[Senate Report 109-368]
[From the U.S. Government Publishing Office]



109th Congress 
 2d Session                      SENATE                          Report
                                                                109-368
_______________________________________________________________________

                                     




          ACTIVITIES OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS


                               __________

                              R E P O R T

                                 of the

         COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE

                                and its

                             SUBCOMMITTEES

                                for the

                      ONE HUNDRED EIGHTH CONGRESS






                December 22, 2006--Ordered to be printed

 Filed, under authority of the order of the Senate of December 9, 2006



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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Deleware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

                   Brandon L. Milhorn, Staff Director
             Michael L. Alexander, Minority Staff Director
                  Trina Driessnack Tyrer, Chief Clerk
      COMMITTEE ON GOVERNMENTAL AFFAIRS DURING THE 108TH CONGRESS

                   SUSAN M. COLLINS, Maine, Chairman
            JOSEPH I. LIEBERMAN, Connecticut, Ranking Member
TED STEVENS, Alaska                  CARL LEVIN, Michigan
GEORGE V. VOINOVICH, Ohio            DANIEL K. AKAKA, Hawaii
NORM COLEMAN, Minnesota              RICHARD J. DURBIN, Illinois
ARLEN SPECTER, Pennsylvania          THOMAS R. CARPER, Delaware
ROBERT F. BENNETT, Utah              MARK DAYTON, Minnesota
PETER G. FITZGERALD, Illinois        FRANK LAUTENBERG, New Jersey
JOHN E. SUNUNU, New Hampshire        MARK PRYOR, Arkansas
RICHARD C. SHELBY, Alabama


                                 ------                                

                  SUBCOMMITTEES OF THE 108TH CONGRESS
      FINANCIAL MANAGEMENT, THE BUDGET, AND INTERNATIONAL SECURITY

                 PETER G. FITZGERALD, Illinois Chairman
                DANIEL K. AKAKA, Hawaii, Ranking Member
TED STEVENS, Alaska                  CARL LEVIN, Michigan
GEORGE V. VOINOVICH, Ohio            THOMAS R. CARPER, Delaware
ARLEN SPECTER, Pennsylvania          MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
JOHN E. SUNUNU, New Hampshire        MARK PRYOR, Arkansas
RICHARD C. SHELBY, Alabama

                                 ------                                

 OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING AND THE DISTRICT OF 
                                COLUMBIA

                  GEORGE V. VOINOVICH, Ohio, Chairman
              RICHARD J. DURBIN, Illinois, Ranking Member
TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
NORM COLEMAN, Minnesota              THOMAS R. CARPER, Delaware
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETER G. FITZGERALD, Illinois        MARK PRYOR, Arkansas
JOHN E. SUNUNU, New Hampshire

                                 ------                                

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                   NORM COLEMAN, Minnesota, Chairman
                  CARL LEVIN, Michigan, Ranking Member
TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
ARLEN SPECTER, Pennsylvania          THOMAS R. CARPER, Delaware
ROBERT F. BENNETT, Utah              MARK DAYTON, Minnesota
PETER G. FITZGERALD, Illinois        FRANK LAUTENBERG, New Jersey
JOHN E. SUNUNU, New Hampshire        MARK PRYOR, Arkansas
RICHARD C. SHELBY, Alabama



                                CONTENTS

                                 ------                                
                                                                   Page
  I. Highlights of Activities.........................................1
       Intelligence Reform.......................................     1
       Postal Civil Service Retirement Funding...................     3
       Homeland Security.........................................     4
       General Governmental Affairs..............................     4
 II. Committee Jurisdiction...........................................4
III. Bills and Resolutions Referred and Considered....................7
 IV. Hearings.........................................................7
  V. Reports, Prints, and GAO Reports................................16
 VI. Official Communications.........................................20
VII. Legislative Actions.............................................21
       Measures Enacted Into Law.................................    21
         Postal Naming Bills.....................................    31
       Measures Favorably Reported by Committee and Passed by the 
        Senate...................................................    37
       Selected Measures Reported by the Committee...............    42
VIII.Presidential Nominations........................................43

 IX. Activities of the Subcommittees.................................47

      International Security, Proliferation, and Federal Services 
                              Subcommittee

  I. Hearings........................................................47
 II. Legislation.....................................................55
III. GAO Reports.....................................................60

Oversight of Government Management, Restructuring, and the District of 
                         Columbia Subcommittee

  I. Hearings........................................................61
 II. Legislation.....................................................68
       Measures Enacted Into Law.................................    68
       Measures Favorably Reported by the Subcommittee and Passed 
        by the Senate............................................    70
       Measures Referred to the Subcommittee upon which Hearings 
        were held or other Legislative Action was taken..........    71
       Measures which did not advance beyond referral to 
        Subcommittee.............................................    72
III. GAO Reports.....................................................74

                Permanent Subcommittee on Investigations

  I. Historical Background...........................................77
       A. Subcommittee Jurisdiction..............................    77
       B. Past Investigations....................................    78
 II. Subcommittee Hearings during the 108th Congress.................82
III. Legislation Activities during the 108th Congress...............106
 IV. Reports and Prints.............................................110
  V. Requested and sponsored GAO Reports............................115
109th Congress
                                 SENATE
                                                                 Report
 2d Session                                                     109-368

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



 
 ACTIVITIES OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS DURING THE 108TH 
                                CONGRESS

                                _______
                                

               December 22, 2006.--Ordered to be printed

 Filed, under authority of the order of the Senate of December 9, 2006

                                _______
                                

 Ms. COLLINS, from the Committee on Homeland Security and Governmental 
                    Affairs, submitted the following

                                 REPORT

    This report reviews the legislative and oversight 
activities of the Committee on Governmental Affairs during the 
108th Congress. These activities reflect the broad scope of 
responsibilities vested in the Committee by the Legislative 
Reorganization Act of 1946, as amended; by Rule XXV(k) of the 
Standing Rules of the Senate; and by additional authorizing 
resolutions. Senator Collins was Chairman of the Committee 
throughout the 108th Congress, and Senator Lieberman was the 
Ranking Member.

                      I. Highlights of Activities


                          INTELLIGENCE REFORM

    The Committee's most notable effort during the 108th 
Congress was a bipartisan push to reform the Nation's 
intelligence apparatus to improve capabilities to detect and 
thwart plans for terror attacks. The result was Congressional 
passage and Presidential signing of S. 2845, the Intelligence 
Reform and Terrorism Prevention Act of 2004.
    On July 22, 2004, the Congressionally chartered, 
independent, and bipartisan National Commission on Terrorist 
Attacks Upon the United States (the ``9/11 Commission'') 
reported on its 20-month investigation into the terror attacks 
of September 11, 2001. It made voluminous findings and issued 
more than 40 recommendations, including two key items on 
intelligence: First, that the U.S. Intelligence Community, 
still configured for multiple efforts focused on a Cold War 
adversary, needed a National Intelligence Director (NID) to 
coordinate activities against terrorists and other 21st Century 
threats; and second, that the Executive Branch, lacking an 
effective, unified planning mechanism for counterterrorism 
operations and a mechanism to coordinate intelligence analysis 
of terrorist threats, needed a National Counterterrorism Center 
(NCTC).
    The 9/11 Commission noted that a key factor in U.S. 
intelligence agencies' failure to ``connect the dots'' among 
various clues that a major terrorist operation was imminent in 
2001 was the very structure of the Intelligence Community. That 
community comprised at least 15 agencies, with functional and 
organizational differences amounting to ``stovepipes'' where 
information could move up and down, but seldom across or 
beneath any unifying gaze and direction. Some agencies focused 
on gathering intelligence abroad; among these, the Central 
Intelligence Agency (CIA) conducted human-intelligence 
collection and all-source analysis, while signals and imagery 
intelligence were carried out by agencies within the Department 
of Defense. Federal law restricted CIA's conduct of internal-
security functions, and the Federal Bureau of Investigation 
(FBI) guarded its role as chief domestic-intelligence and law-
enforcement agency. Information sharing and coordination among 
these agencies was limited by law, by structure, and by 
practice.
    Meanwhile, no one official or entity had the vantage point 
or the express authority to review the overall flow of data and 
analysis, to reallocate assets, or to coordinate efforts among 
intelligence agencies.
    These limitations--which survived several special-
commission recommendations for change published over a period 
of decades--were not critical problems during the protracted, 
nuclear-restrained confrontation with the Soviet Union and its 
Warsaw Pact allies. Some level of U.S. intelligence and 
counter-intelligence synchronization emerged naturally from the 
common focus on a known set of nation-state actors who 
generally operated through standard military, diplomatic, 
intelligence, and client-state instrumentalities.
    The main challenge facing the United States changed, 
however, when the Soviet Bloc collapsed and Islamic extremist 
movements like al Qaeda arose as stateless, geographically 
dispersed threats able to use unofficial financing, high-speed 
travel, advanced technologies, and Web or wireless 
communications to plan and carry out deadly attacks like the 
1993 and 2001 World Trade Centers strikes and bombings directed 
at American citizens, ships, and facilities overseas.
    On the night of July 22, 2004--the day of the 9/11 
Commission report's release--U.S. Senate leadership tasked the 
Governmental Affairs Committee with drafting legislation to be 
submitted to the full Senate by October 1 of that year. Some of 
the 9/11 Commission's recommendations could be moved forward by 
Executive Orders from the President, but matters like creating 
the NID position and the NCTC would require legislation. The 
Governmental Affairs Committee was given the assignment of 
preparing legislation because it has jurisdiction over 
Executive Branch reorganization, as with the legislation that 
created the Department of Homeland Security (DHS). In light of 
the normal pace of legislative drafting, the multiplicity of 
agencies and operations affected, and the urgency of the task, 
this was a formidable assignment.
    Chairman Collins and Ranking Member Lieberman agreed that a 
sustained bipartisan effort would be required to meet the 
target date for draft legislation. The Committee held eight 
hearings from late July until mid-September 2004. Majority and 
Minority staffs collaborated through the Senate's traditional 
August recess to move the work along.
    The Committee met in mid-September to debate its draft 
legislation and to consider more than 30 offered amendments. 
The intelligence-reform bill was introduced and reported on 
September 23, 2004, with Chairman Collins as sponsor.
    Nearly 2 weeks of floor debate saw more than 300 additional 
amendments offered. As in earlier proceedings, bipartisan 
negotiations and votes accepted some changes while preserving 
the essence of the bill. The Senate passed S. 2840, the 
Intelligence Reform Act of 2004, on October 6, 2004, by a vote 
of 96 to 2.
    The bill enacted by the Senate provided for a NID and for 
the NCTC, but also for a protective Privacy and Civil Liberties 
Oversight Board and a structure to expand information sharing 
within the Executive Branch.
    Meanwhile, the House of Representatives had enacted its own 
intelligence-reform legislation. The House measure included 
immigration and criminal-penalty clauses not addressed in the 
9/11 Commission report, kept top-level intelligence funding 
amounts classified, configured the NID and NCTC differently, 
and did not include a Privacy and Civil Liberties Oversight 
Board.
    Senate and House conferees were appointed to resolve 
differences between the bills, but difficult negotiations 
dragged on past the 2004 general election. Conferees finally 
reached agreement on a bill on Sunday night, December 5, 2004. 
The House passed the final bill, now known as S. 2845, the 
Intelligence Reform and Terrorism Prevention Act of 2004, by a 
336-75 vote on December 7. Chairman Collins and Ranking Member 
Lieberman were recorded as Senate sponsor and original 
cosponsor, respectively. The Senate passed it by an 89-2 vote 
on December 8. The President signed the Act on December 17, 
2004, making it Public Law 108-458.
    The law established the DNI as the head of the Intelligence 
Community and as the principal intelligence adviser to the 
President, with the responsibility and the authority to oversee 
and direct implementation of the National Intelligence Program. 
The DNI was also granted the authority to task intelligence 
collection and analysis, as well as significant budget and 
personnel authority.
    The NCTC established by the Act is intended to provide 
horizontal integration of counterterrorism intelligence 
analysis and operational planning among Executive Branch 
departments.
    Other provisions in the Act dealt with security clearances, 
FBI restructuring, policy guidelines and technologies for 
information sharing, public diplomacy and outreach, 
transportation-security strategy, biometric personal-
identification technology, terrorist travel and screening 
standards, border-protection measures, the Incident Command 
System, and interoperable communications, among other matters.

                POSTAL CIVIL SERVICE RETIREMENT FUNDING

    During the 108th Congress, the Committee also deliberated 
on, and reported, S. 380, the Postal Civil Service Retirement 
System Funding Reform Act of 2003.
    The measure revised rules for calculating and paying U.S. 
Postal Service contributions to the Federal Civil Service 
Retirement and Disability Fund (CSRDF). By replacing a static 
formula that underestimated investment earnings and required 
high Postal Service payments into the CSRDF, the measure 
secured savings for the Postal Service that were expected to 
offset the need for postal rate increases for several years. 
The change did nothing to impair the retirement assets 
accumulating for Postal Service employees, but reduced cash-
flow demands that the Federal Office of Personnel Management 
(OPM) estimated would have led to a $78 billion actuarial 
overfunding of retirement liabilities.
    The measure was introduced on February 12, 2003, by 
Chairman Collins with Senators Brownback and Carper as original 
cosponsors, and with bipartisan support from 21 other Senators. 
The Senate adopted the legislation by unanimous consent on 
April 2, 2003, and it passed the House on a 424-0 roll-call 
vote on April 8, 2003. The President signed the Act on April 
23, 2003, whereupon it became Public Law 108-18.

                           HOMELAND SECURITY

    As described elsewhere, the Committee devoted considerable 
time and attention to issues and legislative proposals relating 
to homeland security. As part of these activities, on August 
13, 2003, Ranking Member Lieberman released a staff report, 
``State and Local Officials: Still Kept in the Dark About 
Homeland Security'' (S. Rept. 108-83). The report found that 
too often State and local officials are asked to fight the war 
against terrorism with incomplete and unreliable access to 
homeland security information from Federal agencies. The report 
noted that there is no effective mechanism for allowing 
hundreds of thousands of local law enforcement officials to 
systematically provide information to, or receive information 
from, the Federal Government. The report made eight 
recommendations for improving the relationship and the 
information sharing between the Federal and local levels.

                      GENERAL GOVERNMENTAL AFFAIRS

    During the 108th Congress, the Committee also considered 
several matters affecting the Federal Government operations 
that became public law. These measures included: H.R. 3054 
(Public Law 108-133), which allowed retirement-annuity credit 
for military service performed by current or former members of 
the U.S. Secret Service, the U.S. Park Police, and the District 
of Columbia Police and Fire Departments; S. 610 (Public Law 
108-201), which provided increased workforce flexibilities and 
other personnel provisions for the National Aeronautics and 
Space Administration; and H.R. 2751 (Public Law 108-271), which 
provided human-capital administrative flexibility for the U.S. 
General Accounting Office (GAO).

                       II. Committee Jurisdiction

    The jurisdiction of the Committee (which operated as the 
Committee on Governmental Affairs throughout the 108th 
Congress, and was renamed the Committee on Homeland Security 
and Governmental Affairs when the 109th Congress convened) 
derives from the Rules of the Senate and from Senate 
Resolutions:

                                Rule XXV

                            * * * * * * * *

    (k)(1) Committee on Governmental Affairs, to which 
committee shall be referred all proposed legislation, messages, 
petitions, memorials, and other matters relating to the 
following subjects: 1. Archives of the United States. 2. Budget 
and accounting measures, other than appropriations, except as 
provided in the Congressional Budget Act of 1974. 3. Census and 
collection of statistics, including economic and social 
statistics. 4. Congressional organization, except for any part 
of the matter that amends the rules or orders of the Senate. 5. 
Federal Civil Service. 6. Government information. 7. 
Intergovernmental relations. 8. Municipal affairs of the 
District of Columbia, except appropriations therefore. 9. 
Organization and management of United States nuclear export 
policy. 10. Organization and reorganization of the executive 
branch of the Government. 11. Postal service. 12. Status of 
officers and employees of the United States, including their 
classification, compensation, and benefits.
    (2) Such committee shall have the duty of (A) receiving and 
examining reports of the Comptroller General of the United 
States and of submitting such recommendations to the Senate as 
it deems necessary or desirable in connection with the subject 
matter of such reports; (B) studying the efficiency, economy, 
and effectiveness of all agencies and departments of the 
Government; (C) evaluating the effects of laws enacted to 
reorganize the legislative and executive branches of the 
Government; and (D) studying the intergovernmental 
relationships between the United States and the States and 
municipalities, and between the United States and international 
organizations of which the United States is a member.

                  SENATE RESOLUTION 66, 108TH CONGRESS

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

    Sec. 11. (a) * * *

                             * * * * * * *

    (e) INVESTIGATIONS
    (1) In General--The committee, or any duly authorized 
subcommittee of the committee, is authorized to study or 
investigate--
    (A) the efficiency and economy of operations of all 
branches of the Government including the possible existence of 
fraud, misfeasance, malfeasance, collusion, mismanagement, 
incompetence, corruption, or unethical practices, waste, 
extravagance, conflicts of interest, and the improper 
expenditure of Government funds in transactions, contracts, and 
activities of the Government or of Government officials and 
employees and any and all such improper practices between 
Government personnel and corporations, individuals, companies, 
or persons affiliated therewith, doing business with the 
Government; and the compliance or noncompliance of such 
corporations, companies, or individuals or other entities with 
the rules, regulations, and laws governing the various 
governmental agencies and its relationships with the public;
    (B) the extent to which criminal or other improper 
practices or activities are, or have been, engaged in the field 
of labor-management relations or in groups or organizations of 
employees or employers, to the detriment of interests of the 
public, employers, or employees, and to determine whether any 
changes are required in the laws of the United States in order 
to protect such interests against the occurrence of such 
practices or activities;
    (C) organized criminal activity which may operate in or 
otherwise utilize the facilities of interstate or international 
commerce in furtherance of any transactions and the manner and 
extent to which, and the identity of the persons, firms, or 
corporations, or other entities by whom such utilization is 
being made, and further, to study and investigate the manner in 
which and the extent to which persons engaged in organized 
criminal activity have infiltrated lawful business enterprise, 
and to study the adequacy of Federal laws to prevent the 
operations of organized crime in interstate or international 
commerce; and to determine whether any changes are required in 
the laws of the United States in order to protect against such 
practices or activities;
    (D) all other aspects of crime and lawlessness within the 
United States which have an impact upon or affect the national 
health, welfare, and safety; including but not limited to 
investment fraud schemes, commodity and security fraud, 
computer fraud, and the use of offshore banking and corporate 
facilities to carry out criminal objectives;
    (E) the efficiency and economy of operations of all 
branches and functions of the Government with particular 
reference to--
    (i) the effectiveness of present national security methods, 
staffing, and processes as tested against the requirements 
imposed by the rapidly mounting complexity of national security 
problems;
    (ii) the capacity of present national security staffing, 
methods, and processes to make full use of the Nation's 
resources of knowledge and talents;
    (iii) the adequacy of present intergovernmental relations 
between the United States and international organizations 
principally concerned with national security of which the 
United States is a member; and
    (iv) legislative and other proposals to improve these 
methods, processes, and relationships;
    (F) the efficiency, economy, and effectiveness of all 
agencies and departments of the Government involved in the 
control and management of energy shortages including, but not 
limited to, their performance with respect to--
    (i) the collection and dissemination of accurate statistics 
on fuel demand and supply;
    (ii) the implementation of effective energy conservation 
measures;
    (iii) the pricing of energy in all forms;
    (iv) coordination of energy programs with State and local 
government;
    (v) control of exports of scarce fuels;
    (vi) the management of tax, import, pricing, and other 
policies affecting energy supplies;
    (vii) maintenance of the independent sector of the 
petroleum industry as a strong competitive force;
    (viii) the allocation of fuels in short supply by public 
and private entities;
    (ix) the management of energy supplies owned or controlled 
by the Government;
    (x) relations with other oil producing and consuming 
countries;
    (xi) the monitoring of compliance by governments, 
corporations, or individuals with the laws and regulations 
governing the allocation, conservation, or pricing of energy 
supplies; and
    (xii) research into the discovery and development of 
alternative energy supplies;
    (G) the efficiency and economy of all branches and 
functions of Government with particular references to the 
operations and management of Federal regulatory policies and 
programs:
    Provided, That, (1) in carrying out the duties herein set 
forth, the inquiries of this committee or any subcommittee 
thereof shall not be deemed limited to the records, functions, 
and operations of any particular branch of the Government; but 
may extend to the records and activities of any persons, 
corporation, or other entity.
    (2) Nothing contained in this subsection shall affect or 
impair the exercise of any other standing committee of the 
Senate of any power, or the discharge by such committee of any 
duty, conferred or imposed upon it by the Standing Rules of the 
Senate or by the Legislative Reorganization Act of 1946, as 
amended.
    (3) For the purposes of this subsection, the committee, or 
any duly authorized subcommittee thereof, or in chairman, or 
any other member of the committee or subcommittee designated by 
the chairman, from March 1, 2003, through February 28, 2005, is 
authorized, in its, his, or their discretion--
    (A) to require by subpoena or otherwise the attendance of 
witnesses and production of correspondence, books, papers, and 
documents;
    (B) to hold hearings;
    (C) to sit and act at any time or place during the 
sessions, recess, and adjournment periods of the Senate;
    (D) to administer oaths; and
    (E) to take testimony, either orally or by sworn statement, 
or, in the case of staff members of the Committee and the 
Permanent Subcommittee on Investigations, by deposition in 
accordance with the Committee Rules of Procedure.
    (4) All subpoenas and related legal processes of the 
committee and in subcommittees authorized under S. Res. 66 of 
the One Hundred Eighth Congress, second session, are authorized 
to continue.

           III. Bills and Resolutions Referred and Considered

    During the 108th Congress, 148 Senate bills and 79 House 
bills were referred to the Committee for consideration. Also, 
nine Senate Resolutions, eight Senate Concurrent Resolutions, 
one Senate Joint Resolution, one House Joint Resolution, and 
one House Concurrent Resolution were referred to the Committee. 
The Committee reported 120 bills; an additional 28 measures 
were discharged.
    Of the legislation received by the Committee, 89 measures 
became public laws, including 74 postal naming bills.

                              IV. Hearings

    During the 108th Congress, the Committee held 106 hearings 
on legislation, oversight issues, and nominations. Issues 
addressed in the Committee's legislative and oversight hearings 
ranged from waste in Federal programs and dangers of medicine 
purchases through the Internet, to problems with college 
savings plans and patient-safety practices at hospital.
    The Committee also held 14 business meetings. Major topics 
examined during Committee hearings included:

                           HOMELAND SECURITY

    On April 9, 2003, the Committee conducted a hearing titled 
``Investing in Homeland Security: Challenges on the Front 
Line.'' The Committee heard from first responders, including 
firefighters, police, and emergency medical personnel, as part 
of an examination of how effectively the Federal Government is 
assisting first responders and State and local governments in 
their homeland-security efforts. Witnesses spoke of challenges 
facing first responders and the lack of resources reaching the 
local level.
    At the Committee's May 1, 2003, hearing on ``Investing in 
Homeland Security: Streamlining and Enhancing Homeland Security 
Grant Programs,'' Homeland Security Secretary Tom Ridge 
discussed challenges in providing Federal resources to States, 
localities, and first responders.
    On May 15, 2003, the Committee's hearing on ``Investing in 
Homeland Security: Challenges Facing State and Local 
Governments,'' continued to examine challenges facing State and 
local homeland-security efforts and the distribution of Federal 
funds for those efforts. Testimony focused on how best to 
distribute homeland-security resources, and whether to provide 
resources at the State, city, or county level.

                              INTELLIGENCE

    On February 14, 2003, the Committee conducted a hearing on 
``Consolidating Intelligence Analysis: A Review of the 
President's Proposal to Create a Terrorist Threat Integration 
Center'' (TTIC). Four witnesses testified about the proposed 
TTIC: Senator Warren Rudman, Governor James Gilmore, Jeffrey 
Smith, and James Steinberg. Senator Rudman spoke of the need 
for more clarity on the structure and functions of the TTIC, 
and recommended further study of legal issues in the proposed 
widespread information sharing between the FBI and CIA. 
Governor Gilmore testified on the work, since 1999, of the 
Congressional Advisory Commission on Terrorism and Weapons of 
Mass Destruction (the ``Gilmore Commission''). In December 
2002, the Gilmore Commission issued its fourth report, which 
recommended creating an intelligence-fusion center: The 
National Counter Terrorism Center, a stand-alone agency outside 
of the FBI, CIA, and DHS, charged with analyzing foreign and 
domestic intelligence on terrorists and terror organizations. 
The Gilmore Commission recommended that this entity be an 
independent agency, with a head appointed by the President and 
confirmed by the Senate, and that intelligence collection on 
international terrorist activities within the United States, 
including intelligence collected through the Foreign 
Intelligence Surveillance Act, be transferred to this new 
entity. Mr. Steinberg, who served as Deputy National Security 
Advisor in the Clinton Administration, testified that a strong 
entity was needed to analyze domestic and foreign intelligence 
regarding terrorism, and that it should be based in the 
Department of Homeland Security. Mr. Smith, who previously 
served as General Counsel of the CIA, recommended combining the 
counterterrorism centers of the FBI and CIA into a single 
national counterintelligence center under the supervision of 
the Director of Central Intelligence (DCI). He also urged 
serious consideration be given to creating a domestic security 
service along the lines of Britain's MI5, responsible for 
domestic intelligence collection, but without arrest authority.
    On February 26, 2003, the Committee held a hearing titled, 
``Consolidating Intelligence Analysis: A Review of the 
President's Proposal to Create a Terrorist Threat Integration 
Center--Day 2,'' a sequel to the February 14 session. Three 
Administration officials testified on the proposed TTIC: 
Winston Wiley of the CIA, Pasquale D'Amuro of the FBI, and 
Gordon England of the DHS. Mr. Wiley said the TTIC would be a 
joint venture that would give participating agencies complete 
access to other agencies' relevant intelligence. Mr. D'Amuro 
described the FBI's ongoing efforts to reform its intelligence 
collection and analysis capabilities. Deputy Secretary England 
testified that the DHS would not conduct its own analysis of 
terrorist intelligence, but would participate in the TTIC's 
analytical efforts.

                          INTELLIGENCE REFORM

    ``Making America Safer: Examining the Recommendations of 
the 9/11 Commission'' was the theme of a Committee hearing on 
July 30, 2004. Witnesses were Thomas Kean, Chairman, and Lee 
Hamilton, Vice-Chairman, of the 9/11 Commission. The 
Commissioners' testimony focused on the Commission's four main 
structural recommendations: (1) creating an NCTC; (2) creating 
the position of NID; (3) unifying Intelligence Community 
participants in a network-based, information-sharing system; 
and (4) strengthening the ability of the FBI and homeland 
defenders to carry out their counterterrorism responsibilities. 
The Commissioners envisioned the NCTC as a civilian-led, 
unified joint command for counterterrorism, with tasking 
authority for all counterterrorism collection and analysis 
across government, but with individual agencies executing 
operations. The NID would be part of the Executive Office of 
the President and would have authority over all Intelligence 
Community elements, including personnel, security, and 
information technology. Noting that a key failing before the 
attacks of September 11, 2001, was a lack of effective 
information sharing, the Commissioners recommended creating a 
decentralized network to allow agencies' databases to be 
searchable across agency lines. The Commissioners did not 
support creating a domestic intelligence agency, but suggested 
that the FBI needs to strengthen the intelligence and national-
security aspects of its workforce and institutional culture.
    On August 3, 2004, the Committee held a hearing titled 
``Assessing America's Counterterrorism Capabilities.'' The 
first panel of witnesses comprised John Brennan, Director, 
TTIC; John Pistole, Executive Assistant Director for 
Counterterrorism and Counterintelligence, FBI; Lieutenant 
General Patrick Hughes, Assistant Secretary for Information 
Analysis, DHS; and Philip Mudd, Deputy Director, 
Counterterrorist Center, CIA. Director Brennan supported 
establishing the NCTC, but cautioned against adversely 
affecting ongoing activities in the war on terror. Assistant 
Director Pistole focused his testimony on the FBI's expanded 
intelligence capabilities, and its efforts to build a workforce 
with an expertise in intelligence. Lt. Gen. Hughes said 
creation of the NID and NCTC would enhance DHS's ability to 
identify threats and to map them against vulnerabilities. 
Deputy Director Mudd said the relationship between the CIA's 
Counterterrorist Center and the FBI must continue in the NCTC. 
The second panel consisted of Philip Zelikow, Executive 
Director, and Christopher Kojm, Deputy Executive Director, of 
the 9/11 Commission. They submitted joint testimony that said 
the Executive Branch is currently organized according to 
management principles of the 1950s, with large, vertically 
integrated agencies. Each agency does its job, and then tries 
to get others to cooperate. To do so, each agency sets up its 
own interagency process, and each agency sets up its own fusion 
center. As a result, there is a willingness to cooperate, but 
no joint analysis and no joint planning. Messrs. Zelikow and 
Kojm recommended that the NCTC Directorate of Intelligence have 
primary responsibility for analysis of terrorism from all 
sources of information, while the NCTC Directorate of 
Operations would be responsible for providing guidance and 
plans for joint counterterrorism operations. They also said 
that it is essential that the NID have authorities at least as 
strong as the 9/11 Commission recommendations, or risk becoming 
a bureaucratic ``fifth wheel.''
    On August 16, 2004, the Committee conducted a hearing, 
``Reorganizing America's Intelligence Community: A View from 
the Inside.'' William Webster, a former Director of the FBI and 
DCI, testified that if Congress intends to create a National 
Intelligence Director position, it must grant the NID authority 
to manage the intelligence budget, name or approve leaders of 
the main intelligence agencies, and review their performance. 
Former DCI R. James Woolsey supported creating an NID and an 
NCTC reporting to the NID, but argued for giving the Secretary 
of Defense the ability to appeal NID decisions to the 
President. The third former DCI testifying, retired Admiral 
Stansfield Turner, said the NID should have strong budget 
authority, and argued for clear delineations among the National 
Foreign Intelligence Program (NFIP) at the FBI, the Joint 
Military Intelligence Program (JMIP) at DOD, and the Tactical 
Intelligence and Related Activities (TIARA) program within DOD. 
He argued that only assets tasked by field commanders belong in 
JMIP or TIARA, and that everything else should go into the 
NFIP.
    The August 17, 2004, hearing on ``Voicing a Need for 
Reform: The Families of 9/11,'' brought family members affected 
by the terrorist attacks of September 11, 2001, before the 
Committee. Kristen Breitweiser urged intelligence reform, 
including establishing a NID. Mary Fetchet told the story of 
her son, Brad, who died on the 89th floor of Tower Two of the 
World Trade Center because there was no directive to evacuate. 
Ms. Fetchet said the country remains ``amazingly ill prepared'' 
to prevent another terrorist attack, and supported implementing 
all of the 9/11 Commission recommendations. Steve Push urged 
creating an NID position with ample authority, able to marshal 
all resources for collecting and analyzing intelligence.
    On August 26, 2004, the Committee held a closed hearing on 
``Reorganizing the Intelligence Community: To What Extent 
Should the NID Have Budget Authority and the National 
Counterterrorism Center Play a Role in Operational Planning?'' 
Classified testimony was presented by Dr. Stephen A. Cambone, 
Under Secretary of Defense for Intelligence, DOD; Larry C. 
Kindsvater, Deputy Director of Central Intelligence for 
Community Management; Arthur Cummings, Section Chief, 
International Terrorism Operations Section I, Counterterrorism 
Division, FBI; a counterterrorism operations specialist from 
the CIA; and Lt. Gen. Norton A. Schwartz, Director for 
Operations, J-3, Joint Staff, DOD. Highlights from their 
unclassified written statements follow. Dr. Cambone described 
intelligence formulation as a shared, checks-and-balances 
process between the DCI and the Secretary of Defense. Deputy 
Director Kindsvater supported the 9/11 Commission's proposal to 
give the NID substantial control over the NFIP budget, 
personnel, and management. Mr. Cummings testified about 
significant reform steps at the FBI since September 11, 2001, 
such as forming an Office of Intelligence and a Terrorist 
Financing Operations Section, participating in TTIC and the 
Terrorist Screening Center, and expanding from 34 
intergovernmental Joint Terrorism Task Forces (JTTFs) to 100 
JTTFs across the country. Mr. Cummings testified in support of 
the creation of a NID and NCTC, but noted the importance of 
addressing civil liberties concerns as both offices are 
created.
    On September 8, 2004, the Committee conducted a hearing, 
``Building an Agile Intelligence Community to Fight Terrorism 
and Emerging Threats.'' Director Robert Mueller testified on 
FBI improvements since the 9/11 terrorist attacks in 
collecting, analyzing, and distributing intelligence. He 
identified three principles that should guide any attempt to 
reform the Intelligence Community: (1) providing analysts 
transparency into sourcing, i.e., analysts should not be 
separated from operators; (2) maintaining the operational chain 
of command, i.e., the NID and the NCTC chief should not have 
operational authority over the FBI or other agencies; and (3) 
protecting civil liberties, noting that ``concentrating 
domestic and international counterterrorism operations in one 
organization represents a serious risk to American civil 
liberties.'' Acting DCI John McLaughlin advanced five 
principles for reform: (1) fostering speed and agility, (2) 
creating form that follows function, (3) achieving consensus on 
expectations for intelligence agencies, (4) promoting ``some 
competition,'' and (5) preserving foreign partnerships. 
Director McLaughlin's view was that the NID should (1) maintain 
objectivity and independence as the President's principal 
intelligence advisor; (2) have full authority to determine, 
reprogram, and execute all funding for the core national 
intelligence agencies--CIA, NSA [National Security Agency], NGA 
[National Geospatial-Intelligence Agency], and NRO [National 
Reconnaisance Office]; (3) have clear authority to provide 
strategic direction to agencies and drive their collection and 
analytic priorities; (4) have authority to reorient 
intelligence capabilities to meet new threats; (5) have direct 
access to substantive experts; (6) be able to bridge any 
remaining foreign-domestic divide in areas of policy and 
information technology; (7) set education, training and career-
development standards; and (8) ensure continued synergy from 
close interaction of operators and analysts.
    On September 13, 2004, the Committee conducted a hearing, 
``Ensuring the U.S. Intelligence Community Supports Homeland 
Defense and Departmental Needs,'' with testimony from Secretary 
of State Colin Powell and Secretary of Homeland Security Tom 
Ridge. Secretary Powell supported the President's intelligence-
reform proposal to create a strong NID with budgetary 
authority. He described the State Department's needs for 
intelligence, and suggested that Intelligence Community 
products tended to be tailored more for military than 
diplomatic use. He noted the unique capabilities of the State 
Department's Bureau of Intelligence and Research (INR), and 
urged that they be preserved as a departmental asset in any 
intelligence reform. Secretary Powell also emphasized the need 
for competitive analysis and critical evaluation of 
Intelligence Community performance. Secretary Ridge described 
how recent Executive Orders would improve intelligence and 
homeland security. He noted that under the Executive Order 
strengthening the DCI's management of the Intelligence 
Community, DCI will perform the functions of the NID ``within 
the constraints of existing law'' until intelligence-reform 
legislation is enacted. Secretary Ridge said the President's 
proposal to strengthen management of the Intelilgence Community 
will ``greatly enhance'' DHS's ability to protect the homeland.

