticut
EDOLPHUS TOWNS, New York             STEVEN SCHIFF, New Mexico
JOHN M. SPRATT, Jr., South Carolina  ILEANA ROS-LEHTINEN, Florida
LOUISE McINTOSH SLAUGHTER, New York  WILLIAM H. ZELIFF, Jr., New 
PAUL E. KANJORSKI, Pennsylvania      Hampshire
GARY A. CONDIT, California           JOHN M. McHUGH, New York
COLLIN C. PETERSON, Minnesota        STEPHEN HORN, California
KAREN L. THURMAN, Florida            JOHN L. MICA, Florida
CAROLYN B. MALONEY, New York         PETER BLUTE, Massachusetts
THOMAS M. BARRETT, Wisconsin         THOMAS M. DAVIS, Virginia
BARBARA-ROSE COLLINS, Michigan       DAVID M. McINTOSH, Indiana
ELEANOR HOLMES NORTON, District of ColumbiaTATE, Washington
JAMES P. MORAN, Virginia             DICK CHRYSLER, Michigan
GENE GREEN, Texas                    GIL GUTKNECHT, Minnesota
CARRIE P. MEEK, Florida              MARK E. SOUDER, Indiana
CHAKA FATTAH, Pennsylvania           WILLIAM J. MARTINI, New Jersey
BILL BREWSTER, Oklahoma              JOE SCARBOROUGH, Florida
TIM HOLDEN, Pennsylvania             JOHN B. SHADEGG, Arizona
ELIJAH CUMMINGS, Maryland            MICHAEL PATRICK FLANAGAN, Illinois
            ------                   CHARLES F. BASS, New Hampshire
BERNARD SANDERS, Vermont (Independent)TEVEN C. LaTOURETTE, Ohio
                                     MARSHALL ``MARK'' SANFORD, South 
                                     Carolina
                                     ROBERT L. EHRLICH, Jr., Maryland
                                     SCOTT L. KLUG, Wisconsin

  James L. Clarke, Staff Director
  Kevin M. Sabo, General Counsel
     Judith McCoy, Chief Clerk
 Diann Howland, Professional Staff
  Kristine Simmons, Professional 
               Staff
   Jane Cobb, Professional Staff
  Henry Wray, Professional Staff
  Robert Shea, Professional Staff
 Wallace Hsueh, Special Assistant
Bud Myers, Minority Staff Director


                         LETTER OF TRANSMITTAL

                              ----------                              

                                  House of Representatives,
                                Washington, DC, September 28, 1996.
Hon. Newt Gingrich,
Speaker of the House of Representatives,
Washington, DC.
    Dear Mr. Speaker: By direction of the Committee on 
Government Reform and Oversight, I submit herewith the 
committee's eighteenth report to the 104th Congress.
                                 William F. Clinger, Jr., Chairman.

                                     


                           Executive Summary

    This report is the first attempt by a major oversight 
Committee of Congress to dispassionately examine mismanagement, 
waste, fraud and abuse of Federal resources, programs and 
personnel. In view of the fact that the Committee on Government 
Reform and Oversight is the only committee in the House of 
Representatives with jurisdiction over all Federal managerial 
programs and actions, this report focuses on actual management 
and accomplishments or lack thereof, rather than policy. By no 
means should this report be considered to be comprehensive, 
however. Serious management deficiencies in the executive 
branch of Government are too numerous to inventory in a single 
report. Only some of the more obvious problems facing the 
cabinet departments and several independent agencies have been 
reviewed here.
    Some problems are unique to the departments, such as the 
failure of the Department of Labor to focus sufficient 
management resources on eliminating organized crime in labor 
unions, or the rising delinquency rates in agricultural loans 
managed by the Department of Agriculture. Other problems, such 
as mismanagement of contracts, abuses of the personnel system 
and failure to collect debts owed the Government can be found 
in almost all departments and agencies.
    This report was initiated to shine the light of day on weak 
management practices, lack of effective oversight, and 
inconsistency in evaluating the effects of agency actions in 
the Federal Government. It briefly reviews the administration's 
highly publicized National Performance Review, which was 
developed to make Government ``work better and cost less.'' The 
National Performance Review is clearly a laudable initiative, 
but to date, it has produced few concrete results.
    On the positive side, the 104th Congress enacted 
legislation that, if implemented effectively, should make 
specific improvements in problem areas of the Federal sector. 
For example, comprehensive procurement reform, the Unfunded 
Mandates Reform Act, and the Line Item Veto are but a few of 
the refreshing management improvements enacted during the past 
two years.
    The report concludes that public perceptions of pervasive 
waste, fraud and mismanagement in the Federal Government are 
unfortunately accurate. Other alarming developments in the 
Federal Government which demonstrate the need for greater 
accountability include the expansion of the General Accounting 
Office's ``High Risk'' list of Federal program areas. That 
catalogue of Government ``hot spots'' grew from 14 in 1990 to 
20 today--a net increase of six areas.
    Of the ``twelve worst examples of government waste'' 
outlined for priority attention of this administration by a 
1992 House Committee on Government Operations majority staff 
report, 11 are the same or worse now. Some, like the failure of 
the Internal Revenue Service and the Department of Justice to 
collect outstanding debt and the growth of health care fraud 
and abuse, are much worse now. Taken individually, these items 
are cause for concern; taken in the aggregate, they are cause 
for alarm and an indication that leadership, both at the 
various agencies and at the helm of Government, is lacking. 
Indeed, with some exceptions, key appointees apparently do not 
understand or care to learn about effective management of their 
programs. Bureaucrats cannot operate those programs in the 
absence of strong guidance and oversight at the highest levels 
of their organizations.
    The Federal Government is plagued by generic problems which 
result in billions of dollars lost to mismanagement, fraud and 
abuse. Poor financial management, wasteful procurement and 
inventory practices, sloppy contract management, personnel 
abuses and manipulation of personnel rules, silly or even 
harmful rules and regulations are among the consequences of bad 
management.
    Acts such as the Chief Financial Officers Act and the 
Government Performance and Results Act were passed by Congress 
in frustration over managerial anarchy and program 
disaggregation. These Acts were passed in an effort to counter 
the tendency of management and budget to separate at the 
Federal level. As this report amply demonstrates, the Office of 
Management and Budget has exacerbated that problem by merging 
its management and budget functions.
    This quick review of fraud, abuse and mismanagement 
uncovered $350 billion in potential savings that could be 
achieved if greater resources were devoted to good management 
practices. Hundreds of billions more will be wasted in the near 
term on cost over runs, program delays, delinquent payments, 
loans, grants and unfulfilled contracts. Additional costs for 
the Department of Energy's nuclear waste cleanup alone is 
estimated to cost as much as $350 billion.
    Although this report is critical of the executive branch, 
it is not intended as an indictment of dedicated career civil 
servants, including managers, who are functioning in an 
increasingly complex and sometimes inflexible environment. The 
committee recognizes that Federal employees are operating under 
greater, rather than fewer constraints. It is the committee's 
intent that the report will stimulate discussion, induce action 
and result in positive reforms in Federal management.


                            C O N T E N T S

                               __________
                                                                   Page
Executive Summary................................................     v
  I. Introduction and Findings........................................1
 II. Scope of Review..................................................6
III. Update of ``12 Worst Examples of Government Waste'' From 1992 
     Committee Staff Report...........................................7
 IV. Evolution of GAO's High Risk List...............................13
  V. Need for a Fundamental Review of Federal Programs and Structures15
 VI. Management Problems in Federal Departments and Agencies.........23
          Department of Agriculture..............................    23
          Department of Commerce.................................    32
          Department of Defense..................................    37
          Department of Education................................    47
          Department of Energy...................................    56
          Environmental Protection Agency........................    65
          Executive Office of the President......................    78
          Federal Emergency Management Agency....................    91
          General Services Administration........................    96
          Department of Health and Human Services................   100
          Department of Housing and Urban Development............   114
          Department of the Interior.............................   123
          Department of Justice..................................   130
          Department of Labor and the National Labor Relations 
              Board..............................................   140
          National Aeronautics and Space Administration..........   151
          Office of Personnel Management.........................   154
          Postal Service.........................................   162
          Social Security Administration.........................   167
          Department of State and the Agency for International 
              Development........................................   174
          Department of Transportation...........................   181
          Department of the Treasury.............................   191
          Department of Veterans Affairs.........................   198
          The War on Drugs.......................................   200
VII. Management Reforms in the 104th Congress.......................204

                                 VIEWS

Clarifying comments by Hon. William F. Clinger, Jr...............   212
Minority views of Hon. Cardiss Collins...........................   213
  


                                                 Union Calendar No. 468
104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2nd Session                                                    104-861
_______________________________________________________________________

 FEDERAL GOVERNMENT MANAGEMENT: EXAMINING GOVERNMENT PERFORMANCE AS WE 
                         NEAR THE NEXT CENTURY

                                _______
                                

 September 28, 1996.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

_______________________________________________________________________


  Mr. Clinger, from the Committee on Government Reform and Oversight, 
                        submitted the following

                           EIGHTEENTH REPORT

                             together with

                     ADDITIONAL AND MINORITY VIEWS

    On September 24, 1996, the Committee on Government Reform 
and Oversight approved and adopted a report entitled ``Federal 
Government Management: Examining Government Performance as We 
Near the Next Century.'' The chairman was directed to transmit 
a copy to the Speaker of the House.

                      I. Introduction and Findings

    The primary legislative jurisdiction of the Committee on 
Government Reform and Oversight as reflected in Rule X of the 
Rules of the House of Representatives includes matters relating 
to the overall economy, efficiency and management of government 
operations and activities, the relationship of the Federal 
Government to the States and municipalities, and 
reorganizations in the executive branch of the Government. Rule 
X also affords the committee primary oversight responsibility 
to ``review and study, on a continuing basis, the operation of 
Government activities at all levels with a view to determining 
their economy and efficiency.''
    Pursuant to this authority, the committee initiated a 
comprehensive review of agency management throughout the 
Federal Government. This report details the findings of the 
committee's review. The precedent for the conduct of a 
governmentwide management review was established in 1992 when 
the chairman of this committee, known then as the House 
Government Operations Committee, released a committee staff 
report on poor Federal management.
    The Government Reform and Oversight Committee's review has 
revealed that the alarming problems of mismanagement, waste and 
abuse in Federal departments and agencies persist and may be 
growing. For example, an update of the 12 ``worst examples of 
government waste'' cited in the Government Operations 
Committee's 1992 staff report indicates that only one of the 12 
examples has shown significant improvement. Seven of the cited 
examples are worse now, and three of these are much worse. (See 
Section III of this report.) Also, the General Accounting 
Office's (GAO) ``High Risk'' list of Federal program areas that 
are particularly vulnerable to fraud, waste, and abuse grew 
from 14 in 1990 to 20 today--a net increase of six areas. (See 
Section IV.) Such potential for wasteful spending is 
particularly intolerable given the urgent need to balance the 
Federal budget and make the best use of every dollar spent.
    During the past 4 years, numerous administrative problems 
have arisen or have been exacerbated significantly. The 
incidence of tax scofflaws, inability or unwillingness to 
collect outstanding debt, multi-billion dollar cost over runs, 
and mismanagement of expensive computer systems, are a few 
examples. Specific instances of waste, mismanagement and fraud 
are numerous. Consider, for example, the following:
     $125 billion in Federal debt is delinquent. That 
is 37 percent of all debt owed. An additional $5 to $6 billion 
of criminal debt is outstanding. The amount of delinquent debt 
is climbing steadily.
     Costing at least $1 billion per mile, the 
reconstruction of Boston's central artery/tunnel project, 
financed through the Department of Transportation, is much more 
expensive per mile than the English Channel Tunnel or 
``Chunnel.'' In fact, its total cost is approaching the total 
cost of the Chunnel. This single project may cost $9 billion 
over original estimates.
     Only 8 percent of callers could reach the Internal 
Revenue Service by phone for tax year 1995. The rate has 
plummeted since the 1989 tax filing season, when the agency 
answered 58 percent of its telephone calls for assistance.
     Drug use among teens doubled during the past 4 
years. Spending on drug treatment programs tripled since 1988, 
but the estimated number of individuals treated actually 
declined. 80 percent of users are not enrolled in treatment 
programs--many of those casual users are teens.
     The Department of Interior ``paid'' $800,015 for a 
$150 vacuum cleaner, $700,035 for a $350 dishwasher, and $79 
million for a $793 mobile radio unit. (See page 123.)
     $1.6 million was paid by the Department of 
Interior for ``personality profiles'' for agency supervisors--
and the agency is considering expanding the program to all 
15,000 agency employees.
     The Immigration and Naturalization Service spends 
$30 million annually for overtime. Under its pay system, the 
agency can--and does--pay for 16 hours of overtime for as 
little as 1 hour of work on Sundays and holidays, and it even 
pays workers overtime to take annual leave.
     Unfunded liabilities for nuclear waste cleanup at 
the Department of Energy are estimated to be a staggering $350 
billion.
     The Department of the Interior failed to collect 
as much as $1.2 billion in payments on oil royalties, and in 
California alone, oil companies were undercharged as much as 
$856 million for royalty rights.
     The estimated cost of fraud and abuse this year to 
the Department of Health and Human Services Medicare and 
Medicaid programs may reach $26.9 billion.
     163 Federal job training programs costing more 
than $20 billion compete against one another to serve the same 
client populations, and have overlapping and conflicting 
administrative structures.
     The Department of Agriculture allowed Federal 
prisoners to make long-distance telephone calls to sex and 
adult party lines at its expense.
     Federal employees in the Department of Commerce 
have used Government credit cards to make purchases of liquor, 
jewelry, flowers, music, payment of on-line computer services 
and private auto insurance.
     Since striking air traffic controllers were 
pardoned, safety concerns no longer determine where they are 
deployed. Controllers decide where their duty station will be. 
The Department of Transportation Inspector General declared the 
collective bargaining agreement with the union to be ``[a] 
major problem impacting effectiveness and efficiency of Federal 
Aviation Administration operations.''
     If the Internal Revenue Service were a taxpayer, 
it would be audited. Total amounts of tax revenue and tax 
refunds it collects cannot be verified.
     $12.6 million is being taken out of the Social 
Security Trust Funds to pay Federal employees to work full-time 
on union activities. One such employee is paid $81,000 per year 
and performs no work for the Social Security Administration. 
More than 1,800 Federal employees are spending part of their 
time on union activities at SSA.
     The Environmental Protection Agency reduced its 
total advisory committees, but increased the amount they spend 
on them by 84 percent. Only 6 committees were required by law; 
the Environmental Protection Agency has 22 advisory committees.
     The Department of Labor has been tolerating the 
use of fraudulent wage data for purposes of the Davis-Bacon 
Act, potentially inflating Federal--and State--construction, 
alteration and repair costs by hundreds of millions of dollars.
     At the Department of Agriculture, an estimated $2 
billion per year in overpayments in the Food Stamp program are 
never recovered. A large quantity of food stamps are used in 
trafficking for non-food items, such as drugs and guns.
     The Safe and Drug Free Schools Act is not being 
monitored by the Federal Government. This troubling lack of 
oversight is reflected in the use of Federal funds for items 
such as: $81,000 for large teeth and giant toothbrushes; over 
$12,300 for wooden cars with ping-pong balls; over $18,000 for 
the hokey-pokey song; over $122,000 for latex gloves; and 
$3,700 for bicycle pumps.
    Unfortunately, while the effective management of the 
Federal Government is more important than ever before, the 
Clinton administration has cut back significantly on central 
management capacity to oversee the executive branch. Examples 
include the loss of the management role once held by the Office 
of Management and Budget (OMB); the discontinuance of OMB's 
``High Risk'' list; inadequate staffing at the Office of 
Federal Financial Management; and the approval of a blatantly 
illegal buyout plan for Federal employees.
    The Clinton administration's highly publicized management 
reform initiative, known as the National Performance Review 
(NPR), included an exhaustive review of the executive branch. 
While the NPR has succeeded in highlighting the importance of 
government management, it has only tinkered at the margins of 
serious of management reform. Relatively few substantive 
reforms have been implemented, and it is difficult to 
substantiate any savings flowing from NPR's work. The examples 
of ongoing mismanagement, fraud, waste and abuse contained in 
this report demonstrate persuasively that the NPR's primary 
goal of ``creating a Government that works better and costs 
less'' has failed.
    On a positive note, the committee expects that aggressive 
implementation of the Government Performance and Results Act 
(GPRA) will do much to force a change in the way the Federal 
bureaucracy does business. This law, conceived by Senator 
William Roth of Delaware, requires Federal departments and 
agencies to measure program performance and tie their 
performance goals to annual budget requests. GPRA will set the 
standard for government performance and will ensure that the 
egregious examples contained in this report of Federal 
mismanagement, fraud, waste and abuse will no longer be 
accepted as ``business as usual.''
    Unfortunately, the administration has not aggressively 
implemented the GPRA. While a small group of dedicated civil 
servants are struggling to implement the Act in a responsible 
manner, overall implementation is significantly delayed and 
many agencies are far behind schedule in developing performance 
plans, validating performance measures, and setting sound 
program and agency-wide goals. In large part this is due to a 
lack of commitment at the highest levels of the departments and 
agencies to implementing management reforms. As a result, 
important GPRA pilot projects in managerial accountability and 
flexibility and performance budgeting are delayed. All agency-
wide performance plans are to be in place by September 1997, 
but that goal cannot be achieved with legitimate plans given 
the status of implementation to date.
    Because OMB recognizes that the GPRA will entail extensive 
planning and measurement of programs prior to implementation, 
it has urged agencies to ``not underestimate the scope of the 
tasks ahead, nor the time that will be needed'' \1\ to prepare 
for the GPRA. Regrettably, OMB lacks the oversight authority 
and resources it once had to compel agencies to manage their 
programs responsibly, report honestly on their progress, 
prepare data in a consistent manner or reveal specific program 
information.
    GPRA could be an extremely useful tool for agency managers, 
OMB and legislators to better understand individual programs as 
well as cross-cutting Federal functions such as financial 
management, credit, personnel, health care, environmental 
programs or job training. OMB has asked agencies to identify 
steps that should be taken on a multi-agency basis to 
coordinate and harmonize programs with common and cross-cutting 
goals and objectives in their GPRA strategic plans.\2\ While 
this will be a difficult task, it will be extremely useful to 
identify areas of program overlap, fragmentation and 
duplication. Thus, GPRA can aid in harmonizing Federal 
functions and programs.
    Harmonizing Federal programs and functions is important. In 
April 1995, the GAO completed a study of agency spending 
patterns in various funding categories contained in the Federal 
budget.\3\ The study showed that despite efforts to downsize, 
streamline, and reinvent the Federal bureaucracy, massive 
duplication, overlap and fragmentation in the jurisdiction of 
Federal agencies, programs and delivery systems still exists.
    The GAO study shows that, on average, more than five 
different agencies perform the same or related functions. For 
example, eight agencies perform functions related to regulating 
natural resources and the environment. Fifteen agencies perform 
some kind of income security function. So many agencies are 
involved in trade promotion that 19 are represented on the 
Trade Promotion Coordinating Committee. Each of the four 
missions of the Department of Commerce are performed by eight 
other departments and agencies. Within the same department or 
agency, there are multiple agencies or programs performing the 
same function. The Department of Agriculture, for example, has 
four agencies with roles in rural and community development. 
The budget subfunction ``Advancement of Commerce'' is addressed 
in no fewer than 21 subdepartments within eight departments and 
agencies. In another report, the GAO found that within the 
Federal Government there are an amazing 163 programs with a job 
training or employment function.\4\
    A certain amount of redundancy is understandable and can be 
beneficial if it occurs by design as part of a management 
strategy to foster competition, provide better service delivery 
to customer groups, or provide emergency backup. But GAO's 
examples are not isolated findings of duplication or strategic 
redundancy in a few programs. The scale of duplication in the 
Federal Government reflects serious bureaucratic expansion, 
program proliferation and administrative redundancy.
    To demonstrate that the NPR has fallen short of its claim 
of ``reinventing'' and streamlining government, the GAO 
performed an audit of the accomplishments of the NPR. The GAO 
found that, of 1,203 action items necessary for implementation 
of NPR recommendations, only 294, or 24 percent, were 
completed.\5\ On closer examination, many of the ``completed'' 
action items included activity items, and not actions that 
would fundamentally alter government performance. Some 
completed items include landscaping around Federal buildings, 
writing agency mission statements, publishing reports and 
frequently used statistics on the Internet, increasing user 
fees, using teams to write regulations, and ``. . . select[ing] 
and develop[ing] capable and cohesive executive leaders for 
[the agency].'' \6\ None of these items are original to this 
administration.
    In many other respects, the Federal Government remains un-
reinvented. The big problems of the Federal Government remain. 
Many, though not all of them, are described in this report. The 
findings here are based mainly on government audits, 
congressional oversight and the work of the Federal inspectors 
general. It is clear from the committee's review that the ``Era 
of Big Government'' to which the President alluded in his State 
of the Union Address is far from over.

                                ENDNOTES

    \1\ Alice M. Rivlin, Director, Office of Management and 
Budget, Memorandum for the Heads of Executive Departments and 
Independent Agencies regarding Implementation of the Government 
Performance and Results Act of 1993, April 11, 1996, p. 2.
    \2\ Id.
    \3\ General Accounting Office, Budget Function 
Classification: Agency Spending and Personnel Levels for Fiscal 
Years 1994 and 1995, GAO/AIMD-95-115FS (April 1995).
    \4\ General Accounting Office, Multiple Employment Training 
Programs: Major Overhaul Needed to Reduce Costs, Streamline the 
Bureaucracy, and Improve Results, GAO/T-HEHS-95-53 (January 10, 
1995).
    \5\ General Accounting Office, ``Management Reform: 
Completion Status of Agency Actions Under the National 
Performance Review,'' GAO/GGD-96-94 (June 1996).
    \6\ General Accounting Office, ``Management Reform: 
Completion Status of Agency Actions Under the National 
Performance Review,'' GAO/GGD-96-94 (June 1996), p. 41.

                          II. Scope of Review

    This is a report on Federal management. Its does not 
address what specific policy objectives, programs and 
activities the Federal Government should or should not pursue. 
Rather, it focuses on how Federal agencies execute those 
programs and other responsibilities that have been assigned to 
them. The merits of Federal programs and activities are, of 
course, subject to intense debate--particularly in these times 
of budget deficits and keen competition for limited Federal 
resources. However, the importance of efficient, effective, and 
honest management is not a debatable issue. Fraud, waste, 
abuse, and mismanagement serve no legitimate constituency or 
political interest. They cheat both the taxpayers and the 
intended beneficiaries of the programs and activities they 
affect. They also undermine the confidence of the American 
people in the capacity and will of the Federal Government to 
perform its functions effectively.
    The report consists primarily of a survey of executive 
branch departments and agencies that describes their most 
serious management problems. The results are based on the 
committee's analysis of volumes of data concerning management 
problems developed by the Federal inspectors general, the 
Office of Management and Budget (OMB), the National Performance 
Review, the General Accounting Office (GAO), congressional 
oversight hearings, and sources outside the Federal Government. 
The information is comprehensive and current. Virtually all of 
the reports and other findings relied on were issued within the 
2 to 3 years.
    Each agency description covers several problem areas. This 
does not suggest by any means that the descriptions are 
exhaustive or capture all major problem areas. The committee's 
intent is to concentrate on those areas in which there is a 
clear consensus that a serious problem exists. Most if not all 
of the areas described have been the subject of recurring 
reports by agency inspectors general, the General Accounting 
Office, and others. Many appear on the ``High-Risk'' lists 
maintained by GAO and (until this year) by OMB. They also have 
been described in the work of the National Performance Review 
and in reports prepared by the agencies themselves under the 
Federal Managers' Financial Integrity Act. Unfortunately, it is 
all too easy to identify these core problems. Many have 
persisted for years--during both Republican and Democratic 
administrations.
    The agency descriptions are limited to problems in the 
implementation of programs and activities over which the 
agencies have substantial control. They do not include areas in 
which the root cause of the problem requires a legislative 
solution. By the same token, they do not include statutory 
programs that some might regard as examples of ``waste'' 
because of disagreement with the policies and objectives of the 
law an agency is responsible for implementing.
    In addition to the individual problem descriptions, the 
report discusses several themes that emerge from the agency 
surveys, as well as the committee's analysis of pervasive 
redundancy in current Federal programs and organizations. 
Finally, the report proposes an approach that the committee 
believes might provide a useful framework for addressing 
Federal management reforms on a fundamental and comprehensive 
basis.

  III. Update of ``12 Worst Examples of Government Waste'' From 1992 
                         Committee Staff Report

                                Overview

    The 1992 report by the majority staff of the House 
Government Operations Committee included a list of problem 
areas that it characterized as the twelve ``worst examples of 
government waste.'' \1\ This Section updates the status of the 
twelve areas.
    By way of summary, only one of the twelve areas shows 
significant improvement. Seven of the problem areas are worse 
now, and three of these are much worse. On the positive side, 
the 104th Congress enacted legislation that, if implemented 
effectively, should make specific improvements in four of the 
problem areas. Congress passed legislation to address two more 
specific problem areas, but that legislation was vetoed by the 
President. Other laws enacted by the current Congress, which 
are designed to improve executive branch management practices 
in general, should have a positive impact on a number of the 
problem areas. One example is the Information Technology 
Management Reform Act of 1996 (Public Law 104-106, Division E).
    The twelve problem areas, as described in the 1992 staff 
report, and their current status are as follows:

Problem: Department of Energy nuclear waste cleanup

    Taxpayers will have to spend from $150 to $300 billion over 
the next 30 years because of the careless handling of hazardous 
wastes at Federal nuclear weapons plants.

Status: Worse now

    DOE now has spent $34 billion on cleanups, but schedules 
have slipped and progress is slow. In 1995, DOE projected that 
cleanups could take another 75 years to complete and cost up to 
an additional $350 billion. This estimate does not include the 
cleanup costs for most contaminated groundwater or for 
currently active facilities.\2\ At the end of fiscal year 1994, 
only 13 percent of the 856 environmental restoration projects 
had been completed. Two-thirds of the projects are still in the 
early stages of investigation and characterization. DOE has 
begun deactivating only a handful of its thousands of inactive 
facilities. Finally, DOE cannot permanently dispose of highly 
radioactive wastes from its own and commercial facilities until 
it develops a geologic repository. DOE does not expect to 
determine a site for this depository until 2001, or to begin 
operations until 2010. Some experts, including DOE's own 
internal advisory panel, have called for moving this entire 
project to the private sector.\3\ Management problems relating 
to nuclear waste cleanup are discussed in detail in the DOE 
section of this report.

Problem: S&L bailout

    The S&L bailout is estimated to cost at least $195 billion. 
At least $66 billion could have been avoided if Federal 
regulators had closed insolvent thrifts earlier.

Status: About the same

    Strictly speaking, the S&L bailout is neither better nor 
worse today. The S&L crisis was a fait accompli by 1989, and 
Federal efforts since then have dealt with its resolution. This 
debacle of monumental proportions stemmed from many causes, 
including failures by both the executive and legislative 
branches of the Federal Government. Among its root causes were 
laxity by Federal regulators, ill-conceived statutory 
authorities, and inadequate congressional oversight. Both the 
administration and the Congress waited far too long to address 
the crisis. GAO recently reported that the total cost of 
resolving the S&L crisis far exceeds the $195 billion estimate, 
and could approach one-half a trillion dollars.\4\

Problem: Interior Department's failure to collect royalties on land 
        patents to mining companies

    Since 1987, the Interior Department has given away to 
mining companies patents assigning them mineral rights on 
Federal lands worth $91.3 billion.

Status: The same now

    The problem stems from the Mining Law of 1872, which 
permits mining rights to be patented for much less than current 
fair market value and does not impose any royalties on hardrock 
minerals extracted from Federal lands. Congress moved to 
resolve the problem in the 104th Congress. It passed 
legislation, as part of the fiscal year 1996 budget 
reconciliation bill, that would have (1) required that current 
market rates be used when selling Federal land to miners in the 
form of a patent, and (2) imposed a 5 percent net royalty on 
hardrock mining. \5\ Unfortunately, the President vetoed this 
legislation and, therefore, the problem continues today.

Problem: Interior Department's mine reclamations

    It will cost the Interior Department $81.5 billion to 
reclaim abandoned coal and non-coal mines to make them safe and 
reduce pollution.

Status: The same now

    The 1995 reconciliation bill also established a fund for 
the cleanup of hardrock mines, to be derived from royalty 
revenues.\6\ As noted above, the legislation was vetoed. Thus, 
the problem continues.\7\

Problem: The Internal Revenue Service fails to collect billions in 
        delinquent taxes

    IRS is owed over $125 billion in past due taxes. At least 
$46 billion that could be collected may be written off because 
IRS is moving too slowly and the statute of limitations may 
expire.

Status: Much worse now

    According to GAO, ``IRS is losing ground in collecting 
mounting tax receivables.'' \8\ Total tax receivables now have 
reached $200 billion. Because of the abysmal state of IRS' 
accounting records--a major problem in itself--it is impossible 
to tell how much of this amount is collectible. However, even 
using IRS estimates, annual collections as a proportion of 
collectible delinquent tax debt continue to decline. Despite 
congressional encouragement, IRS shows little enthusiasm for 
initiatives aimed at improving delinquent tax collection. The 
Treasury Department section of this report describes the 
problem in detail.

Problem: Defense Department inventory practices

    In recent years, Defense has wasted over $30 billion in 
inventory stocks. About $21 billion in spare parts, clothing, 
and other supplies was unneeded. Another $9.4 billion was 
excess; its current value has fallen to $200 million.

Status: Worse now

    GAO lists Defense Department inventory management as a 
``high-risk'' area that has not improved:

          . . . DOD has made little overall progress in 
        correcting long-standing management problems that 
        perpetuate buying and holding too much inventory. For 
        example, DOD stores billions of dollars of unneeded 
        inventory, requirements continue to be overstated 
        leading to unnecessary procurements, and modern 
        commercial practices are not being implemented as fast 
        as possible.\9\

    GAO reported that by the end of fiscal year 1993, items not 
needed for war reserves or current operations had grown to $36 
billion--almost half of DOD's total inventory.\10\
    Through enactment of the Federal Acquisition Reform Act of 
1996 (Public Law 104-106, Division D), Congress has made the 
procurement process significantly easier. If DOD takes 
advantage of these procurement reforms and adopts more 
efficient inventory management practices advocated by GAO, it 
would virtually solve the excess inventory problem.

Problem: Department of Agriculture loan programs

    Loan programs for farmers lost nearly $21 billion from 1988 
to 1989, and are expected to lose another $18 billion on 
current loans.

Status: Worse now

    Agriculture loan programs remain on GAO's ``high-risk'' 
list, and losses continue to mount. Losses exceeding $6 billion 
were incurred during fiscal years 1991-94.\11\ As of April 
1995, the outstanding principal on active direct and guaranteed 
farm loans totaled $17.8 billion; almost $6 billion of this 
amount was held by delinquent borrowers.\12\ The Department of 
Agriculture section of this report discusses the problem.
    The recently enacted Federal Agriculture Improvement and 
Reform Act of 1996 (Public Law 104-127) will force the 
Department to make needed improvements in such areas as lending 
guidelines and collection of delinquent debt.

Problem: Mismanagement and corruption at the Department of Housing and 
        Urban Development

    During the ``HUD Scandal'' of the mid to late 1980's, more 
than $8 billion was lost as a result of gross mismanagement, 
influence peddling, favoritism, fraud, and embezzlement on the 
part of HUD officials. This included $6 billion from the 
mutlifamily housing coinsurance program and $2 billion in other 
abuses.

Status: Worse now

    While it appears that corruption has abated, mismanagement 
at HUD remains pervasive. The HUD Inspector General recently 
described the Department's management problems as ``extreme.'' 
In 1994, GAO placed the entire Department on its ``high-risk'' 
list. Also, a 1994 report by the National Academy of Public 
Administration called for HUD's abolition in 5 years if it is 
not operating under a clear legislative mandate and in an 
effective, accountable manner. Congress is actively considering 
legislation to reform HUD. The HUD section of this report 
discusses the Department's management problems in more detail.

Problem: Pension Benefit Guarantee Corporation

    Underfunding of private pension plans and poor financial 
management by PBGC may require a Federal bailout of $20-30 
billion.

Status: Better now

    GAO has removed PBGC from its ``high-risk'' list.\13\ The 
Retirement Protection Act of 1994 (Public Law 103-465) 
strengthened minimum funding standards for private pension 
plans and phased out the cap on variable rate premiums paid by 
underfunded defined pension benefit plans. GAO gave PBGC's 
financial statements for fiscal years 1993 and 1994 an 
unqualified opinion. It noted that PBGC has continued to make 
progress in improving its internal controls but still has 
material internal control weaknesses.\14\

Problem: Health care fraud and abuse

    Health care fraud and abuse could cost $21 billion in 
losses to Federal Medicare and Medicaid payments in 1992. HHS 
oversight, initiative, and resources to combat health care 
fraud are inadequate.

Status: Much worse now

    Medicare fraud and abuse is, by itself, one of 6 major 
focus areas in GAO's high-risk work.\15\ Experts estimate that 
10 percent of national health care spending is lost to fraud, 
waste, and abuse. Applying this factor to projected Medicare 
spending, annual losses will reach $18 billion in fiscal year 
1997 and a staggering $38 billion by 2003. As detailed in the 
HHS section of this report, flawed payment policies, weak 
billing controls, and inconsistent program management all 
contribute to Medicare's vulnerability to fraud, waste, and 
abuse. Medicare scams abound, insurers owe Medicare millions of 
dollars for mistaken payments, and providers continue to 
exploit loopholes and billing control weaknesses. Federal 
controls have not kept pace with increasingly complicated 
health care financial arrangements. These problems are 
exacerbated by the Federal Government's failure to take 
aggressive action to penalize perpetrators of fraud.
    Title V of the recently enacted Health Insurance Reform Act 
of 1996 (Public Law 104-191) contains a number of provisions to 
prevent and combat health care fraud and abuse.

Problem: Environmental Protection Agency Superfund program

    The Superfund program is wasteful and has accomplished 
little. About 40 percent of the $9 billion spent on Superfund 
in recent years went for administration and management. After 
12 years, only 80 of 1,275 hazardous waste sites have been 
cleaned up. Another $50 billion probably will be spent on the 
program.

Status: About the same now

    The Superfund program remains high-risk.\16\ A recent 
estimate indicates that the hazardous waste problem has grown 
to $75 billion for non-Federal sites and to as much as $400 
billion for Federal facilities.\17\ As of March 1995, EPA 
reported 15,723 superfund cleanup sites of which 1,363 are 
considered the most hazardous.\18\ A total of about $30 billion 
has been spent on Superfund, about half of which was financed 
by taxpayer funds appropriated by the government. Between $1.3 
and $1.5 billion is spent annually by the government and 
spending at the non-Federal level is twice that amount. Despite 
this investment, cleanups have been completed at less than 100 
of the nearly 1,400 sites listed as national priorities. The 
average time required for cleanup is 12 years. EPA has been 
criticized for failing to prioritize sites for cleanup on the 
basis of risk,\19\ and has only very recently made its first 
attempt to do so. Superfund management remains inefficient and 
beset by high overhead costs. Nearly half of Superfund 
expenditures go not to clean up sites, but to pay lawyers, 
consultants, and agency staff. The problems with the Superfund 
program are detailed in the EPA section of this report.

Problem: Justice Department debt collection

    Justice Department debt collection efforts are plagued by 
management problems, particularly lack of centralized 
information.

Status: Much worse now

    The problem extends well beyond the Justice Department, as 
the Government's debt collection efforts continue to decline on 
all fronts. As noted above, delinquent tax debt is increasing 
rapidly. Non-tax delinquencies also are on the rise. According 
to OMB's most recent report, non-tax delinquent debt increased 
by $1.2 billion during fiscal year 1995 to a total of over $50 
billion.\20\ The OMB figures do not even include criminal debt, 
which has increased exponentially in recent years and is now 
estimated at nearly $6 billion. Inadequate financial management 
and information systems continue to plague Federal debt 
collection. The most recent example is the total collapse of 
efforts to create a National Fine Center to track and collect 
criminal debt, which resulted in the waste of millions of 
dollars from the Crime Victims Fund. Debt collection problems 
are described in detail in the Justice Department and Treasury 
Department sections of this report.
    The recently enacted Debt Collection Improvement Act of 
1996 \21\ provides agencies with additional tools to enhance 
debt collection efforts. The executive branch needs to supply 
much stronger leadership and interest if these tools are to be 
used successfully.

                                ENDNOTES

    \1\ House Committee on Government Operations Committee 
Print, Managing the Federal Government: A Decade of Decline, 
102d Cong., 2d Sess. (December 1992), pp. xi-xii.
    \2\ General Accounting Office, Energy Management: 
Technology Development Program Taking Action to Address 
Problems, GAO/RCED-96-184 (July 9, 1996), p. 1.
    \3\ General Accounting Office, Department of Energy: 
Observations on the Future of the Department, GAO/T-RCED-96-244 
(September 4, 1996), p. 13.
    \4\ General Accounting Office, Financial Audit: Resolution 
Trust Corporation's 1995 and 1994 Financial Statements, GAO/
AIMD-96-123 (July 2, 1996).
    \5\ See the proposed ``Mining Revenue Act of 1995,'' H.R. 
2491, 104th Cong., Title V, chapter 5.
    \6\ Id.
    \7\ While the problem remains, the Committee staff's 
estimate of the costs of reclaiming mines cannot be confirmed. 
A recent GAO report, Federal Land Management: Information on 
Efforts to Inventory Abandoned Hard Rock Mines, GAO/RCED-96-30 
(February 23, 1996), concludes that total cleanup costs, or 
even the total number of abandoned mines cannot be determined 
definitively.
    \8\ General Accounting Office, High-Risk Series, An 
Overview, GAO/HR-95-1 (February 1995), p. 6.
    \9\ General Accounting Office, High-Risk Series, Defense 
Inventory Management, GAO/HR-95-5 (February 1995), p. 7.
    \10\ Id., pp. 14-15.
    \11\ General Accounting Office, High-Risk Series, Farm Loan 
Programs, GAO/HR-95-9 (February 1995), p. 8.
    \12\ See Consolidated Farm Service Agency: Update on the 
Farm Loan Portfolio, GAO/RCED-95-223FS (July 14, 1995), pp. 1-
2.
    \13\ See General Accounting Office, High-Risk Series, An 
Overview, GAO/HR-95-1, note 4, pp. 30-31.
    \14\ General Accounting Office, Financial Audit: Pension 
Benefit Guaranty Corporation's 1994 and 1993 Financial 
Statements, GAO/AIMD-95-83 (March 8, 1995).
    \15\ Id., pp. 7-8. See also High-Risk Series, Medicare 
Claims, GAO/HR-95-8 (February 1995).
    \16\ See GAO, High-Risk Series, Superfund Program 
Management, GAO/HR-95-12 (February 1995).
    \17\ General Accounting Office, Superfund: More Emphasis 
Needed on Risk Reduction, GAO/T-RCED-96-168 (May 8, 1996), p. 
1.
    \18\ General Accounting Office, Superfund System 
Enhancements Could Improve the Efficiency of Cost Recovery, 
GAO/AIMD-95-177, August 1995.
    \19\ See, for example, General Accounting Office, Federal 
Facilities: Consistent Relative Risk Evaluations Needed for 
Prioritizing Cleanups, GAO/RCED-96-150 (June 7, 1996).
    \20\ Office of Management and Budget & Chief Financial 
Officers Council, Federal Financial Management Status Report & 
Five-Year Plan, Appendix I: Status Report on Credit Management 
and Debt Collection (June 1996), p. 50.
    \21\ Public Law 104-134, section 31001, 110 Stat. 1321-358 
(April 26, 1996).

                 IV. Evolution of GAO's High Risk List

    In 1990, the General Accounting Office undertook an 
initiative to place special emphasis on ``high-risk'' Federal 
program areas--areas that it considered to be particularly 
vulnerable to fraud, waste, abuse, and mismanagement.\1\ The 
GAO's original high-risk list consisted of 14 areas. Three more 
areas were added to the list in 1991 and 1992. In December 
1992, GAO issued its first series of reports on the high-risk 
areas. At this point, the high-risk list consisted of 17 areas. 
In 1994, GAO added another new area--the Department of Housing 
and Urban Development.
    In February 1995, GAO issued a second high-risk series of 
reports. At this time, GAO deleted from the high-risk list 5 
areas that it found had made ``significant progress.'' However, 
it added 7 new high-risk areas. Thus, GAO's high-risk list now 
includes a total of 20 areas. GAO observed: ``Collectively, 
these high-risk areas affect almost all of the government's 
$1.25 trillion revenue collection efforts and hundreds of 
billions of dollars of federal expenditures.'' \2\
    The evolution of GAO's high-risk list is summarized below. 
Areas still on the list are indicated in bold.

Original 14 high-risk areas:

    Resolution Trust Corporation
    Internal Revenue Service Receivables
    Management of Seized and Forfeited Assets
    Medicare claims
    Pension Benefit Guarantee Corporation
    Student Loans
    State Department Management of Overseas Property
    Defense Inventory Management
    Defense Weapons Systems Acquisition
    NASA Contract Management
    Farm Loan Programs
    Superfund Program Management
    Federal Transit Administration Grant Management
    Department of Energy Contract Management

Three areas added in 1991 and 1992:

    Bank Insurance Fund
    Managing the Customs Service \3\
    Defense Contract Pricing

One area added in January 1994:

    Department of Housing and Urban Development

Seven more areas added in February 1995:

    Defense Financial Management
    Defense Corporate Information Management (CIMI) Initiative
    IRS Financial Management
    IRS Filing Fraud
    IRS Tax Systems Modernization (TSM) Initiative
    FAA Air Traffic Control Modernization
    National Weather Service Modernization

Five areas deleted in February 1995:

    Resolution Trust Corporation
    Bank Insurance Fund
    Pension Benefit Guarantee Corporation
    State Department Management of Overseas Property
    Federal Transit Administration's Grant Management

                                ENDNOTES

    \1\ The Office of Management initiated a high-risk program 
of its own in 1989. The OMB high-risk program continued through 
fiscal year 1996, and was featured in detailed reports in the 
President's annual budget. However, OMB now has dropped its 
high-risk program.
    \2\ General Accounting Office, High-Risk Series, An 
Overview, GAO/HR-95-1 (February 1995), p. 7.
    \3\ This area was modified in 1995 to focus on Customs 
Service financial management.

  V. Need for a Fundamental Review of Federal Programs and Structures

    This report's agency-by-agency survey of management issues 
catalogs a wide range of serious problems affecting specific 
programs and activities within those organizations. Taken 
individually, the committee's findings are cause enough for 
concern. Taken in the aggregate, they raise even greater 
concerns. In order to gain a full appreciation of the magnitude 
of the government's management problems, it is necessary to 
step back from the individual programs, activities, and 
agencies and at examine Federal management in a broader 
context.

  The Federal Government Consists of a Maze of Programs and Agencies, 
                    Many of Which Appear Ineffective

    Over the years, Federal programs and agencies have evolved 
in an ad hoc and random manner with little consideration of how 
they relate to each other. Individual programs proliferated in 
response to the real or perceived needs of the moment. This 
committee's recent report, Creating A 21st Century Government, 
pointed out that there were 1,013 Federal programs in 1985, 
while today there are 1,390 Federal programs administered by 53 
departments and agencies. To support these programs and the 
bureaucracies that run them, Federal income tax receipts today 
have grown 13 times higher than they were in 1960.\1\
    As the agency-by-agency survey findings indicate, numerous 
Federal activities are chronically ineffective and wasteful. It 
is unclear, at best, whether many of these activities serve 
currently valid Federal missions. Legitimate questions have 
been raised concerning the viability of entire departments, 
including Commerce, Energy, and Housing and Urban Development. 
Many other activities that clearly address valid Federal 
missions are so beset by chronic problems that it is 
questionable whether they can carry out these missions 
effectively without fundamental change. One prime example is 
the Federal Aviation Administration's air traffic control 
system.
    Existing programs and agencies, no matter how inefficient, 
ineffective or even hopeless they may be, rarely die; nor do 
they undergo fundamental re-examination and reform. 
Unfortunately, the far more common response is to tinker at the 
margins or, worse yet, add more programs and layers of 
government on top of those that have failed or functioned 
poorly. Often, the problems are considered so daunting or 
politically sensitive that they are largely ignored. In this 
environment, management problems flourish and continue to grow.

  Duplication and Overlap Abound in Current Federal Organizations and 
                                Programs

    As one would expect, given the random evolution that has 
occurred over many decades, the Federal Government of today 
features massive overlap and duplication in both programs and 
organizations. The GAO recently analyzed department and agency 
spending patterns in relation to the 18 budget function 
classifications that cover the Federal Government's broad 
mission areas.\2\ A GAO official described the results as 
follows:

          Generally, and not surprisingly, our analysis 
        illustrates that duplication appears to be endemic. Our 
        current environment is a product of an adaptive federal 
        government's response over time to new needs and 
        problems, each of which was reflected in new 
        responsibilities and roles for departments and 
        agencies.\3\

    The essence of the analysis is captured by a table from the 
GAO report that is reproduced on the next page.\4\ As the GAO 
official observed, this table paints ``a picture of both 
fragmentation and overlap--some of it intentional.'' \5\ Among 
other things, the table shows:
     The income security function involves 15 different 
Federal departments and agencies.
     The education, employment and social services 
function involves seven departments and numerous other 
agencies.
     Federal law enforcement functions are spread out 
among five departments and four other agencies.
     Most departments participate in a variety of basic 
functions.
     The Agriculture Department tops the list, 
participating in 10 different functions.
     On top of the array of departments and major 
Federal agencies specifically listed on the table, an 
unspecified number of ``other independent agencies'' 
participate in 14 of the 18 functions.


    The patchwork quilt that makes up the current Federal 
structure is illustrated even more dramatically by examining 
duplication and overlap in major program categories. The 
following examples are taken from two recent GAO products: \6\
     The Department of Education administers over 200 
different education programs, while 30 other Federal agencies 
administer another 308.
     About 86 programs in nine Federal departments and 
agencies, accounting for over $280 million, deal with teacher 
training. At least 46 programs administered by eight Federal 
agencies deal with youth development. These programs are funded 
through earmarked appropriations targeted to similar 
populations.
     The taxpayers support over 90 early childhood 
programs in 11 Federal agencies and 20 offices. The Department 
of Health and Human Services runs 28 of these programs, and the 
Department of Education runs another 34. Thirteen different 
programs target disadvantaged children from birth through age 
5. Thus, a single disadvantaged child could potentially be 
eligible for as many as 13 Federal programs.
     Hundreds of Federal programs provide rural 
development assistance across multiple Federal agencies. The 
programs are difficult to administer because State and local 
officials must grapple with varying program regulations. For 
example, there are 11 different programs in six different 
Federal agencies that provide assistance for water and sewer 
projects; each has its own set of regulations.
     Federal food safety programs evolved through as 
many as 35 laws and are administered by 12 different agencies. 
Yet, these programs do not effectively protect the public from 
major food-borne illnesses. The programs lack coherence because 
their basic structure was created and continues to operate in a 
piecemeal fashion and in response to specific health threats 
from particular food products. Not surprisingly, the programs 
are hampered by inconsistent oversight and enforcement 
authorities, inefficient use of resources, and ineffective 
coordination.
     The Federal Government operates 163 separate 
employment training programs scattered among 15 departments and 
agencies and 40 interdepartmental offices. Given their size and 
structure, these programs--which have a total budget of about 
$20 billion--are particularly vulnerable to fraud, waste and 
abuse.
     Federal lands are managed through the National 
Park Service, Bureau of Land Management, and Fish and Wildlife 
Service within the Department of the Interior, and the Forest 
Service within the Department of Agriculture.
     Fourteen different programs within the Department 
of Agriculture provide food and food-related assistance to 
about 39 million people, from infants to the elderly, with 
estimated Federal funding of $37 billion in fiscal year 1994.
    Finally, departments and agencies can undergo fundamental 
change in their missions but retain obsolete structures. One 
prime example is the Department of Energy (DOE). The DOE was 
created in 1977 in the wake of the energy crisis. While energy 
research, conservation, and policymaking dominated early DOE 
priorities, weapons production, and now environmental cleanup 
now account for most of its budget. New missions in science and 
industrial competitiveness are now emerging. Notwithstanding 
the sharp reduction in the arms race and proposed cutbacks in 
energy and nuclear research funding, DOE still maintains a 
redundant structure for nuclear weapons work. This structure, 
which had its origins in the World War II-era Manhattan 
Project, includes a network of 28 laboratories with a total 
budget of nearly $8 billion and 63,000 employees.\7\
    In a succinct statement of the basic point to be made from 
the analyses and examples described above, the Comptroller 
General observed:

          The case for reorganizing the federal government is 
        an easy one to make. Many departments and agencies were 
        created in a different time and in response to problems 
        very different from today's. Many have accumulated 
        responsibilities beyond their original purposes. As new 
        challenges arose or new needs were identified, new 
        programs and responsibilities were added to departments 
        and agencies with insufficient regard to their effects 
        on the overall delivery of services to the public.\8\

A proposed analytical framework for reassessing Federal programs and 
        organizations

    This committee's Subcommittee on Government Management, 
Information, and Technology held a hearing last May on the work 
of the National Performance Review (NPR).\9\ As discussed in 
that hearing and elsewhere in this report, the results achieved 
by the NPR have been disappointing. In the committee's view, 
one reason for this is that the NPR did not take a sufficiently 
broad approach to Federal management issues. In this respect, 
it is similar to many other efforts to reorganize or 
``reinvent'' the Federal Government.
    In seeking a more comprehensive and innovative approach, 
the committee was particularly impressed with the testimony of 
Mr. Scott Fosler, President of the National Academy of Public 
Administration, at the May 1995 hearing. Mr. Fosler began by 
outlining what he described as ``a common series of responses'' 
that have been taken by both public and private institutions 
when they are confronted with pressure for change and 
restructuring.\10\ The responses consist of four phases. The 
first is ``denial''; the second is making incremental 
adjustments and ``patching'' problems; the third involves deep, 
cost-driven cuts and radical ``downsizing'' of their existing 
structures and resources. None of these phases tends to yield 
lasting and positive changes. Instead, such changes come in the 
fourth and final phase, which Mr. Foster described as follows:

          [O]rganizations return to the fundamentals of 
        performance: mission, capacity, and results. 
        Organizations in this stage ask fundamental questions 
        about purpose: What is our mission? Who are our 
        customers? Do we have the right mission and the right 
        customers? What resources, processes, and other 
        capacities are required to produce results with 
        quality, speed, and at least cost? How should we define 
        our mission given the resources and competencies 
        available to us?
          The emphasis on performance in no way ends the 
        concern with cost, or pressure to downsize. But by 
        focusing on what they should do--identifying core 
        purposes and missions, and strengthening their core 
        competencies--organizations have been able to cut costs 
        by:
           abandoning entire missions and lines of 
        business;
           jettisoning marginal or unproductive 
        resources that were not contributing to their basic 
        purposes;
           outsourcing necessary work that can be 
        performed by other organizations better or at less 
        cost; and
           reengineering work processes, often by 
        employing information technology, and thereby sharply 
        reducing the resources required to accomplish core 
        missions. \11\

    Mr. Fosler noted that, taken as a whole, efforts to 
reorganize and reform the Federal Government have yet to reach 
this fourth phase. Recognizing the difficulty of adopting such 
an approach for the ``vast and varied institution'' that is the 
Federal Government, he nevertheless proposed a framework for 
doing just that. This proposed framework requires a 
comprehensive and zero-based re-evaluation of current Federal 
programs and structures, applying the following considerations:
     Keep and strengthen those programs which fit a 
Federal mission and which work, or can be made to work, 
consolidating programs and eliminating duplication where 
appropriate, and reengineering core processes.
     Terminate those programs which do not fit a 
Federal mission and do not work, or cannot be made to work, or 
do not work at reasonable cost.
     Privatize or devolve to State or local levels of 
government programs which work and have value but do not fit a 
Federal mission.
     Give further consideration to those programs which 
do not fall clearly into one of the first three categories. 
Cases requiring special examination include programs and 
activities that are not working well but might serve a Federal 
mission if they could be made to work. They also include 
problems that require some kind of Federal response, but about 
which too little is known to determine exactly what to do.\12\

           Citizens Commission for a 21st Century Government

    As we approach the 21st Century, with the massive fiscal 
and management problems facing the Federal Government, there is 
a growing consensus that the status quo cannot continue. The 
current state of Federal management constitutes a fundamental 
disservice to the taxpayers as a whole and to all of its 
citizens who must look to the Federal Government to perform 
essential services. As the committee's report on Creating A 
21st Century Government observed:

          [T]he American electorate is demonstrating support 
        for a government smaller in size, scope and cost--yet 
        more efficient and effective in those activities it 
        must perform. The challenge for Congress is to 
        determine the appropriate role of the Federal 
        Government in our evolving society and to identify the 
        structure and practices that will enable the government 
        to fulfill its missions now and into the next century.
          Today, the Federal Government is performing too many 
        functions to deliver them all efficiently and cost 
        effectively. It is critical to refocus government on 
        those essential functions that it must perform and 
        consider whether government should be involved in an 
        activity if it cannot do it well.\13\

    The committee report stated that the first step in this 
process is to consider government reorganization from a broad 
perspective that goes beyond any single department or agency. 
Because of the ripple effects caused by reorganizations, the 
best strategy is to approach the restructuring of the Federal 
Government in a comprehensive, rather than fragmented way. The 
second step is to identify core principles to drive and shape 
government reorganization, and to apply those principles across 
the programs, functions, and institutions of the Federal 
Government.\14\
    Based on these considerations, the committee developed 
legislation last year entitled the ``21st Century Government 
Act.'' This legislation would establish a ``Citizens Commission 
on 21st Century Government.'' The Commission would be an 
independent commission in the legislative branch consisting of 
11 members. The Speaker of the House and the Majority Leader of 
the Senate would each appoint 3 members, and the Minority 
Leaders of the House and Senate would each appoint 2 members. 
The Speaker and the Senate Majority Leader, in consultation 
with the Minority Leaders in each House, would jointly appoint 
one additional member to chair the Commission. Any citizen, 
other than a Member of Congress or an elected or appointed 
executive branch official, could serve on the Commission. The 
Commission would hold such hearings as it considered 
appropriate.
    The Commission would review and analyze current Federal 
functions under the following criteria, which follow closely 
the analytical framework proposed by Mr. Fosler:
     Does the function have clearly defined missions 
and objectives?
     Do the missions and objectives serve a currently 
valid and important Federal role?
     Does the current Federal role constitute the most 
effective and efficient means of achieving the function's 
objectives?
     Is the current Federal role the least intrusive 
means of accomplishing the objectives in terms of individual 
liberty and principles of federalism?
     Is there a need to enhance Federal performance of 
the function?
    Based on its analysis of Federal functions, the Commission 
would develop and submit to Congress a comprehensive 
reorganization and restructuring plan for the executive branch 
in the form of draft legislation. Among other issues, the 
Commission's proposal would address--
     whether the Federal Government should have fewer 
cabinet departments and, if so, what they should be;
     whether and how similar functions should be 
consolidated within a single department or agency;
     whether and how common administrative functions 
should be consolidated within one executive organization;
     whether and how a single cabinet-level White House 
office should be designated with responsibility for 
representation and oversight of all independent agencies; and
     whether and how streamlined hierarchical 
structures could be provided within each department and agency.
    The Commission's legislative proposal would be introduced 
in each House of Congress, considered by congressional 
committees of jurisdiction under a limited timeframe, and then 
considered by each House under expedited procedures. The 
proposal would not be subject to floor amendments.
    The proposed ``21st Century Government Act'' passed the 
House last year.\15\ The committee reiterates its support for 
this proposal, and believes that its enactment should be one of 
the first priorities of the 105th Congress.

                                ENDNOTES

    \1\ House Committee on Government Reform and Oversight, 
Second Report, Creating A 21st Century Government, 104th Cong, 
1st Sess., H.R. Rep. No. 104-434 (December 21, 1995), p. 2.
    \2\ See generally, General Accounting Office, Budget 
Function Classification: Agency Spending and Personnel Levels 
for Fiscal Years 1994 and 1995, GAO/AIMD-95-115FS (April 11, 
1995).
    \3\ Government Restructuring: Identifying Potential 
Duplication in Federal Missions and Approaches, GAO/T-AIMD-95-
161 (June 7, 1995), p. 2.
    \4\ GAO/AIMD-95-115FS, note 2, p. 13.
    \5\ GAO/T-AIMD-95-161, note 3, pp. 2-3.
    \6\ See General Accounting Office, Government 
Reorganization: Issues and Principles, GAO/T-GGD-AIMD-95-166 
(May 17, 1995), and Program Consolidation: Budgetary 
Implications and Other Issues, GAO/T-AIMD-95-145 (May 23, 
1995). Both of these products reference numerous other GAO 
reports and products that document the examples described in 
the text.
    \7\ GAO/T-AIMD-95-145, note 6, pp. 3, 8-9.
    \8\ GAO/T-AIMD-95-166, note 6, p. 2.
    \9\ Hearing before the Subcommittee on Government 
Management, Information, and Technology, House Committee on 
Government Reform and Oversight, The National Performance 
Review, 104th Cong., 1st Sess. (May 2, 1995).
    \10\ Id., p. 69.
    \11\ Id.
    \12\ Id., p. 70. Mr. Fosler's framework is presented in 
full at pages 73-75 of the published hearing record.
    \13\ House Committee on Government Reform and Oversight, 
Second Report, note 1, p. 2.
    \14\ Id., p. 3.
    \15\ See Title II, subtitle F, of H.R. 2586, 104th Cong., 
141 Cong. Rec. 12044 (daily ed., November 9, 1995).

      VI. Management Problems in Federal Departments and Agencies

                       Department of Agriculture

                                Overview

    The U.S. Department of Agriculture (USDA), established in 
1862, is the third largest civilian agency in the Federal 
Government, spending nearly $58 billion annually and employing 
98,277 Federal employees.
    The USDA's mission is to regulate commercial agriculture, 
forestry and food safety, to assist certain groups of low 
income individuals with obtaining food, and to help residents 
of depressed rural areas. The USDA administers a variety of 
agriculture and food programs including direct and guaranteed 
loans intended to help farmers acquire homes and farm 
equipment, crop insurance guarantees, the food stamp program, 
food inspection services, timber sales from U.S. property, and 
others. In addition, the USDA is responsible for the health and 
safety of the Nation's food supply.
    In 1994, USDA was reorganized pursuant to the Federal Crop 
Insurance Reform and Department of Agriculture Reorganization 
Act of 1994, Public Law 103-354. As part of this 
reorganization, several previous agencies were consolidated 
and/or renamed. For purposes of this section, the following 
agency changes are relevant: the new Consolidated Farm Service 
Agency (CFSA) encompasses both the old Agricultural 
Stabilization and Conservation Service (ASCS) and the farm loan 
programs of the old the Farmers Home Administration (FmHA); the 
new Natural Resources Conservation Service (NRCS) encompasses 
the old Soil Conservation Service (SCS); the new Rural 
Utilities Service (RUS) encompasses the electric and telephone 
programs of the old Rural Electrification Administration (REA) 
and the water and waste facility loan programs of FmHA; the new 
Rural Housing and Community Development Service (RHCDS) 
encompasses the rural housing and community lending programs 
formerly administered by FmHA; and the Food and Consumer 
Services Agency (``FCS'') encompasses the old Food and 
Nutrition Service

 Consolidated Farm Service Agency makes Ill-Advised Loans and fails to 
                     Collect Millions in Debts Owed

Farmer Loan Programs (formerly under FmHA)

    CFSA administers loan programs that provide farm credit 
assistance to individuals and entities who cannot obtain credit 
elsewhere. As of June 30, 1994, approximately 875,000 borrowers 
owed CFSA about $32 billion in direct loans, with an additional 
$6.4 billion owed to private lenders that are guaranteed by 
CFSA.
    As of March 31, 1995, CFSA's outstanding principal on 
active direct and guaranteed farm loans was $17.8 billion: 
$11.9 billion in direct loans ($5.6 billion held by delinquent 
borrowers) and $5.9 billion in guaranteed loans ($211 million 
held by delinquent borrowers).\1\ Poor loan program management 
has led to substantial losses:
     Between 1989 and 1995, $12.4 billion in principal 
and interest was lost through forgiving direct loan borrowers; 
$300 million was lost from forgiving guaranteed loans.
     Between 1989 and 1995, CFSA made $448 million in 
additional direct and guaranteed loans to delinquent 
borrowers.\2\
    CFSA assistance is intended to be temporary, moving farmers 
toward commercial credit. CFSA incurs a loss on a direct or 
guaranteed loan when a borrower defaults and the proceeds from 
selling collateral do not equal the outstanding loan amount 
plus the costs of acquiring and selling off collateral. Again, 
the numbers continue:
     Between 1991 and 1994, CFSA lost $6.3 billion 
($6.1 billion on direct loan forgiven debt; $200 million 
through payments to lenders on guaranteed loans), with an 
additional $4.8 billion in guaranteed and direct loans held by 
borrowers unlikely to meet their loan obligations.
     Of the overall $17.8 billion in guaranteed and 
direct loans, $4.6 billion of direct and $200 million of 
guaranteed loans were delinquent.\3\
    The problems here are obvious: (1) additional loans are 
being made to borrowers whose previous delinquent debts were 
forgiven and to borrowers who are delinquent on existing loans; 
(2) lenders are allowed to use guaranteed loans to refinance 
existing customers' debts and to guarantee most of the loans at 
the maximum rate of 90 percent regardless of risk; (3) loan 
terms and conditions are rewritten without requiring borrowers 
to make payments; (4) borrowers' delinquent debts are being 
forgiven; and (5) farmland sold as collateral does not go to 
the highest bidder--limiting return and increasing CFSA's 
holding costs.
    Fortunately, the common-sense changes made to USDA's farm 
lending programs by the Federal Agriculture Improvement Act of 
1996 will force USDA to make improvements in the Federal farm 
lending area through much-needed statutory changes in lending 
guidelines and collection of delinquent debts.\4\

Loan Resolution Task Force

    The Loan Resolution Task Force (LRTF) was established in 
June 1994 at USDA following testimony in February 1994 by USDA 
officials declaring they intended to collect every dime that 
was owed to resolve more than 7,000 delinquent accounts (of 
which 850 accounts exceeded $1 million). Nearly 150 persons 
from Federal, State and county CFSA offices were assigned to 
the LRTF for a 2-year period. However, the U.S. Department of 
Agriculture Office of Inspector General (OIG) \5\ was highly 
critical of the LRTF:
     Management controls were not in place to monitor 
and track progress being made in resolving the delinquent 
accounts. As a result, the task force was unable to revise its 
strategies and timeframes to resolve the delinquent accounts 
and manage returns to the Government.
     As of December 31, 1994, 855 accounts were 
delinquent $1 million or more. As of July 7, 1995, there were 
6,115 delinquent accounts, of which 776 were delinquent $1 
million or more.
     OIG's review of 25 delinquent accounts with 
outstanding indebtedness totaling $28,044,877 showed resolution 
through debt settlement (15 by cancellation and 10 by 
compromise); only $621,050 was recovered (2.2 percent of the 
outstanding indebtedness).

Rural Housing and Community Development Service (RHCDS) Loan Funds Used 
                               Improperly

    RHCDS administers rural housing assistance to individuals 
and entities who cannot obtain credit elsewhere. It includes 
the Rural Rental Housing (RRH) program.
    For fiscal year 1993, OIG studied 285 statistically 
selected RRH projects to determine if the loan funds were 
properly used and if the projects complied with the provisions 
of the loan agreements. The following was found: \6\
     An estimated $11 million was used for unauthorized 
or questionable purposes.
     For about 42 percent of the projects reviewed, the 
borrowers accumulated excess funds in reserve accounts of 
nearly $43 million. Loan agreements generally require that any 
excess be applied to the balance of the loan.
     About 35 percent of the projects continued to 
receive an interest credit subsidy even though reserve accounts 
were fully funded and the need for continued subsidies was 
questionable. An estimated $5.8 million of unneeded interest 
credit subsidy was paid annually to borrowers.
    For fiscal year 1994, OIG reviewed 13 management companies 
with 458 projects in 25 States and Puerto Rico. OIG found that 
13 management companies misused over $918,000 in RRH funds, 
representing approximately 14 percent of the operating and 
maintenance expenditures for the projects audited. 
Specifically:
     Management companies charged $354,000 in 
unallowable expenses to the projects, including duplicate 
management expenses, excessive site management fees, improper 
markups, and miscellaneous charges for personal expenses, 
holiday parties, bonuses, and gifts.
     Six management companies misused $524,000 of 
reserve and tenant security deposit funds, including $125,000 
being used as collateral for a commercial loan.
     An RRH borrower in Indiana submitted fictitious 
invoices for work never performed, resulting in a $1.7 million 
loss.
     The president of a New York real estate management 
company illegally received over $913,000 in builders' profits 
from RRH projects and stole almost $250,000 from the projects' 
laundry accounts.
     An RRH borrower in Michigan unlawfully spent 
$800,000 from accounts pledged to CFSA.\7\

                Forest Service: Below-Cost Timber Sales

    The House Government Operations Committee's 1992 staff 
report on government management, citing the testimony of the 
former director of the Congressional Research Service's Natural 
Resources Division, stated that timber sales from 120 national 
forests totaled more than $7 billion over the previous 14 
years, with 50 percent being sold at prices lower than what it 
cost the Government to conduct the sales and construct the $300 
to $500 million worth of roads into the forests to access the 
timber.
    The 104th Congress, in an attempt to get details about the 
costs and revenues associated with timber sales, enlisted the 
assistance of the General Accounting Office (GAO). 
Specifically, Budget Committee Chairman John Kasich and 
Resources Committee Chairman Don Young requested that GAO 
obtain data showing the costs and revenues of management 
activities being carried out at each of the national forests 
for fiscal years 1992 through 1995.\8\
    However, the Forest Service was unable to provide GAO with 
revenue and cost data for each of the national forests because 
of shortcomings in its accounting and financial information 
systems, a deficiency that has been repeatedly identified and 
reported by OIG over the past several years.\9\ In other words, 
the Forest Service cannot actually determine whether there are 
below-cost timber sales in any particular forest, because they 
cannot determine the costs and revenues of a particular forest.
    The inability of GAO to get the necessary data from the 
Forest Service is really no surprise. The most recent fiscal 
year audit (1994) of the Forest Service by OIG found severe 
deficiencies in their accounting procedures.\10\ In brief, the 
OIG found misstatements of accounts receivable, misstatements 
of accounts payable, ineffective controls over the gathering 
and reporting of program performance measures, a lack of total 
integration of all accounting functions within the ledger, 
ineffective controls over the quality of field-level data, and 
inappropriate reimbursable agreements with USDA's Office of the 
General Counsel.\11\
    One can conclude from this that the Forest Service is 
poorly managed and that taxpayer dollars are being wasted as a 
result. Data are so poorly organized that at the current time 
there is no reliable way for either the Congress or the 
American taxpayer to know the extent to which ``below-cost'' 
timber sales are occurring.

