[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.
-