                               TERRORISM

    During the March 20, 2003, hearing on ``Cargo Containers: 
The Next Terrorist Target?,'' the Committee heard testimony 
from five witnesses regarding the potential for terrorist 
exploitation of the global cargo-container system and 
government response efforts. Witnesses were Under Secretary of 
Homeland Security Asa Hutchinson, Vermont U.S. Attorney Peter 
Hall, Stephen Flynn, Captain Jeffrey Monroe, and Michael 
O'Hanlon. Under Secretary Hutchinson testified that securing 
the global container system was a high priority because of its 
current vulnerability to attack. He gave examples of how 
smugglers have routinely compromised the system and discussed 
how terrorists could similarly exploit containers in the 
future. He explained the programs that the Directorate for 
Borders and Transportation Security is undertaking to mitigate 
the threat: The Container Security Initiative (CSI), the 24-
hour rule, the Customs-Trade Partnership Against Terrorism (C-
TPAT), and Operation Safe Commerce. U.S. Attorney Peter Hall of 
the District of Vermont described his participation, as co-
chair of a regional Law Enforcement Coordinating Committee, in 
Phase One of Operation Safe Commerce, which tracked a test 
shipment of cargo from Slovakia to New Hampshire in a container 
outfitted with tracking and intrusion-detection technology. 
Stephen Flynn of the Council on Foreign Relations argued that 
the current approach is insufficient to secure the container 
system. He said public outcry over a major terrorist event 
involving a container would lead to shutting down the entire 
system, with catastrophic economic consequences because of 
widespread reliance on just-in-time inventory. Captain Jeffrey 
Monroe, Director of Ports and Transportation for the City of 
Portland, Maine, testified about the lack of Federal 
coordination and information provided to local port 
authorities. He indicated that it was unclear to local 
authorities which Federal agencies had the lead in setting 
policy regarding container security or port security in 
general. He opposed consolidating container traffic into a few 
major ports and eliminating small feeder ports, arguing that 
small ports are more likely to spot anomalies in a container 
and that concentrating container traffic simply makes for more 
attractive targets.
    On July 31, 2003, the Committee held a hearing on 
``Terrorism Financing: Origination, Organization, and 
Prevention.'' The first panel of witnesses at the hearing 
consisted of FBI Acting Assistant Director for Counterterrorism 
John Pistole and Office of Foreign Assets Control Director 
Richard Newcomb. They testified about the Executive Branch's 
efforts to combat terrorism financing. The second panel 
consisted of former Ambassador Dore Gold, Steven Emerson, and 
Jonathan Winer. Ambassador Gold testified about support for 
Hamas from sources inside of Saudi Arabia. Mr. Emerson 
testified about the support for Wahhabist extremism, largely 
based in Saudi Arabia. Mr. Winer testified about his 
experiences in the State Department attempting to address 
terrorism financing issues.
    On September 23, 2003, the Committee held a closed hearing 
on ``Combating Terrorist Financing: Are We on the Right 
Track?'' Witnesses presenting classified testimony were: David 
Aufhauser, General Counsel, Department of Treasury; Ambassador 
J. Cofer Black, Coordinator for Counterterrorism, Department of 
State; E. Anthony Wayne, Assistant Secretary, Bureau of 
Economic and Business Affairs, Department of State; and John S. 
Pistole, Assistant Director, Counterterrorism Division, FBI. A 
representative from the CIA was also present to answer Members' 
questions.
    The November 19, 2003, hearing on ``Agroterrorism: The 
Threat to America's Breadbasket,'' considered the stated 
intentions of international terrorist organizations such as al 
Qaeda to wage their terror war on the United States in ways 
that cause maximum economic damage. America's trillion-dollar 
agriculture and food industry accounts for a sixth of gross 
domestic product and an eighth of the Nation's jobs, offering a 
tempting and vulnerable target. The U.S. Government Accounting 
Office (GAO) (renamed the U.S. Government Accountability Office 
after the close of the 108th Congress) estimates that an 
outbreak of foot-and-mouth disease at a single farm could soon 
spread nationwide, inflicting billions of dollars in costs for 
control and eradication, and billions more in losses from 
reduction in trade. Terrorist organizations such as al Qaeda 
have explored the use of easily produced toxins, such as ricin 
and botulinum, to poison human food. Such an attack would cause 
human illness and death and create public panic. Witnesses for 
the hearing spoke of threats to, and vulnerabilities of, the 
U.S. agriculture and food industry, and of steps being taken to 
improve security and response capabilities. Testifying were: 
Senator Talent of Missouri; Dr. Tom McGinn, North Carolina 
Department of Agriculture; Dr. Peter Chalk, RAND Corporation; 
Dr. Colleen O'Keefe, Illinois Department of Agriculture; 
Penrose Albright, Assistant Secretary for Science and 
Technology, DHS; Dr. Lester M. Crawford, Deputy Commissioner, 
Food and Drug Administration; and Dr. Charles Lambert, Deputy 
Under Secretary for Marketing and Regulatory Programs, U.S. 
Department of Agriculture.
    On June 15, 2004, a Committee hearing was devoted to ``An 
Assessment of Current Efforts to Combat Terrorism Financing.'' 
The focus of the hearing was the second report by the 
Independent Task Force on Terrorism Financing, sponsored by the 
Council on Foreign Relations. Witnesses were David Aufhauser, 
former General Counsel, U.S. Department of Treasury; Lee 
Wolosky, Co-Director, Independent Task Force on Terrorism 
Financing; and Mallory Factor, Vice Chair, Independent Task 
Force on Terrorism Financing. Mr. Wolosky discussed the 
background of the report and its findings. According to Mr. 
Wolosky, since May 12, 2003, when al Qaeda bombed housing 
compounds in Riyadh used by U.S. and other foreign residents, 
Saudi Arabia has taken significant steps to combat terrorism 
financing, including new laws, regulations, and institutions 
governing money laundering, charitable oversight, and 
supervision of the formal and informal financial services 
sector. The task force also found, however, that Saudi Arabia 
has not yet fully implemented these new laws and regulations. 
Ms. Factor discussed the report's recommendations, including a 
recommendation that Saudi Arabia fully implement its recently 
enacted laws and regulations pertaining to terrorism financing. 
In order to deter the continued financing of terrorism, the 
report also recommended that Saudi Arabia publicly punish those 
individuals and organizations that have funded terrorism. After 
Ms. Factor's testimony, Mr. Aufhauser discussed the origin of 
Saudi extremism. He testified that while al Qaeda has been 
damaged, it is still extremely lethal, as it consists of 
autonomous cells increasingly funded through local criminal 
activity.

                             POSTAL REFORM

    During the 108th Congress, the Committee pursued its long-
standing and bipartisan interest in reforming the rate-making 
process and business flexibility of the U.S. Postal Service to 
put the USPS on a sustainable business footing and to make rate 
changes more predictable and supportable for customers. Postal-
reform legislation was not enacted during the 108th Congress, 
but a series of hearings helped pave the way for future action:
    The Committee launched its new series of inquiries on 
September 17, 2003, with a hearing titled, ``U.S. Postal 
Service: What Can Be Done to Ensure Its Future Viability?'' 
Members heard extended testimony from James A. Johnson, Co-
Chair of the Presidential Commission on the U.S. Postal 
Service, and Vice Chairman of Perseus, L.L.C.
    On November 5, 2003, the Committee held a hearing titled, 
``The Report of the Presidential Commission on the U.S. Postal 
Service: Preserving Access and Affordability.'' Members heard 
extended testimony from two witnesses on the findings and 
implications of a special-commission report: John E. Potter, 
Postmaster General, United States Postal Service, and David M. 
Walker, Comptroller General, General Accounting Office (as GAO 
was then known, later being renamed the Government 
Accountability Office).
    On February 4, 2004, the Committee conducted a hearing 
titled, ``Preserving a Strong United States Postal Service: 
Workforce Issues.'' Two panels of witnesses testified. The 
first panel comprised Wally Olihovik, National President, 
National Association of Postmasters of the United States; Steve 
LeNoir, President, National League of Postmasters; and Ted 
Keating, Executive Vice President, National Association of 
Postal Supervisors. Witnesses on the second panel were John 
Calhoun Wells, private consultant and former Director of the 
Federal Mediation and Conciliation Service; James L. Medoff, 
Ph.D., Meyer Kestnbaum Professor of Labor and Industry, Harvard 
University; and Michael L. Wachter, Ph.D., Co-Director, 
Institute of Law and Economics, University of Pennsylvania Law 
School.
    On February 24, 2004, the Committee conducted a second 
hearing on ``Preserving a Strong United States Postal Service: 
Workforce Issues.'' Witness for the first panel was Dan G. 
Blair, Deputy Director, U.S. Office of Personnel Management. A 
second panel consisted of William Young, President, National 
Association of Letter Carriers; Dale Holton, National 
President, National Rural Letter Carriers; William Burrus, 
President, American Postal Workers Union, AFL-CIO; and John F. 
Hegarty, President, National Postal Mail Handlers Union.
    On March 9, 2004, the Committee held a hearing titled, 
``Postal Reform: Sustaining the 9 Million Jobs in the $900 
Billion Mailing Industry (Day 1).'' The first panel of 
witnesses consisted of Ann Moore, Chairman and CEO of Time, 
Inc., and Mark Angelson, Chairman, President, and CEO of RR 
Donnelley. The second panel comprised Chris Bradley, President 
and CEO of Cuddledown, Inc.; Max Heath, Vice President of 
Landmark Community Papers, on behalf of the National Newspaper 
Association; William Ihle, Senior Vice President for Public 
Relations, Bear Creek Corp.; and Shelley Dreifuss, Director, 
Office of the Consumer Advocate, Postal Rate Commission.
    On March 11, 2004, the Committee conducted the hearing, 
``Postal Reform: Sustaining the 9 Million Jobs in the $900 
Billion Mailing Industry (Day 2),'' featuring two panels of 
witnesses. The first panel consisted of Fred Smith, Chairman 
and CEO of FedEx, and Michael Eskew, Chairman and CEO of United 
Parcel Service. Witnesses for the second panel were Gary 
Mulloy, Chairman and CEO of ADVO, Inc.; Gary Pruitt, Chairman, 
President and CEO of McClatchy Company, on behalf of the 
Newspaper Association of America; and Robert Wientzen, 
President and CEO of the Direct Marketing Association.
    On March 23, 2004, the Committee participated in ``The 
Postal Service in Crisis: A Joint Senate-House Hearing on 
Principles for Meaningful Reform.'' The joint hearing at the 
Rayburn House Office Building heard testimony from Secretary of 
the Treasury John W. Snow; David Fineman, Chairman, U.S. Postal 
Service Board of Governors; and Postmaster General John E. 
Potter. Brian C. Roseboro, Acting Undersecretary for Domestic 
Finance, U.S. Department of Treasury, accompanied Secretary 
Snow.
    On April 7, 2004, the Committee held a hearing titled, 
``Postal Reform: The Chairmen's Perspectives on Governance and 
Rate-Setting.'' Testifying were George Omas, Chairman, U.S. 
Postal Rate Commission, and David Fineman, Chairman, U.S. 
Postal Service Board of Governors. Chairman Omas was 
accompanied by Stephen L. Sharfman, General Counsel, U.S. 
Postal Rate Commission.

                  V. Reports, Prints, and GAO Reports

    During the 108th Congress, the Committee prepared and 
issued 37 reports and 3 prints on the following topics:
    To amend chapter 83 of title 5, United States Code, to 
reform the funding of benefits under the Civil Service 
Retirement System for employees of the United States Postal 
Service, and for other purposes. (S. Rept. 108-35)
    To amend chapter 84 of title 5, United States Code, to 
provide that certain Federal annuity computations are adjusted 
by 1 percentage point relating to periods of receiving 
disability payments, and for other purposes. (S. Rept. 108-108)
    To amend section 5379 of title 5, United States Code, to 
increase the annual and aggregate limits on student loan 
repayments by Federal agencies. (S. Rept. 108-109)
    To establish the United States Consensus Council to provide 
for a consensus building process in addressing national public 
policy issues, and for other purposes. (S. Rept. 108-110)
    To amend chapter 10 of title 39, United States Code, to 
include postmasters and postmasters organizations in the 
process for the development and planning of certain policies, 
schedules, and programs, and for other purposes. (S. Rept. 108-
112)
    To amend the provisions of title 5, United States Code, to 
provide for workforce flexibilities and certain Federal 
personnel provisions relating to the National Aeronautics and 
Space Administration, and for other purposes. (S. Rept. 108-
113)
    To ensure the continuation of non-homeland security 
functions of Federal agencies transferred to the Department of 
Homeland Security. (S. Rept. 108-115)
    To strengthen and improve the management of national 
security, encourage government service in areas of critical 
national security, and to assist government agencies in 
addressing deficiencies in personnel possessing specialized 
skills important to national security and incorporating the 
goals and strategies for recruitment and retention for such 
skilled personnel into the strategic and performance management 
systems of Federal agencies. (S. Rept. 108-119)
    To preserve existing judgeships on the Superior Court of 
the District of Columbia. (S. Rept. 108-200)
    To provide a site for the National Women's History Museum 
in the District of Columbia. (S. Rept. 108-204)
    To provide for a report on the parity of pay and benefits 
among Federal law enforcement officers and to establish an 
exchange program between Federal law enforcement employees and 
State and local law enforcement employees. (S. Rept. 108-207)
    To amend title 31, United States Code, to improve the 
financial accountability requirements applicable to the 
Department of Homeland Security, and for other purposes. (S. 
Rept. 108-211)
    To amend the District of Columbia Home Rule Act to provide 
the District of Columbia with autonomy over its budgets, and 
for other purposes. (S. Rept. 108-212)
    To make technical corrections to the Homeland Security Act 
of 2002. (S. Rept. 108-214)
    To provide new human capital flexibility with respect to 
the GAO, and for other purposes. (S. Rept. 108-216)
    To establish a technology, equipment, and information 
transfer within the Department of Homeland Security. (S. Rept. 
108-217)
    To provide for reform relating to Federal employment and 
for other purposes. (S. Rept. 108-223)
    To provide for homeland security grand coordination and 
simplification, and for other purposes. (S. Rept. 108-225)
    To establish a servitude and emancipation archival research 
clearinghouse in the National Archives. (S. Rept. 108-282)
    To amend chapter 90 of title 5, United States Code, to 
include employees of the District of Columbia courts as 
participants in long term care insurance for Federal employees. 
(S. Rept. 108-283)
    To amend chapter 84 of title 5, United States Code, to 
provide for Federal employees to make elections to make, 
modify, and terminate contributions to the Thrift Savings Fund 
at any time, and for other purposes. (S. Rept. 108-290)
    To establish a Federal Interagency Committee on Emergency 
Medical Services and a Federal Interagency Committee on 
Emergency Medical Services Advisory Council, and for other 
purposes. (S. Rept. 108-291)
    To amend the Stewart B. McKinney Homeless Assistance Act to 
provide for emergency food and shelter. (S. Rept. 108-308)
    To reform the postal laws of the United States. (S. Rept. 
108-318)
    To authorize the Congressional Award Act. (S. Rept. 108-
339)
    To provide for additional responsibilities for the Chief 
Information Officer of the Department of Homeland Security 
relating to geospatial information. (S. Rept. 108-348)
    To amend the District of Columbia Access Act of 1999 to 
permanently authorize the public school and private school 
tuition assistance programs established under the Act. (S. 
Rept. 108-349)
    To enumerate the responsibilities of the Officer for Civil 
Rights and Civil Liberties of the Department of Homeland 
Security, to require the Inspector General of the Department of 
Homeland Security to designate a senior official to investigate 
civil rights complaints, and for other purposes. (S. Rept. 108-
350)
    Original bill to reform the Intelligence Community and the 
intelligence and intelligence-related activities of the United 
States Government, and for other purposes. (S. Rept. 108-359)
    To provide for a report of Federal entities without 
annually audited financial statements. (S. Rept. 108-383)
    To amend chapter 23 of title 5, United States Code, to 
clarify the disclosures of information protected from 
prohibited personnel practices, require a statement in 
nondisclosure policies, forms, and agreements that such 
policies, forms, and agreements conform with certain disclosure 
protections, provide certain authority for the Special Counsel, 
and for other purposes. (S. Rept. 108-392)
    To amend part III of title 5, United States Code, to 
provide for the establishment of programs under which 
supplemental dental and vision benefits are made available to 
Federal employees, retirees, and their dependents, to expand 
the contracting authority of the Office of Personnel 
Management, and for other purposes. (S. Rept. 108-393)
    To amend the Homeland Security Act of 2002 to provide for 
homeland security assistance for high-risk nonprofit 
organizations, and for other purposes. (S. Rept. 108-408)
    To ensure that a Federal employee who takes leave without 
pay in order to perform service as a member of the uniformed 
services or member of the National Guard shall continue to 
receive pay in an amount which, when taken together with the 
pay and allowances such individual is receiving for such 
service, will be no less than the basic pay such individual 
would then be receiving if no interruption in employment has 
occurred. (S. Rept. 108-409)
    To provide for continued health benefits coverage for 
certain Federal employees, and for other purposes. (S. Rept. 
108-410)
    To amend the Office of Federal Procurement Policy Act to 
establish a governmentwide policy requiring competition in 
certain executive agency procurements. (S. Rept. 108-415)
    To establish an intergovernmental grant program to identify 
and develop homeland security information, equipment, 
capabilities, technologies, and services to further the 
homeland security needs of Federal, State, and local 
governments. (S. Rept. 108-420)
    Organization of Federal Executive Departments and Agencies. 
Agencies and Functions of the Federal Government Established, 
Abolished, Continued, Modified, Reorganized, Extended, 
Transferred, or Changes in Name by Legislative or Executive 
Action During Calendar Years 2001 and 2002. (S. Prt. 108-28)
    State and Local Officials: Still Kept in the Dark About 
Homeland Security. (S. Prt. 108-33)
    Self-Dealing and Breach of Duty at ULLICO, Inc. (S. Prt. 
108-45)

    Also during the 108th Congress, 51 reports were issued by 
the GAO at the request of the Committee:
    Review of the Office of Personnel Management's Analysis of 
the United States Postal Service's Funding of Civil Service 
Retirement System Costs, GAO-03-448R (January 31, 2003)
    Civil Penalties: Agencies Unable to Fully Adjust Penalties 
for Inflation Under Current Law, GAO-03-409 (March 14, 2003)
    Financial Audit: Independent Counsel Expenditures for the 
Six Months Ended September 30, 2002, GAO-03-445 (March 31, 
2003)
    U.S. Postal Service: Better Guidance Is Needed to Improve 
Communication Should Anthrax Contamination Occur in the Future, 
GAO-03-316 (April 7, 2003)
    Federal Procurement: Spending and Workforce Trends, GAO-03-
443 (April 30, 2003)
    Smallpox Vaccination: Implementation of National Program 
Faces Challenges, GAO-03-578 (April 30, 2003)
    Human Capital: Building on DOD's Reform Effort to Foster 
Governmentwide Improvements GAO-03-851T (June 4, 2003)
    Privacy Act: OMB Leadership Needed to Improve Agency 
Compliance, GAO-03-304 (June 30, 2003)
    Posthearing Questions Related to Proposed DOD Human Capital 
Reform, GAO-03-965R (July 3, 2003)
    Federal Vacancies Reform Act: Key Elements for Agency 
Procedures for Complying with the Act, GAO-03-806 (July 15, 
2003)
    Child Welfare and Juvenile Justice: Several Factors 
Influence the Placement of Children Solely to Obtain Mental 
Health Services, GAO-03-865T (July 17, 2003)
    Energy Markets: Additional Actions Would Help Ensure That 
FERC's Oversight and Enforcement Capability Is Comprehensive 
and Systematic, GAO-03-845 (August 15, 2003)
    GAO's Proposed Human Capital Legislation: Views of the 
Employee Advisory Council, GAO-03-1162T (September 16, 2003)
    GAO: Transformation Challenges, and Opportunities, GAO-03-
1167T (September 16, 2003)
    Electronic Rulemaking: Efforts to Facilitate Public 
Participation Can Be Improved, GAO-03-901 (September 17, 2003)
    Rulemaking: OMB's Role in Reviews of Agencies' Draft Rules 
and the Transparency of Those Reviews, GAO-03-929 (9/22/2003)
    Breast Cancer Research Stamp: Effective Fund-Raiser But 
Better Reporting and Cost-Recovery Criteria Needed, GAO-03-1021 
(September 30, 2003)
    Financial Management: Sustained Efforts Needed to Achieve 
FFMIA Accountability, GAO-03-1062 (September 30, 2003)
    Federal Real Property: Actions Needed to Address Long-
standing and Complex Problems, GAO-04-119T (October 10, 2003)
    Office of Personnel Management: Health Insurance Premium 
Conversion, GAO-04-168R (October 20, 2003)
    U.S. Postal Service: Bold Action Needed to Continue 
Progress on Postal Transformation, GAO-04-108T (November 5, 
2003)
    Travel Cards: Internal Control Weaknesses at DOD Led to 
Improper Use of First and Business Class Travel, GAO-04-229T 
(November 6, 2003)
    Electricity Restructuring: 2003 Blackout Identifies Crisis 
and Opportunity for the Electricity Sector, GAO-04-204 
(November 18, 2003)
    Bioterrorism: A Threat to Agriculture and the Food Supply, 
GAO-04-259T (November 19, 2003)
    Postal Pension Funding Reform: Issues Related to the Postal 
Service's Proposed Use of Pension Savings, GAO-04-238 (November 
26, 2003)
    Postal Pension Funding Reform: Review of Military Service 
Funding Proposals, GAO-04-281 (November 26, 2003)
    Smallpox Vaccination: Review of the Implementation of the 
Military Program, GAO-04-15R (December 1, 2003)
    Need for Comprehensive Postal Reform, GAO-04-455R (February 
6, 2004)
    Human Capital: Preliminary Observations on Proposed DHS 
Human Capital Regulations, GAO-04-479T (February 25, 2004)
    Contract Management: Agencies Can Achieve Significant 
Savings on Purchase Card Buys, GAO-04-430 (March 12, 2004)
    U.S. Postal Service Key Reasons for Postal Reform, GAO-04-
565T (March 23, 2004)
    Agencies' Use of Procurement Flexibilities Provided in the 
Homeland Security Act of 2002 (P.L. 107-296), GAO-04-447R 
(March 31, 2004)
    Purchase Cards: Increased Management Oversight and Control 
Could Save Hundreds of Millions of Dollars, GAO-04-717T (April 
28, 2004)
    Diploma Mills: Federal Employees Have Obtained Degrees From 
Diploma Mills and Other Unaccredited Schools, Some at 
Government Expense, GAO-04-771T (May 11, 2004)
    Federal Acquisition: Increased Attention to Vehicle Fleets 
Could Result in Savings, GAO-04-664 (May 25, 2004)
    Aviation Security: Further Steps Needed to Strengthen the 
Security of Commercial Airport Perimeters and Access Controls, 
GAO-04-728 (June 4, 2004)
    DOD Travel Cards: Control Weaknesses Resulted in Millions 
of Dollars of Improper Payments, GAO-04-576 (June 9, 2004)
    DOD Travel Cards: Control Weaknesses Led to Millions in 
Fraud, Waste, and Improper Payments, GAO-04-825T (June 9, 2004)
    Internet Pharmacies: Some Pose Safety Risks for Consumers 
and Are Unreliable in Their Business Practices, GAO-04-888T 
(June 17, 2004)
    Federal Aircraft: Inaccurate Cost Data and Weaknesses in 
Fleet Management Planning Hamper Cost Effective Operations, 
GAO-04-645 (June 18, 2004)
    International Taxation: Tax Haven Companies Were More 
Likely to Have a Tax Cost Advantage in Federal Contracting, 
GAO-04-856 (June 30, 2004)
    U.S. Postal Service: USPS Needs to Clearly Communicate How 
Postal Services May Be Affected by Its Retail Optimization 
Plans, GAO-04-803 (July 13, 2004)
    Financial Management: Department of Homeland Security Faces 
Significant Financial Management Challenges, GAO-04-774 (July 
19, 2004)
    Electricity Markets: Consumers Could Benefit from Demand 
Programs, But Challenges Remain, GAO-04-844 (August 13, 2004)
    U.S. Postal Service: Better Guidance Is Needed to Ensure an 
Appropriate Response to Anthrax Contamination, GAO-04-239 
(September 9, 2004)
    Best Practices: Using Spend Analysis to Help Agencies Take 
a More Strategic Approach to Procurement, GAO-04-870 (September 
16, 2004)
    No Child Left Behind Act: Additional Assistance and 
Research on Effective Strategies Would Help Small Rural 
Districts, GAO-04-909 (September 23, 2004)
    Financial Management: Improved Financial Systems Are Key to 
FFMIA Compliance, GAO-05-20 (October 1, 2004)
    U.S. Postal Service: Physical Security Measures Have 
Increased at Some Core Facilities, but Security Problems 
Continue, GAO-05-48 (November 16, 2004)
    Electronic Government: Federal Agencies Have Made Progress 
Implementing the E-Government Act of 2002, GAO-05-12 (December 
10, 2004)
    Homeland Security: Further Action Needed to Promote 
Successful Use of Special DHS Acquisition Authority, GAO-05-136 
(December 15, 2004)

                      VI. Official Communications

    During the 108th Congress, 1,023 official communications 
were referred to the Committee. Of these, 1,005 were Executive 
Communications, 16 were Petitions or Memorials, two were 
Presidential Messages. Reports on District of Columbia 
legislation accounted for 390 of the official communications.

                        VII. Legislative Actions

    During the 108th Congress, the Committee reported 
significant legislation--most notably, the sweeping reform of 
the national intelligence apparatus--that was approved by 
Congress and signed into law by the President.
    The following are brief legislative histories of measures 
referred to the Committee and, in some cases, drafted by the 
Committee, which (1) became public law or (2) were favorably 
reported from the Committee and passed by the Senate, but did 
not become law. In addition to the measures listed below, the 
Committee received during the 108th Congress numerous 
legislative proposals that were not considered or reported, or 
that were reported but not passed by the Senate. Additional 
information on these measures appears in the Committee's 
Legislative Calendar for the 108th Congress, S. Prt. 108-61, 
Government Printing Office (December 31, 2004).

                       MEASURES ENACTED INTO LAW

S. 380--To amend chapter 83 of title 5, United States Code, to reform 
        the funding of benefits under the Civil Service Retirement 
        System for employees of the United States Postal Service, and 
        for other purposes. (Public Law 108-18)

    This legislation amends Federal civil service law to revise 
the statutory formula for funding benefits under the Civil 
Service Retirement System for U.S. Postal Service employees 
using dynamic rather than static assumptions, and requires (1) 
when computing actuarial present value of future benefits, 
taking account of the full value of benefits attributable to 
military and volunteer service for Postal Service employees 
first employed after June 30, 1971, and a prorated share for 
Postal Service employees first employed before that date; and 
(2) computing interest at the rate used in the most recent 
dynamic actuarial valuation of the Civil Service Retirement 
System when creating amortization schedules for liquidation of 
Postal supplemental pension benefit liability. The legislation 
requires that savings accruing to the Postal Service from these 
changes and attributable to Fiscal Years (FY) 2003 and 2004 be 
used to reduce the postal debt, and prohibits the Postal 
Service from incurring additional debt to offset the use of the 
savings to reduce the postal debt in FY 2003 and 2004. It 
further requires that: (1) savings attributable to FY 2005 be 
used to continue holding postage rates unchanged and to reduce 
the postal debt; and (2) savings attributable to any fiscal 
year after FY 2005 be considered Postal Service operating 
expenses and, until otherwise provided for by law, be held in 
escrow and not be obligated or expended.
    S. 380 was introduced by Senator Collins on February 12, 
2003, with 23 cosponsors. It was reported out of Committee on 
April 1, 2003, by Senator Collins with an amendment in the 
nature of a substitute, and without a written report. It passed 
the Senate with an amendment by Unanimous Consent on April 2, 
2003. The House passed the bill by a 424-0 roll-call vote on 
April 8, 2003, on which date Senator Collins filed the written 
report, S. Rept. 108-35. The Postal Civil Service Retirement 
System Funding Reform Act of 2003 was signed into law by the 
President on April 23, 2003.

S. 678--To amend chapter 10 of title 39, United States Code, to include 
        postmasters and postmasters organizations in the process for 
        the development and planning of certain policies, schedules, 
        and programs, and for other purposes. (Public Law 108-86)

    This legislation amends Federal law to authorize an 
organization (other than one representing supervisors) that 
represents at least 20 percent of certain postmasters to 
participate directly in planning and developing pay policies 
and schedules, fringe-benefit programs, and other programs 
relating to supervisory and other managerial employees. It 
grants postmasters and postmasters' organizations the same 
consultation and other rights afforded to supervisors and 
supervisors' organizations. The legislation provides that if 
two or more postmasters' organizations exist, they shall: (1) 
be treated as if they constituted a single organization and in 
accordance with such arrangements as they may agree upon; and 
(2) in the case of any fact-finding panel convened by the 
Federal Mediation and Conciliation Service at the 
organizations' request, be jointly and severally liable for the 
cost of such panel, apart from the portion to be borne by the 
Service.
    S. 678 was introduced in the Senate on March 20, 2003, by 
Senator Akaka, with 39 cosponsors. It was reported from the 
Committee by Senator Collins on July 25, 2003, with an 
amendment in the nature of a substitute, and with written 
report, S. Rept. 108-112. It passed the Senate with an 
amendment by Unanimous Consent on July 29, 2003, and passed the 
House by a 426-0 vote under suspension of rules on September 
16, 2003. The Postmasters Equity Act of 2003 was signed into 
law by the President on September 30, 2003.

S. 926--To amend section 5379 of title 5, United States Code, to 
        increase the annual and aggregate limits on student loan 
        repayments by Federal agencies. (Public Law 108-123)

    This legislation increases the annual and aggregate limits 
(to $10,000 and $60,000, respectively) on the amount of an 
employee's student loan an agency may repay.
    S. 926 was introduced in the Senate on April 28, 2003, by 
Senator Voinovich, with one cosponsor. It was reported out of 
Committee by Senator Collins on July 21, 2003, without 
amendment, and with written report, S. Rept. 108-109. 
Additional views were filed. It passed the Senate by Unanimous 
Consent on July 30, 2003, and passed the House by voice vote on 
October 28, 2003. The Federal Employee Student Loan Assistance 
Act was signed by the President on November 11, 2003.

H.R. 3054--To amend the Policemen and Firemen's Retirement and 
        Disability Act to permit military service previously performed 
        by members and former members of the Metropolitan Police 
        Department of the District of Columbia, the Fire Department of 
        the District of Columbia, the United States Park Police, and 
        the United States Secret Service Uniformed Division to count as 
        creditable service for purposes of calculating retirement 
        annuities payable to such members upon payment of a 
        contribution by such members, and for other purposes. (Public 
        Law 108-133)

    This legislation amends the Policemen and Firemen's 
Retirement and Disability Act to permit a member or former 
member of the District of Columbia Metropolitan Police force, 
the District of Columbia Fire Department, the United States 
Park Police force, and the U.S. Secret Service to count 
previously performed military service as creditable service for 
purposes of calculating the retirement annuity payable to such 
member. To qualify, the member or former member must pay the 
member's employment office (or former member's appropriate 
benefits administration) an amount equal to 7 percent of the 
military basic pay paid to the member for each period of 
military service after December 1956, with payment to be 
completed before the member's date of retirement, or October 1, 
2006, whichever is later.
    H.R. 3054 was introduced in the House on September 10, 
2003, by Representative T. Davis of Virginia, with seven 
cosponsors. The bill, as amended, was agreed to in the House by 
voice vote on October 8, 2003. It was discharged by Unanimous 
Consent of the Senate from the Committee on November 11, 2003, 
and passed without amendment that same day by Unanimous 
Consent. The District of Columbia Military Retirement Equity 
Act of 2003 was signed by the President on November 22, 2003.

S.J. Res. 18--A joint resolution commending the Inspectors General for 
        their efforts to prevent and detect waste, fraud, abuse, and 
        mismanagement, and to promote economy, efficiency, and 
        effectiveness in the Federal Government during the past 25 
        years. (Public Law 108-139)

    This resolution recognizes the Inspectors General for, and 
commends their role in, preventing and detecting waste, fraud, 
abuse, and mismanagement and promoting economy, efficiency, and 
effectiveness in Federal programs and operations.
    S.J. Res. 18 was introduced in the Senate on September 29, 
2003, by Senator Collins, with eight cosponsors. It was 
discharged by Unanimous Consent from the Committee on October 
14, 2003, and passed the Senate without amendment by Unanimous 
Consent that same day; the House passed the resolution on a 
326-3 roll call on November 17, 2003. The President signed the 
resolution on December 1, 2003.

S. 1683--To provide for a report on the parity of pay and benefits 
        among Federal law enforcement officers and to establish an 
        exchange program between Federal law enforcement employees and 
        State and local law enforcement employees. (Public Law 108-196)

    This legislation requires the Office of Personnel 
Management to report to the President of the Senate, the 
Speaker of the House of Representatives, and appropriate 
congressional committees and subcommittees on: (1) a comparison 
of classifications, pay, and benefits among Federal law 
enforcement officers; and (2) recommendations for ensuring the 
elimination of disparities in such classifications, pay, and 
benefits. It directs the President to establish an employee 
exchange program between Federal agencies that perform law 
enforcement functions and State and local agencies that perform 
such functions.
    S. 1683 was introduced in the Senate on September 30, 2003, 
by Senator Voinovich, with one cosponsor. It was reported from 
Committee by Senator Collins without amendment on November 22, 
2003, and with written report, S. Rept. 108-207. It passed the 
Senate without amendment by Unanimous Consent on November 25, 
2003. Discharged from the House Committee on Government Reform 
and considered on December 8, 2003, it passed the House without 
objection that same day. The Federal Law Enforcement Pay and 
Benefits Parity Act of 2003 was signed by the President on 
December 19, 2003.