                    Food and Consumer Services (FCS)

Food Stamp Program

    The food stamp program is estimated to cost $26.4 billion 
in fiscal year 1996 and to provide benefits to an average of 27 
million people each month.
    A 1992 report by the House Government Operations Committee 
stated that the program was losing at least $1 billion dollars 
per year. The same types of problems identified in 1992 have 
persisted: \12\
     The coupon-based system is vulnerable to waste and 
abuse, and there are no reliable data available to precisely 
determine the full extent of the problem.
     Errors in determining eligibility and benefit 
levels result in overpayments of $2 billion per year. 
Additionally, a large quantity of food stamps are used in 
trafficking for non-food items, in many cases drugs and guns.
     Forty-two percent of overpayments in 1993 occurred 
due to caseworker error, the result of large caseloads, high 
turnover, inadequate training, poor supervision, complexity of 
regulations, and the difference in eligibility requirements 
between food stamps and Aid to Families with Dependent 
Children, which caseworkers also must administer.
     Fifty-eight percent of overpayments in 1993 were 
caused by a failure to verify information provided by 
recipients, such as income and household information.
     Retailer authorization by the Food and Consumer 
Services (FCS) is not sufficient to prevent corrupt retailers 
from being authorized to redeem food stamps. Additionally, once 
stores are authorized, the FCS does not adequately monitor them 
to prevent trafficking in food stamps or other violations, nor 
does FCS ensure that stores that go out of business have their 
authorized redemption numbers in the program computer 
deactivated.
     A considerable number of food stamps are used as a 
second currency to purchase non-food items. The nature of this 
abuse combined with the 27 million people receiving benefits 
precludes any accurate estimate of the amount of trafficking. 
Loss estimates range from $100 million to $3 billion 
annually.\13\

Political polling with appropriated funds

    During an investigation of the USDA's Food and Consumer 
Services Team Nutrition project and contracts, GAO found a 
subcontract that was unrelated to the overall prime Team 
Nutrition contract. This subcontract was with Lake Research, a 
polling firm run by Celinda Lake, a well-known Democratic 
pollster. Over a dinner meeting (February 16, 1995) with Ellen 
Haas, the Under Secretary for Food, Nutrition, and Consumer 
Services, Celinda Lake was hired to run four focus groups in 
Topeka, KS, and Indianapolis, IN, the home States of the 
Chairmen of the House and Senate Agriculture Committees. USDA 
paid $33,000 from money appropriated for the food stamp program 
to gather opinions from people who are registered to vote, 
voted in the last Presidential election, are between the ages 
of 30 and 65, and who are white. The opinions of these ``swing 
voters'' were sought on food stamp program reforms and changing 
the name of the food stamp program.
    The first report from Celinda Lake summarized the findings 
from the four focus groups. It referred to ``voters,'' ``our 
side,'' and the ``opposition,'' and ``key members of the 
Agriculture Committee.'' USDA employees reviewed the report and 
eliminated all references to ``voters'' and other political 
issues, and in some instances changed the meaning of the 
report. The final Lake report reflected all of the changes made 
by USDA to the draft report.
    GAO found that:

          . . . USDA did not comply with the Federal 
        Acquisition Regulations and the Paperwork Reduction Act 
        and used a flawed methodology that would not allow the 
        contract's stated purpose to be achieved. On the basis 
        of these problems, we believe that USDA exercised 
        questionable judgment in conducting virtually every 
        aspect of this work. It would be a cause for concern 
        if--on the basis of the results of this research--USDA 
        made changes to a program that affects millions of 
        American citizens.\14\

    GAO made a number of other findings:
     The Lake contract was improperly awarded because 
it did not go through the competitive bidding process that the 
Federal Property and Administrative Services Act of 1949 
requires;
     The polling conducted by Lake did not comply with 
the Paperwork Reduction Act, which requires an agency to 
publish a notice in the Federal Register any time it plans to 
collect information from the public and obtain approval from 
the Office of Management and Budget;
     The Lake contract was political in nature: it 
really had nothing to do with legitimate food stamp program 
research, evidenced by the massive amount of editing done to 
Lake's report by USDA that actually changed the meaning of the 
report;
     The sites for the focus groups were selected by 
personnel in the office of the Under Secretary for Food, 
Nutrition, and Consumer Services, not by Lake Research;
     USDA political appointees were generally 
uncooperative during the GAO investigation, as evidenced by the 
fact that GAO had to ask certain employees the same questions 
two or three times in order to clear up the inconsistencies; 
and
     During the course of the investigation, many 
career employees in FCS expressed concern and fear about 
possible reprisals for assisting GAO with its investigation. A 
27-year veteran of GAO stated that this was the first time this 
level of concern had been expressed by Federal employees during 
any GAO investigation in which he had been involved.\15\
    This kind of action, while not involving a large amount of 
money, certainly indicates that the current management of FCS 
is not only misguided, but is also being motivated by factors 
that have no place in a cabinet-level agency.

     Mismanaging Telecommunications and Technology Investments and 
                            Permitting Abuse

    USDA has failed to achieve savings in the 
telecommunications area that are easily within reach and also 
has failed to prevent the abuse of telephone services:
     USDA has hundreds of field office sites with 
multiple agencies using separate and often redundant 
telecommunications services. Consolidating equipment at these 
locations would result in telecommunications savings of as much 
as $400,000 to $800,000 per month; \16\
     USDA is not effectively managing its $100 million 
annual telecommunications investment. USDA agencies waste 
millions of dollars each year paying for unnecessary services, 
equipment and services procured but not utilized, and 
commercial carrier services costing three times what they would 
under the FTS 2000 program. These problems exist because the 
Office of Information Resources Management has not fulfilled 
its responsibility to manage telecommunications and ensure that 
resources are properly used, costs are effectively controlled, 
and Federal requirements are fully met; \17\ and
     USDA does not have adequate controls for ensuring 
that its telephones are used properly. A 4-month review of 
calls in Washington, DC, alone showed over 600 inappropriate 
collect calls worth $2,600 accepted by USDA from individuals at 
correctional institutions (many of these calls were routed 
long-distance to phone sex and adult party lines in the 
Dominican Republic). Additionally, there was one instance of 
hackers breaking into USDA's telephone system through a 
contractor's voice mail equipment, resulting in $40,000 to 
$50,000 in unreimbursed international long-distance calls being 
billed to USDA.\18\

Computer purchases mismanaged

    There are several shortcomings associated with USDA 
computer purchases within CFSA and the Forest Service. However, 
the Clinton administration has been unsuccessful in correcting 
any of these deficiencies and has, in fact, made several of 
them worse.
    In April 1993, USDA established a consolidated, multi-
agency program called Info Share to improve operations and 
delivery of services to customers of the farm service and rural 
development agencies. In August 1993, USDA received a whopping 
$2.6 billion delegation of procurement authority from the 
General Services Administration to spend on computer hardware 
and software and telecommunications equipment during fiscal 
years 1994 through 1999.
    However, there have been major problems with this 
initiative, starting with the overall inability of USDA to 
engage in the business process reengineering (BPR) necessary to 
implement such a major undertaking. GAO states:

          USDA is not performing the key BPR steps necessary to 
        reinvent the farm service and rural development 
        agencies. First, senior USDA officials are not directly 
        involved in managing the BPR effort and directing the 
        change. Second, USDA is not adequately analyzing the 
        current business processes and establishing improvement 
        goals. Third, USDA is not providing the training and 
        expertise necessary to guide BPR efforts. Instead of 
        following these steps, USDA is managing Info Share 
        principally as a vehicle to acquire new information 
        technology rather than as an opportunity to 
        fundamentally improve the way the farm service and 
        rural development agencies do business. Accordingly, 
        the Department's plan to acquire new technology before 
        completing its BPR effort is likely to result in USDA 
        spending hundreds of millions of dollars to further 
        automate the current way these agencies do business. At 
        the same time, while USDA may need to replace some of 
        its aging technology as it reengineers business 
        processes, the Department has not identified its needs 
        for this interim period and the most cost effective 
        option for meeting these needs.\19\ (emphasis added)

    For fiscal years 1993 and 1994, Info Share related 
expenditures paid by partner agencies were $38,018,210 and 
$44,375,175 higher than reported by USDA as the direct costs of 
Info Share.\20\ Other problems persist, including lack of 
coordination and communication, inadequate staffing, inability 
to monitor progress, improper contract awards, and security 
vulnerabilities.\21\
    In December 1995, USDA announced a ``refocusing'' of the 
Info Share initiative, with the new role of the Info Share 
staff to be merely a facilitator for USDA agencies to provide 
expertise on information technologies acquired separately by 
each agency. In other words, Info Share was canceled after 
having consumed hundreds of millions of dollars with no 
apparent results. According to the OIG, this approach is 
destined for failure:

          We have found that the partner agency views and 
        expectations for the Info Share program do not agree 
        with the Info Share program manager's views. Also, 
        partner agencies have moved forward on [information 
        resource management] and BPR projects without 
        coordinating with the Info Share staff. . . . In 
        addition, we found that the Info Share staff and [the 
        Office of Information Resources Management] have 
        duplicative responsibilities and objectives; there is 
        confusion among the partner agencies, . . . minimal 
        efforts have been made to record and save outcomes of 
        the prior Info Share program's major projects and 
        strategies and action has not been taken on many of the 
        recommendations made by OIG. \22\

    Not only has the Clinton administration been unsuccessful 
in making any measurable improvements in USDA's ability to 
actually execute an information technology purchase that makes 
sense, is cost effective, and was planned with an agency's 
needs and customers in mind, it has actually exacerbated the 
problem by allowing Info Share to be disbanded, which will 
certainly result in more of the same: hundreds of millions of 
dollars spent on outdated hardware and software, with possibly 
no ability for multiple-agency use.

USDA field office consolidation

    USDA's field office consolidation and business 
modernization effort has once again been placed under the 
leadership of the agencies through USDA's Food and Agriculture 
Council. The realignment was described by USDA's Assistant 
Secretary for Administration as an effort to move 
implementation activities, business process reengineering, and 
change management efforts closer to the field delivery system. 
A recent GAO review of the agencies' plans revealed new budgets 
and time schedules for telecommunications, technology, and 
support services acquisitions. However, USDA has not yet 
completed the fundamental business analyses needed to make good 
technology investments and has not been able to produce any 
studies that show how these acquisitions will result in 
measurable improvements in the delivery of services or 
reductions in redundant administrative management processes.

                                ENDNOTES

    \1\ General Accounting Office, Consolidated Farm Service 
Agency: Update on the Farm Loan Portfolio, GAO/RECD-95-223FS 
(July 1995), pp. 1-2.
    \2\ Id., p. 3
    \3\ General Accounting Office, High Risk Series: Farm Loan 
Programs (February 1995), p. 10-11.
    \4\ Public Law 104-127, the ``Federal Agriculture 
Improvement and Reform Act of 1996'' (April 4, 1996).
    \5\ Department of Agriculture, Office of Inspector General, 
Evaluation of Loan Resolution Task Force Operations, Report No. 
03801-5-Te (March 1996), pp. i-iii.
    \6\ Department of Agriculture, Office of Inspector General, 
Semiannual Report to Congress Fiscal Year 1993--Second Half 
(September 1993), p. 26.
    \7\ Department of Agriculture, Office of Inspector General. 
Semiannual Report to Congress, FY 1994--Second Half (September 
1994), pp. 33-35.
    \8\ Letter from the General Accounting Office to House 
Budget Committee Chairman Kasich and House Resources Committee 
Chairman Young (June 19, 1996).
    \9\ Id.
    \10\ Department of Agriculture, Office of Inspector 
General. Audit of Forest Service's Fiscal Year 1994 Financial 
Statements, Report No. 08401-1-At (June 20, 1995), pp. ii, 2-4.
    \11\ Id., p. ii.
    \12\ General Accounting Office, Food Assistance: Reducing 
Food Stamp Benefit Overpayments and Trafficking, GAO/RCED-95-
198 (June 1995), pp. 2-6.
    \13\ Cruz, Mimi Ko and Lorenza Munoz, ``Community News 
Focus: 18 Held in Food Stamp Inquiry,'' Los Angeles Times, 
Orange County Edition (February 7, 1996), p. 2; Briggs, 
Michael, ``U.S. Plan Targets Food Stamp Fraud: Small Stores May 
be Cut From Program,'' Chicago Sun-Times (January 6, 1996), p. 
1; Executive Office of the President, Office of Management and 
Budget, ``Analytical Perspectives: Progress Report: Correcting 
High-Risk Areas,'' Budget of the United States Government, FY 
1996, Chapter 23 (1996), p. 284.
    \14\ General Accounting Office, Food Stamp Program: Focus 
Group Research and Procurement Problems, GAO/T-RECD-96-157 (May 
8, 1996), p. 8.
    \15\ Testimony of Keith Fultz, Assistant Comptroller 
General, General Accounting Office, Before the House 
Agriculture Committee hearing, Investigation of the Use of Food 
Stamp Program Funds To Obtain Services from Private 
Contractors, Serial No. 104-29 (May 8, 1996), p. 11.
    \16\ General Accounting Office, USDA Telecommunications: 
Missed Opportunities To Save Millions, GAO/AIMD-95-997 (April 
1995), p. 1.
    \17\ General Accounting Office, USDA Telecommunications: 
Better Management and Network Planning Could Save Millions, 
GAO/AIMD-95-203 (September 1995), p. 3.
    \18\ General Accounting Office, USDA Telecommunications: 
More Effort Needed to Address Telephone Abuse and Fraud, GAO/
AIMD-96-59 (April 1996), p. 2.
    \19\ General Accounting Office, USDA Restructuring: Refocus 
Info-Share Program on Business Processes Rather Than 
Technology, GAO/AIMD-94-156 (August 1994), p. 5.
    \20\ Department of Agriculture, Office of Inspector 
General. Review of Info Share Program Expenditures for Fiscal 
Years 1993 and 1994, Report No. 50530-2-HQ (January 17, 1995), 
p. 1.
    \21\ Department of Agriculture, Office of Inspector 
General, Monitoring of the Info-Share Program, Report No. A/
50530-1-HQ (January 1995), p. ii.
    \22\ Department of Agriculture, Office of Inspector 
General, Monitoring of the Info-Share Program, Report No. 
50530-3-HQ (May 1995), pp. 2-3.

                         Department of Commerce

                                Overview

    The Department of Commerce's (DOC) mission is to ensure and 
enhance economic opportunities for all Americans by working in 
partnership with businesses, communities, and workers. It 
promotes American competitiveness in the world economy, 
administers programs to prevent unfair foreign trade 
competition, and provides research and support for business and 
government planners. In addition, through the National Oceanic 
and Atmospheric Administration (NOAA), the Department of 
Commerce runs the National Weather Service and is responsible 
for studying and monitoring the planet's physical environment 
and oceanic resources. The Department of Commerce spends nearly 
$3.5 billion dollars a year and employs nearly 35,000 Federal 
employees.
    The most serious management problems at DOC include the 
planning, by the Bureau of the Census, for the year 2000 
decennial census, the National Weather Service's Advanced 
Weather Interactive Processing System costing taxpayers $175 
million more than the original estimate of $350 million, abuses 
of government-issued credit cards, and poor management of 
travel expenses.

         National Oceanic and Atmospheric Administration (NOAA)

Maintaining the NOAA fleet is unnecessary and more expensive than 
        available alternatives \1\

    The National Oceanic and Atmospheric Administration (NOAA) 
owned and operated fleet should be decommissioned and NOAA 
should contract with the private sector and increase 
coordination with other vessels for its research and other 
needs. Compared to modernizing the fleet, this would be cheaper 
and at least equivalent to the support currently provided to 
NOAA scientists.
    There is no doubt that the Federal Government needs access 
to hydrographic services, updated nautical maps and charts, 
research vessels and the other services available through 
NOAA's fleet of 25 ships (18 of which were active in fiscal 
year 1993 and 1994). Yet the fleet is reaching the end of its 
useful life. Rather than modernizing it, the fleet should be 
decommissioned.
    There are a number of alternatives to accomplish this 
objective which NOAA should explore. The Office of Inspector 
General has found that with proper planning, NOAA can 
transition from government-owned vessels to outsourcing. 
Private contractors can meet NOAA's hydrographic and fishery 
research requirements immediately. Specialized research vessels 
that remain in-house, if any, can be operated by a contractor 
or an academic institution.
    Further, NOAA could coordinate with University-National 
Oceanographic Laboratory System (UNOLS) vessels, which are part 
of a cooperative effort between the Navy, the National Science 
Foundation, and 58 academic institutions. The purpose of UNOLS 
is to coordinate scheduling and access to the research vessels 
that comprise its fleet. The cost of operating the UNOLS fleet 
of 26 ships in 1995 was $50 million.
    By contrast, the Inspector General conducted an analysis of 
the cost to operate NOAA vessels. Not only are NOAA vessels 
more expensive than UNOLS vessels, but the OIG found that 
NOAA's in-house costs average more than $21,000/day per 
ship.\2\
    Most vessels in the NOAA fleet were built in the early to 
mid-1960's. Concerned over the aging fleet, Congress passed the 
NOAA Fleet Modernization Act of 1990, which directed NOAA to 
propose a plan within 18 months for fleet modernization. In 
1993--over a year behind schedule--NOAA proposed a $1.9 billion 
modernization plan but failed to request money to implement it. 
In 1995, NOAA floated a draft revision to the modernization 
plan which would have brought the cost down to $1 billion. This 
year, NOAA is working on a ``revision to the revision.''
    In summary, the time for modernizing NOAA's aging fleet is 
long passed. Because cost-effective alternatives are available, 
maintaining the NOAA fleet is not necessary for NOAA to fulfill 
its mission. Further efforts to modernize the fleet will waste 
millions of taxpayer dollars.

Advanced Weather Interactive Processing System (AWIPS) behind schedule 
        and over budget \3\

    The Advanced Weather Interactive Processing System (AWIPS) 
is a critical component of the National Weather Service's 
modernization effort. However, this program has been plagued by 
delays and cost overruns.
    According to the Department of Commerce Office of Inspector 
General, ``In 1985, NOAA estimated that the National Weather 
Service's modernization program (AWIPS) would cost $350 million 
and be completed in 1995. As of 1995, the NOAA estimate had 
risen to $525 million, with a 1999 completion date. We believe 
that AWIPS will probably cost over $625 million and take nearly 
twice as long as originally planned.'' \4\
    The Department of Commerce testified before the House 
Science Committee in early Spring 1996, and indicated that the 
department could meet the $525 million estimate for AWIPS 
completion. Only a month later, the department reversed itself 
and informed the Science Committee that it would not be able to 
stay within the estimate.
    The Commerce Department appropriations bill passed by the 
House on July 26, 1996 caps the total amount for completion of 
AWIPS at $525 million.\5\
    Further, NOAA has made AWIPS availability a condition for 
closing National Weather Service field offices, which 
diminishes the cost savings expected from the entire 
modernization effort. This is a waste of taxpayer dollars 
because existing systems can sustain operations without 
compromising services. Therefore, office closures can proceed 
even if AWIPS is not yet available.\6\

                          Bureau of the Census

    The Bureau of the Census has devoted inadequate staff and 
resources to integrating the planning of the decennial census 
for the year 2000, and failure to address various policy issues 
regarding reliance on Federal administrative records is likely 
to delay completion of census results.

Managerial Disorganization Endangers Decennial Census

    The Bureau of the Census neglected to create a permanent 
position of Director of the Decennial Census for the year 2000 
until November 1994. This position has no permanent staff, 
budget or offices and no authority to direct actions of other 
divisions of the Census Bureau to carry out the upcoming 
census.\7\
    The decennial census is a tremendous undertaking that 
requires years of planning and development to achieve effective 
implementation. Top managers and officials at the Bureau of the 
Census have not given adequate attention to the management of 
their organization in a way that will optimize agency and 
employee productivity. In hearings held in October 1995 before 
the Committee on Government Reform and Oversight, the Inspector 
General said the Bureau lacked an effective organization for 
planning and implementing the census for the year 2000. 
Specifically, the IG charged that the Bureau lacked a full-time 
staff assigned to leading, directing, and integrating both 
planning and implementation. The Bureau's decennial planning 
and implementation are highly matrixed, with functions 
distributed across many divisions. According to the IG, 
progress is difficult because the work is produced by numerous, 
narrowly focused units and is not incorporated into a cohesive 
design.
    During the period the IG evaluated, the Bureau indicated 
that it would reorganize after the final design of the census 
was finalized in December 1995. However, as of August 1, 1996, 
the IG indicated that the Bureau still has not responded to the 
management and organizational concerns. Further delay will 
adversely impact the ability of the Bureau to effectively 
implement activities leading up to the decennial census in the 
year 2000.

Overlooking privacy concerns and statistical over-counting

    In preparation for the decennial census for the year 2000, 
the Bureau is planning to tap into the data bases of other 
Federal agencies, such as the IRS and Social Security 
Administration, to supplement the count of nonresponding 
households and compile missing responses. Unfortunately, the 
Census Bureau does not have agreements with other Federal 
agencies to obtain this data, nor has it addressed vital 
privacy concerns associated with its access to confidential 
files without a citizen's consent. In addition, the Bureau has 
not resolved concerns regarding how it would avoid over-
counting individuals residing in ``nonresponding'' households.
    The Bureau says it is calling for the extensive use of 
administrative records to support the goals of a more complete 
enumeration with less differential in the results and lower 
costs. Unfortunately, the data bases that the Bureau wishes to 
examine contain confidential information to which it is not 
necessarily entitled. Also, those data bases have been 
developed in varying formats and for different needs and 
purposes. The data from the Internal Revenue Service will not 
mesh seamlessly with that of the Social Security Administration 
or Aid to Families with Dependent Children (AFDC).
    The Bureau contends that use of administrative records is 
necessary to reduce its work load before beginning the followup 
operation on nonresponding households. The Bureau believes that 
by using this additional data it can complete missing 
information from approximately 5 percent of the households that 
do not respond to the census questionnaire. It also claims that 
its use of administrative records is needed to augment the two 
sampling procedures that the Bureau intends to implement during 
the 2000 Census. The use of sampling, even without 
administrative records, has been found by the committee to be 
problematic for purposes of apportionment as the Constitution 
mandates.\8\ While these problems are addressed in a separate 
committee report, they include issues with the method's 
accuracy, subjectivity, and constitutionality.

                      Departmental Administration

Abuse of Government-issued credit cards and poor management of travel 
        expenses continues \9\

    In 1992, the Department of Commerce Office of Inspector 
General (OIG) inspected the use by Department employees of the 
Government-issued Diner's Club charge card. The Inspector 
General found that employees had misused the card for personal 
purchases and failed to pay charges in a timely manner, and 
supervisors failed to monitor or curb card abuse. The contract 
with Diner's Club expired in late 1993, and a new contract with 
American Express took effect on November 30, 1993.
    In 1995, the OIG audited the use of Government-issued 
American Express cards, and identified numerous instances of 
card misuse by employees. Further, the Department of Commerce 
has not taken adequate action to collect payment of outstanding 
travel advances from advisors or consultants who traveled on 
Department business at Department expense.
    The rules for use of Government-issued American Express 
cards are explicit. Use is limited to expenses incurred for 
officially authorized Government travel. Automatic teller 
machine (ATM) cash advances and purchases made in retail stores 
are limited to official travel business. Charge card bills are 
to be paid in full on or before the next statement billing 
date, and employees are required to make proper and timely 
payments for each financial obligation. Further, employee card 
holders are required to sign a statement attesting to the fact 
that they have read and understand policies and procedures 
related to the use of the American Express charge card.
    The Department of Commerce Office of Inspector General 
completed the report, ``Departmental Travel Expenses Need 
Better Control and Oversight'' on August 18, 1995. That report 
reviewed American Express card activity at just four Commerce 
agencies (Census Bureau, International Trade Administration, 
National Oceanic and Atmospheric Administration, and the Office 
of the Secretary) and identified 293 employees with delinquent 
accounts (60 days or more past due) and 567 employees who 
``appeared to have used the card for personal charges or 
questionable ATM advances . . . [including] purchases of 
liquor, jewelry, flowers, books and music; and payment of 
computer on-line service fees and automobile insurance.'' \10\ 
The OIG cited lack of management and oversight by Commerce 
Department agencies as a primary reason for the abuse.
    Managers in the Department's agencies are responsible for 
designating employees to serve as ``coordinators'' to 
administer the charge card program. Coordinators are 
responsible for monitoring card activity and reporting 
suspected misuse to the appropriate bureau manager. The OIG 
found that coordinators were unable to provide an explanation 
of various delinquent accounts or otherwise inappropriate use 
of the charge cards, in part due to the overwhelming number of 
card holders. In the August 1995 report, the OIG stated that 
``the NOAA coordinator had difficulty responding to our request 
because she is the only one who actually reviews charge card 
use by the 5,000 to 6,000 card holders in NOAA.'' \11\

Small purchase and bankcard programs lack oversight \12\

    Commerce employees have been encouraged to use bankcards, 
instead of the small purchase system, to acquire supplies and 
services costing less than $25,000. The objective is to reduce 
overhead and therefore the overall cost of small purchases. 
However, the program lacks adequate internal controls and 
management oversight. The bankcard program is not saving money, 
and indeed, may be costing money.
    The value of purchases made under the bankcard program, 
through which bankcards are used for office purchases, rose 
from $30 million in fiscal year 1993 to $47 million in fiscal 
year 1994.\13\ From fiscal year 1991 through fiscal year 1995, 
the amount expended per Department full-time equivalent 
employees (FTE) increased by 67 percent--from $3,470 to 
$5,791.\14\ This steep increase in costs raises serious 
questions about the management and oversight of the bankcard 
program.
    Further, because data is often not segregated by bureau, 
individual bureau trends are impossible to determine. Commerce 
agencies that do maintain data use varying collation and 
retrieval methods, making direct comparisons difficult.

Commerce agencies are wasting money on unnecessary facilities \15\

    There are a number of examples where Commerce Department 
agencies, in particular the NOAA and the National Institute of 
Standards and Technology (NIST), are wasting taxpayer dollars 
on office space, laboratory space, or facilities they do not 
need.
    NIST, for example, operates two large laboratory 
facilities--one in Gaithersburg, MD and one in Boulder, CO. As 
part of a 10-year, $450 million Capital Improvements Facilities 
Plan (CIFP), NIST has proposed constructing advanced technology 
laboratory space at the Boulder facility. However, because the 
need for advanced technology space in Boulder will be limited, 
the agency should consolidate all plans for an advanced 
technology laboratory in Gaithersburg.\16\
    Further, with respect to the Gaithersburg portion of the 
CIFP, the Commerce OIG has reported that NIST will waste $31 
million over 10 years on unnecessary leased space. NIST leased 
this space ``to provide transition space to accommodate NIST 
staff during the renovation of the chemistry laboratory and 
other lab facilities. However, agency officials later decided 
to build a new chemistry lab and have postponed other 
renovations for some years. Therefore, we do not believe that 
this leased space is now needed.'' \17\
    The OIG also has found that NOAA does not need to construct 
two new facilities: (1) a building near Juneau, Alaska, 
projected to cost $43.5 million, that would consolidate 
National Marine Fisheries Service activities, and (2) the 
Lafayette research center, a laboratory on a university campus 
in Louisiana with construction costs of $12.5 million, 
equipment costs of $4 million, and annual operating costs of up 
to $5.5 million. NOAA's own May 1995 laboratory review has 
confirmed that the Lafayette facility is unnecessary.

                                ENDNOTES

    \1\ Department of Commerce, Office of Inspector General, 
National Oceanic and Atmospheric Administration: NOAA Should 
Decommission Its Ships and Terminate the Recent Billion Dollar 
Fleet Modernization Plan, Inspection Report #IPE-7794 (March 
1996).
    \2\ Id., p. 7.
    \3\ Department of Commerce, Office of Inspector General, 
Semiannual Report to Congress (March 1996).
    \4\ Id., p. 46.
    \5\ House Report #104-676, Departments of Commerce, 
Justice, and State, the Judiciary, and Related Agencies 
Appropriations Bill, Fiscal Year 1997 (July 16, 1996).
    \6\ Department of Commerce, Office of Inspector General, 
Semiannual Report to Congress (March 1996), p. 7.
    \7\ Department of Commerce, Office of Inspector General, 
Semiannual Report to Congress (March 1996).
    \8\ House Committee on Government Reform and Oversight, 
Sampling and Statistical Adjustment in the Decennial Census: 
Fundamental Flaws, H. Rept. No. 104-821 (September 18, 1996).
    \9\ Department of Commerce, Office of Inspector General, 
Departmental Travel Expenses Need Better Control and Oversight 
(August 18, 1995).
    \10\ Id.
    \11\ Id.
    \12\ Department of Commerce, Office of Inspector General, 
Semiannual Report to Congress (March 1996), p. 72.
    \13\ Department of Commerce, Office of Inspector General, 
Semiannual Report to Congress (September 1995), p. 76.
    \14\ Department Of Commerce, Office of Inspector General, 
Semiannual Report to Congress (March 1996), p. 72.
    \15\ Department of Commerce, Office of Inspector General, 
Semiannual Report to Congress (March 1996).
    \16\ Id., p. 59.
    \17\ Id., p. 9.

                         Department of Defense

                                Overview

    The Department of Defense (DOD) employs 1.4 million active 
duty personnel in the Navy, Army, Air Force, and Marine Corps, 
another 841,000 civilians, and an additional 931,000 members of 
the various reserve components to defend the security of the 
United States, uphold the national interest, and safeguard 
internal security. The Department of Defense spends 
approximately $290 billion a year.
    The most serious management problems at the Department of 
Defense involve contract and inventory management, and 
overpayments and inadequate financial accountability. Problems 
with contract and inventory management are a major focus of 
GAO's ``High Risk'' work.
    As described hereafter, DOD has fundamental management 
problems that exist in the following areas: (1) information 
technology; (2) information systems security; (3) defense 
financial management; and (4) environmental compliance. 
Whatever the amount of Defense spending, resources can be saved 
by improving management practices at the Department and 
eliminating costly and duplicative programs and methods.

                         Information Technology

Defense mismanagement of information technology

    Today the Department of Defense (DOD) faces huge challenges 
in effectively managing its diverse operations as it downsizes 
its forces and activities. Trimming operational support costs 
by designing more efficient work processes, integrating 
essential data systems, and automating more program and 
administrative operations is essential to achieving 
productivity gains.\1\
    Today's sophisticated and complex weapons and command, 
control and communication (C3) systems are highly dependent on 
the ability of their computers and software to work reliably. 
DOD, however, is not effectively managing the development and 
support of computer software for administrative; command, 
control and communications; and weapons systems. Software 
information technology and computer resources are critical to 
the success of DOD missions, yet software problems have 
continually plagued DOD over the past several years. It is 
estimated that 7 out of 10 major systems in development today 
are encountering software problems. Furthermore, virtually 
every C3 and administrative system that the General Accounting 
Office has reviewed disclosed significant software problems. 
These problems have caused significant cost overruns and 
performance deficiencies, which resulted in the systems often 
not meeting DOD's needs. DOD has reported spending over $9 
billion annually for information systems and technology. Given 
DOD's increasing dependence on computers, information 
technology, and problems encountered in developing and 
supporting software intensive systems, improved DOD management 
is imperative.\2\

Congressional directives to reform information technology

    In an attempt to improve management within the department 
before acquiring expensive new information technology systems, 
the Information Technology Management Reform Act of 1996 was 
included in the National Defense Authorization Act of 1996 as a 
bi-partisan measure to gain the support of Congress, the 
Department of Defense (DOD), and the administration for solving 
some critical aspects of the mismanagement of information 
technology at DOD. Only with the continuing support of all the 
parties involved in this legislation can we expect to see 
significant cost savings, efficiency, and improved management 
of DOD's information technology systems.
    The Information Technology Management Reform Act of 1996 is 
intended to enable agencies to acquire information technology 
faster and for less money. The act establishes a Chief 
Information Officer (CIO) in each of the executive agencies, 
including Defense, and requires agencies to change the way they 
do business before making investments in information 
technology. The CIO's will serve as senior information 
technology managers to ensure that performance measures are 
applied and used, and expenditures conform to budget and 
program management decisions. Each agency is held accountable 
for the results of its information technology investments.
    The Office of Management and Budget (OMB) will be 
responsible for holding agencies accountable for poor 
performance through the budget process. The Director of OMB is 
responsible for developing guidance for, and ensuring there is 
a process that analyzes and tracks the risk and results of all 
major information technology investments consistent with the 
Government Performance and Results Act and the Paperwork 
Reduction Act.\3\ This provision will improve management 
initiatives by encouraging the use of performance and results-
based management by agencies in making decisions regarding the 
acquisition and administration of information technology 
systems.\4\

                          Contract Management

Defense contract management is in disarray

    The Department of Defense (DOD) spends the most money of 
any Federal Government agency through contracts with private 
companies. Yet the Defense Department also wastes enormous 
amounts of this money by failing to manage its finances 
properly. Major DOD financial management problems include 
failing to track contractor payments and overpaying 
contractors.
    The Defense Department has major problems tracking its 
finances. In October 1994, the General Accounting Office 
reported that DOD had at least $24.8 billion of payments which 
could not be properly accounted for.\5\ This poor job of 
financial management often causes payments to be made where 
they are not legitimate, and conversely, often causes payments 
not to be made when the payments are legitimate. This poor 
financial management system also makes it difficult for 
Congress to track the effectiveness of its appropriations to 
DOD, and for DOD to track the true cost of the items it buys.
    Because of the poor financial tracking, DOD often 
significantly overpays its contractors. GAO reports that during 
fiscal year 1994, DOD overpaid an estimated $746 million to 
contractors.\6\ Furthermore, the DOD accounting systems were so 
inadequate that they detected very few of these overpayments--
the contractors themselves reported virtually all of these 
overpayments. If honest DOD contractors returned $746 million 
dollars in overpayments which DOD did not detect, many millions 
more may have gone unreported by less scrupulous contractors. 
Overpayments cost the Government thousands of dollars in 
interest each day. Underpayments are also costly as DOD is 
required to pay interest on valid invoices that are paid 
late.\7\
    Obviously, this loose DOD financial management system is 
vulnerable to waste and fraud. One former naval supply officer 
simply established a fictitious company and billed the 
Government for $3 million over almost 4 years for items that 
were never delivered. The financial management system did not 
discover that these items had never been delivered. He was only 
caught when he invoiced items for delivery to a decommissioned 
ship--had he not done this, it is likely that he would still be 
receiving DOD payments for nothing.\8\
    These major financial management problems need to be 
corrected, and Congress is taking steps to correct them. The 
Federal Acquisition Reform Act of 1996, enacted in this 
Congress, simplifies the contract management process and 
reduces regulations which make it unnecessarily complex. This 
will help simplify DOD's financial management. Also, Congress 
continues to hold oversight hearings and inquiries into DOD 
financial management, and through this oversight Congress 
continues to help correct these problems.

                      Information Systems Security

Information security risks at Department of Defense

    The Department of Defense's (DOD) computer systems are put 
at risk by unauthorized access and tampering every day. The 
Department is depending more and more on high-performance 
computers linked together in a vast collection of networks, 
many of which are connected to the Internet. The Defense 
Department estimates that as many as 250,000 ``attacks'' may 
have occurred last year alone. Equally worrisome are the 
Defense Information Systems Agency's (DISA) internal tests 
results; in assessing vulnerabilities, DISA attacked and 
successfully penetrated Defense systems 65 percent of the 
time.\9\
    Hackers have been responsible for stealing and destroying 
sensitive data and software. They have installed ``back doors'' 
into computer systems which allow them to regain entry into 
Defense systems. They have ``crashed'' entire systems and 
networks, denying computer service to authorized users. In the 
Air Force's premier command and control research facility in 
Rome, two hackers attacked the facility's computer systems over 
150 times. During the attacks, the hackers stole sensitive air 
tasking order research data. In the Rome case, the Air Force 
Information Warfare Center estimated that the attack on the 
Rome lab alone cost the Government over half a million 
dollars.\10\ Even more critical than the cost and disruption 
caused by these attacks is the potential threat to national 
security. Computer attacks are capable of disrupting 
communications, stealing sensitive information, and threatening 
our ability to execute secure military objectives.
    According to the General Accounting Office, many factors 
combine to make information systems security a huge challenge 
for the Defense Department: the vast size of its information 
structure, its reliance on computer systems and increasing 
amounts of sensitive information, rapid growth of the Internet, 
and increasing skills among hackers coupled with technological 
advances in their tools and methods of attack.\11\
    A 1996 GAO report on Information Security at the Department 
of Defense concluded that Defense's policies relating to 
computer systems attacks are outdated and inconsistent. They do 
not set standards or require actions for important security 
activities, such as periodic vulnerability assessments, 
internal reporting of attacks, correction of known 
vulnerabilities, and damage assessments. Computer users 
throughout the Department are often unaware of fundamental 
security practices, such as using sound passwords and 
protecting them.\12\
    The fact that these vital security measures are absent at 
the Department signifies a need for Defense to implement 
aggressive measures to detect systems attacks, and to 
prioritize its needs in information security protection. Top 
management at DOD needs to ensure that sufficient resources are 
devoted to information security and that corrective measures 
are successfully implemented.

                      Defense Financial Management

    During 1995, articles in the national press \13\ and 
congressional hearings focused the Nation's attention on 
shortcomings in financial management throughout the Department 
of Defense (DOD). The Committee on Government Reform and 
Oversight Subcommittee on Government Management, Information, 
and Technology, concerned because problems in financial 
management inflate administrative costs and leave the 
department vulnerable to fraud, waste, and abuse, held a 
hearing on November 14, 1995, to examine how the financial 
management problems were affecting the DOD's reporting of 
financial information.
    DOD cannot produce reliable financial information and is 
reporting inaccurate data. Because of its poor accounting 
systems and lack of sound internal management controls over the 
accuracy of data input, it has been unable to comply with the 
requirements of the Chief Financial Officers (CFO) Act of 1990 
and is unlikely to be able to comply with the more 
comprehensive requirements of the Government Management Reform 
Act (GMRA). The GMRA requires audited financial statements for 
the entire department for fiscal year 1996, and government wide 
audited financial statements for fiscal year 1997.
    Under GMRA, the DOD is required to produce financial 
statements, have them audited by an independent auditor, the 
General Accounting Office, the agency Inspector General, or an 
independent public accounting firm, and get an opinion from the 
auditor on the statements. There are two kinds of opinions, 
qualified or unqualified. The best is an unqualified opinion. A 
disclaimer of opinion means that the auditor cannot verify that 
the financial statements are accurate.
    The DOD has 27 entities (departments, agencies, corps, and 
funds) in all, although typically only about 6 are audited each 
year. Of the six entities within DOD audited for fiscal year 
1994, four received disclaimers, one received a qualified 
opinion, and only one, a relatively minor trust fund, obtained 
an unqualified opinion.\14\ Since the early 1990's, the DOD has 
been getting disclaimers of opinion on all but a few minor 
trust funds.\15\
    The CFO Act required an annual audit of only the financial 
statements of trust and revolving funds such as the Defense 
Business Operations Fund (DBOF). The CFO Act also called for 
several agencies to have annual audits as part of a pilot 
project. The Army and the Air Force were pilot agencies and 
have gained experience preparing financial statements and 
getting audit feedback since 1992. However, the Army, the Air 
Force and DBOF are still unable to get an opinion, even a 
qualified one, on their financial statements, because records 
are missing or inadequate.
    Even the entities that have been audited for some years, 
such as the DBOF, the Army, and the Air Force, have never 
received anything better than a disclaimer of opinion. The 
Department of Defense appears to be finding it difficult, if 
not impossible, to improve its financial management to the 
point where reliable financial information can be used to 
produce auditable financial statements. As of the fiscal year 
1995 reports,\16\ the Army, the Air Force and DBOF still have 
deficient internal controls and inadequate accounting and 
financial information systems. The Navy lacks even basic 
internal controls and produces financial reports that are 
grossly inaccurate.
    The committee continues to urge the DOD to upgrade and 
modernize its accounting systems and establish a sound system 
of internal controls to ensure that errors prevented or 
detected and corrected quickly. These steps will improve the 
accuracy of the financial information produced and lead to 
financial statements that offer a reliable assessment of DOD's 
financial situation.

               Department of Defense Inventory Management

Keeping the wrong items in the wrong place at the wrong time

    The Department of Defense (DOD) maintains a large inventory 
of supplies and equipment for peacetime and wartime usage. In 
fact, DOD's inventory is almost twice as large as necessary 
because it includes large amounts of excess and unneeded items. 
According to the General Accounting Office, DOD ``. . . does 
not have adequate oversight of its inventory, financial 
accountability remains weak, requirements continue to be 
overstated, and DOD can be more aggressive in implementing 
modern commercial practices.'' \17\ All of these problems add 
up to tens of billions of dollars of unnecessary and 
nonproductive defense costs each year.
    DOD stores about $36 billion of unneeded inventory, which 
is almost half the total DOD inventory of $77 billion, 
according to GAO.\18\ This excessive inventory has been caused 
by a number of factors. First, DOD has downsized significantly, 
yet it has not significantly reduced its inventory. There is no 
need to maintain the same large inventory for a smaller force. 
Second, DOD has retired many weapons systems in the last few 
years, yet they continue to keep spare parts and other items 
for these systems. Third, DOD lacks an effective inventory 
management system, so they cannot determine what items they 
have, what items they truly need, and what items are extra. And 
fourth, DOD consistently overestimates its future needs, 
resulting in excessive inventories. All of these factors 
combine to make an inventory far in excess of DOD's legitimate 
needs.
    DOD needs to adopt modern inventory management techniques 
and tools, but they have not made this a priority. Modern 
companies rely on an accurate inventory control system, rapid 
procurements, and rapid transportation to reduce inventories 
and the high storage costs they entail. DOD, however, still 
uses highly centralized and inefficient processes of inventory 
management. Large, centralized, and inefficient storage centers 
stockpile large numbers of items because they fear it could be 
years before they could staff a procurement to obtain 
replacement items. Field users stockpile items and overestimate 
their requirements because they distrust the storage centers 
and cannot tolerate long transportation delays. And procurement 
officials routinely overbuy items because they fear delays and 
problems if they wait for later reprocurements. Many of these 
problems would be solved by implementing modern inventory 
management techniques readily available in the private sector.
    Congress has encouraged DOD to correct these problems and 
has taken steps to help DOD in correcting them. By passing the 
Federal Acquisition Reform Act of 1996, Congress made the 
process of procuring items significantly easier. This will help 
reduce the ``lag time'' between when an item is needed and when 
it is procured, and thus it will help to reduce the number of 
spares needed to cover the ``lag time.'' Congress has also 
required DOD to consider and test best inventory practices such 
as inventory consolidation and reduction, prime vendor 
delivery, and logistics outsourcing.\19\ If DOD would adopt the 
efficient inventory management processes advocated by Congress, 
these improvements would virtually solve the excess inventory 
problem.

           Department Of Defense Resource Management Failure

DOD wastes resources on the wrong missions

    Most Americans appreciate that the primary mission of the 
Department of Defense is to defend America and American 
interests against armed attacks. Americans want a military 
strong enough to defend them against attack today and in the 
future. Unfortunately, the current administration does not 
appreciate the mission of DOD, and consequently, they have 
squandered precious resources on the wrong missions. Despite 
congressional concerns, the administration's mismanagement of 
DOD resources threatens to open serious holes in the defenses 
of America and her allies.
    In the post-cold war world, America faces many new threats 
from a variety of nations employing a multitude of tactics and 
technology. Clearly, DOD must adapt to these new post-cold war 
threats with innovative strategies, tactics, technologies, 
force structures, and equipment. Although the administration's 
national military strategy is to be able to fight two major 
regional contingencies simultaneously, they have neither 
developed the force structure nor allocated the resources to do 
this. This serious lack of capability to implement our strategy 
is becoming apparent in both short term and long term effects 
on our military units.
    In the short term, an inadequate military force structure 
is being stretched to its limits just to meet its peacetime 
requirements. Due to many peacekeeping commitments, our 
military faces many peacetime deployments for long periods of 
time, such as in Bosnia, Somalia, Iraq and the Middle East. 
Many military personnel must spend months away from their 
families on long deployments, only to deploy again soon after 
returning home because there simply are not any other personnel 
to take their places. The high cost of these deployments add to 
the already high costs of training exercises to keep our armed 
forces prepared for battle at any moment. The administration 
has neglected to budget even for routine training necessary for 
the upkeep of our forces, much less the costly deployments of 
U.S. forces. In the short term, the administration's budget has 
led to resource shortfalls as an overstretched military tries 
to maintain its numerous peacetime commitments.
    In order to stem short term problems, the administration 
has jeopardized modernization of the military. They have 
underfunded the development of future DOD systems and other 
modernization efforts by billions of dollars to subsidize 
current initiatives. The administration has consistently 
underestimated the cost of future modernization (by $150 
billion in fiscal year 1994),\20\ and it has neglected to 
properly allocate resources to future modernization. GAO found 
that in the fiscal year 1996 DOD budget request, ``. . . $27 
billion in planned weapon system modernization programs have 
been eliminated, reduced, or deferred to the year 2000 and 
beyond.'' \21\ Unless the administration restores the priority 
of defense modernization, our military may soon face a 
technologically and numerically superior foe. At that time, as 
at the time of our entry into World War II, the cost of 
modernization will not only be measured in the hundreds of 
billions of dollars; it will also be measured in terms of human 
casualties and fatalities.
    The administration failed to manage resources for both 
short term and long term defense priorities. They have 
underallocated the forces and resources necessary for their 
national military strategy of simultaneously fighting two major 
regional contingencies, with the result that our military is 
today overstretched to accomplish its stated mission. 
Mismanagement of resources causes a serious lack of confidence 
in Congress in the administration's defense planning, and it 
provides a growing confidence to the foreign enemies of 
America.

           Defense Employee Relocation and Travel Management

Making employee relocation and travel less traumatic and expensive

    The Department of Defense (DOD) requires considerable 
relocation and travel of its many employees every year. 
However, DOD manages this process with cumbersome regulations 
and needless administrative red tape, which make travel and 
relocation traumatic for the employee and expensive for the 
Government. Congress is now considering legislation to make 
Federal employee relocation and travel more efficient and less 
expensive.
    By any standard, DOD spends an enormous amount on employee 
relocation and travel. The General Accounting Office determined 
that DOD spent about $3.5 billion in fiscal year 1993 on 
employee relocation and travel.\22\ Despite spending this huge 
amount, arcane regulations still make relocation and travel 
difficult and expensive for DOD employees. An example of this 
is the Federal travel regulation requiring employees to list 
each long distance call made while traveling for the Government 
and to certify that each call was made for official business. 
This regulation may have been warranted when it was first 
written in 1939 and long distance calls were very expensive, 
but the regulation is cumbersome and counterproductive today. 
Today, certifying these phone calls often costs more than the 
phone calls themselves. The Federal travel regulations are full 
of such archaic and arcane rules which drive costs up and 
frustrate employees.
    On top of the huge spending directly on employee relocation 
and travel, DOD also spends a much larger amount than the 
private sector on the administrative processing of employee 
relocation and travel. A typical private sector travel voucher 
is simple and requires about $15 in labor costs to complete, 
while completing the complex Government travel voucher costs up 
to $123 in labor costs.\23\ Also, the private sector typically 
audits a voucher for errors prior to its payment. DOD audits 
the voucher after its payment, requiring many extra steps to 
revise the payment and possibly recoup improper payments if 
errors are discovered. The GAO demonstrated that DOD post-
payment audits are conducted in 100 percent of expense reports 
while in the private sector, they are audited at random. DOD 
travel regulations are 1,357 pages long, while private sector 
large company's regulations ranged from two to 11 pages and DOD 
has 700 travel processing centers compared to one in each of 
the two large firms studied by the GAO.\24\ The GAO also 
suggested that additional administrative costs of preparing, 
processing, and auditing travel vouchers add about $500 million 
to the already enormous direct costs of DOD employee relocation 
and travel.\25\
    Fortunately, Congress is finalizing legislation to improve 
the employee relocation and travel system governmentwide. H.R. 
3637 would simplify travel vouchers, provide incentives for 
efficient travel practices, and eliminate arcane regulations 
which unnecessarily drive up complexity and costs. S. 1745, the 
Senate version of the National Defense Authorization Act for 
fiscal year 1997, includes similar language. It is expected 
that the minor differences between these two bills will be 
resolved, and the language will be included as part of the 
final conference agreement on the National Defense 
Authorization Act for fiscal year 1997.
    The GAO estimates that by making the Government relocation 
and travel system more like that of the private sector, 
Defense-wide annual savings could reach $875 million.\26\ These 
reforms will at the same time make relocation and travel more 
user friendly for DOD employees and, therefore, truly represent 
a ``win-win'' situation for the taxpayer, the DOD employee, and 
the Federal budget.

                                ENDNOTES

    \1\ General Accounting Office, Defense Management: Stronger 
Support Needed for Corporate Information Management Initiative 
to Succeed, GAO/AIMD/NSAID-94-101 (April 1994), p. 1.
    \2\ General Accounting Office, ``Federal Management: 
Updated Information for Congressional Oversight'' (July 1994), 
pp. 31-32.
    \3\ The National Defense Authorization Act of 1996 (Public 
Law 104-106, Division E).
    \4\ Department of Defense, Office of Inspector General 
Report, Semiannual Report to Congress (April 1, 1995 to 
September 30, 1995), p. 49.
    \5\ General Accounting Office, High Risk Series: Defense 
Contract Management, GAO/HR-95-3 (February 1995), p. 24.
    \6\ Id., p. 18.
    \7\ General Accounting Office, Addressing the Deficit, 
Options for Deficit Reduction, GAO/OCG-96-5 (May 1996), p. 40.
    \8\ General Accounting Office, High Risk Series: Defense 
Contract Management, GAO/HR-95-3 (February 1995), p. 24.
    \9\ General Accounting Office, Information Security, GAO/T-
AIMD-96-92 (May 22, 1996), pp. 2-3.
    \10\ General Accounting Office, Information Security: 
Computer Attacks at DOD Pose Increasing Risks, GAO/AMID-96-84 
(May 1996), pp. 22-23.
    \11\ General Accounting Office, Information Security, GAO/
T-AIMD-96-92 (May 22, 1996), pp. 4-5.
    \12\ General Accounting Office, Computer Attacks at DOD 
Pose Increasing Risks, GAO/AIMD-96-84 (May 1996), p. 32.
    \13\ Hearings before the Subcommittee on Government 
Management, Committee on Government Reform and Oversight, 
November 14, 1995.
    \14\ Department of Defense, Chief Financial Officer Reports 
for FY 1994.
    \15\ Department of Defense, Chief Financial Officer Reports 
for FY 1992-5.
    \16\ Department of Defense, Chief Financial Officer Reports 
for FY 1995.
    \17\ General Accounting Office, High Risk Series: Defense 
Inventory Management, GAO/HR-95-5 (February 1, 1995), p. 13.
    \18\ Id., p. 6.
    \19\ National Defense Authorization Act for Fiscal Year 
1996, Sections 360, 391, and 392 (June 1, 1995).
    \20\ General Accounting Office, Future Years Defense 
Program: Optimistic Estimates Lead To Billions in 
Overprogramming, NSIAD-94-210 (July 29, 1994).
    \21\ General Accounting Office, Future Years Defense 
Program: 1996 Program Is Considerably Different From the 1995 
Program, NSIAD-95-213 (September 15, 1995).
    \22\ General Accounting Office, Travel Process 
Reengineering: DOD Faces Challenges in Using Industry Practices 
to Reduce Costs, GAO/AIMD/NSIAD-95-90 (March 8, 1995), p. 3.
    \23\ General Accounting Office, Governmentwide Travel 
Management: Federal Agencies Have Opportunities for 
Streamlining and Improvising Their Travel Practices, GAO/T-
AIMD-96-60 (March 8, 1995).
    \24\ General Accounting Office, Travel Process 
Reengineering: DOD Faces Challenges in Using Industry Practices 
to Reduce Costs, GAO/AIMD/NSIAD-95-90 (March 8, 1995), p. 12.
    \25\ Id., p. 6.
    \26\ General Accounting Office, Travel Process 
Reengineering: DOD Faces Challenges in Using Industry Practices 
to Reduce Costs, GAO/AIMD/NSIAD-95-90 (March 8, 1995), p. 17.

                        Department of Education

                                Overview

    Created in 1979, the Department of Education (ED) is one of 
the newest and smallest Cabinet-level departments. With an 
annual appropriation of $32.3 billion, its 4,787 employees have 
the following missions: (1) to provide financial aid for 
education and monitor its use; (2) to fund and pursue 
education-related research and information dissemination; (3) 
to ensure equal access to education and enforce Federal 
statutes prohibiting discrimination in federally funded 
programs and activities; and (4) to provide national leadership 
in identifying and focusing attention on major educational 
issues and problems.
    ED administers an array of student financial assistance 
programs under Title IV of the Higher Education Act of 1965, as 
amended. These programs provide grants, loans, and work-study 
support to postsecondary education. In fiscal year 1995, the 
Federal Government provided over $35 billion to about 7 million 
postsecondary students. Of this total, $14.3 billion (41 
percent) went to guaranteed student loans and $5.4 billion (or 
15 percent) was paid in Pell grants.\1\ Since its creation, the 
Department has doubled its budget from around $15 billion to 
over $32 billion. Over 200 categorical programs are 
administered within the Department today.
    ED also continues to have the highest percentage of 
political appointees among individual departments. As of 
September 1995, ED had a ratio of one political employee for 
every 33 civil service employees. The next lowest ratio was at 
the Department of Housing and Urban Development with one 
political employee for every 100 civil service employees. 
Political appointees include Presidential appointees requiring 
Senate confirmation, noncareer Senior Executive Service 
appointees, and Schedule C appointees.\2\
    According to the Department's Inspector General, the three 
most significant problems facing ED are (1) the absence of 
performance standards for its programs and operations, (2) 
weaknesses in the design and operation of student financial 
assistance programs, and (3) weaknesses in the Department's 
financial management systems.\3\ Student loan programs, with 
annual losses of over $2 billion, remain the single highest-
risk of ED's operations.\4\
    ED is making progress in addressing some of its core 
management problems. It is implementing many recommendations by 
its IG and GAO for improvements in student assistance program 
management. ED also is moving to develop comprehensive and 
reliable financial management and information systems. Student 
loan losses, while still very high, have declined significantly 
in recent years. On the other hand, ED has neglected its 
responsibilities in one key area of student assistance program 
oversight--``gatekeeping.''
    Given the pervasive nature of its problems, much work 
remains to be done if ED is to become an effective and 
efficient operation. Further, its progress may be hampered by 
long-standing weaknesses in such areas as management 
organizational and structure and human resource practices.

           ED is Not Meeting its Gatekeeping Responsibilities

    One key component in the administration of Title IV of the 
Higher Education Act is screening educational institutions 
which seek to participate in student financial assistance 
programs in order to ensure that only schools providing quality 
education and training have access to Title IV funds. This 
screening process is referred to as ``gatekeeping.'' \5\ The ED 
Inspector General has emphasized that ``it is vital to the 
efficiency of [student assistance programs] to have strong 
front-end controls like effective gatekeeping, rather than rely 
on back-end institutional monitoring and enforcement 
mechanisms.'' \6\ However, ED has take a passive approach to 
gatekeeping. As a result, gatekeeping has not been effective in 
screening out schools that are financially unstable, offer 
educational programs of questionable value, experience high 
default rates, and employ abusive practices such as misleading 
advertising.
    The lack of measurable outcome-oriented performance 
standards, and the resulting lack of adequate performance 
information, represent a fundamental weakness in gatekeeping. 
Accrediting agencies, which are subject to approval and 
regulation by ED, are supposed to ensure the quality of 
training so that students and taxpayers get their money's worth 
from the training purchased. However, the accrediting agencies 
have been reluctant to establish performance standards and 
measures, and ED has been unwilling to require them to do so. 
Without enforceable performance standards, schools that fall 
short of their own accrediting agency standards, even in such 
basic areas as graduation and job placement, may continue to 
participate in student assistance programs.\7\
    The problem is most severe in the case of for-profit 
vocational schools, which have much higher student loan default 
rates than nonprofit institutions.\8\ Under the current method 
of funding vocational training, a participating school can 
enroll as many students as possible and disburse as much 
student financial aid as is available. However, because there 
are no performance standards for student achievement, there is 
little incentive for a school to be concerned about how many of 
its students graduate and find jobs. School recruiters can 
promise glamorous, high-paying careers to prospective students, 
but graduates often receive much less than was promised.\9\
    A May 1995 ED Inspector General report on a review of 
accrediting agencies found that agencies were not using 
performance measures to assess and improve the quality of 
education offered by schools. The report concluded that neither 
the accrediting agencies nor ED could tell whether the $8.8 
billion spent annually on postsecondary education was achieving 
results or how many of the 2 million students obtained 
training-related jobs.\10\
    The IG review disclosed that a number of schools it 
investigated overstated their job placement rates by 54 to 270 
percent.\11\ Both the IG and GAO have raised concerns that the 
schools may be training students for jobs that do not exist. 
About $725 million in Title IV funds are spent annually to 
train cosmetology students in numbers that routinely exceed 
demand. For example, 96,000 cosmetologists were trained 
nationwide in 1 year, adding to a labor market already 
saturated with 1.8 million licensed cosmetologists. In that 
same year, only about one-third of all licensed cosmetologists 
found jobs.\12\ The IG reported that one cosmetology school in 
Louisiana received over $2.8 million in Title IV funds for 673 
students enrolled over a period of approximately 3.5 years. Of 
the 673 students, only 19 actually received State licenses, at 
a cost to the taxpayers of almost $148,000 per license.\13\
    The statutory purpose of vocational training assistance is 
to prepare students for gainful employment.\14\ The lack of 
performance standards, particularly standards to measure 
whether Federal assistance is meeting this fundamental purpose, 
cheats students as well as taxpayers. Many students enroll in 
vocational training programs, incur significant debts, and are 
then unable to obtain employment because they have been trained 
in fields where jobs are not available. These students often 
feel victimized and default on their loans. By virtue of such 
defaults, they are ineligible for additional assistance and are 
thereby disadvantaged even more in their career pursuits.\15\
    In an attempt to deal with the problem, the 1992 Higher 
Education Act Amendments provided new tools to screen out 
unworthy institutions and eliminate their eligibility for Title 
IV funds. The amendments directed ED to establish standards for 
recognizing accrediting agencies and required the accrediting 
agencies to have institutional standards in 12 areas. The 
agencies have resisted establishing such standards on the basis 
that this responsibility should rest with ED.\16\ However, ED 
did not meet its responsibility under the law. The Department 
did not issue final regulations to implement the 1992 
amendments until April 1994.\17\ The regulations it finally did 
issue simply restated the statutory language without providing 
the accrediting agencies any additional direction.\18\ In 
recent congressional testimony, the IG stated:

          We believe that the Department's regulations are not 
        what the 1992 HEA Amendments contemplated; nor will 
        they enable the Department to attain clear, measurable 
        and binding performance standards to help meet the 
        requirements of the Government Performance and Results 
        Act of 1993 (GPRA). The GPRA mandates federal program 
        accountability by requiring federal agencies to 
        establish performance goals that are objective, 
        quantifiable and measurable by fiscal year 1999. The 
        Department currently must rely on accrediting agencies 
        to establish and enforce such performance goals. 
        However, without assessing the institutional 
        performance data collected by the agencies from member 
        schools, the Department's ability to comply with the 
        GPRA may be significantly jeopardized.\19\

    Given ED's unwillingness to act, the IG concluded that 
major gatekeeping improvements have been limited to those areas 
where Congress has legislated bright-line standards for the 
Department to implement without much discretion.\20\

 ED has Experienced Chronic Problems in Overseeing Student Aid Programs

    Student assistance programs, which make up by far the 
largest share of ED's budget and resources, have been plagued 
for years by fundamental management problems. According to the 
IG, student loan programs ``continue as the number one high-
risk area for the Department.'' \21\ GAO included the entire 
inventory of student financial aid programs on its High-Risk 
list. Student loan defaults have declined in the past several 
years, but still cost the taxpayers dearly. In fiscal year 
1994--a relatively good year and the most recent year for which 
figures are available--the Federal Government paid out about 
$2.4 billion to make good its guarantee on defaulted loans.\22\ 
As described below, student assistance program problems arose 
in many areas.

Federal Pell grant program abuses

    The IG describes the Pell grant program as ``basically an 
honor system,'' which is designed by ED to rely on participants 
to assure that awards go only to eligible students in 
attendance, Federal funds are administered properly, required 
refunds are made, and expenditures are accurately reported to 
the Department.\23\ As a result of this approach, the program 
is rife with abuse. GAO reported on the use of false documents 
on students by participating schools. These schools submitted 
documentation to the Department for (1) students who never 
applied for grants, (2) individuals who never enrolled in or 
attended the schools, and (3) students who were ineligible. 
Some schools also misrepresented their academic programs and 
other eligibility criteria.\24\ A September 1994 IG report 
found that over 45,000 Pell grant recipients had falsely 
claimed to be U.S. citizens. These ineligible individuals 
received over $70 million in Pell grants and another $45 
million in other guaranteed loans.\25\

Ineligible students obtain aid and default

    A 1995 GAO report revealed that in 1 year, of 43,519 
students who were eligible for additional loans, 20,210 
students defaulted on 23,298 subsequent loans. The amount 
outstanding on the subsequent loans (which included interest 
and principal) exceeded $56 million. GAO also identified 
101,327 students who previously defaulted on a student loan and 
were, therefore, ineligible for Federal student aid. 
Nevertheless, the data showed that they may have received 
139,123 Pell grants, totaling approximately $200 million. Of 
these ineligible students, 73,934 received one grant; 19,838 
received two grants; and over 7,555 received three or more 
grants.\26\

Students are overpaid in loans

    It is estimated that since 1982, over 2,000 students have 
received loans for more than their Cost of Attendance (COA). 
The overpayments ranged from less than $100 to over $13,000; 
the average amount was $1,200. The overpayments totaled $2.4 
million. The Department's system for tracking student loans was 
not used to ensure that students receive financial aid equal to 
or less than their COA and relies on the schools to ensure 
compliance with Federal requirements. When guaranty agencies 
submitted COA data, they did so after students received aid. 
GAO also found that for the 1982-1992 period, about 8.6 million 
out of approximately 32 million loan records in the Federal 
Family Education Loan Program data base showed no data for 
COA.\27\

Weaknesses in controls over postsecondary vocational training

    As discussed previously, this area represents one of the 
most serious shortcomings in ED's stewardship of student 
assistance. Students attend schools that are incapable of 
administering student aid funds properly and provide an 
educational experience that is unlikely to result in employment 
and higher earnings. ED's abdication of its ``gatekeeping'' 
responsibilities is a major cause of the problem.

Ability-to-benefit

    To be eligible for Title IV assistance, students without 
high school credentials must pass an approved test. The purpose 
of the test is to determine their ability to benefit from the 
training programs. The IG's office has found a great deal of 
abuse in the area of ability-to-benefit testing. The tests are 
administered and scores are set by the schools, which have an 
incentive to admit the maximum number of students to collect 
the maximum amount of Federal aid.\28\ Some schools set the 
passing score below the score recommended by the test 
publisher, thereby defeating the purpose of the test and 
allowing the admission of students with questionable ability to 
benefit from the training. In the 1992 Higher Education Act 
Amendments, Congress authorized ED to specify the passing score 
on independently administered tests. However, the Department 
failed to publish final regulations implementing this authority 
until December 1995. The regulations were finally issued 6 
months after the IG highlighted ED's delay in a letter to 
Congress.\29\

Schools fail to pay refunds

    Another problem is the failure on the part of the schools 
to pay refunds on student loans where borrowers default on loan 
obligations through no fault of their own. By failing to pay 
loan refunds, schools are keeping money they have not earned 
for services they have not rendered. When done intentionally, 
this amounts to theft of public funds. Students are being 
victimized by the failure of schools to pay refunds; when loan 
defaults result, the taxpayers are victimized as well.\30\
    In general, the outlook for student loan programs is 
improving. A number of legislative reforms have been enacted in 
recent years. Also, to its credit, ED is in the process of 
implementing many recommendations by the IG and GAO to address 
the host of management problems that have beset the programs. 
Given the pervasive nature of the problems, however, much work 
remains to be done--especially an evaluation of whether the 
actions taken result in a materially improved program.

    ED's Administration of Programs is Fragmented and Beset by Long-
                      Standing Management Problems

    Fragmentation in the structure and administration of ED's 
programs hinders the Department in carrying out its missions 
effectively. This is due, in no small measure, to the piecemeal 
approach through which the programs have been enacted into law. 
However, ED has exacerbated the situation by its piecemeal 
approach to program administration. Programs targeting similar 
initiatives have sometimes been administered by different 
offices within ED, creating overlap and coordination problems. 
Implementing the Government Performance and Results Act would 
help ED identify program duplication and streamline its 
managerial organization.
    The IG recently reported that there are at least 19 
different programs at the Department that address early 
childhood education. In addition, three other Federal agencies 
operate another 22 programs in this area. According to the IG, 
these programs are administered with little or no 
collaboration. The IG recommended that ED develop a national 
policy to focus the disparate resources devoted to this 
area.\31\ Also, critical decisionmaking information is often 
not shared among program managers. For example, program 
managers who oversee one category of student aid do not know 
whether applicants have defaulted on other federally funded 
loans or grants.\32\
    A striking example of fragmentation is the strategy ED 
consciously adopted to implement the Federal Direct Student 
Loan Program (FDSLP). ED's strategy, in effect, fenced off 
FDSLP from the other student loan programs. This fragmented 
approach divided related functions rather than coordinating 
them, and limited ED's ability to provide adequate attention 
and oversight to the other student aid programs. In a June 1996 
report, the IG recited a list of bureaucratic complications, 
intrigues, and undesirable consequences that resulted. Among 
other problems, ED's approach--
     created an organizational culture that mirrored 
the uncooperative and uncollaborative behavior demonstrated at 
the top levels of the organization, as various staff aligned 
themselves with one of the two leaders;
     fostered an environment where middle managers were 
reluctant to elevate conflict; and
     exacerbated low employee morale and unproductive 
competition between the Office of Student Financial Assistance 
Programs and the Direct Loan staff.\33\
    In accordance with the IG's recommendations, ED is now 
moving to integrate the FDSLP with other student assistance 
programs. However, it appears that such problems could easily 
recur in ED's management environment. The same June 1996 IG 
report reiterated a number of core problems identified in a 
1993 GAO management review of ED which, according to the IG, 
``are still true of OPE [the Office of Postsecondary Education] 
today.'' The Department--
     lacks a clear vision of how to best marshal its 
resources to effectively achieve its mission;
     has a history that is replete with long-standing 
management problems that periodically erupted, became the focus 
of congressional and media attention, and subsequently diverted 
attention from the policy agendas;
     lacks continuous, qualified leadership, and has 
yet to successfully implement all of the fundamental managerial 
reforms recommended by a joint OMB/ED task force in 1991;
     has a long-standing practice of filling key 
technical and policymaking positions with managers who, lacking 
requisite technical qualifications, were ill-equipped to carry 
out their managerial responsibilities;
     has management structures and systems that have 
inadequately supported its major initiatives, such as student 
aid; and
     does not adequately recruit, train, or manage its 
human resources to ensure that workers can accomplish the 
Department's mission and implement Secretarial initiatives.\34\
    The June 1996 IG report highlighted a number of human 
resource management problems at ED. The Department has not 
identified the skills its work force needs, nor has it targeted 
recruitment and training to compensate for limited staff 
resources and increasing program responsibilities. Ironically, 
the education and training of ED's own staff are significantly 
deficient. For example, some senior managers in the Program 
Systems Service office did not appear to have degrees in 
computer science or related curricula, formal systems training, 
or recent experience working with other computer systems.\35\ 
The IG expressed similar concerns about staff in Program 
Systems Service who were responsible for contract 
administration. Given the amount of systems contracting 
involved in the administration of FDSLP and the magnitude of 
upcoming awards for other systems work, the IG warned that 
absence of sufficient qualified staff in this area will pose a 
significant risk to the Department.\36\
    Other problems are ED's practice of placing unqualified 
managers in key technical and policymaking positions, and its 
inability to keep qualified staff in permanent positions. For 
example, ED relies excessively on temporary details of staff, 
thereby preventing stability and adding confusion.\37\ For 
example, as of February 1996, the Office of Postsecondary 
Education had 34 position in headquarters filled by staff 
members serving in an ``acting'' supervisory capacity. These 34 
positions represented 38 percent of all of its headquarters 
supervisory positions at the GS-13 level or higher.\38\

           ED Suffers From Poor Financial Management Systems

    Based on serious problems revealed by its work in recent 
years, the ED Inspector General described the Department's 
financial management data systems as ``deficient or 
nonexistent.'' \39\ ED's automated financial management systems 
are antiquated and have numerous functional and technological 
problems. Such problems make it difficult and labor-intensive 
to produce accurate and timely data for decisionmaking and to 
produce reliable department-wide financial reports.\40\
    The problems include incompatible data exchanges and lack 
of integration between subsidiary systems. In 1994, $27 billion 
in loan subsidies, grants, and administrative costs were 
supported by these systems. ED's financial management systems 
are considered high-risk by OMB and are listed as a material 
non-compliance in the Department's Federal Managers' Financial 
Integrity Act report.\41\
    Major financial management problems affect the Federal 
Family Education Loan Program (FFELP). The FFELP is the largest 
component of student assistance programs, accounting for 72 
percent of the total $29 billion provided in Federal funds 
during the academic year 1993-94. In that year, FFELP 
guaranteed over $21 billion in loans to 6.5 million 
students.\42\ The Department's IG and the GAO have reported 
that ED pays lenders millions of dollars of loan interest 
subsidies on the basis of unaudited summaries of billings, and, 
due to lack of reliable financial information, makes billions 
of dollars in similar payments on an ``honor system.'' 
According to GAO, these long-standing problems stem in part 
from ED's priority of getting loans and grants to recipients 
with little emphasis on financial accountability.\43\
    The IG recently completed an audit of FFELP's financial 
statements for fiscal years 1994 and 1993. The result was a 
disclaimer, based on the same problems identified in prior 
years:
     unreliable loan data continues to prevent the 
Department from reasonably estimating FFELP program costs;
     controls are not in place to verify that billing 
reports submitted by guaranty agencies and lenders are 
reasonable; and
     the financial reporting system does not ensure 
that financial statements and other management reports are 
reliable.\44\
    GAO reviewed the IG's audit of the FFELP financial 
statements and concurred in its findings, including the 
disclaimer of opinion.\45\ GAO added that its own work revealed 
weaknesses in the ability of FFELP's information system to 
protect data from unauthorized use. These weaknesses posed a 
threat to safeguarding assets, maintaining sensitive student 
loan data, and ensuring the reliability of financial management 
information.\46\
    The Department is making progress in addressing its 
financial management problems. It is developing the Education 
Central Automated Processing System and a National Student Loan 
Data System to replace current antiquated and ineffective 
systems. These systems are not yet fully functional, however, 
and much work remains to be done.\47\ For example, the 
usefulness of these systems depends on the accuracy and 
validity of the underlying data, which needs to be tested.\48\

                                ENDNOTES

    \1\ General Accounting Office, Higher Education: Ensuring 
Quality Education From Proprietary Institutions, GAO/T-HEHS-96-
158 (June 6, 1996), p. 1.
    \2\ Congressional Research Service, 1995 data supplied by 
the Office of Personnel and Management (September 12, 1996).
    \3\ Department of Education, Office of Inspector General, 
Significant Problems Facing the U.S. Department of Education 
(June 20, 1995), p. 3.
    \4\ General Accounting Office, High-Risk Series: Student 
Financial Aid, GAO/HR-95-10 (February 1995).
    \5\ Department of Education, Office of Inspector General, 
Gatekeeping in the Student Financial Assistance Programs (June 
6, 1996), p. 1.
    \6\ Id.
    \7\ Id., p. 9.
    \8\ General Accounting Office, Higher Education: Ensuring 
Quality Education From Proprietary Institutions, GAO/T-HEHS-96-
158 (June 6, 1996), pp. 2-3.
    \9\ Department of Education, Office of the Inspector 
General, Significant Problems Facing the U.S. Department of 
Education (June 20, 1995), p. 3.
    \10\ Department of Education, Office of the Inspector 
General, Managing for Results: Review of Performance-Based 
Systems at Selected Accrediting Agencies, Final Report, ACN 06-
30004 (May 8, 1995), pp. 4, 9.
    \11\ Id., pp. 6-7.
    \12\ General Accounting Office, Higher Education: Ensuring 
Quality Education From Proprietary Institutions, GAO/T-HEHS-96-
158 (June 6, 1996).
    \13\ Department of Education, Office of the Inspector 
General, Gatekeeping in the Student Financial Assistance 
Programs (June 6, 1996), p. 10.
    \14\ Id., p. 2.
    \15\ Department of Education, Office of the Inspector 
General, Significant Problems Facing the U.S. Department of 
Education (June 20, 1995), p. 3.
    \16\ Department of Education, Office of the Inspector 
General, Gatekeeping in the Student Financial Assistance 
Programs (June 6, 1996), p. 6; Department of Education, Office 
of the Inspector General, Managing for Results: Review of 
Performance-Based Systems at Selected Accrediting Agencies, 
Final Report, ACN 06-30004 (May 8, 1995), pp. 1, 5.
    \17\ Department of Education, Office of the Inspector 
General, Significant Problems Facing the U.S. Department of 
Education (June 20, 1995), p. 2.
    \18\ Department of Education, Office of the Inspector 
General, Gatekeeping in the Student Financial Assistance 
Programs (June 6, 1996), p. 7.
    \19\ Id., p. 8.
    \20\ Id., p. 4.
    \21\ Department of Education, Office of the Inspector 
General, Significant Problems Facing the U.S. Department of 
Education (June 20, 1995), p. 13.
    \22\ General Accounting Office, High-Risk Series: Student 
Financial Aid, GAO/HR-95-10 (February 1995).
    \23\ Department of Education, Office of the Inspector 
General (April 6, 1995), p. 22.
    \24\ General Accounting Office, High-Risk Series: Student 
Financial Aid, GAO/HR-95-10 (February 1995), p. 37.
    \25\ Department of Education, Office of the Inspector 
General, Improving Efficiency and Effectiveness In the 
Department of Education (April 6, 1995), p. 23.
    \26\ General Accounting Office, Student Financial Aid: Data 
Not Fully Utilized to Identify Inappropriately Awarded Loans 
and Grants, GAO/HEHS-95-89 (July 11, 1995), p. 10.
    \27\ Id., pp. 10-11.
    \28\ Department of Education, Office of the Inspector 
General, Significant Problems Facing the U.S. Department of 
Education (June 20, 1995), p. 5.
    \29\ Department of Education, Office of the Inspector 
General, Significant Problems Facing the U.S. Department of 
Education (June 20, 1995), pp. 5-6; Federal Register, Vol. 60., 
No. 231, December 1, 1995, p. 61830.
    \30\ Department of Education, Office of the Inspector 
General, Significant Problems Facing the U.S. Department of 
Education (June 20, 1995), p. 9.
    \31\ Department of Education, Office of the Inspector 
General, Improving Efficiency and Effectiveness In the 
Department of Education (April 6, 1995), p. 2.
    \32\ General Accounting Office, Student Financial Aid: Data 
Not Fully Utilized to Identify Inappropriately Awarded Loans 
and Grants, GAO/HEHS-95-89 (July 11, 1995), pp. 9-13.
    \33\ U.S. Department of Education, Office of Inspector 
General, Coming Together to Face the Challenges of an Uncertain 
Future, Final Report, Control No: S03-60001 (June 10, 1996), p. 
4.
    \34\ Id., Appendix 2, p. 3.
    \35\ Id., p. 8.
    \36\ Id., p. 9.
    \37\ Id.
    \38\ Id.
    \39\ Department of Education, Office of Inspector General, 
Significant Problems Facing the U.S. Department of Education 
(June 20, 1995), p. 10.
    \40\ Id.
    \41\ Id., p. 11.
    \42\ General Accounting Office, Student Financial Aid: Data 
Not Fully Utilized to Identify Inappropriately Awarded Loans 
and Grants, GAO/HEHS-95-89 (July 11, 1995), p. 1.
    \43\ General Accounting Office, Federal Management: Updated 
Information for Congressional Oversight (July 1994), p. 7.
    \44\ General Accounting Office, Financial Audit: Education 
Loan Program's Financial Statements for Fiscal Years 1994 and 
1993, GAO/AIMD-96-22 (February 26, 1996), p. 8.
    \45\ General Accounting Office, Financial Audit: Education 
Loan Program's Financial Statements for Fiscal Years 1994 and 
1993, GAO/AIMD-96-22 (February 26, 1996).
    \46\ Id., pp. 9-10.
    \47\ Department of Education, Office of the Inspector 
General, Significant Problems Facing the U.S. Department of 
Education (June 20, 1995), p. 13.
    \48\ General Accounting Office, Financial Audit: Education 
Loan Program's Financial Statements for Fiscal Years 1994 and 
1993, GAO/AIMD-96-22 (February 26, 1996), p. 9.