S. 610--To amend the provisions of title 5, United States Code, to 
        provide for workforce flexibilities and certain Federal 
        personnel provisions relating to the National Aeronautics and 
        Space Administration, and for other purposes. (Public Law 108-
        201)

    This legislation amends the National Aeronautics and Space 
Act of 1958 to provide the Administrator of the National 
Aeronautics and Space Administration (NASA) authority to 
compensate certain excepted personnel at the basic rate payable 
for level III of the Executive Schedule. It amends Federal 
employee provisions to establish separate workforce authorities 
and personnel provisions for NASA. It requires the NASA 
Administrator, before exercising any such authorities, to 
submit to specified congressional committees a written 
workforce plan and to obtain plan approval from the Office of 
Personnel Management (OPM), and establishes requirements for 
the plan. It requires plans to be submitted to NASA employee 
representatives and requires the Administrator to give 
recommendations from such representatives full and fair 
consideration. It requires: (1) the current workforce plan to 
be submitted to the Office of Management and Budget whenever a 
NASA performance plan is so submitted for any year; and (2) the 
Administrator, within 6 years, to submit to the Committees on 
Government Reform, Science, and Appropriations of the House of 
Representatives and the Committees on Governmental Affairs, 
Commerce, Science, and Transportation of the Senate an 
evaluation and analysis of the actions taken under this 
section. The legislation includes the authority to: (1) pay 
recruitment, redesignation, relocation, and retention bonuses 
in exchange for service agreements; (2) make term appointments 
of one to 6 years and permanent conversions; (3) fix basic 
rates of pay for critical positions; and (4) extend 
intergovernmental personnel act assignments to up to 4 years. 
It also directs and sets rules for the Administrator to 
establish a NASA Science and Technology Scholarship Program to 
award scholarships to individuals in return for contractual 
agreements under which such individuals agree to serve as full-
time NASA employees for 2 years for each year of such 
scholarships. It authorizes the Administrator to appoint 
directly to the General Schedule of Compensation for Federal 
Employees in GS-7 through GS-12 positions individuals in 
professional and research fields who meet specified educational 
requirements. Provides for the consideration of veterans' 
preference eligibles who meet the criteria for appointment 
ahead of non-preference eligibles and requires public notice of 
vacancies. Other provisions include authorizing the 
Administrator to pay the travel, transportation, and relocation 
expenses of certain new appointees to the same extent and in 
the same manner as the payment of such expenses for transferred 
employees; allowing the Administrator to deem a period of 
qualified non-Federal career service of an individual as an 
equal period of service performed as a Federal employee for 
purposes of annual leave eligibility; and permitting 
appointment of limited SES appointees to career reserved 
positions as long as the limited appointee, immediately before 
the limited appointment, was serving under a career or career-
conditional appointment outside the SES (or an appointment of 
equivalent tenure). The Act requires the Administrator to 
submit to appropriate committees, not later than February 28 of 
each of the next 6 years, a report on the effectiveness of 
exercising such separate workforce authorities.
    S. 610 was introduced in the Senate by Senator Voinovich, 
with nine cosponsors, on March 13, 2003. Senator Collins 
reported it from Committee with an amendment in the nature of a 
substitute on July 28, 2003, with written report, S. Rept. 108-
113. Additional views were filed. The Senate passed it with an 
amendment by Unanimous Consent on November 24, 2003. It was 
passed in the House by voice vote on January 28, 2004. The NASA 
Workforce Flexibility Act of 2003 was signed by the President 
on February 24, 2004.

H.R. 2751--To provide new human capital flexibilities with respect to 
        the GAO, and for other purposes. (Public Law 108-271)

    This legislation amends Federal law to make permanent: (1) 
the entitlement of certain U.S. General Accounting Office (GAO) 
officers and employees who separate from service voluntarily to 
receive annuities under the Civil Service Retirement System or 
the Federal Employees' Retirement System, and (2) authority of 
the Comptroller General to provide voluntary separation 
incentive payments to GAO employees. It authorizes the 
Comptroller General, under specified conditions, to adjust 
annually the basic rates of GAO officers and employees whose 
performance is at a satisfactory level, and provides the same 
authority under the same conditions with respect to Senior 
Executive Service officers and employees. It requires the 
Comptroller General to prescribe regulations under which a GAO: 
(1) officer or employee shall be entitled to pay retention if 
any reduction in force or other workforce adjustment, position 
reclassification, or other appropriate circumstances place an 
officer or employee in a lower grade or band with a maximum 
rate of basic pay less than the rate of basic pay payable to 
the officer or employee immediately before the reduction; (2) 
officer or employee may, in appropriate circumstances, be 
reimbursed for certain relocation expenses for which they would 
not otherwise be eligible; and (3) key officer or employee with 
less than 3 years of service may accrue 6 hours of annual leave 
biweekly in those circumstances appropriate for his or her 
recruitment or retention. It authorizes the Comptroller General 
to establish by regulation an executive-exchange program under 
which GAO officers and employees may be assigned to private 
sector organizations, and employees of private sector 
organizations may be assigned to GAO to further the 
institutional interests of GAO or Congress. The Act renames the 
U.S. General Accounting Office as the U.S. Government 
Accountability Office. It modifies requirements of the GAO 
personnel management system to include: (1) a link between the 
performance management system and the agency's strategic plan; 
(2) adequate training and retraining for supervisors, managers, 
and employees in the implementation and operation of the 
system; (3) a process for ensuring ongoing performance feedback 
and dialogue between supervisors, managers, and employees 
throughout the appraisal period and setting timetables for 
review; (4) effective transparency and accountability measures 
to ensure that the management of the system is fair, credible, 
and equitable, including appropriate independent 
reasonableness, reviews, internal assessments, and employee 
surveys; and (5) a means to ensure that adequate agency 
resources are allocated for the design, implementation, and 
administration of the system. It requires the Comptroller 
General to include in GAO's annual report to Congress, during 
the 5-year period beginning on the enactment of this Act, a 
summary review of actions taken with respect to: (1) GAO's 
permanent authority to offer voluntary early retirements and 
voluntary separation payments to certain officers and 
employees; (2) annual pay adjustments; (3) pay retention; (4) 
increased annual leave for key employees; (5) the executive 
exchange program; (6) the performance management system; and 
(7) GAO's consultation with interested groups or associations 
that represent GAO employees before the implementation of any 
changes authorized under this Act.
    H.R. 2751 was introduced in the House on July 16, 2003, by 
Representative J. Davis of Virginia, with two cosponsors. It 
was reported as amended by the House Committee on Government 
Reform on November 19, 2003, with written report, H. Rept. 108-
380. The House passed the bill on a roll call of 382-43 on 
February 25, 2004. The Senate discharged it without amendment 
from Committee on June 24, 2004, and the Senate passed it 
without amendment by Unanimous Consent that same day. The GAO 
Human Capital Reform Act of 2004 was signed by the President on 
July 7, 2004.

H.R. 1303--To amend the E-Government Act of 2002 with respect to 
        rulemaking authority of the Judicial Conference. (Public Law 
        108-281)

    This legislation amends the E-Government Act of 2002 to 
provide for court rules allowing parties in a Federal court 
proceeding to file under seal a reference list that would 
include both a complete and partially redacted version of 
protected information (e.g., Social Security numbers and 
credit-card account numbers) contained in pleadings. It 
specifies that such rules: (1) provide that all references in a 
case to redacted data shall be construed to refer to the 
unredacted information in the sealed reference list; and (2) 
allow parties to file unredacted exhibits or other evidentiary 
matter under seal for evidentiary purposes.
    H.R. 1303 was introduced in the House on March 18, 2003, by 
Representative L. Smith of Texas, with one cosponsor. The House 
Committee on Judiciary reported it with amendment on July 25, 
2003, and with written report, H. Rept. 108-239. The House 
passed the bill by voice vote on October 7, 2003. After an 
exchange of papers with the House and vitiation of a previous 
report, the bill was discharged from the Committee on 
Governmental Affairs by Unanimous Consent of the Senate on July 
7, 2004, and passed without amendment by Unanimous Consent that 
same day. The Act to Amend the E-Government Act of 2002 with 
Respect to Rulemaking Authority of the Judicial Conference was 
signed by the President on August 2, 2004.

H.R. 4259--To amend title 31, United States Code, to improve the 
        financial accountability requirements applicable to the 
        Department of Homeland Security, to establish requirements for 
        the Future Years Homeland Security Program of the Department, 
        and for other purposes. (Public Law 108-330)

    This legislation amends the Chief Financial Officer Act of 
1990 and the Homeland Security Act of 2002 to direct the 
President to appoint a Chief Financial Officer (CFO) for the 
DHS, who is to report directly to the Secretary of DHS and to 
the Under Secretary for Management; it also removes the Federal 
Emergency Management Agency (FEMA) from the list of agencies 
required to have a CFO. The Act amends the Reports 
Consolidation Act of 2000 to instruct the Secretary of DHS to: 
(1) submit a specified performance and accountability report, 
including an audit opinion of DHS internal controls over its 
financial reporting; and (2) design and implement DHS-wide 
management controls that reflect the national homeland security 
strategy of the Homeland Security Act of 2002, and that permit 
assessment by Congress and DHS managers of DHS performance in 
executing such strategy. Other provisions: Require performance 
and accountability reports for fiscal years after 2005 to 
include an assertion of the internal controls that apply to 
financial reporting by the DHS, and amend the Homeland Security 
Act of 2002 to require the Future Years Homeland Security 
Program to include certain kinds and forms of information, set 
forth the homeland-security strategy used to develop program 
planning guidance, and explain how the resource allocations in 
the Program correlate to homeland security strategy. The Act 
instructs the Secretary to establish an Office of Program 
Analysis and Evaluation, Creates the position of Director of 
Program Analysis and Evaluation, and requires the CFO of DHS to 
notify simultaneously specified congressional committees 
whenever appropriations earmarked for DHS are either 
transferred or reprogrammed.
    H.R. 4259 was introduced in the House by Representative 
Platts of Pennsylvania on May 4, 2004. The House Committee on 
Government Reform reported it on June 9, 2004, with written 
report, H. Rept. 108-533, Part I; on that same day, the House 
Committee on Homeland Security (Select) discharged the bill. It 
passed the House by voice vote on July 20, 2004. By Unanimous 
Consent of the Senate, the bill was discharged from Committee 
and passed without amendment on September 29, 2004. The 
Department of Homeland Security Financial Accountability Act 
was signed by the President on October 16, 2004.

H.R. 3478--To amend title 44, United States Code, to improve the 
        efficiency of operations by the National Archives and Records 
        Administration and to reauthorize the National Historical 
        Publications and Records Commission. (Public Law 108-383)

    This legislation requires the Archivist of the United 
States to promulgate regulations establishing a streamlined 
process for extending agency records retention periods beyond 
those periods specified in disposal schedules; authorizes the 
Records Center Revolving Fund of the Treasury to cover expenses 
for uniforms for National Archives and Records Administration 
(NARA) personnel; authorizes the Archivist to collect 
reasonable fees for the occasional, non-official use of NARA 
facilities and related services by the public and to use such 
fees for educational and public program purposes; authorizes 
the Archivist to enter into cooperative agreements that involve 
the transfer of NARA funds to State and local governments, 
other public entities, educational institutions, or private 
nonprofit organizations to carry out NARA programs; and 
authorizes appropriations to the National Historical 
Publications and Records Commission for FY 2006 through 2009 
for the Commission to carry out its duties and for the 
Archivist to make grants to State and local agencies and to 
nonprofit organizations, institutions, and individuals for 
historical publications and records programs.
    H.R. 3478 was introduced in the House on November 7, 2003, 
by Representative Putnam of Florida, with one cosponsor. It was 
reported by the Committee on Government Reform on December 8, 
2003, with written report, H. Rept. 108-403. The House passed 
the bill, as amended, by voice vote on September 13, 2004. By 
Unanimous Consent of the Senate, the bill was discharged from 
the Committee on Governmental Affairs and passed without 
amendment on October 11, 2004. The President signed the 
National Archives and Records Administration Efficiency Act on 
October 30, 2004.

H.R. 3797--To authorize improvements in the operations of the 
        government of the District of Columbia, and for other purposes. 
        (Public Law 108-386)

    This legislation amends the District of Columbia Home Rule 
Act to require the Board of Education, by March 1 of each year 
or the date on which the Mayor of the District of Columbia 
makes the proposed annual budget for a year available 
(whichever occurs later), to submit to the District Council a 
plan for the allocation of the Mayor's proposed budget among 
various object classes and responsibility centers. It also 
amends the District of Columbia Code to authorize the 
District's Executive Officer, under certain conditions, to 
enter into: (1) a contract for procurement of severable 
services in the same manner and to the same extent as the head 
of an executive agency may enter into such a contract under the 
Federal Property and Administrative Services Act of 1949; (2) a 
lease agreement for the accommodation of the District of 
Columbia courts in a building which is in existence or being 
erected by the lessor to accommodate them; and (3) a multiyear 
contract for the acquisition of property or services in the 
same manner and to the same extent as an executive agency may 
enter into such a contract under the Act. Other provisions 
affect fiscal years for the Armory Board, the DC Public 
Schools, and the University of the District of Columbia; revise 
the deadline for Council adoption of the annual budget for 
District government; revise overtime requirements under the 
Fair Labor Standards Act for certain District government 
employee hours; and amend the District of Columbia Government 
Comprehensive Merit Personnel Act of 1978 regarding 
disciplinary action. The Act also amends the Federal Deposit 
Insurance Act, National Housing Act, Bank Holding Company Act, 
Bank Protection Act of 1968, Depository Institution Management 
Interlocks Act, Securities Exchange Act of 1934, the Federal 
Reserve Act, and the National Bank Receivership Act to provide 
for regulation of District of Columbia-chartered banks by the 
Federal Deposit Insurance Corporation in lieu of the Office of 
the Comptroller.
    H.R. 3797 was introduced in House on February 11, 2004, by 
Representative T. Davis of Virginia, with one cosponsor. The 
House Committee on Government Reform reported it on June 17, 
2004, with written report, H. Rept. 108-551, Part I. The bill 
was discharged from the House Committee on Education and the 
Workforce and the Committee on Financial Services on June 17, 
2004, and passed the House by voice vote on June 21, 2004. By 
Unanimous Consent of the Senate, it was discharged from the 
Committee and passed without amendment on October 11, 2004. The 
2004 District of Columbia Omnibus Authorization Act was signed 
by the President on October 30, 2004.

S. 129--A bill to provide for reform relating to Federal employment, 
        and for other purposes. (Public Law 108-411)

    This legislation comprises three titles. Title I contains 
reforms relating to Federal human-capital management, 
including: Amending Federal employment law to allow the Office 
of Personnel Management (OPM) to authorize the head of a 
Federal agency to pay, in defined circumstances, a recruitment 
or relocation bonus to an individual appointed, moved, or 
relocated to a position that could otherwise be difficult to 
fill; allows OPM to authorize an agency head to pay an 
employee-retention bonus under defined circumstances; requires 
annual reports for 5 years on bonuses paid under this Act; and 
allows OPM, upon the request of a Federal agency, to grant 
authority for such agency to fix the rates of basic pay for 
critical positions in such agency. Title II affects Federal 
employee career-development and benefits. Provisions include: 
Requiring each agency head to evaluate its training against 
performance plans and strategic goals, to appoint a training 
officer, to establish a comprehensive management-succession 
program, and provide special training to managers for dealing 
with employees with unacceptable performances; authorizing 
annual leave for newly hired Federal employees with relevant, 
qualified non-Federal experience; and requiring Senior 
Executive Service positions to receive the maximum authorized 
biweekly annual leave (8 hours); and requiring Federal agencies 
to provide employees compensatory time off for time spent in 
travel status away from their official duty stations, to the 
extent such time is not otherwise compensable. The pay-
administration provisions of Title III include: Amending 
Federal employment law on pay comparability, and including the 
position of Administrator of the Office of Electronic 
Government as a Level III Executive Schedule position.
    S. 129 was introduced in the Senate on January 9, 2003, by 
Senator Voinovich. Senator Collins reported it with an 
amendment in the nature of a substitute on January 27, 2004, 
with written report, S. Rept. 108-223. The bill passed the 
Senate with an amendment by Unanimous Consent on April 8, 2004. 
It was reported, amended, by the House Committee on Government 
Reform on October 5, 2004, with written report, H. Rept. 108-
733, and passed the House by voice vote on October 6, 2004. 
Following Senate acceptance of the House amendment, the Federal 
Workforce Flexibility Act of 2004 was signed by the President 
on October 30, 2004.

H.R. 4012.--To amend the District of Columbia College Access Act of 
        1999 to permanently authorize the public school and private 
        school tuition assistance programs established under the Act. 
        (Public Law 108-457)

    This legislation amends the District of Columbia Access Act 
of 1999 to authorize the public school and private school 
tuition assistance programs established under the Act through 
FY 2007.
    H.R. 4012 was introduced in the House on March 23, 2004, by 
Representative T. Davis of Virginia, with one cosponsor. The 
House Committee on Government Reform reported it with written 
report, H. Rept. 108-527 on June 8, 2004. The House passed the 
bill, as amended, by voice vote on July 14, 2004. Senator 
Collins reported the bill without amendment or written report 
on July 22, 2004. The Senate passed it with an amendment and an 
amendment to the title by Unanimous Consent on November 24, 
2004. Following House acceptance of the Senate amendment, the 
Act was signed by the President on December 17, 2004.

S. 2657--To amend part III of title 5, United States Code, to provide 
        for the establishment of programs under which supplemental 
        dental and vision benefits are made available to Federal 
        employees, retirees, and their dependents, to expand the 
        contracting authority of the Office of Personnel Management, 
        and for other purposes. (Public Law 108-496)

    This legislation provides for establishing programs through 
which current and retired Federal employees and their family 
members and dependents may obtain enhanced dental and vision 
benefits to supplement those available under the Federal 
Employees Health Benefits Program (FEHB). It directs the Office 
of Personnel Management to submit a report to Congress 
describing and evaluating options whereby health insurance 
coverage under FEHB could be made available to unmarried 
dependent children under 25 years of age who are enrolled as 
full-time students at institutions of higher education.
    S. 2657 was introduced in the Senate on July 14, 2004, by 
Senator Collins, with five cosponsors. Senator Collins reported 
it without amendment and with written report, S. Rept. 108-393 
on October 8, 2004. The Senate passed the bill with an 
amendment by Unanimous Consent on November 20, 2004. It passed 
the House by voice vote on December 6, 2004. The Federal 
Employee Dental and Vision Benefits Enhancement Act of 2004 was 
signed by the President on December 23, 2004.

S. 2845--To reform the Intelligence Community and the intelligence and 
        intelligence-related activities of the United States 
        Government, and for other purposes.

    This legislation was the first comprehensive reform of the 
Intelligence Community in half a century. Its text is 
extensive, so only broad summaries of component titles is 
presented here. See the discussion under ``Highlights of 
Activities: Intelligence Reform'' in part I of this Report. 
Title I involves reform of the Intelligence Community, 
including establishing the position of DNI, and assigning 
numerous responsibilities including oversight of a new NCTC. 
This title also establishes a National Intelligence Center, an 
Information Sharing Council, a National Counter Proliferation 
Center, and a Privacy and Civil Liberties Oversight Board 
within the Executive Office of the President. Title II contains 
provisions affecting the FBI and its Director that are intended 
to improve the intelligence capabilities of the FBI and to 
develop and maintain within the FBI a national intelligence 
workforce. Title III directs the President to select a single 
executive branch department, agency, or element to be 
responsible for security clearances and investigations, and 
adds other requirements and directives in that area. Title IV 
requires the Secretary of Homeland Security to: (1) develop and 
implement a National Strategy for Transportation Security and 
transportation modal security plans; and (2) submit such plans 
and periodic progress reports to appropriate congressional 
committees. Title V comprises measures relating to border 
protection, immigration, and visas, including pilot programs 
for advanced technologies, increased staffing levels for Border 
Patrol agents and immigration and customs enforcement 
investigators. Title VI comprises terrorism-prevention measures 
involving money laundering and terrorist financing, reports on 
cross-border electronic transmittals of funds, background 
checks of private security officers, grand jury information 
sharing, and revising laws on terrorist access to destructive 
weapons. Title VII includes numerous measures to implement 
recommendations of the 9/11 Commission. Title VIII deals with 
assorted matters including information sharing between the 
elements of the Intelligence Community and the National 
Infrastructure Simulation and Analysis Center, coordination of 
DHS geospatial information needs, protections for civil rights 
and civil liberties, and information technology planning.
    S. 2845 was introduced (then as S. 2840) in the Senate on 
September 23, 2004, by Senator Collins, with 10 cosponsors. The 
Senate passed the bill with amendments by a 96-2 vote on 
October 6, 2004. On October 16, 2004, under provisions of H. 
Res. 827, S. 2845 was considered to have passed House as 
amended. Following disagreement on the House amendment, 
conferees from each Chamber met and filed conference report H. 
Rept. 108-796 on December 7, 2004. The House agreed to the 
conference report by a 336-75 vote on that same day; the Senate 
agreed to the conference report by an 89-2 vote on December 8, 
2004. The President signed the Intelligence Reform and 
Terrorism Prevention Act of 2004 on December 17, 2004. (Public 
Law 108-458)

                          Postal Naming Bills

    H.R. 1505, a bill to designate the facility of the United 
States Postal Service located at 2127 Beatties Ford Road in 
Charlotte, North Carolina, as the ``Jim Richardson Post 
Office.'' (Public Law 108-17).
    H.R. 1625, a bill to designate the facility of the United 
States Postal Service located at 1114 Main Avenue in Clifton, 
New Jersey, as the ``Robert P. Hammer Post Office Building. 
(Public Law 108-33).
    H.R. 825, a bill to redesignate the facility of the United 
States Postal Service located at 7401 West 100th Place in 
Bridgeview, Illinois, as the ``Michael J. Healy Post Office 
Building.'' (Public Law 108-46).
    H.R. 917, a bill to designate the facility of the United 
States Postal Service located at 1830 South Lake Drive in 
Lexington, South Carolina, as the ``Floyd Spence Post Office 
Building.'' (Public Law 108-47).
    H.R. 925, a bill to redesignate the facility of the United 
States Postal Service located at 1859 South Ashland Avenue in 
Chicago, Illinois, as the ``Cesar Chevez Post Office.'' (Public 
Law 108-48).
    H.R. 981, a bill to designate the facility of the United 
States Postal Service located at 141 Erie Street in Linesville, 
Pennsylvania, as the ``James R. Merry Post Office.'' (Public 
Law 108-49).
    H.R. 985, a bill to designate the facility of the United 
States Postal Service located at 111 West Washington Street in 
Bowling Green, Ohio, as the ``Delbert L. Latta Post Office 
Building.'' (Public Law 108-50).
    H.R. 1055, a bill to designate the facility of the United 
States Postal Service located at 1901 West Evans Street in 
Florence, South Carolina, as the ``Dr. Roswell N. Beck Post 
Office Building.'' (Public Law 108-51).
    H.R. 1368, a bill to designate the facility of the United 
States Postal Service located at 7554 Pacific Avenue in 
Stockton, California, as the ``Norman D. Shumway Post Office 
Building.'' (Public Law 108-52).
    H.R. 1465, a bill to designate the facility of the United 
States Postal Service located at 4832 East Highway 27 in Iron 
Station, North Carolina, as the ``General Charles Gabriel Post 
Office.'' (Public Law 108-53).
    H.R. 1596, a bill to designate the facility of the United 
States Postal Service located at 2318 Woodson Road in St. 
Louis, Missouri, as the ``Timothy Michael Gaffney Post Office 
Building.'' (Public Law 108-54).
    H.R. 1609, a bill to redesignate the facility of the United 
States Postal Service located at 201 West Boston Street in 
Brookfield, Missouri, as the ``Admiral Donald Davis Post Office 
Building.'' (Public Law 108-55).
    H.R. 1740, a bill to designate the facility of the United 
States Postal Service located at 1502 East Kiest Boulevard in 
Dallas, Texas, as the ``Dr. Caesar A.W. Clark, Sr. Post Office 
Building.'' (Public Law 108-56).
     H.R. 2030, a bill to designate the facility of the United 
States Postal Service located at 120 Baldwin Avenue in Paia, 
Maui, Hawaii, as the ``Patsy Takemoto Mink Post Office 
Building.'' (Public Law 108-57).
    S. 1399, a bill to redesignate the facility of the United 
States Postal Service located at 101 South Vine Street in 
Glenwood, Iowa, as the ``William J. Scherle Post Office 
Building.'' (Public Law 108-65).
    H.R. 1761, a bill to designate the facility of the United 
States Postal Service located at 9350 East Corporate Hill Drive 
in Wichita, Kansas, as the ``Garner E. Shriver Post Office 
Building.'' (Public Law 108-71).
    H.R. 2826, a bill to designate the facility of the United 
States Postal Service located at 1000 Avenida Sanchez Osorio in 
Carolina, Puerto Rico, as the ``Roberto Clemente Walker Post 
Office Building.'' (Public Law 108-97).
    S. 1591, a bill to redesignate the facility of the United 
States Postal Service located at 48 South Broadway, Nyack, New 
York, as the ``Edward O'Grady, Waverly Brown, Peter Paige Post 
Office Building.'' (Public Law 108-103).
    H.R. 1610, a bill to redesignate the facility of the United 
States Postal Service located at 120 East Ritchie Avenue in 
Marceline, Missouri, as the ``Walt Disney Post Office 
Building.'' (Public Law 108-110).
    H.R. 1882, a bill to designate the facility of the United 
States Postal Service located at 440 South Orange Blossom Trail 
in Orlando, Florida, as the ``Arthur `Pappy' Kennedy Post 
Office.'' (Public Law 108-111).
    H.R. 2075, a bill to designate the facility of the United 
States Postal Service located at 1905 West Blue Heron Boulevard 
in West Palm Beach, Florida, as the ``Judge Edward Rodgers Post 
Office Building.'' (Public Law 108-112).
    H.R. 2254, a bill to designate the facility of the United 
States Postal Service located at 1101 Colorado Street in 
Boulder City, Nevada, as the ``Bruce Woodbury Post Office 
Building.'' (Public Law 108-113).
    H.R. 2309, a bill to designate the facility of the United 
States Postal Service located at 2300 Redondo Avenue in Long 
Beach, California, as the ``Stephen Horn Post Office 
Building.'' (Public Law 108-114).
    H.R. 2328, a bill to designate the facility of the United 
States Postal Service located at 2001 East Willard Street in 
Philadelphia, Pennsylvania, as the ``Robert A. Borski Post 
Office Building.'' (Public Law 108-115).
    H.R. 2396, a bill to designate the facility of the United 
States Postal Service located at 1210 Highland Avenue in 
Duarte, California, as the ``Francisco A. Martinez Flores Post 
Office.'' (Public Law 108-116).
    H.R. 2452, a bill to designate the facility of the United 
States Postal Service located at 339 Hicksville Road in 
Bethpage, New York, as the ``Brian C. Hickey Post Office 
Building.'' (Public Law 108-117).
    H.R. 2533, a bill to designate the facility of the United 
States Postal Service located at 10701 Abercom Street in 
Savannah, Georgia, as the ``J.C. Lewis, Jr. Post Office 
Building.'' (Public Law 108-118).
    H.R. 2746, a bill to designate the facility of the United 
States Postal Service located at 141 Weston Street in Hartford, 
Connecticut, as the ``Barbara B. Kennelly Post Office 
Building.'' (Public Law 108-119).
    H.R. 3011, a bill to designate the facility of the United 
States Postal Service located at 135 East Olive Avenue in 
Burbank, California, as the ``Bob Hope Post Office Building.'' 
(Public Law 108-120).
    H.R. 1883, a bill to designate the facility of the United 
States Postal Service located at 1601-1 Main Street in 
Jacksonville, Florida, as the ``Eddie Mae Steward Post 
Office.'' (Public Law 108-124).
    S. 1590, a bill to redesignate the facility of the United 
States Postal Service, located at 315 Empire Boulevard in Crown 
Heights, Brooklyn, New York, as the ``James E. Davis Post 
Office Building.'' (Public Law 108-141).
    S. 867, a bill to designate the facility of the United 
States Postal Service located at 710 Wick Lane in Billings, 
Montana, as the ``Ronald Reagan Post Office Building.'' (Public 
Law 108-143).
    S. 1718, a bill to designate the facility of the United 
States Postal Service located at 3710 West 73rd Terrace in 
Prairie Village, Kansas, as the ``Senator James B. Pearson Post 
Office.'' (Public Law 108-144).
    H.R. 2744, a bill to designate the facility of the United 
States Postal Service located at 514 17th Street in Moline, 
Illinois, as the ``David Bybee Post Office Building.'' (Public 
Law 108-149).
    H.R. 3175, a bill to designate the facility of the United 
States Postal Service located at 2650 Cleveland Avenue, NW in 
Canton, Ohio, as the ``Richard D. Watkins Post Office 
Building.'' (Public Law 108-150).
    H.R. 3379, a bill to designate the facility of the United 
States Postal Service located at 3210 East 10th Street in 
Bloomington, Indiana, as the ``Francis X. McCloskey Post Office 
Building.'' (Public Law 108-151).
    H.R. 1822, a bill to designate the facility of the United 
States Postal Service located at 3751 West 6th Street in Los 
Angeles, California, as the ``Dosan Ahn Chang Ho Post Office.'' 
(Public Law 108-239).
    H.R. 2130, a bill to redesignate the facility of the United 
States Postal Service located at 650 Kinderkamack Road in River 
Edge, New Jersey, as the ``New Bridge Landing Post Office.'' 
(Public Law 108-240).
    H.R. 2438, a bill to designate the facility of the United 
States Postal Service located at 115 West Pine Street in 
Hattiesburg, Mississippi, as the ``Major Henry A. Commiskey, 
Sr. Post Office Building.'' (Public Law 108-241).
    H.R. 3029, a bill to designate the facility of the United 
States Postal Service located at 255 North Main Street in 
Jonesboro, Georgia, as the ``S. Truett Cathy Post Office 
Building.'' (Public Law 108-242).
    H.R. 3059, a bill to designate the facility of the United 
States Postal Service located at 304 West Michigan Street in 
Stuttgart, Arkansas, as the ``Lloyd L. Burke Post Office'' 
(Public Law 108-243).
    H.R. 3068, a bill to designate the facility of the United 
States Postal Service located at 2055 Siesta Drive in Sarasota, 
Florida, as the ``Brigadier General (AUC-Ret.) John H. McLain 
Post Office'' (Public Law 108-244).
    H.R. 3175, a bill to designate the facility of the United 
States Postal Service located at 2650 Cleveland Avenue, NW in 
Canton, Ohio, as the ``Richard D. Watkins Post Office 
Building'' (Public Law 108-150).
    H.R. 3234, a bill to designate the facility of the United 
States Postal Service located at 14 Chestnut Street in Liberty, 
New York, as the ``Ben R. Gerow Post Office Building'' (Public 
Law 108-245).
    H.R. 3300, a bill to designate the facility of the United 
States Postal Service located at 15500 Pearl Road in 
Strongsville, Ohio, as the ``Walter F. Ehrnfelt, Jr. Post 
Office Building'' (Public Law 108-246).
    H.R. 3340, a bill to redesignate the facility of the United 
States Postal Service located at 7715 and 7748 S. Cottage Grove 
Avenue in Chicago, Illinois, as the ``James E. Worsham Post 
Office'' and the ``James E. Worsham Carrier Annex Building,'' 
respectively, and for other purposes (Public Law 108-294).
    H.R. 3353, a bill to designate the facility of the United 
States Postal Service located at 525 Main Street in Tarboro, 
North Carolina, as the ``George Henry White Post Office 
Building'' (Public Law 108-247).
    H.R. 3379, a bill to designate the facility of the United 
States Postal Service located at 3210 East 10th Street in 
Bloomington, Indiana, as the ``Francis X. McCloskey Post Office 
Building'' (Public Law 108-151).
    H.R. 3536, a bill to designate the facility of the United 
States Postal Service located at 210 Main Street in Malden, 
Illinois, as the ``Army Staff Sgt. Lincoln Hollinsaid Malden 
Post Office'' (Public Law 108-248).
    H.R. 3537, a bill to designate the facility of the United 
States Postal Service located at 185 State Street in Manhattan, 
Illinois, as the ``Army Pvt. Shawn Pahnke Manhattan Post 
Office'' (Public Law 108-249).
    H.R. 3538, a bill to designate the facility of the United 
States Postal Service located at 201 South Chicago Avenue in 
Saint Anne, Illinois, as the ``Marine Capt. Ryan Beaupre Saint 
Anne Post Office'' (Public Law 108-250).
    H.R. 3690, a bill to designate the facility of the United 
States Postal Service located at 2 West Main Street in Batavia, 
New York, as the ``Barber Conable Post Office Building'' 
(Public Law 108-251).
    H.R. 3733, a bill to designate the facility of the United 
States Postal Service located at 410 Huston Street in Altamont, 
Kansas, as the ``Myron V. George Post Office'' (Public Law 108-
252).
    H.R. 3740, a bill to designate the facility of the United 
States Postal Service located at 223 South Main Street in 
Roxboro, North Carolina, as the ``Oscar Scott Woody Post Office 
Building'' (Public Law 108-253).
    H.R. 3769, a bill to designate the facility of the United 
States Postal Service located at 137 East Young High Pike in 
Knoxville, Tennessee, as the ``Ben Atchley Post Office 
Building'' (Public Law 108-254).
    H.R. 3855, a bill to designate the facility of the United 
States Postal Service located at 607 Pershing Drive in Laclede, 
Missouri, as the ``General John J. Pershing Post Office'' 
(Public Law 108-255).
    H.R. 3917, a bill to designate the facility of the United 
States Postal Service located at 695 Marconi Boulevard in 
Copiague, New York, as the ``Maxine S. Postal United States 
Post Office'' (Public Law 108-256).
    H.R. 3939, a bill to redesignate the facility of the United 
States Postal Service located at 14-24 Abbott Road in Fair 
Lawn, New Jersey, as the ``Mary Ann Collura Post Office 
Building'' (Public Law 108-257).
    H.R. 3942, a bill to redesignate the facility of the United 
States Postal Service located at 7 Commercial Boulevard in 
Middletown, Rhode Island, as the ``Rhode Island Veterans Post 
Office Building'' (Public Law 108-258).
    H.R. 4037, a bill to designate the facility of the United 
States Postal Service located at 475 Kell Farm Drive in Cape 
Girardeau, Missouri, as the ``Richard G. Wilson Processing and 
Distribution Facility'' (Public Law 108-259).
    H.R. 4176, a bill to designate the facility of the United 
States Postal Service located at 122 West Elwood Avenue in 
Raeford, North Carolina, as the ``Bobby Marshall Gentry Post 
Office Building'' (Public Law 108-260).
    H.R. 4222, a bill to designate the facility of the United 
States Postal Service located at 550 Nebraska Avenue in Kansas 
City, Kansas, as the ``Newell George Post Office Building'' 
(Public Law 108-296).
    H.R. 4299, a bill to designate the facility of the United 
States Postal Service located at 410 South Jackson Road in 
Edinburg, Texas, as the ``Dr. Miguel A. Nevarez Post Office 
Building'' (Public Law 108-261).
    H.R. 4327, a bill to designate the facility of the United 
States Postal Service located at 7450 Natural Bridge Road in 
St. Louis, Missouri, as the ``Vitilas `Veto' Reid Post Office 
Building'' (Public Law 108-298).
    H.R. 4380, a bill to designate the facility of the United 
States Postal Service located at 4737 Mile Stretch Drive in 
Holiday, Florida, as the ``Sergeant First Class Paul Ray Smith 
Post Office Building'' (Public Law 108-292).
    H.R. 4381, a bill to designate the facility of the United 
States Postal Service located at 2811 Springdale Avenue in 
Springdale, Arkansas, as the ``Harvey and Bernice Jones Post 
Office Building'' (Public Law 108-392).
    H.R. 4427, a bill to designate the facility of the United 
States Postal Service located at 73 South Euclid Avenue in 
Montauk, New York, as the ``Perry B. Duryea, Jr. Post Office'' 
(Public Law 108-300).
    H.R. 4556, a bill to designate the facility of the United 
States Postal Service located at 1115 South Clinton Avenue in 
Dunn, North Carolina, as the ``General William Carey Lee Post 
Office Building'' (Public Law 108-395).
    H.R. 4618, a bill to designate the facility of the United 
States Postal Service located at 10 West Prospect Street in 
Nanuet, New York, as the ``Anthony I. Lombardi Memorial Post 
Office Building'' (Public Law 108-397).
    H.R. 4632, a bill to designate the facility of the United 
States Postal Service located at 19504 Linden Boulevard in St. 
Albans, New York, as the ``Archie Spigner Post Office 
Building'' (Public Law 108-398).
    H.R. 5039, a bill to designate the facility of the United 
States Postal Service located at United States Route 1 in 
Ridgeway, North Carolina, as the ``Eva Holtzman Post Office'' 
(Public Law 108-403).
    S. 2214, a bill to designate the facility of the United 
States Postal Service located at 3150 Great Northern Avenue in 
Missoula, Montana, as the ``Mike Mansfield Post Office.'' 
(Public Law 108-440).
    S. 2640, a bill to designate the facility of the United 
States Postal Service located at 1050 North Hills Boulevard in 
Reno, Nevada, as the ``Guardians of Freedom Memorial Post 
Office Building'' and to authorize the installation of a plaque 
at such site, and for other purposes. (Public Law 108-442).
    S. 2693, a bill to designate the facility of the United 
States Postal Service located at 1475 Western Avenue, Suite 45, 
in Albany, New York, as the ``Lieutenant John F. Finn Post 
Office.'' (Public Law 108-443).

   MEASURES FAVORABLY REPORTED BY COMMITTEE AND PASSED BY THE SENATE

S. 481--To amend chapter 84 of title 5, United States Code, to provide 
        that certain Federal annuity computations are adjusted by 1 
        percentage point relating to periods of receiving disability 
        payments, and for other purposes.

    This legislation would increase by one percentage point the 
percentage otherwise applicable for a Federal Employees' 
Retirement System annuity computation that includes, in the 
aggregate, at least two months of credit for any period of 
receiving disability compensation benefits.
    S. 481 was introduced in the Senate on February 27, 2003, 
by Senator Allen, with seven cosponsors. Senator Collins 
reported it from the Committee without amendment on July 21, 
2003, with written report, S. Rept. 108-108. It passed the 
Senate without amendment by Unanimous Consent on July 28, 2003, 
and was referred to the House Committee on Government Reform 
the next day.

S. 589--To strengthen and improve the management of national security, 
        encourage Government service in areas of critical national 
        security, and to assist government agencies in addressing 
        deficiencies in personnel possessing specialized skills 
        important to national security and incorporating the goals and 
        strategies for recruitment and retention for such skilled 
        personnel into the strategic and performance management systems 
        of Federal agencies.

    This legislation comprises: Title I, establishing a pilot 
program for student loan repayment for Federal employees in 
national-security positions, subject to regulations to be 
drafted by the Office of Personnel Management; Title II, 
amending the David L. Boren National Security Education Act of 
1991 to require the National Security Education Board to 
establish a program for awarding National Security Fellowships 
to eligible graduate students who agree to employment with the 
Government in national security positions, and amending the Act 
to direct the Board to create a National Security Service 
Corps, under the direction of the Board, to provide rotational 
opportunities for mid-level employees in national-security 
positions within and between specified agencies; and Title III, 
which requires affected agencies to develop annual strategic 
plans that describe training required to achieve goals and 
objectives, and evaluates the extent to which specific skills 
in human capital are needed to achieve the mission, goals, and 
objectives of the agency.
    S. 589, the Homeland Security Federal Workforce Act of 
2003, was introduced in the Senate on March 11, 2003, by 
Senator Akaka, with eight cosponsors. Senator Collins reported 
it from the Committee on July 31, 2003, without amendment and 
with written report, S. Rept. 108-119. Additional views were 
filed. The bill passed the Senate with an amendment by 
Unanimous Consent on November 5, 2003. It was referred to the 
House Subcommittee on Civil Service and Agency Organization on 
July 13, 2004.

S. 2688--To provide for a report of Federal entities without annually 
        audited financial statements.

    This legislation instructs the Director of the Office of 
Management and Budget to list for certain congressional 
committees each Federal entity that receives an exemption or 
waiver from the statutory requirement for an annually audited 
financial statement, and to list other Federal entities, 
including special-purpose entities, that do not prepare 
independently audited annual financial statements. It requires 
OMB to assess: (1) the capability of the listed entities to 
prepare annual financial statements and have them independently 
audited; (2) how to reduce the costs of preparing the financial 
statements and performing independent audits; and (3) the 
benefits of improved financial oversight encompassing the 
Executive Branch, including the feasibility of preparing annual 
financial statements and independently audited statements for 
certain executive branch entities.
    S. 2688, the Executive Branch Financial Accountability 
Reporting Act, was introduced in the Senate on July 19, 2004, 
by Senator Fitzgerald, with one cosponsor. Committee on 
Governmental Affairs. Senator Collins reported it from the 
Committee without amendment on October 4, 2004, with written 
report, S. Rept. 108-383. The bill passed the Senate with an 
amendment by Unanimous Consent on October 11, 2004. It was 
referred to the House Committee on Government Reform on 
November 16, 2004.

S. 2639--To reauthorize the Congressional Award Act.

    This legislation would amend the Congressional Award Act to 
extend through calendar 2009 the requirement that the 
Comptroller General determine and report to Congress whether 
the Director of the Congressional Award Board is complying with 
requirements for financial operations of the Congressional 
Award Program. The bill extends the authorization of the Board 
from October 1, 2004, to October 1, 2009; allows the Board to 
use Federal sources to carry out its functions and make 
expenditures; allows the Board to accept a maximum of one-half 
of all funds accepted from Federal sources; and authorizes 
appropriations for FY 2005 through 2009.
    S. 2639 was introduced in the Senate on July 13, 2004, by 
Senator Lieberman, with four seven cosponsors. Senator Collins 
reported it from Committee without amendment and with written 
report, S. Rept. 108-339 on September 14, 2004. It passed the 
Senate with an amendment by Unanimous Consent on September 29, 
2004, and was referred to the House Committee on Education and 
the Workforce the next day.

S. 2635--A bill to establish an intergovernmental grant program to 
        identify and develop homeland security information, equipment, 
        capabilities, technologies, and services to further the 
        homeland security needs of Federal, State, and local 
        governments.

    This legislation establishes the U.S.-Israel Homeland 
Security Grant Program to identify, develop, or modify existing 
or near term homeland security information, equipment, 
capabilities, technologies, and services to further the 
homeland security of the United States and to address the 
homeland security needs of Federal, State, and local 
governments. It directs the Secretary of Homeland Security to 
assess the homeland security needs of Federal, State, and local 
governments and first responders and areas where specific 
homeland security information, equipment, capabilities, 
technologies, and services could address those needs; survey 
near-term and existing homeland-security information developed 
within the United States and Israel; and provide grants to 
eligible applicants to develop, manufacture, sell, or otherwise 
provide homeland security information, equipment, capabilities, 
technologies, and services to address such needs.
    It authorizes the Secretary to require grant recipients to 
make available non-Federal matching contributions of up to 50 
percent of the total proposed project cost, and to repay the 
amount of the grant with interest and administrative charges.
    The bill was introduced in Senate on July 8, 2004, by 
Senator Collins, with three cosponsors. Senator Collins 
reported it from the Committee on November 11, 2004, with an 
amendment in the nature of a substitute and with written 
report, S. Rept. 108-420. It passed the Senate with an 
amendment by Unanimous Consent on November 21, 2004. The bill 
was held at the desk in the House on November 24, 2004.

S. 2479--To amend chapter 84 of title 5, United States Code, to provide 
        for Federal employees to make elections to make, modify, and 
        terminate contributions to the Thrift Savings Fund at any time, 
        and for other purposes.

    This legislation allows a Federal employee or member to 
elect to make contributions under the Thrift Savings Plan (TSP) 
of the Federal Employees' Retirement System to be made at any 
time, and provides that such an election shall remain in effect 
until modified or terminated. It also instructs the Federal 
Retirement Thrift Investment Board to periodically evaluate 
whether the tools available to TSP participants provide the 
information needed to understand, evaluate, and compare 
financial products, services, and opportunities offered through 
the TSP; and to use these evaluations to improve its program.
    The Thrift Savings Plan Open Elections Act of 2004 was 
introduced in the Senate on May 21, 2004, by Senator Collins, 
with four cosponsors. Senator Collins reported it from the 
Committee without amendment, and with written report, S. Rept. 
108-290, on June 25, 2004. The bill passed the Senate without 
amendment by Unanimous Consent on July 16, 2004. It was 
referred to the House Committee on Government Reform on July 
19, 2004.

S. 2322--To amend chapter 90 of title 5, United States Code, to include 
        employees of the District of Columbia courts as participants in 
        long term care insurance for Federal employees.

    This legislation amends Federal law to include employees of 
the District of Columbia courts as participants in long-term 
care insurance for Federal employees.
    The bill was introduced in the Senate on April 20, 2004, by 
Senator Akaka, with one cosponsor. 6/21 Senator Collins 
reported it from the Committee without amendment and with 
written report, S. Rept. 108-283 on June 21, 2004. It passed 
the Senate without amendment by Unanimous Consent on June 24, 
2004, and was referred to the House Committee on Government 
Reform the next day.

S. 2249--To amend the Stewart B. McKinney Homeless Assistance Act to 
        provide for emergency food and shelter.

    This legislation Amends the portions of the Stewart B. 
McKinney Homeless Assistance Act regarding its emergency food 
and shelter program to authorize appropriations, change the 
name of one of the Board nominating organizations, and provide 
for inclusion of homeless individuals, homeless advocates, or 
food and shelter recipients on local boards.
    The Emergency Food and Shelter Act of 2004 was introduced 
in the Senate on March 29, 2004, by Senator Collins, with eight 
cosponsors. Senator Collins reported it from the Committee 
without amendment and with written report, S. Rept. 108-308 on 
July 15, 2004. It passed the Senate without amendment by 
Unanimous Consent on July 21, 2004. The bill was referred to 
the House Subcommittee on Housing and Community Opportunity on 
August 3, 2004.

S. 1741--To provide a site for the National Women's History Museum in 
        the District of Columbia.

    This legislation requires the Administrator of General 
Services to enter into an occupancy agreement for up to 99 
years to make the Pavilion Annex adjoining the Old Post Office 
in Washington, D.C., available for rent to the National Women's 
History Museum, Inc., and provides for execution and cost 
treatment of renovations and modification of the property.
    The bill was introduced in the Senate on October 16, 2003, 
by Senator Collins, with 20 cosponsors. Senator Collins 
reported it from the Committee without amendment and with 
written report, S. Rept. 108-204 on November 20, 2003. It 
passed the Senate without amendment by Unanimous Consent on 
November 21, 2003. On January 28, 2004, it was referred to the 
House Committee on Transportation and Infrastructure.

S. 1612--To establish a technology, equipment, and information transfer 
        within the Department of Homeland Security.

    This legislation would amend the Homeland Security Act of 
2002 to include a multi-agency program to allow for transfer of 
technology, equipment, and information to State and local law 
enforcement agencies. It allows the program Director, upon 
approval of the Secretary, to expand the program to first 
responders other than law-enforcement agencies and to revise 
the advisory committee accordingly.
    S. 1612 was introduced in the Senate on September 11, 2003, 
by Senator Collins, with 10 cosponsors. Senator Collins 
reported it from the Committee on November 25, 2003, with an 
amendment in the nature of a substitute, and submitted a 
written report, S. Rept. 108-217, on December 9, 2003. The bill 
passed the Senate with an amendment by Unanimous Consent on 
February 4, 2004. It was held at the desk in the House on 
February 6, 2004.

S. 1567--To amend title 31, United States Code, to improve the 
        financial accountability requirements applicable to the 
        Department of Homeland Security, and for other purposes.

    This legislation amends the Chief Financial Officers Act of 
1990 and the Homeland Security Act of 2002 to require the 
President to appoint a Chief Financial Officer for the 
Department of Homeland Security (DHS), subject to Senate 
confirmation. It also instructs the Secretary of Homeland 
Security to submit an annual performance and accountability 
report incorporating the Government Performance and Results Act 
program performance report, including an audit opinion on DHS's 
internal controls over its financial reporting.
    The bill was introduced in the Senate on August 1, 2003, by 
Senator Fitzgerald, with five cosponsors. Senator Collins 
reported it from the Committee with an amendment in the nature 
of a substitute on November 20, 2003. The bill passed the 
Senate with an amendment by Unanimous Consent on November 21, 
2003. A written report, S. Rept. 108-211, was submitted on 
November 25, 2003. The bill was held at the desk in the House 
on November 25, 2003.

S. 1561--To preserve existing judgeships on the Superior Court of the 
        District of Columbia.

    This legislation amends the District of Columbia Code to 
increase from 58 to 61 the number of associate judges on the 
District's Superior Court. The bill was introduced in the 
Senate on August 1, 2003, by Senator Collins, with two 
cosponsors. Senator Collins reported it from the Committee 
without amendment on November 18, 2003, with written report, S. 
Rept. 108-200. The bill passed the Senate without amendment by 
Unanimous Consent on November 20, 2003. It was referred to the 
House Committee on Government Reform on November 21, 2003.

S. 1522--A bill to provide new human capital flexibility with respect 
        to the GAO, and for other purposes.

    This legislation amends Federal law to make permanent: The 
entitlement of certain U.S. General Accounting Office officers 
and employees who separate from service voluntarily to 
annuities under the Civil Service Retirement System or the 
Federal Employees' Retirement System; and (2) authority of the 
Comptroller General to provide voluntary separation incentive 
payments to GAO employees. It also authorizes the Comptroller 
General, under specified conditions, to adjust annually the 
basic rates of GAO and Senior Executive Service officers and 
employees whose performance is at a satisfactory level. Other 
provisions require regulations on pay retention following 
specified job changes, authorize an executive-exchange program 
under which GAO officers and employees may be assigned to 
private sector organizations, and employees of private sector 
organizations may be assigned to GAO, rename the U.S. General 
Accounting Office as the U.S. Government Accountability Office, 
and modify requirements of the GAO personnel management system.
    The bill was introduced in the Senate on July 31, 2003, by 
Senator Voinovich, with one cosponsor. Senator Collins reported 
it from the Committee with amendments on November 21, 2003. The 
bill passed the Senate with amendments by Unanimous Consent on 
November 24, 2003. Written report, S. Rept. 108-216 was 
submitted on December 9, 2003. The bill was held at the desk on 
November 25, 2003.

S. 1267--To amend the District of Columbia Home Rule Act to provide the 
        District of Columbia with autonomy over its budgets, and for 
        other purposes.

    This legislation amends the District of Columbia Home Rule 
Act to provide that the District of Columbia budget passed by 
the Council of the District of Columbia shall be enacted 
without referral to the President or approval by the Congress, 
unless it is the budget for a fiscal year which is a control 
year; it prohibits obligations or expenditures by District 
government officers and employees without the Council's 
approval or, in the case of a control year, congressional 
approval. Other provisions modify rules on reenacting measures 
vetoed as line items; control authorizations for hirings or 
transfers; provide an opt-out mandate for metered cab fares; 
create, assigns powers and duties, and define reporting 
relationships for the position of Chief Financial Officer; and 
require fiscal-impact statement for many measures before final 
adoption by the Council.
    The bill was introduced in the Senate on June 16, 2003, by 
Senator Collins, with six cosponsors. Senator Collins reported 
it from the Committee on November 25, 2003, with an amendment 
and with written report, S. Rept. 108-212. It passed the Senate 
with an amendment by Unanimous Consent on December 9, 2003. On 
January 20, 2004, the bill was referred to the House Committees 
on Government Reform, Rules, and Appropriations.

S. 1292--To establish a servitude and emancipation archival research 
        clearinghouse in the National Archives.

    This legislation directs the Archivist of the United States 
to establish, as part of the National Archives, a national 
database consisting of historic records of servitude and 
emancipation in the United States to assist African Americans 
in researching their genealogy, and requires the National 
Historical Publications and Records Commission to maintain the 
database.
    The bill was introduced in the Senate on June 19, 2003, by 
Senator Landrieu, with seven cosponsors. Senator Collins 
reported it from the Committee with amendments and with written 
report, S. Rept. 108-282 on June 21, 2004. It passed the Senate 
with amendments by Unanimous Consent on June 25, 2004. On July 
1, 2004, it was referred to the House Subcommittee on 
Technology, Information Policy, Intergovernmental Relations and 
the Census.

              SELECTED MEASURES REPORTED BY THE COMMITTEE

    A number of measures considered, adopted, and reported to 
the Senate by the Committee during the 108th Congress were not 
enacted by the full body. Two of these measures, described 
here, were notable as signs of the Committee's focus on 
improving homeland security.

S. 1245--Homeland Security Grants Enhancement Act.

    The bill, which was introduced by Senator Collins on June 
12, 2003, was originally marked up by the Committee on June 17, 
2003, and was approved by a vote of 9-0. The legislation 
included a number of provisions to improve the administration 
of homeland-security grants, and authorized formula grants to 
States for planning, exercises, and equipment for first 
responders. Senator Lieberman proposed a Committee amendment 
which included increasing the portion of the grant funds 
provided directly to local government in high-threat areas from 
10 percent to 25 percent, and loosening restrictions on use of 
funds to pay overtime compensation. The proposed compromise was 
agreed upon unanimously by the Committee on June 23, 2004. The 
full Senate later adopted these provisions as an amendment to 
the Intelligence Reform and Terrorism Prevention Act of 2004. 
However, agreement could not be reached in conference with 
House lawmakers.

S. 2701--Homeland Security Interagency and Interjurisdictional 
        Information Sharing Act of 2004.

    S. 2701, introduced by Senator Lieberman on July 21, 2004, 
would have improved the sharing of homeland security 
information among first responders and all levels of 
government. It would also have helped with inoperability issues 
among first responders. The legislation would have authorized 
$3.3 billion over 5 years to provide a reliable and consistent 
funding source specifically for interoperability solutions and 
would have created an Office of Information Sharing within the 
Department of Homeland Security. Modified versions of several 
provisions in this legislation were included in the landmark 
Intelligence Reform and Terrorism Prevention Act of 2004.

                     VIII. Presidential Nominations

    During the 108th Congress, the Committee received a total 
of 48 Presidential nominations. Of these, 27 were reported 
favorably and confirmed by the Senate, 6 were discharged from 
Committee and confirmed, 2 were withdrawn by the President, and 
13 were not acted upon by the Committee.
    The following 27 nominations were favorably reported by the 
Committee and confirmed by the Senate:
          Penrose C. Albright, to be Assistant Secretary of 
        Homeland Security, Department of Homeland Security. 
        (Hearing held July 29, 2003)
          Joshua B. Bolten, to be Director of the Office of 
        Management and Budget, Executive Office of the 
        President. (Hearing held June 25, 2003)
          Scott J. Bloch, to be Special Counsel, Office of 
        Special Counsel. (Hearing held November 12, 2003)
          Jerry Stewart Byrd, to be Associate Judge of the 
        Superior Court of the District of Columbia, The 
        Judiciary. (Hearing held June 18, 2003)
          Dale Cabaniss, to be Member of the Federal Labor 
        Relations Authority. (Hearing held September 30, 2003)
          Terrence A. Duffy, to be Member of the Federal 
        Retirement Thrift Investment Board. (Hearing held May 
        15, 2003)
          Gordon England, to be Deputy Secretary of Homeland 
        Security, Department of Homeland Security. (Hearing 
        held January 24, 2003)
          Michael J. Garcia, to be Assistant Secretary, 
        Department of Homeland Security. (Hearing held June 5, 
        2003)
          Janet Hale, to be Under Secretary for Management, 
        Department of Homeland Security. (Hearing held February 
        27, 2003)
          Brian F. Holeman, to be Associate Judge of the 
        Superior Court of the District of Columbia, The 
        Judiciary. (Hearing held September 30, 2003)
          Craig S. Iscoe, to be Associate Judge of the Superior 
        Court of the District of Columbia, The Judiciary. 
        (Hearing held September 30, 2003)
          Gregory E. Jackson, to be Associate Judge of the 
        Superior Court of the District of Columbia, The 
        Judiciary. (Hearing held October 5, 2004)
          Joel David Kaplan, to be Deputy Director of the 
        Office of Management and Budget, Executive Office of 
        the President. (Hearing held July 29, 2003)
          James M. Loy, to be Deputy Secretary of Homeland 
        Security, Department of Homeland Security. (Hearing 
        held November 18, 2003)
          Judith Nan Macaluso, to be Associate Judge of the 
        Superior Court of the District of Columbia, The 
        Judiciary. (Hearing held June 18, 2003)
          Neil McPhie, to be Chairman of the Merit Systems 
        Protection Board. (Hearing held July 19, 2004)
          C. Suzanne Mencer, to be Director of the Office for 
        Domestic Preparedness, Department of Homeland Security.
          Fern Flanagan Saddler, to be Associate Judge of the 
        Superior Court of the District of Columbia, The 
        Judiciary. (Hearing held June 18, 2003)
          Thomas J. Ridge, to be Secretary of Homeland 
        Security, Department of Homeland Security. (Hearing 
        held January 17, 2003)
          Joseph Michael Francis Ryan III, to be Associate 
        Judge of the Superior Court of the District of 
        Columbia, The Judiciary. (Hearing held June 18, 2003)
          David Safavian, to be Administrator for Federal 
        Procurement Policy, Executive Office of the President. 
        (Hearing held April 29, 2004)
          Barbara J. Sapin, to be Member of the Merit Systems 
        Protection Board. (Hearing held July 19, 2004)
          Linda M. Springer, to be Controller, Office of 
        Federal Financial Management, Office of Management and 
        Budget, Executive Office of the President. (Hearing 
        held February 27, 2003)
          David M. Stone, to be Assistant Secretary of Homeland 
        Security, Department of Homeland Security. (Hearing 
        held April 8, 2004)
          Dawn A. Tisdale, to be Commissioner of the Postal 
        Rate Commission, Postal Rate Commission. (Hearing held 
        April 29, 2004)
          C. Stewart Verdery, Jr., to be Assistant Secretary, 
        Department of Homeland Security. (Hearing held June 5, 
        2003)
          Joe D. Whitley, to be General Counsel, Department of 
        Homeland Security. (Hearing held July 29, 2003)

    Six nominations were discharged with the concurrence of the 
Committee and confirmed by the Senate. Of these, four were for 
Inspectors General, which by Standing Order of the Senate are 
sequentially referred to the Committee and discharged after 20 
days:
          Harold Damelin, to be Inspector General, Small 
        Business Administration.
          J. Russell George, to be Inspector General for Tax 
        Administration, Department of the Treasury.
          Clay Johnson III, to be Deputy Director for 
        Management, Office of Management and Budget, Executive 
        Office of the President. (Hearing held April 2, 2003)
          James C. Miller III, to be Governor of the United 
        States Postal Service.
          Patrick P. O'Carroll, Jr., to be Inspector General, 
        Social Security Administration.
          Richard W. Moore, to be Inspector General, Tennessee 
        Valley Authority.

    The following two nominations were withdrawn by the 
President:
          Albert Casey, to be Governor of the United States 
        Postal Service.
          Susanne T. Marshall, to be Chairman of the Merit 
        System Protection Board.

    The following 13 nominations were not acted upon by the 
Committee:
          Jennifer M. Anderson, to be Associate Judge of the 
        Superior Court of the District of Columbia, The 
        Judiciary.
          Albert Casey, to be Governor, United States Postal 
        Service.
          Laura A. Cordero, to be Associate Judge of the 
        Superior Court of the District of Columbia, The 
        Judiciary.
          Peter Eide, to be General Counsel of the Federal 
        Labor Relations Authority.
          Clark Kent Ervin, to be Inspector General, Department 
        of Homeland Security.
          Carolyn L. Gallagher, to be Governor of the United 
        States Postal Service.
          Louis J. Giuliano, to be Governor of the United 
        States Postal Service.
          Tony Hammond, to be Commissioner of the Postal Rate 
        Commission.
          Noel Anketell Kramer, to be Associate Judge of the 
        District of Columbia Court of Appeals, The Judiciary.
          Juliet JoAnn McKenna, to be Associate Judge of the 
        Superior Court of the District of Columbia, The 
        Judiciary.
          Brian David Miller, to be Inspector General, General 
        Services Administration.
          Allen Weinstein, to be Archivist of the United 
        States, National Archives and Records Administration.
          Edwin D. Williamson, to be Director of the Office of 
        Government Ethics, Office of Personnel Management.
          

                  IX. ACTIVITIES OF THE SUBCOMMITTEES


  SUBCOMMITTEE ON FINANCIAL MANAGEMENT, THE BUDGET, AND INTERNATIONAL 
                                SECURITY

                     Chairman: Peter G. Fitzgerald

                Ranking Minority Member: Daniel K. Akaka

                              I. Hearings

    The Subcommittee on Financial Management, the Budget, and 
International Security held the following hearings during the 
108th Congress:

Drugs, Counterfeiting, and Weapons Proliferation: The North Korean 
        Connection (May 20, 2003)
    The hearing featured first-time testimony from two North 
Korean defectors: A former high-level official in the North 
Korean government and a former missile scientist. The hearing 
was intended to raise international awareness regarding North 
Korea's use of illicit enterprises to help finance its 
military. As an example of these illicit enterprises, a news 
broadcast was downloaded and played for the audience from ONE 
News of New Zealand regarding an April 20th incident in which a 
North Korean vessel called the Pong Su was spotted trying to 
off-load approximately $80 million of heroin to a fishing boat 
off the coast of Australia.
    Testimony indicated that the North Korean government runs a 
drug production and trafficking business that functions as a 
State-level crime syndicate. Money from the sale of illegal 
drugs, counterfeited currency, and smuggling of counterfeited 
goods is used to finance the North Korean military and its 
exportation of dangerous weapons to other nations, according to 
testimony that was given at the hearing. Due to the sensitive 
nature of the defectors' testimony, a portion of the hearing 
was closed to the public.
    Witnesses: Andre D. Hollis, Deputy Assistant Secretary for 
Counternarcotics, U.S. Department of Defense; William Bach, 
Director, Office of Asia, Africa, and Europe, Bureau of 
International Narcotics and Law Enforcement Affairs, U.S. 
Department of State; Dr. Nicholas Eberstadt, American 
Enterprise Institute; Dr. Robert L. Gallucci, Georgetown 
University Walsh School of Foreign Service; Dr. Larry M. 
Wortzel; Heritage Foundation; Former North Korean High-Ranking 
Government Official; Identity Protected; and Bok Koo Lee 
(alias), former North Korean Missile Scientist.

Oversight of Government-Sponsored Enterprises: The Risks and Benefits 
        of GSEs to Consumers (July 21, 2003)
    The purpose of this oversight hearing was to examine the 
current financial status of the dominant housing GSEs, Fannie 
Mae and Freddie Mac in particular, and to engage in a debate 
about the risks and benefits of GSEs to consumers. On the one 
hand, housing GSEs provide an important social mission. 
Especially in the early years of Fannie Mae and Freddie Mac, 
consumers benefited from lower mortgage rates and enhanced 
opportunities for home ownership by low to moderate income 
consumers. GSEs have also created liquidity for mortgage 
financing through their debt securities. Additionally, the 
housing GSEs have served a useful and important public function 
of educating Americans regarding home ownership. On the other 
hand, recent news reports have raised a number of important 
questions regarding the size, complexity, and financial status 
of housing GSEs, and this hearing sought to address those 
questions. The hearing considered questions such as: Is there 
adequate market discipline on Fannie and Freddie? Would more 
competition help in ensuring that Fannie and Freddie do not 
take unnecessary risks? Are they adequately capitalized? Are 
some of the features of their special status as GSEs necessary 
in today's sophisticated marketplace? What are the implications 
of interest rate volatility? If lower interest rates lowered 
Fannie Mae's earnings, as was recently reported, what would the 
possibility of higher rates do to its financial status?
    Witnesses: Alex J. Pollock, President and CEO, Federal Home 
Loan Bank of Chicago, Chicago, Illinois; Peter J. Wallison, 
Senior Fellow, American Enterprise Institute; Bert Ely, 
President, Ely and Company, Inc.; W. Michael House, Executive 
Director, FM Policy Focus; James C. Miller III, Chairman, 
CapAnalysis Group, LLC; F. Barton Harvey III, Chairman and CEO, 
The Enterprise Foundation; and Dr. Susan M. Wachter, Wharton 
School of Business, University of Pennsylvania.

Safeguarding America's Retirement Security: An Examination of Defined 
        Benefit Pension Plans and the Pension Benefit Guaranty 
        Corporation (September 15, 2003)
    This hearing was held in response to increasing reports 
regarding record pension underfunding. In July 2003, the U.S. 
General Accounting Office designated the PBGC's single-employer 
pension insurance program as a ``high risk'' program requiring 
more oversight. In September, the Pension Benefit Guaranty 
Corporation reported that its financial condition had 
deteriorated sharply since 2001, largely due to financially 
weak companies which made pension promises that they could not 
deliver. These developments raised several concerns: That 
benefits to retirees could be reduced; that companies could be 
forced to increase their contributions to the government 
insurance plan; and that taxpayers might ultimately have to 
bail out the Pension Benefit Guaranty Corporation.
    The overall focus of the hearing was to help ensure the 
retirement security of hardworking Americans by determining 
ways to reform defined benefit pension plans. In broad terms, 
the hearing examined (1) the financial condition of the Pension 
Benefit Guaranty Corporation; (2) how Congress can help 
strengthen the PBGC; and (3) how Congress and the 
Administration can help improve the accuracy of the actuarial 
and funding practices of company-sponsored plans.
    More specifically, the issues discussed included: Improving 
the accuracy of plan sponsors' liability calculations; 
increasing the transparency of pension plan information; 
replacement of the 30-year Treasury bond rate; current 
liability vs. termination liability; declining PBGC revenue; 
increasing the extent to which pension contributions are tax 
deductible; the allowance of alternative investments; and the 
effect of cash balance plans.
    Witnesses: Hon. Peter R. Fisher, Under Secretary for 
Domestic Finance, U.S. Department of the Treasury; Steven A. 
Kandarian, Executive Director, Pension Benefit Guaranty 
Corporation; Christopher W. O'Flinn, Vice President, Corporate 
Human Resources, AT&T, on behalf of the ERISA Industry 
Committee; Kathy Anne Cissna, Director of Retirement Plans, 
R.J. Reynolds, on behalf of the American Benefits Council; 
Norman P. Stein, Professor of Law, University of Alabama, on 
behalf of the Pension Rights Center; John P. Parks, Vice 
President, Pension Practice Council, American Academy of 
Actuaries; J. Mark Iwry, Senior Fellow, The Brookings 
Institution; and guest of the Committee: Malcolm Wicks, 
Minister for Pensions, British Government.

Mutual Funds: Trading Practices and Abuses That Harm Investors 
        (November 3, 2003)
    The hearing was held in order to investigate the breadth 
and the extent of the illicit trading practices that had been 
uncovered in recent months and to identify statutory and 
regulatory reform proposals that could be enacted in order to 
prevent a recurrence of the abuses and to better protect fund 
shareholders.
    Witnesses: Hon. Richard H. Baker (R-LA), Chairman, 
Subcommittee on Capital Markets, Insurance and Government 
Sponsored Enterprises, Committee on Financial Services, U.S. 
House of Representatives; Stephen M. Cutler, Director, Division 
of Enforcement, U.S. Securities and Exchange Commission; Paul 
F. Roye, Director, Division of Investment Management, U.S. 
Securities and Exchange Commission; Hon. William F. Galvin, 
Secretary of the Commonwealth of Massachusetts; Hon. Eliot L. 
Spitzer, Attorney General for the State of New York; Mary L. 
Schapiro, Vice Chairman and President of Regulatory Policy and 
Oversight, National Association of Securities Dealers; John C. 
Bogle, Founder and Former CEO, The Vanguard Group; Mercer E. 
Bullard, Founder and President, Fund Democracy, Inc.; and 
Matthew P. Fink, President, Investment Company Institute.

Oversight Hearing on Mutual Funds: Hidden Fees, Misgovernance, and 
        Other Practices That Harm Investors (January 27, 2004)
    The purpose of this oversight hearing was to examine the 
propriety of mutual fund fees and the adequacy of fee 
disclosure. The hearing attempted to lift the veil off hidden 
fees such as revenue sharing, directed brokerage, and soft 
money arrangements. The hearing also examined hidden loads such 
as 12b-1 fees. Finally, there was a discussion of how statutory 
and regulatory changes might improve the disclosure and allow 
for more informed comparisons between funds.
    Witnesses: Richard J. Hillman, Director, Financial Markets 
and Community Investment, U.S. General Accounting Office; Hon. 
Eliot L. Spitzer, Attorney General, Office of the New York 
State Attorney General; Peter T. Scannell, Weymouth Landing, 
Massachusetts; James Nesfield, Nesfield Capital; John C. Bogle, 
Founder and Former CEO, The Vanguard Group and President, Bogle 
Financial Markets Research Center; Jeffrey C. Keil, Vice 
President, Global Fiduciary Review, Lipper, Inc.; Travis B. 
Plunkett, Legislative Director, Consumer Federation of America; 
Paul Schott Stevens, Partner, Dechert LLP, on behalf of the 
Investment Company Institute; Marc E. Lackritz, President, 
Securities Industry Association; and John P. Freeman, Professor 
of Law, University of South Carolina Law School.

Oversight of the Thrift Savings Plan: Ensuring the Integrity of Federal 
        Employee Retirement Savings (March 1, 2004)
    The Thrift Savings Plan provides Federal employees with the 
equivalent of a private sector 401(k) plan. The TSP is the 
largest defined contribution plan in the world, and currently 
has 3.2 million participants with $13 billion in investments. 
The purpose of this oversight hearing was to ensure the 
financial integrity of the Thrift Savings Plan, making certain 
that the TSP continues to provide plan participants with high-
quality service, while keeping administrative fees and 
transaction costs to a minimum.
    The hearing also examined TSP's oversight mechanisms, its 
audits, and its daily investment and management activities. 
This hearing provided the opportunity to examine the 
implementation of the new automated record keeping system; new 
fund initiatives including the life cycle fund; and proposed 
administrative changes to the TSP, such as the introduction of 
new fees.
    Witnesses: Hon. Andrew M. Saul, Chairman, Federal 
Retirement Thrift Investment Board; Gary A. Amelio, Executive 
Director, Federal Retirement, Thrift Investment Board; Alan D. 
Lebowitz, Deputy Assistant Secretary for Program Operations, 
Employee Benefits Security Administration, U.S. Department of 
Labor; James M. Sauber, Chairman, Thrift Advisory Council; and 
Blake R. Grossman, Global Co-Chief Executive Officer and 
Managing Director, Barclays Global Investors.