                          Department of Energy

                                Overview

    The Department of Energy (DOE) budget for fiscal year 1996 
was $15.9 billion, and DOE had a total of 18,743 employees. As 
management issues are reviewed within the DOE, there is a need 
to re-examine the Department's basic missions. Created in 1977 
to respond to the Nation's energy crisis, DOE's priorities have 
shifted dramatically, first to nuclear weapons production in 
the 1980's and then to environmental cleanup today. DOE now is 
approaching new or expanded missions in such areas as 
industrial competitiveness, science education, safety and 
health, and nuclear arms and verification. Many experts believe 
that DOE needs to concentrate more on energy-related missions--
such as energy policy, energy information, and energy supply 
research and development--and that many of its remaining 
missions should be moved elsewhere.
    Notwithstanding the broad range of expert opinion that a 
fundamental rethinking of DOE's missions is needed, the 
Department has shown little interest in reviewing its missions 
or reforming its management practices. The Department's own 
``strategic plan'' clings to the status quo by assuming that 
all of DOE's current missions are valid and should remain 
within the Department.\1\ Likewise, as discussed later in this 
report, DOE has failed to provide its national laboratories 
with sorely needed guidance on what their missions should be.
    DOE also has been reluctant to reform its management 
practices. This is particularly unfortunate because its serious 
management problems are many. In September 1996 testimony 
before the Senate Committee on Energy and Natural Resources, 
the General Accounting Office (GAO) provided the following 
overview of some of these problems:

          Responding to changing missions and priorities with 
        organizational structures, processes, and practices 
        that had been established largely to build nuclear 
        weapons has been daunting for DOE. For example, DOE's 
        approach to contract management, first created during 
        the World War II Manhattan Project, allowed private 
        contractors to manage and operate billion-dollar 
        facilities with minimal direct federal oversight yet 
        reimbursed them for all of their costs regardless of 
        their actual achievements; only now is DOE attempting 
        to impose modern standards for accountability and 
        performance. Also, weak management and information 
        systems for evaluating program performance has long 
        hindered DOE from exercising effective oversight. In 
        addition, DOE's elaborate and highly decentralized 
        field structure has been slow to respond to changing 
        conditions and priorities, is fraught with 
        communication problems, and poorly positioned to tackle 
        difficult issues requiring a high degree of cross-
        cutting coordination.\2\

    The management problems described in the following sections 
have been emphasized repeatedly by the Department's Inspector 
General, the General Accounting Office, and the Office of 
Management and Budget. These problems include contract 
management, management of the national laboratories, nuclear 
waste cleanup, research and development, and financial 
management.

                 DOE's Contract Management is Defective

    The DOE has relied on the services of contractors to 
operate and manage an extensive complex of nuclear weapons 
research programs, production facilities, and multi-program 
laboratories. Although these facilities are government-owned, 
they are operated by large industrial corporations, non-profit 
entities, and academic institutions. In 1995, the Department 
expended about $14.5 billion for operations conducted by 
contractors.\3\ Thus, effective contract management is a 
critical facet of DOE's management. However, contract 
management weaknesses have been flagged by the Office of 
Management and Budget as a ``high-risk'' area,\4\ and have been 
documented in many audits by the Department's IG and by GAO.
    At the core of DOE's management problems is its inability 
to oversee effectively more than 110,000 contractor employees, 
who perform nearly all of the Department's work. Historically 
these contractors worked largely without any financial risk, 
they were paid even if they performed poorly, and DOE oversight 
was based on a policy of ``least interference.'' \5\ The 
following examples illustrate the Department's ineffective 
project and contract management:
     An IG audit found that DOE spent about $29 million 
on a project to design, modify, and produce 87 accident-
resistant containers for the Air Force. However, the project 
was undertaken unilaterally by DOE without consulting the Air 
Force. As it turned out, the Air Force did not want the 
containers and expressed no desire to use them.\6\
     An IG audit of the Rocky Flats Analytical Services 
Program found that the management and operating contractor did 
not evaluate alternatives to analytical services when less 
expensive and more efficient services were available from 
subcontract laboratories. As a result, about $2.9 million in 
unnecessary charges will be incurred annually for data that is 
not timely and reliable. Rocky Flats did not ensure that the 
contractor's purchasing system required the contractor to 
evaluate alternatives and document that it chose the best 
method of providing services.\7\
     An audit of the Department's project to build a 
new high-level waste evaporator at the Savannah River Site 
disclosed that the project, which was to be completed in 1993, 
is now delayed until 2001. In addition, the cost has risen from 
$44 million to $118 million due to changing architect/
engineering services, inadequate planning, staffing problems, 
and funding shortfalls.\8\
     The IG found that management and operating 
contractor overtime costs totaled about $251 million in fiscal 
year 1994. Of this total amount, $65 million was paid to 
higher-paid executives, administrative, and professional 
employees even though they were exempt from the Fair Labor 
Standards Act. The remaining $186 million was paid to nonexempt 
employees at 1\1/2\ to 2 times their hourly rate of basic pay. 
The IG report described a number of ways in which overtime 
could be reduced and better controlled.\9\
    The Department's project and contract management problems 
are evident in the failure of many of its major systems 
acquisitions. Historically, DOE has been unsuccessful in 
managing a number of its major acquisitions--projects that cost 
$100 million or more. These projects, which are crucial to the 
success of DOE's missions, include accelerators for high-energy 
and nuclear physics, nuclear reactors, and nuclear waste 
processing technologies. Since 1980, DOE has undertaken more 
than 80 major acquisitions. However, the number of major 
acquisition projects that are terminated prior to completion 
far exceeds the number actually completed. Many of these 
projects have large cost overruns and delays. Some of the root 
causes for these dismal results are: constantly changing DOE 
missions; a flawed system of incentives that sometimes rewards 
contractors despite their poor performance; and lack of DOE 
personnel staff with the proper skills to oversee 
contractors.\10\
    According to GAO, which is in the process of evaluating DOE 
contracting practices, the Department is now reforming its 
practices to make them more business-like and results-oriented. 
However, GAO is ``unsure whether the Department is truly 
committed to fully implementing some of its own 
recommendations.'' \11\ GAO's skepticism was prompted by the 
Secretary of Energy's May 1996 decision to extend without 
competition the University of California's three laboratory 
contracts, which are currently valued at about $3 billion. The 
GAO observed:

          . . . DOE's decision to extend, rather than 
        ``compete'' these enormous contracts--held by the 
        University continuously for 50 years--violates two 
        basic tenants of the Department's philosophy of 
        contract reform. First, contracts will be competed 
        except in unusual circumstances. Second, if current 
        contracts are to be extended, the terms of the extended 
        contracts will be negotiated before DOE makes its 
        decision to extend them. DOE justified its decision on 
        the basis of its long-term relationship with the 
        University. However, the Secretary's Contract Reform 
        team concluded that DOE's contracting suffered from a 
        lack of competition, which was caused, in part, by 
        several long-term relationships with particular 
        contractors.\12\

            DOE Fails to Manage its Laboratories Effectively

    The Department's nine laboratories have over 50,000 
employees and annual budgets that total about $6.5 billion. DOE 
estimates that it has invested more than $100 billion in the 
laboratories over the last 20 years. Most of the labs were 
established during or shortly after World War II to develop 
nuclear weapons. DOE owns the labs but contracts with 
universities and private sector organizations for their 
management and operation.\13\ While the achievements of the 
labs have been impressive, their management by DOE has been 
largely ineffective. In particular, DOE has failed to provide 
mission guidance, has managed the labs on a piecemeal rather 
than a national basis, and may have engaged in administrative 
oversight of the labs that is both excessive and ineffective.
    In recent congressional testimony, GAO provided the 
following summary of DOE's management shortcomings with respect 
to the labs:

          . . . DOE has not ensured that work at the national 
        laboratories is focused and managed to make the maximum 
        contributions to national priorities. First, DOE has 
        not established clear missions for the laboratories or 
        developed a consensus among laboratory and government 
        leaders on the laboratories' appropriate missions in 
        the post-Cold War environment, even though past studies 
        and special task forces have called for such action. 
        DOE has exacerbated this problem by treating the 
        laboratories as separate entities, rather than as a 
        coordinated national research system with unified 
        goals. Second, DOE's fragmented management approach has 
        impeded the ability of the laboratories to achieve 
        their current research missions and administrative 
        responsibilities.\14\

    As indicated above, many studies have pointed to the need 
to reassess the missions of the labs in light of current 
conditions. Many experts believe the labs make vital 
contributions to DOE and the Nation, which can continue with 
better management direction and focus on their missions; 
however, DOE has persistently failed to provide the needed 
direction. GAO concluded that ``the lack of proper departmental 
mission direction is compromising both the labs' effectiveness 
in meeting traditional missions and their ability to achieve 
new national priorities.'' \15\ GAO added that DOE's piecemeal 
lab-by-lab management approach--as opposed to treating the labs 
as a single research system with diverse objectives--fails to 
capitalize on one of the labs' greatest strengths--combining 
multi-disciplinary talents to solve complex, cross-cutting 
issues.
    Instead of giving the labs the substantive direction and 
management they need, what DOE apparently does provide them is 
administrative ``micro management.'' GAO reported that DOE's 
day-to-day administrative oversight of the labs is costly and 
ineffective:

          While DOE has recognized the need to expand oversight 
        of the laboratories, the Department's method of doing 
        so poses a strategic dilemma for DOE and laboratory 
        managers. DOE created many new oversight offices, each 
        having the authority to impose new requirements, which 
        involve interpretation and the development of 
        compliance plans, actions, and monitoring. The guidance 
        and direction from these offices is not always 
        consistent, and laboratories are forced to meet similar 
        requirements from many different sources. Some 
        laboratories are subjected to hundreds of reviews 
        annually. Moreover, DOE has not set priorities for 
        compliance with its environmental requirements, forcing 
        the laboratories to treat each requirement as equally 
        important. Consequently, DOE has no assurance that the 
        laboratories address more pressing concerns first, or 
        with enough attention. As a result, laboratory 
        officials are kept from managing their research most 
        effectively, according to many experts.\16\

    Inspector General reviews confirm these problems. A 
laboratory quality testing assurance program found that 
department contractors were performing redundant reviews of 
laboratories that provide analytical services. In one case, a 
laboratory was reviewed for quality assurance 11 times in 1 
year by various contractors, when only one review was 
necessary. In addition, the reviews were not consistent and the 
contractors did not share information with the Department or 
other contractors. The redundant reviews cost the Department 
about $1.2 million annually.\17\
    An audit of the Lawrence Livermore's waste treatment 
facility found that over a 10-year period, major changes were 
made to the facility plan that greatly transformed how the 
facility would meet the mission needs. As a result, the 
initially proposed $38 million waste treatment facility project 
may cost as much as $140 million and is significantly different 
than the one approved by the Congress.\18\

         DOE has made Little Progress in Nuclear Waste Disposal

    As the missions of the DOE have changed, it has assumed the 
task of managing the environmental problems created by decades 
of nuclear weapons production. This requires environmental 
restoration, waste management, and facility transition and 
management at 15 major contaminated facilities and more than 
100 small facilities in 34 States and territories. The estimate 
of total DOE cleanup costs has risen from about $100 billion in 
1988 to $230 billion, with a high end estimate of $350 
billion.\19\ Nuclear waste cleanup has been recognized by a 
wide range of sources as one of the Department's most serious 
problem areas. DOE's environmental management activities have 
been the subject of numerous IG and GAO reviews. OMB has listed 
environmental management as another DOE high-risk area.\20\
    DOE received over $34 billion between 1990 and 1996 for 
environmental activities, but it has made little progress in 
addressing the wide range of environmental problems at its 
sites. It has experienced major delays in its high-level waste 
programs and has yet to develop adequate capacity for treating 
mixed waste--i.e., materials containing both radioactive and 
hazardous components. It has begun deactivating only a handful 
of its thousands of inactive facilities.\21\
    For years, DOE has concentrated on the ``characterization'' 
phase of environmental cleanup--i.e., collecting data and 
investigating sites--rather than the ``remediation'' or actual 
cleanup phase. As a result, over two-thirds of DOE's 856 
cleanup projects are still in the characterization phase. Only 
about 16 percent of the projects are now in the remediation 
phase, and physical cleanup has been completed for only about 
13 percent of the projects. In the waste management area, DOE 
has experienced repeated delays and cost increases. For 
example, the Defense Waste Processing Facility at DOE's 
Savannah River Site has thus far experienced a cost increase of 
over $3 billion and a schedule slippage of about 5 years. Major 
technical problems pervade all aspects of DOE's remediation 
efforts at its Hanford Site, which has experienced a cost 
escalation from $14 billion to about $36 billion.\22\
    GAO has identified many ways to reduce the costs to clean 
up the nuclear weapons complex. For example, DOE usually 
assumes that all of its facilities will be cleaned up for 
unrestricted use; however, because many of the facilities are 
so contaminated, preparing them for future unrestricted use is 
not a realistic objective. By incorporating more realistic 
land-use assumptions into decisionmaking, DOE could, by its own 
estimates, save from $200 million to $600 million annually. 
Also, to reduce costs DOE is now proposing to privatize 
portions of the cleanup, most notably the vitrification of 
high-level waste in the tanks at its Hanford facility.\23\
    GAO also noted that it cannot permanently dispose of its 
inventory of highly radioactive wastes from the Hanford tank 
farms and other facilities until it has developed a geologic 
repository for these wastes generated by the commercial nuclear 
power industry and the DOE. Although an operational repository 
was originally anticipated as early as 1988, DOE now does not 
expect to determine until 2001 if the site at Yucca Mountain, 
Nevada, is suitable and, if it is, to begin repository there 
until at least 2010.\24\
    Legislation to reform DOE's nuclear waste disposal program 
is being considered in both Houses of Congress. Some experts, 
including DOE's own internal advisory panel, have called for 
moving the entire program to the private sector.\25\ Future 
progress also will depend on adopting a national risk-based 
strategy under which DOE and the Federal regulators of 
environmental cleanup activities can negotiate realistic 
agreements and milestones under increasingly restrictive 
budgets.\26\

  DOE Needs to Improve its Oversight of Research and Development Work

    Applied research and development (R&D) programs are 
designed to support the development of technologies to 
accomplish the Nation's energy objectives. These activities are 
a major focus of DOE's resources. In fiscal year 1995, DOE was 
appropriated about $1.65 billion for applied R&D programs--
almost 10 percent of its budget. However, concerns have been 
expressed about these programs. A 1994 report by the 
Congressional Budget Office concluded that few successful 
technologies have emerged from the Department's R&D programs. 
Some contend that applied research should be conducted by the 
private sector instead of the Government.\27\
    The R&D program also presents major cost issues. DOE 
currently spends approximately $1.3 billion on research in 
energy efficiency technologies and renewable energy sources in 
an effort to reduce total energy demand, conserve natural 
resources, and improve national energy independence. Private 
industry is fully capable of investing in energy efficiency 
research, and many of the technologies subsidized with Federal 
research are not cost-effective alternatives to fossil fuel 
consumption. Despite many years of expensive activism on the 
part of DOE, studies still indicate that such technologies are 
not cost-effective alternatives to increased consumption. Two 
recent studies have pinpointed costs at between 5 and 11 cents 
saved. The marginal cost of producing a kilowatt-hour of 
electricity today ranges from two to four cents per kilowatt-
hour, which means that it is still more expensive to save 
electricity than to produce it.\28\ The multi-billion dollar 
coal mining industry receives funding from DOE's Coal Research 
and Development program ($167 million) and the Clean Coal 
Technology Program ($337 million). Because the coal industry 
already invests in research and development, a significant 
portion of the Federal funds go to lower priority research 
areas of new technologies and processes that are unlikely to be 
economically viable in the marketplace.\29\
    Furthermore, opportunities exist to recoup the Federal 
Government's investment in projects funded jointly by DOE and 
the private sector that yield commercially successful 
technologies. GAO recently reviewed four DOE offices that are 
engaged in over 500 cost-shared R&D projects with private 
sector organizations. The total cost of the 500 projects is 
about $15 billion, of which DOE will contribute about $8 
billion. About 60 of these projects, representing a total 
government investment of about $2.5 billion, already are 
subject to provisions that require reimbursement to the 
Government in the form of royalties and licensing fees if they 
become commercially viable. GAO recommended that DOE develop a 
Department-wide policy requiring repayment of the government's 
investment in commercially successful cost-shared technologies, 
under appropriate arrangements that would not unduly inhibit 
technology development.\30\
    The Department appears to have been overly defensive, and 
not wholly accurate, in responding to concerns about its R&D 
work. DOE recently produced a report, called ``Success 
Stories,'' which touted its R&D programs. However, a GAO review 
disclosed many defects in this report and concluded that it 
could not be used to assess the effectiveness of the programs. 
GAO found problems with the analyses used to support the 
benefits cited for 11 of the 15 cases it reviewed. The problems 
included weak assumptions underlying economic analyses, 
unsupported links between the benefits cited and DOE's role, 
and ``basic math errors.'' One example of the latter was a case 
in which the DOE report claimed that a technology to enhance 
gas well production would increase revenues by $20 million per 
well; when the math was corrected, the true figure was less 
than $300,000 per well.\31\

               DOE Suffers from Weak Financial Management

    The IG was unable to express an opinion on DOE's statement 
of financial position for fiscal year 1995, finding several 
major deficiencies. The Department did not ensure that all 
unfunded liabilities (recorded at $200 billion) were properly 
identified. For example, although DOE prepared an estimate of 
its unfunded environmental liabilities, it had not estimated 
the cost of remediation at certain facilities. Also, DOE failed 
to identify additional unfunded liabilities, including an 
estimated $1.9 billion for environmental, safety and health 
compliance. The IG's audit also found that DOE lacked adequate 
controls over its property and equipment. In all, the audit 
identified eight material internal control weaknesses.\32\
    One major financial management weakness is that DOE does 
not have a standard, effective approach for identifying excess 
carryover balances that may be available to reduce future 
budget requests. Instead, it relies on broad estimates of 
potentially excess balances in its individual programs. As a 
result, there is no assurance that DOE has reduced its 
carryover balances to the minimum level needed to operate its 
programs, thereby minimizing the need for new budget authority. 
This is a significant problem since DOE had $12 billion in 
unobligated carryover balances from prior year appropriations 
as it began fiscal year 1995. During fiscal year 1995, DOE used 
almost $1 billion in carryover balances to supplement its new 
obligational authority of about $18 billion.\33\
    Over the last 3 years, GAO has identified almost $500 
million in ``uncosted obligations'' (amounts obligated but for 
which costs were not incurred) that were classified as 
necessary to meet the requirements of DOE's programs when they 
should have been categorized as available to reduce DOE's 
budget request. For example, at DOE's Savannah River Site in 
South Carolina, GAO identified $46.2 million reserved for 15 
projects at the end of fiscal year 1994 that was no longer 
needed because of cost underruns, reductions in the projects' 
scope, or cancellation of projects.\34\
    The Secretary of Energy needs to develop a more effective 
approach for identifying the carryover balances that exceed the 
requirements of DOE's programs and determining whether they are 
available to reduce the Department's annual budget request. 
These approaches would involve: (1) developing a standard goal 
for all programs' carryover balances that represent the minimum 
needed to meet the programs' requirements; (2) projecting what 
the carryover balances will be for all programs at the 
beginning of the fiscal year for which new obligational 
authority is being requested; and (3) comparing the programs' 
goals and projected carryover balances to identify the balances 
that exceed requirements.\35\

                                ENDNOTES

    \1\ General Accounting Office, Department of Energy: 
Observations on the Future of the Department, GAO/T-RCED-96-224 
(September 4, 1996), p. 8.
    \2\ Id., p. 2.
    \3\ Department of Energy, Office of Inspector General, 
Audit of the Department of Energy Program Offices' Use of 
Management and Operating Contractor Employees, DOE/IG-0392 
(July 8, 1996), p. 5.
    \4\ Office of Management and Budget, Progress Report: 
Correcting High Risk Areas, Analytical Perspectives on the 
Budget of the United States for Fiscal Year 1996, p. 289.
    \5\ General Accounting Office, Department of Energy: 
Observations on the Future of the Department, GAO/T-RCED-96-224 
(September 4, 1996), p. 10.
    \6\ Department of Energy, Office of Inspector General, 
Semiannual Report to Congress, October 1, 1995 to March 31, 
1996, DOE/IG-0002/96 (April 1996), p. 13.
    \7\ Department of Energy, Office of Inspector General, 
Fiscal Year 1996 Annual Work Plan, DOE/IG-0010/12 (September 
30, 1995), p. 19.
    \8\ Id., p. 41.
    \9\ Department of Energy, Office of Inspector General, 
Audit of Management and Operating Contractor Overtime Costs, 
DOE/IG-0381 (October 1995), p. 1.
    \10\ General Accounting Office, Department of Energy: 
Observations on the Future of the Department, GAO/T-RCED-96-224 
(September 4, 1996), pp. 11-12.
    \11\ Id., p. 11.
    \12\ Id.
    \13\ General Accounting Office, Department of Energy: 
Alternatives and Clearer Missions and Better Management at the 
National Laboratories, GAO/T-RCED-95-128 (March 9, 1995), p. 2. 
General Accounting Office, Department of Energy: National 
Laboratories Need Clearer Missions and Better Management, GAO/
RCED-95-10 (January 27, 1995).
    \14\ Id., p. 1.
    \15\ General Accounting Office, Department of Energy: 
Alternatives and Clearer Missions and Better Management at the 
National Laboratories, GAO/T-RCED-95-128 (March 9, 1995), p. 3.
    \16\ Id., p. 4.
    \17\ Department of Energy, Office of Inspector General, 
Fiscal Year 1996 Annual Work Plan, p. 41.
    \18\ Id.
    \19\ General Accounting Office, Environmental Protection: 
Issues Facing the Energy and Defense Environmental Management 
Programs, GAO/T-RCED/NSIAD-96-127 (March 21, 1996), p. 4.
    \20\ Office of Management and Budget, Progress Report: 
Correcting High Risk Areas, Analytical Perspectives on the 
Budget of the United States for Fiscal Year 1996, p. 289.
    \21\ General Accounting Office, Department of Energy: 
Observations on the Future of the Department, GAO/T-RCED-96-224 
(September 4, 1996), p. 12.
    \22\ General Accounting Office, Nuclear Weapons Complex: 
Establishing a National Risk-Based Strategy for Cleanup, GAO/T-
RCED-95-120 (March 6, 1995), pp. 1-4; General Accounting 
Office, Department of Energy: Hanford Waste Privatization, GAO/
RCED-96-213R (August 2, 1996), p. 1.
    \23\ General Accounting Office, Department of Energy: 
Observations on the Future of the Department, GAO/T-RCED-96-224 
(September 4, 1996), p. 13.
    \24\ Id.
    \25\ Id.
    \26\ General Accounting Office, Nuclear Weapons Complex: 
Establishing a National Risk-Based Strategy for Cleanup, GAO/T-
RCED-95-120 (March 6, 1995), p. 2.
    \27\ General Accounting Office, Energy R&D: Observations on 
DOE's Success Stories Report, GAO/T-RCED-96-133 (April 17, 
1996), pp. 1-2.
    \28\ Competitive Enterprise Institute, Dirty Dozen: Soft 
Targets for Elimination at Energy, Interior, & EPA, ``Defund 
Energy Efficiency and Renewable Energy Research'' (December 
1994).
    \29\ Competitive Enterprise Institute, Dirty Dozen Part 
Deux: The Baker's Dozen, More Soft Targets for Elimination, 
``Eliminate Coal R&D Subsidies'' (April 1995).
    \30\ General Accounting Office, Energy Research: 
Opportunities Exist to Recover Federal Investment in Technology 
Development Projects, GAO/RCED-96-141 (June 26, 1996).
    \31\ General Accounting Office, Energy R&D: Observations on 
DOE's Success Stories Report, GAO/T-RCED-96-133 (April 17, 
1996), pp. 1, 4.
    \32\ Department of Energy, Office of Inspector General, 
Semiannual Report to Congress, October 1, 1995 to March 31, 
1996, DOE/IG-0002/96 (April 1996), p. 9-10.
    \33\ General Accounting Office, DOE Management: DOE Needs 
to Improve Its Analysis of Carryover Balances, GAO/RCED-96-57 
(April 12, 1996), p. 2.
    \34\ Id., p. 4.
    \35\ Id., p. 5.

                    Environmental Protection Agency

                                Overview

    The Environmental Protection Agency (EPA) was established 
in the executive branch as an independent agency pursuant to 
Reorganization Plan No. 3 of 1970, which was effective December 
2, 1970. It was created to permit coordinated and effective 
governmental action on behalf of protection of the environment. 
The EPA has stated that its mission is to reduce environmental 
risks to human health and the environment, prevent pollution 
and foster sustainable development ``in the most cost-
effective, efficient ways''.\1\
    The EPA has featured prominently on both the Office of 
Management and Budget's and the General Accounting Office's 
``High-Risk'' lists. Congress is committed to preserving and 
protecting the environment--and to doing so both wisely and 
effectively. Administration officials and Federal bureaucrats 
have not met their responsibilities to protect the environment.

    Better Prioritization and Management of Responsibilities Needed

    The Environmental Protection Agency (EPA) has not developed 
the strategies and priorities necessary to meet its current 
work load, implement its mission effectively and give the 
American people a safer, cleaner and healthier environment. EPA 
regulators have not been able to manage their scientific and 
regulatory responsibilities and maximize protection of human 
health and the vitality of natural ecosystems. Unless the 
management of the agency can be turned around, the gains of two 
decades of environmental progress will be at risk.
    EPA faces many management challenges, not the least of 
which is focusing its resources on eliminating environmental 
problems that present the highest health risks. One concern is 
that prioritization of EPA's efforts be based on analysis of 
risks to human health and the environment. Based, in part, on 
reports such as the National Academy of Public Administration's 
(NAPA) Setting Priorities, Getting Results,\2\ the Superfund 
program was seen as dedicating resources on low threats to 
health and the environment. Later studies supported this view 
and helped spur an interest in Superfund reform. Though 
Superfund reform has yet to occur, administratively the agency 
has done little to mitigate the waste of public and private 
resources to accomplish hazardous site cleanup. The NAPA report 
said:

          The rate of environmental progress will slacken 
        considerably unless there are profound changes in the 
        legal foundation and management structure of EPA, a 
        continued devolution of responsibility for 
        administering environmental programs, and a serious 
        attempt to integrate programs to combat pollution.\3\

    and

          EPA's management systems and organizational structure 
        have impeded efforts to set priorities and allocate 
        resources effectively. EPA is a fragmented agency: it 
        mirrors the fragmented statutes, and it lacks effective 
        mechanisms to mobilize the agency's resources in a 
        consistently coherent fashion.\4\

    Clearly, EPA should clean up hazardous waste site according 
to the degree of hazard, rather than according to the ease of 
cleanup. Many sites are being mitigated now merely to remove 
them from the National Priorities List (NPL). It is welcome 
news that the President wants to clean up more Superfund sites. 
However, EPA needs to be more accountable to the public and 
responsible for taking action to make the environment cleaner 
and safer.
    GAO has urged the agency to improve the effectiveness of 
environmental programs, and has recommended that one way to 
accomplish this goal would be to set risk-based priorities. In 
this way, the EPA could achieve the greatest amount of 
protection of public health and the environment as possible, 
given its resources. The EPA, itself, has noted that ``[t]here 
has been little progress in setting priorities across the 
spectrum of environmental problems. . . .'' \5\ GAO has also 
called for a more flexible, incentive-based regulatory system 
based on performance goals.\6\
    These findings are of interest because the use of 
performance-based goals and results is required under the 
Government Performance and Results Act of 1993 (GPRA) which the 
EPA is required to implement. GPRA is designed to help agencies 
measure the results of its programs, such as the relative 
hazard presented by a toxic waste site, rather than its 
activities, e.g. number of inspections of a toxic waste site. 
While GPRA is not a cure-all for the agency's management 
difficulties, greater compliance with GPRA would help the 
agency set priorities and evaluate its progress is reaching 
agency goals. The EPA has made progress developing performance 
measures, but has not integrated these changes into the day-to-
day business operations of the agency, to validate its 
performance measures and to consult with Congress about its 
proposed performance plan and goals. Despite the many actions 
taken by EPA to implement GPRA, there have been few results.

            Information to Judge Program Outcomes is Lacking

    The Environmental Protection Agency (EPA) lacks the 
information necessary to determine whether its programs are 
having any measurable effect on environmental quality.\7\
    Although the ultimate objective of environmental programs 
is to clean up or preferably prevent unacceptable levels of 
pollution, EPA has not had the information necessary to judge 
or measure its success in making a cleaner, safer, healthier 
environment. Environmental regulations must be founded on 
accurate scientific data dealing with key issues such as the 
different pathways by which pollutants come into contact with 
people and the environment, the concentrations at which they 
cause damage, and the effectiveness of alternative strategies 
to prevent their effects. However, quality scientific data on 
these and other issues are lacking, a problem that also occurs 
in the agency's water, pesticides and other programs. Data 
management problems, particularly the agency's reliance on 
numerous separate and distinct information systems, have 
exacerbated these difficulties.
    Despite the fact EPA collects and analyzes vast amounts of 
data to support the agency's environmental enforcement and 
protection mission, and claims to use that information to 
evaluate whether its programs are accomplishing their intended 
goals, the agency does not have a program to manage information 
to meet agency goals based on good scientific methodology, nor 
does EPA have an inventory of reporting and recordkeeping 
requirements imposed upon the public.
    Federal environmental statutes focus on single sets of 
pollutants affecting the air, water or ground, and accordingly, 
EPA has tended to collect information on pollution risks in a 
disaggregated manner. At the same time, the agency recognizes 
that a multi-pollutant approach to assessing environmental 
risks would assist in making decisions resulting in a healthier 
environment. In fact, the EPA acknowledged problems with its 
scientific data and processes in its 1994 Federal Manager's 
Financial Integrity Act (FMFIA) report.\8\ In this report, EPA 
identified several significant material weaknesses in 
facilities, equipment and data management. One material 
weakness addresses EPA's lack of top management commitment of 
sufficient resources for Information Resources Management 
activities. This weakness is very important, especially given 
that EPA data show uncollected Superfund cost recovery 
receivables totaled about $498 million at the end of fiscal 
year 1994 \9\--and that number has been increasing steadily.
    While EPA has developed some indicators, such as national 
air quality standards, the agency has generally relied on 
``activity measures'' such as number of inspections to gauge 
its progress. EPA has historically relied on activity based 
measures because of the inherent technical difficulties in 
establishing linkages between program activities and 
environmental improvements and because of a lack of information 
on ambient environmental conditions. By its own admission the 
agency said:

          The media-specific (i.e., air, water, land) nature of 
        environmental laws and EPA's resulting administrative 
        structure have fragmented EPA's response to 
        environmental protection. Too often, our piecemeal 
        approach to pollution has ended up simply moving 
        contaminants around--from air, to water, to land--
        rather than reducing and preventing pollution.\10\

    As further evidence of this problem, the Inspector General 
for the EPA noted that the agency spent nearly $2 million 
overseeing the Superfund site of a major Department of Defense 
contractor, but had not evaluated the quality of laboratory 
data used for making public health risk assessments, developing 
cleanup alternatives and designing the remedy. The contractor 
spent around $100 million on studies and cleanup without 
ensuring the quality of its underlying data or complying with 
the data quality requirements in its consent decree.\11\
    Currently there is no inventory of EPA's reporting and 
recordkeeping requirements, who must report, what must be 
reported. No environmental management system can achieve its 
results without an inventory of its current information 
requirements and their relevance to agency appropriations 
requests and the achievement of scientifically and economically 
supported goals. Despite reinvention promises, the agency has 
not established information collection, use and dissemination 
priorities and strategies for management that supports cost-
effective risk-reduction. The agency should view information as 
a tool for problem analysis and prioritization, and scientific 
and economic justification of its programs and regulations.

Superfund: Continuing Management Problems are Hampering Cleanup Efforts

    Despite growing agency budgets and repeated environmental 
concerns expressed by the Congress, management problems 
continue to hamper Superfund cleanup efforts. The Superfund 
program was created in 1980 pursuant to the Comprehensive 
Environmental Response, Compensation and Liability Act (CERCLA) 
to provide what began as short-term cleanup at abandoned 
hazardous waste sites. Final costs for the cleanup have not 
been determined, but a recent estimate by the General 
Accounting Office indicates that the hazardous waste problem 
has grown to $75 billion for non-Federal sites and to as much 
as $400 billion for Federal facilities.\12\ As of March 1995, 
EPA reported 15,723 superfund cleanup sites of which 1,363 are 
considered the most hazardous.\13\ Thousands more sites are 
expected to be added to the list.
    Superfund management problems were also examined in 
hearings before the Subcommittee on National Economic Growth, 
Natural Resources and Regulatory Affairs. The subcommittee 
reports that a total of about $30 billion has been spent on 
Superfund, about half of which was financed by taxpayer funds 
appropriated by the Government. Between $1.3 and $1.5 billion 
is spent annually by the Government and spending at the non-
Federal level is twice that amount. EPA has more than 1,000 
Federal employees who work on a full-time basis on Superfund at 
its offices in Washington. Many more personnel are assigned to 
Superfund tasks in EPA field offices and regional offices.
    Currently, the Superfund program has cleaned up only 25 
percent of all the sites on the National Priorities List (NPL) 
of the most hazardous waste sites. EPA has removed (or deleted) 
only 8 percent of sites from the list. At the same time, the 
pace of cleanup has not changed over the life of the program, 
despite administration claims to the contrary. In fact, claims 
that program results have improved are misleading. The agency 
Inspector General noted that prolonged agency study and cleanup 
design times and liability battles caused major delays in 
Superfund cleanups extending average cleanup time from 12 to 15 
years.\14\ Thus the large number of sites added to the list 
during the early years of the program are just now being 
completed--but only after more than a decade in the system.
    Cleanup statistics have not improved during the last few 
years. Only 68 sites were declared ``construction complete'' 
(the barometer by which EPA measures the number of cleanups 
completed) last year--the high for the past 3 years. EPA 
projects similar levels for the next 4 to 5 years of the 
program. It is interesting to note that for 1992, the number of 
completed projects was 82.
    Also, the average site cleanup times have not improved. The 
General Accounting Office has shown that, not including 
preliminary studies and negotiations with potentially 
responsible parties, the study, design and cleanup stages of a 
Superfund sites averaged 8.6 years.\15\ The data for 1995 shows 
that the ``new'' average is 8.5 years--a barely perceptible 
drop.
    The liability and financing system for Superfund 
contributes significantly to program delays. Negotiations over 
``shares'' of liability, who pays and what remedy should be 
used add an average of 3 years to the cleanup process. The EPA 
Inspector General stated that liability negotiations consume 
time and delay completion of cleanup of Superfund sites.\16\
    Many of EPA's administrative reforms concentrate on 
streamlining the current liability system. The agency 
repeatedly proposed ways for expediting settlements for de 
minimus parties and parties that cannot afford to pay 
significant cleanup costs on the NPL. The number of parties in 
the liability system has grown rapidly despite the fact that 
the number of sites on the NPL has declined somewhat. EPA's 
statistics demonstrate that there are still between 80,000 and 
100,000 parties involved in the Superfund liability system.
    Further confusing the agency's ability to implement more 
settlements for these parties is EPA's poor data and computer 
system capabilities and inability to identify who actually 
qualifies for a de minimus settlement. The General Accounting 
Office concluded that EPA's data was so inconsistent and 
incomplete that it was unable to provide good estimates of the 
number of de minimus parties now involved in Superfund 
litigation.\17\ GAO estimated that there are at a minimum about 
8,500 to more than 25,000 de minimus parties at 175 non-Federal 
Superfund sites and about 15,000 to 40,000 or more potentially 
responsible parties at 245 non-Federal municipal co-disposal 
landfills sites. The GAO said that because EPA's data are 
incomplete, its estimates are likely to be understated.\18\

            Risk Plays Limited Role in Allocating Resources

    In theory, EPA focuses clean up efforts first on the most 
contaminated Superfund sites. In practice, however, EPA has not 
implemented a priority-based program for cleaning up non-
Federal or Federal Superfund sites on the basis of their 
relative risk. It is essential that EPA ensure that cleanup 
resources go to the sites that present the greatest threat to 
human health and the environment. While the agency recognizes 
these problems and is making some changes in procedures to 
correct them, it was only within the past 3 months that the EPA 
released its first ever list of prioritized non-Federal sites 
ready for clean up. EPA has encountered internal obstacles to 
following through with a priority-based cleanup program, making 
its implementation of prioritization difficult.\19\
    Similarly, a priority-setting system for allocating funds 
for cleaning up Federal hazardous waste sites across agency 
lines had not been properly developed.\20\ GAO reported that 
there may be as many as 51,000 Federal Superfund sites.\21\ 
Agencies with large numbers of Federal facilities have not 
developed a consistent process for assessing and rating the 
relative risks of hazardous waste sites, allowing less 
hazardous and extremely dangerous sites to be similarly 
classified. In the case of Federal facilities, the Federal 
Government is both the polluter and the party responsible for 
cleanup. Three agencies have the greatest number of polluted 
sites, namely the Department of Defense, the Department of the 
Interior and the Department of Energy. GAO reported that the 
Federal Government's liability for its own Superfund cleanup 
may be as high as $400 billion, making it the size of the 
Savings and Loan bailout and the biggest public works project 
in the history of the United States.\22\
    The GAO also learned that the EPA has not identified the 
Federal facilities presenting the greatest risks to public 
health and the environment, much less prioritized the list for 
purposes of cleaning up the most hazardous sites first.\23\ 
That may prove to be a daunting task because in the listings of 
its identified Superfund sites, the Department of Defense's 
system does not permit risk distinctions among many of its 
sites.\24\ And, interagency comparisons of risks prepared by 
the Departments of Interior and Energy would not be meaningful 
because different criteria were used to evaluate risks by those 
two agencies.

     System Enhancements Needed to Improve Superfund Efficiency in 
                            Recovering Costs

    Future improvements in EPA's cleanup costs will depend 
largely on the agency's sustaining its efforts in this area and 
on constructive changes being made to the Superfund authorizing 
legislation. EPA's automated information systems are a vital 
component of efficient cost recovery. Currently, financial and 
records management efforts do not efficiently support cost 
recovery, which is a critical part of the agency's business and 
the operation of Superfund. EPA is taking steps to improve 
automated support for cost recovery but many problems remain 
and billions of dollars are owing to Superfund.\25\
    For example, data contained in EPA's central computer 
systems is insufficiently detailed, and sometimes inaccurate or 
incomplete. Records management systems do not provide for 
documentation, which, without efficient retrieval of supporting 
cost and work-performed documentation, can result in 
unrecovered costs. The agency's main financial system is not 
sophisticated enough to address the complexity of agency 
repayment agreements. Neither of the two main financial 
management systems can trace information or store data at the 
``operable unit'' level.\26\ As a result, agency staff are 
often required to augment data obtained from agency financial 
management systems with data which is obtained manually in 
order to properly assign the correct amount of costs in 
operable units. During the course of a cleanup, there may be 
thousands of individual transactions and many thousands of 
documents. To trace these costs to individual operable units, 
staff must identify all costs that have been recorded and 
accumulated by the site and manually segregate the costs by 
operable unit.\27\
    EPA staff have also expressed concerns over the integrity 
of the data in the main financial management system. In 1994, 
the EPA Inspector General expressed similar concerns regarding 
data integrity and inaccuracies, including critical cost and 
site identification information, in the agency's financial 
information systems.\28\ For example, staff in three regions 
stated that they identified instances of duplicative data. In 
one such case, one region initially overstated costs for a 
potentially responsible party by about $822,000. While staff 
corrected the overstatement prior to final negotiations, they 
determined that the error was due to a cost figure that had 
been duplicated in the financial system.\29\ Two regions 
provided examples of missing or invalid data. This was 
confirmed by a report generated by the EPA's Financial 
Management Division showing about 10,500 transactions totaling 
about $129 million in expenditures for which, according to EPA 
officials, the site/project identification field was 
missing.\30\
    Many of these problems exist because the EPA's central 
financial system does not contain adequate application 
controls. This problem was confirmed by the agency Inspector 
General in a report dated February 1995. The Office of 
Inspector General stated that it could not assess application 
processing controls due to a lack of technical system 
documentation.\31\ Data integrity problems could continue to 
adversely affect the efficiency of performing cost recovery 
until EPA fully addresses the need for documented system 
controls. Actions taken to date by EPA are not sufficient to 
track costs and account for complex Superfund expenses. As long 
as data is inaccurate and staff must depend instead on tedious, 
manual document searches, they will not be able to rely upon 
the systems to provide all the information they need to execute 
cost recovery tasks efficiently.\32\

               Weaknesses in Contract Management Persist

    EPA relies heavily on contractors to clean up Federal 
Superfund sites, provide computer and data collection services 
and supply materials, but the agency's actions to address 
serious deficiencies in its contract management have been 
insufficient to solve its problems. The Office of Management 
and Budget identified Superfund contract management problems as 
so serious that they were highlighted on the most recent OMB 
``High-Risk'' list included with the President's Budget. OMB 
stated that EPA contract management had ``persistent widespread 
problems in contract management''.\33\ OMB also stated that, 
because of poor contract management at EPA, environmental 
program effectiveness and efficient use of financial and human 
resources were at risk. Contract management problems in EPA 
also persist despite the attention given this issue by the 
National Performance Review.\34\ So serious was this problem 
that the National Performance Review concluded ``agency 
oversight has become lax, leading to vague work instructions, 
nebulous lines of authority and individual responsibility.'' 
\35\
    Of some additional interest is OMB's decision to remove EPA 
contract management from its ``High Risk'' list citing that the 
agency was taking actions to alleviate contract management 
problems. For a period of time, the agency Inspector General 
(IG) continued to consider contract management a high risk area 
for its purposes, though the IG recently removed contract 
management from its list of most serious concerns. In addition 
to deleting EPA's contract management from its ``High-Risk'' 
list, OMB also decided to terminate the list altogether. 
Problems cannot be solved by not counting them, however. OMB 
and the agency Inspector General's conclusion that contract 
management problems have been solved prior to evaluating the 
results of agency actions may be premature and are in conflict 
with the spirit of the Government Performance and Results Act.
    By contrast, the General Accounting Office (GAO) continues 
to view EPA contract management as a high risk area. 
Recognizing that EPA has taken actions to reduce contract 
management problems, the GAO argues that in the absence of a 
thorough evaluation of the actual achievements made by EPA, 
contract management remains a area of major concern. As a 
result, EPA contract management continues to be on the GAO's 
High Risk review list.
    EPA makes extensive use of cost-reimbursable contracts in 
the Superfund program. These contracts require EPA to reimburse 
contractors for all allowable expenses. Accordingly, 
contractors continue to have little incentive to control costs. 
The agency has even allowed contractors to perform oversight 
work that it should have been doing, such as preparing agency 
decision documents or reviewing payroll.\36\ In view of the 
EPA's dependence upon contractors, the top agency managers and 
officials have not focused enough attention on contract 
management, and greater oversight and evaluation needs to be 
exercised in this area.

                  Superfund Audits and Indemnification

    While the agency has implemented some changes in its 
contract management, uncertain progress has been made in 
reducing the risk to Superfund contract dollars resulting from 
insufficient or untimely audits.\37\ Backlogs of requests by 
procurement officials for audits to verify the accuracy of 
contractor's charges have grown significantly. Auditing these 
contractors is critical to assure that unallowable costs, such 
as entertainment, alcoholic beverages or unauthorized travel is 
not charged to accounts. For a period of time the agency was 
also granting unlimited indemnification to contractors, without 
proof of uninsurablity. That practice opened Superfund to 
excessive risk.\38\ While the agency made some attempts to 
limit indemnification of contractors as standard contract 
language, it did so merely by publishing guidelines, rather 
than through notice and comment rulemaking procedures as 
approved in the Administrative Procedures Act. Guidelines, 
unfortunately, do not have the full force and effect of 
regulations.

            IG Audit of Serious Contract Management Problems

    In March 1996, the EPA Office of the Inspector General 
published an extensive report on problems with the agency's 
management and oversight of selected contracts awarded to a 
major EPA contractor. The IG found instances where the products 
and services were either inadequate, untimely or of 
questionable value. For example, the Green Lights program did 
not meet program expectations for participation and was 
mismanaged by its contractor. Three of the indoor air quality 
projects went on year after year, greatly exceeding their 
original budgets and due dates. The Local Government 
Reimbursement program was so small that it was unreasonable to 
contract out its administration. The following is a discussion 
of some problems the Inspector General found.\39\

                        The Green Lights Program

    The EPA spent $12.2 million on contracts to promote and 
market the program the Green Lights Program through one of its 
primary contractors in fiscal years 1994 and 1995. This is a 
voluntary, nonregulatory program to reduce air pollution. The 
IG found the contractor spent money promoting the program 
through placing advertisements in expensive publications such 
as Fortune and Business Week, and permitting ``field visits'' 
to Hawaii. The program measured its ``success'' by the number 
of participants. Of the more than 1,500 entities listed as 
participants of the program, 75 percent of them did not 
participate actively or had problems implementing the program. 
Many either never participated in the program or only made 
minor progress. Many failed to file progress reports. While the 
agency placed great importance on the prominence of 
participants, they often failed to reveal that those entities 
often lacked actual participation in the program. The IG said, 
``Admittedly, the program is essentially a marketing venture, 
so it is understandable that EPA would highlight the enlistment 
of such prominent participants. However, we believe that it was 
misleading to promote such enlistments. Based on the agency's 
letters, some of these prominent participants had yet to 
actually participate three and four years after having signed 
up.'' \40\ In one instance, EPA actually informed itself that 
it could not evaluate its own progress because it had failed to 
submit reports to itself.
    In another instance, one participant received two letters 
from EPA on the same day. The first letter congratulated the 
participant on passing its second anniversary. The second 
letter terminated the participant from the program because it 
had failed to submit a progress report. Despite the 
termination, 9 months later the entity continued to be listed 
as a ``participant'' in the Annual Green Lights status report.

 Reliance on Contractors Increased the Agency's Vulnerability to Delay

    EPA's heavy reliance on a contractor to support the 
``Indoor Air Quality'' projects dramatically increased the 
agency's vulnerability to delays and escalating program costs. 
This problem was exacerbated because the agency did not plan 
the program in advance. The Inspector General found that, 
indoor air quality projects lingered on for years, greatly 
exceeding their original budgets. Of three audited projects, 
original budgets ranged from a low of $28,000 to a high of 
$31,000, but actual costs were as much as $736,000. Among these 
three contracts, one was incomplete more than 6 years after it 
began, one was canceled after 5 years, and the only one 
completed took 6 years and cost of more than twenty-six times 
the original estimate. In each of these cases, the EPA placed 
too much reliance on contractors to finish the projects on-time 
and within budget. The agency allowed the indoor air projects 
to continue years after their scheduled due dates, which is 
completely unacceptable. Clearly, EPA management should take 
additional steps to ensure that projects are adequately planned 
so that they can be completed at a fair cost to the taxpayers.

 Excessive Administrative Costs for the Local Government Reimbursement 
                             (LGR) Program

    The EPA's management of the Local Government Reimbursement 
(LGR) program was inefficient, as well as ineffective, the 
agency's Inspector General reported. The purpose of the LGR 
program is to help local governments defray the costs of 
responding to hazardous substance threats (such as oil spills, 
chemical plant explosions or fires at landfills) through 
reimbursements of up to $25,000 per response. The program is 
coordinated by the American Association of Retired Persons' 
(AARP) Senior Environmental Employment Program. Ironically, 
during fiscal year 1994, the EPA spent more money promoting the 
program, than it did on actual reimbursements to local 
governments. While the agency paid its contractor to organize 
conferences to advertise the program, the response from local 
governments was lukewarm. Agency personnel in public 
information programs were unaware of LGR's existence.
    During the period of the audit, the EPA reimbursed $45,000 
to local governments but paid $363,000 to the contractor to 
administer and promote the program. EPA was unable to determine 
exactly how much of that amount was spent on LGR activities. 
The IG believes, however, that the amount may have been 
somewhat large because, in fiscal year 1995, the agency paid 
approximately $300,000 to support the LGR program and 
reimbursed local governments only $94,794.\41\
    During 1994, the contractor was paid to put on conferences 
in Florida, Hawaii and Colorado. At times, arranging logistics 
cost far in excess of what either EPA or the contractor 
originally estimated. For example, the number of professional 
level 4 hours (the highest, most costly grade level hours) 
allowed under the contract was 50 by EPA's estimate, 225 by the 
contractor's estimate but the actual number of hours charged to 
the contract was 838.5. Nevertheless, the high administrative 
costs of the LGR program were unreasonable in relation to the 
low response to the program. To spend such high amounts to 
process so few applications was not cost effective.

       Committees Under the Federal Advisory Committee Act (FACA)

    More attention to good management practices would help the 
agency in other areas as well. For example, the Inspector 
General reported that despite the administration's policy to 
decrease the number of Federal advisory groups, committees 
formed pursuant to the Federal Advisory Committee Act (FACA), 
the EPA has only reduced its committees from 31 to 22. Of the 
22 FACA committees at the EPA, only 8 were statutory in 1995 
and in 1996, only 6 were statutory.\42\ Ironically, the cost of 
those committees has increased 84 percent, from $4.9 million at 
the beginning of the Clinton administration, to $9 million in 
1995. Also, there is an inverse relationship between the 
``reduced'' number of committees and the number of FTE's 
supporting the activities of those committees. During the 
current administration, the number of employees involved in 
FACA committees has increased from 37.57 employees to 65.22 
FTE's. Seventy percent of those FTE's are GS/GM-14's and above. 
The Inspector General has reported that the cost of the 
employees alone has risen from $2.2 million to $3.6 million, or 
a 64 percent increase. The IG also noted that most of the EPA's 
costs spent during 1995 were for operational committees, which 
were not required by statute.\43\

         Government Property Improperly Provided to Contractors

    The Environmental Protection Agency has obtained hundreds 
of passenger vehicles without statutory authority to do so. In 
addition, the agency recently reported $138.3 million in 
Government property (including tools, equipment and furniture 
and passenger and other vehicles) held by contractors, despite 
regulatory requirements that contractors furnish all necessary 
property.\44\
    Agencies are not authorized to acquire passenger motor 
vehicles, unless specifically permitted by appropriation act or 
other law. The Federal Acquisition Regulations (FAR) prohibit 
Federal agencies from providing vehicles to contractors. In 
violation of this restriction, the EPA has acquired a fleet of 
523 vehicles, 287 of which were being used as passenger 
vehicles. This is in clear violation of statutory restrictions. 
EPA argued to its Inspector General that these acquisitions 
were necessary because Superfund contractors said they were 
unwilling to permit the wear and potential contamination to 
their own vehicles.
    The IG reported that as of February 1996, the EPA had 229 
active contracts providing $138.3 million in Government 
property to contractors, including 392 EPA-owned vehicles and 
other vehicles leased from the General Services Administration 
(GSA). The property also includes the EPA's shuttle bus service 
at Headquarters. EPA's contractor provides drivers for buses 
and vans leased from the GSA. Also scientific equipment used at 
EPA laboratories by contractors was transferred by the agency. 
The Office of Acquisition Management acknowledged that it has 
become an agencywide routine practice to provide property 
(including vehicles) to contractors, in spite of Federal 
acquisition regulations.

                                ENDNOTES

    \1\ Office of the Administrator, The New Generation of 
Environmental Protection: EPA's Five-Year Strategic Plan (July 
1994), p. 1.
    \2\ National Academy of Public Administration, Setting 
Priorities, Getting Results: A New Direction for the 
Environmental Protection Agency (April 1995).
    \3\ Id., p. 5.
    \4\ Id., p. 40.
    \5\ Office of the Administrator, The New Generation of 
Environmental Protection: EPA's Five-Year Strategic Plan (July 
1994), p. 2.
    \6\ General Accounting Office, Environmental Protection 
Issue Area Plan: Fiscal Years 1995-1997 (June 1996).
    \7\ General Accounting Office, Federal Management: Updated 
Information for Congressional Oversight (July 1994), p. 5.
    \8\ General Accounting Office, Environmental Protection: 
EPA's Problems with Collection and Management of Scientific 
Data and Its Efforts to Address Them, GAO/T-RCED-95-174 (May 
12, 1995), p. 2.
    \9\ General Accounting Office, Superfund: System 
Enhancements Could Improve The Efficiency of Cost Recovery, 
GAO/AIMD-95-177.
    \10\ Office of the Administrator, The New Generation of 
Environmental Protection: EPA's Five-Year Strategic Plan (July 
1994), p. 1.
    \11\ Environmental Protection Agency, Office of the 
Inspector General, Semiannual Report to Congress, October 1, 
1996 through March 31, 1996.
    \12\ General Accounting Office, Superfund: More Emphasis 
Needed on Risk Reduction, GAO/T-RCED-96-168 (May 8, 1996).
    \13\ General Accounting Office, Superfund System 
Enhancements Could Improve The Efficiency of Cost Recovery, 
GAO/AIMD-95-177 (August 1995).
    \14\ Environmental Protection Agency, Office of the 
Inspector General, Semiannual Report to the Congress, October 
1, 1995 through March 31, 1996.
    \15\ General Accounting Office, Superfund Status, Cost and 
Timeliness of Hazardous Waste Site Cleanups, GAO/RCED-94-256 
(September 1994); Environmental Protection Agency, End-of-Year 
Fiscal Year 1995 Trends Analysis (November 1995).
    \16\ Environmental Protection Agency, Office of the 
Inspector General, Review of Barriers to Superfund Site 
Cleanup, Audit Report No. EISFB5-11-0008-6400016.
    \17\ General Accounting Office, Potentially Responsible 
Parties at Superfund Sites, GAO/RCED-96-75 (March 1996).
    \18\ Id.
    \19\ General Accounting Office, Superfund: More Emphasis 
Needed on Risk Reduction, GAO/T-RCED-96-168 (May 8, 1996).
    \20\ General Accounting Office, Federal Facilities: 
Consistent Relative Risk Evaluations Needed for Prioritizing 
Cleanups, GAO/RCED-96-150 (June 1996).
    \21\ Id.
    \22\ Id.
    \23\ Id.
    \24\ Id., p. 2.
    \25\ General Accounting Office, Superfund System 
Enhancements Could Improve The Efficiency of Cost Recovery, 
GAO/AIMD-95-177 (August 1995).
    \26\ EPA regions divide large or complex cleanup sites into 
smaller components called operable units. EPA data show that as 
of April 1995, of 1,363 most hazardous sites, 670 had two or 
more operable units.
    \27\ General Accounting Office, Superfund System 
Enhancements Could Improve The Efficiency of Cost Recovery, 
GAO/AIMD-95-177 (August 1995).
    \28\ Environmental Protection Agency, Office of the 
Inspector General, EPA's Integrated Financial Management System 
(IFMS), Audit Report EINMF3-15-0073-4100561 (September 28, 
1994).
    \29\ General Accounting Office, Superfund System 
Enhancements Could Improve The Efficiency of Cost Recovery, 
GAO/AIMD-95-177 (August 1995).
    \30\ Id.
    \31\ Environmental Protection Agency, Office of the 
Inspector General, Fiscal 1994 Financial Statement Audit of 
EPA's Trust Funds, Revolving Funds and Commercial Activity, 
Audit Report E1SFL4-20-8001-5100192 (February 28, 1995).
    \32\ General Accounting Office, Superfund System 
Enhancements Could Improve The Efficiency of Cost Recovery, 
GAO/AIMD-95-177 (August 1995).
    \33\ Office of Management and Budget, Budget of the United 
States Government: Analytical Perspectives: Progress Report: 
Correcting High Risk Areas (Fiscal Year 1996), p. 299.
    \34\ The National Performance Review, Creating a Government 
and Works Better and Costs Less: Environmental Protection 
Agency (September 1993), p. 35.
    \35\ The National Performance Review: Creating a Government 
that Works Better and Costs Less, The Environmental Protection 
Agency, ``EPA08, Reform EPA's Contract Management Process'' 
(September 1993), p. 36.
    \36\ General Accounting Office, Superfund Program 
Management, GAO/HR-95-12 (February 1995), p. 15.
    \37\ General Accounting Office, Superfund Program 
Management, GAO/HR-95-12 (February 1995).
    \38\ Id.
    \39\ Environmental Protection Agency, Office of the 
Inspector General, Report of Audit on Agency's Management and 
Oversight of Selected Contracts Awarded to a Major EPA 
Contractor, E1SKF5-03-0070-61--161.
    \40\ Id., p. 13.
    \41\ Id., p. 44.
    \42\ U.S. House of Representatives, Committee on 
Appropriations, Subcommittee on VA, HUD and Independent 
Agencies, hearing on the Departments of Veteran's Affairs and 
Housing and Urban Development, and Independent Agencies 
Appropriations for 1997 (April 16, 1996).
    \43\ Environmental Protection Agency, Office of the 
Inspector General, Report of Audit, EPA FACA Committees' Costs 
Increase, Audit Report No. E1XMG5-13-0071-6100147 (March 29, 
1996).
    \44\ Environmental Protection Agency, Office of the 
Inspector General, Semiannual Report to the Congress, October 
1, 1995 through March 31, 1996.

                   Executive Office of the President

                                Overview

    The Executive Office of the President includes, among its 
major components: the White House Office; the Office of 
Management and Budget; the Council of Economic Advisers; the 
National Security Council; the Office of the United States 
Trade Representative; the Office of National Drug Control 
Policy; the Office of Administration; and the Office of the 
Vice President. Funding for the Executive Office of the 
President and funds appropriated to the President totaled about 
$279.2 million for fiscal year 1996. The total budget request 
for fiscal year 1997 amounted to about $286.3 million.\1\
    As the 1992 Government Operations Committee staff report 
correctly stated: ``Sound management must flow from the top--
from the President on down.'' \2\ The President, by his actions 
and those of his immediate staff, sets the tone for the rest of 
the executive branch. The actions of the current administration 
in this regard have been well documented and speak for 
themselves. A number of White House activities have been the 
subject of lawsuits, investigations by the Independent Counsel, 
and oversight by this committee and other congressional 
committees.
    Many of these activities have been addressed elsewhere and 
need not be repeated in detail here. At a minimum, however, it 
is fair to observe that the White House has set a poor example 
of management for the rest of Government. Indeed, White House 
officials have acknowledged serious management failures. 
Remarkably, they even have asserted mismanagement as an excuse 
for some of their more egregious actions. Their actions make a 
compelling case for greater accountability on the part of the 
White House to the public and the taxpayers.
    Effective management of the executive branch also requires 
strong leadership and capacity from within the Executive Office 
of the President. Here too, the current administration has 
regressed. The management role and capacity of the Office of 
Management and Budget--traditionally precarious in view of the 
agency's competing budget responsibilities--have declined 
substantially in recent years. This decline appears to result, 
in part, from the administration's ``OMB 2000'' reorganization 
in 1994. Further, the enormous cuts in the Office of National 
Drug Control Policy (ONDCP) in 1993 virtually hollowed out that 
office and set back the War Against Drugs.
    One administration initiative that deserves credit for at 
least highlighting management issues is the National 
Performance Review (NPR). While the NPR has accomplished little 
by way of verifiable cost savings or fundamental management 
improvements, it has focused attention on the importance of 
management reform and perhaps raised consciousness levels 
within the executive branch.
    Finally, the administration and the Congress have 
collaborated to achieve important statutory reforms in a number 
of management areas. These include the Government Performance 
and Results Act and several financial management reform laws. 
The 104th Congress has enacted additional statutory reforms in 
such areas as government procurement, use of information 
technology, and debt collection practices (See Section VII of 
this report). It is vital that these reforms be implemented 
effectively and that such collaborative efforts continue if we 
are to make progress in addressing the daunting management 
problems that face the Federal Government today. Effective 
implementation of these laws will require strong central 
leadership and capacity within the Executive Office of the 
President.

               Lack of Accountability in The White House

White House Counsel's Office

    Traditionally, the Office of the Counsel to the President 
has supported the institution of the Presidency by providing 
the President and the White House staff with legal advice and 
assistance on a wide range of subjects. The office, which has 
been lead and staffed by some of the Nation's most respected 
attorneys, could point to a distinguished record of performing 
these functions. From the early days of the current 
administration, however, the office has been transformed into 
what is, in effect, a private law firm designed to serve the 
individual and political interests of the President and the 
First Lady. One incident after another has demonstrated that 
the highest priorities of the current White House Counsel's 
Office are shielding the activities of the occupants and staff 
of the White House from legitimate congressional and public 
scrutiny, engaging in political damage control, and otherwise 
advancing political agendas.
    Early indications of the transformation in the White House 
Counsel's Office came with the appointment of two Arkansas 
attorneys and former law partners of the First Lady to key 
positions in the office. With the change in majority control in 
the 104th Congress, the White House hired numerous additional 
attorneys, apparently for the purpose of responding to 
congressional investigations into alleged personal and official 
misdeeds by the President, the First Lady and others. Several 
attorneys were hired to interview key witnesses in 
congressional investigations, share information, negotiate over 
access to documents with congressional investigators and 
Independent Counsel staff, and even prepare suggested questions 
and opening statements for minority members to deliver during 
congressional hearings. One senior attorney was hired just to 
respond to press inquiries. None of these new staff members 
reports to the White House Counsel; instead, they report to the 
Deputy Chief of Staff and the First Lady.
    Among other examples, abuses of the role of the White House 
Counsel's Office are illustrated by its conduct in the Travel 
Office affair, the FBI Files fiasco, and efforts to shield the 
operations of the Health Care Task Force from public scrutiny. 
The committee regrets and condemns the misuse of the White 
House Counsel's Office in recent years. The committee 
recognizes, of course, that White House lawyers necessarily 
serve as advocates and defenders of the President, and that 
there often is a thin line between the President's official and 
political interests. However, the committee is convinced that 
the current White House Counsel's office has repeatedly and 
blatantly crossed that line, becoming essentially a political 
tool of the administration.

Travel Office and FBI files

    The committee is issuing separate reports on the Travel 
Office and FBI Files, respectively, that will discuss these 
matters in detail.\3\ With respect to the Travel Office, White 
House attorneys participated extensively in the effort to 
terminate seven long time Government employees, and then 
participated in a White House ``internal review'' of their own 
activities. They pressured the Federal Bureau of Investigation 
(FBI) to undertake an ill-considered and inappropriate 
investigation of the Travel Office. They also worked 
aggressively to limit and control outside investigations of the 
Travel Office firings and their aftermath. In part as a result 
of their missteps, a relatively small mistake mushroomed into a 
multi-year, highly embarrassing scandal.
    With respect to the FBI files, the improper use of these 
sensitive files resulted in part from the employment of 
otherwise competent attorneys hired to perform duties for which 
they had no prior experience or expertise. White House 
Associate Counsel William Kennedy was put in charge of a 
security process and allowed several unqualified political 
operatives (campaign aides Craig Livingstone and Anthony 
Marceca) access to an unlimited amount of sensitive Federal 
Bureau of Investigation information. With the active 
participation of the White House Counsel's Office, the FBI has 
been politicized by the requests for the files and by several 
episodes that have occurred during the subsequent 
investigation.