The Federal Government's Role in Empowering Americans to Make Informed 
        Financial Decisions (March 30, 2004)
    The purpose of the hearing was to examine the current 
status and effectiveness of Federal financial literacy 
programs, and to assess the proposed activities of the new 
Federal Financial Literacy and Education Commission. Title V of 
the Fair and Accurate Transactions Act created the Financial 
Literacy and Education Commission in December 2003. The 
Commission is charged with developing a national strategy to 
promote financial literacy and education among all American 
consumers. It will review financial literacy and education 
efforts throughout the Federal Government including programs 
run by the SEC, FDIC, Federal Reserve, Department of the 
Treasury, and the Department of Education; identify and 
eliminate duplicative financial literacy efforts; and 
coordinate the promotion of Federal financial literacy efforts 
including outreach partnerships between Federal, State, and 
local governments, non-profit organizations, and enterprises. 
Through increased collaboration and coordination between 
agencies, the effectiveness of financial literacy efforts can 
be improved, helping to empower consumers of all ages to create 
effective budgets, accumulate savings, use credit wisely, and 
make smart investment decisions.
    Witnesses: Hon. Paul S. Sarbanes, U.S. Senator; Hon. Mike 
Enzi, U.S. Senator; Hon. Debbie Stabenow, U.S. Senator; Hon. 
Brian C. Roseboro, Acting Under Secretary for Domestic Finance, 
U.S. Department of the Treasury; Nina Shokraii Rees, Deputy 
Under Secretary for Innovation and Improvement, U.S. Department 
of Education; Susan Ferris Wyderko, Director, Office of 
Investor Education and Assistance, U.S. Securities and Exchange 
Commission; Don M. Blandin, President, American Savings 
Education Council; Dara Duguay, Executive Director, Jump$tart 
Coalition for Personal Financial Literacy; and Dr. Robert F. 
Duvall, President and CEO, National Council on Economic 
Education.

Legislative Hearing on S. 346, a Bill to Amend the Office of Federal 
        Procurement Policy Act to Establish a Governmentwide Policy 
        Requiring Competition in Certain Procurements From Federal 
        Prison Industries (April 7, 2004)
    S. 346 would repeal the ``mandatory source'' authority 
found in the 1934 legislation that created Federal Prison 
Industries. The bill would thus require that all Federal 
agencies conduct a competition for any products those agencies 
would otherwise have purchased from FPI on a sole-source basis.
    The bill provides three exceptions to the competitive 
bidding requirement: (1) the Attorney General determines that 
the FPI cannot reasonably expect fair consideration in a 
competitive bidding scenario, and the award to FPI is necessary 
to maintain safe and effective prison administration; (2) the 
product is only available from FPI; and (3) the agency head 
determines that the product would otherwise be furnished by 
prison labor abroad.
    Section three of the bill would expand the Federal statute 
prohibiting the sale of prison-made goods into interstate 
commerce to apply to both products and services. Currently, FPI 
is allowed to provide goods across State lines to other Federal 
agencies, but not to the commercial market. UNICOR currently 
provides some services to the commercial market.
    This legislative hearing provided the Subcommittee with an 
opportunity to assess the implications of S. 346 for the 
Federal Prison Industries program. Issues the hearing explored 
included how inmates receive work experience in prisons, and 
how this work experience helps maintain discipline within the 
correctional facilities; the impact work experience has in 
equipping prisoners for re-entry into society; and the extent 
to which the products and services inmates produce impact the 
private sector--both positively and negatively.
    Witnesses: Hon. Craig Thomas, U.S. Senator; Hon. Debbie 
Stabenow, U.S. Senator; Harley G. Lappin, Director, Federal 
Bureau of Prisons; Jack R. Williams, Jr., Assistant Regional 
Administrator, Federal Supply Service, Region 3, U.S. General 
Services Administration; John M. Palatiello, President, 
Management Association for Private Photogrammetric Surveyors, 
on behalf of the U.S. Chamber of Commerce; Kurt Weiss, Senior 
Vice President and General Manager, U.S. Business Interiors, on 
behlaf of the Office Furniture Dealers Alliance; Andrew S. 
Linder, President, Power Connector, Inc., on behalf of the 
Correctional Vendors Association; and Philip W. Glover, 
President, Council of Prison Locals, American Federation of 
Government Employees, AFL-CIO.

Oversight Hearing on Expensing Stock Options: Supporting and 
        Strengthening the Independence of the Financial Accounting 
        Standards Board (April 20, 2004)
    The purpose of this oversight hearing was to explore the 
importance of the Financial Accounting Standards Board's 
independence in setting financial reporting and accounting 
standards. In addition, the witnesses evaluated FASB's proposal 
that would require public companies to recognize the expense 
for employee stock options measured using only the fair value 
method on grant date, based on the estimated number of awards 
that are expected to vest. The Subcommittee also examined the 
economic, accounting, and financial reporting impact of 
expensing stock options.
    Witnesses: Hon. Barbara Boxer, U.S. Senator; Hon. Mike 
Enzi, U.S. Senator; Robert H. Herz, Chairman, Financial 
Accounting Standards Board; Hon. Paul A. Volcker, Chairman, 
International Accounting Standards Committee Foundation, and 
former Chairman, Board of Governors, Federal Reserve System; 
Jack T. Ciesielski, President, R.G. Associates, Inc.; Damon 
Silvers, Associate General Counsel, The American Federation of 
Labor--Congress of Industrial Organizations (AFL-CIO); Donald 
P. Delves, President, The Delves Group; Mark Heesen, President, 
National Venture Capital Association; and James K. Glassman, 
Resident Fellow, American Enterprise Institute.
International Smuggling Networks: Weapons of Mass Destruction 
        Counterproliferation Initiatives (June 23, 2004)
    International smuggling of weapons of mass destruction 
poses a grave and dangerous threat to U.S. national security. 
On May 31, 2003, President Bush acknowledged this threat when 
he announced the Proliferation Security Initiative, which seeks 
to combine the use of existing national and international legal 
authorities with enhanced intelligence sharing to improve WMD 
interdiction efforts. The PSI also includes a strong focus on 
multilateral efforts to combat the smuggling of WMD. The 
purpose of this hearing was to examine the current status of 
the PSI, as well to review it in light of the recent 
revelations of the WMD smuggling network orchestrated by 
Pakistani scientist Abdul Qadeer Khan.
    The hearing further sought to review the past success made 
by the PSI, and to gain a better understanding of the role the 
Bush Administration intends in terms of global security. 
Witnesses testified on a series of issues directly concerning 
the smuggling of weapons of mass destruction including export 
controls and post shipment verification of dual use 
technologies in the United States and abroad.
    Witnesses: Hon. Peter Lichtenbaum, Assistant Secretary of 
Commerce for Export Administration, U.S. Department of 
Commerce; Mark T. Fitzpatrick, Acting Deputy Assistant 
Secretary for Nonproliferation Controls, U.S. Department of 
State; David Albright, President and Founder, Institute for 
Science and International Security; Michael Moodie, President, 
Chemical and Biological Arms Control Institute; Leonard S. 
Spector, Deputy Director, Center for Nonproliferation Studies, 
Monterey Institute of International Studies;and Baker Spring, 
F.M. Kirby Research Fellow in National Security Policy, The 
Heritage Foundation.

The Federal Government's Financial Statement and Accountability of 
        Taxpayer Dollars at the Departments of Defense and Homeland 
        Security (July 8, 2004)
    For the seventh year in a row, the financial statement of 
the United States failed to receive an audit opinion from the 
U.S. Government Accountability Office (formerly the U.S. 
General Accounting Office) for fiscal year 2003. The GAO cited 
significant material deficiencies that affected both the 
financial statement and the management of government 
operations. Specifically, the GAO was unable to render an 
opinion because of serious financial management problems at the 
Department of Defense and the Federal Government's inability to 
account for billions of dollars of transactions between Federal 
Government entities, and the Federal Government's ineffective 
process for preparing the consolidated financial statements. 
The purpose of the hearing was to examine the issues hindering 
an opinion on the consolidated financial statements while 
focusing on the financial management issues at the Department 
of Defense.
    The hearing also sought to identify potential financial 
management risks at the Department of Homeland Security (DHS), 
a newly created department with 22 financial management legacy 
systems. DHS is the only cabinet department not yet subject to 
CFO Act requirements, but is required under the Accountability 
of Tax Dollars Act to prepare and have audited financial 
statements.
    Witnesses: Hon. David M. Walker, Comptroller General, U.S. 
Government Accountability Office; Hon. Linda M. Springer, 
Controller, Office of Federal Financial Management, U.S. Office 
of Management and Budget; Donald V. Hammond, Fiscal Assistant 
Secretary, U.S. Department of the Treasury; Lawrence J. 
Lanzillotta, Acting Under Secretary of Defense for 
(Comptroller), U.S. Department of Defense; Francis E. Reardon, 
Deputy Inspector General for Auditing, U.S. Department of 
Defense; Gregory D. Kutz, Director, Financial Management and 
Assurance, U.S. Government Accountability Office; Andrew B. 
Maner, Chief Financial Officer, U.S. Department of Homeland 
Security; Hon. Clark Kent Ervin, Inspector General, U.S. 
Department of Homeland Security; and McCoy Williams, Director, 
Financial Management and Assurance, U.S. Government 
Accountability Office.

Oversight Hearing on Section 529 College Savings Plans: High Fees, 
        Inadequate Disclosure, Disparate State Tax Treatment and 
        Questionable Broker Sales Practices (September 30, 2004)
    Section 529 College Savings Plans are administered at the 
State level and encourage families to save money for their 
children's college educations by providing investment 
opportunities. Each State, as well as the District of Columbia, 
offers 529 Plans. These plans are considered municipal 
securities and therefore are not subject to disclosure 
requirements of the Investment Company Act of 1940. Given the 
complex cost structure of these plans, the lack of standardized 
disclosure often leads to confusing and frustrating comparison 
of plans for the less sophisticated investors.
    Another interest of the hearing was to discuss the layers 
of fees incurred by investors because of the State Governments, 
brokers, and fund managers all participating in the investment 
process. Chairman Fitzgerald voiced his opinion that Congress 
should limit or minimize the fees charged by third parties.
    Witnesses: Steven T. Miller, Commissioner, Tax Exempt and 
Governmental Entities Division, Internal Revenue Service; Mary 
L. Schapiro, Vice Chairman and President, Regulatory Policy and 
Oversight, NASD; Ernesto A. Lanza, Senior Associate General 
Counsel, Municipal Securities Rulemaking Board; Hon. Michael A. 
Ablowich, Treasurer, State of New Hampshire, on behalf of the 
National Association of State Treasurers; Jacqueline T. 
Williams, Executive Director, College Advantage Savings Plan, 
Ohio Tuition Trust Authority, on behalf of the College Savings 
Plan Network; Martin M. Noven, Deputy Chief of Staff, on behalf 
of Judy Baar Topinka, State Treasurer, State of Illinois; 
Richard O. Davis, Deputy Executive Director for Finance and 
Administration, Utah Higher Education Assistance Authority; 
Daniel McNeela, CFA, Senior Analyst, Morningstar, Inc.; and 
Mercer E. Bullard, Founder and President, Fund Democracy, Inc.

Oversight Hearing on Insurance Brokerage Practices, Including Potential 
        Conflicts of Interest and the Adequacy of the Current 
        Regulatory Framework (November 16, 2004)
    The purpose of this oversight hearing was to investigate 
insurance brokerage practices and the impact of these practices 
on consumers. The hearing focused especially on contingent 
commission arrangements, which a broker receives based upon 
volume or profitability of business it sends to insurers. 
Because the broker owes a duty to its client, the insured, to 
represent its best interests, contingent commissions raise the 
specter of a conflict of interest. In any instance of 
recommending an insurance policy to a client, is the broker 
acting in the client's best interests or its own interests 
based upon compensation agreements with particular insurers? 
New York Attorney General Eliot Spitzer's recent lawsuit 
against industry giant Marsh and McLennan raises these issues, 
and further alleges that contingent commissions give rise to 
more egregious practices such as illegal bid-rigging and price-
fixing.
    On the other hand, as a dominant market player, Marsh was 
arguably in a position to leverage its market power in ways 
that companies in more competitive industry sectors could not. 
The hearing thus additionally examined the impact of market 
power, and whether additional or more aggressive antitrust 
enforcement would be an appropriate policy response. Finally, 
the hearing inquired whether the brokerage controversy shed any 
further illumination on current insurance reform proposals, 
such as the optional Federal charter and the State 
Modernization and Regulatory Transparency (SMART) Act.
    Witnesses: Hon. Eliot L. Spitzer, Attorney General, State 
of New York; Hon. Richard Blumenthal, Attorney General, State 
of Connecticut; Hon. Gregory V. Serio, Superintendent of 
Insurance, State of New York, on behalf of the National 
Association of Insurance Commissioners; Hon. John Garamendi, 
Insurance Commissioner, State of California; Albert R. 
Counselman, President and CEO, Riggs, Counselman, Michaels and 
Downes, Inc., on behalf of the Council of Insurance Agents and 
Brokers; Alex Soto, President, InSource, Inc., on behalf of the 
Independent Insurance Agents and Brokers of America; Ernst N. 
Csiszar, President and CEO, Property Casualty Insurers 
Association of America; Janice Ochenkowski, Senior Vice 
President for External Affairs, Risk and Insurance Management 
Society; J. Robert Hunter, Director of Insurance, Consumer 
Federation of America.

                            II. Legislation

    The following bills were considered by the Subcommittee on 
Financial Management, the Budget, and International Security 
during the 108th Congress:

Measures enacted into law
    S. 481, the Kurtz bill, a bill to amend chapter 84 of title 
5, United States Code, to provide that certain Federal annuity 
computations are adjusted by 1 percentage point relating to 
periods of receiving disability payments. This bill provides 
that the percentage otherwise applicable for a Federal 
Employees' Retirement System annuity computation that includes, 
in the aggregate, at least 2 months of credit for any period of 
receiving disability compensation benefits shall be increased 
by 1 percentage point. S. 481 was introduced on February 27, 
2003, by Senators George Allen and John Warner, and was 
referred to the Senate Committee on Governmental Affairs. 
Senators Daniel Akaka, Hillary Clinton, Susan Collins, Richard 
Durbin, Olympia Snowe, and Ted Stevens were cosponsors. On 
March 21, 2003, the bill was referred to the Subcommittee on 
Financial Management, the Budget, and International Security. 
S. 481 was favorably polled out of the Subcommittee on May 12, 
2003, and was reported by the Governmental Affairs Committee 
without amendment on July 21, 2003 (S. Rept. 108-108). On July 
28, 2003, S. 481 passed the Senate with no further action. On 
July 29, 2003, the bill was received in the House and referred 
to the House Government Reform Committee. A companion bill, 
H.R. 978, was signed by the President and became law on October 
3, 2003 (P.L. 108-92).
    S. 2657, the Federal Employee Dental and Vision Benefits 
Enhancement Act of 2004. This bill amends part III of title 5, 
United States Code, to provide for the establishment of 
programs under which supplemental dental and vision benefits 
are made available to Federal employees, retirees, and their 
dependents to expand the contracting authority of the Office of 
Personnel Management. S. 2657 was introduced by Senators Susan 
Collins and Daniel Akaka on July 14, 2004, and was referred to 
the Governmental Affairs Committee. Senators George Allen, 
Joseph Lieberman, Rick Santorum, and George Voinovich were 
cosponsors of this legislation. On July 15, 2004, S. 2657 was 
referred to the Subcommittee on Financial Management, the 
Budget, and International Security. The bill was favorably 
polled out of the Subcommittee on July 20, 2004, and was 
favorably reported without amendment by the Governmental 
Affairs Committee on July 21, 2004 (S. Rept. 108-393). S. 2657 
passed the Senate on November 20, 2004, with an amendment by 
unanimous consent. The House passed the bill on December 6, 
2004. On December 23, 2004 the bill was signed by the President 
and became P.L. 108-496.

Measures favorably reported by the Subcommittee and passed by the 
        Senate
    S. 2322, a bill to amend chapter 90 of title 5, United 
States Code, to include employees of the District of Columbia 
courts as participants in the long term care insurance program 
for Federal employees. S. 2322 was introduced on April 20, 2004 
by Senators Daniel Akaka and George Voinovich and was referred 
to the Governmental Affairs Committee. On May 6, 2004, S. 2322 
was referred to the Subcommittee on Financial Management, the 
Budget, and International Security. The bill was favorably 
polled out of the Subcommittee on May 27, 2004, and was 
favorably reported from the Governmental Affairs Committee 
without amendment on June 21, 2004 (S. Rept. 108-283). The 
Senate passed S. 2322 by unanimous consent without amendment on 
June 24, 2004.
    S. 2479, the Thrift Savings Plan Open Elections Act of 
2004. This bill would amend chapter 84 of title 5, United 
States Code, to allow a Federal employee or member to make, 
modify, or terminate contributions under the Thrift Savings 
Plan (TSP) of the Federal Employees' Retirement System at any 
time. Senators Susan Collins, Daniel Akaka, Peter Fitzgerald, 
Joseph Lieberman, and George Voinovich introduced S. 2479 on 
May 21, 2004. On May 21, 2004, the bill was referred to the 
Subcommittee on Financial Management, the Budget, and 
International Security. S. 2479 was favorably polled out of the 
Subcommittee on June 1, 2004. On June 2, 2004, the Governmental 
Affairs Committee favorably reported the bill without amendment 
to the Senate (S. Rept. 108-290). S. 2479 passed the Senate by 
unanimous consent without amendment on July 16, 2004.

Measures referred to the Subcommittee upon which hearings were held or 
        other action was taken
    S. 1358, the Federal Employee Protection of Disclosures 
Act. This bill would amend chapter 23 of title 5, United States 
Code, to clarify the disclosure of information protected from 
prohibited personnel practices, require a statement in non-
disclosure policies, forms, and agreements that such policies, 
forms, and agreements conform with certain disclosure 
protections, provide certain authority for the Special Counsel, 
and for other purposes. Senators Daniel Akaka, Richard Durbin, 
Charles Grassley, Patrick Leahy, and Carl Levin introduced S. 
1358 on June 26, 2003. Senators Mark Dayton, Tim Johnson, Frank 
Lautenberg, and Mark Pryor were later added as cosponsors. On 
August 1, 2003, the bill was referred to the Subcommittee on 
Financial Management, the Budget, and International Security. 
The full Committee held a hearing regarding this legislation on 
November 12, 2003.
    On July 8, 2004, Senators Daniel Akaka, Susan Collins, Mark 
Dayton, Richard Durbin, Peter Fitzgerald, Charles Grassley, Tim 
Johnson, Frank Lautenberg, Patrick Leahy, Carl Levin, Joseph 
Lieberman, Mark Pryor, and George Voinovich introduced S. 2628, 
an amended version of S. 1358. S. 2628 was referred to the 
Subcommittee on Financial Management, the Budget, and 
International Security on July 9, 2004. On October 8, 2003, S. 
2628 was favorably polled out of the Subcommittee. On October 
8, 2004, the Governmental Affairs Committee favorably reported 
the bill without amendment (S. Rept. 108-392).
    S. 346, a bill to amend the Office of Federal Procurement 
Policy Act to establish a governmentwide policy requiring 
competition in certain executive agency procurements. S. 346 
was introduced on February 11, 2003, by Senators Carl Levin and 
Craig Thomas. Senators Conrad Burns, Saxby Chambliss, Elizabeth 
Dole, Charles Grassley, Richard Lugar, Richard Shelby, and 
Debbie Stabenow were cosponsors of this legislation. On 
September 24, 2003, the bill was referred to the Subcommittee 
on Financial Management, the Budget, and International 
Security. The Subcommittee held a hearing regarding S. 346 on 
April 7, 2004. The bill was favorably polled out of the 
Subcommittee on June 1, 2004. The Governmental Affairs 
Committee favorably reported the bill with an amendment on 
November 18, 2004 (S. Rept. 108-415).
    S. 2409, a bill to provide for continued health benefits 
coverage for certain Federal employees. S. 2409 was introduced 
by Senators George Voinovich, Daniel Akaka, Susan Collins, 
Richard Durbin, and Joseph Lieberman on May 11, 2004, and was 
referred to the Governmental Affairs Committee. On May 17, 
2004, the bill was referred to the Subcommittee on Financial 
Management, the Budget, and International Security. The bill 
was favorably polled out of the Subcommittee on May 27, 2004. 
The Governmental Affairs Committee favorably reported S. 2409 
with an amendment on November 16, 2004 (S. Rept. 108-410).
    S. 1369 and its companion bill, H.R. 2631. These bills 
would ensure that prescription drug benefits offered to 
medicare eligible enrollees in the Federal Employees Health 
Benefits Program are at least equal to the actuarial value of 
the prescription drug benefits offered to enrollees under the 
plan generally. S. 1369 was introduced on June 27, 2003, by 
Senators Daniel Akaka, George Allen, Barbara Mikulski, Paul 
Sarbanes, and John Warner. Senators Jon Corzine, Thomas 
Daschle, Byron Dorgan, Daniel Inouye, Tim Johnson, Frank 
Lautenberg, Carl Levin, Patty Murray, Harry Reid, and Jay 
Rockefeller were later added as cosponsors. On July 7, 2003, S. 
1369 was referred to the Subcommittee on Financial Management, 
the Budget, and International Security. H.R. 2631 was referred 
to the Subcommittee on August 1, 2003. Both bills were 
favorably polled out of the Subcommittee on May 27, 2004.

Measures which did not advance beyond referral to the Subcommittee
    S. 81, Clinical Social Workers' Recognition Act of 2003. 
This bill amends chapter 81 of title 5, United States Code, to 
authorize the use of clinical social workers to conduct 
evaluations to determine work-related emotional and mental 
illnesses. The bill was introduced by Senator Daniel Inouye on 
January 7, 2003 and referred to the Senate Committee on 
Governmental Affairs. The bill was referred to the Subcommittee 
on Financial Management, the Budget, and International Security 
on March 21, 2003.
    S. 90, a bill to extend certain budgetary enforcement to 
maintain fiscal accountability and responsibility. This bill 
amends the Balanced Budget and Emergency Deficit Control Act of 
1985 (Gramm-Rudman-Hollings Act) to extend Pay-As-You-Go 
(PAYGO) requirements. The bill was introduced on January 7, 
2003 by Senator Judd Gregg and Russell Feingold, and 
cosponsored by Senators Lincoln Chafee, and John McCain, and 
referred to the Senate Committee on Governmental Affairs. The 
bill was referred to the Subcommittee on Financial Management, 
the Budget, and International Security on June 20, 2003.
    S. 319, Federal Employees Health Benefits Improvement Act 
of 2003. This bill increases the biweekly contribution payable 
by the Government for a Federal employee or annuitant enrolled 
in a Federal employee health insurance plan. The bill was 
introduced on February 5, 2003 by Senator Barbara Mikulski and 
Paul Sarbanes, and cosponsored by Senators Richard Durbin and 
Tim Johnson, and referred to the Senate Committee on 
Governmental Affairs. The bill was referred to the Subcommittee 
on Financial Management, the Budget, and International Security 
on March 21, 2003.
    S. 417, Osteoporosis Federal Employee Health Benefits 
Standardization Act of 2003. This bill prohibits contracts from 
being made or plans approved under the health insurance program 
for Federal employees which do not include coverage of bone 
mass measurements of qualified individuals. The bill was 
introduced on February 14, 2003 by Senators Olympia Snowe, Tom 
Harkin, Mary Landrieu, and Patty Murray, and cosponsored by 
Senator Barbara Mikulski, and referred to the Senate Committee 
on Governmental Affairs. The bill was referred to the 
Subcommittee on Financial Management, the Budget, and 
International Security on March 21, 2003.
    S. 530, Federal Firefighters Fairness Act of 2003. This 
bill provides that, with regard to an individual federally 
employed in fire protection activities: (1) heart disease, lung 
disease, and specified cancers and infectious diseases shall be 
presumed to be proximately caused by the individual's 
employment; (2) such individual's disability or death due to 
such a disease shall be presumed to result from personal injury 
sustained while in the performance of duty; and (3) such 
presumptions may be rebutted by a preponderance of the 
evidence. The bill was introduced on March 5, 2003 by Senator 
John Kerry, and cosponsored by Senator Mark Dayton, and 
referred to the Senate Committee on Governmental Affairs. The 
bill was referred to the Subcommittee on Financial Management, 
the Budget, and International Security on June 20, 2003.
    S. 640, Federal Prosecutors Retirement Benefit Equity Act 
of 2003. This bill amends Federal civil service law to include 
Federal prosecutors within the definition of ``law enforcement 
officer'' (LEO). The bill would extend LEO benefits under the 
Civil Service Retirement System and the Federal Employees' 
Retirement System to Federal prosecutors, including Assistant 
United States Attorneys (AUSAs), and such other attorneys in 
the Department of Justice (DOJ) as may be designated by the 
Attorney General. The bill would exempt Federal prosecutors 
from mandatory retirement provisions for LEOs under the civil 
service laws. The bill was introduced on March 18, 2003 by 
Senator Patrick Leahy, and cosponsored by Senators Barbara 
Boxer, John Breaux, Jim Bunning, Saxby Chambliss, Jon Corzine, 
Michael Crapo, Christopher Dodd, Richard Durbin, Dianne 
Feinstein, Orrin Hatch, Mary Landrieu, Barbara Mikulski, Bill 
Nelson, Jay Rockefeller, Gordon Smith, Debbie Stabenow, and Ron 
Wyden, and referred to the Senate Committee on Governmental 
Affairs. The bill was referred to the Subcommittee on Financial 
Management, the Budget, and International Security on June 20, 
2003.
    S. 675, a bill to require the Congressional Budget Office 
and the Joint Committee on Taxation to use dynamic economic 
modeling in addition to static economic modeling in the 
preparation of budgetary estimates of proposed changes in 
Federal revenue law. The bill was introduced on March 20, 2003 
by Senator John Ensign, and cosponsored by Senators Michael 
Crapo, Jon Kyl, and Jeff Sessions, and referred to the Senate 
Committee on Governmental Affairs. The bill was referred to the 
Subcommittee on Financial Management, the Budget, and 
International Security on June 20, 2003.
    S. 776, a bill to amend chapters 83 and 84 of title 5, 
United States Code, to authorize payments to certain trusts 
under the Social Security Act, and for other purposes. The bill 
was introduced on April 3, 2003 by Senator Ben Nighthorse 
Campbell, and referred to the Senate Committee on Governmental 
Affairs. The bill was referred to the Subcommittee on Financial 
Management, the Budget, and International Security on June 20, 
2003.
    S. 819, Law Enforcement Officers Retirement Equity Act. 
This bill redefines the term ``law enforcement officer'' under 
provisions of the Federal Employees Retirement System (FERS) 
and the Civil Service Retirement System (CSRS) to include: (1) 
Federal employees not otherwise covered by such term whose 
duties include the investigation or apprehension of suspected 
or convicted individuals and who are authorized to carry a 
firearm; and (2) such employees of the Internal Revenue Service 
whose duties are primarily the collection of delinquent taxes 
and the securing of delinquent returns. The bill was introduced 
on April 8, 2003 by Senator Barbara Mikulski, and cosponsored 
by Senators Ben Nighthorse Campbell, Patrick Leahy, and Paul 
Sarbanes, and referred to the Senate Committee on Governmental 
Affairs. The bill was referred to the Subcommittee on Financial 
Management, the Budget, and International Security on June 20, 
2003.
    S. 1229, Federal Employee Protection of Disclosure Act. 
This bill serves as a protected disclosure by a Federal 
employee any lawful disclosure an employee or applicant 
reasonably believes is credible evidence of waste, fraud, 
abuse, or gross mismanagement, without restriction as to time, 
place, form, motive, context, or prior disclosure. The bill was 
introduced on June 10, 2003 by Senator Daniel Akaka, and 
cosponsored by Senators Mark Dayton, Richard Durbin, Patrick 
Leahy, and Carl Levin, and referred to the Senate Committee on 
Governmental Affairs. The bill was referred to the Subcommittee 
on Financial Management, the Budget, and International Security 
on June 20, 2003. An adjusted version of this bill, S. 1358 was 
subsequently introduced.
    S. 1252, Domestic Partnership Benefits and Obligations Act 
of 2003. This bill entitles domestic partners of Federal 
employees to benefits available to spouses of Federal 
employees. Specifies certifications required for benefit 
eligibility, filing requirements regarding partnership 
dissolution, and confidentiality requirements. Amends the 
Internal Revenue Code to extend to domestic partners under this 
Act the tax exemption for employer contributions to accident 
and health plans. The bill was introduced on June 12, 2003 by 
Senator Mark Dayton, and cosponsored by Senators Barbara Boxer, 
Maria Cantwell, Hillary Rodham Clinton, Jon Corzine, Daniel 
Inouye, John Kerry, Frank Lautenberg, Joseph Lieberman, Patty 
Murray, and referred to the Senate Committee on Governmental 
Affairs. The bill was referred to the Subcommittee on Financial 
Management, the Budget, and International Security on June 20, 
2003.
    S. 2367, a bill to amend chapters 83 and 84 of title 5, 
United States Code, to provide Federal retirement benefits for 
U.S. citizen employees of Air America, Inc., its subsidiary Air 
Asia Company Limited, or the Pacific Division of Southern Air 
Transport, Inc. This bill was introduced on April 29, 2004 by 
Senator Harry Reid, and cosponsored by Senators Daniel Inouye 
and Ted Stevens, and referred to the Senate Committee on 
Governmental Affairs. This bill was referred to the 
Subcommittee on Financial Management, the Budget, and 
International Security on May 6, 2004.
    S. 2418, a bill to amend chapter 83 and 84 of title 5, 
United States Code, to authorize payments to certain trusts 
under the Social Security Act, and for other purposes. This 
bill was introduced on May 13, 2004 by Senator Ben Nighthorse 
Campbell and referred to the Senate Committee on Governmental 
Affairs. This bill was referred to the Subcommittee on 
Financial Management, the Budget, and International Security on 
July 14, 2004.
    S. 2612, a bill to amend the Law Enforcement Pay Equity Act 
of 2000 to permit certain annuitants of the retirement programs 
of the U.S. Park Police and U.S. Secret Service Uniformed 
Division to receive the adjustments in pension benefits to 
which such annuitants would otherwise be entitled as a result 
of the conversion of members of the U.S. Park Police and U.S. 
Secret Service Uniformed Division to a new salary schedule 
under the amendments made by such Act. This bill was introduced 
on July 7, 2004 by Senator Barbara Mikulski, and cosponsored by 
Senator Paul Sarbanes, and referred to the Senate Committee on 
Governmental Affairs. This bill was referred to the 
Subcommittee on Financial Management, the Budget, and 
International Security on July 14, 2004.

                            III. GAO Reports

    The following reports were issued by the Government 
Accountability Office at the request of the Chairman and/or 
Ranking Member of the Subcommittee on Financial Management, the 
Budget, and International Security:
    Weapons of Mass Destruction: Additional Russian Cooperation 
Needed to Facilitate U.S. Efforts to Improve Security at 
Russians Sites, GAO-3-482 (March 24, 2003).
    Nuclear Nonproliferation: DOE Action Needed to Ensure 
Continued Recovery of Unwanted Sealed Radioactive Sources, GAO-
03-483 (May 13, 2003).
    Nuclear Nonproliferation: U.S. and International Assistance 
Efforts to Control Sealed Radioactive Sources Need 
Strengthening, GAO-30-638 (June 16, 2003).
    Nuclear Security: Federal and State Action Needed to 
Improve Security of Sealed Radioactive Sources, GAO-03-804 
(August 6, 2003).
    Pending request to the GAO for review of the International 
Atomic Energy Agency's role in assisting countries to control 
sealed radioactive source, July 28, 2003.
    Pending request to the GAO for review of Executive Branch 
entities that do not prepare annual financial statements and 
have those statements independently audited, December 13, 2004.

                SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT

                   MANAGEMENT, THE FEDERAL WORKFORCE,

                      AND THE DISTRICT OF COLUMBIA

                     Chairman: George V. Voinovich

               Ranking Minority Member: Richard J. Durbin

                              I. Hearings

    The Subcommittee on Oversight of Government Management, the 
Federal Workforce, and the District of Columbia held the 
following hearings during the 108th Congress:

Evaluating Human Capital at the National Aeronautics and Space 
        Administration (March 6, 2003)
    This was the Subcommittee's eleventh oversight hearing on 
the human capital challenge of the Federal Government. The 
purpose of the hearing was to examine the current condition of 
the workforce at the National Aeronautics and Space 
Administration (NASA). This hearing also considered the 
personnel reform proposal NASA brought to Congress.
    Representative Sherwood Boehlert expressed concern that the 
human capital challenge at NASA is a need that must be 
addressed by Congress immediately. NASA faces increasing 
competition from the private sector and academia for the 
globally shrinking talent pool. Mr. O'Keefe identified the 
Scholarship for Service program as the most needed tool to 
ensure NASA's success in the future. He also identified 
enhanced leave provisions and enhanced recruitment, retention, 
and relocation provisions, as necessary tools for NASA to meet 
its current workforce challenge.
    Witnesses: Hon. Sherwood Boehlert, Chairman, House Science 
Committee, and Hon. Sean O'Keefe, Administrator, National 
Aeronautics and Space Administration.

The Human Capital Challenge: Offering Solutions and Delivering Results 
        (April 8, 2003) Joint Hearing with House Subcommittee on Civil 
        Service and Agency Organization
    The Subcommittee hearing was held jointly with the House 
Subcommittee on Civil Service and Agency Organization of the 
Government Reform Committee and was co-chaired by Senator 
Voinovich and Representative Jo Ann Davis. The purpose of the 
hearing was twofold: (1) to examine the Federal Government's 
strategic human capital management as a GAO High-Risk List 
item, and (2) to consider pending legislation to reform the 
Federal workforce.
    Witnesses testified on current human capital practices, pay 
for performance, and external views of the governments' 
recruitment policies. Witnesses promoted increasing recruitment 
among young people, as well as developing a mid-career 
presidential management fellows program.
    Witnesses: Hon. David M. Walker, Comptroller General of the 
United States; Hon. Dan G. Blair, Deputy Director of the Office 
of Personnel Management; Bobby L. Harnage, National President, 
American Federation of Government Employees (AFGE); Colleen M. 
Kelley, President, National Treasury Employees Union (NTEU); 
Carol A. Bonosaro, President, Senior Executives Association 
(SEA); Karen Heiser, Treasurer, Chapter 88, Federal Managers 
Association (FMA); Hannah S. Sistare, Executive Director, 
National Commission on the Public Service; Dr. Steven J. 
Kelman, Weatherhead Professor of Public Management, John F. 
Kennedy School of Government, Harvard University; Max Stier, 
President and Chief Executive Officer, Partnership for Public 
Service; and Jeff Taylor, President and Chief Executive 
Officer, Monster.

An Overlooked Asset: The Defense Civilian Workforce (May 12, 2003) 
        Field Hearing at Wright-Patterson Air Force Base, Dayton, Ohio
    This was the Subcommittee's thirteenth oversight hearing 
since July 1999 on the Federal Government's human capital 
challenges. The hearing was conducted in the Philip E. Carney 
Auditorium, United States Air Force Museum, Wright-Patterson 
Air Force Base. The purpose of the hearing was to examine the 
status of the civilian workforce at the Department of Defense 
(DOD), including the Air Force and at the Base level.
    Witnesses testified on the Defense Department's proposed 
National Security Personnel System (NSPS), workforce 
reductions, the makeup of the Air Force's civilian employees 
and their progress in recruiting a younger, more diverse 
workforce, and the use and frequency of current workforce 
flexibilities.
    Witnesses: Hon. David S. C. Chu, Under Secretary of 
Defense, Personnel and Readiness; Hon. David M. Walker, 
Comptroller General of the United States; Hon. Michael L. 
Dominguez, Assistance Secretary of the Air Force, Manpower and 
Reserve Affairs; General Lester L. Lyles, Commander, Air Force 
Materiel Command (AFMC); Dr. Vincent J. Russo, Executive 
Director, Aeronautical Systems Center; Dr. Beth J. Asch, Senior 
Economist, RAND; Scott Blanche, President, American Federation 
of Government Employees, Council 214; Michael Durand, Deputy 
Treasurer, American Federation of Government Employees, Local 
1138; and John P. Nauseef, Vice President, Aerospace, Defense, 
and Technology, Dayton Development Coalition.

Great Lakes Restoration Management: No Direction, Unknown Progress 
        (July 16, 2003)
    The purpose of this hearing was to review a U.S. General 
Accounting Office (GAO) report, ``An Overall Strategy and 
Indicators for Measuring Progress Are Needed to Better Achieve 
Restoration Goals--GAO-03-515,'' and management of the various 
Great Lakes environmental programs and to discuss options to 
improve restoration efforts. The GAO report, released in April 
2003, identified the Federal and State environmental programs 
operating in the Great Lakes Basin and funding devoted to them, 
evaluated the restoration strategies used and how they are 
coordinated, and assessed overall environmental progress made 
in the basin restoration effort. GAO found that there are 
numerous strategies that are not coordinated or unified and 
that EPA's Great Lakes National Program Office has coordination 
authority over many activities but has not fully exercised it 
to this point. Additionally, the GAO found that available 
information does not allow for a comprehensive assessment of 
restoration progress in the Great Lakes and that success of an 
ongoing binational effort to develop overall indicators for the 
Great Lakes is uncertain.
    Questions and discussion during the hearing focused on how 
to develop a coordinated strategy for Great Lakes restoration 
and who or what should coordinate the various programs and 
actors involved at the local, State, Federal, and international 
level.
    Witnesses: Senator Mike DeWine; Senator Carl Levin; John 
Stephenson, Director of Natural Resources and Environment 
Issues, U.S. General Accounting Office; Robyn Thorson, Region 3 
Director, U.S. Fish and Wildlife Service; Thomas Skinner, 
Region 5 Administrator, U.S. Environmental Protection Agency; 
Colonel William E. Ryan, III, Deputy Commander, Great Lakes 
Ohio River Division, Army Corps of Engineers; Timothy Keeney, 
Deputy Assistant Secretary, National Oceanic and Atmospheric 
Administration; Dennis Schornack, Chairman, United States 
Section, International Joint Commission; Susan Garrett, 
Illinois State Senator, District 29; Chris Jones, Director, 
Environmental Protection Agency, State of Ohio; Margaret 
Wooster, Executive Director, Great Lakes United.

Then and Now: An Update on the Bush Administration's Competitive 
        Sourcing Initiative (July 24, 2003)
    The hearing was, in part, a follow-up to the March 6, 2002, 
full Committee hearing to consider Federal contracting issues. 
The purpose was to consider the various changes the 
Administration has made to its competitive sourcing initiative, 
originally detailed in the 2002 President's Management Agenda.
    Testimony indicated that changes are taking place to the 
ambitious competitive sourcing agenda first established in 
2002, but there is still much to be done. The cost 
effectiveness of competitive sourcing is believed to be an 
effective tool for government cost cutting.
    Witnesses: Hon. Angela Styles, Administrator, Office of 
Federal Procurement Policy; Hon. David Walker, Comptroller 
General, U.S. General Accounting Office; Hon. Jacques Gansler, 
Center for Public Policy and Private Enterprise, University of 
Maryland; Dr. Paul C. Light, Senior Fellow, The Brookings 
Institution; Charles Tiefer, Professor of Law, University of 
Baltimore; and Dr. Frank Camm, Senior Analyst, RAND.

Keeping the Lights On: The Federal Role in Managing the Nation's 
        Electricity, Parts I and II (September 10, 2003 and November 
        20, 2003)
    The Subcommittee held a series of two hearings regarding 
the Federal Government's role in ensuring the reliability of 
the electricity supply following the August 14, 2003 blackout, 
which affected the northern Midwest and the Northeast, causing 
approximately 50 million people to lose power. The hearing was 
held in two parts. Part I considered future energy policy, 
including ways to modernize the country's electrical grid, the 
Federal role in electricity regulation, and how to prevent 
future blackouts from occurring. Part II reviewed a draft 
report issued by the U.S.-Canada Joint Task Force regarding the 
August 14 blackout from the Federal Energy Regulatory 
Commission, the Department of Energy, and the North American 
Electric Reliability Council (NERC).
    Witnesses for Part I, September 10, 2003: Kyle E. 
McSlarrow, Deputy Secretary of Energy; Hon. Pat Wood, III, 
Chairman Federal Energy Regulatory Commission; Dr. Alan R. 
Schriber, Chairman, Public Utilities Commission of Ohio; Craig 
A. Glazer, Vice President Government Policy, PJM 
Interconnection; James P. Torgerson, President and Chief 
Executive Officer, Midwest Independent Transmission System 
Operator, Inc.; William J. Museler, President and CEO, New York 
Independent System Operator; and James Y. Kerr, II, North 
Carolina Utilities Commission.
    Witnesses for Part II, November 20, 2003: Hon. Pat Wood, 
III, Chairman, Federal Energy Regulatory Commission; James W. 
Glotfelty, Director, Office of Electric Transmission and 
Distribution, Department of Energy; and Michael Gent, President 
and CEO, North American Electric Reliability Council.

Fair or Foul: The Challenge of Negotiating, Monitoring, and Enforcing 
        U.S. Trade Laws (December 9, 2003 )
    This hearing focused on the human capital challenges at the 
United States Trade Representative (USTR) and the Department of 
Commerce's International Trade Administration (ITA). Throughout 
the 1990s, employment figures within ITA fluctuated from year-
to-year. According to GAO, even though staffing levels have 
increased, several additional human capital challenges exist 
for these agencies. In particular, the need for specialized 
knowledge and the demand for individuals with experience in 
trade compliance and litigation creates unique recruitment and 
retention challenges for our trade agencies.
    Assistant Secretary Jochum noted that Commerce will be 
ready to appoint a new Assistant Secretary of Manufacturing as 
soon as the FY 2004 omnibus legislation, which contains funding 
for this new position, is passed. The creation of a new Office 
of China Compliance with Commerce, which brings together for 
the first time, in one office, various Commerce staff who 
handle China issues, will also be implemented when the omnibus 
bill is passed.
    Witnesses: Dr. Loren Yager, Director of International 
Affairs and Trade at the U.S. General Accounting Office; Hon. 
James Jochum, Assistant Secretary, Import Administration; Hon. 
Charles Freeman III, Deputy Assistant U.S. Trade 
Representative; Frank Vargo, Vice President of the National 
Association of Manufactures; Dr. Thomas Duesterberg, President 
and Chief Executive Officer of the Manufactures Alliance; Tim 
Hawk, Superior Metal Products and American Trim LLC, Lima, 
Ohio.

The Key to Homeland Security: The New Human Resources System (February 
        25, 2004)
    This hearing, held jointly with the House Subcommittee on 
Civil Service and Agency Organization of the Government Reform 
Committee, was co-chaired by Senator Voinovich and 
Representative Jo Ann Davis. The purpose of the hearing was to 
examine the new human resource management system designed 
jointly by the Department of Homeland Security and the Office 
of Personnel Management. The proposed regulations for the new 
system were published in February in the Federal Register for 
public comment.
    Testimony offered differing views of the effect that the 
New Human Resources System would have on the Federal workforce. 
Union representatives argued against the changes in pay, 
performance, and classification that would take place, while 
Director Kay Coles James disputed their claims.
    Witnesses: Hon. James Loy, Deputy Secretary, Department of 
Homeland Security; Hon. Kay Coles James, Director of the Office 
of Personnel Management; Hon. David M. Walker, Comptroller 
General of the U.S. General Accounting Office; John Gage, 
National President, American Federation of Government Employees 
(AFGE); Colleen M. Kelley, President, National Treasury 
Employees Union (NTEU); and Mike Randall, President, National 
Association of Agriculture Employees.

The Road to Recovery: Solving the Social Security Disability Backlog 
        (March 29, 2004) Field Hearing at the Vocational Rehabilitation 
        Guidance Service Building, Cleveland, Ohio
    This hearing examined the problems associated with the 
backlog of the Social Security Administration's (SSA) 
disability cases. The primary focus of the hearing, however, 
was to explore Social Security Commissioner Jo Anne Barnhart's 
comprehensive strategy to improve the entire disability claims 
process, which includes short- and long-term solutions.
    Overall, all witnesses recognized that there were problems 
with the disability process, but believed that Commissioner 
Barnhart was taking comprehensive steps to address the 
shortcomings.
    SSA Commissioner Barnhart discussed her approach to solving 
the disability backlog. Her plan includes several long-term 
nationwide strategies, including the development of an 
Accelerated Electronic Disability System. This initiative will 
move all components involved in disability claims adjudication 
and review to an electronic disability folder.
    Witnesses: Hon. Jo Anne Barnhart, Commissioner of the 
Social Security Administration; Hon. Hal Daub, Chairman of the 
Social Security Advisory Board; Robert Robertson, GAO Director 
of Education, Workforce, and Income Security; Erik Williamson, 
Assistant Director of the Ohio Bureau of Disability 
Determination; Hon. Kevin Dugan, Executive Vice President of 
the Association of Administrative Law Judges; James A. Hill, 
President, National Treasury Employees Union Chapter 224, SSA 
Office of Hearings and Appeals, Cleveland Ohio; Marcia 
Margolius, Attorney with Brown and Margolius, L.P.A., 
Cleveland, Ohio.

Does CMS Have the Right Prescription? Implementing the Medicare 
        Prescription Drug Program (April 8, 2004)
    The hearing focused on a variety of administrative 
challenges facing CMS as the agency works toward implementing 
the new prescription drug benefit by January 2006. Special 
attention was paid to CMS's ability to educate and assist 
beneficiaries in enrolling in and understanding the new 
benefit.
    Testimony indicated that this program will constitute one 
of the most fundamental changes in Medicare's history. In order 
for it to be implemented successfully, the agency must use all 
available human and financial resources. Medicare has had a 
history of successes for implementing programs such as the 
Medicare drug card.
    Witnesses: Michael McMullan, Deputy Director, Center for 
Beneficiary Choices, Centers for Medicare and Medicaid 
Services; Gail Wilensky, Senior Fellow, Project HOPE; and Nancy 
Ann Min DeParle, Senior Advisor, J.P. Morgan Partners, LLC.

Pirates of the 21st Century: The Curse of the Black Market (April 20, 
        2004)
    This hearing focused on the effectiveness of the Federal 
Government's various efforts to enforce existing intellectual 
property rights (IPR). Specifically, the hearing examined the 
activities of the Department of Commerce (Commerce), the Office 
of the United States Trade Representative (USTR), and the 
Department of Homeland Security (DHS) to protect U.S. 
intellectual property interests both at home and abroad. It 
should be noted that the Office of the United States Trade 
Representative did not send a witness to the hearing, although 
an invitation was extended to the agency.
    The overarching focus of the hearing was how the current 
U.S. intellectual property enforcement policies relate to the 
loss of over 2.7 million jobs in the U.S. manufacturing sector. 
The International Chamber of Commerce estimates that 
counterfeiting drains between $300 and $350 billion annually 
from the world's economy. This is roughly 5 to 7 percent of 
total world trade, and each dollar lost to American citizens 
and companies winds up lining the pockets of criminals. For 
U.S. manufacturers, protection of intellectual property is not 
an abstract concept. America's competitive edge is derived from 
innovation and rising productivity, and the protection of 
intellectual property remains one of the best means for 
ensuring that American manufacturers enjoy the benefits of 
their investments.
    Witnesses: Jon Dudas, Acting Undersecretary, Intellectual 
Property and Director, U.S. Patent and Trademark Office; 
Francis Gary White, Unit Chief, Commercial Fraud, Immigration 
and Customs Enforcement, U.S. Department of Homeland Security; 
Professor Daniel C. K. Chow, Michael E. Moritz College of Law, 
The Ohio State University; Phillip A. Rotman II, Assistant 
Patent and Trademark Counsel, Dana Corporation; and Jeff 
Gorman, President and CEO, The Gorman-Rupp Company.

Trimming the Fat: Examining Duplicative and Outdated Federal Programs 
        and Functions (May 6, 2004)
    The purpose of this hearing was to examine Senator Sam 
Brownback's legislation, S. 1668, the Commission on the 
Accountability and Review of Federal Agencies Act (CARFA).
    Senator Brownback introduced S. 1668, the Commission on the 
Accountability and Review of Federal Agencies Act (CARFA), on 
September 26, 2003, which creates a commission to evaluate 
domestic Federal agencies and programs to maximize the 
effectiveness of Federal funds. The Commission established by 
this legislation would recommend plans for realignment or 
elimination of Federal programs that are duplicative, wasteful, 
outdated, or irrelevant. Upon completion of its work, the 
Commission would report back to Congress with draft legislation 
to implement its recommendations. Congress would subsequently 
be required to vote either up-or-down on the recommendations. 
This is similar to the procedure employed by past base 
realignment and closure commissions.
    Witnesses: Senator Sam Brownback; Hon. Clay Johnson III, 
Deputy Director for Management, Office of Management and 
Budget; Hon. Dick Armey, Citizens for a Sound Economy, and 
former Majority Leader of the House of Representatives; Paul 
Weinstein Jr., Senior Fellow, Progressive Policy Institute and 
Adjunct Professor at Johns Hopkins University.

Dietary Supplement Safety Act: How is the Food and Drug Administration 
        Doing 10 Years Later? (June 8, 2004)
    This hearing examined the challenges and successes the U.S. 
Food and Drug Administration (FDA) has experienced since the 
passage of the Dietary Supplement Health and Education Act of 
1994 (DSHEA). DSHEA amended the Federal Food, Drug, and 
Cosmetic Act (FD&C) to establish a regulatory framework for 
dietary supplements in an attempt to create the right balance 
between providing consumers access to dietary supplements and 
giving the Food and Drug Administration (FDA) the regulatory 
power to take action against supplements that present safety 
problems, have false or misleading claims, or are otherwise 
adulterated or misbranded. Although dietary supplements are 
regulated as foods, pre-market approval is not mandatory.
    Witnesses: Robert E. Brackett, Ph.D., Director of the 
Center for Food Safety and Applied Nutrition, Food and Drug 
Administration (FDA); Alice M. Clark, Ph.D., Vice Chancellor 
for Research and Sponsored Programs, The University of 
Mississippi; Dr. Ronald M. Davis, M.D., Member, Board of 
Trustees, American Medical Association; Charles Bell, Program 
Director, Consumer Reports; Bruce Silverglade, Director of 
Legal Affairs, Center for Science in the Public Interest; 
Anthony L. Young, General Counsel, American Herbal Products 
Association (AHPA); and Annette Dickinson, Ph.D., President, 
Council for Responsible Nutrition.
    Dr. Bracket discussed in detail the statutory framework of 
DSHEA, as well as how the FDA enforces DSHEA. Both Dr. Davis 
and Silvergrade advocated the pre-market approval by the FDA 
for dietary supplements, just as with prescription drugs. Mr. 
Young and Dr. Dickinson talked about the need to change DSHEA 
to require Adverse Event Reporting.

Building the 21st Century Federal Workforce: Assessing Programs in 
        Human Capital Management (July, 20, 2004)
    The purpose of this hearing was to review governmentwide 
workforce flexibilities available to Federal agencies, with a 
focus on those enacted in the Homeland Security Act. The 
hearing examined their implementation, use by agencies, and 
training and education related to using the new flexibilities.
    Testimony indicated that progress for improving hiring 
processes and human capital management is taking place 
throughout government. NASA in particular has made great 
strides with the flexibilities allowed for hiring necessary 
personnel.
    Witnesses: Hon. Dan Blair, Deputy Director, Office of 
Personnel Management; Hon. Clay Johnson, III, Deputy Director 
for Management, Office of Management and Budget; J. Christopher 
Mihm, Managing Director of Strategic Issues, U.S. General 
Accounting Office; Dr. Ed Sontag, Assistant Secretary for 
Administration and Management, Department of Health and Human 
Services; Joanne Simms, Deputy Assistant Attorney General for 
Human Resources and Administration, Department of Justice; and 
Vicki Novak, Assistant Administrator for Human Resources, 
National Aeronautics and Space Administration.

The 9/11 Commission Human Capital Recommendations: A Critical Element 
        of Reform (September 14, 2004)
    The hearing was held to examine the personnel issues 
addressed in the recommendations of the National Commission on 
Terrorist Attacks Upon the United States (9/11 Commission).
    The 9/11 Commission noted several areas for Federal 
personnel reform, including (1) improving the presidential 
appointments process for national security positions; (2) 
establishing a single agency that conducts security clearance 
background investigations; and (3) providing some additional 
personnel flexibilities to the Federal Bureau of Investigation 
(FBI) to reflect its increased counterterrorism and 
intelligence responsibilities.
    Witnesses: Fred Fielding, Commissioner, National Commission 
on Terrorist Attacks Upon the United States; Jamie Gorelick, 
Commissioner, National Commission on Terrorist Attacks Upon the 
United States; Mark Bullock, Assistant Director of 
Administrative Services, Federal Bureau of Investigation; John 
A. Turnicky, Special Assistant to the Director of Central 
Intelligence for Security; Chris Mihm, Managing Director of 
Strategic Issues, Government Accountability Office; Dr. Paul 
Light, Senior Fellow, The Brookings Institution; C. Morgan 
Kinghorn, President, National Academy of Public Administration; 
Max Stier, President and Chief Executive Officer, Partnership 
for Public Service; and Doug Wagoner, Chairman, Security 
Clearance Task Group, Information Technology Association of 
America.

                            II. Legislation

    The following bills were considered by the Subcommittee on 
Oversight of Government Management, the Federal Workforce, and 
the District of Columbia during the 108th Congress:

                       MEASURES ENACTED INTO LAW

    S. 129--The Federal Workforce Flexibility Act of 2003 
amends provisions of title 5, United States Code, to make 
reforms to Federal employment. This bill revises existing 
authority to pay recruitment, relocation, and retention 
bonuses. S. 129 provides for enhanced annual leave for 
individuals beginning Federal employment mid-career and 
authorizes compensatory time for employees required to travel 
during nontraditional work hours. The bill transfers oversight 
of critical pay authority from the Office of Management and 
Budget to the Office of Personnel Management. It also improves 
the effectiveness of the special salary rates by correcting 
numerous pay administration anomalies associated with the 
locality pay provisions of the General Schedule. S. 129 
requires employee training be linked with agency performance 
plans and strategic goals. S. 129 was introduced on January 9, 
2003, by Senator Voinovich and referred to the Governmental 
Affairs Committee. On March 21, 2003, the bill was referred to 
the Subcommittee on Oversight of Government Management, the 
Federal Workforce and the District of Columbia. The bill was 
favorably reported out of the Subcommittee on June 13, 2003. S. 
129, as amended, was reported to the Senate by the Governmental 
Affairs Committee on January 27, 2004 (S. Rept. 108-223). On 
April 8, 2004, S. 129, further amended, passed the Senate by 
unanimous consent. On April 20, 2004, the bill was received in 
the House of Representatives and referred to the House 
Government Reform Committee and the Subcommittee on Civil 
Service and Agency Organization. The Subcommittee on Civil 
Service and Agency Organization reported the bill to the House 
Government Reform Committee with amendment on May 18, 2004. The 
Government Reform Committee further amended S. 129 on October 
5, 2004, and reported the measure. The House passed S. 129 by 
voice vote on October 6, 2004. The Senate passed by unanimous 
consent S. 129, as amended by the House, on October 11, 2004. 
S. 129 was signed by the President and became law on October 
30, 2004 (P.L. 108-411).
    S. 610--The NASA Flexibility Act of 2004 adds chapter 98 to 
title 5, United States Code, to provide the National 
Aeronautics and Space Administration additional workforce 
authorities. S. 610 was introduced by Senator Voinovich on 
March 13, 2003, and referred to the Governmental Affairs 
Committee. The bill was cosponsored by Senators Allen, Senator 
Carper, Cochran, Coleman, Lott, Nelson, Sessions, Shelby, and 
Stevens. On April 30, 2003, the bill was referred to the 
Subcommittee on Oversight of Government Management, the Federal 
Workforce and the District of Columbia. The bill was favorably 
reported out of the Subcommittee on June 13, 2003. S. 610, as 
amended, was reported to the Senate by the Governmental Affairs 
Committee on June 28, 2003 (S. Rept. 108-113). On November 24, 
2003, S. 610, further amended, passed the Senate by unanimous 
consent. On November 25, 2003, the bill was received in the 
House of Representatives and held at the desk. On January 28, 
2004, the House passed S. 610 by voice vote without amendment. 
S. 610 was signed by the President and became law on February 
24, 2004 (P.L. 108-201).
    S. 926--The Federal Employee Student Loan Assistance Act 
amends section 5379 of title 5, United States Code, to increase 
the annual and aggregate amount to $10,000 and $60,000 that 
agencies can repay to a highly qualified employee for a student 
loan. S. 926 was introduced by Senator Voinovich on April 28, 
2003, and referred to the Governmental Affairs Committee. 
Senator Stevens is a cosponsor of the bill. On April 30, 2003, 
the bill was referred to the Subcommittee on Oversight of 
Government Management, the Federal Workforce and the District 
of Columbia. The bill was favorably reported out of the 
Subcommittee on June 13, 2003. S. 926 was reported to the 
Senate without amendment by the Governmental Affairs Committee 
on June 17, 2003 (S. Rept. 108-109). On July 30, 2003, the 
Senate passed S. 926 by unanimous consent. The bill was 
received in the House of Representatives on September 3, 2003, 
and referred to the Committee on Government Reform. On 
September 16, 2003, S. 926 was referred to the Subcommittee on 
Civil Service and Agency Organization. On October 28, 2003, the 
House passed S. 926. On November 11, 2003, S. 926 was signed by 
the President and became law (P.L. 108-123). H.R. 3797--The 
2004 District of Columbia Omnibus Authorization Act was the 
first annual omnibus authorization bill for the District of 
Columbia. It authorizes improvements in the operations of the 
government of the District of Columbia. H.R. 3797 was sponsored 
by Representative Tom Davis and cosponsored by Delegate Norton. 
H.R. 3797 was introduced in the House of Representatives on 
February 11, 2004, and referred to the House Committee on 
Government Reform (House Rept. 108-551). On June 21, 2004, H.R. 
3797 was passed by the House. H.R. 3797 was received in the 
Senate and referred to the Governmental Affairs Committee on 
June 22, 2004. On July 14, 2004, the bill was referred to the 
Subcommittee on Oversight of Government Management, the Federal 
Workforce and the District of Columbia. On July 15, 2004, the 
Subcommittee favorably reported H.R. 3797. On July 21, 2004, by 
voice vote, the Governmental Affairs Committee ordered H.R. 
3797 reported favorably without amendment. The Senate passed 
H.R. 3797 by unanimous consent on October 11, 2004. On October 
30, 2004, the President signed the bill into law (P.L. 108-
386). S. 1683--The Federal Law Enforcement Pay and Benefits 
Parity Act of 2003 provides for a report on the parity of pay 
and benefits among Federal law enforcement officers and to 
establish an exchange program between Federal law enforcement 
employees and State and local law enforcement employees. S. 
1683 was introduced by Senator Voinovich on September 30, 2003, 
and referred to the Governmental Affairs Committee. Senator 
Collins is a cosponsor. The bill was referred to the 
Subcommittee on Oversight of Government Management, the Federal 
Workforce and the District of Columbia on October 1, 2003 and 
reported favorably out of the Governmental Affairs Committee on 
October 22, 2003 (S. Rept. 108-207). S. 1683 passed the Senate 
on November 25, 2003 and passed the House on December 8, 2003. 
On December 19, 2003, the President signed the bill into law as 
(P.L. 108-196).

   MEASURES FAVORABLY REPORTED BY THE SUBCOMMITTEE AND PASSED BY THE 
                                 SENATE

    S. 101--This bill authorizes salary adjustments for U.S. 
justices and judges during fiscal year 2003 concurrently with 
the salary adjustment for the General Schedule for Compensation 
for Federal employees. S. 101 was introduced by Senator Hatch 
on January 7, 2003, and referred to the Governmental Affairs 
Committee. The bill was cosponsored by Senators DeWine, Leahy, 
Sessions, and Specter. S. 101 was discharged by the 
Governmental Affairs Committee on January 30, 2003, and passed 
the Senate by unanimous consent. On January 31, 2003, S. 101 
was received in the House of Representatives and held at the 
desk. The companion bill, H.R. 16, was signed by the President 
and became law on February 13, 2003 (P.L. 108-6).
    S. 1522--The GAO Human Capital Reform Act of 2003 amends 
chapter 7 of title 31, U.S. Code, to reform the employment 
authorities provided to the U.S. General Accounting Office (as 
it was then known). The bill also changes the name of the 
agency from the U.S. General Accounting Office to the U.S. 
Government Accountability Office. The bill was introduced by 
Senator Voinovich on July 31, 2003 and referred to the 
Governmental Affairs Committee. Senator Collins is a cosponsor 
of the bill. S. 1522 was referred to the Subcommittee on 
Oversight of Government Management, the Federal Workforce, and 
the District of Columbia on August 1, 2003 and was favorably 
reported by the Subcommittee on October 22, 2003. S. 1522 was 
favorably reported by the Governmental Affairs Committee on 
November 21, 2003, with amendments (S. Rept. 108-216). On 
November 24, 2003, S. 1522 passed the Senate by unanimous 
consent. The bill was received in the House of Representatives 
on November 25, 2003, and held at the desk. The companion bill, 
H.R. 2751, was signed by the President and became law on July 
7, 2004 (P.L. 108-271).

MEASURES REFERRED TO THE SUBCOMMITTEE UPON WHICH HEARINGS WERE HELD OR 
                   OTHER LEGISLATIVE ACTION WAS TAKEN

    S. 593--The Reservists Pay Security Act of 2003 would amend 
chapter 55 of title 5, United States Code, to direct the 
Federal Government to pay the salary differential for Federal 
employees who are called to active duty in the uniformed 
services or the National Guard and lose pay as a result. S. 593 
was introduced by Senator Durbin on March 11, 2003, and 
referred to the Governmental Affairs Committee. S. 593 was 
cosponsored by Senators Allen, Bingaman, Gregg, Kerry, 
Landrieu, Lautenberg, Leahy, Mikulski, and Sarbanes. S. 593 was 
referred to the Subcommittee on Oversight of Government 
Management, the Federal Workforce, and the District of Columbia 
on June 20, 2003. S. 593 was reported with an amendment in the 
nature of a substitute from the Governmental Affairs Committee 
on November 16, 2004 (S. Rept. 108-409).
    S. 1267--The District of Columbia Budget Autonomy Act of 
2003 would amend the District of Columbia Home Rule Act to 
provide that the District of Columbia budget passed by the 
Council of the District of Columbia shall be enacted without 
referral to the President or approval of Congress, unless it is 
the budget for a fiscal year which is a control year. It also 
amends the District of Columbia Home Rule Act to revise 
requirements of the Office of the Chief Financial Officer. S. 
1267 was introduced by Senator Collins on June 16, 2003, and 
was referred to the Governmental Affairs Committee. S. 1267 was 
cosponsored by Senators DeWine, Durbin, Landrieu, Lieberman, 
Stevens, and Voinovich. On June 20, 2003, the bill was referred 
to the Subcommittee on Oversight of Government Management, the 
Federal Workforce and the District of Columbia and was 
favorably reported by the Subcommittee on October 22, 2003. On 
November 25, 2003, the Governmental Affairs Committee reported 
S. 1267 favorably with an amendment (S. Rept. 108-212). On 
December 9, 2003, S. 1267 was passed by the Senate with an 
amendment by unanimous consent. On January 20, 2004, S. 1267 
was referred to the House Committee on Government Reform, as 
well as the House Committees on Rules and Appropriations for 
consideration.S. 1668--The Commission on the Accountability and 
Review of Federal Agencies Act would establish a commission to 
conduct a comprehensive review of Federal agencies and programs 
and recommend the elimination or realignment of duplicative, 
wasteful, or outdated functions, and for other purposes. S. 
1668 was introduced by Senator Brownback on September 26, 2003, 
and referred to the Governmental Affairs Committee. The bill 
was cosponsored by Senators Alexander, Allard, Allen, Bunning, 
Burns, Chambliss, Cornyn, Craig, Crapo, Ensign, Enzi, 
Fitzgerald, Graham, Hatch, Hutchison, Inhofe, Kyl, Lott, 
McCain, Miller, Murkowski, Nickles, Santorum, Sessions, Sununu, 
Talent, Thomas, and Voinovich. S. 1668 was referred to the 
Subcommittee on Oversight of Government Management, the Federal 
Workforce and the District of Columbia on September 29, 2003. A 
Subcommittee hearing was held regarding S. 1668 on May 6, 
2004.S. 2347--A bill to amend the District of Columbia College 
Access Act of 1999 to permanently authorize the public school 
and private school tuition assistance programs established 
under the Act. S. 2347 was introduced by Senator Voinovich on 
April 26, 2004, and referred to the Governmental Affairs 
Committee. The bill was cosponsored by Senators Durbin, 
Jeffords, and Lieberman. On May 6, 2004, the bill was referred 
to the Subcommittee on Oversight of Government Management, the 
Federal Workforce and the District of Columbia. On May 11, 
2004, the Subcommittee favorably reported S. 2347. On July 21, 
2004, the Governmental Affairs Committee ordered S. 2347 
reported favorably with an amendment that modified the 
reauthorization from a permanent reauthorization to a 5-year 
extension. On September 20, 2004, the bill was reported by 
Senator Collins with an amendment and a written report, S. 
Rept. 108-349, and placed on the legislative calendar. A 
related bill, H.R. 4012, described in the previous section, was 
enacted into law (P.L. 108-457).

     MEASURES WHICH DID NOT ADVANCE BEYOND REFERRAL TO SUBCOMMITTEE

    S. 46--A bill for the relief of Robert Bancroft of Hayden 
Lake, Idaho, to permit the payment of back pay for overtime 
incurred in missions flown with the Drug Enforcement Agency. S. 
46 was introduced by Senator Craig on January 7, 2003, and 
referred to the Governmental Affairs Committee. The bill was 
referred to the Subcommittee on Oversight of Government 
Management, the Federal Workforce and the District of Columbia 
on June 20, 2003.
    S. 48--A bill to repeal the provisions of law that provides 
automatic pay adjustments for Members of Congress. S. 48 was 
introduced by Senator Feingold on January 7, 2003, and referred 
to the Governmental Affairs Committee. S. 48 was referred to 
the Subcommittee on Oversight of Government Management, the 
Federal Workforce and the District of Columbia on June 20, 
2003.
    S. 617--The No Taxation Without Representation Act of 2003 
would provide for full voting representation in Congress for 
the citizens of the District of Columbia. S. 617 was introduced 
by Senator Lieberman on March 13, 2003, and referred to the 
Governmental Affairs Committee. S. 617 was cosponsored by 
Senators Clinton, Corzine, Daschle, Dayton, Dodd, Durbin, 
Edwards, Feingold, Jeffords, Kennedy, Kerry, Landrieu, Leahy, 
Mikulski, Sarbanes, Schumer, and Stabenow. S. 617 was referred 
to the Subcommittee on Oversight of Government Management, the 
Federal Workforce and the District of Columbia on June 23, 
2003.
    S. 768--The Senior Executive Service Reform Act of 2003 
would provide for reform of the Senior Executive Service and 
adjustment in the rates of pay of certain positions. S. 768 was 
introduced by Senator Voinovich on April 2, 2003, and referred 
to the Governmental Affairs Committee. Senator Stevens is a 
cosponsor of the bill. S. 768 was referred to the Subcommittee 
on Oversight of Government Management, the Federal Workforce 
and the District of Columbia on April 30, 2003.
    S. 837--The Commission on the Accountability and Review of 
Federal Agencies Act would establish a commission to conduct a 
comprehensive review of Federal agencies and programs and 
recommend the elimination or realignment of duplicative, 
wasteful, or outdated functions. S. 837 was introduced by 
Senator Brownback on April 9, 2003, and referred to the 
Governmental Affairs Committee. The bill was cosponsored by 
Senators Alexander, Allard, Allen, Bunning, Cornyn, Ensign, 
Enzi, Fitzgerald, Graham, Hutchison, Inhofe, Kyl, McCain, 
Miller, Santorum, Sessions, Sununu, and Thomas. S. 837 was 
referred to the Subcommittee on Oversight of Government 
Management, the Federal Workforce and the District of Columbia 
on June 20, 2003. A revised version of this bill, S. 1668, was 
subsequently introduced.
    S. 953--A bill to amend chapter 53 of title 5, United 
States Code, to provide special pay for board certified Federal 
Employees who are employed in health science positions, and for 
other purposes. S. 953 was introduced by Senator Landrieu on 
April 30, 2003, and referred to the Governmental Affairs 
Committee. The bill was cosponsored by Senators Breaux, Inouye, 
and Kennedy. S. 953 was referred to the Subcommittee on 
Oversight of Government Management, the Federal Workforce and 
the District of Columbia on June 20, 2003.
    S. 985--A bill to amend the Federal Law Enforcement Pay 
Reform Act of 1990 to adjust the percentage differentials 
payable to Federal law enforcement officers in certain high-
cost areas, and for other purposes. This bill was introduced by 
Senator Dodd on May 1, 2003, and referred to the Governmental 
Affairs Committee. The bill was cosponsored by 61 senators. S. 
985 was referred to the Subcommittee on Oversight of Government 
Management, the Federal Workforce and the District of Columbia 
on June 20, 2003.
    S. 1339--A bill to amend title 5, United States Code, to 
provide for appropriate overtime pay for National Weather 
Service employees who perform essential services during severe 
weather events. S. 1339 was introduced by Senator Breaux on 
June 26, 2003, and referred to the Governmental Affairs 
Committee. The bill was cosponsored by Senators Jeffords, 
Leahy, and Roberts. S. 1339 was referred to the Subcommittee on 
Oversight of Government Management, the Federal Workforce and 
the District of Columbia on August 1, 2003.
    S. 1414--The District of Columbia Personal Protection Act 
would amend the District of Columbia Code to provide that the 
D.C. Council's regulatory authority regarding firearms, 
explosives, and weapons in the District shall not be construed 
to permit the Council, the Mayor, or any governmental or 
regulatory authority of the District to prohibit, 
constructively prohibit, or unduly burden the ability of 
persons otherwise permitted to possess firearms under Federal 
law from acquiring, possessing in their homes or businesses, or 
using for sporting, self-protection or other lawful purposes, 
any firearm neither prohibited by Federal law nor regulated by 
the National Firearms Act. The bill would deny the District any 
authority to enact laws or regulations that discourage or 
eliminate the private ownership or use of firearms. S. 1414 was 
introduced by Senator Hatch on July 15, 2003, and referred to 
the Governmental Affairs Committee. The bill was cosponsored by 
Senators Allard, Allen, Baucus, Bond, Brownback, Bunning, 
Burns, Campbell, Chambliss, Cornyn, Craig, Crapo, Domenici, 
Ensign, Enzi, Graham, Grassley, Hagel, Hutchison, Inhofe, Kyl, 
Lott, Miller, Murkowski, Nelson, Nickles, Reid, Sessions, 
Shelby, Stevens, Sununu, Talent, and Thomas. S. 1414 was 
referred to the Subcommittee on Oversight of Government 
Management, the Federal Workforce and the District of Columbia 
on July 24, 2003.
    S. 2041--The Fiscal Responsibility Act of 2004 would 
provide that pay for Members of Congress be reduced following 
any fiscal year in which there is a Federal deficit. S. 2041 
was introduced by Senator Miller on February 2, 2004, and 
referred to the Governmental Affairs Committee. S. 2041 was 
referred to the Subcommittee on Oversight of Government 
Management, the Federal Workforce and the District of Columbia 
on February 12, 2004.
    S. 2064--The Administrative Law Judges Pay Reform Act of 
2004 would increase the minimum and maximum rates of basic pay 
for administrative law judges by linking those rates to level 
III of the Executive Schedule (currently level IV). The bill 
would also increase the maximum rate of locality pay for 
administrative law judges to level II of the Executive Schedule 
(currently level III). S. 2064 was introduced by Senator 
Voinovich on February 11, 2004, and referred to the 
Governmental Affairs Committee. S. 2064 was referred to the 
Subcommittee on Oversight of Government Management, the Federal 
Workforce and the District of Columbia on February 12, 2004.
    S. Con. Res. 1--A concurrent resolution expressing the 
sense of Congress that there should continue to be parity 
between the adjustments in the compensation of members of the 
uniformed services and the adjustments in the compensation of 
civilian employees of the United States. S. Con. Res. 1 was 
introduced by Senator Sarbanes on January 9, 2003, and was 
referred to the Governmental Affairs Committee. The resolution 
was cosponsored by Senators Akaka, Allen, Bingaman, Cantwell, 
Clinton, Corzine, Daschle, Dayton, Dorgan, Durbin, Johnson, 
Kennedy, Landrieu, Levin, Lieberman, Mikulski, Murray, Nelson, 
Reed, and Warner. The resolution was referred to the 
Subcommittee on Oversight of Government Management, the Federal 
Workforce and the District of Columbia on June 20, 2003.
    S. Con. Res. 88--A concurrent resolution expressing the 
sense of Congress that there should continue to be parity 
between the adjustments in the pay of members of the uniformed 
services and the adjustments in the pay of civilian employees 
of the United States. S. Con. Res. 88 was introduced by Senator 
Sarbanes on February 9, 2004, and was referred to the 
Governmental Affairs Committee. The resolution was cosponsored 
by Senators Akaka, Allen, Cantwell, Collins, Corzine, Dayton, 
Dorgan, Durbin, Jeffords, Johnson, Kennedy, Levin, Lieberman, 
Mikulski, Murray, Snowe, and Warner. The resolution was 
referred to the Subcommittee on Oversight of Government 
Management, the Federal Workforce and the District of Columbia 
on February 12, 2004.