Health Care Task Force

    On January 25, 1993, in one of his first official acts, 
President Clinton appointed the First Lady to head the White 
House Task Force on National Health Care Reform. The mission of 
the Health Care Task Force (HCTF) was to develop legislation to 
be submitted to Congress by April 30, 1993. From the outset 
that its mission was shrouded in secrecy in terms of who was on 
the Task Force and what, exactly, it was doing.
    In a letter to President Clinton dated February 1, 1993, 
Representative Clinger, then-ranking minority member of the 
House Government Operations Committee, exercised the 
committee's oversight authority with respect to the Federal 
Advisory Committee Act (FACA), 5 U.S.C. App. The act is 
designed to prohibit Federal officials from crafting policy in 
conjunction with private citizens behind closed doors. 
Specifically, FACA requires public openness and accountability 
on the part of any advisory committee that is not composed 
entirely of full-time Federal officers or employees.
    Representative Clinger noted that since the First Lady was 
not a Federal official, the HCTF should be considered subject 
to FACA and its meetings should be open to the public. 
Meanwhile, there was a growing public awareness that other 
private citizens were participating in secret meetings. Then-
White House Counsel Bernard Nussbaum denied the FACA 
violations, but several public interest groups filed a lawsuit 
against the First Lady and the 12 other Cabinet and White House 
officials who ran the Task Force to force them to open their 
meetings to the public. Such openness would seem most 
appropriate given that the Task Force was to determine the role 
of the Federal Government in the health care industry, which 
represents fully one-seventh of the U.S. economy and touches 
the lives of each and every American directly.
    In what Mr. Nussbaum later referred to as an ``aggressive'' 
defense, the White House Counsel's Office devised a strategy of 
obfuscation and stonewalling, particularly with respect to the 
composition of the Interdepartmental Working Group--a component 
of the HCTF. This strategy even resulted in misleading the 
Department of Justice attorneys assigned to defend the lawsuit. 
In March 1993, Ira Magaziner, Senior Advisor to the President 
for Policy Development, signed an affidavit which stated that, 
other than representatives of some large, private, tax-exempt 
foundations, all of the members of the White House 
Interdepartmental Working Group were Federal employees.\4\ This 
affidavit was filed with the court by Department of Justice 
attorneys, who failed to conduct an independent investigation 
to confirm the facts in support of the White House's motion to 
dismiss the lawsuit.
    The U.S. District Court for the District of Columbia held 
that the First Lady was not a Federal official, and, therefore, 
the HCTF was subject to FACA.\5\ The Court of Appeals reversed 
this decision, holding that the HCTF was not subject to FACA. 
However, the Court of Appeals remanded the case for further 
factual inquiry to determine whether the Interdepartmental 
Working Group in itself constituted a FACA advisory 
committee.\6\
    The discovery proceedings that followed showcased the 
stonewalling tactics of the Counsel's Office. In a decision 
ordering compliance with the plaintiffs' discovery requests, 
the Federal trial judge stated: ``Defendants have submitted 
meritless relevancy objections in almost all instances, and 
incomplete and inadequate responses in most instances. . . .'' 
\7\ The judge characterized one of the Government's responses 
to a discovery request as ``preposterous.'' The judge described 
as ``[e]ven more egregious'' the Government's claim that lists 
of Working Group meeting participants that the White House 
itself had prepared ``should not be understood as fully 
exhaustive or completely accurate lists. . . .'' \8\
    The White House eventually relented and released 
information about the Working Group, and the lawsuit was 
dismissed as moot. However, the published information 
contradicted the claim by White House officials that the Task 
Force was composed entirely of Federal employees. The district 
court's decision dismissing the case observed:

          We now know, from the records produced in this 
        litigation, that numerous individuals who were never 
        federal employees did much more than just attend 
        working group meetings on an intermittent basis, and we 
        now know that some of these individuals even had 
        supervisory or decision-making roles. The extent to 
        which these individuals were subjected to conflict-of-
        interest scrutiny is also questionable.\9\

    The claim that all Working Group members were Federal 
employees had been central to the White House's legal defense 
in its efforts to avoid application of the FACA to the Task 
Force, with its attendant accountability and public access 
requirements. When this claim was revealed to be false, the 
trial judge referred Mr. Magaziner to the Justice Department 
for consideration of criminal prosecution.\10\ After a lengthy 
investigation, U.S. Attorney Eric Holder concluded that Mr. 
Magaziner should not be prosecuted.
    A host of other problems dogged the HCTF. When the 
identities of the members became public, it also was revealed 
that some of the non-Federal employee members had business and 
other financial interests that were directly implicated by the 
Task Force's work. Many members of entitlement-oriented special 
interest groups were given White House passes to attend 
meetings without completing either FBI or Secret Service 
background checks. The 100 day timeframe for writing 
legislation to provide ``universal care'' to all Americans 
proved unworkable, and it would take at least 8 months for 
President Clinton to outline his proposal to a joint session of 
Congress in September 1993. Not until March 1994 would the 
House Ways and Means Committee vote on health care reform. By 
the following August, administration and congressional leaders 
would concede that there was no chance of passing universal 
health care during the 103d Congress. While the White House 
originally claimed that the Task Force would cost only 
$100,000, a GAO report eventually documented costs of almost 
$10 million. GAO cautioned that even this information was 
incomplete.\11\

White House Communications Agency

    The White House Communications Agency (WHCA) was 
established in 1941 in order to provide national security-
related communications support to the President. In response to 
reports of possible fraud, waste, and abuse at the WHCA, this 
committee's Subcommittee on National Security, International 
Affairs, and Criminal Justice initiated a comprehensive 
independent review of WHCA operations. After the White House 
refused to cooperate with a GAO audit, the subcommittee 
arranged for the Department of Defense Inspector General to 
conduct the review.\12\ The Defense IG issued two reports on 
the WHCA, and the subcommittee held two oversight hearings.
    The IG concluded that the WHCA, which now consists of over 
800 military personnel and has a budget in excess of $100 
million, has expanded its activities well beyond its original 
mission. For example, the IG found that in 1 year the WHCA 
provided the White House almost $8 million worth of services 
that exceeded its stated mission and would have been more 
appropriately funded by the Executive Office.\13\ The IG also 
found serious financial management problems and lack of 
accountability at the WHCA. These problems stemmed in part from 
the fact that while the WHCA was technically under the 
supervision of DOD, it received day-to-day direction from 
political appointees at the White House.\14\

Questionable procurement and personnel practices

    GAO reported on a series of dubious procurement and 
personnel actions on the part of the White House. For example, 
GAO found that a sole source procurement for resume-processing 
services did not fully comply with Federal procurement 
regulations and contained insufficient evidence that the 
contract price was fair and reasonable.\15\ GAO also reported 
that 38 percent of the 611 personnel appointments by the 
Executive Office of the President between January 20 and late 
April 1993 were made retroactively. During the same period, 67 
employees received retroactive salary adjustments.\16\ The 
report noted that granting retroactive pay raises to some of 
these employees would not have been permitted under normal 
government personnel rules, but were legal because the White 
House is exempt from those rules. Because of the potential for 
abuse, GAO suggested that Congress might wish to revisit this 
exemption.\17\

Need for greater accountability

    The incidents described above highlight the need for 
greater accountability on the part of the White House, and the 
consequences of its exemption from the civil rights, labor and 
personnel laws that cover the private sector and now the 
Congress. They also highlight the absence of an investigative 
and oversight capacity in the White House to alert the 
President to potential management, ethical, and other problems.
    The Travel Office affair also disclosed that ethics rules 
apparently do not apply to informal unpaid advisers recruited 
by the White House who are not appointed as ``special 
Government employees'' under 18 U.S.C. Sec. 202, but function 
as de facto employees. A special Government employee must 
comply with criminal conflict of interest statutes and may be 
subject to financial disclosure requirements and standards of 
conduct. This lack of accountability fostered abuses of power 
by individuals who had no official status but nevertheless 
appeared to act with the authority of the President. The most 
prominent example is Harry Thomason, who had office 
accommodations and a White House pass, participated in meetings 
with officials of the Executive Office of the President, and 
attempted to influence policy. Mr. Thomason advocated 
dismissing the Travel Office employees and replacing an air 
charter company when that action would have promoted his own 
business interests.
    Subcommittee Chairman Mica, of the Subcommittee on Civil 
Service, along with many other Members, introduced a bill--the 
``Presidential and Executive Office Accountability Act'' (H.R. 
3452)--to require the Executive Office of the President to 
comply with the same civil rights, labor, and employment laws 
that apply to the Congress and throughout the United States. 
H.R. 3452 also would establish a Chief Financial Officer and an 
Inspector General in the White House and revise the definition 
of ``special Government employee'' to ensure that it covers 
individuals who perform activities or functions that could give 
rise to conflict of interest. The bill has been ordered 
reported by the full committee.

  The Management Capacity of the Office of Management and Budget has 
                           Diminished Greatly

    In 1970, the former Bureau of the Budget was reconstituted 
as the Office of Management and Budget (OMB) in order to 
strengthen central management leadership and capacity in the 
executive branch. However, since that time and during both 
Republican and Democratic administrations, concerns have been 
voiced over the vitality of the management role in OMB. As GAO 
recently observed:

          Throughout the history of OMB and its predecessor 
        organization, the Bureau of the Budget, management and 
        budget issues have competed for attention and 
        resources. In general, budget issues have tended to 
        squeeze out management issues.\18\

    Interestingly, when he was chairman of the House Budget 
Committee, Leon Panetta introduced a bill (H.R. 2750) in 1991 
to establish a separate ``Office of Federal Management'' in the 
Executive Office of the President. A 1991 report by Mr. 
Panetta's Budget Committee staff noted that ``the tyranny of 
deficit politics has required OMB to devote all of its time and 
resources to the budget part of its responsibilities, and there 
is little reason to expect real change until the budget is 
brought under control.'' \19\
    The problem continues today, and was exacerbated by the 
March 1994 reorganization of OMB called ``OMB 2000.'' The 
stated purpose of this reform was to increase attention to 
management issues, but instead it had the opposite effect of 
subordinating management issues to budget issues even more. OMB 
2000 fundamentally changed the organizational structure of OMB. 
The former budget areas were redesignated Resource Management 
Offices (RMO's). The RMOs were staffed by the former budget 
examiners, who now have both budget and management 
responsibility.
    On June 28, 1994, Representative John Conyers, Jr., then-
chairman of the committee, and Representative Clinger, then-
ranking minority member, wrote to the Comptroller General 
expressing their concerns about the OMB 2000 changes as 
follows:

          We are especially concerned that, as a result of the 
        reorganization plan, OMB's statutory management 
        functions (namely, the Office of Information and 
        Regulatory Affairs, the Office of Federal Procurement 
        Policy, and the Office of Federal Financial Management) 
        are not diminished but further strengthened and that 
        OMB will be better positioned to meet its critical 
        leadership role. We further want to ensure that broad 
        management initiatives such as the Paperwork Reduction 
        Act, the Chief Financial Officers Act, and the 
        Government Performance and Results Act be fully and 
        effectively implemented.

    Their concerns proved to be well-founded. As part of the 
reorganization, the Office of General Management was abolished. 
The three statutory offices were weakened by the transfer of 
about one-third of their staffs to the RMOs.\20\ A report by 
this committee, based on a series of hearings held in early 
1995 by the Subcommittee on Government Management, Information, 
and Technology, stated by way of summary: ``The capacity 
available to the President in the Office of Management and 
Budget to reform or improve management has steadily declined 
and now barely exists, despite a competent Director of OMB and 
a Deputy Director for Management, whose talents in this area 
are underutilized. Federal management organization, oversight 
authority, and general influence have been consistently 
overridden by recurring budget crises and budget cycle demands, 
despite conscientious intention to give `Budget' and 
`Management' equal voice within OMB.'' \21\
    A February 1996 hearing before the Subcommittee on 
Government Management, Information, and Technology indicated 
that the situation at OMB has not improved. The consensus 
opinion of the expert witnesses testifying at the hearing was 
that:
     The intensity of budget pressures makes it 
unrealistic to expect OMB to find the time and energy to 
provide sustained leadership for major management initiatives.
     OMB no longer has much capacity to provide 
meaningful advice or leadership to departments and agencies or 
to Congress on reorganization issues.
     OMB no longer has the capacity to assess the total 
impact of government regulations on local communities, 
businesses, and families.\22\
    The hearing highlighted several problems. Statutory 
reports, such as those required under the Chief Financial 
Officers (CFO) Act, are being transmitted from OMB to Congress 
months late and with no analysis or any other added value 
supplied by OMB. At the time of the hearing, only 14 of the 24 
agency CFO Act reports had been received by the committee. The 
average time it took to get the report through OMB was nearly 5 
months. In many cases, all that OMB added was a transmittal 
letter from the Director.\23\ The Defense Department's CFO Act 
report for fiscal year 1994 was not transmitted to Congress for 
more than 6 months after its submission to OMB.\24\
    The quality of reports also has suffered. For example, 
OMB's 1995 Federal Financial Management Status Report & Five-
Year Plan overstated the number of unqualified opinions on 
audited financial statements reported by the Department of 
Defense. OMB's 1996 Status Report greatly exaggerated 
delinquent tax debt collection results for fiscal year 1995 by 
relying on data other than that used by IRS. OMB reported tax 
debt to be about $24 billion less than IRS data showed, and OMB 
overstated by more than $1 billion the amount of delinquent tax 
debt IRS collected in 1995. The debt collection portion of 
OMB's annual status reports omits any mention of outstanding 
criminal debt, which, according to available estimates, now 
amounts to between $5 and $6 billion.\25\
    OMB's inattention to management issues appears in other 
areas as well. Management staff at OMB have not ensured that 
agencies are developing performance measurement systems 
necessary to comply with the Government Performance and Results 
Act (GPRA). OMB has not yet approved any pilots required by the 
second stage of the GPRA, which requires the Director of OMB to 
designate not less than five agencies as pilot projects on 
managerial accountability and flexibility for fiscal years 1995 
and 1996. This is because the first round of pilots were 
generally weak, and were only recently critiqued by OMB and 
returned to the agencies. OMB's problems in carrying out its 
central role in GPRA implementation are distressing, but hardly 
surprising since OMB has devoted only one staff position to 
work specifically on GPRA. Effective implementation of GPRA is 
vitally important to improving government management. The 
committee finds OMB's lack of support for this effort 
inexcusable and alarming.
    OMB's Office of Information and Regulatory Affairs (OIRA) 
is failing to carry out its statutory responsibilities. GAO 
recently testified that OIRA has not satisfied its mandate 
under the Paperwork Reduction Act of 1995 to keep Congress 
``fully and currently informed'' concerning why it has not set 
paperwork burden reduction goals.\26\
    In addition to its own statutory lapses, OMB seems 
unwilling to ensure that agencies comply with the law. A recent 
example was OMB's approval of a plan by the Department of 
Energy to offer a new round of ``buyouts'' to its employees 
long after the statutory deadline for buyouts had expired. The 
plan was patently illegal, as the Office of Personnel 
Management had advised OMB in advance of its approval, and as 
the Comptroller General later ruled.\27\ Following a hearing by 
the Subcommittee on Civil Service, at which both majority and 
minority members also challenged the legality of the proposal, 
OMB finally was forced to withdraw its approval.
    In a particularly unfortunate abdication of management 
responsibility, OMB has abandoned its initiative to maintain 
and oversee a ``high-risk'' list of programs particularly 
susceptible to fraud, waste, and abuse. OMB's high-risk 
initiative began in 1989 and was pursued vigorously until the 
current fiscal year. Just last year, the agency refined its 
High-Risk list to 57 areas in order to better focus on the most 
important problems. OMB's most recent (and last) progress 
report, which devoted an entire chapter in the Analytical 
Perspectives portion of the fiscal year 1996 budget, stated:

          By focusing on a smaller number of important items, 
        OMB intends to provide assurance to the public and the 
        Congress that significant problems are being 
        aggressively addressed. This approach will also allow 
        OMB and the agency to ensure that appropriate resources 
        are provided to solve the problems.\28\

    In a rather stark reversal, the high-risk initiative was 
quietly dropped this year with only a passing comment. The 
fiscal year 1997 budget noted that six agencies are conducting 
pilots designed to streamline management reporting, and stated 
that these pilots ``eliminate the need to separately identify 
and track `high risk areas'--the Government's serious 
management challenges.'' \29\ This statement is dubious on its 
face. It becomes wholly implausible when one considers that the 
six pilot agencies, taken together, account for only seven of 
OMB's 57 high-risk areas. Two of the pilot agencies have no 
high-risk areas at all. In the committee's view, OMB's 
abandonment of the high-risk initiative is a major step 
backward and sends a terrible message to agencies about OMB's 
level of interest in or commitment to improving the 
Government's most serious management challenges.

  Drastic Reductions in the Authority and Resources of the Office of 
    National Drug Control Policy have Impeded the War Against Drugs

    This committee has conducted extensive oversight of the War 
on Drugs through its Subcommittee on National Security, 
International Affairs, and Criminal Justice. The problems 
afflicting the Drug War are discussed in detail in a separate 
section of this report. One problem that merits discussion in 
this section is the fate of the Office of National Drug Control 
Policy in recent years.
    The Anti-Drug Abuse Act of 1988 (Public Law 100-690, title 
I, subtitle A) established the Office of National Drug Control 
Policy (ONDCP) in the Executive Office of the President and 
created the position of ONDCP Director, known as the ``Drug 
Czar.'' Among other things, the Act required the ONDCP Director 
to present to the President and Congress an annual strategy 
with measurable goals and a Federal drug control budget. The 
Violent Crime Control and Law Enforcement Act of 1994 (Public 
Law 103-322, title X) strengthened ONDCP's role in budget 
formulation in order to improve resource targeting, policy 
consistency, and overall counter-narcotics coordination.\30\
    Notwithstanding its vital missions, ONDCP bore the brunt of 
funding and staff cuts made by the President in 1993 in an 
effort to downsize the White House staff. The committee's 
recent comprehensive report on the Drug War summarized the 
extent and impact of these cuts as follows:

          Expert witnesses concurred that the sudden, 
        unilateral 1993 cut by President Clinton in ONDCP staff 
        by more than 80 percent from 146 staff to 25, and a 
        simultaneous reduction in the fiscal year 1994 ONDCP 
        appropriations from $101.2 million to $5.8 million, has 
        never fully been rectified, and continues to contribute 
        both to the perception that the administration places a 
        low priority on anti-drug efforts, and to the reality 
        that ONDCP is unable to perform all previous functions, 
        especially on interdiction policy.\31\

    The administration's lack of interest in the work of ONDCP 
was apparent in other ways as well. For example, the President 
failed to produce the 1993 annual strategy required by law; 
instead, only a terse ``interim'' strategy was issued. The 
President delayed the appointment of an ONDCP Director until 
half way through 1993, and failed to appoint an ONDCP Deputy 
for Supply Reduction.\32\ As this committee's report observed, 
according to a wide cross section of drug policy experts, lack 
of Presidential leadership and involvement has contributed to 
the recent alarming reversals in youth drug use trends and 
other indicators of progress in combating illegal drugs.\33\

   The National Performance Review is a Laudable Initiative, but has 
                     Produced Few Concrete Results

    The National Performance Review (NPR) initiative, which was 
conducted under the auspices of Vice President Gore, proceeded 
in two phases. In NPR Phase I, agencies were asked to come up 
with ideas for management improvements. The NPR's initial 
report, From Red Tape to Results: Creating Government That 
Works Better and Costs Less, was issued in September 1993 and 
contained 384 major recommendations.\34\ After the 1994 
elections, the Vice President launched a second phase. NPR 
Phase II required the agencies to re-evaluate their missions 
and ``reinvent'' themselves, to justify their existence, and to 
recommend improvements and cost saving proposals. Phase II 
culminated in a September 1995 report entitled Common Sense 
Government: Works Better and Costs Less, which included 180 
more recommendations.\35\
    While the administration deserves credit for undertaking 
NPR, this initiative has produced few verifiable savings or 
fundamental reforms in Government operations. NPR Phase I took 
a bottoms-up approach, incorporating many recommendations that 
agencies already formulated through their efforts under the 
Government Performance and Results Act of 1993 and similar 
laws, and recommendations that GAO had been making for years. 
However, NPR did not address many critical management issues. 
NPR failed to consider nearly three-fourths of what GAO 
regarded as the most important management problems in 23 
agencies. It also failed to consider a number of areas on GAO's 
and OMB's high-risk lists.\36\
    The September 1995 NPR report stated that $70 billion in 
savings would result from implementing these new 
recommendations during the period from fiscal year 1996 to 
fiscal year 2000. It also claimed that ``reinventing 
government'' had reduced the size of Government. However, these 
savings are unverifiable and staff cuts have resulted from many 
factors unrelated to NPR. At least 70 percent of the cuts came 
from downsizing in the Department of Defense--reductions that 
had nothing to do with the NPR and everything to do with the 
end of the cold war and subsequent base closures.\37\ Many 
program eliminations resulted from actions taken by Congress 
over the past 3 years.
    The NPR did not include any objective external evaluation 
of its success or failure. In compiling its reports, the NPR 
took at face value information provided by the agencies on 
whether they have implemented their recommendations. There has 
been no objective assessment of overall savings as a result of 
the NPR recommendations, particularly with respect to the NPR 
Phase II.
    In a report that evaluated the status of the 384 major 
recommendations in NPR Phase I, the GAO found that only 4 
percent of the recommendations had been fully implemented by 
December 1994.\38\ Two years later, another GAO report found 
that only 24 percent had been fully implemented.\39\
    This committee, the Senate Governmental Affairs Committee, 
and the House Budget Committee sought to have GAO evaluate NPR 
Phase II savings claims of over $100 million, but GAO was 
forced to drop the project. GAO stated that, for a variety of 
reasons, ``it would be difficult or impossible, to verify most 
of the NPR Phase II savings estimates.'' \40\ According to GAO, 
this resulted from a variety of factors. Some of the 
recommendations involved major institutional reforms, but 
provided few details on precisely how agency operations and 
programs would change. Information and data used for the 
original NPR Phase II estimates would not be easily available 
and might in some cases be impossible to reconstruct. It would 
often be impossible to evaluate the savings associated with 
policy changes accurately. In many cases, the budgetary impact 
of individual policy changes could not be isolated accurately 
from the impacts on spending of related policy changes, 
subsequent legislation, other administrative actions, changes 
in the economy, and behavioral responses.
    In the committee's view, NPR has not been a wasted 
exercise. It highlighted many management problems that have 
plagued the government for some time and provided a renewed 
focus on them. The failure of NPR to achieve more is 
disappointing, however, particularly since many of its 
recommendations for administrative and management changes were 
fairly modest. The relatively low rate at which such 
recommendations have been implemented is also disappointing 
since the recommendations in effect come from the White House 
and their implementation is in the hands of agencies subject to 
its direction.

                                ENDNOTES

    \1\ House Committee on Appropriations, Report on H.R. 3756: 
Treasury, Postal Service, and General Government Appropriations 
Bill, 1997, H. Rept. No. 104-660, 104th Congress, 2d Session 
(1996), pp. 129-130.
    \2\ House Committee on Government Operations, Majority 
Staff Report, Managing the Federal Government: A Decade of 
Decline, 102d Congress, 2d Session, Committee Print (December 
1992), p. 2.
    \3\ House Committee on Government Reform and Oversight, 
Final Report, Investigation of the White House Travel Office 
Firings and Related Matters, H. Rept. No. 104-849 (1996), and 
Interim Nineteenth Report, Investigation into the White House 
and Department of Justice on Security of FBI Background 
Investigation Files (1996).
    \4\ U.S. District Court for the District of Columbia. 
Association of American Physicians and Surgeons, Inc., et al. 
v. Hillary Rodham Clinton, et al., Civil Action No. 93-399. 
Defendants' Motion to Dismiss or, in the Alternative, for 
Summary Judgment. Declaration of Ira Magaziner, Attachment 1, 
pp. 1-13.
    \5\ Association of American Physicians and Surgeons, Inc. 
v. Clinton, 813 F. Supp. 82 (D.D.C. 1993).
    \6\ Association of American Physicians and Surgeons, Inc. 
v. Clinton, 997 F.2d 898 (D.C. Cir. 1993).
    \7\ Association of American Physicians and Surgeons, Inc. 
v. Clinton, 837 F. Supp. 454, 457 (D.D.C. 1993).
    \8\ Id.
    \9\ Association of American Physicians and Surgeons, Inc. 
v. Clinton, 879 F. Supp. 106, 108 (D.D.C. 1994).
    \10\ Id., pp. 107-109.
    \11\ General Accounting Office, Cost of Health Care Task 
Force Related Activities, GAO/T-GGD-95-114 (March 14, 1995), p. 
5.
    \12\ House Committee on Government Reform and Oversight, 
Twelfth Report, A Two-Year Review of the White House 
Communications Agency Reveals Major Mismanagement, Lack of 
Accountability, and Significant Mission Creep, H. Rept. No. 
104-748, 104th Congress, 2d Session (August 2, 1996), p. 3.
    \13\ Id., p. 25.
    \14\ Id., p. 6.
    \15\ General Accounting Office, White House: Follow-up on 
Acquisition of Automated Resume Processing, GGD-94-127 (August 
3, 1994), pp. 1-2.
    \16\ General Accounting Office, Personnel Practices: 
Retroactive Appointments and Pay Adjustments in the Executive 
Office of the President, GAO/GGD-93-148 (September 9, 1993), p. 
2.
    \17\ Id., p. 18.
    \18\ General Accounting Office, OMB 2000: Changes Resulting 
From the Reorganization of the Office of Management and Budget, 
GAO/T-GGD/AIMD-96-68 (February 7, 1996), p. 1.
    \19\ Committee Print, Management Reform: A Top Priority for 
the Federal Executive Branch, Serial No. CP-4 (November 1991), 
p. 1.
    \20\ Hearing before the Subcommittee on Government 
Management, Information, and Technology, House Committee on 
Government Reform and Oversight, 104th Cong., 2d Session, OMB 
2000 Reforms: Where Are They Heading? (February 7, 1996), pp. 
37-38.
    \21\ House Committee on Government Reform and Oversight, 
Third Report, Making Government Work: Fulfilling the Mandate 
for Change, H. Rept. No. 104-435, 104th Congress, 1st Session 
(1995), p. 5.
    \22\ See generally Hearing before the Subcommittee on 
Government Management, Information, and Technology, House 
Committee on Government Reform and Oversight, 104th Cong., 2d 
Session, OMB 2000 Reforms: Where Are They Heading? (February 7, 
1996).
    \23\ Id., pp. 23-24.
    \24\ Id., p. 32.
    \25\ See the discussion of debt collection in the 
Department of Justice section of this report.
    \26\ General Accounting Office, Paperwork Reduction: Burden 
Reduction Goal Unlikely To Be Met, GAO/T-GGD-96-186 (June 5, 
1996), p. 1.
    \27\ General Accounting Office, Federal Downsizing: Delayed 
Buyout Policy at DOE Is Unauthorized, GAO/T-GGD/OGC-96-132 
(June 11, 1996).
    \28\ Office of Management and Budget, Progress Report: 
Correcting High Risk Areas, Analytical Perspectives, Budget of 
the United States Government, Fiscal Year 1996, Chapter 23 
(1995), p. 283.
    \29\ Budget of the United States Government, Fiscal Year 
1997, Budget Supplement, p. 128.
    \30\ House Committee on Government Reform and Oversight, 
Seventh Report, National Drug Policy: A Review of the Status of 
the Drug War, H. Rept. No. 104-486, 104th Congress, 2d Session 
(March 19, 1996), pp. 3-4.
    \31\ Id., p. 67.
    \32\ Id., p. 66.
    \33\ Id., p. 6.
    \34\ The National Performance Review, From Red Tape to 
Results: Creating a Government That Works Better and Costs Less 
(September 7, 1993).
    \35\ Id.
    \36\ General Accounting Office, Management Reform: 
Implementation of the National Performance Review's 
Recommendations, GAO/OCG-95-1 (December 5, 1994), pp. 4-5.
    \37\ Nesterczuk, George, ``Reviewing The National 
Performance Review'', Regulation, Number 3 (1996), pp. 35-37.
    \38\ Id., p. 3.
    \39\ General Accounting Office, Management Reform: 
Completion Status of Agency Actions Under the National 
Performance Review, GAO/GGD-96-94 (June 12, 1996), p. 6.
    \40\ General Accounting Office, NPR Savings Estimates, GAO/
GGD/AIMD-96-149R (July 24, 1996), p. 2.

                  Federal Emergency Management Agency

                                Overview

    The Federal Emergency Management Agency (FEMA) was 
established in 1979 to consolidate disaster response throughout 
the Federal Government. FEMA distributes the President's 
Disaster Relief Fund, the source of most assistance following 
major natural disasters. Appropriations for FEMA total $701 
million and the agency is staffed by approximately 6,000 
positions.
    FEMA has problems managing the moneys it distributes. It 
gives public assistance grants to rebuild entities that should 
be ineligible for such funds. FEMA provides unnecessary funds 
for the renovation of lavish parks and recreation facilities 
throughout the country. Perhaps most urgent, however, is the 
lack of overall efficiency of FEMA's management of the Disaster 
Relief Fund.

                Economy and Efficiency of Operations \1\

    In 1995, in response to a request from Senator Christopher 
Bond, FEMA's Inspector General conducted an audit of FEMA's 
Disaster Relief Fund. A large portion of the audit focused on 
the economy and efficiency of operations at FEMA. The Inspector 
General provided substantial insight into many of the areas in 
which waste and abuse occurs at FEMA.

Management of human resources

    When a disaster occurs, FEMA staffs the effort with 
permanent full-time employees and reservists. Because full-time 
employees and reservists are paid travel and per diem costs, 
FEMA spent $38 million in 1994 alone for the expenses of these 
employees. Major savings would result from FEMA's use of local 
employees to staff disaster relief operations, or from 
transitioning from per diem employees to local hires sooner.
    The disaster relief operation that occurred as a result of 
the Northridge earthquake employed 1,400 employees in February 
1994 and decreased to 130 employees in February 1995. At an 
average per diem of $128, FEMA's Inspector General estimates 
that FEMA could have saved approximately $1,961,000 if it had 
utilized a greater percentage of local labor sooner in the 
relief effort.\2\
    FEMA should allow more flexibility in hiring temporary, 
local employees to staff its onsite operations.

Mission assignments

    FEMA often dictates that other Federal agencies complete 
work on disaster relief, called mission assignments. When FEMA 
pays for the services provided by other agencies, it does not 
ensure that services were actually completed or that property 
was actually delivered. FEMA often lacks the proper 
documentation to support the payments it makes.
    The Stafford Act requires States to contribute up to 25 
percent of the costs of direct Federal assistance resulting 
from mission assignments. For the Houston flood, the State's 
share of mission assignments was estimated to be $254,000. For 
the Georgia flood, the State's share of mission assignments was 
estimated to be between $2 million and $8 million. According to 
FEMA's Inspector General, FEMA Headquarters does not know 
whether the regional offices have collected these amounts.\3\
    Further, FEMA needs to close-out mission assignments in a 
more timely manner. As of the date of a July 1995 Inspector 
General report, 187 mission assignments were still open.\4\ 
These were assignments from disasters declared before fiscal 
year 1994. The fund set aside for payment of these assignments 
totaled $143 million. Until these mission assignments are 
closed-out and other Federal agencies submit final bills to 
FEMA, that money can not be used for other disaster activities.

Small projects

    The Stafford Act provides that public assistance grants for 
less than $35,000 require no accounting for costs. The only 
requirement is that the grantee certify that the work is 
completed. Grants of this nature account for almost 30 percent 
of all public assistance awards. $47 million was granted under 
small projects as a result of Hurricane Andrew. $103 million 
was granted under small projects as a result of the Northridge 
earthquake.
    In routine audits of this program, FEMA's Inspector General 
found numerous examples where funds granted for small projects 
went for purposes other than disaster related repairs. In one 
instance, a small project grant for emergency services and 
repairs went instead for computer purchases and beautification 
projects. A grant for sewer line repair went to install 
lighting at a city park. A grant for the repair of parking lots 
went to the purchase of computers.\5\
    FEMA specifically requires that a grantee not account for 
the expenditure of funds under a small project grant. Three 
States required grantees to account for excess funds. Two of 
the States required that excess funds be used for worthwhile 
projects, although not necessarily for disaster related 
purposes. Another State required grantees to refund excess 
moneys. FEMA, in accordance with its non-accountability policy, 
ordered the State to discontinue the refund of excess funds.\6\

Administrative allowances

    When a State receives a grant from FEMA, it has the right 
to receive an administrative allowance to cover the costs of 
grant administration. In addition, a State can apply for State 
management grants to cover other administrative costs.
    Today, grantees receive funds far in excess of those needed 
to administer grants. For instance, using data from the Public 
Assistance Summary Report, FEMA's Inspector General estimates 
that excessive administrative fees from Hurricane Andrew and 
the Northridge Earthquake totaled $413,000.\7\
    There are several ways in which excess administrative 
grants are made. Administrative allowances are computed 
incorrectly on damage survey reports and advances. Or, FEMA 
regularly makes administrative grants for management grants, 
funds granted specifically to pay administrative costs. Once 
again, FEMA does not require States to account for the funds.

 FEMA Makes Public Assistance Grants to Those Who Are Not Eligible \8\

    FEMA's public assistance program makes grants necessary to 
rebuild public and private nonprofit structures destroyed or 
damaged in natural disasters. Between 1989 and 1994, FEMA made 
$6.5 billion in grants for this purpose. The purposes of public 
assistance grants are to remove debris, protect the health and 
safety of the public, and restore destroyed buildings. In 
addition to Government buildings, public assistance grants may 
be made to those private nonprofit facilities that provide 
essential Government services. The manner in which these grants 
are made and the criteria used to determine eligibility brings 
to this program a high level of waste.
    The amount of money distributed for the purposes of public 
assistance programs has increased dramatically in the past few 
years. In 1991, FEMA obligated approximately $301 million in 
public assistance costs. In 1994, FEMA obligated approximately 
$2.15 billion in public assistance costs. This amounts to a 
more than seven fold increase, while the number of disasters 
actually decreased from 39 in 1991 to 37 in 1994.\9\
    When FEMA agrees to fund the repair of structures damaged 
in disasters, there is often dispute concerning the extent to 
which the structure should be repaired. Some believe that the 
damaged structure should be brought in conformity with the 
building codes that were in place at the time of the disaster, 
while others believe that the structure should be rebuilt to 
withstand similar, future disasters. Another concern is the 
part of the structure that should be repaired. Some believe 
that only the part of the structure damaged by the disaster 
should be repaired by FEMA funds, while others believe that 
FEMA funds should encompass a broader renovation of the 
structure. In one instance, FEMA determined that a hospital was 
eligible for $3.8 million in funds. The hospital sought $64 
million. Finally, as a result of this dispute over which codes 
should govern the hospital's repair, FEMA paid $29.3 
million.\10\
    Public assistance grants have gone, in the past, to 
facilities that were abandoned at the time of the disaster, or 
were leased by private entities at that time. For example, the 
Williams Building in San Francisco was largely vacant at the 
time of the Loma Prieta earthquake, and was unsuitable for 
renting; however, FEMA granted $7 million to repair this 
building. Also as a result of the Loma Prieta earthquake, FEMA 
granted $2 million to repair the old Gilroy City Hall, which 
was being used as a restaurant and meeting facility. The Los 
Angeles Coliseum, an entertainment center, stands to receive 
approximately $91 million. None of the aforementioned 
facilities provide the services intended to be addressed by the 
public assistance program.\11\
    Nonprofit facilities eligible for public assistance grants 
are limited to those that provide essential Government 
services, but interpreting the definition of essential 
Government services has been difficult for FEMA. In 1993, FEMA 
attempted to limit grants to those private nonprofit facilities 
that provided health and safety services. Nonetheless, in 1994, 
FEMA granted funds to nonprofit organizations that clearly fell 
outside such criteria. Because of damage from the Northridge 
earthquake, FEMA gave $120,000 to a contemporary dance 
foundation because it taught dance to underprivileged children. 
FEMA gave $1.5 million to a performing arts theater because it 
offered discount tickets to senior citizens and taught theater 
to young and senior citizens. FEMA gave $4.8 million to an 
institute used as a retreat for youth of different 
religions.\12\
    The General Accounting Office recommends that FEMA clarify 
the criteria for receipt of public assistance program 
funds.\13\ Limiting the nonprofit organizations eligible for 
these funds would restrict the amount of funds FEMA would be 
obligated to distribute. Preventing distribution of public 
assistance funds to buildings that are abandoned or profit-
making would also contribute savings to the American taxpayer.

     Disaster Assistance for Park and Recreational Facilities \14\

    In the last several years, 50 of the largest disasters gave 
FEMA the opportunity to grant more than $214 million in 
disaster assistance for parks and recreational facilities 
throughout the country. FEMA's Inspector General found that 
large amounts of money go to repair recreational facilities 
used by a relatively small portion of the population.
    In 1974, a law was passed to allow disaster assistance to 
repair park and recreational facilities. Congressional intent 
is clear on the point that funds should not be used for the 
repair of ``golf courses, football or baseball fields, [or] 
tennis courts.'' \15\ Nonetheless, FEMA spends millions of 
dollars on just that purpose. As a result of Hurricane Andrew, 
FEMA paid almost $3.5 million for tree replacement at Crandon 
Park at The Links in Key Biscayne. Officials defended the use 
of the money for tree replacement in the median of the road 
going through the park, saying that it provided a 
``psychological boost'' to the citizens.
    The original purpose of allowing disaster assistance 
dollars to pay for parks and recreation facilities was to 
resurrect buildings used for public assemblage. In Atlantic 
Highlands, New Jersey, damage from a storm totaled more than $4 
million. While the building at the site was insured, the piers 
were not. FEMA paid to rebuild the piers, apparently in 
contravention of the purpose of such grants. That same law 
requires that organizations obtain insurance on the renovated 
property, but the Atlantic Highlands Marina claims that FEMA 
made no request to that effect.\16\
    There can be a legitimate purpose for Federal support for 
some parks and recreation. However, millions of dollars are 
being wasted on facilities that generate substantial revenue, 
contain insurable property, and provide no necessary public 
purpose.

                                ENDNOTES

    \1\ Federal Emergency Management Agency, Office of 
Inspector General, Audit of FEMA's Disaster Relief Fund, Report 
Number H-16-95 (July 1995).
    \2\ Id., pp. 61-62.
    \3\ Id., p. 69.
    \4\ Id., p. 71.
    \5\ Id., p. 80.
    \6\ Id., p. 80.
    \7\ Id., p. 83.
    \8\ General Accounting Office, Disaster Assistance: 
Improvements Needed Determining Eligibility for Public 
Assistance, GAO/RCED-96-113 (May 23, 1996).
    \9\ Id., p. 12.
    \10\ Id., p. 43.
    \11\ Id., p. 47.
    \12\ Id., p. 22.
    \13\ Id., p. 6.
    \14\ Federal Emergency Management Agency, Inspector 
General, Unintended Consequences: The High Cost of Disaster 
Assistance for Park and Recreational Facilities, Inspection 
Report I-01-96 (May 1996).
    \15\ Congressional Record (February 26, 1974), p. S2229.
    \16\ Federal Emergency Management Agency, Inspector 
General, Unintended Consequences: The High Cost of Disaster 
Assistance for Park and Recreational Facilities, Inspection 
Report I-01-96 (May 1996), p. 11.

                    General Services Administration

                                Overview

    The U.S. General Services Administration has a dual role of 
providing direct administrative services to other Federal 
agencies and establishing policy and oversight for Government 
agencies in areas as diverse as procurement, property disposal, 
travel, and aircraft management. In fiscal year 1996, the 
agency received an appropriation of $240 million. Most of the 
services provided by GSA are accomplished through revolving 
funds, most importantly the General Supply Fund, the Federal 
Buildings Fund, the Information Technology Fund and the Working 
Capital Fund. Through these cross-servicing schemes, GSA 
directly controls more than $11.2 billion in disbursements. 
Furthermore, the agency impacts how agencies spend another $50 
billion dollars on programs for which GSA establishes 
governmentwide policy but has no direct involvement. In fiscal 
year 1996, GSA had 16,140 full-time equivalents.
    GSA is primarily divided into policy and operations. In 
1995, an Office of Policy, Planning and Evaluation was 
established, thus separating the policy and operational 
branches by creating a new organization. The remaining 
operational units of GSA include the Public Buildings Service, 
which provides real estate services, such as office space in 
Federal buildings, commercial real estate brokerage services, 
real property management and physical security services to 
Federal agencies; the Federal Supply Service, which provides 
various administrative services to Federal agencies, such as 
motor vehicle management, supply and procurement, and personal 
property management. Finally, the Information Technology 
Service oversees services such as local telecommunications 
services, long-distance phone services and policy regarding 
acquisition of information technology.

                      Costly Real Estate Monopoly

    The General Services Administration's (GSA) monopoly on 
real estate wastes time and money for every agency that is 
required to use its services. GSA maintains a costly monopoly 
over the provision of real property services to Federal 
agencies costing in excess of $210 million per year.\1\ In 
September 1993, to promote competition, the National 
Performance Review recommended eliminating the monopoly which 
GSA holds on Government real estate.\2\ The General Accounting 
Office concurred.\3\
    Before an agency can rent office space, it must go through 
the General Services Administration. GSA determines the rate 
the agency will pay and can take up to 65 months to get a new 
lease for the agency.\4\ That is five times longer than the 
private sector takes to finalize leases for real estate. 
Despite this longer time period, the only benefit an agency 
obtains for the delay is a more expensive lease. According to 
GSA's own price determinations, it pays more than the market 
value of the property in many cases.\5\
    For example, GSA leases office space in the World Trade 
Center in Long Beach, California for an average of $28.77 per 
square foot per year.\6\ Private sector renters, in the same 
building, can currently rent for $16.50 per square foot per 
year. GSA spends 74 percent more than private sector renters. 
The Government could save over $680,000 per year on this one 
rented building if it negotiated for private-sector rates.
    GSA argues that the Federal Government obtains an economy 
of scale through its purchasing power, leveraging the weight of 
Federal buying power to obtain lower rates. If that is the 
case, GSA could enjoy an advantage which would draw Federal 
customers by choice, rather than by a coercive monopoly.
    The President's National Performance Review recommended 
that GSA allow choice among its real property clients. Neither 
GSA nor the Vice President has followed up on this pledge. 
``NPR Action Item: The President should end GSA's real estate 
monopoly and make the agency compete for business. GSA will 
seek legislation, revise regulations, and transfer authority to 
its customers, empowering them to choose among competing real 
estate management enterprises, including those in the private 
sector,'' states the First Report of the National Performance 
Review, which was announced with much fanfare 3 years ago. 
Unfortunately, the President has not followed through on this 
recommendation.

 Motor Vehicle Fleet Management Services: Wasting $135 Million Per Year

    The Federal vehicle fleets operated by Federal agencies are 
very expensive. According to figures supplied by Federal 
agencies, accounting and consulting firm Arthur Andersen, which 
examined GSA's business lines under the Federal Operations 
Review Model, estimates that non-GSA fleets could save $135 
million per year if they could bring their costs down only to 
the level of GSA.\7\ Neither the Office of Management and 
Budget nor GSA has taken any steps to achieve these savings. 
Rather, GSA has focused its attention on its own fleet, to the 
detriment of other agency fleets, for which GSA has policy and 
oversight responsibility.
    In addition, the Office of Management and Budget (OMB) is a 
serious barrier to efficient management of Federal vehicle 
fleets. For example, GSA and the Army discussed the GSA 
managing the Army's fleet of 8,000 vehicles in Europe. The Army 
was managing these vehicles with 450 personnel. GSA would be 
able to perform the same task with 50 FTE, and provide faster 
replacement of old vehicles. This would save $11 million per 
year. GSA and Army began discussions in 1992. OMB, however, 
prevented the Army from transferring 50 FTE to GSA from its 450 
fleet management work force. This action by OMB had the effect 
of blocking the deal. The delay has cost $44 million, prevented 
the Government from eliminating 400 superfluous jobs, and the 
Army from getting new vehicles faster.\8\

            Excess Real Estate--GSA is an Absentee Landlord

    While the Federal Government has been downsizing, it has 
not been reducing the amount of physical space they occupy. 
According to the General Accounting Office, if agencies had 
given up space in proportion to their reductions in personnel, 
they would have reduced their space by over 16.2 million square 
feet.\9\ Using the average cost per square foot as a gauge, 
this would save $362 million per year. Neither GSA nor OMB has 
made any plans to reduce the amount of real estate controlled 
by Federal agencies. As the number of employees declines, and 
the space used to house these agencies maintains its current 
level, Federal agencies will pay for more and more empty 
offices.
    Reducing personnel without capturing the administrative 
costs associated with excess personnel is a management problem 
requiring the attention of management in each agency. The lack 
of any central focus--by GSA or OMB or anyone else in the 
Federal Government--on this problem has resulted in hundreds of 
millions of dollars in excess costs each year. These costs will 
continue to grow as agencies continue the process of 
downsizing.

      Dangerous Reduction of Federal Protective Services Employees

    In 1989, Congress passed Public Law 100-440, a law which 
required GSA to increase by 50 officers per year the strength 
of the Federal Protective Service (FPS). The FPS is a Federal 
security force which provides protection for individuals in 
Federal office buildings. This is particularly crucial as 
violent attacks against Federal employees have occurred, such 
as the bombing of the Alfred P. Murrah building in Oklahoma 
City on April 19, 1995. This process of increasing FPS strength 
was to continue on an annual basis until the force reached 
1,000 officers.
    Instead of increasing the strength of the force, GSA 
oversaw a decline in FPS strength. When the administration 
reduced FTE positions, the force strength of the Federal 
Protective Service was reduced. Despite the law requiring a 
certain strength of FPS officers, GSA did not exempt Federal 
Protective Officers from downsizing by designating them as 
mission-critical.\10\
    In the years before the Oklahoma City bombing, numerous 
officers were offered buyouts, including officers in Oklahoma 
City. In addition to the buyouts, FPS strength was reduced by 
poor retention and low pay. GSA has now sought to remedy this 
situation by raising pay administratively and hiring unarmed 
contract guards to displace Federal Protective Service workers. 
GSA has proposed to comply with the law by repealing it.\11\

                Overspending on Courthouse Construction

    Federal courthouses have become enormously expensive 
construction projects. For example, Seattle's new Federal 
courthouse is expected to cost $224 million, and St. Louis' at 
$194 million, is not far behind.\12\ At $299 per square foot, 
the cost of the Seattle courthouse is three times more 
expensive than nearby State courthouses.\13\ Since courthouse 
construction is financed through agency payments for leased 
office space, which exceed its own payment for those leased 
buildings, GSA has an oversight role in this expensive 
construction, and the expense of these courthouses raise costs 
to all Federal agencies.
    The effects of frequent changes in plans demonstrates how 
GSA's methods of construction can increase costs. For example, 
custom-made $114-per-square-yard carpeting made the Foley 
Square courthouse in New York one of the most expensive recent 
Federal building projects.\14\ GAO recently studied a sample of 
courthouse construction projects nationwide. On three recent 
courthouse projects, GSA modified construction contracts to 
change the type or placement of wood paneling, molding, 
benches, desks, and bookcases to accommodate requests by the 
Courts because the tenants changed their requirements after 
construction began. These changes cost taxpayers an additional 
$198,000.\15\
    Over the next decade, a General Accounting Office report 
warns that the Nation's taxpayers could be hit with a $1.1 
billion bill for courthouses that the judicial branch cannot 
fully justify because of flaws in its forecasting.\16\ The 
challenge for GSA is to protect America's taxpayers from this 
occurrence, but it appears that they are not meeting their 
responsibilities.

 Reform of the Public Building Service: Proposals Lacked Follow-Through

    GSA contracted with the accounting and consulting firm 
Arthur Andersen to review the Public Building Service (PBS). 
After a lengthy review, Arthur Andersen proposed three options 
for reforming PBS. The options included: (1) Virtual 
Privatization; (2) Extended Privatization; and (3) Performance-
based organization (PBO). Virtual privatization of the public 
building service would save $565 million in annual savings 
through reduced administrative costs and asset-related savings 
.\17\ Others have estimated that the correct savings to be $1 
billion.\18\ In any case, GSA chose not to implement the option 
with the largest savings. Instead, GSA opted to proceed with 
the performance-based organization option, yet apparently 
decided to not pursue this choice either, because it was never 
forwarded to Congress as part of the Appropriations process 
(like other PBO proposals in other agencies).\19\ As a result, 
there has been no comprehensive reform of the PBS.
    The largest single element of the estimated savings for the 
PBS is reducing lease payments by renegotiating existing lease 
contracts. GSA has implemented a program of renegotiating 
leases, but has been hampered by focused resources. Lease 
renegotiation could save taxpayer dollars if GSA would devote 
increased attention to performing this service for agencies. 
Until that happens, taxpayers will continue to pay higher than 
market rate rents, many of which will be for empty office 
buildings.

                                ENDNOTES

    \1\ Letter from Arthur Andersen to Congressman Stephen 
Horn, chairman of the Subcommittee on Government Management, 
Information, and Technology, dated July 22, 1996. Arthur 
Andersen provided advice on the General Services 
Administration's Federal Operations Review Model.
    \2\ The National Performance Review, Creating a Government 
That Works Better and Costs Less, p. 57.
    \3\ General Accounting Office, Implementation of the 
National Performance Review's Recommendation, GAO/OCG 95-1, pp. 
476-478.
    \4\ General Accounting Office, Federal Office Space: More 
Businesslike Approach Could Reduce Costs and Improve 
Performance, GAO/GGD 95-48, p. 23.
    \5\ Id., p. 4.
    \6\ General Services Administration Lease Inventory, Region 
IX (February 1, 1996).
    \7\ Testimony of Andrew Jones of Arthur Andersen before the 
Committee on Government Reform and Oversight, Subcommittee on 
Government Management, Information, and Technology (May 10, 
1996).
    \8\ Testimony of GSA's Federal Supply Service Commissioner 
Frank Pugliese, before the House Committee on Government Reform 
and Oversight, Subcommittee on Government Management, 
Information, and Technology (May 10, 1996).
    \9\ General Accounting Office, Letter report to Senator 
William Cohen, chairman, Senate Committee on Governmental 
Affairs, Subcommittee on Oversight of Government Management 
(July 14, 1995).
    \10\ Testimony of Administrator of General Services Roger 
Johnson, before the House Committee on Government Reform and 
Oversight, Subcommittee on Government Management, Information, 
and Technology (May 2, 1995).
    \11\ General Services Administration, FY 1997 Congressional 
Justifications for the Administration's budget request, p. S-6.
    \12\ The National Journal, ``The Judiciary's Edifice 
Complex'' (January 8, 1994), p. 92.
    \13\ Business Week, ``Lost in Space: Uncle Sam's Crazy 
Building Spree'' (February 14, 1994), p. 62.
    \14\ The Washington Post, ``Judging Extravagance Of 
Courthouse Projects'' (November 9, 1995), p. A21.
    \15\ General Accounting Office, Status of Open 
Recommendations: Improving Operations of Federal Departments 
and Agencies, GAO/OP-96-1 (January 1996), p. 128.
    \16\ The National Journal, ``The Judiciary's Edifice 
Complex'' (January 8, 1994), p. 92.
    \17\ ``Public Building Service: The New PBS--Summary of 
Presentations to Roger Johnson, Administrator, General Services 
Administration,'' presented to Roger Johnson by Arthur 
Andersen, LLP (January 25, 1996).
    \18\ Testimony of Mr. Mark Donahue, senior executive vice 
president, CB Commercial, before Committee on Appropriations, 
Subcommittee on Treasury, Postal, and General Government (April 
18, 1996).
    \19\ General Services Administration, FY 1997 Congressional 
Justifications for the Administration's budget request.

                Department of Health and Human Services

                                Overview

    The Department of Health and Human Services (HHS) is the 
largest social service agency in the Federal Government with an 
annual budget of $301 billion. HHS's mission is to protect and 
promote the health, social and economic well being of all 
Americans and in particular those least able to help 
themselves--children, the elderly, persons with disabilities, 
and the disadvantaged--by helping them and their families 
develop and maintain healthy, productive, and independent 
lives.
    HHS consists of four major divisions. The Health Care 
Financing Administration (HCFA) oversees the Medicare and 
Medicaid programs serving 50 million beneficiaries. The Public 
Health Service oversees a broad range of agencies including the 
Food and Drug Administration, the National Institutes of 
Health, the Alcohol, Drug Abuse and Mental Health 
Administration, and the Centers for Disease Control; the 
Administration on Aging administers the Older Americans Act. 
The Administration for Children and Families manages AFDC, Head 
Start, and the Child Support Enforcement programs.
    The Department faces some enormous management problems as 
health care expenditures expand dramatically. Examples of the 
most important management problems in HHS include ineffective 
information technology systems, increasing levels of fraud and 
abuse in Medicare and Medicaid and the Administration on 
Children and Families' information technology management 
problems with the Office of Child Support Enforcement. Not the 
least of these management problems is the impending insolvency 
of the Medicare Part A Trust Fund.

     Medicare Part A: $7 Billion in Deficit, Program Headed Toward 
                               Insolvency

    Good management of Medicare and Medicaid is particularly 
important because of the financial strain under which the 
programs are currently operating. Medicare Part A, the Hospital 
Insurance Trust Fund (HI), is the source of reimbursements for 
hospitals and other institutional providers for health care 
services to the 37 million Americans who are elderly and/or 
disabled. Trustees for this program have estimated that the 
fund will be depleted by 2001. The Trust Fund lost $4.2 billion 
in the first half of the current fiscal year and is expected to 
accumulate a $7 billion deficit by the end of this fiscal 
year--and the situation is not improving. Medicare is the 
Nation's largest health payer--its outlays are exceeded only by 
social security, defense, and interest on the national debt. It 
is also the fastest growing part of the budget. In less than a 
decade, Medicare's expenditures have more than doubled, from 
$70 billion in 1985 to $162 billion in 1994 and are estimated 
to be as much as $184 billion in 1996.
    The Congressional Budget Office (CBO) reported that, 
despite recent successes of private insurers in controlling 
their mounting costs, the Federal Government has been unable to 
restrain health care spending. With Medicare growing at 10 
percent annually and Medicaid increasing by 15 percent per 
year, these programs are consuming an increasing share of the 
gross domestic product.\1\ This change from a surplus to a 
deficit in the HI Trust Fund occurred in 1995 and projections 
were updated by CBO in April 1996. In the words of the 
administration's Medicare Trustees, including, Secretary of the 
Treasury, Robert Rubin, Secretary of HHS, Donna Shalala, 
Secretary of Labor, Robert Reich, and Social Security 
Administrator, Dr. Shirley Chater ``The HI [Medicare Part A] 
program remains severely out of financial balance. . . . [t]he 
HI trust fund does not meet even our short-range test of 
financial adequacy. Moreover, income and assets are 
insufficient to support projected program expenditures beyond 5 
years under the intermediate assumptions. Thus, without 
corrective legislation soon, the fund would be exhausted 
shortly after the turn of the century--initially producing 
payment delays, but very quickly leading to a curtailment of 
health care services to beneficiaries.'' \2\

              Management Information Resources Ineffective

    Key HHS agencies are not managing information resources to 
ensure that systems are efficiently acquired and meet mission 
needs.\3\
    The Department of Health and Human Services (HHS) relies 
heavily on information technology to help it manage a massive 
amount of Federal expenditures. Within HHS, key component 
agencies require information technology to achieve their 
critical missions of ensuring adequate health care and 
providing assistance to eligible individuals and their 
families.
    The GAO has reported on numerous problems in HHS in 
managing information technology, including a lack of 
information resources leadership and oversight of the Public 
Health Service, Health Care Financing Administration (HCFA) 
computer acquisitions, and telecommunication network 
procurement planning at the Administration on Children and 
Families. Through fiscal year 1999, the States are planning to 
spend more than $11 billion to develop and operate automated 
welfare information systems. The General Accounting Office 
(GAO) has found continuing problems with the manner in which 
HHS health and welfare agencies acquire and manage information 
technology. For example, poor monitoring of States' efforts to 
develop automated welfare systems allowed millions of dollars 
to be spent on systems that either do not work, or do not meet 
program needs.
    HCFA has not corrected the Medicaid program's problems with 
data reported by State Medicaid information systems. In 
testimony given last year by the GAO, it was reported that 
State Medicaid agencies have claims data and records that can 
be used to expose a pattern of possible fraud, overuse or care 
that is not medically indicated. GAO found, however, that State 
Medicaid agencies view their data as unreliable and typically 
do not use their own analyses to detect fraud or abuse. Most 
fraud that could be exposed through examining State data, is 
routinely ignored, and such cases are typically identified 
through tips or by accident.\4\
    HHS' Office of Child Support Enforcement (OCSE) has not 
demonstrated leadership in guiding changes in some States' 
seriously flawed automated child support enforcement systems 
(discussed in more detail later in this report). Development of 
these systems continued for years, with costs totaling over $32 
million in Federal funds before development efforts were 
stopped and redirected. The money spent on that system is now 
about $1 billion. The General Accounting Office is currently 
examining the OCSE's oversight of State programs on information 
collection and computer systems.
    Finally, GAO's examination of HCFA's cost-savings estimate 
for its Medicare Transaction System (MTS) indicates that 
although the new system should generate some administrative 
cost savings, the amount is uncertain. Implementation is not 
expected until at least 2 years from now and make take longer. 
GAO also noted that risks associated with HCFA's planning and 
acquisition strategy for the MTS could result in the new system 
not achieving intended benefits and in cost increases and 
schedule delays.\5\ It should be noted, that the Medicare 
Transaction System has the potential to increase the overall 
efficiency of the Medicare program. It will allow HCFA to take 
advantage of advanced technology, track patient data and 
claims, consolidate disparate computer systems, and better 
coordinate program information.

                      Medicare and Medicaid Fraud

    Medicare and Medicaid are the fastest growing programs in 
the Federal budget. In fiscal year 1994, the Government spent 
over $440 million a day or $162 billion per year on Medicare. 
The Congressional Budget Office estimates that under current 
policy, Medicare will reach about $380 billion by 2003. The 
proportion of health care spending attributable to waste, fraud 
and abuse is difficult to quantify, however, health care 
experts have estimated that 10 percent of national health 
spending is lost to these practices.\6\
    Ten percent applied to Medicare's estimated $180 billion in 
spending for the current fiscal year is $18 billion, an amount 
that increases and becomes even more devastating as the program 
grows. Medicaid is similarly open to fraud and abuse and State 
Medicaid officials believe program fraud may be as high as 10 
percent.\7\
    Medicaid is the third largest social program in the Federal 
Government. This joint Federal-State program pays for medical 
costs and pharmaceuticals for certain groups of low-income 
individuals. This program is a life-line to the poor and 
elderly disabled who cannot afford acute or long-term care. 
Federal spending for Medicaid in fiscal year 1995 was 
approximately $89 billion \8\ and the program served 36.2 
million individuals. Medicaid is administered by the States and 
each State designs its own program along Federal guidelines. 
States are mandated, however, by the Federal Government to 
provide specific services to specified groups, and within 
limits may set their own payment rates.\9\
    Because of its size, structure, target population and 
state-by-state variations, Medicaid is very vulnerable to 
fraudulent activities and false billings. As with the Medicare 
program, States believe that the introduction of managed care 
for Medicaid beneficiaries offers some hope of decreasing fraud 
related to overbilling or providing unnecessary services.\10\
    Flawed payment policies, weak billing controls and 
inconsistent program management have all contributed to 
Medicare and Medicaid's vulnerability to waste, fraud and 
abuse. Instances of scams, abuses and fraud are well documented 
in the programs. Insurers have owed Medicare millions of 
dollars for mistaken payments and to maximize profits, 
providers continue to exploit loopholes and billing control 
weaknesses. Medicaid is further compromised by drug fraud that, 
by earlier estimates could consume as much as $1 billion in 
Federal costs to the system in the program in the current 
fiscal year.\11\
    The General Accounting Office reports that HCFA has moved 
to counteract some of these abuses. For example, the agency has 
directed its Inspector General to work cooperatively with the 
Department of Justice and the Federal Bureau of Investigation 
to focus management resources on the elimination of fraud in 
Operation Restore Trust. This cooperative effort has shown some 
promise and demonstrates what can be accomplished when an 
agency focuses its attention on management practices. While it 
has not been fully implemented, the aforementioned Medicare 
Transaction System also holds promise in reducing fraud 
associated with the Federal health care systems. In view of the 
importance of the MTS to eliminating wasteful practices of 
these programs, the House Appropriations Committee recommended 
full funding of the MTS for fiscal year 1997 while expressing 
concerns regarding the potential for cost over runs and 
implementation delays.\12\
    Even greater attention to management of these programs is 
essential to deter a drain on program funds. The GAO revealed 
that HCFA is aware that health care scams and abusive billing 
practices the plague Medicare and State Medicaid programs, but 
the problems are difficult to eradicate. In addition, HCFA's 
controls against fraud and abuse have not kept pace with health 
care's more complicated financial arrangements and the 
increasingly entrepreneurial health care environment.\13\ While 
States are meeting with some success in curbing Medicaid fraud, 
the absence of Federal leadership has kept States from making 
the best use of the resources they do have to combat fraud.\14\
    Medicare's vulnerability to billions of dollars in 
unnecessary payments stems from a combination of factors. 
Medicare, for example, pays higher than market rate for certain 
services and supplies. Documented overpayments for more than 40 
surgical dressings are one such example.\15\ The program's 
collection of anti-fraud and abuse controls do not 
systematically prevent the unquestioned payment of claims for 
improbably high charges or manipulated billing codes. And, 
Medicare's checks on the legitimacy of providers are too 
superficial to detect the potential for scams. Medicaid is also 
vulnerable to abusive providers who take advantage of program 
incentives to over provide services.\16\
    These weaknesses are exacerbated by difficulties in 
prosecuting and recovering losses as well as its limited 
likelihood of penalizing perpetrators of fraud.\17\ The General 
Accounting Office reports that providers who defraud or 
otherwise abuse health care payers have little chance of being 
prosecuted or having to repay fraudulently obtained money. Few 
cases are pursued as fraud, and when they are, many are settled 
without conviction, penalties are often light and providers 
frequently continue in business.\18\ Unfortunately these 
efforts are too slow to be effective in curbing unnecessary 
costs or deterring further fraud and abuse of the program.
    Various health care management strategies help private 
payers alleviate these problems, but these strategies are not 
generally used in Medicare. The Federal program's pricing 
methods and controls over utilization, consistent with health 
care financing and delivery that existed 30 years ago, are not 
adequate to deal with the major financing and service delivery 
changes that exist now. To a certain extent, the predicament 
inherent in public programs--the line between adequate 
managerial control and excessive oversight by government--helps 
explain the dissimilarity in the ways Medicare and private 
health insurers administer their respective ``plans''. There is 
no excuse, however, for inadequate monitoring of programs, 
services or products, and there are many actions HCFA could be 
taking, and should be taking to reduce overpayments to 
providers.\19\ Medicaid fails to collect data it needs to curb 
abusive practices, unlike payers of private health care. 
Private payers would use payment controls to flag improbable 
charges, but in Medicaid those warnings are often disregarded 
as unreliable or ignored. For example, Medicaid was billed by a 
psychiatrist for 4,800 hours of service in a single year--
billings that would indicate the physician worked almost 24 
hours per day.\20\ In another instance, one clinical laboratory 
bought massive quantities of blood from the poor and billed 
Medicaid $3.6 million for expensive, unordered blood tests.\21\
    Vast sums of money are lost to fraud and abuse in Medicare 
and Medicaid, two programs of vital importance to the lives of 
millions of Americans. So pervasive is the problem that the 
Subcommittee on Human Resources and Intergovernmental Relations 
held hearings solely on the problem of excluding fraudulent 
providers from Medicare and Medicaid on June 15, 1995 and again 
on September 5, 1996. The General Accounting Office, the agency 
Inspector General and other experts have concurred that fraud 
and abuse should be a major concern to the Department of Health 
and Human Services.

                       Medicare Claims Processing

    Broad discretion given to Medicare's claims processing 
contractors has resulted in uneven implementation of fraud and 
abuse controls that the agency has attempted. This problem has 
been compounded by HCFA's contractor management. HCFA does not 
have the information necessary to ensure that contractors are 
adequately protecting Medicare payments from health care 
service provider exploitation or fraud. In addition, HCFA is 
unable to explain why some contractors pay many more claims for 
certain procedures than do other contractors because it does 
not know what criteria its contractors use to identify claims 
ineligible for payment.\22\ Further, HCFA makes little use of 
management reports submitted by contractors that describe their 
claims review activities. For example, HCFA did not probe a 
contractor report that showed a 53 percent drop--amounting to 
almost $27 million--in the amount of savings that were being 
achieved through claims review.\23\ HCFA, unlike private sector 
payers, pays substantially higher than market rates for many 
services and products. The HHS Inspector General reported that 
Medicare paid between $144 to $211 for home blood glucose 
monitors when drug stores across the Nation were charging less 
than $50 for the same product--or even offering them free as a 
marketing incentive. Because of regulatory and legislative 
constraints and agency delay, it took HCFA 3 years to reduce 
the price to $59. The Inspector General estimated that this 
delay in reducing the price cost Medicare $10 million.\24\ 
Another example of Medicare paying inflated charges was a bill 
for $8,415 for therapy to one nursing home resident, of which 
over half were charges added by the billing service for 
submitting the claim. This bill-padding is permissible because, 
for institutional providers, Medicare allows almost any 
patient-related costs that can be documented, regardless of the 
fair-market value of those services.\25\
    HCFA is billed for services through private contractors 
with whom the agency has agreements to handle claims screening 
and processing. Contractors also audit providers. While 
Medicare contractors use a number of automated controls, many 
improbably high charges continue to be paid on a regular basis 
and are unquestioned by Medicare. One contractor, for example, 
paid $23,000 when the correct payment should have been $1,650. 
Medicare also paid a psychiatrist over a prolonged period for 
claims that represented, on average, nearly 24 hours a day for 
services. The contractor's automated controls did not flag 
either of these questionable billings.\26\
    Screening guidelines should be established to ensure 
Medicare does not continue to pay claims for medically 
unnecessary services. HCFA should hold its contractors 
accountable for implementing local policies and prepayment 
screens in order to control payments for widely overused 
procedures. According to GAO, if the use of auto-adjudication 
screens were expanded to all of Medicare's Part B contractors, 
the savings would likely be in the hundreds of millions of 
dollars.\27\

                  Medicaid Prescription Drug Diversion

    In studying prescription drug diversion in the Medicaid 
program, the General Accounting Office found diversion of drugs 
to be a widespread and persistent problem in many States, often 
occurring in conjunction with other types of fraud such as 
overbilling for office visits, lab tests, and other services 
that were not medically necessary.\28\
    GAO found that prescription drug fraud took many forms, one 
of the most prevalent of which were the so-called ``pill 
mills,'' in which physicians, clinic owners and pharmacists 
collude to defraud Medicaid by prescribing and distributing 
drugs mainly to obtain reimbursement. Patients are often 
parties to these schemes, and allow providers to use ``their 
Medicaid recipient numbers for billing purposes in exchange for 
cash, drugs or other inducements.'' \29\ Clinics sometimes 
provided Medicaid recipients with completed prescription forms 
that were traded for merchandise from local pharmacies, or sold 
on the street to the highest bidders. Some pharmacists would 
routinely add medications to customers' orders, and keep the 
additional drugs for themselves or to sell to others.
    As alluded to earlier in this report, State Medicaid 
agencies generally do not rely on analysis of automated paid 
claims data as a primary source for identifying potential drug 
diversion. In California, for example, the GAO found that a 
pharmacist was billing and being reimbursed by Medicaid for 
dispensing large volumes of drugs. For 3 years, the volume was 
improbably high, sometimes 20 prescriptions for one customer 
per day. The State's reporting system did not flag an 
investigation of the pharmacist nor any of the customers who 
were on Medicaid.\30\ Medicaid data and existing reports are 
also viewed by many States as cumbersome, unreliable and 
difficult to analyze. Rather than rely on their own reports, 
State agencies often depend on tips from informants to pursue 
fraud.\31\
    Many States have Medicaid Fraud Control Units (MFCU's) 
which investigate instances of intentional wrongdoing, and in 
the case of provider abuse, may take administrative action 
against unscrupulous providers. Some MFCU's have authority to 
prosecute these cases though others must refer cases to other 
agencies with prosecutorial authority.
    Individuals who are convicted of crimes can be excluded 
from the program, but for those cases pursued as fraud, the 
outcome is neither timely nor satisfactory. Of the cases 
studied by the GAO, almost half took more than 2 years until 
adjudication and penalties were mild. Cases involving license 
revocation, suspension or probation took much longer to resolve 
(GAO said up to nearly 7 years) until the licensure agency took 
action. Few perpetrators of fraud went to prison, and more than 
half of the convicted professionals experienced no licensure 
action, not even probation.\32\ While investigations proceed 
slowly, losses to the program mount--losses that could be put 
to better use providing more or better services for Medicaid 
recipients. Drug diversion investigations and cases can stall 
at any one of the various agencies through which it must pass--
the State Medicaid agency, the MFCU, the Federal, State or 
local prosecutor's office. This is particularly true when case 
backlogs are too large to accept new cases.
    HCFA recognizes that prescription drug diversion is a 
problem. The agency established the Medicaid Drug Utilization 
Review (DUR), an automated system that examines drug use and 
potential exploitation. About half of the States have a DUR in 
place, and while DUR's do not stop pill mills, they are a good 
first step in dealing with drug diversion problems. DUR's, of 
course, are dependent on good management practices, quality 
data collection and dependable information technology.
    GAO believes that HCFA should assume a leadership role with 
the States in orchestrating and encouraging efforts to oppose 
fraud and abuse and raising State sensitivity to the financial 
benefits of reducing instances of fraud by conducting concerted 
assessment and guidance activities. In particular, HCFA could 
foster the development and implementation of measures intended 
to prevent program fraud. The agency could also help States 
address the overarching concerns revealed by the GAO such as 
determining whether and how State laws, Federal regulations and 
other factors discourage prosecution or attempts to recover 
payment of claims subsequently determined not to be permitted 
under law.\33\ In fairness, the HCFA Administrator has 
appointed an individual to be the agency Fraud and Abuse 
Coordinator and to work with both Federal programs and the 
States to resolve obstacles preventing elimination of fraud or 
abuse. However, to be truly effective, such a position must 
have authority. A merely political position, with no real 
authority subsequent to the departure of the current HCFA 
Administrator, cannot have a long-term impact on problems as 
intractable as fraud and abuse. Bureaucratic positions, in 
particular, entropy in the absence of clear mission, statutory 
authority and budget.

                    Medicare Rehabilitation Therapy

    An entire industry has grown and flourished out of the 
Federal requirement to assess nursing home residents for their 
need for rehabilitation therapy services. From 1990 to 1993, 
claims submitted to Medicare for these services tripled to $3 
billion and continue to grow at a rapid pace. Some of this cost 
growth is attributable to the excessive rates Medicare pays for 
therapy services. For example, Medicare has been charged rates 
as high as $600 per hour, though physical, occupational and 
speech therapists' salaries range from under $20 to $32 per 
hour.\34\ Medicare's open-ended definition of reimbursable 
costs and the absence of clear billing rules account for this 
situation. Combined, these two weaknesses enable skilled 
nursing facilities and therapy companies to pad the amount of 
administrative costs for which they are reimbursed by Medicare. 
Loose payment and billing rules also allow providers to pass on 
these inflated charges with little or no scrutiny.\35\
    One questionable business practice is that of therapy 
companies using a skilled nursing home's provider number to 
bill Medicare. Under such an arrangement, the therapy company 
bills Medicare as if the patients had received services in that 
nursing facility, though the patients may be anywhere in the 
country. This practice benefits therapy companies by enabling 
them to evade Medicare controls that might flag over-billing. 
For example, one therapy company divided a Texas patient's 
$10,950 claim for physical therapy between nursing homes that 
submitted their claims to two different Medicare processing 
contractors, one in North Carolina and one in Florida.\36\
    While HCFA has made some progress in standardizing vendor 
billing identification numbers, much remains to be done to 
simplify provider identification and billing through the use of 
a universal vendor, or billing, number in all Federal health 
care systems. In the Health Care Portability and Accountability 
Act of 1996, Congress directed the Secretary of Health and 
Human Services to formulate standards to guide implementation 
of a uniform system of health care provider identification.
    Sometimes shell therapy companies are established to 
enhance opportunities to over-bill. A Georgia Medicare 
contractor reported that the program authorized a company to 
bill for therapy services, even though it had no salaried 
therapists and was essentially a storefront office operated by 
one clerical employee.\37\ The company billed Medicare for 
services provided to nursing home residents through two therapy 
agencies with which it subcontracted. The company's contractual 
relationship with the nursing home entitled it to add to its 
claims an 80 percent markup over what the company paid the 
therapy agencies. As a result, a company that appeared to exist 
solely for the purpose of billing Medicare added in one fiscal 
year about $135,000 in administrative charges to the costs of 
the therapy services.\38\
    HCFA has been aware of these problems for years, but did 
not advise claims processing contractors of certain irregular 
billing practices and of actions they could take to minimize 
billing problems. While HCFA is in the process of establishing 
certain reimbursable cost guidelines, judging from similar 
efforts in the past, drafting and implementing will take years.

   Medicare HMO's: Not Achieving the Goal of Reducing Medicare Costs

    Despite efforts of the agency to control costs through use 
of health maintenance organizations (HMO's), Medicare overpays 
the HMO's it uses.
    In the early 1980's, Congress created the Medicare risk 
contract program to take advantage of potential cost savings 
associated with utilizing health maintenance organizations. 
Medicare enrolls participants in HMO's for a predetermined 
capitation rate fee in return for providing necessary medical 
services. Within certain specified limits, risk HMO's can 
profit if their cost of providing services is less than the 
predetermined payment, though they risk a loss if their costs 
are higher overall. Generally, Medicare pays a flat 95 percent 
of the estimated average cost of treating the patient in a fee-
for-service setting to an HMO. Those HMO costs, however, vary 
by geographic region of the country, by the age, sex, Medicaid 
eligibility of the enrollee and whether the enrollee is in an 
institution such as a nursing home. Individuals who choose to 
enroll in an HMO tend to be significantly healthier than 
patients in fee-for-service settings, about 5 percent healthier 
than other patients.\39\
    Because HMO enrollees are generally healthier than other 
patients, HCFA's use of the risk contract HMO's has not been 
successful in reducing program costs. The General Accounting 
Office and others have reported that there are two principal 
reasons for this. First, HCFA's risk adjustment methodology has 
proved insufficient to prevent HMO's from benefiting from 
favorable selection. Because HMO enrollees are healthier (and 
less expensive) than other patients in a fee-for-service 
setting, HCFA has paid more to HMO's for beneficiaries' 
treatment than it would have spent had those individuals 
remained in a fee-for-service setting. Second, in many areas, 
Medicare's 5 percent ``discount'' from fee-for-service costs is 
too modest. By failing to reflect local market conditions and 
greater HMO efficiencies, the capitation rate causes Medicare 
to pay more than it should for services.\40\
    In addition to flaws in the method HCFA uses to pay HMO's, 
both the HHS Inspector General and the General Accounting 
Office have found other serious problems with the management of 
Medicare HMO's. For example, the HHS Inspector General found 
that overpayments totaling $70.5 million had been made for 
beneficiaries who were erroneously classified as eligible for 
Medicaid, on the understanding that health care costs for 
Medicaid beneficiaries are higher than those who are just 
eligible for Medicare.\41\ This problem was exacerbated because 
the interface between HCFA computer systems did not recognize 
those beneficiaries who had lost their Medicaid eligibility.

                            Home Health Care

    The expansion of the health care delivery system in recent 
decades has widened the opportunity for profiteering. Since 
Medicare was enacted in 1965, the delivery of health care 
services has become more complex, but fraud and abuse controls 
have not kept pace with the medical environment. The HHS 
Inspector General determined that HCFA has not limited or 
controlled home health care benefits as have other payers who 
are similar to Medicare, in their criteria for eligibility, 
quality monitoring and the means used to pay providers. Other 
payers use a variety of techniques to control home health care 
costs, including targeting patient needs and managing cases for 
beneficiaries with chronic care needs.
    HCFA has not implemented similar controls. For example, the 
Office of the Inspector General found during one audit that 26 
percent of home health agency claims approved for payment in 
Florida by fiscal intermediaries did not meet Medicare 
reimbursement requirements. As a result, the IG estimated that 
$16.6 million of the $78 million payment was unallowable. This 
problem occurred, the IG said, because physicians did not 
always review or actively participate in developing the plans 
of care that they signed, beneficiaries were not aware of home 
health agency claims paid on their behalf and intermediary 
reviews of claims were not sufficient to detect unallowable 
claims.\42\

                       Durable Medical Equipment

    Suppliers of durable medical equipment (prosthetic devices, 
wheelchairs, orthotics, etc.) have persistently participated in 
schemes to bill Medicare or Medicaid for equipment never 
delivered, higher-cost equipment than that actually delivered, 
totally unnecessary equipment or supplies or equipment 
delivered in a different State from that billed, in order to 
obtain higher reimbursement. Despite new regulations published 
by HCFA, the Department of Health and Human Services, Office of 
the Inspector General continues to uncover the actions of 
unscrupulous suppliers. In the most recent Semiannual Report of 
the Office of the Inspector General of the United States 
Department of Health and Human Services, eight cases of fraud 
involving durable medical equipment were settled or convictions 
were obtained. These cases totaled more than $9.91 million in 
funds lost to the Government. Many other investigations remain 
outstanding, as well as yet-uncovered cases of durable medical 
equipment fraud.\43\
    Medicare also tends to lose large amounts of money to 
suppliers of durable medical equipment that should never have 
been authorized to serve program beneficiaries in the first 
place. This problem has become more acute as durable medical 
equipment suppliers, which are less scrutinized or more 
transient than doctors and hospitals, use elaborate, 
multilayered corporations to bill the program. However, HCFA 
has recently taken steps to improve the application process by 
which suppliers are identified with the program. The recently 
established National Supplier Clearinghouse began issuing 
supplier numbers to providers submitting claims for durable 
medical equipment, prosthetics, orthotics, and supplies. To 
apply for a supplier number, the provider must complete a 
detailed application, but privacy concerns preclude the 
Clearinghouse from verifying the accuracy of Social Security 
and tax identification numbers required on the application. 
Also, the Clearinghouse does not routinely perform background 
checks on the owners or verify that supplier facilities really 
exist.\44\ The number of durable medical equipment providers is 
growing rapidly, and in many respects the requirements remain 
superficial.

                Administration on Children and Families

Child support enforcement: $1 billion for a computer system that is not 
        improving program performance

    The Federal Government has contributed approximately $1 
billion into automated systems of the States for purposes of 
tracking progress in collecting child support and gathering 
other data but the system is not meeting mandatory requirements 
nor improving collection of outstanding child support. Because 
of shortcomings in this important computer system, $34 billion 
in outstanding child support may be at risk due to State 
statutes of limitations and poor collection services.
    The Department of Health and Human Services, Administration 
on Children and Families administers the Office of Child 
Support Enforcement (OCSE). OCSE provides direction, guidance 
and oversight of State child support enforcement programs and 
activities authorized under Title IV, part D of the Social 
Security Act. Child support enforcement legislation requires 
States to develop programs for establishing and enforcing 
support obligations by locating absent parents, establishing 
paternity when necessary, and obtaining child support. One 
estimate of the amount of child support payments due nationwide 
is $34 billion. A key component of coordinating these actions 
is efficient and state-of-the-art computer systems that the 
Office of Child Support Enforcement can use to communicate with 
State offices and monitor their progress. The Family Support 
Act required States to have automated systems in place by 1995, 
and that deadline has been moved back to October 1997 because 
the original deadline has not been met.
    Since the Federal Government has devoted this funding to 
automation, States collect on only 19 out of every 100 
cases.\45\ This is a dismal record which will not improve until 
the efficiency of the computer tracking system improves.
    Computer technology alone will not solve the poor 
performance of the OCSE, however. OCSE is an pilot project for 
purposes of the Government Performance and Results Act of 1993, 
but is behind schedule in setting demanding but realistic long-
term and measurable outcomes for the national program and State 
programs, setting valid performance indicators and measures and 
using them to improve the performance of their program. OCSE 
has been put on notice about its need to employ the principles 
of GPRA to improve program performance. In late 1994, the 
General Accounting Office urged the agency to incorporate the 
GPRA in its daily management of the program to help the OCSE 
develop management tools needed to improve the performance of 
the program and the assistance it provides in both AFDC and 
non-AFDC cases. Attention to properly implementing GPRA could 
make a significant difference in the agency's evaluation of 
problem areas--including mismanagement of computer systems--and 
correction of those problems.
    The Federal Government has a large stake in the success of 
child support enforcement efforts, not only because of the 
millions of Federal tax dollars expended so far, but because of 
the heavy burden on our welfare system when the computer 
systems fail. The Department of Health and Human Services, 
Office of Child Support Enforcement claims the States have 
primary responsibility for system development, but regardless, 
the law and regulations require OCSE to assess each State's 
progress and allows for suspension of funding if no progress 
exists. It is clear that the Administration on Children and 
Families should focus more management resources on this 
program.

Job Opportunities and Basic Skills Program Literacy Training Contract: 
                        $40,584 per GED Diploma

    The Inspector General at the Department of Health and Human 
Services investigated a job training program based at the 
University of Mississippi.\46\ The IG learned that between 
February 1993 and December 1994, this program, which cost $15.3 
million, was only 8 percent effective in training participants 
to pass a High School Equivalency Diploma Examination (GED). 
For $15.3 million only 720 of 4,300 participants (16 percent) 
even took the GED examination. Of the 720 individuals who took 
the test, a mere 377 (52 percent) passed the examination. The 
cost per diploma of this program was $40,584.
    The State contracted with the University of Mississippi to 
operate its Learn, Earn and Prosper (LEAP) program designed to 
help participants in the Federal Job Opportunities and Basic 
Skills (JOBS) training program increase their literacy, earn 
their GED and prepare for employment. The IG found that the 
contract did not include criteria to measure participant 
outcomes and hold the University accountable under the 
contract. In addition, the Inspector General discovered that 
more than $747,000 (nearly $666,000 Federal share) in contract 
expenditures did not meet Federal requirements, and over $1 
million of the expenditures warranted further review.\47\

                                ENDNOTES

    \1\ The Congressional Budget Office, The Financial Status 
of the Medicare Program, Statement of Paul Van de Water, 
Assistant Director for Budget Analysis (April 30, 1996); 
correspondence from June E. O'Neill to the Honorable Pete V. 
Domenici, regarding CBO's estimates solvency of the Medicare 
program (May 15, 1996).
    \2\ The Annual Report of the Board of Trustees of the 
Federal Hospital Insurance Trust Fund, Pursuant to Section 
1817(b) of the Social Security Act, as amended, referred to the 
Committee on Ways and Means, House Document 104-227 (June 1, 
1996).
    \3\ General Accounting Office, Federal Management: Updated 
Information for Congressional Oversight (July 1994), pp. 19-23.
    \4\ General Accounting Office, Medicare and Medicaid: 
Opportunities to Save Program Dollars by Reducing Fraud and 
Abuse, GAO/T-HEHS-95-110 (March 22, 1995).
    \5\ Id.
    \6\ General Accounting Office, GAO's High-Risk Focus, GAO/
HR-95-1 Overview (February 1995).
    \7\ General Accounting Office, Medicaid: A Program Highly 
Vulnerable To Fraud, GAO/T-HEHS-94-106 (February 24, 1996).
    \8\ Congressional Research Service, Medicaid Per Capita 
Caps, 96-292 EPW (March 29, 1996), p. 1.
    \9\ Congressional Research Service, Medicaid: Program 
Description and Recent Trends, 95-863 EPW (July 27, 1995).
    \10\ General Accounting Office, Medicare and Medicaid: 
Opportunities to Save Program Dollars by Reducing Fraud and 
Abuse, GAO/T-HEHS-95-110 (March 22, 1996).
    \11\ General Accounting Office, Medicaid Drug Fraud: 
Federal Leadership Needed to Reduce Program Vulnerabilities, 
GAO/HRD-93-118 (August 1993).
    \12\ House Committee on Appropriations, H. Rept. No. 104-
659 for H.R. 3755, Subcommittee on Labor, Health and Human 
Services and Education, and Related Agencies (1997), pp. 101-
102.
    \13\ General Accounting Office, High-Risk Series: Medicare 
Claims, GAO/HR-95-8 (February 1995).
    \14\ General Accounting Office, Medicaid: A Program Highly 
Vulnerable to Fraud, GAO/T-HEHS-94-106 (February 25, 1994), p. 
7.
    \15\ General Accounting Office, Medicare Spending: Modern 
Management Strategies Needed to Curb Billions in Unnecessary 
Payments, GAO/HEHS-95-210 (September 1995).
    \16\ General Accounting Office, Medicaid: A Program Highly 
Vulnerable to Fraud, GAO/T-HEHS-94-106 (February 25, 1994), pp. 
3-5.
    \17\ General Accounting Office, Medicare Spending: Modern 
Management Strategies Needed to Curb Billions in Unnecessary 
Payments, GAO/HEHS-95-210 (September 1995).
    \18\ Id.
    \19\ General Accounting Office, Medicare: Private Payer 
Strategies Suggest Options to Reduce Rapid Spending Growth, 
GAO/T-HEHS-96-138 (April 30, 1996).
    \20\ General Accounting Office, Medicare and Medicaid: 
Opportunities to Save Program Dollars by Reducing Fraud and 
Abuse, GAO/T-HEHS-95-110 (March 22, 1995), p. 6.
    \21\ Id.
    \22\ General Accounting Office, Medicare: Screening 
Medicare Claims for Medical Necessity, GAO/T-HEHS-96-86 
(February 8, 1996).
    \23\ General Accounting Office, Medicare Claims, GAO/HR-95-
8 (February 1995), p. 31.
    \24\ Id.
    \25\ Id.
    \26\ Id.
    \27\ House Committee on Government Reform and Oversight, 
Fraud and Abuse in Medicare: Stronger Enforcement and Better 
Management Could Save Billions, Eighth Report, H. Rept. No. 
104-641, 104th Congress, 2d Session, June 27, 1996, p. 17.
    \28\ General Accounting Office, Medicaid Drug Fraud: 
Federal Leadership Needed to Reduce Program Vulnerabilities, 
GAO-HRD-93-118 (August 1993).
    \29\ Id., p. 1.
    \30\ Id., p. 14.
    \31\ Id.
    \32\ Id., p. 17.
    \33\ General Accounting Office, Medicaid Drug Fraud: 
Federal Leadership Needed to Reduce Program Vulnerabilities, 
GAO-HRD-93-118 (August 1993).
    \34\ General Accounting Office, High Risk Series: Medicare 
Claims, GAO/HR-95-8 (February 1995).
    \35\ General Accounting Office, Medicare: Private Payer 
Strategies Suggest Options to Reduce Rapid Spending Growth, 
GAO/HEHS-96-138 (April 30, 1996).
    \36\ General Accounting Office, High Risk Series: Medicare 
Claims, GAO/HR-95-8 (February 1995), p. 23.
    \37\ General Accounting Office, High Risk Series: Medicare 
Claims, GAO/HR-95-8 (February 1995), p. 24.
    \38\ General Accounting Office, Medicare: Tighter Rules 
Needed to Curtail Overcharges for Therapy in Nursing Homes, 
GAO/HEHS-95-23 (March 1995).
    \39\ General Accounting Office, Medicare Managed Care: 
Growing Enrollment Adds Urgency to Fixing HMO Problem, GAO/
HEHS-96-21 (November 1995).
    \40\ General Accounting Office, Medicare: Changes to HMO 
Rate Setting Method Are Needed to Reduce Program Costs, GAO/
HEHS-94-119 (September 1994); Medicare Managed Care: Growing 
Enrollment Adds Urgency to Fixing HMO Payment Problem, GAO/
HEHS-96-2 (November 1995); Addressing The Deficit: Updating 
Budgetary Implications of Selected GAO Work, GAO, OCG-96-5 
(June 1996).
    \41\ Department of Health and Human Services, Office of the 
Inspector General, Semiannual Report (April 1, 1995-September 
30, 1995).
    \42\ Id.
    \43\ Department of Health and Human Services, Office of the 
Inspector General, Semiannual Report of the Inspector General 
(October 1, 1995 to March 31, 1996).
    \44\ General Accounting Office, Medicare Spending: Modern 
Management Strategies Needed to Curb Billions in Unnecessary 
Payments, GAO/HEHS-95-210 (September 1995).
    \45\ General Accounting Office, Child Support Enforcement: 
Families Could Benefit From Stronger Enforcement Program, GAO/
HEHS-95-24 (December 1994), p. 14.
    \46\ Department of Health and Human Services, Office of the 
Inspector General, Semiannual Report (October 1, 1995-March 31, 
1996), p. 43.
    \47\ Id.

              Department of Housing and Urban Development

                                Overview

    The Department of Housing and Urban Development (HUD) 
insures or guarantees mortgage financing through its $497 
billion Federal Housing Administration (FHA) loan portfolio; 
guarantees about $485 billion in mortgage-backed securities 
through the Government National Mortgage Association; provides 
about $25 billion to subsidize rentals and to operate and 
modernize residences for lower-income households; and provides 
$5 billion annually in Community Development Block Grant 
assistance.\1\
    HUD's pervasive management problems have been recognized by 
OMB, GAO, the Department's Inspector General, and others. OMB 
placed 7 of the Department's programs and activities on its 
most recent ``high risk'' list of areas that are especially 
vulnerable to waste, fraud, abuse, and mismanagement. In 
January 1994, GAO placed the entire Department on its ``high 
risk'' list based on a number of long-standing department wide 
problems.\2\
    In March 1996, GAO reported to the House Appropriations 
Subcommittee on HUD that management at the Department had not 
improved:

          Today, despite the promise of reform, reinvention, 
        and transformation initiatives aimed at solving HUD's 
        problems, much more remains to be done. HUD is very 
        much an agency in limbo: Few of the proposals in HUD's 
        reinvention blueprint have been adopted.\3\

    The report added that ``for the foreseeable future, the 
agency will be high-risk in terms of its programs being 
vulnerable to waste, fraud, and abuse.'' \4\
    At the appropriation hearing, the HUD IG echoed GAO's 
pessimistic assessment of the state of HUD management:

          The management problems . . . at HUD are extreme. And 
        there should be no expectation that those problems can 
        be solved in a matter of a couple of years.\5\

    Ironically, the IG added that the preoccupation with 
``reinventing'' HUD during the past 3 years had detracted from 
addressing the Department's management problems:

          [T]his discussion of reinvention . . . is another 
        diversion from solving the management problems, because 
        we are all caught up in talking about policy.
          And, meanwhile, the mechanisms to get something done 
        are of a real secondary nature.\6\

    A July 1994 report on HUD by the National Academy of Public 
Administration provided the following summary of where HUD 
stands and where it may be headed:

          The U.S. Department of Housing and Urban Development 
        (HUD) is at a crossroads. It can become an effective 
        public institution or it can continue down the now 
        familiar road of poor performance.
          * * * * *
          The department should be preserved only if it can 
        demonstrate the capacity to manage its resources 
        responsibly, and if the administration, Congress, and 
        HUD can put aside the past to look toward how the 
        department can best help communities meet their needs 
        in a flexible fashion. If, after five years, HUD is not 
        operating under a clear legislative mandate and in an 
        effective, accountable manner, the president and 
        Congress should seriously consider dismantling the 
        department and moving its programs elsewhere.\7\

    Congress is addressing those problems that require a 
legislative solution. Bills to reform HUD have passed both the 
House (H.R. 2406) and the Senate (S. 1260). Among other things, 
the bills would fundamentally alter public housing programs by 
giving more choice to tenants and provide greater flexibility 
through such means as block grants and vouchers allowing for 
tenant-based rather than project-based assistance. Whether the 
necessary management improvements are made remains to be seen.

    HUD Suffers from Weak Internal Controls, as Well as Inadequate 
              Financial Management and Information Systems

    OMB, GAO and the IG have consistently viewed weaknesses in 
internal controls, financial management, and information 
systems as fundamental management deficiencies at HUD. In 
listing HUD's financial systems as a high-risk area, OMB stated 
that HUD lacks an integrated financial management system, and 
existing systems suffer from inefficiencies, incompatibilities, 
and internal control problems.\8\ According to GAO, weaknesses 
in internal controls are a long-standing problem at HUD and 
have resulted in billions of dollars of losses and wasteful 
spending.\9\ GAO noted that HUD's most serious internal control 
weaknesses concern its $13 billion grant and subsidy payments 
to Indian and public housing authorities, including $9.5 
billion in operating subsidies and Section 8 rental assistance. 
As a result of these weaknesses, HUD has no assurance that 
federally subsidized units are occupied by eligible lower-
income families or that tenants are paying the correct 
rents.\10\
    GAO recently reported that despite HUD's efforts to improve 
its accounting systems, 60 of HUD's 88 financial management 
systems don't comply with OMB requirements.\11\ According to 
GAO, full integration of HUD's systems ``remains years away.'' 
\12\ In the same vein, the HUD IG's March 1996 semiannual 
report observed:

          Much work remains to complete the development and 
        integration of HUD's accounting and financial 
        management systems. . . . HUD systems are not yet 
        capable of verifying tenant reported income data for 
        determining funding eligibility in assisted housing 
        programs; and information for essential program 
        management and loss mitigation efforts in HUD's 
        significant multifamily housing programs area is still 
        not readily available in automated form.\13\

    Illustrating these systemic problems, on June 30, 1995, 
outside auditors issued a disclaimer on HUD's fiscal year 1994 
consolidated financial statements because of internal control 
weaknesses and uncorrected deficiencies in accounting 
systems.\14\
    Continuing the pattern, the HUD IG issued a report in 
August of this year disclaiming an opinion on the reliability 
of the Department's fiscal year 1995 financial statements.\15\ 
In particular, the report stated:

          Material control weaknesses affect more than $18 
        billion in subsidy funds disbursed annually by HUD 
        through its Section 8, Section 202/811, Section 236 and 
        Operating Subsidy programs. As a result, HUD lacks 
        sufficient information to ensure that federally 
        subsidized housing units are occupied by eligible 
        families and that those families living in such units 
        are paying the correct rents. . . .\16\

    The report further noted that this was the fifth year that 
HUD had been subject to the financial statement audits, and 
that most of the material weaknesses and other reportable 
conditions were the same as those included in the prior year 
reports.\17\
    According to GAO, the lack of adequate information and 
financial management systems, including computerized systems, 
is pervasive throughout HUD and affects all major programs and 
operations. HUD continues to be plagued by poorly integrated, 
ineffective, and generally unreliable information systems that 
do not satisfy management needs or provide adequate control. 
Progress in these areas has been impeded by ineffective 
planning and management oversight.\18\ A recent illustration of 
this problem is HUD's request for $845 million to pay 
performance bonuses to grantees at the close of fiscal year 
1997. GAO pointed out that HUD lacked the performance 
measurement and information systems necessary to support such 
bonuses.\19\

 HUD's Organizational Structure Contributes to its Management Problems

    GAO has reported that HUD's organizational problems of 
overlapping and ill defined responsibilities and authorities in 
its headquarters, regional offices, and field offices; lack of 
consensus on program priorities; and poor communication of 
policy updates and management directives contribute to 
department-wide management problems. According to GAO, HUD 
faces monumental challenges, the most basic of which is trying 
to change an organizational culture that has become reactive 
and defensive.\20\ GAO's high risk report on HUD pointed to ``a 
fundamental lack of management accountability and 
responsibility.'' \21\
    Prompted by the National Performance Review, HUD has 
undertaken a number of reorganization and restructuring 
initiatives. However, the concepts underlying these initiatives 
have changed repeatedly. Some of the concepts--like the 
proposed ``community catalyst role'' and the ``place-based 
approach''--are, as the IG put it, ``lacking in practical 
definition.'' \22\
    In 1993, HUD reorganized its field structure along program 
lines, so that the program Assistant Secretaries each directed 
field staff. According to the IG, this organization is not 
appropriate for carrying out HUD's new vision of a seamless, 
community-first, place-based program delivery structure. While 
HUD is now attempting to modify the structure, the IG views the 
modifications as inefficient, and notes that the same approach 
has been tried by other Federal agencies with limited 
effectiveness.\23\
    The IG recently surveyed HUD field staff on the results of 
the reorganization started in 1993. Field staff reported that, 
they endorsed elimination of the regional management level, 
``communication and cooperation among the program offices had 
suffered badly; and the promised empowerment of field program 
staff by HUD headquarters had not materialized.'' Meanwhile the 
IG reported that there is little focus on streamlining and 
reorganizing HUD's considerable headquarters staff, which 
number over 2,500. According to the IG--

          HUD's staff morale and reputation can ill afford 
        further costly interruptions in program delivery and 
        performance through repeated reorganizations and 
        changes in program direction. As a sine qua non of 
        reinvention, HUD must set and stabilize its 
        organization and program delivery structure.\24\

  Poor Resource Management Exacerbates HUD's Other Management Problems

    GAO's High Risk report stated that ``an insufficient mix of 
staff with the proper skills has hampered the effective 
monitoring and oversight of HUD programs and the timely 
updating of procedures.'' \25\ GAO identified staff 
inadequacies as one of the four fundamental deficiencies 
leading to its designation of HUD as a high risk department. 
GAO noted that the Department's IG and other HUD officials had 
repeatedly pointed to staff inadequacies as hampering the 
performance of key departmental functions. Price Waterhouse 
also noted these deficiencies in its financial statement audit 
of HUD.\26\
    HUD's resource management is an OMB-designated high risk 
area. According to OMB, the Department's methods of formulating 
resource needs and utilizing available resources are 
inadequate.\27\
    The HUD Inspector General pointed to deficient resource 
management as one of three ``systemic issues'' facing the 
Department.\28\ For example, according to the IG, decisions 
relating to HUD's ``reinvention'' proposals, including 
decisions on the staff allocations between field offices and 
headquarters, have been made without sufficient analysis.\29\ 
The IG recently summarized this problem as follows:

          As a result of HUD's continuing resource management 
        weaknesses, there is little assurance that HUD's $1 
        billion annual salaries and expenses budget is 
        efficiently and effectively used to further HUD's 
        mission and minimize program risks. OIG audit work 
        continues to find that many critical program functions 
        are not being adequately performed, and that there are 
        continuing imbalances in staffing to workload ratios 
        from office to office.\30\

    The need for HUD to address its resource management 
weaknesses becomes even more critical as the Department's 
budget and staffing levels decline.

              Multifamily Housing Programs are Mismanaged

    HUD continues to have fundamental problems in overseeing 
its $47.7 billion multifamily housing portfolio. For a large 
proportion of this housing, the government pays more to house 
lower-income families than what is needed to provide them 
decent and affordable housing. These properties also expose the 
government to substantial current and future financial 
liabilities from default claims. Almost one-fourth of the 
multifamily properties are ``distressed''--i.e., they fail to 
provide sound housing and lacked the resources to correct 
deficiencies or they are likely to fail financially. It has 
been estimated that at least 15 percent of the properties have 
severe physical problems that threaten the tenants' health and 
safety.\31\
    GAO identified three ``fundamental and interrelated 
problems'' with HUD's oversight of its multifamily housing 
portfolio:
     A large number of defaults on FHA-insured loans 
have occurred in the past and are expected to continue into the 
future, partly because FHA has not effectively managed its 
insured loan portfolio.
     In many cases, the cost to the government of 
providing Section 8 project-based subsidies is excessive. For 
example, about three-fourths of Section 8 new construction and 
substantial rehabilitation properties receive rents exceeding 
those in the marketplace.
     Subsidy costs associated with project-based 
Section 8 assistance are already high and are rising. For 
example, CBO estimated that simply preserving existing units 
will require about $22 billion in budget authority each 
year.\32\
    The shortcomings of multifamily housing programs are 
illustrated by the problems besetting HUD's insured Section 8 
portfolio (now totaling about $17.5 billion in unpaid loan 
balances), which consists of rental housing properties that 
receive both Federal mortgage insurance and Section 8 rental 
subsidies. GAO recently summarized these problems as follows:

          The basic problems affecting the insured Section 8 
        portfolio are high subsidy costs, high exposure to 
        insurance loss, and the poor condition of many 
        properties. These problems stem from one or more of 
        several basic causes. These include (1) program design 
        flaws that have contributed to high subsidies and put 
        virtually all the insurance risk on HUD; (2) HUD's dual 
        role as mortgage insurer and rental subsidy provider, 
        which has resulted in the federal government's averting 
        claims against the FHA insurance fund by supporting a 
        subsidy and regulatory structure that masked the true 
        market value of the properties; and (3) weaknesses in 
        HUD's oversight and management of the insured 
        portfolio, which have allowed physical and financial 
        problems at a number of HUD-insured multifamily 
        properties to go undetected and uncorrected.\33\

          HUD Needs to Improve its Oversight of Public Housing

    Public Housing Authority (PHA) management is yet another 
OMB-designated high risk area at HUD.\34\ Problems in PHA 
management identified by GAO include unmet needs for capital 
improvement, physical deterioration, high vacancy rates, and 
high concentrations of poor and unemployed persons.\35\ 
According to recent GAO testimony:

          . . . the overall results of HUD's focused technical 
        assistance program that targeted the large, troubled 
        authorities have been inconsistent. During the past 
        year, 4 troubled authorities have come off the original 
        list of 17, and 4 others have made substantial 
        improvements in their performance scores. However, the 
        other nine authorities--accounting for over 70 percent 
        of all housing units managed by troubled authorities--
        have not shown appreciable improvement. Furthermore, 
        the performance of four of the nine declined this past 
        year, despite HUD's intervention and technical 
        assistance.\36\

    Before 1995, HUD's limited oversight allowed some PHAs to 
provide substandard services for years. HUD has now improved 
its oversight and taken over some PHAs. However, requirements 
for HUD to take stronger action against troubled PHAs may 
strain its resources and limit its ability to conduct effective 
oversight of the remaining authorities that are not 
troubled.\37\
    According to the IG, HUD needs to establish a ``program 
management culture that no longer tolerates blatant abuses and 
substandard performance in programs intended to serve low-
income persons.'' \38\ In the past year, HUD has initiated more 
aggressive actions to remedy some of its most egregious program 
problem areas, including actions against several longstanding 
large, troubled PHAs, as well as owners of financially and 
physically troubled insured and assisted multifamily housing 
projects. However, these efforts have been largely directed by 
headquarters management. The IG added that--

          The need for an improved HUD program enforcement 
        culture is still frequently evidenced in the lack of 
        management action on the results of OIG audit findings 
        of waste, abuse and funding misuse in HUD programs.\39\

    Recent IG audits of HUD-funded public housing resident 
initiatives illustrate these weaknesses. In testimony before 
this committee's Subcommittee on Human Resources and 
Intergovernmental Relations, the HUD IG summarized the 
situation as follows:

          . . . OIG audits and investigations through the years 
        have generally found that HUD funded resident 
        initiatives suffer from inadequate mission objectives, 
        management controls, program coordination, performance 
        measures, program oversight, and substantive results. 
        Much of the funding has been inefficiently and 
        ineffectively utilized. The programs are good 
        candidates for elimination and/or consolidation.\40\

    For example, a 1995 IG audit found that despite technical 
assistance grants totaling $22 million to 328 Resident 
Management Councils, only 15 of the Councils were performing 
most of the management functions for their projects. Eight of 
these 15 Councils already managed their projects before the 
program began.\41\
    A particularly egregious example is HUD's participation in 
an August 1995 National Tenants Organization (NTO) convention 
held at a resort hotel and casino in Puerto Rico, which was 
billed as ``a vacation that will be unforgettable!!.'' \42\ The 
IG found that 97 percent of the convention's estimated cost of 
$335,000 came from federally funded or related sources, 
including direct Tenant Opportunity Program grant funds as well 
as other HUD grant funds for PHA operating subsidies and 
modernization activities.\43\ According to the IG, the 
convention activities consisted primarily of ``internal NTO 
organizational business and social activity, and political 
rallying against Republican public housing proposals, and for 
NTO and HUD supported program proposals.'' \44\ The IG review 
concluded that HUD officials played a key role in planning and 
conducting the convention, and that HUD's participation 
violated its own Departmental guidance.\45\

                                ENDNOTES

    \1\ General Accounting Office, Housing and Urban 
Development: Comments on HUD's FY 1997 Budget Request, GAO/T-
RCED-96-205 (June 17, 1996), p. 2; General Accounting Office, 
Housing and Urban Development: Limited Progress Made on HUD 
Reforms, GAO/T-RCED-96-112 (March 27, 1996), p. 2.
    \2\ General Accounting Office, High Risk Series, An 
Overview, GAO/HR-95-1 (February 1995), p. 23, 68-69; General 
Accounting Office, High Risk Series, Department of Housing and 
Urban Development, GAO/HR-95-11 (February 1995), p. 6.
    \3\ General Accounting Office, Housing and Urban 
Development: Limited Progress Made on HUD Reforms, GAO/T-RCED-
96-112 (March 27, 1996), p. 1.
    \4\ Id.
    \5\ Hearings before the Subcommittee on VA, HUD, and 
Independent Agencies of the House Committee on Appropriations, 
104th Cong., 2d Sess., Part 6: Department of Housing and Urban 
Development (1996), p. 74.
    \6\ Id.
    \7\ National Academy of Public Administration, Renewing 
HUD: A Long-Term Agenda for Effective Performance (Summary 
Report) (July 1994), pp. vii-viii.
    \8\ Office of Management and Budget, Progress Report: 
Correcting High Risk Areas, Analytical Perspectives on the 
Budget of the United States for Fiscal Year 1996, p. 289.
    \9\ General Accounting Office, Federal Management: Updated 
Information for Congressional Oversight (July 1994), p. HUD-6.
    \10\ General Accounting Office, Housing and Urban 
Development: Limited Progress Made on HUD Reforms, GAO/T-RCED-
96-112 (March 27, 1996), p. 4.
    \11\ Id.
    \12\ Id., p. 5.
    \13\ Department of Housing and Urban Development Office of 
Inspector General, Semiannual Report to the Congress As of 
March 31, 1996, p. 7.
    \14\ General Accounting Office, Housing and Urban 
Development: Limited Progress Made on HUD Reforms, GAO/T-RCED-
96-112 (March 27, 1996), p. 4.
    \15\ Department of Housing and Urban Development Office of 
Inspector General, U.S. Department of Housing and Urban 
Development: Report on Fiscal Year 1995 Financial Statements, 
96-FO-177-0003 (August 16, 1996).
    \16\ Id., p. 1.
    \17\ Id., p. 3.
    \18\ General Accounting Office, Federal Management: Updated 
Information for Congressional Oversight (July 1994), p. HUD-1.
    \19\ General Accounting Office, Housing and Urban 
Development: Comments on HUD's FY 1997 Budget Request, GAO/T-
RCED-96-205 (June 17, 1996), pp. 1-2, 5-8.
    \20\ General Accounting Office, Federal Management: Updated 
Information for Congressional Oversight (July 1994), p. HUD-9.
    \21\ General Accounting Office, Department of Housing and 
Urban Development, GAO/HR-95-11 (February 1995), p. 7.
    \22\ Department of Housing and Urban Development Office of 
Inspector General, Semiannual Report to the Congress As of 
September 30, 1995, p. 4.
    \23\ Department of Housing and Urban Development Office of 
Inspector General, Semiannual Report to the Congress As of 
March 31, 1996, p. 5.
    \24\ Department of Housing and Urban Development Office of 
Inspector General, Semiannual Report to the Congress As of 
September 30, 1995, pp. 3-4.
    \25\ General Accounting Office, Department of Housing and 
Urban Development, GAO/HR-95-11 (February 1995), p. 7.
    \26\ Id., pp. 14-15.
    \27\ Office of Management and Budget, Progress Report: 
Correcting High Risk Areas, Analytical Perspectives on the 
Budget of the United States for Fiscal Year 1996, p. 290.
    \28\ Hearings before the Subcommittee on VA, HUD, and 
Independent Agencies of the House Committee on Appropriations, 
104th Cong., 2d Sess., Part 6: Department of Housing and Urban 
Development (1996), p. 46.
    \29\ Department of Housing and Urban Development Office of 
Inspector General, Semiannual Report to the Congress As of 
March 31, 1996, p. 5.
    \30\ Id., p. 6.
    \31\ General Accounting Office, Housing and Urban 
Development: Limited Progress Made on HUD Reforms, GAO/T-RCED-
96-112 (March 27, 1996), p. 6; General Accounting Office, 
Housing and Urban Development: Major Management and Budget 
Issues, GAO/T-RCED-95-86 (January 19, 1995), p. 4.
    \32\ General Accounting Office, Housing and Urban 
Development: Major Management and Budget Issues, GAO/T-RCED-95-
86 (January 19, 1995), pp. 5-6, 9.
    \33\ General Accounting Office, Multifamily Housing: HUD's 
Proposals for Reengineering Its Insured Section 8 Portfolio, 
GAO/T-RCED-96-210 (June 27, 1996), pp. 1-2.
    \34\ Office of Management and Budget, Progress Report: 
Correcting High Risk Areas, Analytical Perspectives on the 
Budget of the United States for Fiscal Year 1996, p. 290.
    \35\ General Accounting Office, Housing and Urban 
Development: Comments on HUD's FY 1997 Budget Request, GAO/T-
RCED-96-205 (June 17, 1996), pp. 10-12.
    \36\ General Accounting Office, Housing and Urban 
Development: Limited Progress Made on HUD Reforms, GAO/T-RCED-
96-112 (March 27, 1996), p. 11.
    \37\ General Accounting Office, Housing and Community 
Development: Public and Assisted Housing Reform, GAO/T-RCED-96-
25 (October 13, 1995), p. 9.
    \38\ Department of Housing and Urban Development Office of 
Inspector General, Semiannual Report to the Congress As of 
March 31, 1996, p. 8.
    \39\ Id.
    \40\ Statement of Susan Gaffney, Inspector General, 
Department of Housing and Urban Development, before the 
Subcommittee on Human Resources and Intergovernmental 
Relations, House Committee on Government Reform and Oversight, 
Public Housing Resident Initiatives (November 9, 1995), p. 1.
    \41\ Department of Housing and Urban Development Office of 
Inspector General, Audit of Technical Assistance Grants To 
Support Public Housing Resident Management and Self-employment 
Programs, 95-AT-101-0001 (February 28, 1995), p. iii.
    \42\ Undated letter signed by Maxine Green, Chairwoman of 
the National Tenants Organization, p. 1.
    \43\ Statement of Susan Gaffney, Inspector General, 
Department of Housing and Urban Development, before the 
Subcommittee on Human Resources and Intergovernmental 
Relations, House Committee on Government Reform and Oversight, 
Public Housing Resident Initiatives (February 29, 1996), p. 2.
    \44\ Id., p. 4.
    \45\ Id., pp. 6, 9.

                       Department of the Interior

                                Overview

    The Department of Interior (DOI) manages Federal natural 
resources, including 500 million acres of public land and some 
50 million acres of Native American reservations. DOI's mission 
is the conservation, development, and regulation of mineral and 
water resources, as well as the preservation of national parks 
and wilderness areas. Interior also supervises governments in 
U.S. territories and coordinates Federal and State recreation 
programs. The Department employs a staff of 67,177 with an 
annual budget of $7 billion.
    The major areas of waste and abuse include the poor 
accounting and questionable personnel practices within the 
National Park Service, the millions of dollars owed to the 
Minerals Management Service for oil company production on 
Federal lands in California, the Bureau of Land Management 
falling behind in maintaining its land structures, and finally 
the Bureau of Indian Affairs has failed to effectively manage 
the Indian Trust Fund accounts.

            National Park Service Plagued by Poor Management

    Tasked with conserving the Nation's natural and cultural 
resources by managing and maintaining 368 park units covering 
380 million acres \1\ for today's use and future generations, 
the National Park Service (NPS) has a poor record of management 
in the past several years. Poor management runs the gamut from 
poor accounting to questionable personnel practices.
    The NPS financial and property management system has enough 
problems that substantiating NPS' estimated $6.6 billion in 
assets and $68 million in liabilities is rather difficult. In 
terms of substandard bookkeeping, NPS property records show 
paying $800,015 for a $150 vacuum cleaner, $700,035 for a $350 
dishwasher, $79 million for a $793 mobile radio, and, 
incredibly, a mere 1 cent for the purchase of a brand new fire 
truck valued at $133,000. Overall, the NPS has recently 
overestimated the value of its personal property to the tune of 
more than $90 million.\2\
    The NPS has trouble keeping track of its property as well. 
A recent audit noted that a total of 16,277 items--from washing 
machines to binoculars--worth $27 million were missing and 
could not be accounted for.\3\ At one particular NPS office, 49 
firearms could not be found.\4\

Golden parachutes

    As was the case with many Federal agencies, the National 
Park Service provided buy-outs of up to $25,000 each to dozens 
of employees who were already at or past retirement age. The 
agency subsequently negotiated agreements with these same 
individuals to remain on the job for a year or more. In a 
particularly egregious example of abuse, the NPS Director 
created new special assistant positions in his office for two 
former regional directors so they could continue to draw their 
SES salaries. The former Southeast Regional Director, who 
supervised all the parks in 9 States, is now working on an 
international task force on the environment in the Gulf of 
Mexico. The former Pacific Northwest Regional Director's SES 
job was ``abolished'' under an agency-wide reorganization, but 
he now serves as a special assistant to the Director for 
international tourism.

Personality profiles for every supervisor in the agency

    The agency has entered into a contract to prepare a 
personality profile of every supervisor in the agency at a 
total cost of about $1.6 million. Under this program, each 
supervisor mails a questionnaire to about a half dozen people 
who answer questions about the nature of the supervisor's 
personality. How the agency intends to use this information is 
unclear. The most disturbing part of this program is that each 
park is required to fund the cost of this inventory, including 
travel to the training session, out of its own funds, at a cost 
of about $500 per person. NPS is weighing the possibility of 
extending this program to all 15,000 permanent employees in the 
agency.\5\

Lack of priority-setting hurts the American public

    In August 1995, in response to a request by the House and 
Senate Chairmen of the committees with responsibility over the 
NPS, GAO delivered a report on the state of the parks. It 
reported that the agency was at a crossroads and that drastic 
action was needed to protect the future of the parks. 
Specifically, GAO found that the agency had no system to ensure 
that the $1.4 billion allocated to the agency was being spent 
on the highest priority needs. NPS lacks the necessary 
financial and program data to match park conditions with 
available funds. In other words, instances such as visitor 
facilities being shut down at one park while new ones are being 
opened at other parks continue to happen.

Proposing new parks at the expense of the existing park system

    The Clinton administration has endorsed the establishment 
of a half dozen new park areas and major expansions of a dozen 
or more existing park areas at a cost of tens of millions of 
dollars. In many cases, this is a departure from the position 
taken by agency professionals from previous administrations. In 
a time of limited funding, these expansion proposals come at 
the expense of existing national parks, including Yellowstone, 
Yosemite, and others.
    Due to years of diverting money from park maintenance to 
new park acquisition, the overall level of visitor services--
campgrounds, trails, facilities--has deteriorated to a sorry 
level. The current maintenance backlog rests at over $4 
billion.\6\ There may be a way out, however. Operational 
shortfalls and maintenance backlogs result, in no small 
measure, because of an unwillingness to institute necessary fee 
reform. In 1919, the entry fee at Yellowstone was $10; today 
the fee remains $10.\7\ Despite being given the authority by 
Congress to institute a 3-year fee demonstration program 
allowing participating parks to keep 80 percent of new 
collected fees \8\ for their own use, the Clinton 
administration refuses to institute this program. Park 
maintenance and operation suffer accordingly.

                 Problems at the Bureau of Reclamation

The Yuma Desalination Plant

    Several years ago, officials of the Bureau of Reclamation, 
an agency of the Department of the Interior, decided to put the 
Yuma Desalting Plant in Arizona in ready reserve status at a 
cost of about $6 million annually.\9\ This desalting plant was 
constructed to help the United States meet its obligations 
under a 1944 treaty with Mexico to deliver 1.5 million acre-
feet of Colorado River water of a certain quality to Mexico.
    The plant is no longer state-of-the-art, and cannot be 
retrofitted. If the plant were to be operated at full capacity, 
the annual operation and maintenance costs would be almost $30 
million, about double the amount originally anticipated.\10\ 
The Bureau of Reclamation has determined that for the next 
several years, without operating the desalting plant, the 
United States can meet its treaty obligations to Mexico.
    In June 1994, in testimony before a Senate subcommittee, a 
former Interior official stated that, ``the Bureau of 
Reclamation is evaluating long-term options for meeting water 
quality obligations to Mexico. Operation of the desalting plant 
is extremely expensive, and more cost-effective, long-term 
options may be available. Reclamation plans to consult with the 
Basin States and other interested parties in carrying out its 
evaluation.'' \11\
    Over 2 years have passed and millions of dollars have been 
spent since this testimony. When questioned about the status of 
the plant, the Bureau of Reclamation responded that while it 
has consulted with the Basin States on specific occasions, a 
consensus resolution has not been achieved. Therefore, the 
Bureau intends to continue to hold the plant in ready reserve 
status. In addition, the agency states it is evaluating 
possible alternative uses of the plant that may help offset 
some of the plant's costs. It is unclear how long this 
evaluation has been taking place, or when it will be 
concluded.\12\
    In the meantime, in the President's fiscal year 1997 budget 
proposal for the Bureau of Reclamation, there is a request for 
another $6 million to keep the plant in ready reserve.\13\

Glen Canyon Dam EIS/``spike flow'' experiment

    Environmental studies on the operation of Glen Canyon Dam 
on the Colorado River and on the Grand Canyon, begun under the 
Reagan administration, have cost over $72 million since 
1984.\14\ In 1991, the Bush administration instituted interim 
operating criteria for Glen Canyon Dam designed to protect the 
resources of the Grand Canyon. Those interim operating 
criteria, as well as the environmental studies, were 
subsequently codified in the Grand Canyon Protection Act of 
1992.
    The final environmental impact statement (EIS) on Glen 
Canyon Dam operations contained a preferred alternative that 
would modify the operating criteria for the dam in a way that 
would allow for more power production. Despite the scientific 
basis for the preferred alternative, certain groups have 
publicly expressed opposition to those modifications. We should 
be concerned that good science guide the Secretary's decision 
when he issues the record of decision on this EIS.
    The final EIS on Glen Canyon Dam operations recommended a 
research ``spike flow'' to produce a ``flood'' in the Grand 
Canyon for habitat restoration and beach building along the 
Colorado River. There were months of preparation and 
development of a scientific research program for this ``spike 
flow,'' which occurred for more than a week beginning on March 
26, 1996. The spike flow cost nearly $4 million: $2.5 million 
in foregone power revenues and $1.3 million for research 
costs.\15\ This should have been a serious research effort, and 
if it had been, it would have been impossible to analyze the 
data generated by this flow in a few short days; yet, the 
Secretary declared this research flow a success within days 
after the flood flows were stopped. In fact, a determination of 
the success of the research flow requires long-term monitoring 
of the downstream resources and an analysis of the monitoring 
data.
    There were also numerous quotes in the press around the 
time of the Glen Canyon research flows indicating that Interior 
Secretary Bruce Babbitt would like to utilize such floods at 
other Federal dams around the country. These declarations of 
intent were also made before the scientific results of the 
research flows at Glen Canyon were known. It is also unclear--
given that the Department must operate these facilities in 
accordance with State water law and interstate compacts--that 
the Department has the authority to implement such flows 
elsewhere, particularly in the Colorado River.

Deferred maintenance of power generation facilities

    A number of water users, interest groups, and power 
customers have contacted the House Resources Committee with 
concerns about the impact of deferred maintenance at power 
generation facilities operated by the Bureau of Reclamation. 
The Bureau has indicated that it is having no problem securing 
the amount of funding necessary to finance appropriate 
operations and maintenance (O&M). However, at the same time it 
is notifying customers of drastic cutbacks in O&M funding at 
certain facilities. At other facilities, the agency is pursuing 
loans or advance payments from firm power customers to conduct 
needed repairs.
    The Bureau believes it has adequate authority to pursue 
this off-budget financing. Although the concept of greater 
customer involvement may have some validity, these arrangements 
overlook several problems:
     The authority on which the Bureau is relying is a 
1921 statute that appears to have been set up originally as an 
exception but which the Bureau is now trying to make the rule 
(taken at face value it would go a long way toward eliminating 
the need for the appropriations process);
     Agency oversight by the Congress would be greatly 
limited;
     Customers have little bargaining power in 
negotiations;
     Plans by the Bureau to expand generating capacity 
without participation of the States could cause a problem for 
State Public Utility Commissions that are attempting to 
structure competition in their States and determine generating 
capacity within the State;
     Private power utilities see this as an attempt by 
the Federal Government to compete with them in violation of 
Federal law; and
     The Bureau's direct financing proposal will short-
circuit the rate-setting process, which is ostensibly done by 
the Power Marketing Administrations with Federal Energy 
Regulatory Commission oversight.\16\

     Minerals Management Service Fails to Rectify Huge Oil Royalty 
                             Underpayments

    In 1991, six oil companies involved in a suit with the 
State of California and the city of Long Beach reached 
settlements totaling $345 million to end court actions by the 
State and city alleging undervaluation of oil, which has the 
effect of reducing the amount of the royalty due. In light of 
this settlement, the Department of Interior's Minerals 
Management Service (MMS) performed an exercise to estimate the 
size of any potential royalty underpayments resulting from 
Federal lands in California. This preliminary effort was 
followed by a 2-year interagency study. In May 1996, the 
interagency task force consisting of MMS, the Department of the 
Interior's Office of the Solicitor and the Departments of 
Energy and Commerce confirmed that there was a serious 
undervaluation problem. The interagency task force estimated 
that lessees underpaid royalties by up to $856 million in 
California alone for the period 1978 to 1993 by paying 
royalties based on prices that did not represent fair market 
value for Federal oil.
    After 2 years of agency delay, the Minerals Management 
Service announced that it would accept some of the task force 
recommendations and attempt to collect only $440 million of the 
$856 million figure. The figure was reduced largely due to 
mismanagement of global settlements reached between the oil 
companies and the Department of the Interior. Also, the MMS 
will not examine whether the underpayment problem exists in 
other States, despite administration officials conceding that 
royalty underpayments in other States might reach $1.2 
billion.\17\
    During the time the task force report was being developed, 
MMS was engaged in global settlements (which allowed two oil 
companies with large underpayments to avoid payment) with the 
full knowledge that there were substantial problems with 
underpayments in California in this program.\18\ These 
agreements may have extinguished the claim of the Federal 
Government to collect these amounts owed. Apparently, the 
Inspector General also recognized that these agreements did not 
protect the interests of the United States. In a draft report, 
the Inspector General notes that the royalty settlements were 
not conducted in accordance with ``Minerals Management Service 
Settlement Negotiation Procedures.'' The report faults MMS for 
including ``no documentation for the estimated values of the 
issues concerning the underpayment of royalties to be 
negotiated. . . .'' \19\ In addition, the report faults MMS for 
writing down amounts owed for no apparent reason:

          Prior to negotiations, one of the Service's Royalty 
        Management Program divisions estimated the value of a 
        particular issue to be negotiated in a global 
        settlement to be about $439 million. However, the list 
        of issues and values prepared by the negotiation team 
        prior to negotiations estimated that the same issue was 
        valued at $78 million. Documentation in the settlement 
        file was insufficient to explain the $360.4 million 
        difference in the estimated values of this issue.\20\

    Based on Department of Interior statistics, this 
mismanagement and poor judgment at the Minerals Management 
Service will cost $2.05 billion.

               Bureau of Land Management (BLM) Mismanaged

    Approximately 270 million acres of natural resource land 
are managed by BLM, serving the interests of ranching, timber 
production, mining, and recreation for 70 million people each 
year.\21\ In addition, BLM maintains 2,415 structures ranging 
from sewer systems to fire stations, 1,150 recreation sites, 
59,000 miles of roads, 14,000 miles of trails, and 287 
bridges.\22\
    BLM, like its brother agency, the National Park Service, is 
rapidly falling behind in maintaining its land and structures. 
In its 1995 budget request, BLM reported a $258 million backlog 
in maintenance needs. In contrast, during 1993, BLM's 
maintenance costs were only $27.1 million.\23\
    The problem of maintenance is not merely one of poor 
allocation of resources, however. An examination of just $9 
million worth of purportedly maintenance-related expenses found 
that $2.1 million was spent on other activities such as 
firefighting, personnel relocation, and other decidedly non-
maintenance activities. To cover their tracks, BLM officials 
intentionally mislabeled expenses as maintenance-related to 
give the impression that those funds were not being diverted 
into other areas.\24\

Unrealized processing fees

    In 1989, BLM promised to start collecting higher processing 
fees for the documentation corporations and others must 
complete in order to engage in mineral exploration or 
development on BLM-controlled land. Over 5 years later, this 
promise is still unfulfilled, those fees still are not in 
effect, and the U.S. Government has lost in excess of $47 
million in revenues. Until the proper fees are put in place, 
this situation will continue to cost the Government $7.6 
million in annual revenues.\25\
    In the interim, BLM officials claim they have been trying 
to streamline the certification process from an initial list of 
125 potential revenue-producing documents down to 59 and then 
trying to compute average processing costs for each document. 
Ironically, auditors found that $5 million of the $7.6 million 
in annual revenues could be generated by just 4 of the 
documents.\26\

Unwarranted overtime

    BLM's criminal investigators received as much as $1.3 
million in unwarranted overtime during a 2-year period; 58 of 
63 field agents received the maximum amount of administratively 
``uncontrollable'' overtime despite the fact their hours did 
not qualify as irregular, unscheduled, or critical work. 
Instead, agents claimed overtime for commonplace tasks such as 
training sessions, attending meetings, and completing 
paperwork.\27\
    Further, all but one of the BLM special agents routinely 
took their Government vehicles--mainly expensive 4-wheel-drive 
vehicles--home. Most agents claimed they needed the vehicles in 
order to respond to emergencies, despite the fact that not one 
incident was reported requiring an agent to respond outside of 
regular hours. This practice of taking vehicles home in 
anticipation of overtime emergencies that likely would not 
occur cost the taxpayers an additional $600,000 over a 2-year 
period.\28\

                                ENDNOTES

    \1\ General Accounting Office, National Parks: Difficult 
Choices Need to be Made About the Future of Parks, GAO/RCED-95-
238 (August 1995), p. 3.
    \2\ Collins, Chris. Your Taxes at Work. Gannett News 
Service, April 30, 1994.
    \3\ Id.
    \4\ National Park Service Lost Track of Property Worth More 
Than $27 Million, Audit Says; Agency Admits ``Weakness,'' 
Claims It Has Cut Risk of Loss. Rocky Mountain News, April 30, 
1994, p. 16A.
    \5\ National Park Service Leadership Seminar, Briefing 
Statement. February 28, 1996.
    \6\ General Accounting Office, National Parks: Difficult 
Choices Need to be Made About the Future of Parks, GAO/RCED-95-
238 (August 1995), p. 4.
    \7\ House Committee on Appropriations, Subcommittee on 
Interior and Related Agencies, Rep. Ralph Regula, chairman. 
Dear Colleague (uncirculated). July 26, 1996.
    \8\ Id.
    \9\ Water Problems Facing the Lower Colorado River Area, 
Hearing before the Senate Subcommittee on Water and Power, 
Committee on Energy and Natural Resources, June 8-9, 1994, p. 
28.
    \10\ Id.
    \11\ Id.
    \12\ Department of the Interior, Bureau of Reclamation, 
Letter from Eluid L. Martinez, Commissioner to John T. 
Doolittle, chairman Subcommittee on Water and Power Resources, 
May 20, 1996.
    \13\ Department of the Interior Budget Justifications, 
Bureau of Reclamation, FY 1997, p. 69.
    \14\ Department of Interior, Bureau of Reclamation, Upper 
Colorado Region Power Office, information provided to the 
Congressional Research Service (September 16, 1996).
    \15\ Department of Interior, Bureau of Reclamation, Upper 
Colorado Region, Glen Canyon Dam: Beach/Habitat-Building Test 
Flow (February 1996), p. 53.
    \16\ House Committee on Resources Subcommittee on Water and 
Power Resources, Oversight of Western Area Power Administration 
(WAPA) Transmission Construction Projects and Issues Concerning 
Deferred Maintenance of Power Generation Facilities at Bureau 
of Reclamation Sites, March 19, 1996.
    \17\ Testimony of Robert Berman, Economist, Office of 
Policy Analysis, Department of the Interior, before the 
Subcommittee on Government Management, Information, and 
Technology, June 17, 1996.
    \18\ During testimony in a hearing on this topic on June 
17, 1996, Robert Berman, Economist, Office of Policy Analysis, 
Department of the Interior, testified that he issued a 
memorandum expressing his concern that MMS was entering into 
global settlements with no consideration given to the 
underpayment issue. This memorandum was issued prior to the 
global settlements, but apparently went unheeded.
    \19\ Negotiated Royalty Settlements, Minerals Management 
Service, U.S. Department of the Interior, Office of Inspector 
General, p. 4.
    \20\ Id.
    \21\ O'Brien, Randy, Vice-President, Wilderness Society. 
Prepared Statement before the Committee on Appropriations, 
Subcommittee on Interior and Related Agencies, Rep. Ralph 
Regula, chairman. March 14, 1996.
    \22\ Collins, Chris. Your Taxes at Work. Gannett News 
Service, September 24, 1994.
    \23\ Id.
    \24\ Id.
    \25\ Collins, Chris. Your Taxes at Work. Gannett News 
Service, March 4, 1995.
    \26\ Id.
    \27\ Collins, Chris. Your Taxes at Work. Gannett News 
Service, November 26, 1994.
    \28\ Id.

                         Department of Justice

                                Overview

    The Department of Justice's appropriations totaled 
approximately $14.7 billion for fiscal year 1996. The fiscal 
year 1997 budget request for the Department was about $16.6 
billion. Most of the Department's funding is derived from 
general discretionary appropriations. The remainder comes from 
the Violent Crime Reduction Trust Fund.\1\
    The House-passed appropriations bill for fiscal year 1997 
(H.R. 3814) provided the Justice Department a total of $16.3 
billion, including increases above the President's 1997 request 
for the Department's law enforcement components and 
programs.\2\ This funding level represents a one-third increase 
in DOJ programs over the past 2 years, including a 46 percent 
increase for the Immigration and Naturalization Service to 
combat illegal immigration, a 27 percent increase for the Drug 
Enforcement Administration to fight the war on drugs, a 20 
percent increase for the FBI to fight violent crime and 
terrorism, and a 68 percent increase in funding to assist State 
and local law enforcement.\3\
    The House Appropriations Committee report on H.R. 3814 
noted, however, that the resources provided to DOJ are not 
always used effectively:

          The Committee recommendation for the Department of 
        Justice reflects the continuing commitment of the 
        Congress to provide resources for the Nation's top 
        domestic priority--fighting crime. . . . The Congress 
        has done its part to dedicate resources, during a time 
        of severe fiscal constraint, to the Department of 
        Justice. But despite the Committee's emphasis on 
        providing resources and despite the importance of the 
        problems of crime, drugs and illegal immigration, the 
        Department of Justice has failed to use these resources 
        for the intended purposes in the following ways: (1) 
        the FBI and DEA have still not hired the agents and 
        support staff provided in 1995; (2) critical law 
        enforcement systems such as NCIC 2000 and the 
        Integrated Automatic Fingerprint Identification System 
        (IAFIS) are not complete and are significantly over 
        budget; (3) INS has not removed illegal aliens residing 
        in the United States at rates promised, thereby having 
        little, if any impact on the population levels of 
        illegal aliens living here; (4) and funding to combat 
        domestic violence--Violence Against Women Grants--to 
        this day are not in the hands of State and local 
        organizations that are prepared to address this 
        problem. The Committee finds this unacceptable and 
        expects that serious attention be given to the 
        management of these resources to provide the needed 
        staff, critical systems and funding to law enforcement 
        that is vital to addressing the crime and drug 
        problem.\4\

    The Justice Department also has long-standing problems in 
the areas of debt collection and management of forfeited 
assets. The Immigration and Naturalization Service is beset by 
management problems that affect the entire range of its 
operations. Further, as the Appropriations Committee report 
suggests, DOJ has chronic infrastructure weaknesses in 
financial and information management that limit its ability to 
apply its resources most efficiently and effectively.

       DOJ Does a Poor Job of Collecting Debts Due the Government

    In general, the Federal Government does a poor job of 
collecting the immense debt it is owed. According to OMB, the 
Government's accounts receivable as of the close of fiscal year 
1995 totaled $334 billion. Of that amount, OMB reported that 
almost $125 billion was delinquent debt.\5\ The amount of 
delinquent debt has climbed steadily since fiscal year 1991.\6\
    Government debt collection is plagued by pervasive 
management deficiencies. These deficiencies extend well beyond 
the Justice Department, as discussed in other sections of this 
report. However, Justice bears a major share of the 
responsibility. OMB designated the Justice Department's debt 
collection efforts a high risk area. According to OMB, Justice 
lacks a reliable debt collection information system to support 
management of litigation and collection activity. OMB noted 
that DOJ collected over $1 billion in 1994, but placed 
Justice's civil claims receivable inventory for that year at 
over $15 billion.\7\
    Criminal debt collection is a particularly vexing problem. 
This debt consists of fines, restitution orders, special 
assessments, and court costs imposed on persons convicted of 
Federal crimes. These criminal monetary penalties--consisting 
primarily of fines and restitution--are important tools in the 
criminal justice system, and serve both punitive and remedial 
purposes. Most criminal fine payments go to the Crime Victims 
Fund, which is used for grants to support victim assistance 
programs. Restitution orders are designed to compensate 
identifiable victims for financial loss suffered as a result of 
the defendant's crime.\8\
    Outstanding criminal debt has grown exponentially over the 
past decade from about $300 million in 1985 to nearly $6 
billion in 1995.\9\ Yet, collection rates are extremely low. As 
of June 1994 the 50 largest criminal debtors had paid only $4.1 
million--or 0.5 percent--of the total of over $800 million they 
owed.\10\ It is hard to tell how much of the outstanding 
criminal debt is actually collectible. One basic problem, 
according to GAO and the Justice IG, is that Government 
information systems are inadequate to determine how much debt 
is presently due and owing and how much is collectible. In 
fact, the Government is unable even to reconcile criminal debt 
balances maintained by the courts and by U.S. Attorney offices 
across the country.\11\ A recent GAO report noted:

          Criminal debtors have been allowed to make payments 
        directly to victims or to local offices of one of three 
        different agencies within judicial districts--the Clerk 
        of the Court, probation office, or U.S. Attorney's 
        Office . . . This has created a fragmented process for 
        tracking and collecting criminal debt and resulted in a 
        lack of standardized procedures, discrepancies among 
        agency collection records, and duplication of 
        effort.\12\

    Another basic problem appears to be a general lack of 
interest throughout the Federal criminal justice system in 
pursuing criminal debt. One recent report noted that:

          The public perception of the courts and the justice 
        system's credibility to impact crime and criminals is 
        seriously eroded by the appearance of failure to 
        aggressively collect monetary punishments.\13\

    Sadly, there are indications that this perception is all 
too accurate. A report by the Justice IG found that, in 
addition to data problems, debt collection efforts suffer 
because of the low priority that U.S. Attorneys give them. 
Prosecutors did not actively share financial information about 
debtors with personnel in their offices who were responsible 
for debt collection.\14\ Also, some U.S. Attorney Offices were 
not applying interest and penalties to outstanding criminal 
debts as prescribed by Department regulations, thereby 
lessening the debtors' incentive to pay.\15\ The report 
contained the following disturbing comment by a senior DOJ 
official responsible for debt collection oversight:

          The prosecutors just don't think in terms of fines 
        and restitution or how it will be collected as they are 
        working a case. In fact, prosecutors really don't care 
        about fine collection. They should start looking for 
        dollars immediately upon receiving a case. The single 
        greatest weakness in criminal debt collection is apathy 
        on the part of the Assistant U.S. Attorneys. We may 
        just be able to improve criminal debt collection in the 
        Department if it was a critical element of the USAO's 
        workplan.\16\

    A particularly tragic and telling example of the management 
problems and attitudes that impede criminal debt collection is 
the fate of the National Fine Center (NFC). The Criminal Fine 
Improvements Act of 1987 (Public Law 100-185) transferred 
responsibility for processing criminal fines and assessments 
from the Justice Department to the Administrative Office of the 
United States Courts. Pursuant to the Act, the Administrative 
Office, working with Justice, sought to establish the NFC as a 
centralized and automated system capable of tracking criminal 
debts and receiving and processing debtor payments. After close 
to a decade of failed efforts and wasted expenditures of 
millions of dollars from the Crime Victims Fund, the NFC 
project has now been abandoned. The consulting firm of Coopers 
& Lybrand recommended termination of the project, upon 
concluding that its failures were ``overwhelmingly the result 
of cultural and environmental issues'' emanating from the 
courts and the Justice Department.\17\ These ``cultural and 
environmental issues'' refer to the decentralized and largely 
autonomous nature of the Federal courts and U.S. Attorney 
offices, and the apparent inability of either the Federal 
judiciary or the Justice Department to achieve the degree of 
cooperation necessary to get the job done.
    In the recently enacted Debt Collection Improvement Act of 
1996 (Public Law 104-134, section 31001), Congress supplied 
additional tools to enhance debt collection efforts. The 
Justice Department, as well as other executive and judicial 
branch agencies, must supply the will to use these tools 
vigorously and effectively.