                            III. GAO Reports

    The following reports were issued by the Government 
Accountability Office at the request of the Chairman and/or 
Ranking Member of the Subcommittee on Oversight of Government 
Management, the Federal Workforce and the District of Columbia:

    Performance Management Systems at the Department of 
Homeland Security, GAO-03-488 (03/21/2003)
    Original Analysis of Motor Vehicle Accident Causation Data, 
GAO-03-436 (04/01/2003)
    Human Capital: Building on the Current Momentum to Address 
High-Risk Issues, GAO-03-637T (04/08/2003)
    OPM's Role in Assisting Agencies to Use Their Personnel 
Flexibilities, GAO-03-428 (05/09/2003)
    Review of the District's 2002 Performance and 
Accountability Report, GAO-03-693 (05/15/2003)
    Ways to Expedite the Federal Hiring Process, GAO-03-450 
(05/30/2003)
    Human Capital: DOD's Civilian Personnel Strategic 
Management and the Proposed National Security Personnel System, 
GAO-03-493T (06/03/2003)
    Comparison of Federal Uniformed Police Forces Recruitment 
and Retention Rates, Pay, Benefits, Qualifications 
Requirements, Duties, and Working Conditions, GAO-03-658 (06/
27/2003)
    Merger Integration Practices, GAO-03-669 (07/02/2003)
    Great Lakes: A Coordinated Strategic Plan and Monitoring 
System Are Needed to Achieve Restoration Goals, GAO-03-999T 
(07/31/2003)
    Superfund Program: Current Status and Future Fiscal 
Challenges, GAO-03-850 (08/08/2003)
    Competitive Sourcing: Implementation Will Be Challenging 
for Federal Agencies, GAO-03-1022T (08/26/2003)
    Assessment of the Federal Emergency Management Agency 
Public Assistance for the New York Disaster, GAO-03-926 (09/05/
2003)
    Succession Planning in Other Countries, GAO-03-914 (09/15/
2003)
    Disaster Assistance: Federal Aid to the New York City Area 
Following the Attacks of September 11th and Challenges 
Confronting FEMA, GAO-03-1174T (09/24/2003)
    DHS Efforts to Design a Personnel System and Involve 
Employees and Unions, GAO-03-1099 (09/30/2003)
    Competitive Sourcing: Clarification on Implementation 
Issues, GAO-04-155R (10/31/2003)
    Assessment of Federal Assistance for the 9/11 Disasters, 
GAO-04-72 (11/30/2003)
    Effective Workforce Planning Practices in Federal Agencies, 
GAO-04-39 (12/11/2003)
    Human Capital Challenges at Key Trade Agencies, GAO-04-301T 
(12/30/2003)
    D.C. Family Court: Progress Has Been Made in Implementing 
Its Transition, But Action Needed to Improve Performance, GAO-
04-234 (01/06/2004)
    Pay for Performance: Lessons Learned From Personnel 
Demonstration Projects, GAO-04-83 (01/23/2004)
    Managing for Results: Implementation of OMB's Program 
Assessment Review Tool (PART) During the FY 2004 Budget, GAO-
04-174 (01/30/2004)
    Select Agencies' Efforts to Design Training and Development 
Programs, GAO-04-291 (01/30/2004)
    DHS Human Capital Regulations, GAO-04-479T (02/25/2004)
    A Ten-Year Retrospective of the Government Performance 
Results Act, GAO-04-38 (03/10/2004)
    SSA Disability: Commissioner Proposes Strategy to Improve 
Claims Process, But Faces Challenges, GAO-04-552T (03/29/2004)
    Competitive Sourcing Goals and Strategies, GAO-04-367 (04/
09/2004)
    Human Capital Considerations Within Continuity of 
Operations Planning Efforts, GAO-04-384 (04/20/2004)
    Additional Post-Hearing Questions Related to Proposed DHS 
Human Capital Regulations, GAO-04-617R (04/30/2004)
    Definitional Issues in Unfunded Mandates Reform Act, GAO-
04-637 (05/12/2004)
    SES Performance Management Systems, GAO-04-614 (05/26/2004)
    Nuclear Regulation: NRC Needs to More Aggressively and 
Comprehensively Resolve Issues Related to the Davis-Besse 
Nuclear Power Plant's Shutdown, GAO-04-415 (05/31/2004)
    Analysis of Proposed DHS Human Capital Regulations, GAO-04-
790 (06/18/2004)
    Human Capital: Selected Agencies' Use of ASD Options for 
Human Capital Activities, GAO-04-679 (06/25/2004)
    DC's Performance Report Dated March 2004, GAO-04-940R (07/
07/2004)
    United Nations: Observations on the Oil-for-Food Program 
and Areas for Further Investigation, GAO-04-953T (07/08/2004)
    Human Capital: Building on the Current Momentum to 
Transform the Federal Government, GAO-04-976T (07/20/2004)
    Assessing Progress in Human Capital Management--Posthearing 
Questions, GAO-04-1072R (09/03/2004)
    Intelligence Reform: Human Capital Considerations Critical 
to 9/11 Commission's Proposed Reforms, GAO-04-1084T (09/14/
2004)
    Great Lakes Environmental Indicators, GAO-04-1024 (09/28/
2004)
    Intelligence Reform: Certain Human Capital Issues at the 
FBI and Other Intelligence Agencies Related to the 9/11 
Commission Proposed Reforms(11/10/2004) No report
    Experience of Foreign Countries Consolidating Their Food 
Safety Systems (2/22/05) No report
    Overlap Within Federal Food Safety Functions (3/30/2005) No 
report

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                         Chairman: Norm Coleman

                  Ranking Minority Member: Carl Levin

    The following is the Activities Report of the Permanent 
Subcommittee on Investigations during the 108th Congress:

                        I. Historical Background

                      A. Subcommittee Jurisdiction

    The Permanent Subcommittee on Investigations was originally 
authorized by Senate Resolution 189 on January 28, 1948. At its 
creation in 1948, the Subcommittee was part of the Committee on 
Expenditures in the Executive Departments. The Subcommittee's 
records and broad investigative jurisdiction over government 
operations and national security issues, however, actually 
antedate its creation, since it was given custody of the 
jurisdiction of the former Special Committee to Investigate the 
National Defense Program (the so-called ``War Investigating 
Committee'' or ``Truman Committee''), chaired by Senator Harry 
S. Truman during the Second World War. Today, the Subcommittee 
is part of the Committee on Homeland Security and Governmental 
Affairs. 1
---------------------------------------------------------------------------
    \1\ In 1952, the parent committee's name was changed to the 
Committee on Government Operations. It was changed again in early 1977, 
to the Committee on Governmental Affairs, and again in 2005, to the 
Committee on Homeland Security and Governmental Affairs, its present 
title.
---------------------------------------------------------------------------
    The Subcommittee has had nine chairmen: Senators Homer 
Ferguson of Michigan (1948), Clyde R. Hoey of North Carolina 
(1949-1952), Joseph R. McCarthy of Wisconsin (1953-1954), John 
L. McClellan of Arkansas (1955-1972), Henry M. Jackson of 
Washington (1973-1978), Sam Nunn of Georgia (1979-1980 and 
1987-1994), William V. Roth of Delaware (1981-1986 and 1995-
1996), Susan M. Collins of Maine (1997-2001); Carl Levin of 
Michigan (2001-2002); and Norm Coleman of Minnesota (2003-
present).
    Until 1957, the Subcommittee's jurisdiction focused 
principally on waste, inefficiency, impropriety, and illegality 
in government operations. Its jurisdiction has expanded 
considerably since then, however, today encompassing 
investigations within the broad ambit of the parent committee's 
responsibility for matters relating to the efficiency and 
economy of operations of all branches of the government, 
including matters related to: (a) waste, fraud, abuse, 
malfeasance, and unethical practices in government contracting 
and operations; (b) criminality or improper practices in labor-
management relations; (c) organized criminal activities 
affecting interstate or international commerce; (d) criminal 
activity affecting the national health, welfare, or safety, 
including investment fraud, commodity and securities fraud, 
computer fraud, and use of offshore banking and corporate 
facilities to carry out criminal objectives; (e) the 
effectiveness of present national security methods, staffing 
and procedures, and U.S. relationships with international 
organizations concerned with national security; (f) energy 
shortages, energy pricing, management of government-owned or 
controlled energy supplies; and relationships with oil 
producing and consuming countries; and (g) the operations and 
management of Federal regulatory policies and programs. While 
technically reduced to a subcommittee of a standing committee, 
the Subcommittee has long exercised its authority as almost a 
separate entity, selecting its own staff, issuing its own 
subpoenas, and determining its own investigatory agenda.
    The Subcommittee acquired this sweeping jurisdiction in 
several successive stages. In 1957--based on information 
developed by the Subcommittee--the Senate passed a Resolution 
establishing a Select Committee on Improper Activities in the 
Labor or Management Field. Chaired by Senator McClellan, who 
also chaired the Subcommittee at that time, the Select 
Committee was composed of eight Senators--four of whom were 
drawn from the Subcommittee on Investigations and four from the 
Committee on Labor and Public Welfare. The Select Committee 
operated for 3 years, sharing office space, personnel, and 
other facilities with the Permanent Subcommittee. Upon its 
expiration in early 1960, the Select Committee's jurisdiction 
and files were transferred to the Subcommittee on 
Investigations, greatly enlarging the latter body's 
investigative authority in the labor-management area.
    The Subcommittee's jurisdiction expanded further during the 
1960s and 1970s. In 1961, for example, it received authority to 
make inquiries into matters pertaining to organized crime and, 
in 1963, held the famous Valachi hearings described below, 
examining the inner workings of the Italian Mafia. In 1967, 
following a summer of riots and other civil disturbances, the 
Senate approved a Resolution directing the Subcommittee to 
investigate the causes of this disorder and to recommend 
corrective action. In January 1973, the Subcommittee acquired 
its national security mandate when it merged with the National 
Security Subcommittee. With this merger, the Subcommittee's 
jurisdiction was broadened to include inquiries concerning the 
adequacy of national security staffing and procedures, 
relations with international organizations, technology transfer 
issues, and related matters. In 1974, in reaction to the 
gasoline shortages precipitated by the Arab-Israeli war of 
October 1973, the Subcommittee acquired jurisdiction to 
investigate government operations involving the control and 
management of energy resources and supplies.
    In 1997, the full Committee on Governmental Affairs was 
charged by the Senate to conduct a special examination into 
illegal or improper activities in connection with Federal 
election campaigns during the 1996 election cycle. The 
Permanent Subcommittee provided substantial resources and 
assistance to this investigation, contributing to a greater 
public understanding of what happened, to subsequent criminal 
and civil legal actions taken against wrongdoers, and to 
enactment of campaign finance reforms in 2001.

                         B. Past Investigations

    Armed with its broad jurisdictional mandate, the 
Subcommittee has in recent years conducted investigations into 
a wide variety of topics of public concern, ranging from 
corporate misconduct, including the Senate's most in-depth 
investigation of the collapse of the Enron Corporation, to 
gasoline price gouging, predatory lending, and tax evasion. The 
Subcommittee has also conducted investigations into numerous 
aspects of criminal wrongdoing, including money laundering, the 
narcotics trade, child pornography, labor racketeering, and 
organized crime activities. The Subcommittee has also devoted 
itself to investigating allegations of waste, fraud, and abuse 
in government programs and consumer protection issues, 
addressing problems ranging from food safety to Medicare fraud 
and mortgage ``flipping.'' Most recently, under the leadership 
of Senator Coleman, the Subcommittee has focused on exposing 
corruption problems in the United Nations' Oil-for-Food 
Program, port and supply-chain security, credit counseling 
abuses, and Federal contractors with billions of dollars in 
unpaid taxes. At Senator Levin's request, the Subcommittee has 
also examined the role of tax professionals in designing and 
marketing abusive tax shelters, transparency and pricing 
problems in U.S. crude oil markets, and the failure of U.S. 
bank regulators to crack down on possible money laundering 
practices at financial institutions like Riggs Bank.
    In 1998, the Subcommittee marked the fiftieth anniversary 
of the Truman Committee's conversion into a permanent 
subcommittee of the U.S. Senate. 2 In the half-
century of its existence, the Subcommittee's many successes 
have made clear to the Senate the importance of retaining a 
standing investigatory body devoted to keeping government not 
only efficient and effective, but also honest and accountable.
---------------------------------------------------------------------------
    \2\ This anniversary also marks the first date upon which internal 
Subcommittee records generally began to become available to the public. 
Unlike most standing committees of the Senate whose previously 
unpublished records open after a period of 20 years has elapsed, the 
Permanent Subcommittee on Investigations, as an investigatory body, may 
close its records for 50 years to protect personal privacy and the 
integrity of the investigatory process. With this 50th anniversary, the 
Subcommittee's earliest records, housed in the Center for Legislative 
Archives at the National Archives and Records Administration, began to 
open seriatim. The records of the predecessor committee--the Truman 
Committee--were opened by Senator Nunn in 1980.
---------------------------------------------------------------------------

                       (1) Historical Highlights

    The Subcommittee's investigatory record as a permanent 
Senate body began under the Chairmanship of Republican Senator 
Homer Ferguson and his Chief Counsel (and future Attorney 
General and Secretary of State) William P. Rogers, as the 
Subcommittee inherited the Truman Committee's role in 
investigating fraud and waste in U.S. Government operations. 
This investigative work became particularly colorful under the 
chairmanship of Senator Clyde Hoey, a North Carolina Democrat 
who took the chair from Senator Ferguson after the 1948 
elections. The last U.S. Senator to wear a long frock coat and 
wing-tipped collar, Mr. Hoey was a distinguished southern 
gentleman of the old school. Under his leadership, the 
Subcommittee won national attention for its investigation of 
the so-called ``five percenters,'' notorious Washington 
lobbyists who charged their clients five percent of the profits 
from any Federal contracts they obtained on the client's 
behalf. Given the Subcommittee's jurisdictional inheritance 
from the Truman Committee, it is perhaps ironic that the ``five 
percenters'' investigation raised allegations of bribery and 
influence-peddling that reached right into the White House and 
implicated members of President Harry Truman's staff. In any 
event, the fledgling Subcommittee was off to a rapid start.
    What began colorful soon became contentious. When 
Republicans returned to the Majority in the Senate in 1953, 
Wisconsin's junior Senator, Joseph R. McCarthy, became the 
Subcommittee's Chairman. Two years earlier, as Ranking Minority 
Member, Senator McCarthy had arranged for another Republican 
Senator, Margaret Chase Smith of Maine, to be removed from the 
Subcommittee. Senator Smith's offense, in Senator McCarthy's 
eyes, was her issuance of a ``Declaration of Conscience'' 
repudiating those who made unfounded charges and used character 
assassination against their political opponents. Although 
Senator Smith had carefully declined to name any specific 
offender, her remarks were universally recognized as criticism 
of Senator McCarthy's accusations that communists had 
infiltrated the State Department and other government agencies. 
Senator McCarthy retaliated by engineering Senator Smith's 
removal from the Subcommittee, replacing her with the newly 
elected Senator from California, Richard M. Nixon.
    Upon becoming Subcommittee Chairman, Senator McCarthy 
staged a series of highly publicized anti-communist 
investigations, culminating in an inquiry into communism within 
the U.S. Army, which became known as the Army-McCarthy 
hearings. During the latter portion of these hearings, in which 
the parent Committee examined the Wisconsin Senator's attacks 
on the Army, Senator McCarthy recused himself, leaving South 
Dakota Senator Karl Mundt to serve as Acting Chairman of the 
Subcommittee. Gavel-to-gavel television coverage of the 
hearings helped turn the tide against Senator McCarthy by 
raising public concern about his treatment of witnesses and 
cavalier use of evidence. In December 1954, in fact, the Senate 
censured Senator McCarthy for unbecoming conduct; in the 
following year, the Subcommittee adopted new rules of procedure 
that better protected the rights of witnesses. The Subcommittee 
also strengthened the rules ensuring the right of both parties 
on the Subcommittee to appoint staff, initiate and approve 
investigations, and review all information in the 
Subcommittee's possession.
    In 1955, Senator John McClellan of Arkansas began 18 years 
of service as Chairman of the Permanent Subcommittee on 
Investigations. Senator McClellan appointed the young Robert F. 
Kennedy as the Subcommittee's Chief Counsel. That same year, 
Members of the Subcommittee were joined by Members of the 
Senate Labor and Public Welfare Committee on a special 
committee to investigate labor racketeering. Chaired by Senator 
McClellan and staffed by Kennedy and other Subcommittee staff 
members, this special committee directed much of its attention 
to criminal influence over the Teamsters Union, most famously 
calling Teamsters' leaders Dave Beck and Jimmy Hoffa to 
testify. The televised hearings of the special committee also 
introduced Senators Barry Goldwater and John F. Kennedy to the 
Nation, as well as leading to passage of the Landrum-Griffin 
Labor Act.
    After the special committee completed its work, the 
Permanent Subcommittee on Investigations continued to 
investigate organized crime. In 1962, the Subcommittee held 
hearings during which Joseph Valachi outlined the activities of 
La Cosa Nostra, or the Mafia. Former Subcommittee staffer 
Robert Kennedy--who had by now become Attorney General in his 
brother's Administration--used this information to prosecute 
prominent mob leaders and their accomplices. The Subcommittee's 
investigations also led to passage of major legislation against 
organized crime, most notably the Racketeer Influenced and 
Corrupt Organizations (RICO) provision of the Crime Control Act 
of 1970. Under Chairman McClellan, the Subcommittee also 
investigated fraud in the purchase of military uniforms, 
corruption in the Department of Agriculture's grain storage 
program, securities fraud, and civil disorders and acts of 
terrorism. From 1962 to 1970, the Permanent Subcommittee on 
Investigations conducted an extensive probe of political 
interference in the awarding of government contracts for the 
Pentagon's ill-fated TFX (``tactical fighter, experimental''). 
In 1968, the Subcommittee also examined charges of corruption 
in U.S. servicemen's clubs in Vietnam and elsewhere around the 
world.
    In 1973, Senator Henry ``Scoop'' Jackson, a Democrat from 
Washington, replaced Senator McClellan as the Subcommittee's 
Chairman. During these years, recalled Chief Clerk Ruth Young 
Watt--who served in this position from the Subcommittee's 
founding until her retirement in 1979--Ranking Minority Member 
Charles Percy, an Illinois Republican, was more active on the 
Committee than Chairman Jackson, who was often distracted by 
his Chairmanship of the Interior Committee and his active role 
on the Armed Services Committee. 3 Senator Percy 
worked closely in this regard with Georgia Democrat Sam Nunn, 
who subsequently succeeded Senator Jackson as Chairman in 1979. 
As Chairman, Senator Nunn continued the Subcommittee's 
investigations into the role of organized crime in labor-
management relations and also investigated pension frauds.
---------------------------------------------------------------------------
    \3\ It had not been uncommon in the Subcommittee's history for the 
Chairman and Ranking Minority Member to work together closely despite 
their partisan differences, but Senator Percy was unusually active in 
the Minority--a role that included chairing one investigation of the 
hearing aid industry.
---------------------------------------------------------------------------
    The regular reversals of political fortunes in the Senate 
of the 1980s and 1990s saw Senator Nunn trade Chairmanship 
three times with Delaware Republican William Roth. Senator Nunn 
served from 1979 to 1980 and again from 1987 to 1995, while 
Senator Roth served from 1981 to 1986, and again from 1995 to 
1996. These 15 years saw a strengthening of the Subcommittee's 
bipartisan tradition in which investigations were initiated by 
either the Majority or Minority and fully supported by the 
entire Subcommittee. For his part, Senator Roth led a wide 
range of investigations into commodity investment fraud, off-
shore banking schemes, money laundering, and child pornography. 
Senator Nunn led inquiries into Federal drug policy, the global 
spread of chemical and biological weapons, abuses in Federal 
student aid programs, computer security, airline safety, and 
health care fraud. Senator Nunn also appointed the 
Subcommittee's first female counsel, Eleanore Hill, who served 
as Chief Counsel to the Minority from 1982 to 1986 and then as 
Chief Counsel from 1987 to 1995. Ms. Hill subsequently served 
as Inspector General at the Department of Defense.

                       (2) Recent Investigations

    In January 1997, Republican Senator Susan Collins of Maine 
became the first woman to Chair the Permanent Subcommittee on 
Investigations. Senator John Glenn of Ohio became the Ranking 
Minority Member. After Senator Glenn's retirement, Michigan 
Democrat Carl Levin succeeded him in January 1999 as the 
Ranking Minority Member. During Senator Collins's Chairmanship, 
the Subcommittee conducted a number of investigations affecting 
Americans in their day-to-day lives, including investigations 
into mortgage fraud, phony credentials obtained through the 
internet, deceptive mailings and sweepstakes promotions, day 
trading of securities, and securities fraud on the internet. 
Senator Levin, while Ranking Minority Member, initiated an 
investigation into money laundering, and in 1999, the 
Subcommittee held a hearing on money laundering issues 
affecting private banking. Senator Collins continued to Chair 
the Subcommittee until June 2001, when the Senate Majority 
party changed hands, and Senator Levin assumed the 
Chairmanship. Senator Collins, in turn, became the Ranking 
Minority Member.
    During the 107th Congress, both Senator Collins and Senator 
Levin chaired the Subcommittee. In her 6 months chairing the 
Subcommittee at the start of the 107th Congress, Senator 
Collins held hearings examining issues related to cross border 
fraud, the improper operation of tissue banks, and Federal 
programs designed to fight diabetes. During the following 18 
months, Senator Levin led a bipartisan Subcommittee 
investigation of the Enron Corporation, which had collapsed 
into bankruptcy just before Senator Levin became the Chairman. 
Senator Levin also advanced the investigation he had initiated 
while Ranking Minority Member into issues related to money 
laundering and opened new investigations into offshore tax 
havens and tax scams, border security, and the pricing of 
gasoline and other fuels.
    In January 2003, Republican Senator Norm Coleman of 
Minnesota became the Chairman of the Permanent Subcommittee on 
Investigations. During the 108th Congress, Chairman Coleman 
held 15 hearings on disparate topics of national and global 
concern, including: Illegal file sharing on peer-to-peer 
networks, abusive tax shelters, abusive practices in the credit 
counseling industry, the dangers of purchasing pharmaceuticals 
and controlled substances over the Internet, money laundering, 
foreign corruption, the effectiveness of the Patriot Act, 
Federal contractors with billions of dollars in unpaid taxes, 
SARS, border security, and how Saddam Hussein abused the United 
Nation's Oil-for-Food Program and utilized oil to reward 
politicians. The following pages describe the Subcommittee's 
work during the 108th Congress.

          II. Subcommittee Hearings During the 108th Congress

A. Border Security: How are State and Local Officials Coping with the 
        New Levels of Threat? (May 12, 2003, Field Hearing held at 
        Anoka-Hennepin Technical College, Anoka, MN)
    The first hearing held by the Subcommittee during the 108th 
Congress, under the Chairmanship of Senator Norm Coleman, was a 
field hearing in Anoka, MN, on May 12, 2003. Under the 
Chairmanship of Senator Coleman, the Subcommittee held a 
hearing examining the developing relationship between the 
Department of Homeland Security (DHS) and State and locate 
government, focusing on DHS grants provided to such 
governments. Federal law at the time gave DHS little guidance 
concerning the distribution of grant money. The main purpose of 
the hearing was to evaluate the implementation of security 
measures at a local level, specifically in Minnesota.
    While securing our Nation's borders is of paramount 
concern, providing an efficient border is also essential to 
tourism and international trade. At the Federal level, 
strategies and systems have been designed to prevent terrorists 
and their weapons from entering the United States. These 
concepts, which balance security with the need to facilitate 
the flow of trade and travel, include the US-VISIT system that 
replaced the preexisting entry and exit system at the U.S. 
border. The Department of Homeland Security had also 
implemental the Container Security Initiative and the Custom-
Trade Partnership Against Terrorism to identify high-risk cargo 
containers and scan them with non-intrusive inspection 
technology, such as x-ray and gamma ray systems.
    At top priority of DHS at that time was to develop an 
effective communications system to coordinate the efforts of 
State and local officials with DHS. Improving and integrating 
radio networks and making databases available to State and 
local officials increase the ability of law enforcement to 
respond to specific threats.
    Anne Lombardi, Interim Director of Field Operations in the 
Chicago Bureau of Customs and Border Protection, gave testimony 
relating to the current efforts to integrate Federal, State and 
local authorities in responding to simulated attacks under the 
TOPOFF program, and as to the implementation of the lessons 
learned from those exercises.
    The second witness panel included State and local officials 
in Minnesota, each speaking to their general level of readiness 
to deal with terrorist threats. All four officials testified to 
the need for improved communications in the way of radios and 
increased communication with Federal authorities.
    Rich Stanek, Commissioner of Public Safety and Director of 
Homeland Security for the State of Minnesota, testified that 
funding was adequate, but that a relaxation of the restrictions 
and limitations on spending would allow Minnesota to make 
better decisions on providing for the safety of its citizens. 
Patrick McGowan, Sheriff of Hennepin County, discussed the 
formation of Regional Response Teams, strategically 
regionalized to consolidate and allocate resources effectively.
    Ardell Brede, Mayor of Rochester, MN, testified that his 
city experienced a tremendous negative economic impact that was 
caused by the dramatic decrease in international patients at 
the Mayo Clinic due to the increase in time that it takes to 
process a visa. Furthermore, International Falls is 
``desperately in need of funding for homeland security 
situations,'' said Paul Nevanen, Director of the Koochiching 
Economic Development Authority in International Falls, who 
testified that costs associated with emergency preparedness 
have doubled in International Falls since September 11, as a 
direct result of additional training for emergency personnel.
    The consensus among the witnesses on the final panel, which 
included industry security officials from seaports, airports, 
railways and trucking, was that, while more work and more 
funding was necessary, each industry is up to the security 
challenges of a post-September 11 world.
    Captain Ray Skelton, Environmental and Government Affairs 
Director of the Duluth Seaway Port Authority in Duluth, MN, 
testified that, although it was impossible to secure the 49 
miles of shoreline at the port in Duluth, the implementation of 
improved identification and documentation has served to reduce 
security threats prior to ships' arrival at port. Steve Leqve, 
Airport Manager for Rochester International Airport, desired 
the maintenance of a Federal presence at the airport, rather 
than see a reduction in TSA agents for airports of his size. He 
further noted that he would like to see more local decision-
making within the TSA to allow for the differences between 
different airport operations.
    Michael Curry, Director of Security for the Canadian 
Pacific Railway in Minneapolis, testified that the rail 
industry had implemented its own rail security task force to 
independently monitor security risks, but noted the importance 
of a long-term commitment to rail security and continued 
cooperation with Federal authorities. John Hauslauden, 
President of the Minnesota Trucking Association in St. Paul, 
testified as to the need for an efficient border, applauded the 
introduction of non-invasive scanning technology, and stressed 
the need for higher concern for stolen cargo.

B. SARS: How Effective is the State and Local Response? (May 21, 2003)
    On May 21, 2003, the Subcommittee held a hearing chaired by 
Senator Coleman on the Nation's preparedness to deal with 
possible outbreaks of severe acute respiratory syndrome (SARS). 
SARS emerged as a force to be reckoned with, not only as a 
tragedy taking peoples' lives, but delaying others as well. 
Since SARS emerged in China, adoptions of Chinese children by 
Americans were stopped. Toronto sustained substantial economic 
damage because of potential unnecessary reactions to SARS on 
the part of organizations responsible for addressing this 
disease.
    At the national and international levels, agencies had to 
develop information quickly about the characteristics of the 
disease in order to treat patients and prevent its spread. 
Local doctors needed to know how to recognize that something 
new was happening and who to turn to for information and 
support. Most importantly, information from national and 
international health organizations must be transmitted back to 
local officials so that doctors, airline attendants, 
researchers and average citizens know what to do to protect 
themselves.
    The May 2003 hearing focused on current levels of readiness 
for a future SARS outbreak in the United States, and the need 
to continue to develop a national response, predicated on the 
understanding that the bulwark of any response will be at the 
local level.
    The first witness panel consisted of Federal health agency 
officials who commented on what they have learned from the 
international health crisis, their current level of readiness, 
and what more needed to be done to provide protection from a 
SARS outbreak. Julie L. Gerberding, M.D., M.P.H., Director of 
the Center for Disease Control (CDC) and Prevention in the 
Department of Health and Human Services testified that the CDC 
is ahead of the curve in terms of current preparedness, but 
cautioned that many hospitals and clinics may not yet have the 
ability to adequately quarantine suspected SARS cases, and that 
the communications infrastructure between the national and 
local level was still developing.
    Anthony S. Fauci, Director of the National Institute of 
Allergy and Infectious Diseases at the National Institutes of 
Health in the Department of Health and Human Services testified 
as to the research progress being made in identifying and 
combating SARS, commenting that the project to create 
successful therapies and vaccines was still in its infancy. 
Michael T. Osterholm, Ph.D., M.P.H., Director of the Center for 
Infectious Disease Research and Policy at the University of 
Minnesota testified that luck played a large role in the United 
States averting a public health disaster like the one in 
Toronto, and noted the significant likelihood of a future SARS 
epidemic on U.S. soil.
    The second witness panel included State and local health 
officials, each speaking to their experiences in dealing with 
possible SARS cases and, responding to questions regarding 
their readiness, sounded the call for continued and increased 
cooperation between national organizations and those battling 
SARS on the front lines. Rodney N. Huebbers, President and CEO 
of Loudoun Hospital Center of Loudoun Healthcare, Inc. in 
Loudon County of Leesburg, VA, commented that the additional 
costs associated with training and supplies in dealing with 
disease emergencies prevented him from meeting the expectations 
of his community.
    Thomas R. Frieden, M.D., M.P.H., Commissioner of New York 
City Department of Health and Mental Hygiene echoed that 
sentiment, testifying that the spread of SARS could rapidly 
overwhelm their ability to respond because Federal funding ``is 
not nearly enough.'' Mary C. Selecky, Secretary of the 
Washington State Department of Health in Olympia, WA, and 
President of the Association of State and Territorial Health 
Officials discussed the need for increased preparedness, public 
health capacity, collaboration between national and local 
organizations, and addressed the public health work force 
shortage facing the nation.
    The final witness panel addressed the practical ability of 
health care providers and health care companies to minimize the 
concerns and vulnerabilities associated with a possible SARS 
outbreak. Lawrence O. Gostin, Director of the Center of Law and 
the Public's Health at Georgetown University Law Center 
testified to the legal challenges of mass quarantines, 
addressing practical and ethical concerns, and introduced model 
State legislation that would address those concerns without 
running afoul of constitutional limits.
    Bruce R. Cords, Ph.D., Vice President of Environment, Food 
Safety and Public Health at Ecolab Inc. in St. Paul, MN, 
testified to the current potency of disinfectants, 
acknowledging the practical problem that even if cleaning 
products can combat SARS, people using the products must also 
be trained as to what and how to clean. Vicki Grunseth, Chair 
of the Metropolitan Airports Commission in Minneapolis, MN, 
discussed the current measures being taken by large airports to 
anticipate a SARS outbreak, and outlined plans by airline and 
airport officials to deal with possible cases.