   Administration Of The Assets Forfeiture Program Remains High-Risk

    The Justice Assets Forfeiture Fund consists of cash and 
other property used in criminal activity that has been 
confiscated, or ``seized,'' by Federal law-enforcement 
authorities. The Justice fund, which is administered by the 
U.S. Marshals Service (USMS) and had an inventory of $1.6 
billion at the end of 1994, was designated a high risk area by 
OMB.\18\ According to OMB, asset forfeiture information systems 
are inadequate; current procedures do not adequately record the 
value of assets received; and cash should be placed in Treasury 
deposit fund accounts more expeditiously. GAO also included the 
Justice fund (along with the similar Treasury fund) on its high 
risk list. According to GAO, enhancements to seized property 
tracking systems and development and implementation of 
additional procedures are necessary to ensure adequate 
accountability and stewardship over seized property. GAO also 
reported that Justice and Treasury have not pursued plans to 
consolidate their forfeited asset management and disposal 
programs despite a statutory mandate to do so. GAO estimated 
that consolidation of the two funds would reduce administrative 
costs by 11 percent annually.\19\
    The Justice IG reported several years ago that USMS was 
holding property for long periods of time, thereby contributing 
to the deterioration of its value, and that contractors hired 
by USMS to maintain and dispose of property routinely failed to 
perform work or overcharged for the work they did. According to 
the IG, these concerns are resurfacing in a pending review of 
USMS' management of a seized gambling casino in California 
known as the ``Bicycle Club,'' which USMS has held for almost 6 
years.\20\
    The IG also reported that the Justice Department's proposed 
system to consolidate seized asset tracking for all agencies, 
known as ``CATS,'' is experiencing substantial cost escalations 
and schedule delays. The original cost of $24 million has 
ballooned to over $106 million. The scheduled implementation 
date has slipped from December 1992 to December 1996. The IG 
doubts that the current deadline will be met. According to the 
IG, participating agencies have become increasingly frustrated 
with DOJ's lack of progress. The IRS has expressed an intention 
to withdraw, and the Customs Service already is developing its 
own system.\21\
    Under the ``equitable sharing program,'' the Justice 
Department annually provides about $230 million from the Fund 
to State and local agencies that participated in the seizure or 
forfeiture of assets. However, a series of IG audits questioned 
millions of dollars of equitable sharing fund expenditures by 
these agencies.\22\

      INS Continues To Experience Serious Management Shortcomings

    Fundamental management weaknesses at the Immigration and 
Naturalization Service (INS) have been widely reported by GAO 
and others. Last year GAO pointed out that, while INS is making 
some progress, many of its management problems persist. Among 
others, GAO listed the following management challenges facing 
INS:
     The backlog of aliens requesting asylum is large 
and growing.
     The demand for naturalization and other benefits 
is such that INS cannot meet its own processing time goal in 
some districts.
     The identification and removal of criminal and 
illegal aliens is an enormous problem.
     The flow of aliens across the Southwest border 
continues and violations of the conditions of legal entry are 
commonplace.\23\
    The Justice Department's IG testified at this year's 
appropriations hearings that INS ``continues to be the highest-
risk component'' of the Department.\24\ INS even has trouble 
taking advantage of increased resources provided by Congress. 
For example, while Congress provided for a substantial increase 
in Border Patrol agents, the IG reported that INS would have 
difficulty training and equipping the large influx of new 
agents. It now appears that INS is on track to train the new 
agents, but only at the cost of delaying advanced training for 
the senior agents who must supervise the new agents and make 
sure they perform their duties properly.\25\
    According to the IG, ``INS faces a critical situation in 
dealing with its sadly deficient management information 
systems.'' \26\ For example, the IG found that much information 
developed on persons suspected of engaging in illegal 
activities at the border could not be used because of 
weaknesses in the way INS compiled and maintained the data.\27\ 
At seven sites visited by the IG, 120,000 Employment 
Authorization Document records were omitted from the Central 
Index System, which is used to determine eligibility for 
benefits and for employer verifications.\28\ In a particularly 
egregious example, a review of cases in which aliens illegally 
obtained INS documents, benefits, and legal status by 
furnishing bribes showed that INS did not take action against 
the aliens or even correct the fraudulent records. Thus, not 
only were these illegal aliens not prosecuted, but they got to 
keep the fraudulent documents, maintain their fraudulently 
conferred status, and continue receiving benefits.\29\
    Unfortunately, employee misconduct is a serious problem at 
INS. The IG investigates over 900 criminal and serious 
misconduct cases in INS each year. Two-thirds of the 374 
arrests by the OIG in the past 3 years involved INS corruption. 
For example, an INS inspector was convicted of facilitating the 
smuggling of $78 million worth of cocaine into the United 
States. A number of INS employees have been caught selling 
employment authorization cards and other documents. Employees 
also have been found guilty of civil rights violations.\30\
    The IG emphasized that, in order to reduce employee 
misconduct, INS senior management must impose tough punishments 
and send strong signals that misconduct will not be 
tolerated.\31\ However, senior management does not set the best 
example. A recent IG report confirmed allegations that senior 
INS field managers intentionally misled the Congressional Task 
Force on Immigration Reform by creating a false picture of 
conditions at detention facilities in Florida during a visit by 
the Task Force. Among other things, INS officials released or 
moved detained aliens to cover up overcrowding and brought in 
extra staff to give the appearance of greater efficiency.\32\ 
Many of the released aliens had not received Public Health 
Service medical clearances, and a number of others had criminal 
records.\33\ According to the IG report, the INS field managers 
lied to its investigators, destroyed evidence, and otherwise 
obstructed its investigation of the deception perpetrated on 
the Congressional Task Force.\34\ According to press reports, 
Border Patrol supervisors are now being investigated for 
allegedly falsifying arrest records and intelligence reports in 
an effort to show better results for Operation Gatekeeper--an 
increased deployment of agents along a portion of the 
California-Mexico border.\35\
    INS' deportation activities also have serious flaws. The IG 
described the agency's program to deport non-detained aliens as 
``largely ineffective.'' \36\ The program resulted in the 
removal of only about 11 percent of such aliens.\37\ Also, INS 
routinely releases apprehended aliens, some of whom are violent 
criminals or fugitives. An IG review found that 257 released 
fugitives had a total of 685 arrests, including many arrests 
for violent and drug-related crimes.\38\ Finally, the IG found 
that INS did not fully utilize its Institutional Hearing 
Program to remove criminal aliens upon completion of time 
served in State prisons. As a result, INS has incurred millions 
of dollars in additional processing and detention costs.\39\
    INS has failed to collect $47 million in fines. The IG 
reported that INS systematically reduces civil penalties 
imposed under the Employer Sanctions Program to 42 cents on the 
dollar, thereby undermining employer sanctions enforcement and 
causing a revenue loss to the Treasury of $41 million. In 
addition, during 1 year alone, INS failed to initiate or impose 
at least $6 million in visa fines for numerous violations 
committed by transportation carriers.\40\

   Several DOJ Components Suffer from Financial Management Weaknesses

    Several Justice Department components have experienced 
problems with their financial management systems. OMB placed 
financial management at two of these components--the 
Immigration and Naturalization Service and the United States 
Marshals Service--on its high-risk list. The Justice IG also 
has reported on financial management weaknesses on the part of 
these two components.

Immigration and Naturalization Service (INS)

    In listing INS' financial system weaknesses as high-risk, 
OMB noted that the agency's accounting system processes over $2 
billion annually. Among its other problems, OMB noted that INS 
lacks reliable information in its financial reports, fails to 
comply with administrative financial controls, and has 
significant weaknesses in controls over payments and 
obligations. The specific areas of weakness included management 
of fee accounts, bonds, and inspectional overtime.\41\
    The Justice IG has reported on some of the same problems. 
The IG concluded that INS financial records are not adequate 
for OIG auditors to express an opinion on its accounting 
records. According to the IG, the auditors lacked assurances 
that INS' records contained current, uniform and accurate 
information.\42\ Specifically, OIG audits of INS fee accounts 
for fiscal years 1991 and 1993, as well as a fiscal year 1993 
audit of an INS bond fund all resulted in disclaimers due to 
the condition of the accounting records. The audits identified 
significant weaknesses in internal controls and compliance with 
laws and regulations.\43\
    The IG also has found problems with INS' management of 
overtime pay. The IG found abuses and management weaknesses 
with respect to overtime paid to inspectors, for which INS 
spends about $30 million annually and which can provide up to 
16 hours of pay for as little as 1 hour of work on Sundays and 
holidays. In fact, the potential for abuse was so high and the 
management so weak that the IG recommended abolishing this form 
of overtime. The IG also found that INS had not corrected 
problems causing inconsistencies and possible errors in the 
payment of administratively uncontrollable overtime, and 
concluded that payment of this overtime required ``intense 
scrutiny.''

U.S. Marshals Service (USMS)

    Financial management at USMS also was listed as an OMB high 
risk area, based on inadequate financial management systems and 
material non-conformance in fund control and asset value 
reporting. According to OMB, the USMS accounting system 
processes over $1 billion annually.\44\ Likewise, the IG has 
reported on internal control weaknesses leading to fraud and 
other problems in USMS activities. For example, the IG found 
that USMS inspectors were able to embezzle over $350,000 in 
Government funds due to vulnerabilities in the witness security 
program. The IG also found deficiencies in the fee collection 
practices of USMS districts. It found confusion and 
inconsistency among USMS districts in calculating fees, billing 
for services, and controlling collections.\45\

        Information Management and Security at DOJ are Deficient

    OMB and GAO have identified the lack of reliable 
information systems as a problem with regard to several areas 
of activity at the Justice Department. Information system 
weaknesses play a major role in the key DOJ management problem 
areas described earlier in this report. According to GAO, the 
Justice Department is not effectively managing its information 
technology resources and needs Department-wide leadership and 
sustained oversight to correct the weaknesses.\46\
    As discussed previously, INS information systems suffer 
from many deficiencies. INS now is undertaking a billion-dollar 
management technology program. While this effort is laudable, 
the program will require close oversight. In fact, the IG has 
described the program as ``the highest-risk endeavor in the 
entire Department.'' \47\ The IG also stated that INS faces an 
enormous challenge in training its staff to use the new 
information technology tools.\48\
    GAO reported on the absence of comprehensive information 
systems in connection with monitoring the performance of U.S. 
Attorneys. Due to the unreliability of some data and the lack 
of other data, DOJ's Executive Office for U.S. Attorneys could 
not fully use its information systems to determine how U.S. 
Attorneys were addressing national and local prosecutorial 
priorities. Some existing measures of U.S. Attorneys' caseloads 
and workloads appeared to be inaccurate. The information 
systems did not collect other useful information for 
determining how U.S. Attorneys addressed national and local 
priorities and managed their resources. GAO also reported that 
data maintained by U.S. Attorney offices did not accurately 
reflect the caseloads and workloads of all the offices.\49\
    Redundant drug intelligence centers exist within the 
Justice Department. The National Drug Intelligence Center, 
funded through DOJ and DOD at $34 million annually, overlaps 
with the DEA's El Paso Intelligence Center, which has an annual 
budget of over $20 million. The FBI's regional drug 
intelligence squads, costing about $14 million a year, were 
established without consideration of existing systems. Finally, 
DOJ's Office of Justice Programs provides about $14 million 
annually to fund intelligence systems for State and local 
governments. As the Justice IG concluded, consolidation of drug 
intelligence activities would save millions of dollars annually 
and also streamline the intelligence function.\50\
    Information security also is a problem at the Justice 
Department. OMB placed computer security at DOJ on its high 
risk list, and the Department itself reported this area as a 
material internal control weakness. According to OMB, the 
Department maintains inadequate security over departmental ADP 
sites and systems, thereby putting at risk the confidentiality 
of sensitive litigation and law enforcement information.\51\ 
The IG also has reported on computer security problems at DOJ. 
The IG identified security weaknesses in the INS Central Index 
System, some of which were described previously in this report. 
The IG also found vulnerabilities in FBI computer security 
control practices.\52\

                                ENDNOTES

    \1\ House Committee on Appropriations, Report to accompany 
H.R. 3814, Departments of Commerce, Justice, and State, the 
Judiciary, and Related Agencies Appropriations Bill, Fiscal 
Year 1997, H. Rept. No. 104-676, 104th Cong., 2d Sess. (July 
16, 1996), pp. 184 and 8.
    \2\ Id., p. 8. See also 142 Cong. Rec. H8150 (daily ed., 
July 23, 1996).
    \3\ Id.
    \4\ Id., pp. 8-9.
    \5\ Office of Management and Budget (OMB), Federal 
Financial Management Status Report & Five Year Plan, Appendix 
I: Status Report on Credit Management and Debt Collection (June 
1996), p. 53. Even these large figures probably are too low. 
For example, OMB understated the amount of delinquent tax debt 
by at least $20 billion and overstated by $1 billion the amount 
of delinquent debt that IRS collected in fiscal year 1995. See 
the discussion of IRS debt collection in the Department of the 
Treasury section of this report.
    \6\ Id., p. 47.
    \7\ OMB, Progress Report: Correcting High Risk Areas, 
Analytical Perspectives on the Budget of the United States for 
Fiscal Year 1996, p. 291.
    \8\ General Accounting Office, Restitution, Fines, and 
Forfeiture: Issues for Further Review and Oversight, GAO/T-GGD-
94-178 (June 28, 1994), p. 2.
    \9\ Coopers & Lybrand, Independent Assessment of the 
Mission, Goals, Plans, & Progress to Date for Implementing the 
National Fine Center (May 27, 1996), pp. IV-1.
    \10\ Restitution, Fines, and Forfeiture: Issues for Further 
Review and Oversight, note 8, p. 9.
    \11\ Id., p. 1. See also Department of Justice, Office of 
Inspector General (DOJ IG), Audit Report: Criminal Debt 
Collection Efforts Within the Department of Justice, No. 93-19 
(September 1993).
    \12\ General Accounting Office, National Fine Center: 
Progress Made but Challenges Remain for Criminal Debt System, 
GAO/AIMD-95-76 (May 25, 1995), p. 3.
    \13\ Independent Assessment of the Mission, Goals, Plans, & 
Progress to Date for Implementing the National Fine Center, 
note 9, p. IV-2.
    \14\ Audit Report: Criminal Debt Collection Efforts Within 
the Department of Justice, note 11, p. 20.
    \15\ Id. pp. 22, 25.
    \16\ Id. p. 18.
    \17\ Independent Assessment of the Mission, Goals, Plans, & 
Progress to Date for Implementing the National Fine Center, 
note 9, p. I-1.
    \18\ Progress Report: Correcting High Risk Areas, note 7, 
p. 291.
    \19\ General Accounting Office, Asset Forfeiture: 
Historical Perspective on Asset Forfeiture Issues, GAO/T-GGD-
96-40 (March 19, 1996), pp. 7-8. See also General Accounting 
Office, High-Risk Series, Asset Forfeiture Programs, GAO/HR-95-
7 (February 1995).
    \20\ Hearings before the Subcommittee on Commerce, Justice, 
State, and the Judiciary, House Committee on Appropriations, 
104th Cong., 2d Sess., Departments of Commerce, Justice, and 
State, the Judiciary, and Related Agencies Appropriations for 
1997 (Part 6) (1996), p. 571.
    \21\ Id. p. 572.
    \22\ Id. pp. 571-572.
    \23\ General Accounting Office, INS: Update of Management 
Problems and Program Issues, GAO/T-GGD-95-82 (February 8, 
1995), p. 1.
    \24\ Hearings, note 20, p. 561.
    \25\ Id. pp. 562-563.
    \26\ Id., p. 563.
    \27\ Id.
    \28\ Id.
    \29\ Id., p. 564.
    \30\ Id., pp. 567-569.
    \31\ Hearings, note 20, pp. 567-570.
    \32\ See generally DOJ IG, Department of Justice, Alleged 
Deception of Congress: The Congressional Task Force on 
Immigration Reform's Fact-finding Visit to the Miami District 
of INS in June 1995 (June 1996), pp. 4-10.
    \33\ Id., pp. 7-8.
    \34\ Id. p. 3.
    \35\ Center for Immigration Studies, Immigration Review, 
No. 26 (Summer 1996).
    \36\ DOJ IG, Semiannual Report to Congress, October 1, 
1995-March 31, 1996, p. 23.
    \37\ Id.
    \38\ DOJ OIG, Semiannual Report to Congress, April 1, 1995-
September 30,1995, p. 19.
    \39\ Id.
    \40\ Hearings, note 20, p. 591.
    \41\ Progress Report: Correcting High Risk Areas, note 7, 
p. 292.
    \42\ Hearings, note 20, p. 563.
    \43\ Semiannual Report to Congress, October 1, 1995-March 
31, 1996, note 36, p. 30.
    \44\ Progress Report: Correcting High Risk Areas, note 7, 
p. 292.
    \45\ Semiannual Report to Congress, October 1, 1995-March 
31, 1996, note 36, pp. 11, 28.
    \46\ General Accounting Office, INS: Management Problems 
and Program Issues, GAO/T-GGD-95-11 (October 5, 1994), p. DOJ-
9.
    \47\ Hearings, note 20, p. 558.
    \48\ Id., p. 559.
    \49\ General Accounting Office, U.S. Attorneys: More 
Accountability for Implementing Priority Programs Is Desirable, 
GAO/GGD-95-150 (June 23, 1995), p. 3.
    \50\ Hearings, note 20, p. 593.
    \51\ Progress Report: Correcting High Risk Areas, note 7, 
p. 293.
    \52\ Semiannual Report to Congress, April 1, 1995-September 
30,1995, note 38, p. 19.

       Department of Labor and the National Labor Relations Board

                                Overview

    The Department of Labor's (DOL) mission is to promote the 
welfare of wage earners, improve working conditions and train 
workers for profitable employment. DOL is one of the largest 
regulatory agencies in the Federal Government and it enforces 
over 130 labor statutes on job safety, employee benefits, 
minimum wages, unemployment insurance, job training, labor-
management relations, employment discrimination and conducts 
programs to collect and analyze labor statistics.
    The National Labor Relations Board is an independent agency 
created by the National Labor Relations Act of 1935 (NLRA) as 
amended by the Taft-Hartley Act and the Landrum-Griffin Act. 
The purpose of the NLRA is to protect the right of employees to 
self-organization and collective bargaining through 
representatives of their own choosing and to engage in 
concerted activity or to refrain from such activity. The budget 
for the NLRB in 1995 was $174 million, 78 percent of which is 
spent on compensation for its approximately 2,000 employees. 
Only about 11 percent of the private-sector work force is 
unionized.
    DOL spends $31 billion annually and employs over 15,000 
full-time employees. Key components of DOL are the Bureau of 
Labor Statistics, the Employment and Training Administration, 
Labor Management Standards, Occupational Safety and Health 
Administration, Mine Safety and Health Administration, Pension 
and Welfare Benefits Administration, and Veterans Employment 
and Training Services.
    The Department of Labor job training programs are 
inefficient because they duplicate many other similar Federal 
job training programs. Studies have also shown such programs to 
be ineffective thus, robbing program participants of the hope 
of a better job through training. Deficient audits of pension 
plans can conceal violations of law and endanger the retirement 
security of American workers. Also of extremely serious concern 
is the failure by the Department to adequately address the 
growing problem of labor racketeering. A poor record of debt 
collection continues to be a problem for the Department.
    Serious questions have been raised regarding partisanship 
at the National Labor Relations Board which has biased 
decisions and actions taken there.

  Federal Job Training Programs: Programs Duplicate Effort and Waste 
                             Taxpayer Funds

    In 1994, the General Accounting Office reported that there 
were 163 Federal job training programs located in 14 
departments and spending over $20 billion annually.\1\ While 
many of these programs are in other departments, the Department 
of Labor has taken a leadership role in Federal job training 
programs. As a consequence, the proliferation of job training 
programs continues today.
    These programs may have well-intentioned purposes, which 
include helping adult dislocated workers or disadvantaged youth 
find employment or obtain training to compete in the labor 
force. Collectively, however, they create confusion and 
frustration for their clients and administrators, hamper the 
delivery of services tailored to the needs of those seeking 
assistance and create the potential for duplication of effort 
and unnecessary administrative costs. Many of the programs 
overlap by targeting the same client populations, such as 
dislocated workers, Native Americans, the economically 
disadvantaged or at-risk youth. Numerous programs have the same 
or similar goals, such as reducing welfare dependency, easing 
worker dislocation or preventing students from dropping out of 
school. Although these programs frequently provide the same 
categories of services, they are administered through a 
patchwork of separate structures for the delivery of services, 
which are sometimes duplicated again at the State and local 
levels. The main beneficiaries of this Federal money are the 
administrators, bureaucrats and grantees executing these 
duplicative programs, not those disadvantaged individuals in 
need of job training.
    In addition, the programs lack basic tracking and 
monitoring systems needed to ensure that assistance is provided 
efficiently and effectively. Past efforts to ``fix'' the system 
have fallen short of solving its substantial problems. Major 
structural overhaul and consolidation of employment training 
programs is needed. Congress has attempted to consolidate as 
many as 128 Federal education and training programs.
    Furthermore, a nationwide controlled study of the Job 
Training Partnership Act (JTPA) programs reported no 
significant effect of JTPA on earnings or employment rates 
after 5 years.\2\ By the fifth year, each of the four treatment 
groups studied (adult men, adult women, male youth and female 
youth) had earnings and employment rates that were nominally 
higher than those of the control group; however, because none 
of the fifth-year differences were statistically significant, 
GAO could not attribute the higher earnings to JTPA training 
rather than to chance alone.\3\
    For example, the effect of JTPA training on young men was 
worse than it was even on young women. The program had zero 
impact on employment and a 7.9 percent negative effect on 
earnings. Although the program increased the hourly wage of 
adult women by a modest 3.4 percent, it had no significant 
effect on women who were on welfare or were high school drop 
outs. This program demonstrates that the effectiveness of 
Federal job training programs are marginal, at best, and cost, 
in the aggregate more than $20 billion annually.

           Job Training Program Inefficiency: Another Example

    In 1995, the Department of Labor's Inspector General 
concluded a financial and performance audit of a program to 
train migrant and seasonal farm workers. The OIG found that the 
Department of Labor wasted more than $10 million on this 
program that subsidized farmers to train migrant and seasonal 
farm workers to perform the same menial tasks they were trying 
to escape. This is another example of the failure of Federal 
job training programs to affirmatively help their clients. 
Money intended for helping the disadvantaged is stuck in the 
pockets of bureaucrats and grantees. Programs are being 
mismanaged and are not helping those in need of their services.
    For the three program years ending in June 1994, the local 
Department of Labor and Human Relations had a goal to place 564 
participants in unsubsidized employment. However, after the 
expenditure of $5.2 million on this activity, only 67 
participants, or 12 percent of the goal, were placed in 
unsubsidized employment. Furthermore, of the 67 placements, 
only 37 were placed in occupations related to their training, 
and only 17 were retained in training-related occupations in 
excess of 90 days.
    These facts translate into an average cost per placement of 
about $77,000; for a training-related placement costs were 
around $140,000; and training-related placement in which 
employment exceeded 90 days of cost $305,000 per participant, 
according to the Inspector General.\4\ The OIG concluded 
program performance was ``extremely poor'' and questioned 
$1,764,658 out of total program expenditures. In addition, the 
OIG said that the local welfare program and another Federal job 
training program designed to assist economically disadvantaged 
individuals had the unintended effect of making it more 
difficult for the migrant and seasonal farm worker program to 
achieve its overall objectives.

 Pension and Welfare Benefits Administration: Limited Scope Audits and 
                     Limited Pension Plan Security

    There are significant deficiencies in audits of private 
employee benefit plans which are putting American retirement 
programs at risk. These audits present such a threat to the 
fiscal health of pension plans that the Office of Management 
and Budget included this on its ``High Risk'' list for the 
President's Budget for fiscal year 1996. The Department of 
Labor's Pension and Welfare Benefits Administration (PWBA) is 
charged with protecting America's 700,000 private-sector 
pension plans, and 6 million welfare plans covering 150 million 
workers and over $3 trillion dollars.
    The Employee Retirement Income Security Act of 1974 (ERISA) 
established safeguards to protect the assets of private 
employee benefits and ensure that plan participants receive the 
benefits to which they are entitled. Under ERISA, pension plans 
having 100 or more participants must obtain an annual financial 
statement audit by an independent public accountant (IPA).
    Audits of plans are a key safeguard for protecting the 
assets held by plans and ERISA cannot be materially enforced 
without them. Reviews by the DOL Office of Inspector General 
and the General Accounting Office (GAO) have caused increasing 
concern regarding the inadequacy of these independent audits. 
Although classified as audits, these reports sometimes contain 
disclaimed opinions and limit liability for the auditor who 
prepares them. They may be ``limited in scope'' and not 
identify ERISA violations, disclose known violations or they 
may be unreliable in meeting ERISA requirements. Nearly 20 
percent of audits examined in 1992, the year for which the most 
recent data is available, failed to comply with one or more of 
the established professional standards, and 33 percent of 
independent qualified public accountant audits failed to comply 
with one or more of ERISA's reporting and disclosure 
requirements and had ``audit weaknesses so serious that their 
reliability and usefulness were questionable.''\5\ This error 
rate remains unacceptably high.\6\ A follow-up report is due to 
be released by the DOL Office of Inspector General this fall.
    The failure to verify the existence of plan investments in 
limited scope audits, or to assure the accuracy of asset 
valuations, the nature of investments and their degree of risk, 
can lead to pension plan failures and the loss of millions of 
dollars in funds, jeopardizing the economic security of 
retirees and plan participants who may not have yet retired. 
Reporting requirements are the primary mechanism to detect and 
deter such waste and abuse. Effective monitoring and 
enforcement cannot occur if the reporting system fails to 
provide all essential information regarding the plan's 
investments and possible prohibited transactions. As a result, 
the reporting system envisioned by Congress in 1974, when ERISA 
was passed, cannot serve its purpose of becoming the primary 
protection for pension plan participants.

 Opposing Labor Racketeering Needs to be a Priority at the Secretarial 
                                 Level

    Repeated reports of the Department of Labor Office of the 
Inspector General show that labor racketeering continues to 
plague American labor unions. In hearings before the Committee 
on Government Reform and Oversight on July 11, 1996, the 
current Inspector General said: ``Our investigations have also 
disclosed that labor racketeering is not the exclusive province 
of the more traditional La Cosa Nostra (LCN) crime families. 
Rather, there are many other organized groups that have 
infiltrated the workplace.'' \7\ Despite the criminal nature of 
this problem, the numerous instances of corruption and the 
magnitude of loss to union members, the Secretary and Deputy 
Secretary of Labor do not place sufficient priority on 
combating organized crime in labor unions. In fact, in response 
to recommendations of the Inspector General made on March 24, 
1995 regarding improvement of Departmental enforcement against 
racketeering, then-Deputy Secretary of Labor Thomas Glynn 
complained that developing coordinated Departmental criminal 
enforcement would be ``complicated . . . difficult, time-
consuming and costly. . . .'' \8\
    Despite the recommendations of the 1985 President's Task 
Force On Organized Crime, the work of the Secretary of Labor's 
1990 Enforcement Task Force, and more than 5 years of in-depth 
oversight by the Inspector General, Departmental enforcement 
activities remain weak, inconsistent and without an integrated 
approach to common criminal enforcement issues.
    The Office of the Inspector General examined six recent 
instances of union-related racketeering and fraud in its most 
recent semiannual report. These are a examples of egregious 
problems of corruption in labor unions today.

Marine Engineers Beneficial Association (MEBA)

    Three former officials of the Marine Engineers Beneficial 
Association of America, District #1 (MEBA / National Maritime 
Union) participated in a scheme to steal $2 million in union 
funds and engage in election fraud and extortion of political 
action fund contributions. These individuals also participated 
in a scheme to pay themselves phony severance payments when 
MEBA merged with the National Maritime Union. ``This 
investigation identified long-standing election fraud and 
coercive political action fund solicitation practices in the 
maritime industry. The investigation showed that the union 
officials sought only to benefit themselves . . . and failed to 
uphold the high calling of their union offices.'' \9\ (Emphasis 
in the original.)

General Building Laborers Union

    The former head of the General Building Laborers Local 66 
in New York reported that a member of the Luchese organized 
crime family participated in a conspiracy to steal millions in 
union welfare funds by inflating construction costs and 
kickbacks from contractors on the training center. In addition, 
this individual arranged for a fraudulent $4 million loan to 
finance the construction project. As a result, the lender has 
foreclosed on the union's recently built training center and 
Local 66's offices. ``[This union leader] used his position as 
a union leader to enrich himself, members of his family, and 
business associates at the expense of the union benefit fund 
and the union membership. Local 66 members are currently being 
taxed $1.00 per hour by the union to recover the money stolen . 
. . in an effort to keep the benefit fund solvent.'' \10\ 
(Emphasis in the original.)

International Longshoremen's Association

    The administrator for two union welfare funds embezzled 
more than $500,000 from the International Longshoreman's 
Association (ILA) in Jacksonville. This union official 
defalcated funds from the ILA's Welfare and Pension Fund and 
the local Container Royalty Fund. This plan covers 
approximately 1,000 members of the union. An assistant union 
administrator was also involved in the scheme to defraud the 
funds and the rank-and-file members. The officials issued 
themselves unauthorized bonuses and various other unauthorized 
payments. In addition, the two issued checks to themselves from 
the Royalty Fund totaling more than $307,000 which would 
otherwise have been distributed to longshoremen who had worked 
700 hours or more in the Port of Jacksonville. According to an 
ILA representative, ``the $307,000 embezzled from the Royalty 
Fund directly resulted in the loss of between $500 and $600 to 
each qualified union member who worked the Jacksonville 
waterfront.'' \11\ (Emphasis in the original.)

Chicago Truck Drivers, Helpers and Warehouse Workers Union

    The former president of the Chicago Truck Drivers, Helpers 
and Warehouse Workers Union (CTDU) engaged in racketeering by 
receiving over $416,000 in kickbacks and extortion payments in 
connection with $15 million in pension fund investments. In 
addition, this individual received over $140,000 in kickback 
payments for the fund's investment of $1 million in a coal 
project in Indiana. Kickback payments were then split with the 
union vice president, who was also the union's legal counsel 
and pension plan trustee. Again, these union officials used 
their office to benefit themselves at the expense of their 
union brethren and failed to uphold the public's trust and the 
high calling of union leadership. (Emphasis added.)

Allied Novelty and Production Workers Union

    The president of Joint Board 18 and Local 118 of the 
International Union of Allied Novelty and Production Workers, 
embezzled more than $125,000 from several different union 
funds. Two accomplices also participated in the scheme to 
defraud the union. The scheme involved the payment of 
construction project kickbacks on renovation of an office 
building. Funds were kicked back to the union officials through 
the help of one of the accomplices, an accountant. Once again, 
rank-and-file union members were victimized by corrupt union 
officials enriching themselves at the expense of honest union 
members. (Emphasis added.)

Fraudulent labor union scheme

    Two former officials of a now-defunct New York union local 
formed a union solely for the purpose of selling fraudulent 
health insurance to small employers. The individuals even went 
so far as to file union reporting and disclosure forms with the 
Department of Labor's Office of Labor Management Services 
(OEMS) but were still not discovered by the Department of Labor 
until they defrauded union ``members'' and employers of 
approximately $350,000 in kickbacks from insurance brokers who 
conducted business with phony welfare funds. This union welfare 
fund was placed under control of a court-appointed independent 
fiduciary when the fund had accumulated $6 million in unpaid 
medical claims from its members. Honest labor union member 
continue to be victimized by corrupt union leaders. (Emphasis 
added.)

              Davis-Bacon Act: Use of Fraudulent Wage Data

    Through mismanagement and the use of fraudulent wage data 
to inflate construction costs, the Davis-Bacon Act is adding 
hundreds of millions to the cost of Federal construction 
contracts. The Davis-Bacon Act, passed in 1931, requires that 
each contract for construction, alteration or repair of public 
buildings or works in excess of $2,000 to which the United 
States is party--or under 77 related laws in which the United 
States shares the financing--pay the prevailing wage. The Act 
was intended to discourage non-local contractors from 
successfully bidding on Federal Government projects by hiring 
cheap labor from outside the project area, thus disrupting the 
prevailing local wage structure.
    For many years, the General Accounting Office has called 
for the repeal of the Davis-Bacon Act, charging that changes in 
the economy, the construction industry, and the passage of 
other wage laws have made the Act obsolete.\12\ For the past 17 
years, the GAO has noted that the wage data used by the 
Department of Labor were inaccurate and inflationary. In 12 
wage areas where the GAO determined that rates were higher than 
prevailing wages, the higher wage costs ranged from a low of 5 
percent to a high of 123 percent.\13\ Estimated cost savings 
from repealing the Act range between $150 million \14\ to 
``several hundred million'' per year in unnecessary costs to 
American taxpayers.\15\ Charges of a vastly changed socio-
economic landscape and the Act's general inflationary effect 
continue to be true.
    In May 1996, the GAO confirmed that use of inaccurate wage 
data by the Department of Labor is a serious problem.\16\ The 
use of fraudulent wage data to inflate wages on Federal 
construction projects, particularly in the State of Oklahoma, 
has been documented in hearings before the U.S. Congress.\17\ 
Oklahoma completed an investigative report in 1994 on general 
wage decisions issued by the U.S. Department of Labor for heavy 
construction in Oklahoma County and several other counties in 
and around Oklahoma City. Cases were selected at random for 
investigation. In each of the first three cases investigated, 
the Oklahoma Department of Labor discovered elements of fraud--
fictitious projects and ghost employees--each of which had been 
perpetrated by interested parties and which had the effect of 
inflating wage rates for federally financed construction 
projects. The State has since uncovered nearly 100 cases of 
fraudulent activities in Davis-Bacon wage surveys.
    While the State of Oklahoma has made a concerted effort to 
eliminate fraud in the operation of the Act, it has encountered 
resistance by the United States Department of Labor in 
correcting the use of fraudulent wage data for use on federally 
financed construction projects. In late 1995, the DOL withdrew 
the prevailing wage determinations for two Oklahoma cities and 
referrals of the case were made to the Departmental Inspector 
General's Office and to the Criminal Fraud Division of the 
Department of Justice, but only after the 104th Congress had 
exposed the scandal. Missouri and Colorado are also in the 
process of investigating possible Davis-Bacon fraud in their 
States. When these investigations are completed we may find 
that Oklahoma's Davis-Bacon Act problems are symptomatic of a 
much larger nationwide problem.

 Debt Collection: Millions in Outstanding Debts Labor is Not Collecting

    The most recent semiannual report of the Inspector General 
for the United States Department of Labor covering the period 
October 1, 1995 through March 31, 1996 shows that the agency 
has failed to collect debts owed to it. As of March 31, 1996, 
the Department of Labor's beginning balance was $136,132,453 in 
collection with an additional $256,422,976 under appeal. Its 
ending balance totaled $348,606,848, which consisted of 
$84,543,034 in delinquent payments, $34,207,918 in current 
money owed and $229,855,896 in assessments, debts and fines 
under appeal. The Department of Labor ``wrote off'' nearly $11 
million as uncollectible. As a result of this and other large, 
outstanding debts, Congress passed the Debt Collection 
Improvement Act of 1996, to attempt to correct the root 
problems of this administration in failing to collect payments 
to the government.

   Balance of Interests Needed at the National Labor Relations Board 
                                 (NLRB)

    Despite the tradition of impartiality and even-handedness 
in administration of the National Labor Relations Act (NLRA), 
the President has nominated to the five-member National Labor 
Relations Board several individuals who advocate union 
positions to alter the balance in established labor law. The 
NLRB was established in 1935 to administer and enforce the 
National Labor Relations Act which was passed that year. Its 
primary function is to facilitate the exercise of workers' 
rights to form and join unions and bargain collectively, or to 
refrain there from. Congress intended that the NLRB perform as 
an impartial referee among frequently conflicting interests.
    On January 19, 1996, the President gave a recess 
appointment to Sarah Fox, former staff counsel to the 
International Union of Bricklayers and Allied Craftsmen, and 
Chief Labor Counsel to Senator Edward M. Kennedy (D-MA) when it 
was clear that she would not be confirmed by the Senate. This 
appointment brings to three the total number of partisan 
advocates on the five-member Board nominated by the President.
    In addition to Member Fox, these include Board member 
Margaret Browning, the former counsel to the Building and 
Constructions Trades Union and Chairman William Gould, a former 
professor of labor law, who has departed from Board tradition 
by testifying and making speeches advocating banning permanent 
replacements for economic strikers and defeating the worker-
management cooperation bill known as the TEAM Act.
    The President made a second recess appointment in August 
1996. This time to John Higgins, long-term Federal employee and 
now former-Acting Inspector General of the National Labor 
Relations Board. Despite these adverse odds, the public 
relations office at the NLRB hails the appointment of Mr. 
Higgins, who is being appointed as a Republican, as evidence of 
the ``agency's role as an impartial enforcer of the law'' \18\ 
There is one vacancy on the Board.

Election fraud

    In a clear example of bias, a senior level NLRB official 
continued directing that union elections be held at a food-
processing plant even though he knew that the union organizers 
seeking the election had committed ``massive fraud'' in the 
words of the Federal district court for the Eastern District of 
North Carolina.
    To obtain an NLRB election, a union must first file 
authorization cards collected from at least 30 percent of the 
workers expressing a desire to organize. At a Perdue Farms 
facility in Lewiston, North Carolina, the United Food and 
Commercial Workers Union (UFCW) filed 800 authorization cards 
claimed to have been signed by Lewiston workers. Half had been 
forged. After being told of the forgery, NLRB Regional Director 
Willie L. Clark dismissed objections and directed a third 
election, despite the fact that the union had been rejected in 
two earlier votes. The Federal district court then issued an 
injunction ordering Clark and the National Labor Relations 
Board not to hold further elections until such time as the FBI 
and other Federal agencies are given the opportunity to 
investigate.\19\
    This case raises serious questions about the relationship 
between certain employees of the NLRB and organized labor. It 
also raises questions about the current management in the NLRB 
and its leadership that may have created a climate encouraging 
misconduct. The NLRB is responsible for ensuring that union 
representation is a matter of employee choice.
    The UFCW petitioned the Board to conduct a representational 
election at the processing plant in Lewiston, in May 1995. The 
UFCW filed 800 authorization cards, which it claimed had been 
endorsed by plant workers. This number would surpass the 
required 600, 30 percent of the 2,000 employees. Nevertheless, 
on June 28, 1995, the union petition was rejected on a vote of 
952-851. In February, 1996, the NLRB Regional Director decided 
that Perdue Farms had violated an NLRB rule that was 
established after the June 28, 1995 election, and ordered a new 
election to be held.\20\
    Prior to that election, however, two UFCW organizers 
confessed to having forged 400 of the 800 authorization cards, 
under orders from the local UFCW president. This would have 
reduced the number of cards to only 400--200 short of the 
number required by law to hold elections. The NLRB ordered the 
second election to go forward. The union was defeated by an 
even larger margin, this time it was defeated on a vote of 947-
755. In April 1996, the company was informed by representatives 
of the Board that a third election would be held.
    In the intervening period, the U. S. District Court for the 
Eastern District of North Carolina issued a temporary 
restraining order against any further NLRB consideration of 
elections at Perdue until it had conducted an ``appropriate 
investigation'' of fraud charges--as required by the National 
Labor Relations Act--to the satisfaction of the court. The 
court said:

          The fraud allegations are as compelling of [the need 
        for] an investigation as might ever be imagined, and 
        yet the NLRB has admittedly failed to meet this bare-
        minimum standard (i.e. NLRB case-handling 
        guidelines).\21\

    The new leadership of the AFL-CIO has made membership a top 
priority. As it devotes staff and resources into increasing its 
membership, the NLRB ought to assure the public that any 
membership increases are the result of choice by workers rather 
than coercion from Government agencies. This case raises 
serious doubt that American workers can depend on the Board for 
protection against coercive unionization. The court observed:

          The public interest in holding free and fair 
        elections is beyond question. Employers and employees 
        alike are ill-served by appearances that their public 
        servants are unwilling to investigate substantial 
        allegations of massive fraud in labor elections. The 
        public desires to know that its rights to democratic 
        representation will be ensured by those charged with 
        keeping the election process honest.\22\

Weakening the right to secret ballot elections

    Despite objections from its Regional Director, the National 
Labor Relations Board, in Shepard Convention Services v. NLRB, 
attempted to deny workers the right to a secret ballot 
election. The NLRA generally guarantees workers the right to a 
secret ballot election. Occasional absentee ballots are allowed 
for extraordinary cases, such as long-haul truckers who tend 
not to be in the same location long enough to vote in 
elections. In the past, the NLRB argued against using absentee 
or mail-in ballots because participation, according to NLRB 
statistics, was low. Activists tend to take the time to fill 
out the forms, rather than all workers and the likelihood for 
coercion from the employer or union is greater.
    The leadership of the AFL-CIO is opposed to secret-ballot 
elections and has advocated basing representation solely on the 
basis of authorization cards obtained by its organizers. In 
secret ballot elections, workers support the union between 50 
to 60 percent of the time. The AFL-CIO, as a means of 
increasing its wins, supports basing representation on signing 
authorization cards which are passed around the workplace by 
organizers.
    Chairman of the National Labor Relations Board, William 
Gould, has made statements to the effect that he could 
tentatively accept the arguments of some unions in favor of a 
wider use of the postal or mail ballots in NLRB conducted 
elections. The secret ballot election can still be undermined, 
sub silentio, through promoting the use of mail-in ballots, and 
that is what occurred in the Shepard Convention Services case.
    This case gave the Board an opportunity to expand the use 
of circumstances under which mail balloting was permissible, 
and the Board ordered such ballots. Of a total of 438 employees 
eligible to cast votes, 17.5 percent, or 77 cast valid ballots. 
Between two unions, 40 employees supported one union, 23 
workers supported the second union and five employees voted for 
no union. The NLRB legitimated the election on the basis of the 
11 percent of employees who supported the first union.
    The Court of Appeals said, ``Had the Board left the 
[regional director's] decision intact, as its regulations 
required, voter turnout might well have been higher.'' \23\ It 
could hardly have been lower. The court further found that the 
NLRB ``undertook to second-guess the Regional Director in 
violation of its own regulations.'' \24\ As such, the court 
struck down the attempt by the NLRB to deny rank and file 
workers their right to a secret ballot election.

                                ENDNOTES

    \1\ General Accounting Office, Multiple Employment Training 
Programs, Major Overhaul Is Needed, Testimony of Clarence C. 
Crawford (March 3, 1994).
    \2\ General Accounting Office, Job Training Partnership 
Act: Long-Term Earnings and Employment Outcomes, GAO/HEHS-96-40 
(March 1996).
    \3\ General Accounting Office, Job Training Partnership 
Act, Long-Term Earnings and Employment Outcomes, GAO/HEHS-96-40 
(March 1996).
    \4\ U.S. Department of Labor, Office of the Inspector 
General, Semiannual Report to the Congress, October 1, 1995 
through March 31, 1996.
    \5\ General Accounting Office, Employee Benefits, Improved 
Plan Reporting and CPA Audits Can Increase Protection Under 
ERISA, GAO/AFMD-92-14, p. 3.
    \6\ U.S. Department of Labor, Pension and Welfare Benefits 
Administration, Assessment of the Quality of Employee Benefit 
Plan Audits, 1996 draft, p. 3.
    \7\ Testimony of Charles C. Masten, Inspector General U.S. 
Department of Labor, Before the Subcommittee on Human Resources 
and Intergovernmental Relations, Committee on Government Reform 
and Oversight, U.S. House of Representatives, July 11, 1996, p. 
1.
    \8\ Memorandum from Deputy Secretary of Labor Thomas Glynn 
to Inspector General Charles C. Masten, ``Final Status Report 
on Efforts to Improve Departmental Criminal Enforcement 
Programs, Report No. 17-95-005-50-598,'' February 14, 1996.
    \9\ United States Department of Labor, Office of the 
Inspector General, Semiannual Report to the Congress, October 
1, 1995-March 31, 1996, p. 22.
    \10\ Id., p. 23.
    \11\ Id., p. 25.
    \12\ General Accounting Office, GAO-HRD-79-18, The Davis-
Bacon Act Should Be Repealed.
    \13\ Id.
    \14\ Citizens Against Government Waste, 1995 ``Prime Cuts'' 
Summary Fifty Ways to Leaner Government.
    \15\ General Accounting Office, GAO-HRD-79-18, The Davis-
Bacon Act Should Be Repealed.
    \16\ General Accounting Office, GAO/HEHS-96-130, Davis-
Bacon Act: Process Changes Could Raise Confidence That Wage 
Rates Are Based on Accurate Data (May 31, 1996).
    \17\ Testimony of Brenda Reneau, Oklahoma Labor 
Commissioner, Before the U.S. House of Representatives, 
Committee on Economic and Educational Opportunities, June 20, 
1996.
    \18\ As reported in the Bureau of National Affairs, Daily 
Labor Reporter, ``White House Selected John E. Higgins To Fill 
NLRB Vacancy As Recess Appointee'', September 4, 1996, p. A-9.
    \19\ Perdue Farms v. N.L.R.B., No.2: 96-CV-27-BO(1) July 
23, 1996.
    \20\ Perdue Farms v. N.L.R.B., No.2: 96-CV-27-BO(1) July 
23, 1996.
    \21\ Perdue Farms v. N.L.R.B., No.2: 96-CV-27-BO(1) July 
23, 1996.
    \22\ Perdue Farms v. N.L.R.B., No.2: 96-CV-27-BO(1) July 
23, 1996.
    \23\ Shepard Convention Services, Inc. v. N.L.R.B., 85 F.3d 
671, p. 675 (D.C. Cir 1996).
    \24\ Shepard Convention Services, Inc. v. N.L.R.B., 85 F.3d 
671, p. 674 (D.C. Cir. 1996).

             National Aeronautics and Space Administration

                                Overview

    The National Aeronautics and Space Administration (NASA) 
was established in 1958 as the Federal agency responsible for 
the exploration of space with manned and unmanned vehicles and 
the research of flight within and outside the Earth's 
atmosphere. NASA also arranges for the utilization of American 
scientific and engineering resources with other nations engaged 
in aeronautical and space activities for peaceful purposes. 
NASA's budget is $13.693 billion, and the agency has a staff of 
21,300.
    NASA has serious problems using funds as effectively as 
possible. The agency wastes millions of dollars on poor 
property controls, unnecessary spending on agency aircraft and 
data archive centers, and shuttle maintenance that could be 
performed more efficiently.

NASA Lacks Property Controls While Lending Property to Employees at the 
                     Jet Propulsion Laboratory \1\

    The Jet Propulsion Laboratory is a research and development 
center whose sole purpose is the exploration of the solar 
system. It is a division operated by the California Institute 
of Technology. With a cost of approximately $1 billion, this 
government-owned facility is employs 6,400 people. According to 
the General Accounting Office, NASA's equipment at the Jet 
Propulsion Laboratory is poorly controlled.\2\ Only one person 
at NASA's Management office is assigned the responsibility of 
overseeing the property control system at the Jet Propulsion 
Laboratory.
    A property control system is required by the Federal 
Acquisition Regulation. In addition to regulations on lending 
property to employees in the Federal Acquisition Regulation, 
NASA has even more stringent regulations regarding the loaning 
of property. These regulations allow for the loaning of 
property only on a temporary basis and only for mission work or 
``other government purposes.'' In addition, no equipment may be 
purchased for the sole purpose of loaning it.
    As of September 1993, 4,000 pieces of equipment were on 
loan to employees of the Jet Propulsion Laboratory. Ninety-six 
percent of this property was computer equipment valued at 
approximately $7.6 million. This represents a 40 percent 
increase in loaned property in just 2 years.\3\
    The computer equipment loaned included 150 laser printers, 
color monitors, modems, and approximately 250 laptop computers. 
In addition to computer equipment, a wide variety of other 
equipment was on loan, including cellular telephones, telephone 
answering machines, video cassette recorders, televisions, 
cameras and camcorders. Management officials told the General 
Accounting Office that the system of lending equipment relied 
on trust, although they knew that much of the equipment was for 
the personal use of the employees.\4\ Property is being 
purchased for the sole purpose of lending to employees and is 
routinely held by the employees for more than 2 years. The 
General Accounting Office cites several examples of the abuse 
apparent at the Jet Propulsion Laboratory: \5\
     One scientist has custody of three lap-top 
computers, valued at more than $18,000. He attests that one of 
the computers is rarely used, and is kept in case one of the 
other computers fails.
     One analyst admits that she keeps a computer, 
monitor and printer solely for word processing, and has no work 
requirement for the computer.
     Another scientist keeps a computer valued at more 
than $5,000, although he rarely uses it.
    Jet Propulsion Laboratory lending practices are in direct 
contravention of NASA's expressed property regulations. Indeed, 
there appears to be little policy in conformity with the 
Federal Acquisition Regulation. At a value of $7.6 million, the 
Jet Propulsion Laboratory lends too much property to its 
employees, and for the wrong reasons.

Performing Shuttle Maintenance in Florida Would Save Americans Hundreds 
                            of Millions \6\

    Today, regular maintenance on the space shuttles is 
performed in Palmdale, CA. The shuttles operate largely from 
Kennedy Space Center in Cape Canaveral, FL. The extra expense 
of moving the shuttles to California for regular maintenance is 
prohibitive.
    Each space shuttle must undergo structural inspections 
every 3 years. Each of these inspections is done at the 
Palmdale facility and performed by the Rockwell Corporation. 
Primary shuttle operations are kept at the Kennedy Space Center 
and performed by the Lockheed Company. According to NASA's 
Inspector General, the shuttle program could save $30 million 
in maintenance costs each year and $480 million over the life 
of the program.\7\
    Performing maintenance inspections at Palmdale requires 185 
contractors at $8.6 million. An additional $25.8 million in 
extra costs brings the total cost of maintenance at Palmdale to 
$34.4 million. To perform the maintenance at Kennedy Space 
Center, the cost would be only $8.8 million.\8\
    Maintenance of the shuttles at Kennedy Space Center would 
eliminate the costs associated with ferrying the vehicles to 
and from Palmdale, California. Fuel costs and flight servicing 
costs total $4.1 million. Costs for the transportation and per 
diem of employees required for the transport total $300,000. 
These costs would be avoided if maintenance were done in 
Florida, and maintenance time would be reduced by 4 months.\9\

   NASA's Distributed Active Archive Centers, Which House the Earth 
Observing System Data and Information System, Expend Funds in Violation 
                      of Congressional Intent \10\

    The goal of the Earth Observing System (EOS) program is to 
promote scientific understanding of the Earth's system on a 
global scale. The Earth Observing System Data and Information 
System (EOSDIS) is an element of the Earth Observing System and 
serves as the mechanism for generating, archiving, and 
distributing Earth Science data. Distributed Active Archive 
Centers (DAAC) are located at institutions or facilities that 
have expertise and ongoing research in specific Earth science 
disciplines and have been selected to carry out the 
responsibilities for processing, archiving, and distributing 
EOS and related data.
    Although the budget for the EOS program has been reduced 
from $17 billion in 1991 to $7.25 billion in 1994, funding for 
the DAAC's has increased by 16 percent, from $254.9 million in 
1993 to $295.9 million in 1995. The number of DAAC's has 
increased from seven to nine, and NASA has allowed some to 
expand their facilities. NASA must scale back the program to 
conform with the reality of fiscal austerity.\11\
    Further, DAAC's have been expending funds beyond their 
legislative mandate. The 1994 Conference report of the 
Appropriations for the Departments of Veterans Affairs, Housing 
and Urban Development, and Sundry Independent Agencies, Boards, 
Commissions, Corporations and Offices, states that ``NASA is 
directed . . . to provide no funds for the construction of non-
NASA facilities.'' \12\ Because DAAC's are supposed to use the 
existing facilities of their host institutions, there is no 
budgetary intent to build new facilities. Nonetheless, seven of 
the nine DAAC's have used NASA funds to build or rent expanded 
facilities. Two DAAC's have built new facilities; five are 
leasing facilities. This is a clear violation of congressional 
intent.
    In one instance DAAC funds were used to expand the Earth 
Resources Observation System Data Center, a Department of the 
Interior project. In 1994, the Center spent $600,000 in NASA 
funds, and plans to spend another $4.2 million by 1998.\13\ 
Other DAAC's, including those managed by the Marshall Space 
Flight Center and the Alaska Synthetic Aperture Radar Facility, 
leased facilities with DAAC funds. Today, Marshall Space Flight 
Center, having left an offsite facility, leases part of a 
building in contravention of congressional intent, and pays a 
disproportionate amount of the rent.\14\
    The Earth Observing System must be reconfigured to meet 
current budgetary constraints, and NASA must conduct better 
oversight of the funds which exist to perform specific, 
congressionally mandated functions. Otherwise, the program will 
be left with little or no funds with which to conduct 
operations.

            NASA Mismanages Use of Government Aircraft \15\

    NASA has approximately 160 airplanes. The cost of operating 
these aircraft in fiscal year 1992 was approximately $93 
million. NASA has a poor record of using these aircraft in an 
economical fashion.
    NASA aircraft was used on numerous occasions at a higher 
cost than using commercial airlines. The NASA Inspector General 
estimates that travel using seven of the eight mission 
management aircraft cost $5.8 million more than commercial 
flights would have cost. At a value of $10.6 million, the 
aircraft could have been sold and the money used for other 
purposes. For every mission management aircraft reviewed by the 
Inspector General, the cost of commercial aircraft would have 
been considerably less than NASA aircraft.
    In another example of NASA's poor management of its fleet 
of airplanes, the Inspector General notes that NASA assumed a 
lease of a DC-9 for more than it cost to purchase an aircraft. 
NASA did not perform a lease versus purchase analysis to 
determine how much the decision to lease would cost. The 
Inspector General estimates that NASA could have purchased the 
aircraft for $1.75 million less than it will spend to lease the 
same aircraft.
    NASA should implement better management policies to deal 
with its aircraft and enforce those policies already in place. 
Further, NASA should use commercial air travel whenever 
practical.

                                ENDNOTES

    \1\ General Accounting Office, Report to Congressional 
Requesters, ``NASA property: Poor Lending Practices at the Jet 
Propulsion Laboratory,'' Report Number NSIAD-94-116, April 18, 
1994.
    \2\ Id., p. 1.
    \3\ Id., p. 4.
    \4\ Id., p. 6.
    \5\ Id., p. 9.
    \6\ Inspector General, National Aeronautics and Space 
Administration, ``Impacts of Performing Orbiter Maintenance 
Down Periods at KSC Versus Palmdale,'' Report Number KE-96-001, 
October 24, 1995.
    \7\ Id., p. 1.
    \8\ Id., pp. 10-11.
    \9\ Id., p. 11.
    \10\ Inspector General, National Aeronautics and Space 
Administration; ``EOS Data and Information System: Distributed 
Active Archive Centers;'' Report Number GO-96-001; March 19, 
1996.
    \11\ Id., p. 12.
    \12\ Id., p. 37.
    \13\ Id., p. 37.
    \14\ Id., p. 39.
    \15\ Inspector General, National Aeronautics and Space 
Administration; ``NASA Aircraft Management;'' Report Number LA-
95-001; March 28, 1995.

                     Office of Personnel Management

                                Overview

    The Office of Personnel Management (OPM) administers a 
merit system for Federal employment that includes recruiting, 
examining, training, and promoting people on the basis of 
knowledge and skills, regardless of their race, religion, sex, 
political influence, or other nonmerit factors. The Office's 
role is to ensure that Federal employees provide the highest 
quality products and services to the American public. Through a 
range of programs designed to develop and encourage the 
effectiveness of the Federal employee, the Office supports 
government program managers in their personnel management 
responsibilities and provides benefits to employees and to 
retired employees. OPM employs 4,210 staff and has an annual 
budget of $40 million.
    The recent management problems within OPM include gross 
mismanagement of the buyout program authorized by Congress 
including illegal buyouts, privacy violations, manipulating 
work force downsizing, underfunding of the civil service 
pension system and lobbying on official (government) time.

                  Illegal Buyouts To Federal Employees

    The Office of Management and Budget (OMB) approved illegal 
buyout payments to 217 Federal employees, amounting to more 
than $5 million in losses to the Treasury. OMB authorized an 
additional 1,200 illicit buyouts, which could have cost as much 
as $30 million more. These were halted after the Subcommittee 
on Civil Service investigative hearings held on May 23 and June 
11, 1996. Responsibility for this action rests directly with 
the Deputy Director for Management at the Office of Management 
and Budget who permitted extension of the buyout program in 
clear violation of law.
    The Federal Workforce Restructuring Act of 1994 required 
that buyouts paid to Federal employees be approved no later 
than March 31, 1995. After the buyout authority expired, the 
Department of Energy devised a legal opinion that twisted the 
clear language of the statute to give the appearance that 
agencies might be able to extend buyout offers for as long as 
another 2 years. On October 4, 1995, OMB Deputy Director for 
Management John Koskinen approved Energy's plan to extend 
additional buyout authority.\1\
    OMB subsequently allowed both the Department of Commerce 
and the Department of Transportation to issue additional 
illegal buyouts. Congress first learned of these extended 
buyouts in a Washington Post column of May 2, 1996. The 
Subcommittee on Civil Service conducted hearings on May 23, 
1996, and June 11, 1996 to assess the authority and the extent 
of these buyouts. Amazingly, the Department of Commerce 
conducted a 1-day extension of buyout offers during the first 
day of these hearings.
    The GAO provided a June 6, 1996, legal opinion for the 
subcommittee that refuted the Department of Energy's opinion 
\2\ that extending buyouts would comport with the law. After 
the June 11, 1996 hearing, OMB agreed that no additional 
buyouts would be approved using this Department of Energy 
opinion.

                 Invasions Of Federal Employee Privacy

    In clear violation of privacy concerns, the Office of 
Management Budget and Office of Personnel Management has given 
Federal labor unions access to employees' home addresses. 
Alleging that Federal employee unions were unable to 
communicate with employees in bargaining units during the 
government shutdowns, then-OMB Director Alice Rivlin wrote to 
AFGE National President John Sturdivant to commit all Federal 
agencies to provide employees' home addresses to the unions 
claiming them as members.\3\ The Office of Personnel Management 
complied swiftly.
    The Subcommittee on Civil Service received numerous phone 
calls from Federal employees who did not want the unions to 
have their home addresses, and claiming that OPM's compliance 
opened the door to unwarranted invasions of privacy. One 
employee claimed that she had secured court orders to prevent 
an abusive former husband from learning her home address, and 
she feared that he would be able to get this information from 
friends in the local union. Other employees claimed that, once 
the unions have the addresses, nothing could stop them from 
using them improperly, for example for mailing partisan 
election material.
    OPM has asserted that the unions have described a valid 
purpose for seeking the information, but has ignored the 
privacy concerns of its employees. In view of the fact that 
both in the aggregate and in many bargaining units, unions 
represent a minority of Federal workers OMB and OPM ought never 
to have permitted this invasion of privacy. And unions already 
have the home addresses of Federal employees who have chosen to 
be their members. Once this threshhold has been crossed, 
Federal workers could find a great number of otherwise 
protected information released, without their express 
permission, to the unions. Will OMB and OPM release home phone 
numbers to the unions so that nonmembers can be solicited for 
political contriutions at their homes? Will the unions have 
access to Federal employee's performance evaluations? This 
action constitutes gross mismanagement and abuse of the 
discretionary authority of both OMB and OPM.

          Manipulating the Downsizing Of The Federal Workforce

    The Federal Workforce Restructuring Act of 1994 required 
the elimination of 272,900 full-time equivalent positions from 
the Federal civilian work force by 1999. These reductions were 
to be achieved by generally downsizing the Federal Government 
and specifically targeting administrative and supervisory 
positions. NPR claimed that technological and procedural 
improvements could allow for the elimination of many 
accounting, administrative, budgeting, procurement, personnel, 
and first-level supervisory positions. NPR targeted reductions 
of 50 percent of personnel performing these functions at all 
agencies.
    The administration is generally exceeding its aggregate 
work force reduction targets. Through 1996, however, three-
quarters of the work force reductions come from the Department 
of Defense. The DOD reductions result from the congressionally 
mandated Base Realignment and Closure Commission (BRAC) and not 
from reinventing government. For fiscal year 1997, the 
President's budget, proposes a 2,000 FTE increase in non-
Defense agencies. As a result, at the end of fiscal year 1997, 
Defense cuts will account for more than 80 percent of Federal 
personnel reductions in the Clinton administration. This 
constitutes a hollowing of the Department of Defense at a time 
when the President has crises simmering in Bosnia, Iraq, North 
Korea, Taiwan, Cuba, Haiti, Chechnya and the Middle East, to 
name a few.
    The General Accounting Office has reviewed the work force 
reduction targets set by the NPR, and concluded that agencies 
both established lower targets than NPR and failed to meet 
their own targets. GAO documented that many of the 
administrative functions that were to have been reduced, have 
increased as a portion of the work force.\4\ Although the 
administration has written and spoken about its proposals to 
close offices, eliminate functions, and reduce duplication, OMB 
testified before the Subcommittee on Civil Service at the June 
11, 1996 hearing on buyouts, that it has not tracked the FTE 
reductions associated with its proposals and that there is no 
efficient method of gathering such information.\5\
    Agencies claim that NPR recommendations could not be 
applied rigidly, and each has distanced themselves from NPR 
targets. The administration also claims that attempts to close 
offices and activities have been impeded by Congress.

                   Inept Management Of Buyout Program

    The Federal Workforce Restructuring Act of 1994 authorized 
agencies to pay ``voluntary separation incentive payments,'' 
(buyouts) to reduce the Federal work force. OPM testified 
before the Subcommittee on Civil Service that, as of March 31, 
1996, Federal agencies paid more than 110,500 buyouts to former 
Federal employees. Ironically, nearly 90 percent of buyouts in 
non-Defense agencies went to employees who were already 
eligible for either optional or early retirement, and therefore 
employees who took buyouts moved directly from collecting a 
salary to collecting pensions, with a $25,000 bonus. This 
transition cost taxpayers more than $2.8 billion.
    There are abundant indications that the money was not well 
spent. Although the law required a position to be cut for each 
buyout used, reductions did not necessarily come from the 
agency using the buyout. The bulk of reductions in the Federal 
work force came from the Department of Defense. For other 
agencies, buyouts had little relation to work force cuts. The 
Department of Justice used 835 buyouts while increasing its 
work force by more than 7,000 FTE. The Department of the 
Treasury used 346 buyouts while increasing more than 200 FTE in 
1995. EPA bought out 487 permanent employees in 1995 while 
reducing fewer than 100 positions.
    Worse than not achieving work force reductions, the buyouts 
have not accelerated retirement rates beyond 3 percent of the 
work force per year--a historical attrition average that is 
considerably below the 10 percent attrition rate that private 
firms rely on to manage normal work force changes. The buyouts 
have nurtured a sense of entitlement among the work force, and 
the Subcommittee on Civil Service of the Committee on 
Government Reform and Oversight has received numerous calls 
from Federal employees who resent not having gotten ``their'' 
buyout, who ``threaten'' not to leave until they get one, or 
who allege that the buyouts offered by managers were allocated 
on an arbitrary, capricious, or malicious basis.

                 OPM Not Utilizing Performance Measures

    The Office of Personnel Management is not using performance 
measures and standards to manage the delivery of service it 
provides, nor of the performance and productivity of its 
workers. Civil Service Reform Act of 1978 recognizes the need 
for performance measures and emphasizes that, when feasible, 
organizational and individual performance should be appraised 
in terms of timeliness, quality and efficiency. The Government 
Performance and Results Act of 1993 (GPRA) also requires that 
OPM set performance goals, develop a strategic plan and measure 
its performance toward achieving those goals beginning in 
September 1997.
    To help ensure that operations are managed properly and 
customers are served satisfactorily, an organization needs 
performance measures and standards against which to judge 
itself. The General Accounting Office has reported that many 
key OPM services lack the full range of potential performance 
measures and standards. The quality of services provided by 
some sections of OPM is uneven, making the implementation of 
performance measurement even more important.\6\
    In the past, OPM has tended to measure its inputs or 
activities, rather than its outcomes, or performance. Measuring 
inputs, rather than outcomes has applied even at the level of 
individual performance evaluations. OPM employees have been 
judged by how many forms or applicants are processed, rather 
than by a combination of how well forms are filled out or the 
caliber of applicants chosen for jobs and the speed with which 
clearances were processed.
    OPM could realize substantial performance improvement by 
systematically analyzing its performance data, but it will have 
no data to examine unless greater attention is given--at the 
Director's level--to implementing the GPRA. The agency is 
seriously behind schedule in implementing the Act, in 
developing performance measures that can be validated, in 
consulting with Congress on its goals and on drafting its GPRA 
performance plan. Actions taken to date on GPRA show an 
unacceptable lack of commitment to implementing the Act and 
preparing for performance management and performance budgeting 
stages of the Act. While OPM is attempting to restructure some 
of its operations, the entire organization could benefit from 
the discipline that performance measurement and performance 
plans could impose.
    To date, OPM has made little progress in addressing the 
concerns raised by the GAO over its use of performance 
measures. Currently the agency has focused a great deal of its 
resources toward measuring program and service success through 
customer service surveys. That action is insufficient to meet 
the most fundamental requirements of the GPRA. The American 
public--and Federal employees and annuitants--deserve to know 
how effectively personnel programs are being operated.

 Financial Management Problem: Underfunding of the Federal Retirement 
                                 System

    The Federal pension system consists of two programs, the 
Civil Service Retirement System (CSRS) which covers Federal 
employees hired prior to 1984, and the Federal Employees 
Retirement System (FERS) covering employees hired after 1984. A 
total of 2.8 million active individuals participate in the 
systems, with 1.5 million individuals are covered by CSRS and 
1.3 million individuals are in FERS. Currently 2.3 million 
individuals receive annuities. CSRS has 2.2 million annuitants 
and survivors and FERS has approximately 48,000. The current 
Federal work force consists of approximately 2 million workers, 
or 300,000 fewer than there are retirees.
    The Federal Civil Service Retirement System is seriously 
underfunded. The General Accounting Office reports that benefit 
obligations of the CSRDF and other Federal plans have a $1.2 
trillion liability.\7\ According to the Office of Personnel 
Management's 1995 Annual Report on the Civil Service Retirement 
and Disability Fund (CSRDF) in 1996, the outlay for monthly 
payments for retirees of the Federal Government is estimated to 
be $39 billion. For the same period, cash receipts into the 
Fund were estimated to be $10 billion (including receipts from 
the Postal Service), or $29 billion less than were deposited in 
the fund. Transfers from the General Treasury make up the 
difference. Federal annuities are projected to grow, while cash 
receipts will stay relatively the same. In 2025, cash received 
by the Fund is estimated to total only $3.6 billion, but 
outlays will grow to $166.2 billion. And by 2035, cash receipts 
will be $5.6 billion while outlays will exceed $218 billion. 
This increasing burden on the overall financial stability of 
the Federal retirement system signals a serious financial 
management problem for the government.
    A principal effect of underfunding most pension plans is 
that agencies' budgets have not included the full cost of their 
pension obligations. This is changing because the Federal 
Accounting Standards Advisory Board issued an exposure draft 
entitled, Accounting Liabilities of the Federal Government 
(November 7, 1994). It will require that the accrued liability 
of Federal Government defined benefit pension plans, such as 
those in CSRDF, be reflected in Federal Government financial 
statements. The funded status of Federal pension funds is of 
great concern because of the large number of dedicated--both 
currently employed, retired employees and their survivors--who 
depend on these funds for income maintenance. Ironically, the 
same Federal Government that owes $1.2 trillion on its pension 
plans requires private sector plans to fully fund their 
pensions, not just with promises to pay, but with real assets.
    As Federal retirement programs are scrutinized, equity 
among workers and retirees must be a guiding principal. Any 
changes in the programs have an impact on employee and retiree 
morale, upon recruitment and retention of a talented and 
experienced Federal work force, and the the government's future 
capacity to provide the vital services performed by its 
employees.
    The past 4 years have been a seesaw for Federal employees, 
retirees and their survivors. Federal workers and the survivors 
of retirees have been unable to have any confidence in the 
stabilty of either their employment, or their retirement 
system. The formation of FERS was supposed to reform these 
defects and achieve stability. Unfortunately, as a result of 
the budget deficit, and now of the requirement that agencies 
show their unfunded vested liabilities on their budgets, the 
size of the Federal retirement system's unfunded liability will 
make it an enduring concern in efforts to balance the Federal 
budget.

  Use of Official Time By Unions for Lobbying: A Conflict of Interest

    Federal employees are Congress, while on official 
government time. Current law, at 18 U.S.C. 1913, specifically 
prohibits lobbying with appropriated money.
    To allow Federal employees or unions to lobby, recruit or 
distribute propaganda on taxpayer time creates a conflict of 
interest between unions, the President, and the Congress, which 
undermines the nonpartisan character of the Federal civil 
service. Unfortunately, that statute, is ignored and unenforced 
in the current administration. Instead, because of title 5 
U.S.C. section 7131 (d), lobbying on official time is 
increasing and in fact, being mandated as a provision in agency 
collective bargaining agreements. Title 5 U.S.C. section 
7131(d) contains a broad clause that is being interpreted to 
permit unions and any bargaining unit employee represented by 
the union to be granted official time (government time) to 
engage in ``any other matter covered by [5 U.S.C. Chapter 71, 
Labor-Management Relations]''. Section 7131(d) has been 
interpreted to include lobbying on government time.
    For example, in 1993, the Federal Labor Relations Authority 
found that a union's proposal for official time to lobby 
Congress was negotiable. The FLRA ruled that the activity of 
``visiting, phoning and writing to elected representatives in 
support of or opposition to legislation which could affect the 
working conditions of the employees represented by the union'' 
was a ``representational activity'', and that providing 
``official time for representational activity involving the 
exercise of employee rights . . . was negotiable under section 
7131(d)'' of the Federal Service Labor-Management Relations 
Statute.\8\ More recently, in December 1995, the Federal 
Service Impasses Panel (FSIP) summarily dismissed 18 U.S.C. 
1913 as a bar to direct union lobbying on government time, and 
ordered the defendant agency to include in its collective 
bargaining agreement a provision that permits the Federal union 
officials to lobby Congress without having to take leave.\9\
    To permit lobbying on official time is in direct violation 
of 18 U.S.C. 1913 and the Director of the Office of Personnel 
Management should immediately direct the FLRA and the FSIP to 
enforce that section of the U.S. Code. Federal employees and 
unions have every right to present their views to Congress or 
the executive branch, but it is wrong to compel taxpayers to 
subsidize lobbying activities when these employees should be 
working.

 Ex-imbank Abuse of Personnel Management Systems Related to Retention 
                          Bonuses and Buyouts

    Federal civil service law authorizes agencies to pay 
retention bonuses to uniquely skilled employees who would be 
difficult (and costly) to replace. This authority is not used 
extensively. A December 1995 GAO report \10\ documented that 
only 374 retention bonuses were authorized by all government 
agencies in 1994; with 248 at the Department of Defense and 100 
at the Export-Import Bank. This made the Export-Import Bank's 
use of the retention bonuses disproportionate to all other 
Federal agencies.
    In response to the GAO report, the Office of Personnel 
Management intervened and temporarily withdrew the Export-
Import Bank's authority to award retention bonuses. OPM 
determined that the procedures used to approve these bonuses 
were inconsistent with regulations. OPM restored the delegated 
authority after it was satisfied that the Export-Import Bank 
had revised its procedures.
    Additional research by the Subcommittee on Civil Service of 
the House Government Reform and Oversight Committee, revealed 
that, in four instances, the Export-Import Bank paid retention 
bonuses to people who also were paid buyouts. In three of the 
four cases, the retention bonuses were approved after the 
buyouts were authorized.
    Martin Kamark, Acting President of the Export-Import Bank 
was reported to have argued that GAO had merely found a long-
standing abuse of the payroll system and that he was correcting 
problems left over from the previous administration. GAO's 
report, however, demonstrates that the Export-Import Bank did 
not begin paying such retention bonuses until 1994.\11\

    Conversion Of Political Appointees In Violation Of Merit System 
                              Principles.

    In violation of the principles of a merit system, Office of 
Personnel Management Director Jim King created a new position, 
Director, Partnership Council, and filled the vacancy by 
appointing Chief of Staff Michael Cushing to the job. Cushing's 
previous experience had been in political positions in the 
Federal Government. And, he had a long-standing political and 
professional relationship with the Director. Although the 
responsibilities of the office emphasize a political priority 
of the administration, the position was created and filled as a 
career appointment, suggesting an effort to improve this 
administration's strategy for labor-management relations on 
future administrations. This is a clear act of ``burrowing in'' 
the Federal service, an action to which the Clinton 
administration and the previous Congress objected bitterly at 
the conclusion of the previous administration, and took legal 
action against some converted employees. It is also highly 
suspect that political and personal favoritism may have 
factored into this conversion from a political to a career job.

                                ENDNOTES

    \1\ Memorandum for OMB Deputy Director for Management John 
Koskinen, from Gary Bennethum, Energy Branch Chief, and Cyndi 
Vallina, Policy Analyst, ``Subject: DOE Buyout Reprogramming'' 
(September 28, 1995). This memo is part of the Subcommittee on 
Civil Service's June 11, 1996 hearing record. Director 
Koskinen's initials approving this memo are dated October 4.
    \2\ General Accounting Office, ``FEDERAL DOWNSIZING: 
Delayed Buyout Policy At DOE is Unauthorized'' (June 11, 1996). 
GAO/T-GGD/OGC-96-132. The legal opinion letter dated June 6, 
1996.
    \3\ Letter from Alice M. Rivlin, Director, OMB to Mr. John 
Sturdivant, President, American Federation of Government 
Employees (March 21, 1996).
    \4\ General Accounting Office, ``FEDERAL DOWNSIZING: Better 
Workforce and Strategic Planning Could Have Made Buyouts More 
Effective,'' GAO/GGD-96-62, August, 1996.
    \5\ John A. Koskinen, testimony before the Subcommittee on 
Civil Service Hearing (June 11, 1996).
    \6\ General Accounting Office, Federal Management: Updated 
Information for Congressional Oversight, Office of Personnel 
Management, pages OPM-5-OPM-7, July 1994.
    \7\ General Accounting Office, Public Pensions: Summary of 
Federal Pension Plan Data, GAO/AIMD-96-6, February 1996.
    \8\ NFFE, Local 122 v. U.S. Department of Veteran's 
Affairs, 47 FLRA 118 (1993).
    \9\ Department of Defense, Nevada National Guard, Carson 
City, Nevada and Silver Barons and Silver Stage Chapters, 
Association of Civilian Technicians, Case Nos. 95 FSIP 147 and 
95 FSIP 148 (December 28, 1995).
    \10\ General Accounting Office, Retention Allowances: Usage 
and Compliance Vary Among Federal Agencies, GAO/GGD-96-32.
    \11\ General Accounting Office, Retention Allowances: Usage 
and Compliance Vary Among Federal Agencies, GAO/GGD-96-32, p. 
5.

                             Postal Service

                                Overview

    The U.S. Postal Service is a $59 billion independent 
establishment of the executive branch. In addition to postal 
revenues, it receives an annual appropriation of about $100 
million. As of November 1995, the Postal Service had 855,471 
employees. The basic function of the Postal Service is to 
provide postal services to bind the Nation through the 
personal, educational, literary, and business correspondence of 
the people.\1\ The Postal Service is directed by a Board of 
Governors composed of 11 members. Nine of the members, known as 
Governors, are appointed by the President, by and with the 
advice and consent of the Senate, and not more than five of 
them can be from the same political party. The Governors elect 
a chairman from among the members of the board. The Governors 
appoint and have the authority to remove the Postmaster 
General, who is a voting member of the board.
    As described hereafter, the Postal Service has significant 
management problems in several areas of its operations. 
However, its most serious management weakness is an 
organizational one--the absence of an office of Inspector 
General (IG) that is both independent of Postal Service 
management and unencumbered by internal management 
responsibilities.
    Pursuant to the Inspector General Act of 1978 (Public Law 
95-452) and related legislation, independent Presidentially 
appointed inspectors general have been established for most 
executive branch entities. These IG's conduct and supervise 
audits and investigations; recommend policies to promote 
economy, efficiency, and effectiveness; and prevent and detect 
fraud and abuse in their agencies' programs and operations. By 
law, the IG's are responsible for keeping agency heads and the 
Congress fully informed of agency problems and corrective 
actions. The nearly 20-year history of the Inspector General 
Act demonstrates that the American public has benefited from 
the work of these dedicated public servants in identifying and 
correcting fraud, waste and abuse in government activities.\2\
    Although the Postal Service is the largest civilian entity 
in the executive branch, it is unique among all other 
government agencies in that its Inspector General serves as 
part of agency management and carries out management functions 
as head of the Postal Inspection Service. This structure is 
fundamentally flawed in that the IG serves as a member of the 
Postal Service's management team, but at the same time is 
expected to perform independent oversight of Postal Service 
management. Additionally, this IG cannot provide independent 
oversight of the Postal Inspection Service--the agency's 
important law enforcement division--because the IG heads that 
division.\3\ Under the current scheme, therefore, the 
Inspection Service is not subject to the same objective review 
as other Federal law enforcement entities.
    Reported abuses by the Postal Inspection Service in its 
failed drug stings in Cleveland and elsewhere in recent years, 
as well as numerous complaints to this committee's Subcommittee 
on the Postal Service about the investigatory practices of the 
Inspection Service, are prime examples of the need for 
independent oversight. In addition, it is notable that the 
specific Postal Service management problems described in this 
report--including contracting abuses by the Postal Service and 
problem-plagued implementation of its $5 billion automation 
initiative--are based entirely on findings by the GAO rather 
than the IG. This further suggests that the current IG is not 
sufficiently independent and/or is too preoccupied with 
internal agency duties to conduct comprehensive oversight of 
the Postal Service.
    There is also some evidence that, because of its 
subordinate position in the management structure, findings and 
recommendations by the Inspection Service may not have been 
given sufficiently serious consideration by the Postal Service 
itself. The Subcommittee on the Postal Service has received 
numerous communications from rank and file postal employees 
regarding their concerns and distrust of the Postal Inspection 
Service and its inability to be an independent and objective 
watchdog within their agency.
    In summary, the current statutory structure compromises the 
independence and integrity of the Office of Inspector General. 
During the 103d Congress, the House passed legislation (H.R. 
4400) to establish an independent IG for the Postal Service.\4\ 
The Subcommittee on the Postal Service is now conducting 
hearings on H.R. 3717, the Postal Reform Act of 1996, which 
includes provisions for an independent office of Inspector 
General.

     Automation is Taking Longer and Saving Less than Expected \5\

    The Postal Service must overcome difficult, if not 
insurmountable, obstacles to successfully complete its program 
to fully automate mail processing by the projected date of 
1998. Barcoding of letter mail and automatic sorting of letters 
to homes and businesses, referred to as ``delivery point 
sequencing,'' has proven to be more difficult than the Service 
expected; consequently, the project is behind schedule. Also, 
the savings from automation continue to be small compared to 
overall labor costs and more difficult to achieve than the 
Service anticipated. This is an extremely significant problem 
in light of the fact that by 1997, the Postal Service plans to 
deploy up to 14,000 pieces of automation equipment costing 
about $5 billion.
    For example, in 1994, the Service estimated the budget 
impact from automation to be savings of $41 million, or less 
than one tenth of a percent--a relatively insignificant amount 
compared with cost increases due to higher mail volume ($716 
million) and the higher cost of labor ($1.1 billion) in 1994. 
Automation, while producing some savings, is unlikely to be the 
remedy envisioned by Postal Service management for reversing 
the tendency of postal costs to outpace inflation.

Improved Oversight Is Needed To Protect The Privacy Of Address Changes 
                                  \6\

    Through the National Change of Address (NCOA) program, the 
Postal Service collects and widely disseminates change-of-
address information reported by postal customers. To do this, 
the Postal Service uses 24 licensees, primarily mail 
advertising and credit information firms, to provide the 
address-correction service. The licensees pay the Postal 
Service to receive and use the electronic master NCOA file, and 
Postal Service-approved computer software that is used for 
updating mailing lists. The licensees are to use NCOA data to 
provide address services to other private firms and 
organizations in accordance with the standards and procedures 
specified in the licensing agreement.
    The Postal Service's oversight of NCOA program licensees 
and controls over the release of NCOA data have not been 
adequate to prevent, detect, and correct potential breaches of 
the licensing agreement and potential violations of the Federal 
Privacy Act (5 U.S.C. 552a). Specifically, the GAO identified 
the following weaknesses in the Postal Service's licensee 
oversight activities:
     Inadequate ``seeding'' of NCOA files to identify 
unauthorized uses of addresses. (``Seeding'' is a commonly used 
practice in the mailing industry to control proprietary 
information. A ``seed'' record planted in a file can be used to 
detect the inappropriate release of a record or file.)
     Ineffective audits of the performance of software 
that licensees use to match their mailing lists with NCOA 
files.
     Inadequate reviews of NCOA advertisements that 
licensees propose to use.
     Deficient process to investigate complaints about 
the NCOA program. (Postal Service officials were unable to 
provide GAO any documentation concerning complaints received or 
investigated.)
    Postal Service officials said they believe that neither the 
Privacy Act nor the Postal Reorganization Act of 1970 limit 
licensees' use of address data that have been properly updated 
or corrected through the NCOA service. However, GAO concluded 
that use of NCOA-linked data by a licensee to create a new-
movers list would violate the Privacy Act. The Postal Service 
did not explain in the acknowledgment form signed by customers 
of licensees that NCOA data are not to be used to create or 
maintain new-movers lists. Unless the Postal Service enforces 
these limitations, it cannot be assured that the use of NCOA-
derived data is limited to the purpose for which it was 
gathered or that the privacy of postal customers is protected.

   Inadequate Internal Oversight Resulting In Problems In Some Major 
                             Purchases \7\

    After reviewing seven major Postal Service purchases, GAO 
found that they resulted in excessive delay and wasted about 
$89 million in cost incurred for the acquisition of unusable 
property and in penalties assessed against the Service. GAO 
also found that, in each instance, Postal Service officials 
either agreed to forgo required reviews in the purchase process 
or failed to resolve conflict-of-interest situations. The $89 
million wasted on these purchases, which totaled about $1.3 
billion, consisted of the following:
     $32 million paid in penalties to injured parties 
to compensate them for damages caused by the conflicts of 
interest during awards for air transportation and automation 
equipment;
     $12.5 million for a building located in St. Louis, 
which as of August 1995, the Postal Service was trying to 
dispose of;
     $14.7 million for a building site in Queens, which 
turned out to be unusable due to contamination; and
     $29.5 million for a building located in the Bronx, 
which was essentially unusable for its intended purpose.
    The Postal Service can improve its purchasing organization 
and methods to help safeguard against such occurrences in the 
future, and the Service has actions under way to do so. For 
example, the Postal Service has consolidated three independent 
purchasing units under a single purchasing executive who plans 
to improve the purchasing process and the training and ethics 
awareness of purchasing personnel. In addition, after years of 
ethics deficiencies identified by the Office of Government 
Ethics, Postal Service senior management has begun improving 
its ethics programs to ensure full compliance with applicable 
ethics laws and regulations. Despite these initiatives, 
however, continued oversight by the Congress, the Inspector 
General, and Postal Service management is needed to ensure that 
these reform initiatives help prevent the recurrence of these 
problems.

    Weak Mail Acceptance Internal Controls Cause Revenue Losses \8\

    The Postal Service has inadequate internal controls over 
postage paid on presorted/barcoded mailings submitted by 
business customers. As a result, the Postal Service has no 
assurance that it is receiving payment for approximately $8 
billion in discounts provided to bulk business mailers. The 
Postal Service does not know the full extent of losses, and has 
not developed a means for identifying losses. Required 
verifications are not being performed by Postal Service staff, 
and Postal Service management has not sought the necessary 
information to oversee this area of its business. When dealing 
with this amount of money, it is not enough to assume that 
losses aren't occurring if they are not reported. The need for 
strong internal controls is demonstrated by several instances 
of bribery, fraud, and other criminal activity perpetrated upon 
the Postal Service. In August 1994, the head of a direct mail 
consulting business pled guilty to bribing postal workers who 
allowed him to conduct mass mailings while paying little or no 
postage. For example, bulk mailings of 1,800 fliers were 
conducted, but only 300 were claimed to be mailed. He faces up 
to 5 years in prison, a fine of $250,000 and restitution. The 
scam deprived the Postal Service of $7.5 million in revenues 
over a period of years. Four other businessmen pleaded guilty 
to involvement in the ``bulk-rate'' scheme. They will owe more 
than $600,000 in fines and $4.6 million in restitution.\9\
    In a scheme involving employees from another mail 
consultant, four men were indicted for tampering with postage 
meters. They were able to steal $4 million by printing postage 
meter stamps without charge.\10\ Similarly, a former college 
mail services director pleaded guilty to mail fraud when it was 
discovered that she defrauded the Postal Service of $69,000 by 
submitting phony postage meter strips for reimbursement. Court 
documents alleged she illegally collected the money when she 
created unusable postage meter strips in various denominations 
with the college's postal meters.\11\
    In June 1996, the GAO recommended that the Postmaster 
General direct bulk mail acceptance program supervisors and 
managers to report periodically to appropriate Service levels 
on the operation of the bulk mail acceptance system, 
initiatives to improve the system, and the progress and 
effectiveness of related improvements so that management can be 
reasonably assured that:
     mail verifications, including supervisory reviews, 
are done and that the results are documented as required;
     mailings resubmitted following a failed 
verification are reverified and errors are corrected;
     acceptance clerks and supervisors are provided 
with adequate, up-to-date procedures, training, and tools 
necessary to make efficient and objective verification 
determinations;
     information on the extent and results of 
verifications, including supervisory reviews, is regularly 
reported to appropriate levels, including Postal Service 
headquarters, and that such information is used regularly to 
assess the adequacy of controls and staffing, training needs, 
and acceptance procedures; and
     risk becomes the prominent factor in determining 
mailings to be verified.\12\
    Also, the GAO recommended that the Postmaster General 
direct bulk mail acceptance program managers to develop 
methodologies that can be used to determine system-wide losses 
associated with accepting improperly prepared mailings.\13\

 Performing Remote Barcoding In-House Costs More Than Contracting Out 
                                  \14\

    In September 1995, the GAO estimated that in-house 
barcoding of about 2.8 billion images cost about $4.4 million, 
or 6 percent more than if the images were processed by 
contractors. On the basis of data provided by the Service, the 
GAO projected that the cost differential would increase to 
about 14 percent, or about $86 million annually (not adjusted 
to inflation) to process 23 billion letters. Remote barcoding 
is a part of the Service's letter mail automation efforts that 
began in 1982. The Service made a decision in July 1991 to 
contract out remote barcoding based on a cost analysis that 
showed contracting out would result in an expected savings of 
$4.3 billion over a 15-year period.
    In November 1993, the Postal Service reversed its decision 
to contract out the remote barcoding function as a result of an 
arbitration award. The Service expected that agreeing to use 
postal employees for remote barcoding would improve its 
relations with the American Postal Workers Union (APWU), 
representing postal clerks. In 1995, however, the Postal 
Service said that it was disappointed in the lack of progress 
with APWU in building productive labor-management relations. In 
contrast, APWU said that the use of postal employees is 
providing the opportunity for the Postal Service and APWU to 
cooperate in establishing and operating remote barcoding sites.

                                ENDNOTES

    \1\ General Accounting Office, Compendium of Budget 
Accounts, Fiscal Year 1997, GAO/AIMD-96-113 (July 1996), p. 
137; GAO, Government Corporations: Profiles of Existing 
Government Corporations, GAO/GGD-96-14 (December 13, 1995), p. 
178-179.
    \2\ General Accounting Office, Inspectors General: Action 
Needed to Strengthen OIG's at Designated Federal Entities, GAO/
AIMD-94-39 (November 30, 1993), p. 2-3.
    \3\ General Accounting Office, Postal Inspection Service, 
GAO/AIMD-94-103R (April 14, 1994).
    \4\ The report on H.R. 4400 by the former House Committee 
on Post Office and Civil Service, Postal Inspection Service and 
Inspector General Act, H. Rept. No. 103-561, 103d Cong., 2d 
Sess. (1994) (Part I), describes in detail the need for this 
legislation.
    \5\ See generally, General Accounting Office, Postal 
Service: Automation Is Taking Longer and Producing Less Than 
Expected, GAO/GGD-95-89BR (February 22, 1995), p. 2.
    \6\ See generally, General Accounting Office, U.S. Postal 
Service: Improved Oversight Needed to Protect Privacy of 
Address Changes, GAO/GGD-96-119 (August 13, 1996).
    \7\ See generally, General Accounting Office, Postal 
Service: Conditions Leading to Problems in Some Major 
Purchases, GAO/GGD-96-59 (January 18, 1996).
    \8\ See generally, General Accounting Office, U.S. Postal 
Service: Stronger Mail Acceptance Controls Could Help Prevent 
Revenue Losses, GAO/GGD-96-126 (June 25, 1996).
    \9\ ``Man Pleads Guilty in Postal Service Fraud,'' Fort 
Lauderdale Sun-Sentinel (August 24, 1994), p. 3B.
    \10\ ``Four Men Accused of Pocketing $4 Million in Postage 
Fraud Scheme,'' Boston Globe (February 24, 1995), p. 25.
    \11\ ``Roseville Woman Pleads Guilty to Mail Fraud,'' 
Minneapolis Star Tribune, November 15, 1994, p. 5B.
    \12\ U.S. Postal Service: Stronger Mail Acceptance Controls 
Could Help Prevent Revenue Losses, GAO/GGD-96-126 (June 25, 
1996), p. 21.
    \13\ Id.
    \14\ General Accounting Office, Performing Remote Barcoding 
In-House Costs More Than Contracting Out, GAO/GGD-95-143 
(September 13, 1995).

                     Social Security Administration

                                Overview

    The Social Security Administration (SSA) administers the 
Federal retirement, survivors, disability, and health insurance 
programs for the aged, disadvantaged, and physically and 
mentally disabled. It is responsible for studying the problems 
of income maintenance and health care. SSA spends $362 billion 
annually. Social Security payments provide income maintenance 
to approximately 43 million individuals.\1\ SSA is a large, 
complex and changing organization. Over the next two decades 
the size of the beneficiary population and the agency's 
workload will increase as baby-boomers begin to retire.
    The Social Security Administration was established as an 
independent agency in the executive branch of government by the 
Social Security Independence and Program Improvement Act of 
1994, which became effective on March 31, 1995. SSA has made 
some progress toward solving its management problems, but 
numerous opportunities exist to improve. While SSA has had in 
place a General Business Plan for several years, the agency is 
making only minute progress toward integrating the requirements 
of the Government Performance and Results Act into its daily 
operations. This is in spite of the fact that the entire agency 
is a GPRA pilot project. As evidence of weak management, 
officials of the Social Security Administration have failed to 
consult with the Ways and Means Committee in setting agency 
goals for purposes of GPRA. SSA cannot hope to proceed with 
finalizing its GPRA strategic plan, much less implementing it, 
unless it has set program goals.
    In addition to the failure of officials at SSA to focus on 
their statutory obligation to comply with the provisions of the 
Government Performance and Results Act, some of the more 
prominent management problems within the SSA are the use of 
Social Security trust funds to finance union activities, 
mismanagement of systems modernization, untimely and inaccurate 
eligibility determinations, and financial data recording 
problems.

             Systems Modernization Not Effectively Managed

    The Social Security Administration has not effectively 
managed the modernization of its information systems to achieve 
its goals of providing the Nation with timely, efficient, and 
reliable service.\2\
    The Social Security Administration relies heavily on its 
automated information systems to provide quality services and 
timely and accurate benefit payments that affect nearly every 
U.S. citizen. SSA has spent over $4 billion operating and 
modernizing its computer systems since 1982 and has made some 
progress improving its service in several areas. However, SSA 
still depends upon manual processes to perform much of its 
work. In fact, SSA estimates that it has automated only 40 
percent of its operations.\3\ The agency's current initiatives 
call for an additional investment in automated systems of over 
$1 billion. After many years of modernization, SSA has yet to 
establish a clear, long-range vision to guide its use of 
information technology. SSA has been automating existing 
practices in a piecemeal fashion, without regard to the 
fundamental improvements that will be needed in the next 
century. SSA risks being overwhelmed by the huge increase in 
beneficiaries expected over the next 20 years. Unless 
automation absorbs the impact of these dramatically increasing 
workloads, SSA may find that its staff is unable to provide an 
acceptable level of service to the public.
    The Social Security Administration has yet to link its 
automation efforts, which could cost $5 to $10 billion over the 
next 10 years, with its planning and reengineering efforts. 
Without this linkage, SSA will risk billions of dollars on 
computer-system solutions that may fall short of adequately 
supporting operational needs and improving public service. SSA 
also has not completely assessed the costs and benefits of its 
reengineering and systems efforts, including tests of proposed 
solutions.\4\
    As recently as June 1996, the SSA's Inspector General said 
in his review of the SSA's software development for the 
distributed data processing environment, that the agency:

          has no reasonable assurance that when the [system] is 
        implemented, it will fully support the planned changes 
        to SSA's operation. In addition, SSA may not be able to 
        take full advantage of the capabilities of the 
        distributed environment that is being acquired at a 
        cost of $1.1 billion.\5\

    The agency Inspector General also noted that it will 
continue to review selected automated processing systems, 
particularly those that are vulnerable to fraud, controlled 
access to and safeguarding of data, software development and 
maintenance, adequacy of systems capacity, and associated risks 
of new technology.\6\

       Eligibility Determinations Are Neither Timely Nor Accurate

    The SSA is experiencing significant problems in managing 
its disability programs, including the initial and appellate 
decisionmaking levels, to achieve the goals of providing timely 
and correct eligibility decisions.\7\ Proper administration of 
this program is vital to those individuals who depend on 
Disability Insurance income maintenance payments.
    Evidence from SSA's quality assurance reviews shows a 
decline over the last few years in the accuracy of disability 
decisions, particularly those decisions to deny benefits, made 
for SSA by State Disability Determination Service (DDS) 
agencies. Such a decline has accompanied significant increases 
in work loads and production for the State agencies.\8\ The 
increases in errors reported by SSA's quality assurance program 
appear to support concerns raised by the General Accounting 
Office and some State administrators over the last few years 
about the impact of budget and productivity pressures on case 
development. Many claimants denied at the initial level have to 
wait until their cases are presented before an administrative 
law judge (ALJ) to be allowed benefits. The success rate, for 
those claimants that appeal to ALJs, is about 63 percent, an 
increase from the 50 percent rate of 10 years ago.\9\
    In the late 1980's, the GAO warned SSA about placing 
burdens on the disability insurance program. However, claim 
backlogs and processing times reached an all time high in the 
early 1990's. State DDS agencies were not able to keep up with 
the high rate of claims for benefits, which have continued to 
grow. The Social Security Administration has undertaken 
initiatives to keep up with claims, but high workloads have 
stressed many State DDS agencies considerably. Service remains 
poor and the agency continues to perform continuing disability 
reviews (CDR) at levels far below those mandated by law.\10\ 
GAO has reported to the agency that, as a result of not 
reviewing continuing disability cases, as much as $2.5 billion 
would be paid to ineligible beneficiaries through 1997.\11\
    SSA's plan to reduce program backlogs consists of two 
components. The short-term disability project calls for 
reducing State disability determinations by over 100,000 
pending cases and reducing the Office of Hearings and Appeals' 
pending cases by over 100,000--or half of the current backlog--
by the end of this calendar year.\12\
    Reduction of case backlogs is a laudable goal, but it is 
disturbing that this initiative involves removing over 300 
trained staff attorneys and paralegals from their support 
function as decision writers for the administrative law judges 
who hear disability appeals, and placing them in the role of 
claims adjudicators. They perform this function without 
supervision of an administrative law judge and have authority 
only ``to issue fully favorable decisions''.\13\
    This initative is being perceived as an effort to ``pay 
down'' the backlog and will result in immense pressure to pay 
claims that will be forced by production goals.\14\ The 
attorneys and paralegals are not receiving additional training 
before taking on this adjudicator function. Replacing 
experienced decision writers with less experienced staff will 
result in even further delays in the issuance of a final 
written decision.
    In addition, SSA introduced its ``Plan for a New Disability 
Claims Process'' to improve service delivery to persons with 
disabilities. Part of this plan would involve appointing a 
``Disability Claims Manager'' as the single agency point of 
contact for all initial claims processing activities. 
Unfortunately, this part of the plan will not be implemented 
until fiscal year 2001. While claims-taking has been completed 
in the field, employees on the front line have never been asked 
to make complex disability decisions, nor have they been 
required to inform applicants of the results of their own 
decisions.\15\
    Possible changes in the disability decision methodology are 
aimed at identifying allowances earlier through a simplified 
process. Regulatory requirements for a physician sign-off on 
all cases would be removed. Such actions have the potential to 
move the program from an objective, medically documented 
program, to a subjective, medically un-documented program in 
which decisions are made more quickly, but certainly less 
accurately. Under this scenario, case levels could hemorrhage 
the program.\16\
    SSA staff have expressed concerns that the prerequisites 
promised to be in place before implementation, namely training, 
technology and standards for quality assurance, will not be in 
place but that they will be expected to move forward 
anyway.\17\

                  Agency Financial Management Problems

    The SSA Office of the Inspector General has determined that 
the agency's annual financial statement for fiscal year 1995 
shows that a lack of sufficient controls over the recording of 
accrued benefit liability could result in the preparation of 
unreliable financial statements, and that controls in the 
agency's overpayment systems are inadequate to ensure reliable 
accounts receivables data. Further, the SSA is not fully 
complying with Social Security Act requirements for performing 
continuing disability reviews (CDR's).\18\
    The audit prepared by the IG shows that for the fiscal year 
1995 year-end financial statements, accrued benefit liability 
for the old-age survivors and disability insurance program 
(OASDI) did not include the value of Medicare premiums expected 
to be withheld from benefit payments in the month of October. 
Because the SSA omitted the expected withholding, the accrued 
benefit liability and program expenses for OASDI were 
understated by $1.4 billion. The understatement of the OASDI 
benefit liability occurred because of poorly worded 
instructions for computing liability and because there was no 
management or supervisory review of the accrued liability to 
ensure its accuracy.
    Similarly, the agency's underlying systems, which generate 
accounts receivable data, are still material weaknesses in its 
financial statements under the reporting requirements of the 
Federal Managers' Financial Integrity Act (FMFIA). The SSA's 
Title II and Title XVI overpayment systems cannot identify how 
much is owed or collected. While the agency has undertaken a 
program to modernize its Debt Management System (DMS), more 
needs to be accomplished. The Inspector General reports that 
SSA has developed software to correct ``forced balancing'', 
which occurs when two payment master files do not reconcile. 
Currently, this software is reporting accounts receivables 
balances which are potentially incorrect. The Inspector General 
said that despite efforts to correct problems, a number of 
systems weaknesses remain uncorrected. ``Accordingly, SSA's 
Title II and Title XVI accounts receivable systems cannot 
generate reliable accounts receivable data . . . the underlying 
systems still contain many fundamental weaknesses.'' \19\
    Finally, the agency is backlogged in performing continuing 
disability reviews required under the authorizing legislation. 
These reviews are performed by State disability determination 
services which have been unable to keep up as the number of 
people on disability has increased dramatically. The Inspector 
General reports that, even with reforms made to the review 
process by SSA, the backlog is growing at the rate of 300,000 
cases per year. In the past, medical CDR's were not required by 
law, but under section 208(a) of the Social Security 
Independence and Program Improvements Act of 1994, the agency 
is required to perform at least 100,000 Title XVI CDR's 
annually from fiscal year 1996 through fiscal year 1998. As 
mentioned above, serious concerns exist regarding actions the 
agency is taking to reduce its backlog. The IG cautions that 
the additional mandate may ``increase the number of backlogged 
cases and the risk of failing to detect unnecessary payments.'' 
\20\ (emphasis added).

     Use of Social Security Trust Funds to Finance Union Activities

    The Social Security Administration has been spending money 
from the Social Security Trust Funds to pay salaries of 
employees who perform activities devoted solely union actions 
and operations, sometimes on a full-time basis, instead of 
serving the public. From 1987 until 1993 there were 80 social 
security employees performing full-time union work. In 1994, 
however, the number skyrocketed to 145, an increase of 80 
percent.\21\ The cost to fund these union activities has surged 
during the current administration to over $12.6 million 
annually, according to the General Accounting Office.\22\ The 
trust funds currently pay for 146 individuals to work full-time 
on union activities, and no time on work of the Social Security 
Administration's important programs. One such Social Security 
Administration employee doing full time union work is paid over 
$81,000 per year, plus benefits.\23\
    More disturbing is the finding that as many as 1,800 Social 
Security Administration designated union representatives were 
authorized to spend at least part of their time on union 
activities. In addition, the number of hours that could be 
confirmed as dedicated to union-related activities at the 
Social Security Administration ballooned to 413,000 per 
year.\24\ The General Accounting Office found during its audit 
that the agency did not have a proper system in place to 
account for the hours devoted solely to union-related 
activities at the agency. For example, the agency does not take 
into consideration the amount of time that managers have had to 
devote to collective bargaining, grievance adjustment and other 
administration of union complaints or redistributing work not 
being performed by union representatives.\25\
    Under the terms of the SSA union contract negotiated at the 
beginning of the Clinton administration, the selection of union 
representatives and the amount of time they spend on union 
activities are determined by the union without the consent of 
local managers and supervisors.\26\ That action cedes to the 
union an area traditionally reserved for management, namely, to 
make decisions necessary to deploy staff in order to provide 
products and services required by the Social Security Act and 
related acts administered by the SSA. The General Accounting 
Office learned that some field managers felt that their having 
no involvement in decisions about how much time is spent by 
individuals and who the individuals are, hinders their ability 
to manage the day-to-day activities of their operations.
    During the period studied by the GAO, there has been a 110 
percent increase in the amount of Social Security Trust Fund 
money devoted to union activities at the SSA while the overall 
size of the SSA work force has increased by just 1 percent. In 
view of the fact that the unions do not even represent a 
majority of SSA employees, these findings are disturbing.\27\
    Federal employee unions have dues-paying members who fund 
the activities of their organization. Dues range according to 
the employee's salary. But the total amount collected by the 
unions is estimated to be in the millions of dollars, yet the 
agency is subsidizing the salaries of employees to spend all 
their time on union business. The agency is spending an 
additional amount of money on computers, supplies, office space 
and travel for union activities.
    In view of the Social Security Administration's drain on 
its trust funds to subsidize union salaries and activities, an 
amendment was added to the House Labor, HHS Appropriations bill 
on July 11, 1996 to bar the Social Security and Medicare Trust 
Funds from being used to fund the unions was adopted 421 to 3.

                                ENDNOTES

    \1\ The Social Security Administration, Basic Facts About 
Social Security, SSA Publication No. 05-10080 (August 1995).
    \2\ General Accounting Office, Federal Management: Updated 
Information for Congressional Oversight (July 1994).
    \3\ Id.
    \4\ Id.
    \5\ The Social Security Administration, Office of the 
Inspector General, Review of the Social Security 
Administration's Software Development for the Distributed Data 
Processing Environment, A-13-95-006005 (June 1996), p. 4.
    \6\ The Social Security Administration, Office of the 
Inspector General, Semiannual Report, April 1, 1995-September 
30, 1995, p.14. Additional source of information: The General 
Accounting Office, Social Security: Sustained Effort Needed to 
Improve Management and Prepare for the Future, GAO/HRD-94-22 
(October 1993). Report shows that SSA was on notice to improve 
automated systems.
    \7\ General Accounting Office, Federal Management: Updated 
Information for Congressional Oversight (July 1994).
    \8\ Id.
    \9\ Id.
    \10\ Id.
    \11\ Id.
    \12\ General Accounting Office, Correspondence from Jane L. 
Ross to the Honorable Sam M. Gibbons, GAO/HEHS-95-228R, 
regarding case backlogs at the Social Security Administration's 
Office of Hearings and Appeals (OHA) (July 28, 1995).
    \13\ Id., p. 6.
    \14\ Id., p. 7.
    \15\ General Accounting Office, SSA Disability 
Reengineering: Project Magnitude and Comlexity Impedes 
Implementation, GAO/T-HEHS-96-211 (September 12, 1996), 
discussing the SSA initiative outlined as Plan for A New 
Disability Claim Process, SSA (Washington, D.C.: September 
1994); see also testimony of The National Association of 
Disability Examiners and National Council of Disability 
Determinations Directors, presented before the Subcommittee on 
Social Security, Committee on Ways and Means, September 12, 
1996.
    \16\ Id.
    \17\ Testimony of The National Association of Disability 
Examiners, presented before the Subcommittee on Social 
Security, Committee on Ways and Means (September 12, 1996) by 
Larry DeVantier.
    \18\ Social Security Administration, Office of the 
Inspector General, Inspector General's Report on the Social 
Security Administration's Financial Statements,, A-13-95-00604 
(December 1995), p. IV-5.
    \19\ Id.
    \20\ Social Security Administration, Office of the 
Inspector General, Inspector General's Report on the Social 
Security Administration's Financial Statements, A-13-95-00604 
(December 1995), p. IV-6; Social Security Administration, 
Office of the Inspector General, Semiannual Report of the 
Inspector General April 1, 1995 to September 30, 1995.
    \21\ General Accounting Office, Social Security: Union 
Activity at the Social Security Administration, GAO/T-HEHS-96-
150 (June 4, 1996), p. 3.
    \22\ Id., p. 2.
    \23\ Id., p. 12.
    \24\ Id.. p. 7.
    \25\ Id., p. 7.
    \26\ Id., pp. 14-15.
    \27\ Id., pp. 7, 11, 12, and 13.

    Department of State and the Agency for International Development

                                Overview

    The Department of State was established in 1789. Its 
primary objective in the conduct of foreign relations is to 
promote the long-range security and well-being of the United 
States. The Department analyzes the facts relating to American 
overseas interests, makes recommendations on policy and future 
action, and takes the necessary steps to carry out established 
policy. The State Department received total appropriations of 
about $3.9 billion for fiscal year 1996, and has approximately 
24,500 staff positions.
    The United States Agency for International Development 
(USAID) administers U.S. foreign economic and humanitarian 
assistance programs worldwide in the developing world, Central 
and Eastern Europe, and the newly independent states of the 
former Soviet Union. USAID was appropriated $465 million in 
fiscal year 1996, and had a staff of approximately 3,200 
positions plus 5,000 contract employees.
    The State Department continues to have serious internal 
control and financial management problems. While a third 
attempt is underway at the State Department to implement an 
Integrated Financial Management System, State has no overall 
management structure or agencywide information strategy plan 
with which to implement the system. According to GAO, State 
runs a high risk of perpetuating its long-standing financial 
management problems, detracting from its ability to meet the 
goals and requirements of the Chief Financial Officers Act.
    In addition to the problems surrounding the State 
Department's Financial Management System, it continues to have 
problems in the management of its embassies and real estate. 
USAID administers programs throughout the world, and has little 
success in preventing waste and abuse in these programs.

       The State Department Could Manage Its Embassies Better \1\

    The State Department manages approximately 160 embassies 
and 100 consulates at a cost of about $2 billion annually. The 
U.S. embassies throughout the world manage about $600 million 
worth of personal property, buy approximately $500 million in 
goods and services annually, and are responsible for almost $12 
billion in housing and other real properties. Embassies also 
have responsibility for over $2 million annually in accounts 
receivable.\2\
    Embassies poorly manage the $600 million over which they 
have control. In 1993, this committee made a series of 
recommendations to the State Department regarding management of 
personal property. One suggestion was to establish a formal 
inventory of Embassy property. The Property Management Branch 
(PMB) of the State Department visited 20 embassies, 14 of which 
failed to show that inventories of personal property were made. 
This committee also suggested that the embassies establish a 
``zero tolerance'' policy with reference to the loss of 
personal property. The State Department, however, implemented a 
``one percent tolerance'' policy.\3\ An embassy with personal 
property losses equal to or less than 1 percent of its total 
personal property will not be held responsible for that loss. 
Thus, the State Department begins its pursuit of personal 
property losses by waiving the loss of $6 million dollars. The 
State Department is attempting to implement a software package 
to better manage the personal property of embassies, but the 
General Accounting Office warns there has been inadequate 
management and planning for this system.
    The embassies of the United States buy approximately $500 
million in goods and services annually. To comply with laws 
regarding such purchases, the State Department developed a data 
base. However, this data base reports only the number and type 
of contract. Because it is not used to monitor purchasing, many 
embassies lack any competition in their procurement decisions. 
Many of those same embassies have no policy to advertise 
contracts to vendors.
    The State Department needs to become more dedicated in its 
pursuit of waste in its embassies. The acceptance of at least 
$6 million dollars in personal property losses and the lack of 
clear guidelines over procurement decisions denotes a 
lackadaisical attitude toward real reform. This committee has 
made substantive recommendations for the improvement of embassy 
operations. The State Department should implement them.

  Millions of Dollars Could Be Generated by Selling Overseas Unneeded 
                            Real Estate \4\

    The Department of State owns more that $10 billion in real 
estate at 200 locations throughout the world. The State 
Department receives over $400 million annually for the purposes 
of buying and maintaining buildings abroad. It can also sell 
its real estate and use the proceeds to buy or improve other 
real estate and furnishings without congressional approval. 
State's Office of Foreign Buildings Operations (FBO) is 
responsible for establishing and overseeing policies and 
procedures for State's real property, including approving the 
disposition of excess, underutilized, or uneconomical 
properties.
    As of October 1995, State had a list of over 100 properties 
for potential sale valued at $467 million.\5\ Many more have 
questionable value and are expensive to maintain. The State 
Department has not developed a systematic process for 
identifying and disposing of excess property. As a result, FBO 
and embassies are sometimes unable to expeditiously reach 
agreement on properties to sell, move forward on sales, and 
determine the use of proceeds.
    FBO sold almost $53 million in real estate during fiscal 
year 1995. However, it did not routinely use the sales proceeds 
for State's highest priority real property needs, account 
separately for the use of the sales proceeds, or use the 
proceeds to offset its appropriation request for such needs.\6\
    Excluding a single sale of $133 million, which was the 
result of a forced sale, State Department sales averaged less 
than $4 million annually from 1990 to 1993. Although sales 
increased in 1994 and 1995, a significant amount of property 
has yet to be sold from FBO's list of properties available for 
disposal. Both FBO's October 1994 list and a second list 
submitted to the Office of Management and Budget in 1995 had 
about 100 properties listed for sale. Properties on the 1994 
list were valued at $250 million. One year later, FBO added 
high-value properties in Manila, Singapore, Paris, and Bangkok 
to its list, bringing the total value of properties available 
for sale to $474 million.\7\ State holds other property that it 
could potentially sell that was not on these lists. These 
properties are worth millions of dollars and continue to incur 
high operation and maintenance costs. For example, in 1993, the 
embassy in Buenos Aires reported operating costs on its 
property had doubled to almost $500,000 and major maintenance 
costs had risen to about $1 million.\8\
    The Foreign Affairs Manual requires each post to 
periodically identify and report on properties that are excess 
to post requirements, not being fully utilized, or uneconomical 
to retain. FBO officials cannot provide evidence to show that 
embassies have submitted excess property reports pursuant to 
this provision.
    In some instances, embassies and FBO have had lengthy and 
costly disagreements regarding the use or sale of property and 
use of potential sales proceeds. In Brasilia, Brazil, the 
embassy and FBO had a standoff for over 2\1/2\ years over 
whether to sell vacant lots, which were bought in the early 
1960's, and use the proceeds to renovate a 29-unit apartment 
building or to sell an apartment building and other property 
and use the proceeds to build residences on the vacant lots. 
The embassy emphasized that the apartment building is in an 
extremely poor location. Also, according to FBO officials, the 
lots are located in the best parts of Brasilia, and there is a 
stigma attached to living in apartments in Brasilia. 
Nonetheless, FBO indicated that it was cheaper to renovate the 
apartment building than to build private residences on the 
vacant lots. During the time of this dispute, the embassy spent 
$580,000 annually to lease housing while the 29 apartments 
remained vacant.\9\
    FBO has developed no procedure for routinely using sales 
proceeds to meet prioritized worldwide requirements. For 
example, the consulate in Lyon, France, closed in June 1992 and 
the consul residence was sold in April 1995 for $613,000. In 
anticipation of the sale, the embassy in Paris requested in May 
1992 to use the sales proceeds. Rather than making the proceeds 
available for priority use in other countries, the FBO has been 
working with the Paris embassy since 1994 to allow the embassy 
to retain the disputed funds.\10\
    The State Department has the authority to retain proceeds 
from real estate sales. While proceeds from real estate sales 
are uncertain, they provide embassies with funds not justified 
or funded through the regular appropriation process. This 
process essentially creates a source of income not scrutinized 
within the process of congressional budgeting and oversight.
     In Alexandria, Egypt, the consulate general was 
closed in 1993; however, State officials retained the consulate 
general residence, with an estimated value of over $1 million, 
in hope that the post would be reopened. State officials 
attempted to justify its retention on economic grounds, such as 
using it as a residence for a U.S. Information Agency 
representative. The State Department Inspector General 
questioned such retention as an ``apparent lack of concern for 
the financial loss being incurred by the U.S. government.'' 
State officials then said that when the Ambassador used the 
residence, State would save $20,000 in lodging costs and that 
the spacious residence is ideal for representational and trade 
promotion events.\11\
     In Zanzibar, the consulate was closed in 1979. 
Today, the consulate is being used for recreational purposes. 
In 1994, maintenance and salaries relating to the residence 
were $32,000. The residence was used 122 nights for recreation 
and 36 nights for representational purposes.\12\
     In Shanghai, China, the State Department owns 2.6 
acres of vacant land having an estimated value of $4 
million.\13\
     In Rabat, Morocco, the State Department paid 
$435,000 for an 8-acre lot for an embassy and ambassador 
residence. The King of Morocco has used the lot for an orange 
grove since its purchase. There are no current plans to build 
on the property. The embassy also owns a residence, acquired in 
1972, that the security officer will no longer clear for 
occupancy. In February 1994, the Inspector General reported 
that State should develop a plan to dispose of excess property 
in Morocco. In May 1994, the embassy reported that it had six 
properties that were no longer needed and should be sold, not 
including the 8-acre lot. In June 1995, however, the embassy 
indicated that it was willing to sell only two of the 
properties.\14\
     In Hamilton, Bermuda, the State Department owns a 
home for the consul general. In April 1994, the property was 
estimated to be worth over $12 million. An FBO survey in 
February 1993 disclosed that the residence needed $240,000 in 
major repairs. The main house is nearly 10,000 square feet and 
is situated on a 14-acre estate with a beach house. The State 
Department Inspector General has stated that ``at a time of 
continual budget constraints, the Department cannot afford the 
luxury of maintaining this ostentatious piece of property.'' 
Annual operational and maintenance costs for this one residence 
are over $100,000.\15\
     In Buenos Aires, Argentina, the State Department 
has maintained a 43,000-square foot mansion as an ambassador 
residence since 1929. Estimates of its value vary widely and 
range up to $20 million. Annual operating costs are about 
$500,000. The embassy has historically opposed selling the 
residence, indicating that it stands as a symbol of the U.S. 
presence in Argentina. Funding of $5 million to $6 million will 
be required to repair the house and equipment, and operating 
costs will require additional funding. According to the State 
Department Inspector General, ``The residence will continue to 
represent a major expense which the inspectors doubt can be 
justified indefinitely if budgets continue to shrink.'' \16\

USAID--U.S. Food Donations to Lesser-Developed Countries Are Wasted Due 
                     to Theft and Poor Quality \17\

    The Public Law 480 program is a bilateral grant program 
whereby the U.S. Government donates agricultural commodities to 
least-developed, food-insecure countries. A country is 
considered least developed and eligible for donation of food 
under this program if the country meets the poverty criteria 
established by the World Bank for providing financial 
assistance or is a food deficit country characterized by high 
levels of malnutrition among significant numbers of its 
population. To qualify for food donations under a Title III 
program, a country must also be committed to policies which 
promote food security and have a long-term plan for broad-
based, equitable, and sustainable development.
    Mozambique, as the poorest of nations with a per capita 
income of $80, is among the nations that qualify for this 
program. As a part of this program, the United States donated 
approximately 458,000 metric tons of commodities worth 
approximately $88 million.\18\ These commodities are to be used 
to generate local currency for the purpose of funding various 
governmental ministries, as well as supporting private 
voluntary organization activities. An audit by the USAID 
Inspector General found that while USAID had established a 
system to monitor the receipt, storage, and sale of 
commodities, the program was replete with many other problems. 
The Inspector General found that poor quality commodities, 
subsequently determined by USAID management to be ``unfit for 
human consumption,'' arrived in Mozambique, resulting in a loss 
of $8 million for purchase, transport, and disposal costs; 
pilferage of $1,376,378 worth of commodities occurred at 
Mozambique ports during the unloading of shipments--often in 
plain view of port security guards; and the deposit of funds 
generated by the sale of the commodities was delayed and no 
method existed to ensure that the funds were used for their 
intended purposes.\19\
    The audit conducted by the USAID Inspector General found 
numerous examples of commodity theft. The ship Lash Atlantico 
reported theft of 1,024 metric tons (mts) of corn and 58,000 
empty food bags. According to the ship's officers, the theft 
took place in full view of the port's security guards. When the 
officers attempted to stop the theft, they were attacked by the 
thieves. The ship Ashley Lykes reported various instances of 
theft and the Meezan I reportedly lost 1,560 mts of corn to 
theft. The George Lyras lost 1,200 mts of corn to theft, which 
was done in full view of security guards. The local port 
authority took no action. The vessel Kansas Trader reported 
that 1,400 mts of maize, an amount that would fill 94 trucks, 
was missing and presumed stolen.\20\
    Reports were also made about the poor quality of 
commodities sent to Mozambique. The U.S. Ambassador to 
Mozambique reported that the shipments had a higher moisture 
content than was necessary to transport the commodities. As a 
result, the food arrived unfit for human consumption. In some 
instances, insect infestation was so bad that the entire cargo 
and ship had to be fumigated several times. This caused a waste 
of 33,700 mts of corn worth approximately $8 million.\21\
    The proceeds from the sale of these commodities are to be 
deposited into special accounts for the express purpose of 
accounting for the funds and ensuring that they go to purposes 
intended by the program. The USAID Inspector General could not 
assess whether local currency generated from the sale of 
commodities was used for its intended purposes. No audits have 
been performed on local currency expenditures.

 USAID's Cash Transfer Program Fails to Monitor the Implementation of 
                              Reforms \22\

    In response to an Egyptian government economic and 
structural adjustment program, USAID initiated the Sector 
Policy Reform Program in August 1992. The program was designed 
to distribute $400 million to the Egyptian government if it 
could establish proof that it implemented efforts to liberalize 
financial markets, undertake fiscal reforms, reduce controls 
over imports and exports, and privatize public sector 
enterprises. As of June 1995, USAID distributed $380 million of 
the $400 million program. This money was distributed despite 
the refusal of some recipients to provide proof that the 
required reforms had been implemented.\23\
    One of the principal reforms encouraged by the program was 
the relaxation of constraints on private financial 
institutions. In response to requests from auditors for 
documentation of this reform, USAID/Egypt reported that the 
Government of Egypt compiled a ``comprehensive study and made 
recommendations for policy reform.'' The auditors discovered, 
however, that the study was actually performed by the World 
Bank and the recommendations were written by USAID/Egypt. In 
fact, the government of Egypt refused to agree in writing to 
implement any of the study's recommendations. The study and its 
recommendations were the documentation USAID/Egypt used to 
justify the disbursement of $65 million.\24\
    Another reform sought by the program was a capital/asset 
ratio among commercial banks of at least 5 percent. USAID/Egypt 
sought information on each bank to ensure that the reform had 
been implemented. The Governor of the Central Bank of Egypt 
declined to proffer such information. The Governor of the 
Central Bank of Egypt also declined to give proof, in a later 
year, that these banks had achieved a capital/asset ratio of 8 
percent. In the first case, USAID/Egypt made a distribution of 
$65 million. In the second case, it made a distribution of $75 
million.\25\
    This program exemplifies the gratuitous grant of American 
taxpayer dollars to encourage reforms even when agencies cannot 
verify their implementation. The money was expended with little 
or no return on the investment.

 USAID Funds the Small Enterprise Credit Project Despite Questionable 
                        Local Expenditures \26\

    The Small Enterprise Credit Project was established to loan 
money to small businesses in Cairo, Egypt. To distribute these 
loans, the project provides for the establishment of branch 
offices of the National Bank for Development, the entity which 
manages the project. An audit of the program found questioned 
costs up to $1,023,040.\27\ This constitutes approximately \1/
3\ of the entire program.
    The OIG contracted with an independent public accounting 
firm to audit the propriety of costs incurred by the Egyptian 
National Bank for Development (NBD). The audit also evaluated 
NBD's internal controls and compliance with applicable laws, 
regulations and grant terms as necessary in forming an opinion 
on the NBD's Fund Accountability Statement. Of the $3,470,013 
total expenditures incurred during the period, the audit 
identified $1,023,040 in questioned costs billed to USAID. The 
audit states that these costs were either ``ineligible because 
they are not project related, unreasonable, or prohibited by 
the terms of the agreement'' or ``not supported with adequate 
documentation or did not have the required approvals or 
authorizations.'' \28\
    The questioned costs cover a wide variety of instances 
where funds were used improperly. In one instance, the 
chairman, project director, and NBD officers, divided $64,583 
among themselves as bonuses without providing any basis on 
which these bonuses were determined. Employees outside the 
Small Enterprise Credit Project were apparently awarded bonuses 
totaling $44,743, although no documentation established the 
employees receipt of this money. Bonuses to project employees 
totaled $248,875, and the project could state no guidelines for 
awarding these bonuses.\29\
    Auditors found more questionable costs in the vehicles 
bought and leased by the project. The project purchased a 
Japanese car at $17,102 on which it paid $16,854 in customs 
duties and sales taxes. The grant under which the project 
functions specifically mandates that all vehicles purchased 
under the grant be American made. The project also leases a 
number of vehicles at a total cost of $36,312. The leased 
vehicles, which include models dating between 1980 and 1984, if 
appraised at current value, would have relatively no value. 
Indeed, if the project continues the practice of renting these 
vehicles, it will surpass the amount of money necessary to 
purchase newer vehicles.\30\
    Several instances of questionable costs are inexplicable. 
$413,487 is missing from the project's contingency fund, and 
the project has not provided sufficient documentation to 
support any contingency. The project expended funds in excess 
of $14,000 on items such as curtains for automobiles, flowers, 
and obituaries in newspapers for the families of project 
personnel. The project purchased $23,625 worth of training 
equipment after the significant training of employees had 
ceased. The expenditure was never approved, and exceeded the 
project's entire equipment budget by $15,696.\31\
    The aforementioned problems are particularly flagrant 
abuses of the funds provided by the American people to support 
its friends throughout the world. Many problems plague USAID's 
programs and waste precious dollars that, if better accounted 
for, could increase the efficiency and effectiveness of 
American assistance.

                                ENDNOTES

    \1\ General Accounting Office, State Department: Actions 
Needed To Improve Embassy Management, GAO/NSIAD-96-1 (March 
1996).
    \2\ Id., p. 1.
    \3\ Id., p. 4.
    \4\ General Accounting Office, Report to Congressional 
Committees; Overseas Real Estate: Millions of Dollars Could Be 
Generated by Selling Unneeded Real Estate, GAO/NSIAD-96-36 
(April 1996).
    \5\ Id., p. 1.
    \6\ Id., p. 2.
    \7\ Id., p. 2.
    \8\ Id., p. 3.
    \9\ Id., p. 4.
    \10\ Id., p. 5.
    \11\ Id., p. 16.
    \12\ Id., p. 16.
    \13\ Id., p. 18.
    \14\ Id., p. 18.
    \15\ Id., p. 21.
    \16\ Id., p. 21.
    \17\ Inspector General, U.S. Agency for International 
Development, Audit of USAID/Mozambique's Management of Public 
Law 480 Title III Program, Report Number 3-656-96-003, February 
9, 1996.
    \18\ Id., pp. 1-2.
    \19\ Id., pp. 1-2.
    \20\ Id., pp. 9-10.
    \21\ Id., pp. 11-12.
    \22\ Inspector General, U.S. Agency for International 
Development; Audit of USAID/Egypt's Economic Support Fund, Cash 
Transfer Program; Report Number 6-623-96-003; December 12, 
1995.
    \23\ Id., p. 2.
    \24\ Id., p. 3.
    \25\ Id., p. 4.
    \26\ Inspector General, U.S. Agency for International 
Development; Audit of the National Bank for Development, Local 
Expenditures Incurred Under the Small Enterprise Credit 
Project, Grant Number 263-0228; Report Number 6-263-96-001-N; 
October 1, 1995.
    \27\ Id., p. 4.
    \28\ Id., p. 4.
    \29\ Id., pp. 16-17.
    \30\ Id., pp. 17-18.
    \31\ Id., p. 18.

                      Department of Transportation

                                Overview

    The Department of Transportation (DOT) received slightly 
over $37 billion in total budgetary resources for fiscal year 
1996. The President's budget requested a total of $37.5 billion 
in fiscal year 1997 funding for DOT. Most of the Department's 
budget comes from dedicated transportation trust funds. The 
remainder is provided by general treasury appropriations.\1\
    As described hereafter, significant management problems 
affect several DOT components. Unfortunately, the most 
troubling and pervasive problems exist in the component where 
they can be least afforded--the Federal Aviation Administration 
(FAA). The FAA's deficiencies were recently highlighted in the 
aftermath of the tragic Valujet accident.
    With a budget in excess of $8 billion, FAA has not suffered 
from a lack of resources. Rather, according to a number of 
expert observers, its problems stem fundamentally from a 
management ``culture'' which is internally focused and lacks 
any sense of accountability to the public. A July 1996 joint 
study by the Aviation Foundation and the Institute of Public 
Policy of George Mason University, entitled Why Can't the 
Federal Aviation Administration Learn?, stated:

          Our research indicates that the primary problem is a 
        culture that does not recognize or serve any client 
        other than itself. This has fostered a system in which 
        the normal checks and balances do not apply, so there 
        is no accountability in the system. Furthermore, no 
        mechanism is in place whereby the FAA can learn from 
        its mistakes and make effective, substantive 
        changes.\2\

    GAO also pointed to fundamental problems with the 
``culture'' at FAA in the context of the serious procurement 
and related problems besetting its Air Traffic Control 
modernization efforts, which are described later in this 
report.
    The problem is again illustrated by the personnel abuses 
that infect FAA, also described later. As the Aviation 
Foundation-George Mason study observed, ``the FAA runs under 
the assumption that the air traffic controllers are its 
clients.'' \3\ The DOT Inspector General made a similar point 
in a January 1996 memorandum to the FAA Administrator captioned 
``Environment for Abuse'':

          During the last 12 to 18 months, the Office of 
        Inspector General has advised you of at least four 
        instances of significant [personnel] abuses by the . . 
        . FAA. . . . While each of these abuses are very 
        different, there is a common thread. The thread is the 
        mind set within FAA that managers are not held 
        accountable for decisions that reflect poor judgment. 
        Until senior FAA management is willing to send a 
        different message, I suspect that the pattern of abuse 
        we identified will, unfortunately, continue.\4\

    As part of last year's Department of Transportation 
Appropriation Act, Congress enacted legislation to reform FAA's 
procurement and personnel practices.\5\ Additional reform 
legislation is pending. Time will tell whether FAA can make the 
necessary reforms in its ``culture.'' However, the personnel 
actions taken in the wake of the Valujet tragedy are not cause 
for optimism that the agency will get to the root of its 
problems. As the Aviation Foundation-George Mason study 
observed:

          . . . We feel that recent actions taken to reorganize 
        the FAA have not done anything to change the long-term 
        structural problems that plague the organization. . . . 
        The problems instead are much deeper than any one 
        individual; the demotion or firing of one individual or 
        a secretary or administrator is not a substitute for 
        meaningful reform. Such action has the harmful effect 
        of making people believe that the problems are caused 
        by one individual and subsequently solved once that 
        person has been removed.\6\

       FAA's Oversight of Aviation Safety is Fundamentally Flawed

    Reports by the DOT IG and GAO as well as recent 
congressional hearings have identified systemic deficiencies in 
FAA's management and oversight of aviation safety. Among the 
deficiencies identified by the IG are: failure to target 
inspection resources to entities having the greatest risk; a 
substantial decrease in the number of required inspections; 
FAA's refusal to adopt mandatory inspection requirements; lack 
of oversight of parts used throughout the industry; inadequate 
training of inspectors; and reluctance to conduct unannounced 
inspections using realistic testing techniques. Finally, the IG 
noted that--

          . . . FAA needs to ``call'' the results as they are. 
        FAA's responses to problems suggest that FAA too often 
        is more concerned about the impact its decisions will 
        have on the industry, rather than with stringent 
        enforcement of its safety regulations.\7\

    Unfortunately, the accuracy of this observation, as well as 
the overall state of FAA's safety oversight are illustrated by 
Secretary Pena's and FAA Administrator Hinson's initial 
declarations of in the wake of the Valujet accident that the 
airline was safe--followed within days by the grounding of 
Valujet. Senator Cohen, whose Senate Governmental Affairs 
Subcommittee on Oversight of Government Management has 
conducted an extensive review of FAA aviation safety issues, 
recently noted that these statements were particularly 
troublesome:

          . . . The two senior officials stated that their 
        earlier declarations about Valujet's safety record were 
        based on information available to them at the time 
        those statements were made. However, when those 
        statements were made, DOT and FAA had several documents 
        in their possession that clearly questioned Valujet's 
        safety record and showed that the airline was not in 
        full compliance with federal aviation regulations.\8\

    Specific examples of safety oversight problems at FAA 
abound. An IG audit found that during 1 year 84 aircraft 
operators were inspected between 200 and 18,000 times. This 
included one plane that was inspected 200 times, although no 
significant violations had been identified. By contrast, 1,100 
aircraft operators for whom inspections were required received 
no inspections at all during that year.\9\ On a related matter, 
the IG reviewed FAA's report that it accomplished 99.8 percent 
of its ``required'' inspections for fiscal year 1994. While 
this appeared to represent a significant improvement, the IG 
found that FAA had reduced the number of ``required'' 
inspections from 103,000 in 1990 to 44,000 in 1994. Thus, the 
number of required inspections conducted actually declined.\10\
    The IG also has reported on deficiencies in FAA 
inspections. For example, while FAA mandates that aircraft 
maintenance and repairs be conducted in accordance with current 
manufacturers' manuals, FAA procedures do not require its 
inspectors to verify that current manuals are being used. In 
fact, IG audits of repair stations found many instances in 
which outdated manuals were in use. FAA management has rejected 
IG recommendations that minimum mandatory inspection 
requirements be established for FAA inspectors. According to 
the IG, FAA's position is that its inspectors are experienced 
professionals who should be allowed wide latitude in 
determining the scope of their work.\11\
    FAA's opposition to mandatory inspection standards is 
particularly disturbing in view of recent IG and GAO reports 
documenting recurring deficiencies in the qualifications and 
training of FAA inspectors. Both the IG and GAO have found that 
FAA inspectors were inspecting types of aircraft and equipment 
for which their training was outdated or for which they had no 
training at all. For example, one maintenance inspector who was 
responsible for inspecting 7 commuter airlines had never 
attended maintenance training school for the aircraft he 
inspected. Despite his requests for such training, FAA sent him 
instead for training on the Boeing 727--a plane his airlines 
did not use--apparently to fill available training slots.\12\
    Several inspectors with responsibility to approve 
specialized navigation equipment had received no formal 
training on this equipment A maintenance inspector who was 
responsible for overseeing operations and repairs of Boeing 
737, 757, 767 and McDonnell Douglas MD-80 aircraft told GAO 
that the last training he received on maintenance and 
electronics was 5 years ago for the 737. Both the IG and GAO 
have reported that FAA inspectors making pilot flight checks 
either did not have the credentials (type ratings) or were not 
current in their aircraft qualifications in accordance with FAA 
requirements.\13\
    Even beyond these specific examples (and many others that 
could be cited), GAO's work raises serious questions about 
FAA's training priorities. GAO recently reported that between 
fiscal years 1993 and 1996, FAA reduced its budget for 
technical training 42 percent from $147 to $85 million. This 
comes at a time when Congress has directed FAA to hire over 230 
additional inspectors.\14\ By contrast, FAA made only modest 
reductions in its management training programs--which have been 
experienced waste, mismanagement, and corruption. For example, 
funding for FAA's Center for Management Development in Palm 
Coast, FL, decreased only about 10 percent over a period in 
which FAA's aggregate staff decreased by 15 percent. FAA 
rejected a study by its own contractor that showed the agency 
could save millions of dollars and eliminate duplication by 
closing the Palm Coast facility and transferring its functions 
to the FAA Academy in Oklahoma City.\15\

 FAA's Air Traffic Control (ATC) Modernization Project has Experienced 
  Chronic Management Problems and is Unlikely to Fix the Obsolete ATC 
                                 System

    Unquestionably, the ATC system is obsolete; the question is 
whether FAA has the capacity to modernize it. The results to 
date are not encouraging. The House Budget Committee report on 
the Budget Resolution for Fiscal Year 1997 summarized the state 
of the ATC system and the prospects for improvement as follows:

          . . . [C]ontrollers still use pre-1960's equipment to 
        guide 19,000 planes a year. According to FAA, vacuum 
        tubes made obsolete by the transistor in 1947 are still 
        used at hundreds of ATC sites. The system's truck-sized 
        UNIVAC computers have one-tenth the power of today's 
        personal computers costing less than $2,000, and some 
        ATC computers could not run the $49 flight simulator 
        computer games that are installed on millions of 
        personal computers in homes across America.
          * * * * *
          The antiquated technology and Federal mismanagement 
        are at least partially responsible for the chronic 
        airport congestion and delays that cost travelers, 
        industry, and the government nearly $6 billion 
        annually. In the next few years, as many as 40 airports 
        will experience serious congestion affecting 80 percent 
        of air travelers. Clearly, the current system will not 
        meet the Nation's air travel needs of the next century.
          The current condition of the Federal Aviation 
        Administration in many ways illustrates what happens 
        when a Government bureaucracy tries to be a service 
        provider, particularly in a high-volume, high-tech 
        field such as air traffic control.\16\

    According to FAA estimates, the Air Traffic Control (ATC) 
modernization project carries a price tag of $35 billion.\17\ 
The project has been beset by problems. GAO recently observed:

          Over the years, we and others have chronicled 
        persistent cost, schedule, and performance problems 
        associated with FAA's major systems acquisitions for 
        modernizing the ATC system. We have found that 
        technical difficulties and weaknesses in FAA's 
        management of the acquisition process were the primary 
        causes of these problems.\18\

    GAO added the project to its high-risk list in 1995.\19\ 
OMB also included on its high-risk list FAA's ``inadequate'' 
contract administration with respect to one component of 
modernization project, the Advanced Automation System (AAS). 
OMB observed that the AAS program ``suffers from cost overruns, 
schedule delays, and the potential for conflict of interest in 
FAA's monitoring of the program.'' \20\
    GAO noted that the AAS component, which was once the 
centerpiece of the modernization project, subsequently failed 
because FAA did not recognize the technical complexity of the 
effort, realistically estimates the resources required, 
adequately oversee its contractors' activities, or effectively 
control system requirements.\21\ A series of IG reports also 
document deficiencies in the AAS, which grew from an estimated 
cost of $2.5 billion to over $6 billion. The IG reported that--

          . . . Due to inadequate oversight of software 
        development and testing and FAA's ineffective 
        resolution of requirements issues, the Administrator 
        restructured the AAS Program, canceling major portions 
        of the AAS contract and downscoping the remaining 
        enroute and tower segments.\22\

    According to GAO, a root cause of the problems with ATC 
modernization is FAA's ``culture,'' which features shortcomings 
in focus on its mission, accountability, coordination, and 
adaptability.\23\

 FAA is Plagued by Personnel Management Problems and Abusive Employee 
                               Practices

    A recent semiannual report to Congress by the DOT IG 
observed:

          In the current budget environment where FAA will be 
        required to accomplish its missions with less personnel 
        and funding, it is paramount management provide the 
        necessary oversight to ensure programs meet their 
        objectives in an economical and efficient manner and 
        employees maintain a high standard of ethical conduct. 
        However, OIG has performed audits of FAA programs and 
        identified an alarming number of personnel related 
        problems and issues.\24\

    The reported personnel abuses include payment of excessive 
and unauthorized permanent change of station (PCS) benefits, 
abuses of the buyout law, wasteful workers' compensation 
payments, and travel abuses involving air traffic controllers.
    The IG found that FAA could have saved $18.4 million at 
Denver and Chicago alone by adhering to its policy requiring 
employees to move at least 35 miles in order to qualify for PCS 
benefits. In an audit of a random sample of 20 FAA employees 
who left the agency and received buyouts, the IG found that 17 
returned to FAA under contract to do the same work they 
previously did or to do work done by other employees who took 
buyouts. These contract arrangements, which violated the buyout 
law, apparently were worked out before the employees left the 
FAA.\25\ FAA pays about $78 million in annual workers' 
compensation costs. Yet, because of ineffective monitoring by 
FAA, claimants have remained on the workers' compensation rolls 
even though physicians have found them able to return to work. 
The IG found that 80 percent of claimants age 55 or older were 
injured prior to July 1, 1980, and had been receiving benefits 
for more than 15 years. In one case, a controller went on 
workers' compensation at age 53 and now, at age 70, is still 
receiving benefits. A 1988 medical report noted that the 
employee and his wife enjoy a ``country club lifestyle'' in 
Florida, playing 3 rounds of golf a week.\26\ This is 
significant because Federal workers' compensation benefits are 
considerably higher than Federal retirement benefits.
    The IG also reviewed FAA's familiarization (``FAM'') 
program, which allows FAA controllers free commercial airline 
trips allegedly for training purposes. The IG found that 
controllers consider FAM trips to be a ``perk'' and use them 
for personal gain. For example, a preliminary review by the IG 
disclosed that 83 percent of FAM tickets were arranged in 
conjunction with personal travel. In a particularly blatant 
case, Chicago controllers took 134 free FAM trips to Las Vegas 
over a 2-year period. The IG pointed out that while these FAM 
trips resulted in no monetary loss to FAA, they violated 
ethical standards and reflected negatively on the agency.\27\
    Many of the personnel abuses discussed above stem in part 
from the degree to which FAA has ceded control of the agency to 
its employee unions. For instance, the union agreement requires 
FAA to allow controllers 8 domestic FAM trips and one 
international trip a year, and precludes the agency from 
requiring that the trips take place only during duty time. 
Also, FAA's payment of PCS benefits for moves of less than 35 
miles resulted from the agency's agreement with the union to 
waive the 35-mile requirement.\28\
    Indeed, the IG described FAA's current union agreement with 
the National Air Traffic Controllers Association as ``[a] major 
problem impacting the effectiveness and efficiency of FAA 
operations.'' \29\ In particular, the IG noted that FAA plans 
to contract out or close its 151 Level I towers by fiscal year 
1997 and relocate about 1,000 controllers from these 
facilities. However, the union agreement allows controllers 
from closed Level I towers to move to facilities of their 
choice. The agreement further provides that relocated 
controllers who are unable to attain full performance at their 
new facilities be given one more chance at another location 
and, if funds are available, be moved again at Government 
expense. As a result, controllers may relocate to already over 
staffed facilities and make existing staffing imbalances even 
worse.\30\ Meanwhile, other towers and centers remain 
understaffed. This is an important management problem that has 
direct safety ramifications.

  Better Oversight of Highway and Transit Projects is Needed to Curb 
              Exponential Cost Overruns and Other Problems

    Surface transportation activities make up about 66 percent 
of DOT's budget. Collectively, they accounted for over $23 
billion in fiscal year 1996 funds and 6,700 full-time 
equivalent staff positions within the Department.\31\ The 
principal surface transportation components are highway 
projects funded from grants administered by the Federal Highway 
Administration (FHWA) and mass transit projects funded by 
Federal Transit Administration (FTA) grants. For fiscal year 
1996, FHWA's budget was almost $20 billion, and FTA had a 
budget of slightly over $4 billion.\32\ GAO recently testified 
that four such projects, each of which has a price tag of over 
$1 billion, have been plagued by cost increases and other 
problems that reaffirm the need for Federal oversight.\33\
    The largest of the four is the 7.5 mile Central Artery/
Tunnel construction project in Boston. At a cost of over $1 
billion per mile, this is one of the largest and most expensive 
highway construction projects in history.\34\ Current total 
cost estimates far exceed the original $2 billion-plus figure 
and continue to escalate. According to GAO, Massachusetts' most 
recent estimate of $7.8 billion to complete the project is 
severely understated. For example, the State excluded over $1 
billion in costs that were included in prior estimates and it 
did not account for inflation. GAO estimated that the project 
will cost at least $10.4 billion, assuming that the State meets 
its aggressive cost containment goals.\35\ However, GAO 
cautioned that if historic patterns of cost growth rather than 
the project's cost containment goals prevail, the total could 
exceed $11 billion.\36\ By way of contrast, the 32-mile 
``Chunnel'' project connecting England and France cost $16 
billion.\37\
    Finally, GAO noted that to meet its ambitious schedule of 
completing the project by 2004, Massachusetts plans to make 
extensive use of advance construction projects and pay for them 
over the next several years. However, sufficient funds may not 
be available to pay the bills as they become due since 
Massachusetts' finance plan shows project shortfalls of $1.9 
billion from 1996 through 2000. GAO stated that ``[i]t is 
difficult to see how DOT can approve these contracts without a 
definitive strategy on how the State will pay for them.'' \38\
    Not surprisingly, the Central Artery/Tunnel project has 
been the subject of many audit findings. For example, the DOT 
IG found management control weaknesses calling into question 
the validity of millions of dollars in contract change orders; 
payments of over $25 million for use of police officers to 
direct motorists at constructionsites (Massachusetts is the 
only State to rely exclusively on police officers for this 
purpose); the waste of over $20 million to acquire properties 
and rights-of-way that were unnecessary for the project; and a 
decision to spend $100 million more for a tunnel than a bridge 
``because of local political considerations.'' \39\ The 
Commonwealth of Massachusetts Auditor has reported on 
additional wasted project costs totaling over $100 million.\40\
    GAO has cited problems with other $1 billion-plus projects. 
The $1.3 billion Cypress Viaduct Reconstruction Project in 
California has experienced a $210 million increase because 
State officials underestimated certain costs. Also, FHWA 
recently approved funding to significantly realign the Viaduct 
without making a finding, required by its own regulations, that 
the realignment was economically justified. According to GAO, 
the $1.11 billion Bay Area Rapid Transit (BART) extension to 
the San Francisco Airport is ripe for oversight and may require 
Federal funding beyond the amount assumed in the financing plan 
because necessary funds from local sources may not be 
forthcoming. Finally, according to GAO, the Los Angeles subway 
project, with a cost in excess of $5 billion, ``has experienced 
poor construction management and ineffective quality control 
programs that have resulted in cost increases and schedule 
delays.'' \41\

DOT's Financial Management Systems are Improving but Still Have Serious 
                               Weaknesses

    In recent years, GAO has reported that the Department's 
financial management systems are fragmented and non-standard. 
These system deficiencies impede the ability of managers to 
plan, budget, and evaluate performance. DOT itself identified 
lack of financial systems integration as well as the inaccurate 
and untimely preparation of financial reports as the most 
critical of its areas of material non-conformance with the 
Federal Managers' Financial Integrity Act.\42\
    DOT recently dropped fragmented financial systems as a 
material deficiency because it had converted most of its 
components to a consolidated system called the ``Departmental 
Accounting and Financial Information System'' (DAFIS). While 
this represents progress, the IG reports that material 
weaknesses and internal control problems remain. Therefore, the 
IG still considers financial management system controls to be a 
significant issue.
    According to the IG, the DAFIS system does not adequately 
address two material financial systems weaknesses identified by 
OIG's financial statement audits. First, DOT lacks an adequate 
reconciliation process to validate DAFIS subsidiary account 
balances. This deficiency required OIG to disclaim audit 
opinions on five of the seven financial statements the 
Department has prepared on the basis of DAFIS. Second, DAFIS 
lacks the ability to track prior period adjustments in the 
manner required by OMB guidance. Until corrected, this 
deficiency also continues to impair OIG's ability to render 
opinions on the related financial statements. The OIG has 
identified still other weaknesses in the internal controls 
associated with the Department's current financial management 
systems.\43\
    The OIG's financial statement audits of seven DOT 
components during fiscal year 1995 disclosed 60 reportable 
internal control structure deficiencies and ten instances of 
noncompliance with applicable laws and regulations, including 
one noncompliance involving $585 million in the Maritime 
Administration's Federal Ship Financing Fund. The audits 
identified additional material discrepancies and noncompliance 
issues leading to over $9.1 billion in account balance 
adjustments. For example, 40 percent of the invoices submitted 
to the Coast Guard for reimbursement of oil spill clean-up 
activities were paid without the requisite certification that 
the work in fact had been done.\44\

                                ENDNOTES

    \1\ Congressional Research Service, Transportation and the 
FY 1997 Budget, 96-453E (July 23, 1996), pp. 1, 4, 16-18.
    \2\ The Aviation Foundation & the Institute of Public 
Policy, George Mason University, Why Can't the Federal Aviation 
Administration Learn? Creating A Learning Culture at the FAA 
(July 10, 1996), pp. 6-7.
    \3\ Id., p. 10.
    \4\ Memorandum dated January 26, 1996, from A. Mary 
Schiavo, Inspector General, to Federal Aviation Administrator, 
ACTION: Environment for Abuse, reprinted in Hearings before the 
Subcommittee on the Department of Transportation and Related 
Agencies Appropriations, House Committee on Appropriations, 
104th Cong., 2d Sess., Department of Transportation and Related 
Agencies Appropriations for 1997 (Part 3) (March 1996), p. 40.
    \5\ Sections 347-348 of Public Law 104-50, 109 Stat. 460 
(November 15, 1995).
    \6\ Aviation Foundation & Institute of Public Policy, note 
2, p. 4.
    \7\ Hearings before the Aviation Subcommittee, House 
Committee on Transportation and Infrastructure, 104th Cong., 2d 
Sess., Issues Raised by the Crash of Valujet Flight 592 (June 
25, 1996) (Statement of the Honorable Mary F. Schiavo).
    \8\ Id. (Statement of the Honorable William S. Cohen).
    \9\ Statement of the Honorable Mary F. Schiavo, note 7, p. 
2.
    \10\ Id.
    \11\ Id., p. 4.
    \12\ General Accounting Office, Aviation Safety: Targeting 
and Training of FAA's Safety Inspector Workforce, GAO/T-RCED-
96-26 (April 30, 1996), p. 5.
    \13\ Id., pp. 6, 8.
    \14\ Id., p. 9.
    \15\ Id., p. 10. See also GAO, DOT's Budget: Challenges 
Facing the Department in Fiscal Year 1997 and Beyond, GAO/T-
RCED-96-88 (March 7, 1996), pp. 38-40.
    \16\ H. R. Rep. No. 104-575, 104th Cong., 2d Sess. (May 14, 
1996), pp. 93-94.
    \17\ DOT's Budget: Challenges Facing the Department in 
Fiscal Year 1997 and Beyond, note 15, p. 27.
    \18\ Id., p. 31.
    \19\ General Accounting Office, High Risk Series, An 
Overview, GAO/HR-96-1 (February 1995), pp. 12, 56-57.
    \20\ Office of Management and Budget, Progress Report: 
Correcting High Risk Areas, Analytical Perspectives on the 
Budget of the United States for Fiscal Year 1996, p. 297.
    \21\ General Accounting Office, High Risk Series, An 
Overview, note 19, p. 56. See also General Accounting Office, 
Advanced Automation System: Implications of Problems and Recent 
Changes, GAO/T-RCED-94-188 (April 13, 1994).
    \22\ Office of Inspector General, Department of 
Transportation (DOT IG), Inspector General Semiannual Report to 
the Congress, April 1, 1995-September 30, 1995, p. 4.
    \23\ DOT's Budget: Challenges Facing the Department in 
Fiscal Year 1997 and Beyond, note 15, p. 31.
    \24\ Inspector General Semiannual Report to the Congress, 
April 1, 1995-September 30, 1995, note 22, p. 5.
    \25\ Hearings before the Subcommittee on the Department of 
Transportation and Related Agencies Appropriations, House 
Committee on Appropriations, 104th Cong., 2d Sess., Department 
of Transportation and Related Agencies Appropriations for 1997 
(Part 3) (March 1996), pp. 8-9.
    \26\ Inspector General Semiannual Report to the Congress, 
April 1, 1995-September 30, 1995, note 22, p. 5.
    \27\ Hearings, note 25, pp. 9, 48-51.
    \28\ Id., pp. 56-57.
    \29\ Inspector General Semiannual Report to the Congress, 
April 1, 1995-September 30, 1995, note 22, p. 5.
    \30\ Id.
    \31\ DOT's Budget: Challenges Facing the Department in 
Fiscal Year 1997 and Beyond, note 15, pp. 1, 4.
    \32\ Congressional Research Service, Transportation and the 
FY 1997 Budget, note 1, pp. 16-17.
    \33\ DOT's Budget: Challenges Facing the Department in 
Fiscal Year 1997 and Beyond, note 15, p. 8.
    \34\ Id.
    \35\ General Accounting Office, Transportation 
Infrastructure: Central Artery/Tunnel Project Faces Continued 
Financial Uncertainties, GAO/RCED-96-131 (May 10, 1996), pp. 1, 
9.
    \36\ General Accounting Office, Central Artery/Tunnel 
Project: Cost and Financing, GAO/T-RCED-96-218 (July 11, 1996), 
p. 2.
    \37\ Project on Government Oversight, No Light at the End 
of This Tunnel: Boston's Central Artery/Third Harbor Tunnel 
Project (February 1995), p. 3.
    \38\ DOT's Budget: Challenges Facing the Department in 
Fiscal Year 1997 and Beyond, note 15, p. 10.
    \39\ Hearings, note 25, pp. 10, 75, 80.
    \40\ No Light at the End of This Tunnel: Boston's Central 
Artery/Third Harbor Tunnel Project, note 37, p. 4.
    \41\ DOT's Budget: Challenges Facing the Department in 
Fiscal Year 1997 and Beyond, note 15, pp. 11-15, 17.
    \42\ General Accounting Office, Federal Management: Updated 
Information for Congressional Oversight (July 1994), pp. 
TRANSPORTATION-21-22.
    \43\ Inspector General Semiannual Report to the Congress, 
April 1, 1995-September 30, 1995, note 22, pp. 3-4.
    \44\ Hearings, note 25, pp. 10-11, 198.

                       Department of the Treasury

                                Overview

    The Treasury Department received total appropriations of 
about $10.4 billion for fiscal year 1996. The President's 
budget request for Treasury for fiscal year 1997 totaled 
approximately $11.3 billion. The Internal Revenue Service (IRS) 
is, by far, the largest component of the Treasury Department. 
IRS' fiscal year 1997 budget request totaled almost $8 billion, 
representing an increase of $647 million over its funding level 
of $7.3 billion for fiscal year 1996. The second largest 
component of the Treasury Department is the United States 
Customs Service. The fiscal year 1996 appropriation for the 
Customs Service totaled about $1.46 billion, and its 1997 
request was about $1.55 billion.\1\
    The most serious management problems at the Department 
involve IRS and Customs, and relate particularly to their 
ability to ensure that revenues due the Government are 
accounted for and collected. Revenue collection problems 
besetting these two agencies are a major focus of GAO's ``high-
risk'' work. In its February 1995 High Risk Overview report, 
GAO stated:

          Fair and equitable administration of our tax laws 
        demands that the government collect what it is owed. 
        Yet, with annual collections currently at $1.25 
        trillion, IRS and Customs, the government's principal 
        revenue collectors, continue to be unable to adequately 
        account for and collect all that is due the government. 
        The result is the potential loss of billions of dollars 
        in revenue.\2\

    IRS has fundamental management problems in at least 4 
areas: (1) collection of tax debt, (2) its own financial 
management, (3) its massive Tax Systems Modernization program, 
and (4) providing assistance to taxpayers. Customs has made 
progress in addressing its overall management problems. 
However, it still has serious deficiencies in the areas of 
financial and information management.

             IRS Debt Collection Efforts are Losing Ground

    IRS' efforts to collect delinquent tax debt have been 
described as ``inefficient and unbalanced.'' \3\ GAO observed 
in this regard:

          IRS' poor performance in resolving tens of billions 
        of dollars in outstanding tax delinquencies has not 
        only lessened the revenues immediately available to 
        support government operations but could also jeopardize 
        future taxpayer compliance by leaving the impression 
        that IRS is neither fair nor serious about collecting 
        overdue taxes.\4\

    IRS' management of its accounts receivable has been 
designated a high-risk area by GAO, OMB, and the agency itself. 
Noting the significant gap between taxes owed and taxes 
voluntarily paid, OMB stated:

          Developing a more comprehensive strategy for 
        increasing tax compliance and managing accounts 
        receivable would yield improved tax revenue. Resolving 
        this problem is a long term challenge. This item has 
        been expanded in scope from accounts receivable to 
        recognize that the entire universe of tax non-
        compliance offers opportunity for improvement.\5\

    GAO has reported that ``IRS is losing ground in collecting 
mounting tax receivables.'' \6\ According to GAO, IRS has made 
negligible progress in collecting tax receivables, and the 
problem is worse today than when GAO designated this a high-
risk area. To illustrate this, GAO noted that between 1990 and 
1994, the reported inventory of tax debt increased from $87 to 
$156 billion; but by 1994, collections of delinquent taxes had 
actually declined from $25.5 to $23.5 billion.\7\
    The gap between tax receivables and collections continues 
to grow. Receivables reached $200 billion by the end of fiscal 
year 1995, while only $25.1 billion of delinquent taxes was 
collected. Of the $200 billion accounts receivable total, IRS 
estimates that $113 billion represent ``valid accounts 
receivable'' and that $46 billion represent ``collectible 
accounts receivable.'' \8\
    One major factor contributing to the problem is that IRS 
lacks reliable information about the accounts it is trying to 
collect and the effectiveness of its collection activities and 
programs. As a result, IRS agents don't know whether they are 
targeting and resolving cases in the most productive manner or 
whether they are spending time pursuing unproductive cases.\9\ 
As discussed later, even IRS' estimates of the aggregate 
amounts due are unreliable.
    Finally, it is questionable whether collection of 
delinquent taxes is a priority for IRS. Both the House and 
Senate Appropriations Committees took action to transfer from 
IRS to main Treasury funding for a second private sector debt 
collection program based on dissatisfaction with IRS 
contracting initiatives.\10\ The Senate Committee report 
pointed out that IRS' initiative for fiscal year 1996 had been 
roundly criticized by private industry. The report added:

          . . . The Committee is also concerned that IRS is not 
        committed to the success of this program, nor has it 
        established a viable program which can be expanded and 
        used in the future. . . . The vast majority of 
        Americans faithfully and voluntarily pay their taxes. 
        Every effort should be made to protect them by 
        collecting those taxes legitimately owed the Federal 
        Government.\11\

IRS' Own Inadequate Financial Management Doesn't Measure up to What it 
                          Demands of Taxpayers

    IRS' significant financial management weaknesses cause 
errors in taxpayer accounts and an inability to adequately 
account for collection operations.\12\ GAO aptly observed that 
IRS ``has not kept its own books and records with the same 
degree of accuracy it expects of taxpayers.'' \13\
    Both GAO and the Treasury IG have found IRS' financial 
statements to be unauditable. GAO issued a disclaimer of 
opinion on the reliability of IRS' financial statements for 
each of the 4 fiscal years from 1992 through 1995. Its most 
recent financial audit listed a series of fundamental, 
persistent problems that remain uncorrected and, until 
resolved, will continue to prevent GAO from expressing an 
opinion on IRS' financial statements in the future. Among these 
problems are:
     The amounts of total revenue and tax refunds 
cannot be verified or reconciled to accounting records. For 
example, IRS' reported total of $1.3 trillion for revenue 
collections in fiscal year 1994 was $10.4 billion more than the 
amount recorded in IRS master files.
     The amounts reported for various types of taxes 
collected (for example, social security, income and excise 
taxes) cannot be substantiated.
     The reliability of reported estimates of $113 
billion for valid accounts receivable and $46 billion for 
collectible accounts receivable cannot be determined. 
Consequently, the financial statements cannot be relied on to 
accurately disclose the amount of taxes owed to the Government 
or the portion of that amount which is collectible.\14\
    To resolve these issues, GAO has made 59 recommendations to 
improve IRS financial management systems and reporting, but 
many of the more significant recommendations have not yet been 
fully implemented. As GAO pointed out, solving these problems 
is essential to ensure taxpayers that their tax dollars are 
properly accounted for. The accuracy of IRS' financial 
statements also is key to (1) ensuring adequate accountability 
for IRS programs, (2) assessing the impact of tax policies, and 
(3) measuring IRS' performance and cost-effectiveness in 
carrying out its enforcement, customer service, and collection 
activities.\15\

      The IRS Tax Systems Modernization (TSM) Program is a Failure

    IRS is drowning in paper--a problem which severely affects 
the timeliness and efficiency of its operations, including 
processing returns, paying refunds, and responding to taxpayer 
inquiries. This problem can only be mitigated through 
electronic tax filings. The TSM program is the key to achieving 
IRS' vision of a virtually paper-free work environment.\16\ 
However, the reality is far from the vision. For years GAO and 
others have warned that TSM ``is jeopardized by persistent and 
pervasive management and technical weaknesses,'' and that ``IRS 
continues with plans to spend billions more on TSM with little 
assurance of successfully delivering effective systems within 
established time frames and cost figures.'' \17\
    In February 1995, GAO placed the TSM program on its high-
risk list. GAO summarized the problems besetting TSM as 
follows:

          Through fiscal year 1995, IRS will have spent or 
        obligated over $2.5 billion on its $8 billion Tax 
        System Modernization (TSM) initiative to automate 
        selected tax processing functions. Yet, the overall 
        design for TSM is still incomplete and IRS is 
        continuing to automate existing problem-plagued 
        functions with limited understanding of whether or how 
        different systems will eventually connect to improve 
        tax processing overall.\18\

    Likewise, the Treasury IG has listed TSM as one of several 
``areas of concern.'' The IG noted that IRS' oversight efforts 
with respect to TSM have been ineffective and that IRS 
continues to experience recurring problems in TSM's 
development.\19\ The IRS Inspection Service also considers TSM 
to be a major ``material weakness.'' \20\
    While IRS has initiated a number of corrective actions, GAO 
recently reported that the agency has not made significant 
progress. IRS' corrective actions are incomplete and none of 
GAO's recommendations have been fully implemented. For example, 
one corrective action was to obtain additional help from 
contractors to develop and integrate TSM since IRS lacks the 
capability to do this. However, GAO pointed out that IRS lacks 
the capability to manage its current contractors 
successfully.\21\ ``Consequently,'' GAO observed, ``IRS today 
is not in an appreciably better position than it was a year ago 
to ensure the Congress that it will spend its 1996 and future 
TSM appropriations judiciously and effectively.'' \22\
    IRS requested $850 million in TSM funding for fiscal year 
1997--a $155 million increase from its proposed 1996 operating 
level. As a result of the managerial and technical weaknesses 
affecting TSM, GAO expressed the opinion that IRS could not 
make effective use of TSM systems development funds at the 
present time. GAO's concern was heightened by the fact that IRS 
would not provide it specific information on the agency's plans 
for spending the requested $850 million.\23\ Both the House and 
Senate fiscal year 1997 appropriations bills substantially 
reduce funding for TSM.

         IRS Doesn't Provide Effective Assistance to Taxpayers

    The success of the U.S. tax system depends on voluntary 
compliance by American taxpayers. Many taxpayers need IRS' help 
in understanding and meeting their responsibilities. However, 
IRS has problems providing timely and clear responses to 
taxpayers.\24\ It appears that IRS service to taxpayers has 
deteriorated in recent years.
    IRS walk-in sites provide free services to taxpayers such 
as copies of commonly used tax forms and publications, help in 
preparing returns, free electronic filing, and answers to tax 
law questions. Yet, for the 1996 tax filing season, IRS closed 
93 walk-in assistance sites, reduced the operating hours of 
some of the 442 sites that remained open, and eliminated free 
electronic filing at 195 of the sites. According to IRS, the 
closures and cutbacks at sites were determined on the basis of 
their historical volume of work and their proximity to other 
walk-in sites. However, the net effect of these service 
cutbacks is demonstrated by IRS' own data: Walk-in sites served 
about 1.7 million taxpayers from January through early March, 
1996--about 16 percent fewer taxpayers than were served for the 
same period last year.\25\
    IRS' record in providing telephone assistance to taxpayers 
is even more dismal. Taxpayers have long had problems reaching 
IRS by telephone. Only 58 percent of callers were able to get 
through to IRS for the 1989 tax filing season. While this 
percentage is bad enough, it has plummeted in recent years. GAO 
reported that IRS answered only 19.2 million of 236 million 
call attempts for tax assistance between January 1 and April 
15, 1995--an ``accessibility rate'' of only 8 percent. The 
accessibility rate for the early months of 1996 still was very 
low--only 12.7 million--or about 20 percent--of the 
approximately 63.3 million calls to IRS were answered.\26\
    Even those relatively few callers who get through do not 
necessarily receive answers to their questions answered. The 
different functional areas within IRS maintain separate 
taxpayer data bases. As a result, the IRS employee may have to 
refer the taxpayer to another office, research the problem and 
call the taxpayer back, or tell the taxpayer to call back 
later. Thus, taxpayers may have to make several inquiries 
before locating an IRS office that can address their concern or 
question.\27\
    In short, getting help from IRS can be a frustrating and 
often fruitless undertaking. The treatment IRS gives those 
taxpayers who seek its help in meeting their legal obligations 
hardly supports a tax system that is premised on voluntary 
compliance.

 Customs Service Financial And Information Management Problems Persist

    The Customs Service is an important revenue-collector for 
the government, with responsibility for about $20 billion 
annually. According to GAO, while Customs has made improvements 
in some management and organizational areas, its financial 
management problems remain high-risk. In a February 1995 
report, GAO observed:

          Despite other improvements, Customs still needs to 
        make significant additional efforts to correct its 
        financial management and internal control systems 
        weaknesses. Our audits of Customs' financial statements 
        for fiscal years 1992 and 1993 disclosed that the 
        agency had not yet fully resolved many of the financial 
        management problems that we reported earlier. Although 
        efforts are underway to address recommendations from 
        our fiscal year 1992 financial statements audit, as of 
        May 1994, Customs had completed actions on only 11 of 
        54 recommendations we made.\28\

    The Office of Management and Budget also listed Customs 
financial management as a high risk area.\29\
    GAO's fiscal year 1993 financial audit found that Customs 
has not implemented controls, systems, and processes to 
reasonably ensure that--
     Carriers, importers, and their agents complied 
with trade laws. As a result, revenue owed to the Federal 
Government may not have been identified and quotas and other 
legal restrictions may have been violated.
     Sensitive data in its automated systems, such as 
import inspection criteria and law enforcement data, were 
adequately protected from unauthorized access and change.
     Full accountability was maintained for agency 
assets and use of appropriated funds, and computer 
modernization efforts were reliably determined.\30\
    The Treasury IG's audit of Customs' financial statements 
for fiscal year 1994 likewise resulted in a disclaimer. The IG 
expressed concern that if problems identified in financial 
statement audits at Customs and IRS (discussed previously) 
continue, both the consolidated Treasury and Government-wide 
financial statements will be materially affected.
    The OIG recently completed its report on Customs' fiscal 
years 1995 and 1994 consolidated financial statements, and was 
able to express a ``qualified'' opinion. While this represents 
an important step in the right direction, the report cautioned:

          Customs' progress in correcting weaknesses identified 
        in previous audit efforts enabled us to provide limited 
        audit assurance for the first time. While that is 
        significant, continued progress is critical. Our report 
        cites five material weaknesses and seven reportable 
        conditions in the internal control structure. Our 
        report also cites one reportable instance of 
        noncompliance with laws and regulations.\31\

    GAO also recently reported on information management 
problems at Customs. In order to modernize and support its 
import process, Customs is developing a new computerized system 
known as the ``Automated Commercial Environment'' (ACE). 
However, according to GAO, this effort is ``vulnerable to 
failure because the agency is not effectively applying best 
practices to mitigate the serious risks associated with such an 
ambitious systems modernization effort.'' For example, Customs 
selected hardware, software, and telecommunications for ACE 
before it redesigned its key business processes. Also, Customs 
is not applying specific criteria in assessing project costs 
and benefits.\32\ The House committee report on the fiscal year 
1997 appropriations bill echoed these concerns:

          The Committee is concerned that the issues raised by 
        the GAO report are of the same character as the 
        problems the Committee has found regarding the Internal 
        Revenue Service's Tax Systems Modernization (TSM) 
        program. In the case of both ACE and TSM, the agency 
        has proceeded with system development before completing 
        a blueprint.\33\

    Accordingly, the committee prohibited use of funds for ACE 
without prior approval of the House and Senate Appropriations 
Committees and directed Customs to submit a report responding 
to the points raised by GAO.

                                ENDNOTES

    \1\ See generally Congressional Research Service, Treasury, 
Postal Service, Executive Office of the President, and General 
Government: Appropriations for FY 1997, 96-603E (August 2, 
1996), p. 14; General Accounting Office, Tax Administration: 
IRS' Fiscal Year 1996 and 1997 Budget Issues and the 1996 
Filing Season, GAO/T-GGD-96-99 (March 28, 1996), p. 1, 4.
    \2\ General Accounting Office, High Risk Series, An 
Overview, GAO/HR-95-1 (February 1995), pp. 44-45.
    \3\ General Accounting Office, High Risk Series, Internal 
Revenue Service Receivables, GAO/HR-95-6 (February 1995), p. 6.
    \4\ Id.
    \5\ Office of Management and Budget, Progress Report: 
Correcting High Risk Areas, Analytical Perspectives on the 
Budget of the United States for Fiscal Year 1996, p. 297.
    \6\ High Risk Series, An Overview, note 2, p. 11.
    \7\ Id., p. 47; High Risk Series, Internal Revenue Service 
Receivables, note 3, p. 7.
    \8\ General Accounting Office, Financial Audit: Examination 
of IRS' Fiscal Year 1995 Financial Statements, GAO/AIMD-96-101 
(July 11, 1996), pp. 6, 21.
    \9\ General Accounting Office, Tax Administration: IRS Debt 
Collection Practices, GAO/T-GGD-96-112 (April 25, 1996), p. 3.
    \10\ See Committee on Appropriations, House of 
Representatives, Report on H.R. 3756, Treasury, Postal Service, 
and General Government Appropriations Bill, 1997, H. Rept. No. 
104-660 (1996), pp. 9-10; Committee on Appropriations, United 
States Senate, Report on H.R. 3756, Treasury, Postal Service, 
and General Government Appropriations Bill, 1997, S. Rept. No. 
104-330 (1996), p. 8.
    \11\ S. Rept. No. 104-330, note 10, p. 8.
    \12\ High Risk Series, An Overview, note 2, p. 45.
    \13\ Id., p. 10.
    \14\ Financial Audit: Examination of IRS' Fiscal Year 1995 
Financial Statements, note 8, pp. 1-2, 7.
    \15\ Id., p. 2.
    \16\ General Accounting Office, Tax Systems Modernization: 
Management and Technical Weaknesses Must Be Overcome To Achieve 
Success, GAO/T-AIMD-96-75 (March 26, 1996), pp. 2, 4.
    \17\ Id., pp. 1-2.
    \18\ High Risk Series, An Overview, note 2, p. 57.
    \19\ Department of the Treasury, Office of Inspector 
General (Treasury IG), Semiannual Report to the Congress, April 
1, 1995-September 30, 1995, p. 7.
    \20\ Treasury IG, Semiannual Report to the Congress, 
October 1, 1995-March 31, 1996, p. 7.
    \21\ General Accounting Office, Tax Systems Modernization: 
Actions Underway But IRS Has Not Yet Corrected Management and 
Technical Weaknesses, GAO/AIMD-96-106 (June 7, 1996), pp. 2-3.
    \22\ Tax Systems Modernization: Management and Technical 
Weaknesses Must Be Overcome To Achieve Success, note 16, p. 4.
    \23\ Tax Administration: IRS' Fiscal Year 1996 and 1997 
Budget Issues and the 1996 Filing Season, note 1, pp. 13-14.
    \24\ General Accounting Office, Federal Management: Updated 
Information for Congressional Oversight (July 1994), p. 
TREASURY-23.
    \25\ Tax Administration: IRS' Fiscal Year 1996 and 1997 
Budget Issues and the 1996 Filing Season, note 1, p. 8.
    \26\ Id., p. 12.
    \27\ General Accounting Office, Managing IRS: IRS Needs to 
Continue Improving Operations and Service, GAO/T-GGD/AIMD-96-
170 (July 29, 1996), pp. 5-6.
    \28\ High Risk Series, An Overview, note 2, p. 51.
    \29\ Office of Management and Budget, Progress Report: 
Correcting High Risk Areas, Analytical Perspectives on the 
Budget of the United States for Fiscal Year 1996, p. 297.
    \30\ High Risk Series, An Overview, note 2, p. 51.
    \31\ Treasury IG, Report on the United States Customs 
Service's Fiscal Years 1995 and 1994 Consolidated Financial 
Statements, OIG-96-060 (April 25, 1996), p. 2.
    \32\ General Accounting Office, Customs Service 
Modernization: Strategic Information Management Must Be 
Improved for National Automation Program to Succeed, GAO/AIMD-
96-57 (May 9, 1996), pp. 1-2.
    \33\ H. Rept. No. 104-660, note 10, p. 29.

                     Department of Veterans Affairs

                                Overview

    The Veterans Administration was established in 1930, and 
was upgraded to the Department of Veterans Affairs (VA) in 
1988. A large organization, with an annual budget of $38 
billion, the Department employs a staff of 256,542. The VA 
operates the Veterans Health Administration, the Veterans 
Benefits Administration, and the National Cemetery System. Its 
primary objective is to administer programs for and distribute 
benefits to the Nation's veterans.
    Problems affecting the VA involve the distribution of 
benefits to veterans and the management of VA employees. The 
system utilized to distribute benefits to veterans is replete 
with management problems. Often, veterans and their families 
receive substantial overpayments. Worse, when a veteran appeals 
a decision by the VA, that appeal may be the subject of a two 
to 3 year delay. Public frustration with these problems is 
exacerbated when veterans learn that VA employees will fight 
for the chance to be paid for days on which they did no work.
    The VA should re-examine the way it distributes money and 
the way it examines claims in order to improve service to our 
Nation's veterans.

               Compensation and Pension Overpayments \1\

    The Department of Veterans Affairs pays benefits to 
veterans who are injured or contract disease while in the 
service of their country. In addition, the Department of 
Veterans Affairs provides pension benefits to veterans whose 
incomes are limited and who become disabled after their time of 
service.
    Many factors can change the amount of payments owed to the 
beneficiaries of the Department of Veterans Affairs programs. 
Among the changes in status that can affect a beneficiary's 
payments are changes in marital status, income, or disability. 
Those who become divorced, begin receipt of Social Security 
benefits, or become hospitalized at a VA hospital may have 
their benefits reduced. The primary source of information on 
the reduction of benefits is the beneficiaries themselves. The 
VA expects the beneficiaries to notify the agency if a change 
in their status occurs.
    In 1994, the VA discovered $372 million in overpayments. In 
May 1994, the VA reported 16,995 instances in which it overpaid 
beneficiaries. The balance of overpayments yet to be repaid 
rose to $618 million.\2\ Many of these overpayments could be 
prevented.
    The General Accounting Office estimates that 39 percent of 
overpayments result when beneficiaries begin receiving Social 
Security benefits.\3\ On average, more than 4 months pass 
before the VA learns that a beneficiary is receiving Social 
Security benefits. The VA need only track the age of its 
beneficiaries to know when they will be eligible for Social 
Security benefits and contact the beneficiaries at that point 
to make the appropriate adjustments to their benefits. This 
simple reform could have saved the Department of Veterans 
Affairs approximately $52 million in 1994.\4\
    In addition to the change in status as a result of Social 
Security benefits, the status of beneficiaries may change as 
the result of several other factors. The VA has no system by 
which to detect such changes in status. According to the 
General Accounting Office, the VA could better target 
overpayments by collecting, analyzing, and using information on 
the specific causes or contributing factors of overpayments.

                          Appeals Backlog \5\

    In addition to problems concerning overpayment of benefits, 
the VA continues to have a significant backlog of appeals 
regarding payments to beneficiaries. A veteran first makes a 
claim for benefits to one of 58 Veterans Affairs regional 
offices. If the veteran is dissatisfied with the decision of 
the regional office, he may appeal the decision to the Board of 
Veterans' Appeals. According to the General Accounting Office, 
the VA has a backlog of over 47,000 appeals before the Board. 
The average wait for processing of appeals is 2\1/2\ years.
    The number of appeals backlogged before the Board of 
Veterans' Appeals more than doubled from approximately 22,400 
in 1992 to approximately 47,000 in 1994.\6\ The number of 
decisions rendered by the Board dropped from approximately 
35,000 cases in 1992 to approximately 22,000 cases in 1994. The 
number of days the Board will take to render a decision on all 
pending appeals rose from 240 days in 1992 to 781 days in 1994. 
The cost per case rose from approximately $400 in 1990 to 
$1,250 in 1994.
    The Department of Veterans Affairs cites judicial 
requirements to fully explain its decisions as one of the 
reasons for the increased backlog and the concomitant rise in 
cost per case.\7\ However, many point to the complexity of the 
process for making appeals as the reason for the backlog. A 
limit on the time in which a veteran can introduce new issues 
to the appeal would likely reduce the time required to process 
an appeal. Another proposed reform would allow the Board of 
Veterans' Appeals to obtain requisite information itself, 
rather than remand the case to the Department of Veterans 
Affairs Regional Office to obtain that information.
    While many of the proposed reforms are controversial, and 
may adversely affect veterans' ability to obtain benefits, the 
Department of Veterans Affairs should begin to address the 
problem. The Board of Veterans' Appeals has set no goal for the 
administration of appeals, and the Department of Veterans 
Affairs has not implemented recommendations designed to improve 
interaction between organizations within the VA. The VA must 
begin to address the backlog of appeals, or veterans will 
continue to suffer as a result.

                 Sunday Premium Pay Costs Millions \8\

    In 1993, the United States Court of Appeals for the Federal 
Circuit interpreted a provision of title 5 of the United States 
Code to mean that employees scheduled to work on a Sunday, but 
actually on leave, were entitled to receive ``Sunday premium 
pay.'' Sunday premium pay is equal to 1.25 times the rate of 
basic pay for the employee. Before this court decision, Sunday 
premium pay was paid on the condition that employees actually 
performed work on that Sunday. After the court decision, Sunday 
premium pay was paid in many instances while employees were on 
leave.
    The abuse of Sunday premium pay was in evidence at a number 
of Federal agencies. It was most pronounced at the Department 
of Veterans Affairs. Before the court decision mandating the 
payment of Sunday premium pay to employees who did not work on 
that Sunday, 9 percent of the employees of the Department of 
Veterans Affairs took advantage of Sunday premium pay while on 
leave. After that court decision, 11.7 percent took advantage 
of Sunday premium pay while on leave. The rise in use of leave 
while scheduled to work on Sunday rose higher at the Department 
of Veterans Affairs than at any other agency.\9\
    In fiscal year 1994, 4,253 employees of the Veterans 
Administration were scheduled to work on Sunday. 11.3 percent 
of those employees exercised leave on those Sundays. The 
General Accounting Office estimates that the Veterans 
Administration paid $4 million in Sunday premium pay to 
employees who were on leave.\10\
    Of the $146.1 million in Sunday premium pay by the five 
agencies reviewed by the General Accounting Office, $17.9 
million was paid to employees on leave.\11\

                                ENDNOTES

    \1\ General Accounting Office, Veterans' Benefits: VA Can 
Prevent Millions in Compensation and Pension Overpayments, 
GAAO/HEHS-95-88 (April 28, 1995).
    \2\ Id., p. 3.
    \3\ Id., p. 4.
    \4\ Id., p. 8.
    \5\ General Accounting Office, Veterans' Benefits: 
Effective Interaction Needed Within VA to Address Appeals 
Backlog, Report to Congressional Requesters, GAO/HEHS-95-190 
(September 1995).
    \6\ Id., pp. 8, 13.
    \7\ Id., p. 20.
    \8\ General Accounting Office, Sunday Premium Pay: Millions 
of Dollars in Sunday Premium Pay Are Paid to Employees on 
Leave, GAO/GGD-95-144; May 19, 1995.
    \9\ Id., p. 7.
    \10\ Id., p. 7.
    \11\ Id., p. 7.

                          The War on Drugs \1\

                                Overview

    The War on Drugs, fought by the Federal Government and many 
other valiant private and public entities throughout the World, 
is made up of many different organizations. Within the Federal 
Government alone, the effort consists of programs that include 
the Federal Court System, the Food and Drug Administration, 
Social Security Administration, Department of Defense, 
Department of Agriculture's Agricultural Research Service, U.S. 
Forest Service, Department of the Interior's Bureau of Indian 
Affairs, Bureau of Land Management, Fish and Wildlife Service, 
National Park Service, Department of Justice's Community 
Policy, Immigration and Naturalization Service, U.S. Marshal's 
Service and Tax Division, Department of Labor, Small Business 
Administration, Agency for International Development, 
Department of the Treasury's Internal Revenue Service, U.S. 
Secret Service, U.S. Information Agency, and Department of 
Health and Human Services.
    While the total antidrug budget rose from $1.5 billion in 
fiscal 1981 to $13.2 billion in fiscal 1995, the Office of 
National Drug Control Policy (ONDCP) reports a drop in both 
drug interdiction and international program funding over the 
past 4 years, and concedes a significant shift among demand 
reduction programs to treatment efforts in the same time 
period. Drug interdiction funding fell from $1.511 billion in 
fiscal 1993 to $1.312 billion in fiscal 1994. President 
Clinton's fiscal 1994 budget slashed the interdiction budget by 
$200 million and by $18 million more to $1.293 billion in 
fiscal 1995. For fiscal 1996, he cut interdiction by another 
$15 million to $1.278 billion. At the same time, international, 
or source country, counter narcotics funding fell from a high 
of $523 million in fiscal 1993 to $329 million in fiscal 1995, 
recovering only slightly to $399 million in fiscal 1996.
    In an attempt to rebuild the Nation's drug war, the House 
of Representatives has moved to appropriate $20 million above 
the President's request to the Drug Enforcement Administration 
and restored 75 DEA agents to focus on drug interdiction.\2\ 
The House of Representatives has also increased the President's 
Department of Defense request by $132 million, specifically for 
drug interdiction.\3\ House appropriators have also added $35 
million to last years' appropriations for foreign counterdrug 
operations.\4\ And the House of Representatives has 
appropriated $25 million above the administration's request for 
Byrne grants, those grants that support local law enforcement 
efforts in the war on drugs.\5\
    While there has been a substantial shift away from 
successful interdiction programs in the past 4 years, the White 
House National Drug Control Strategy identifies first on its 
list of ``National Funding Priorities for FY's 1997-99'' the 
``[s]upport programs that expand drug treatment capacity and 
services so that those who need treatment can receive it.'' In 
fiscal 1993, treatment resources stood at $2.339 billion. The 
figure increased to $2.398 billion in fiscal 1994, to $2.646 
billion in fiscal 1995, and the President's request for fiscal 
1996 was at an all-time high of $2.826 billion.
    However, despite the stated aim of President Clinton's 
strategy, namely reduction of hardcore use by heightened 
emphasis on treatment, the most recent data gathered by the 
non-partisan Drug Abuse Warning Network from emergency rooms 
around the country shows that ``drug related emergency room 
cases . . . have reached the highest levels ever, in reporting 
going back to 1978'' and ``[c]ocaine, heroin, and marijuana 
cases all increased sharply to record levels [in 1994].\6\''
    John P. Walters, president of the New Citizenship Project 
and former Acting Director of ONDCP, testifed on March 9, 1995 
before the Subcommittee on National Security, International 
Affairs, and Criminal Justice of the Committee on Government 
Reform and Oversight. He explained the value of effective 
treatment. Walters testified that today's Federal ``government 
[drug] treatment bureaucracy is manifestly ineffective.'' He 
said the Clinton administration has, on the one hand, sought 
increased treatment funding, yet on the other, failed to 
provide sufficient treatment slots to effectuate the policy: 
``Although Federal drug treatment spending almost tripled 
between FY 1988 and FY 1994, the number of treatment slots 
remained virtually unchanged and the estimated number of 
persons treated declined--from 1,557,000 in 1989 to 1,412,000 
in 1994.''
    Walters also noted in his testimony that the current 
strategy's success cannot be found in chronic, hardcore drug 
user numbers--since these are also rising.
    Nancy Reagan, the Reagan administration's most effective 
spokesman for the War on Drugs, also testified before the 
Subcommittee on National Security at its March 9, 1995 hearing. 
In questioning the administration's focus on hardcore drug 
users, she stated that ``[r]oughly 80 percent of drug users are 
causal users. Only 20 percent are hardcore, and most of the 
casual users are children and adolescents. They are ones whose 
lives are changed by prevention and education.''
    Other witnesses at the March 9, 1995 hearing were also 
critical of President Clinton's drug strategy. Former 
Administrator of the Drug Enforcement Administration Robert C. 
Bonner agreed with the assessment of Walters and Reagan. 
testifying that ``[t]he Clinton Strategy badly oversells the 
efficacy of the treatment of hardcore drug abusers'' and fails 
to acknowledge that ``studies repeatedly indicate the low 
success rates associated with many programs . . .'' 
Specifically, Bonner cited the work of Harvard University's 
Mark Kleinman, a former member of the Clinton Justice 
Department Transition Team, which shows that ``even the most 
expensive treatment program--long-term residential treatment 
programs costing as much as $20,000 per patient--have success 
rates as low as 15 to 25 percent.''
    The moneys set aside for fighting the drug war on our 
Nation's streets are also in jeopardy. In 1993, events in Waco 
pointed to an abuse of funds put aside for drug enforcement. 
The Bureau of Alcohol, Tobacco and Firearms (ATF) sought the 
assistance of U.S. Military and National Guard forces in their 
assault on the Branch Davidian Compound in Waco, TX. Such 
assistance could be provided without the need for reimbursement 
only if the ATF could establish that drug use or drug 
trafficking was taking place at the residence. In order to get 
reimbursed for the funds used to provide support for the 
assault, the ATF produced stale information to point to drug 
manufacturing at the residence. At no time did ATF actually 
believe that the Branch Davidians were engaged in the 
manufacture or sale of illegal narcotics. Nonetheless, ATF 
diverted funds from the crucial fight against drugs for the use 
of free military assistance in their failed assault on the 
Branch Davidian residence in Waco, TX.
    While the Clinton administration has also increased funding 
for Safe and Drug Free Schools programs, it is troubling that a 
lack of oversight of these programs has resulted in a great 
deal of wasted taxpayers dollars. In an examination of this 
problem, the Subcommittee on National Security received expert 
testimony and documentary evidence that the program has been 
subject to serious misuse, waste and abuse of funding. At an 
April 6, 1995 hearing, Congresswoman Ileana Ros-Lehtinen cited 
specific examples of waste. She cited a program in Michigan, 
where ``$10 million in Federal funds intended to provide our 
children a front line defense against drugs was utilized for 
the following: Over $81,000 for large teeth and giant 
toothbrushes; over $1.5 million on a human torso model used in 
one lesson of one grade, not even the drug section of the 
curriculum; wooden cars with ping pong balls, over $12,300; 
hokey pokey song, over $18,000; over $7000 on ``sheep eyes''; 
dog bone kits, $3,700; bicycle pumps, $11,000; latex gloves, 
$122,000; over $300,000 was spent on how we feel about sound.'' 
\7\
    The committee finds that Presidential leadership on the 
drug problem has been particularly weak. In 1993 and 1994, 
President Clinton made seven addresses to the Nation; none 
mentioned illegal drugs. The President's 1993 Presidential 
papers reveal 13 references to illegal drugs in a total 1,628 
Presidential statements, addresses, and interviews. Of 1,742 
Presidential statements and other utterances in 1994, illegal 
drugs were mentioned only 11 times.\8\
    Dr. William J. Bennett, former White House Drug Czar, 
testified before the Subcommittee on National Security on March 
9, 1995 that ``the Clinton administration has abdicated its 
responsibility'' and ``has been AWOL in the War on Drugs.'' 
Strikingly, Bennett noted that the administration's 1995 
strategy would ``cut . . . more than 600 positions from drug 
enforcement divisions of the Drug Enforcement Administration,'' 
cut ``more than 100 drug prosecution positions in the United 
States Attorney's offices,'' cut ``drug interdiction and drug 
intelligence programs from fiscal 1994 levels,'' and was ``an 
unfocused, wasteful drug strategy that will do little to target 
hardcore users.''
    Walters pointed to the President's 80 percent reduction in 
ONDCP staff, the Attorney General's stated goal of reducing 
mandatory minimum sentences for drug trafficking, a 
Presidential directive reducing Department of Defense support 
to drug interdiction efforts, the reduction in resources to 
transit and source countries by 33 percent (from $523.4 million 
in fiscal year 1993 to $351.4 million in fiscal year 1994), a 
reduction in Federal domestic marijuana eradication efforts, a 
call by the President's Surgeon General for study of drug 
legalization, and ``no moral leadership or encouragement'' from 
President Clinton himself.
    Unfortunately, drug abuse numbers continue to swell under 
current policies. The rate of current drug use of any illicit 
drug among youth aged 12-17 was found to be 10.9 percent in 
1995, up from 5.3 percent in 1992.\9\ The rate of marijuana use 
among youth aged 12-17 in 1995 is 8.2 percent, more than double 
the rate compared to the 3.4 percent long-term low estimated 
for 1992.\10\ The rate of cocaine use among youth aged 12-17 
increased to .8 percent, double the .4 percent in 1994.\11\ 
Heroin related emergencies increased by 19 percent, from 64,013 
emergencies in 1994 to 76,023 in 1995.\12\ Marijuana related 
emergencies rose 17 percent from 40,183 in 1994 to 47,069 in 
1995.\13\ LSD has reached the highest rate since recordkeeping 
started in 1975.\14\

                                ENDNOTES

    \1\ Committee on Government Reform and Oversight, 
``National Drug Policy: A Review of the Status of the Drug 
War,'' H. Rept. No. 104-486, March 19, 1996.
    \2\ H.R. 3814, Departments of Commerce, Justice, and State 
FY 97 Appropriations.
    \3\ H.R. 3610, Department of Defense FY 97 Appropriations.
    \4\ H.R. 3450, Foreign Operations FY 97 Appropriations.
    \5\ H.R. 3814, Departments of Commerce, Justice, and State 
FY 97 Appropriations.
    \6\ Preliminary Estimates from the Drug Abuse Warning 
Network, U.S. Department of Health and Human Services, 
September 1995.
    \7\ Id, pp. 79-80.
    \8\ Presidential Papers of President William Jefferson 
Clinton, 1993 and 1994.
    \9\ U.S. Department of Health and Human Services, New 
National Household Survey on Drug Abuse Warning Network Data 
for 1995, August 1995.
    \10\ Id.
    \11\ Id.
    \12\ Id.
    \13\ Id.
    \14\ Id.

             VII. Management Reforms in the 104th Congress

    This section of the report summarizes major management 
reforms that have been enacted by the 104th Congress.
    Beginning with its first day, the 104th Congress has 
enacted dozens of key congressional reforms, including numerous 
provisions of the Contract with America. Many of these laws 
make important improvements in the management and 
administrative operations of the Federal Government. A number 
of laws, such as the Federal Acquisition Reform Act and the 
Information Technology Management Reform Act, enhance 
management practices governmentwide. Others make improvements 
in specific program areas. In addition to paving the way for 
substantial management reforms in the executive branch, the 
104th Congress made fundamental reforms in congressional 
operations. This process began with the very first law enacted 
by the 104th Congress, the Congressional Accountability Act of 
1995.
    If effectively implemented, the management reforms enacted 
during this Congress will result in major cost savings and 
improvements in the efficiency of the Federal Government. These 
reforms also have far-reaching effects beyond the internal 
operations of the Federal Government. For example, the Unfunded 
Mandates Reform Act curbs the practice, formerly engaged in by 
both the executive branch and Congress, of imposing costly 
requirements on State and local governments without considering 
their consequences. The Paperwork Reduction Act and the Small 
Business Regulatory Enforcement Fairness Act combat unnecessary 
burdens imposed by Federal regulators and facilitate compliance 
with legitimate regulations.
    The following descriptions cover both laws enacted during 
the 104th Congress and resolutions adopted to reform 
congressional operations. The descriptions are limited to laws 
and resolutions that deal with government management issues. By 
no means do they cover all of the important legislation enacted 
during the current Congress; nor do they cover many important 
pieces of management reform legislation that are now before the 
Congress.

  Congressional Accountability Act of 1995--Public Law 104-1 (Enacted 
                           January 23, 1995)

    Applies to Members of Congress and congressional employees 
the major Federal workplace and civil rights laws from which 
previous Congresses had exempted themselves. These laws 
include: the Age Discrimination in Employment Act, the 
Americans with Disabilities Act, the Civil Rights Act of 1964, 
the Rehabilitation Act, the Employee Polygraph Protection Act, 
the Federal Labor Management Relations Act, the Fair Labor 
Standards Act, the Family Medical Leave Act of 1993, the 
Occupational Safety and Health Act, the Veterans' Reemployment 
Rights Act, and the Worker Adjustment and Retraining 
Notification Act.
    Establishes a Congressional Office of Compliance, and 
requires its Board of Directors to review provisions of Federal 
laws and regulations relating to the terms and conditions of 
employment and access to public services and accommodations; 
and report on whether or to what degree such provisions are 
applicable to the legislative branch and, if inapplicable, 
whether they should be made to apply.
    Requires each congressional committee report accompanying 
any bill or joint resolution relating to terms and conditions 
of employment or access to public services or accommodations 
to: (1) describe the manner in which its provisions apply to 
the legislative branch; or (2) if the provisions do not apply, 
include a statement of the reasons why.

 Unfunded Mandates Reform Act of 1995--Public Law 104-4 (Enacted March 
                               22, 1995)

    Provides that when reporting a bill with a Federal mandate, 
a congressional committee must request a Congressional Budget 
Office (CBO) cost estimate. CBO must provide detailed cost 
estimates for each bill reported by an authorizing committee 
containing mandates that have an annual aggregate impact of $50 
million or greater on State and local governments or $100 
million on the private sector. A committee must publish this 
CBO estimate prior to floor consideration, or a point of order 
against further consideration of the bill would lie on the 
floor.
    A point of order would lie on the floor against 
consideration of legislation that imposes intergovernmental 
mandates over $50 million unless the legislation provides that 
the mandate is funded. It is not in order to consider any rule 
waiving this point of order.
    Federal agencies must prepare statements assessing the 
costs and benefits of proposed or final rules expected to have 
an annual aggregate cost to States and localities, or the 
private sector, of $100 million or more. Agencies are required 
to consider a number of regulatory alternatives in the 
rulemaking process and to select the least costly, least 
burdensome or most cost-effective option. These provisions are 
subject to limited judicial review.
    Further, the Act directs the Advisory Commission on 
Intergovernmental Relations to review existing mandates and 
make recommendations to Congress and the President regarding 
their value and whether some or all should be eliminated or 
changed.

District of Columbia Financial Responsibility and Management Assistance 
         Act of 1995--Public Law 104-8 (Enacted April 17, 1995)

    Establishes the District of Columbia Financial 
Responsibility and Management Assistance Authority (``Control 
Board'') to oversee the financial operations of the District of 
Columbia Government. The Act requires the Mayor of the District 
of Columbia to submit annual financial plans and budgets for 
the District to the Control Board. The Act also provides for 
the Control Board to review laws passed by the District Council 
and to review contracts and leases executed by the District 
Government to ensure their compliance with the financial plan 
and budget. Prohibits the District from borrowing money except 
with the prior approval of the Control Board.

  Paperwork Reduction Act of 1995--Public Law 104-13 (Enacted May 22, 
                                 1995)

    Amends and strengthens the Paperwork Reduction Act of 1980. 
Requires the Office of Information and Regulatory Affairs 
(OIRA), in the Office of Management and Budget, to develop an 
information collection budget specifying the total number of 
paperwork ``burden hours'' imposed by executive agencies. 
Targets a 40 percent reduction in governmentwide paperwork 
burdens over the next 6 years by requiring OIRA to set goals of 
at least a 10 percent governmentwide reduction for each of 
fiscal years 1996 and 1997, and a 5-percent reduction for each 
of the following 4 fiscal years.
    Extends the Paperwork Reduction Act to cover paperwork 
burdens imposed on educational and nonprofit institutions, 
Federal contractors, and tribal governments.
    Imposes new responsibilities on agencies to review and 
control paperwork burdens. For example, requires agencies to 
establish a 60-day public notice and comment period for each 
proposed collection of information.

 Department of Transportation and Related Agencies Appropriations Act, 
          1996--Public Law 104-50 (Enacted November 15, 1995)

    Sections 347 of the Act establishes a more flexible 
personnel management system for the Federal Aviation 
Administration (FAA). It frees FAA from many current statutory 
personnel that have limited the ability of FAA to meet the 
unique demands of its work force.
    Section 348 of the Act establishes a similar, more flexible 
acquisition system for FAA, freeing the agency from many 
current procurement law restrictions.

Legislative Branch Appropriations Act, 1996--Public Law 104-53 (Enacted 
                           November 19, 1995)

    Cuts the congressional budget by 10 percent in fiscal year 
1996, saving taxpayers $207 million.
    Cuts the House of Representatives administrative staff by 
34 percent in fiscal year 1996, reducing the number of 
employees from 1,063 to 600 and saving taxpayers $7 million a 
year.

 Lobbying Disclosure Act of 1995--Public Law 104-65 (Enacted December 
                               19, 1995)

    Enacts the most sweeping lobbying disclosure reforms in 
half a century. Requires registration with the Secretary of the 
Senate and the Clerk of the House of Representatives by any 
individual lobbyist within 45 days after the individual first 
makes, or is employed or retained to make, a lobbying contact 
with either the President, the Vice President, a Member of 
Congress, or any other specified Federal officer or employee, 
including certain high-ranking members of the uniformed 
services.
    Requires registrants to file semiannual lobbying activity 
reports with the appropriate congressional officials and making 
copies of them available to the public.
    Sets forth special rules for the identification of foreign 
and other clients on whose behalf lobbying contacts are made 
with a covered legislative or executive branch official.

 Federal Reports Elimination and Sunset Act of 1995--Public Law 104-66 
                      (Enacted December 21, 1995)

    Reduces costs and paperwork requirements on the executive 
branch by eliminating or modifying nearly 200 outdated and 
unnecessary statutory reporting requirements imposed on Federal 
agencies. Establishes a ``sunset'' date for other reporting 
requirements.

  Private Securities Litigation Reform Act of 1995--Public Law 104-67 
                      (Enacted December 22, 1995)

    Enacts (by overriding President Clinton's veto) a major 
reform of securities litigation law to curb abusive lawsuits by 
unscrupulous trial lawyers. Prohibits secret settlements of 
class action lawsuits, and requires that the terms of 
settlements be disclosed to all class members. Requires judges 
to screen attorneys for conflicts of interest. Discourages 
coercive settlements.
    Directs the Securities and Exchange Commission to recommend 
to Congress increased protections from securities fraud and 
abusive or unnecessary securities fraud litigation for senior 
citizens and qualified retirement plans if the Commission finds 
that they have a need for such increased protections.

Federal Acquisition Reform Act of 1996--Public Law 104-106, Division D 
                      (Enacted February 10, 1996)

    Reduces unnecessary costs, regulation, and bureaucracy in 
government procurement through the following reforms:
    Commercial Acquisition System: Eliminates extra regulations 
and simplifies the contracting process for commercially 
available items. By shopping smart in the way that private 
businesses do, the government can get better products faster 
and cheaper.
    Reduction in Certifications: Eliminates unnecessary and 
costly formal written certifications by contractors that they 
will comply with certain prohibitions, while keeping the 
important prohibitions intact.
    International Competitiveness: Permits the President to 
waive the export fee from contractors who exported products 
developed under government contracts, when appropriate. This 
fee hindered U.S. companies from selling products overseas and 
made them less competitive.
    Competition: While permitting all interested companies an 
opportunity to participate in a competition for government 
business, provides more efficiency in the manner of obtaining 
competition. It permits government buyers to down-select from 
many bidders to the greatest number of bidders constituting an 
efficient competition.

 Information Technology Management Reform Act of 1996--Public Law 104-
              106, Division E (Enacted February 10, 1996)

    Reduces unnecessary costs in government information 
technology procurement by decentralizing procurement of 
information technology and simplifying information technology 
efforts. This will help the government procure new information 
technology products to keep pace with the information 
revolution.
    Requires agencies to give greater attention to information 
technology management. For example, it establishes Chief 
Information Officers as members of executive management teams 
and provides for the use of performance measures to ensure 
accountability for information technology spending results.

 ICC Termination Act of 1995--Public Law 104-88 (Enacted December 29, 
                                 1995)

    Abolishes the Interstate Commerce Commission, an obsolete 
regulatory agency.

Small Business Regulatory Enforcement Fairness Act of 1996--Public Law, 
               104-121, Title II (Enacted March 29, 1996)

    Eases small business compliance burdens by permitting 
judicial review of the agency regulatory impact analyses 
required under the 1980 Regulatory Flexibility Act.
    Requires Federal agencies to publish plain English guides 
to help small businesses comply with regulations.
    Requires the Small Business Administration to designate a 
Small Business and Agriculture Regulatory Enforcement Ombudsman 
to: (1) ensure that small businesses that receive an audit, 
inspection, or other enforcement action are given a 
confidential means to comment on such enforcement activity; (2) 
establish means to receive comments from small businesses 
regarding enforcement actions; (3) report annually to the 
Congress on such comments; and (4) provide the affected agency 
with an opportunity to comment.
    Provides for congressional review and potential disapproval 
of regulations issued by executive branch agencies.

  Federal Agricultural Improvement and Reform Act of 1996--Public Law 
                    104-127 (Enacted April 4, 1996)

    Enacts the most environmentally friendly agricultural soil 
and water conservation provisions in 60 years, as part of the 
landmark Agricultural Market Transition Act, promoting crop 
rotation and wetlands preservation.
    Reforms Federal farm programs to allow farmers to reduce 
pesticide and fertilizer use.
    Enacts the first-ever reduction in peanut price supports.
    Enacts major reforms in Federal dairy price supports and 
market orders.

     Line Item Veto Act--Public Law 104-130 (Enacted April 9, 1996)

    Amends the Congressional Budget and Impoundment Control Act 
of 1974 to enact the ``line item veto,'' enabling the President 
to eliminate individual items from massive appropriations 
bills. This authority can be used to cut out wasteful and 
parochial spending projects, special interest tax breaks, and 
entitlement provisions. Under this authority, the President can 
cancel in whole any dollar amount of discretionary budget 
authority, any item of new direct spending, or any limited tax 
benefit signed into law, if the President: (1) determines that 
such cancellation will reduce the Federal budget deficit and 
will not impair essential Government functions or harm the 
national interest; and (2) notifies the Congress of any such 
cancellation.

Omnibus Consolidated Rescissions and Appropriations Act of 1996--Public 
                  Law 104-134 (Enacted April 26, 1996)

    Reduces the number of Federal employees at 29 of the 39 
major agencies.
    Saves taxpayers $23 billion in fiscal year 1996 through 
reductions in spending.

     Debt Collection Improvement Act of 1996--Public Law, 104-134, 
                  Sec. 31001 (Enacted April 26, 1996)

    Enhances interagency cooperation in collecting Federal 
debts by providing centralized administration offset and cross-
servicing authority. The Department of the Treasury will act as 
the coordinator of governmentwide debt collection activities, 
providing a mechanism for effective administrative offset and 
acting as a clearinghouse to assure that Federal debts are 
collected in a timely and efficient manner.
    Creates new offset authorities to allow the Federal 
Government to deduct Federal debts owed by debtors from amounts 
the government owes them.
    Gives the Attorney General permanent authority to contract 
with private counsel to collect delinquent non-tax civil debts.

 Taxpayer Bill of Rights 2--Public Law 104-168 (Enacted July 30, 1996)

    Contains a host of provisions to afford taxpayers greater 
rights and protections in dealing with the Internal Revenue 
Service (IRS), including the following:
    Establishes an Office of Taxpayer Advocate within the IRS 
to: (1) assist taxpayers in resolving problems with the IRS; 
(2) identify areas in which taxpayers have problems in dealings 
with the IRS; and (3) propose administrative and identify 
legislative changes to mitigate the problems.
    Requires prior notification to taxpayers under an 
installment agreement to pay tax liability before altering, 
modifying, or terminating such an agreement, and provides for 
administrative review of installment agreement terminations.
    Authorizes the abatement of interest in the case of an 
assessment due to an unreasonable error or delay on the part of 
IRS. Allows abatement of the penalty: (1) on a person's 
inadvertent failure to deposit any employment tax in certain 
circumstances; and (2) the first time a deposit is required if 
the deposit is inadvertently sent to the Secretary instead of 
to the appropriate depository.
    Makes a number of reforms in IRS tax collection practices 
and activities.
    Liberalizes the rules for awarding litigation costs and 
fees to individuals who prevail in lawsuits against the IRS.
    Directs the Secretary of the Treasury to disclose certain 
information where more than one person is liable for a penalty. 
Allows each person who paid the penalty to recover 
proportionately from other liable persons. Prohibits imposing a 
penalty (for a failure to collect and pay over a tax) on 
unpaid, volunteer, honorary board members of tax-exempt 
organizations who do not participate in day-to-day financial 
operations or have actual knowledge of the failure.
    Generally prohibits retroactive tax regulations.

  Health Insurance Portability and Accountability Act--Public Law 104-
                 191, Title V (Enacted August 21, 1996)

    Amends Title XI of the Social Security Act to direct the 
Secretary of Health and Human Services, acting through the HHS 
Office of Inspector General and the Attorney General, to 
establish a program to: (1) coordinate Federal, State, and 
local law enforcement programs to control health care fraud and 
abuse; (2) conduct investigations, audits, and inspections 
relating to the delivery of and payment for health care; (3) 
facilitate enforcement of certain provisions of that title and 
other acts applicable to health care fraud and abuse; (4) 
provide for the modification and establishment of safe harbors 
and to issue interpretative rulings and special fraud alerts; 
and (5) provide for the reporting and disclosure of certain 
final adverse actions against health care providers, suppliers, 
or practitioners pursuant to the data collection system 
established by this title.

              House Resolution 6 (Adopted January 5, 1995)

    Requires a three-fifths super-majority vote in the House to 
raise income tax rates and prohibited retroactive income tax 
increases.
    Abolishes commemorative bills--a form of legislation that 
constituted half of all the bills passed by some previous 
Congresses.
    Cuts House committee staff by one third, saving taxpayers 
$45 million a year.
    Bans ``proxy voting'' at congressional committees by absent 
Members.
    Guarantees media access to all public meetings and hearings 
in the House.
    Imposes a 6-year term limit on all House committee and 
subcommittee chairmen.
    Imposes an 8-year term limit on the Speaker of the House.
    Provides for an independent accounting firm to perform the 
first-ever comprehensive audit of House financial records.
    Abolishes the Office of House Doorkeeper.
    Requires the Clerk of the House to submit semiannual 
reports on the financial and operational status of functions 
under the Clerk's jurisdiction.
    Imposes a similar reporting requirement on the Sergeant-at-
Arms
    Creates a Chief Administrative Officer of the House to have 
operational and financial responsibility for functions as 
assigned by the Speaker and the Committee on House Oversight.

             House Resolution 107 (Adopted March 15, 1995)

    Cuts House committee funding by 30 percent compared with 
the preceding Congress, saving taxpayers $67 million over 2 
years.

            House Resolution 250 (Adopted November 16, 1995)

    Imposes the strictest congressional gift ban in history, 
prohibiting House Members and staff from accepting work-related 
gifts, meals, or trips (except for bona fide work-related fact 
finding trips requiring substantial participation by the Member 
or staffer).
     Clarifying Comments by Hon. William F. Clinger, Jr., Chairman

    The first sentence of the section in this document 
regarding durable medical equipment should read, ``The durable 
medical equipment industry (Suppliers of prosthetic devices, 
wheelchairs, orthotics, etc.) has consistently suffered from 
waves of fraudulent schemes in which Medicare or Medicaid has 
been billed for equipment never delivered, higher-cost 
equipment than that actually delivered, unnecessary equipment 
or supplies or equipment delivered in a different State from 
that billed, in order to obtain higher reimbursement.''
                                       Hon. William F. Clinger, Jr.
                 Minority Views of Hon. Cardiss Collins

    This report was drafted by the majority in absolute secrecy 
from the minority and was not provided to the members until the 
last minute. I doubt that any of the committee members have had 
an opportunity to review it. Because the report is not based on 
any particular hearings and the minority was not included in 
its preparation, there is no way to know if its findings are 
accurate.
    The majority report appears to be an effort to discredit 
the administration's claims of success in its National 
Performance Review. While the minority would have no objection 
to an objective examination of the administration's management 
efforts, the committee made no effort to do so, and there has 
been no opportunity at hearings to judge the veracity of the 
administration's claims.
    A better approach might have been to request a non-partisan 
organization such as the General Accounting Office to review 
both the majority's report and the administration's efforts to 
determine the success of the National Performance Review. That 
would be the responsible way to conduct important oversight.
    Lacking such an objective approach, the only fair way to 
proceed is to place the administration's claims side-by-side 
with the majority's criticisms, and to let the public decide 
for themselves the success of the administration's efforts. 
Therefore, we refer readers to the recent report by the Vice 
President of the National Performance Review entitled, ``The 
Best Kept Secrets In Government,'' which claims significant 
progress in many areas and savings to the taxpayers of $118 
billion.
                                              Hon. Cardiss Collins.

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