C. Patient Safety: Instilling Hospitals with a Culture of Continuous 
        Improvement (June 11, 2003)
    On June 11, 2003, under the Chairmanship of Senator 
Coleman, the Subcommittee held a hearing on patient safety with 
the aim of reducing hospital error, saving lives and reducing 
injury. The Centers for Disease Control estimated that, between 
1998 and 2003, as many as 15,000 people had foreign objects 
left inside their bodies after surgery. In 1999, the Institutes 
of Medicine reported that between 44,000 and 98,000 Americans 
die each year as a result of preventable medical errors at a 
cost to the health system of between $37 billion and $50 
billion per year. Doctors and nurses are in the unenviable 
position where their mistakes can easily have fatal 
consequences. While a complete solution to human fallibility is 
impossible, this hearing sought to present witnesses with 
experience in systematic solutions to the problem of patient 
safety. It found that implementing system-wide solutions would 
help to reduce error within the health care industry and 
minimize the human cost of those errors that do occur by 
learning from past mistakes and collaborating in the production 
of a proactive solution.
    The first witness, Roxanne J. Goeltz of Burnsville, MN, 
related the story of her brother's sudden death while in the 
hospital and the dearth of information or explanation by 
hospital staff to her relatives regarding the circumstances of 
his death. She testified to numerous lapses, such as 
misdiagnosis of his condition and allowing her parents to see 
their deceased son with no one to support them, and stated that 
if a standardized healthcare protocol were initiated these 
kinds of mistakes could be minimized or eliminated. She also 
discussed her subsequent involvement in the Patient and Family 
Advisory Council and shared her thoughts on the current state 
of the health care system. Ms. Goeltz emphasized the role of 
the consumer in making intelligent healthcare decisions, and 
made several suggestions as to what the Federal Government 
could do to encourage a more effective health care environment.
    The second panel consisted of national health 
administrative officials testifying to current national efforts 
to decrease physician error and patient injury. James P. 
Bagian, M.D. P.E., Director of the National Center for Patient 
Safety in the U.S. Department of Veterans Affairs, discussed 
the need for real leadership--not just emails and shifting 
policies--to direct the patient safety movement. Carolyn M. 
Clancy, M.D., Director of the Agency for Healthcare Research 
and Quality at the U.S. Department of Health and Human 
Services, focused on the need to stop blaming physicians for 
problems and truly address the system-wide changes that are 
required to improve healthcare across the board. She noted that 
AHRQ had been developing programs designed to do just that. 
Dennis S. O'Leary, M.D., President of the Joint Commission on 
Accreditation of Healthcare Organizations, testified that the 
accreditation process at that time incorporated a systems 
approach to managing risk that was borrowed from industries in 
the manufacturing world. He commented that such adaptations had 
been extremely helpful in developing solutions to the patient 
safety problem.
    The final panel consisted of a variety of local, State, and 
private interests each speaking to the urgent need for 
systematic healthcare reform and the baby steps that had 
already been taken by the industry in that direction. David R. 
Page, President and CEO of Fairview Health Services, related an 
account of a recent system failure at his own hospital and 
echoed the need for a process improvement system of the sort 
that 3M, Motorola, Toyota, and other industry leaders had in 
place. Dianne Mandernach, Commissioner of the Minnesota 
Department of Health, encouraged the development of a national 
system that would aid in the identification of trends and 
encouraged a more collaborative response to improving patient 
safety. Robert E. Krawisz, Executive Director of the National 
Patient Safety Foundation, testified to the enormous cost 
burden that poor healthcare has on the industry, and encouraged 
more active patient involvement in their own care to help fill 
the gaps in the healthcare system as it continues to improve. 
Suzanne Delbanco, Ph.D., Executive Director of The Leapfrog 
Group, discussed her groups' effort to inform and educate the 
33 million employees of the 140 employers whom she represented 
so that they understand how quality can vary widely between 
healthcare institutions, and the need to make informed 
healthcare decisions.

D. SARS: Best Practices for Identifying and Caring for New Cases (July 
        30, 2003)
    Under the Chairmanship of Senator Coleman, the Subcommittee 
held the second in a series of hearings on the national 
response to the international epidemic of severe acute 
respiratory syndrome (``SARS''). A GAO report, released in 
conjunction with the hearing on July 30, 2003, detailed the 
readiness of the Federal Government to deal with a national 
SARS outbreak. The GAO concluded that, although preparation 
efforts are underway at every level, implementing those plans 
during a large-scale outbreak may prove difficult due to 
limitations in both hospital and workforce capacity that could 
result in overcrowding, as well as potential shortages in 
health care workers and equipment.
    Experts agree that the possibility of an outbreak of SARS 
in the United States remains significant and that just one 
confirmed case in an American city would require tracking down 
potentially hundreds of possible contacts across the country 
who may also be infected. The hearing focused on the need for 
further education of the general public, for continued 
vigilance by State and local health officials, and the 
effective coordination of a national response at the Federal 
level.
    The first witness, Marjorie E. Kanof, M.D., Director of 
Health Care-Clinical and Military Health Care Issues at the 
U.S. General Accounting Office, testified to the general 
characteristics of SARS transmission and to the general 
preparedness of the United States to respond to a widespread 
outbreak of SARS, including a checklist prepared by the CDC for 
distribution to hospitals across the country. Dr. Kanof 
explained that, although the outbreak was believed to be 
contained, it was expected to recur during the fall and winter 
months. She further stated that, during the first outbreak, 
experts maintained that well-established infectious disease 
control measures played a pivotal role in containing the 
outbreak.
    Dr. Kanof also testified that, despite the effective 
response, federal, State and local authorities all agreed to 
the necessity of preparing for the possibility of a large-scale 
SARS resurgence. She noted that, at that time, no definitive 
test existed to identify SARS during the early phase of the 
illness. Furthermore, Dr. Kanof testified that most hospitals 
lack the capacity to respond to large-scale infectious disease 
outbreaks; and few had adequate staff, medical resources and 
equipment needed to care for the potentially large number of 
patients that may need treatment. She warned that patients 
placed in isolation or quarantine required additional resources 
that could severely strain the resources of local health 
authorities.
    The second witness, James M. Hughes, M.D., Director of the 
National Center for Infectious Diseases at the Centers for 
Disease Control and Prevention at the U.S. Department of Health 
and Human Services, discussed the national response. Dr. Hughes 
testified that, despite a successful initial response involving 
intense collaboration among public health officials at the 
local, State and national levels, the clinical and academic 
communities, members of processional organizations and industry 
representatives, much remained to be done. According to Dr. 
Hughes, the CDC was developing a research agenda to help build 
the scientific base to ensure that the global clinical and 
public health communities have the necessary knowledge and 
tools to meet the challenges of SARS. Dr. Hughes also testified 
that the CDC had also established a SARS preparedness task 
force to develop effective response mechanisms to rapidly and 
efficiently detect the introduction of SARS into the United 
States and adapt easily to meet a range of local needs. In 
response to a question posed by Senator Coleman on the impact 
of an outbreak on rural America, Dr. Hughes stressed the 
importance of public awareness and local preparedness starting 
and ending with increased education, preventing unnecessary 
panic and dramatically improving the response to an outbreak.

E. Privacy and Piracy: The Paradox of Illegal File Sharing on Peer-To-
        Peer Networks and the Impact of Technology on the Entertainment 
        Industry (September 30, 2003)
    On September 30, 2003, the Subcommittee held a hearing, 
Privacy and Piracy: The Paradox of Illegal File Sharing on 
Peer-To-Peer Networks and the Impact of Technology on the 
Entertainment Industry, with the aim of creating future 
foundations to accommodate the developing use of technology 
distributing music and movies, while maintaining copyright laws 
that protect creative work. Sixty to ninety million people use 
peer-to-peer (P2P) networks to illegally trade copyrighted 
material, presenting a growing problem as advanced technology 
makes downloading files free and easy. On September 8, 2003, 
the Recording Industry Association of America (RIAA) launched 
its first round of copyright infringement lawsuits in an effort 
to deter people from illegal downloading. There is no law to 
regulate RIAA's use of subpoenas against potential offenders. 
The Subcommittee expressed concern over RIAA's broad powers to 
issue subpoenas to individual users when perhaps the subpoenas 
should target the P2P companies, such as Kazaa.
    At the hearing, Mitch Bainwol, Chairman and Chief Executive 
Officer, Recording Industry Association of America, testified 
that in 2003 domestic revenue in the music industry decreased 
from $15 to $11 billion, while international revenues suffered 
an even greater decline, due to the sharing of illegal audio 
files on the Internet. The RIAA attempted to inform people of 
illegal downloading by way of emails, instant messages, and 
websites, but later resorted to enforcement activities. Mr. 
Bainwol proposed that to alleviate the problems associated with 
illegal downloading, society must understand right versus 
wrong, and the market for legal downloads must become more 
competitive.
    Jack Valenti, President and Chief Executive Officer, Motion 
Picture Association of America (MPAA), testified that the movie 
industry is America's greatest trade export, five percent of 
America's economic output, and a big part of economic growth. 
MPAA increased law enforcement programs against illegal file 
sharing, and embarked upon a public persuasion and education 
campaign to teach children what copyright means and how it is a 
benefit to the United States. Mike Negra, President of Mike's 
Video, Inc., testified that in 2000, the year Napster was 
formed, his company's video and music sales decreased by about 
23 percent.
    On the second witness panel, witnesses agreed that the 
general public does not understand file sharing is wrong, let 
alone a crime. Jonathan D. Moreno, Director, Center for 
Biomedical Ethics at the University of Virginia, explained that 
those who illegally download copyrighted material do not have 
direct contact with the artists who own it, making the two 
groups ``moral strangers.'' Further, because file sharing is 
marketed by P2P organizations and is easy to achieve, people 
are less likely to view downloading copyrighted files as a 
crime.
    The Subcommittee also took testimony from L.L. Cool J, 
Recording Artist, New York, NY; Alan Morris, Executive Vice 
President, Sharman Networks Limited; Derek S. Broes, Executive 
Vice President of Worldwide Operations, Altnet; Chris Gladwin, 
Founder and Chief Operating Officer, Full Audio, Inc.; Lorraine 
Sullivan, New York, NY; Chuck D, Record Artist, Author, 
Activist; and James V. DeLong, Senior Fellow and Director, 
Center for the Study of Digital Property, The Progress and 
Freedom Foundation.

F. SARS: Is Minnesota Prepared? (October 8, 2003, Field Hearing at St. 
        Louis Park High School, St. Louis Park, MN)
    On October 8, 2003, at St. Louis Park High School in St. 
Louis Park, MN, the Subcommittee held the third in a series of 
hearings designed to assess the readiness of the United States 
to respond to a widespread outbreak of severe acute respiratory 
syndrome (``SARS'') within our borders. The previous hearings 
focused primarily on the need for a national response effort 
and, once a response was formulated, what must be done to 
successfully implement that response at the national level. The 
October 8 hearing focused specifically on the State and local 
response within Minnesota, and on the concrete steps that had 
to be taken to ensure that the State was prepared for new cases 
of SARS.
    The first witness panel consisted of State health officials 
testifying about their preparations and readiness to handle a 
SARS outbreak in Minnesota. Dianne Mandernach, Commissioner of 
the Minnesota Department of Health in St. Paul, MN, discussed 
efforts at the State level to maintain and strengthen disease 
surveillance. She noted that an effective hospital procedure to 
contain the spread of SARS and consistent communication with 
local health practitioners and the general public was critical 
to a successful campaign against communicable disease. Michael 
T. Osterholm, Ph.D. M.P.H., Director of the Center of 
Infectious Disease Research and Policy and Professor at the 
School of Public Health at the University of Minnesota, 
testified that, although there is extensive data on the initial 
SARS outbreak, the challenge would be to translate that 
information into meaningful State and local preparedness plans, 
and identify the necessary resources for comprehensive 
implementation of those plans, should SARS return.
    The second witness panel included local health hospital and 
school officials who testified more directly to local response 
plans and experiences with implementation. Jeff Spartz, 
Administrator of Hennepin County Medical Center, discussed the 
Minneapolis-St. Paul Metropolitan Hospital Compact, a group of 
27 hospitals that have developed a regional plan for dealing 
with infectious disease emergencies, but cautioned that certain 
facilities such as laboratories and ICU units would be almost 
immediately overwhelmed should a significant outbreak occur. 
Mary Quinn, Vice President of Patient Care Services at 
Northfield Hospital, and Ann Hoxie, Student Wellness 
Administrator for the St. Paul Public Schools, both discussed 
their responses to possible SARS cases. Each felt that they had 
sufficient information, but both were concerned with the legal 
and ethical problems surrounding quarantine and isolation. Ms. 
Hoxie also expressed concern with the large percentage of 
students who did not have health coverage, relegating the front 
lines of the fight against infectious disease to the school 
nurse.
    Debra Herrmann, R.N., P.H.N., L.S.N., District Lead Nurse 
for the Marshall School District, testified that, although 
there has been a great deal of information from the CDC and the 
Department of Health, it has been mainly medically oriented and 
contains little by way of information and procedures applicable 
to schools. She also testified that the schools did not have 
the funds to develop and implement response protocols. Rob 
Benson, Superintendent of the Floodwood School District in 
Floodwater, MN, explained their dependence upon the school 
nurse in a small, rural town. He expressed dismay over the fact 
that his school district could not afford to employ a school 
nurse full-time and that the best information that was 
available was a newsletter that contained information gleaned 
from the CDC website.

G. DOD's Improper Use of First and Business Class Airline Travel 
        (November 6, 2003)
    The Subcommittee working in conjunction with the Government 
Accountability Office (GAO) initiated an investigation to 
determine if Federal employees were complying with Federal 
travel requirements. Between 2001 and 2003, the GAO and 
Inspector Generals at several Federal departments and agencies 
had reported on abuses related to the use of government-issued 
travel cards. The first part of the Subcommittee's 
investigation focused on the Department of Defense (DOD).
    The Subcommittee's investigation determined that DOD 
personnel are generally required to travel at the least expense 
to the government. In the case of air travel, the least costly 
travel class is generally coach class. First or business class 
travel is available to DOD employees when specified exceptional 
circumstances warrant the additional cost. Any request for 
first or business class travel by a DOD employee must be 
justified by the traveler and authorized by an appropriate 
official.
    Within DOD, travel for military personnel is governed by 
the Joint Federal Travel Regulations, and travel for civilian 
personnel is governed by the Joint Travel Regulations. These 
regulations set forth the specific circumstances that justify 
the use of first or business class travel. For example, first 
class travel may be justified if other classes of travel are 
not reasonably available, or if there are exceptional security 
circumstances, or if a medically substantiated handicap or 
physical impairment requires the use of a premium class of 
travel. Business class travel may be justified for eight 
different reasons, such as regularly scheduled flights only 
provide premium class accommodations, or coach class is not 
available and the travel is so urgent it cannot be postponed, 
or travel is outside the United States and exceeds 14 hours. 
The traveler is required to cite the appropriate justification 
before the travel is authorized. It is usually only approved by 
an official who is senior to the employee who is traveling.
    During the investigation the Subcommittee also determined 
that all Federal agencies annually report their first class 
travel to the Office of Management and Budget (OMB) pursuant to 
OMB Bulletin 93-11. This report provides the only government-
wide mechanism to monitor the use of first class travel and 
deter abuse. Business class travel is not reported in this 
manner.
    At a Subcommittee hearing on November 6, 2003, Gregory D. 
Kutz of GAO testified that during fiscal years 2001 and 2002, 
DOD spent almost $124 million on about 68,000 tickets where at 
least one leg of a trip was booked in first or business class. 
GAO further testified that 72 percent of DOD's premium travel 
in these years was not authorized and 73 percent was not 
properly justified. About half of the people who abused the 
travel regulations were civilian supervisors, managers, 
executives, or senior military officers. According to GAO's 
testimony, DOD did not have accurate and complete data on the 
extent of premium class travel and performed little or no 
monitoring of this travel. GAO estimated that DOD could save 
tens of millions of dollars per year through better oversight 
that assured adherence to DOD's travel policies and 
regulations. GAO also testified that 98 percent of the travel 
abuse related to the use of business class travel, which can be 
as costly as first class travel.
    In their testimony, DOD officials Charles S. Abell, 
Assistant Secretary of Defense (Force Management Policy) and 
Lawrence J. Lanzillotta, Principal Deputy Under Secretary 
(Comptroller) agreed that more aggressive action needed to be 
taken in this area. DOD began updating its travel regulations 
to more clearly state when first or business class travel can 
be authorized, and emphasized that it must only be used when 
exceptional circumstances warrant the additional cost.
    Following the hearing, on November 25, 2003, Chairman 
Coleman wrote to the Director of OMB and requested that the 
annual Federal travel report be expanded to include business 
class travel. Given that 98 percent of DOD's abusive travel 
occurred in business class, the annual first class Federal 
travel report would potentially only have identified two 
percent of DOD's abuse.

H. U.S. Tax Shelter Industry: The Role of Accountants, Lawyers and 
        Financial Professionals (November 18 and 20, 2003)
    On November 18 and 20, 2003, the Subcommittee held 2 days 
of hearings examining the role played by accountants, lawyers, 
investment advisors, and bankers to develop, market, and 
implement abusive tax shelters to reduce and eliminate Federal 
and State tax taxes. Abusive tax shelters are complex financial 
transactions in which a significant purpose is to reduce and 
eliminate Federal, State or local taxes in a manner not 
intended by the law.
    The hearings were the culmination of a Subcommittee 
investigation that was initiated under Senator Levin with the 
support and concurrence of Chairman Coleman, and which lasted 
for close to 2 years. The Subcommittee determined that, by 
2003, the U.S. tax shelter industry was no longer focused 
primarily on providing individualized tax advice to persons who 
initiate contact with a tax advisor. Instead, the industry 
focus had expanded to developing a steady supply of generic 
``tax products'' that were aggressively marketed to multiple 
clients. In short, the tax shelter industry had moved from 
providing one-on-one tax advice in response to tax inquiries to 
also initiating, designing, and mass marketing tax shelter 
products to hundreds of taxpayers.
    The investigation also found that numerous respected 
members of the American business community were heavily 
involved in the development, marketing, and implementation of 
generic tax products whose objective was not to achieve a 
specific business or economic purpose, but to reduce or 
eliminate a client's U.S. tax liability. By 2003, dubious tax 
shelter sales were no longer the province of shady, fly-by-
night companies with limited resources. They had become big 
business, assigned to talented professionals at the top of 
their fields and able to draw upon the vast resources and 
reputations of the country's largest accounting firms, law 
firms, investment advisory firms, and banks.
    The Subcommittee's investigation and hearings focused on 
generic tax products developed and promoted by KPMG, 
PricewaterhouseCoopers, and Ernst and Young, three of the top 
four accounting firms in the United States. During the 1990s, 
in response in part to the stock market boom and the 
proliferation of stock options, these firms and others designed 
and developed tax products used to shelter gains from taxation. 
Tax products examined by the Subcommittee included: KPMG's Bond 
Linked Issue Premium Structure (BLIPS), Foreign Leveraged 
Investment Program (FLIP), Offshore Portfolio Investment 
Strategy (OPIS), and S-Corporation Charitable Contribution 
Strategy (SC2); PricewaterhouseCooper's Bond and Option Sales 
Strategy (BOSS); and Ernst and Young's Contingent Deferred Swap 
(CDS). Each of these products generated hundreds of millions of 
dollars in phony tax benefits for taxpayers, using a series of 
complex, orchestrated transactions, structured finance, and 
investments with little or no profit potential.
    The investigation examined a number of professional firms 
that assisted in the development, marketing, and implementation 
of the tax shelters promoted by the three accounting firms. 
Leading banks, including Deutsche Bank, HVB, and UBS, provided 
multi-billion dollar credit lines essential to the orchestrated 
transactions. Wachovia Bank, acting through First Union 
National Bank, made client referrals to KPMG and 
PricewaterhouseCoopers, playing a key role in facilitating the 
marketing of potentially abusive or illegal tax shelters. 
Leading law firms, such as Brown and Wood, which later merged 
with another firm to become Sidley Austin Brown and Wood, 
provided favorable tax opinions advising that certain abusive 
tax shelters were permissible under the law. The evidence also 
suggests collaboration between Sidley Austin Brown and Wood and 
KPMG on the OPIS and BLIPS tax shelters, including the issuance 
of allegedly independent opinion letters on BLIPS by KPMG and 
the law firm which contained numerous virtually identical 
paragraphs. Two investment advisory firms, Presidio Advisory 
Services and Quellos Group (formerly doing business as Quadra 
Advisors and QA Investments), also assisted in the design, 
marketing, and implementation of tax shelters promoted by KPMG. 
Additionally, Quellos served as the investment advisor for 
PricewaterhouseCooper's version of FLIP.
    At the November 18 hearing, the Subcommittee heard 
testimony from three tax experts: Debra Peterson, Tax Counsel, 
California Franchise Tax Board; Mark Watson, former Partner, 
KPMG LLP; and Calvin Johnson, Professor, The University of 
Texas at Austin School of Law. The Subcommittee also heard 
testimony from numerous tax professionals from various 
accounting firms. Tax professionals from KPMG LLP included: 
Philip Wiesner, Partner in Charge, Washington National Tax 
Client Services; Jeffrey Eischeid, Partner, Personal Financial 
Planning; Lawrence DeLap, retired National Partner in Charge, 
Department of Professional Practice-Tax; Lawrence Manth, former 
West Area Partner in Charge, Stratecon; and Richard Smith Jr., 
Vice Chair, Tax Services. Accounting firm 
PricewaterhouseCoopers was represented by Richard Berry, Jr., 
Senior Tax Partner. Accounting firm Ernst and Young LLP was 
represented by Mark Weinberger, Vice Chair, Tax Services.
    At the November 20 hearing, the Subcommittee heard 
testimony from three lawyers: Raymond Ruble, former Partner, 
Sidley Austin Brown and Wood LLP; Thomas Smith, Jr., Partner, 
Sidley Austin Brown and Wood LLP; and N. Jerold Cohen, Partner, 
Sutherland Asbill and Brennan LLP. The Subcommittee also heard 
testimony from William Boyle, former Vice President, Structured 
Finance Group, Deutsche Bank AG; Domenick DeGiorgio, former 
Vice President, Structured Finance, HVB America, Inc.; John 
Larson, Managing Director, Presidio Advisory Services; and 
Jeffrey Greenstein, Chief Executive Officer, Quellos Group LLC. 
Lastly, the Subcommittee heard testimony from three regulators: 
Mark Everson, Commissioner, Internal Revenue Service; William 
McDonough, Chairman, Public Company Accounting Oversight Board; 
and Richard Spillenkothen, Director, Division of Banking 
Supervision and Regulation, The Federal Reserve.
    In connection with the November 2003 hearings, the 
Subcommittee's Minority staff issued a report detailing the 
transactions developed and promoted by KPMG, and involving the 
activities of Deutsche Bank, HVB, UBS Bank, Sidley Austin Brown 
and Wood, Wachovia Bank, Quellos, and Presidio Advisory 
Services. Following the hearings, the Subcommittee issued a 
bipartisan Senate Report in April 2005, which included the 
findings and text of the earlier Minority staff report and also 
detailed transactions involving Ernst and Young and 
PricewaterhouseCoopers, activities of Sutherland Asbill and 
Brennan, and additional details relating to activities by 
Presidio Advisory Services, Quellos, Sidley Austin Brown and 
Wood, HVB Bank, and Wachovia Bank.
    As a result of the Subcommittee's hearings and 
investigation, the three accounting firms committed to 
cultural, structural, and institutional reforms and changes to 
end the development, promotion, and implementation of mass-
marketed abusive tax shelters. KPMG informed the Subcommittee 
that the firm had dismantled its development, marketing, and 
sales infrastructure used for offering mass-marketed tax 
shelters. In addition, KPMG indicated that it had dismantled 
various tax practice groups, made leadership changes, and 
strengthened oversight and compliance. KPMG indicated that 
these changes reflected a firm-wide commitment to attain the 
highest degree of trust from the firm's clients, regulators, 
and the public at large. Similarly, Ernst and Young told the 
Subcommittee that the firm had instituted new oversight and 
leadership changes, IRS compliance and monitoring systems, and 
firm-wide policies to ensure the highest standards of 
professionalism. PricewaterhouseCoopers told the Subcommittee 
that the firm had instituted new leadership positions, and a 
centralized product development process to monitor all tax 
services to ensure that mass-marketed abusive tax shelters 
would not be marketed by the firm in the future.
    Following the hearings, the Senate passed resolution S. 274 
authorizing production of documents from this investigation to 
law enforcement authorities. In August 2005, in a matter 
handled by the Tax Division of the U.S. Justice Department, 
KPMG admitted to criminal wrongdoing and agreed to pay $456 
million in fines, restitution, and penalties. The criminal 
information and indictment together stated that, from 1996 to 
2003, KPMG and others conspired to defraud the IRS by 
designing, marketing, and implementing illegal tax shelters in 
relation to the FLIP, OPIS, and BLIPS shelters and another 
shelter known as SOS. In addition, the Justice Department 
indicted multiple individuals, including former KPMG tax 
partners and a former Brown and Wood law partner, for their 
roles in these and other tax shelter activities.
    To further address the problem of abusive tax shelters 
involved with robbing the U.S. Treasury of millions of dollars 
at the expense of honest American taxpayers, Senator Levin and 
Senator Coleman introduced the Tax Shelter and Tax Haven Reform 
Act, S. 2210, to strengthen penalties on tax shelter promoters, 
prevent abusive tax shelters, deter uncooperative tax havens, 
and codify the economic substance and business purpose 
doctrines. This bill was referred to the Senate Finance 
Committee which subsequently reported a more comprehensive tax 
bill, S. 1637. This bill included some of the tax shelter 
provisions in S. 2210. In May 2004, the Senate considered and 
adopted S. 1637. During the Senate debate, a Levin-Coleman 
amendment was accepted to further strengthen Federal penalties 
on promoters, aiders and abettors of abusive tax shelters. In 
October 2004, after a House-Senate conference, Congress enacted 
into law H.R. 4520, the American Jobs Creation Act. This tax 
legislation included a number of tax shelter reforms supported 
by the Subcommittee's investigation and the Senate Finance 
Committee, including stronger penalties on promoters of abusive 
tax shelters.

I. DOD Contractors Who Cheat on Their Taxes and What Should be Done 
        About It (February 12, 2004)
    In 2003, the Subcommittee initiated an investigation into 
the problem of Federal contractors who are paid with taxpayer 
dollars, while failing to meet their own tax obligations. This 
problem is a longstanding one. For example, in 1992, the 
Government Accountability Office (GAO) reported that more than 
5,700 Federal contractors had failed to pay $773 million in 
taxes, penalties, and interest. Another 1,100 contractors were 
under investigation at that time for failing to file tax 
returns. Based on more recent reports that certain Federal 
contractors continue to evade payment of their taxes, the 
Subcommittee initiated an investigation to determine the scope 
of the problem and the state of Federal programs designed to 
cure it, including the Federal tax levy program, which is 
supposed to levy a portion of all Federal contractor payments 
to ensure the payment of any outstanding tax debt.
    In a February 12, 2004 hearing before the Subcommittee, GAO 
testified that 27,100 Department of Defense (DOD) contractors 
(25,600 businesses and 1,500 individuals) owed about $3 billion 
in unpaid taxes. These contractors provided DOD with a wide 
variety of goods and services, including building maintenance, 
construction, consulting, catering, dentistry, funeral 
services, and parts or services related to weapons. GAO also 
identified 47 cases involving potential tax fraud which were 
subsequently referred to the IRS for enforcement action.
    GAO also identified numerous problems with the Federal tax 
levy program, including flaws in how the program was being 
implemented by DOD with respect to its contractors. For 
example, GAO noted that more than a dozen DOD payment systems 
did not participate in the automated tax levy program, which 
meant that about $85 billion in DOD contract payments were not 
being screened for delinquent taxpayers. In addition, many of 
DOD's payment documents lacked valid taxpayer identification 
numbers, which meant that their contract payments could not be 
matched to IRS debt records to identify payments that should be 
levied. DOD contractors are required to register in the Central 
Contractor Registration--a DOD database--before they can be 
awarded a contract. As part of the registration process, 
contractors are required to provide a taxpayer identification 
number. However, the numbers provided are not validated with 
the IRS. GAO testified that it found cases where contractors 
did not provide their taxpayer identification numbers and in 
some instances provided fraudulent numbers. GAO concluded that, 
under the tax levy program, DOD had collected less than $1 
million in 2002, when it should have been collecting a minimum 
of $100 million.
    The Subcommittee also took testimony from Mark Everson, 
Commissioner, IRS, Department of the Treasury; Richard L. 
Gregg, Commissioner, Financial Management Service, Department 
of the Treasury; and Lawrence J. Lanzillotta, Principal Deputy 
Under Secretary (Comptroller), DOD.

J. Profiteering in a Non-Profit Industry: Abusive Practices in Credit 
        Counseling (March 24, 2004)
    In 2003, the Subcommittee initiated an investigation into 
abusive practices by the credit counseling industry. In 2004, 
the Subcommittee held hearings to examine the industry and 
issued a bipartisan Subcommittee staff report on this issue.
    Since 1996, more than one million consumers have filed for 
bankruptcy each year, with a record 1.66 million filings in 
2003. The national credit card debt has skyrocketed over the 
past several years, and consumer debt has more than doubled in 
the past 10 years. To manage that debt, consumers regularly 
turned to the non-profit credit counseling industry for advice, 
financial education, and debt consolidation. Consumers who 
could not afford to make all of their credit card payments 
often enrolled in a debt management program, which allowed them 
to consolidate their debts from several credit cards, reduce 
their monthly payments, and lower their interest rates.
    The non-profit credit counseling industry often provided a 
last chance for heavily indebted consumers to repair their 
finances. Over the past several years, however, the credit 
counseling industry has undergone significant changes. The 
behavior of many new entrants into the industry resulted in 
increased consumer complaints, which led the Subcommittee, 
under the Chairmanship of Senator Coleman, to open an 
investigation into practices within the industry. The 
Subcommittee's initial inquiry lasted from approximately 
October 1993 to March 1994.
    The Subcommittee investigated the practices of credit 
counseling agencies, the for-profit service providers who 
performed ``back room'' services for those agencies, and the 
creditor banks. The enforcement policies and practices of the 
Internal Revenue Service (IRS) and the Federal Trade Commission 
(FTC) were also examined. The Subcommittee investigation 
revealed that the consumer complaints were often due to the 
practices of new entrants into the credit counseling industry 
that pressured consumers into debt management plans, charged 
excessive fees, provided little or no financial counseling or 
education, promised results that never came about, ruined 
credit ratings, provided poor service, and in many cases left 
consumers in worse debt than before they initiated their debt 
management plan.
    On March 24, 2004, the Subcommittee held a hearing to 
explore its findings. Two consumers who had been victimized by 
credit counseling agencies appeared as witnesses and told their 
stories to the Subcommittee, and two former credit counseling 
employees testified about the operations of credit counseling 
agencies from the inside. The Subcommittee also heard from 
three major credit counseling ``conglomerates''--the DebtWorks-
AmeriDebt conglomerate, the Cambridge-Brighton conglomerate, 
and the Ascend One-Amerix conglomerate. IRS Commissioner Mark 
Everson and FTC Commissioner Thomas Leary testified regarding 
their respective efforts to regulate the industry and enforce 
consumer protection laws. On the same date as the hearing, the 
Subcommittee released a bipartisan staff report.
    In response to the hearings and report, all three credit 
counseling conglomerates examined by the Subcommittee pledged 
to improve their operations. In addition, the IRS initiated a 
major review of credit counseling agencies claiming to be non-
profit organizations. The FTC also continued its enforcement 
actions against several of the conglomerates examined by the 
Subcommittee.

K. Buyer Beware: The Danger of Purchasing Pharmaceuticals Over the 
        Internet (June 17 and 22, 2004)
    In 2003, the Subcommittee initiated an investigation into 
health and security issues related to purchasing pharmaceutical 
products on the Internet and, in 2004, held two hearings on 
this issue.
    The Subcommittee held the first of the two hearings on June 
17, 2004. At that time, Americans were increasingly turning to 
the Internet for access to affordable drugs, spending in excess 
of $2.3 billion in 2003 alone. Consumers had been turning to 
Internet pharmacies due to the exorbitant prices of 
pharmaceuticals available at ``brick-and-mortar'' pharmacies, 
lured by the promise of cheaper prices and streamlined service.
    Unfortunately, rogue Internet pharmacies have proliferated, 
making millions of dollars by selling unproven, counterfeit, 
defective or otherwise inappropriate medications to 
unsuspecting consumers. Even more dangerous, these sites profit 
by selling addictive and potentially deadly controlled 
substances to consumers without a prescription or any physician 
oversight. The Subcommittee conducted a preliminary 
investigation at the JFK International Airport International 
Mail Branch (IMB) and found that 40,000 parcels containing 
drugs are imported through that airport on a daily basis, 
11,200 of them being controlled substances like Vicodin, 
OxyCodone, and morphine. These parcels entered the United 
States from many countries, not just Canada. They contained 
counterfeit drugs and drugs with improvised packaging or 
instructions in languages other than English. The Subcommittee 
also discovered that similar problems existed at Chicago O'Hare 
and Miami IMB's.
    The first panel consisted of two GAO officials who 
conducted an investigation into issues surrounding the 
availability and safety of prescription drugs sold over the 
Internet, as well as the business practices of certain Internet 
pharmacies. Marcia Crosse, Director of Health Care, Public 
Health and Military Health Care Issues at the U.S. General 
Accounting Office, testified that, at that time, online 
pharmacies outside the U.S. and Canada regularly dispensed 
pharmaceuticals without prescriptions, that many of the drugs 
were either damaged, improperly packaged, or counterfeit, and 
that a significant number of the internet pharmacies appeared 
to be running scams. Most of the drugs obtained through the 
investigation were unapproved by the FDA. These problems, in 
certain cases, were severe. She testified that a package of 
Accutane, an acne treatment that causes birth defects if 
handled by pregnant women, came with instructions written only 
in Spanish. Problems like this raise the potential that a 
person receiving medications would not have had a physician 
consultation and could not read the instructions, placing them 
at a high risk for injury.
    Robert J. Kramer, Managing Director of the Office of 
Special Investigations at the U.S. General Accounting Office, 
testified that the GAO investigation revealed that most of the 
U.S. online pharmacies in the business of selling hydrocodone 
knowingly service and richly profit from individuals who 
purchase narcotics for illicit purposes. Mr. Kramer revealed 
that the hydrocodone purchased online sold for 3 to 16 times 
the prices charged by local retail pharmacies. Further, none of 
the websites required a prescription and the narcotics could be 
easily obtained by filling out an online questionnaire. He 
testified that tech-savvy children, using their parent's credit 
cards, could easily obtain dangerous and addictive narcotics.
    The second panel consisted of individuals researching the 
growing problem of uncontrolled pharmaceutical importation and 
the unique threats to American consumers associated with the 
rise in Internet pharmacies. Hon. Rudolph W. Giuliani, Chairman 
and CEO of Giuliani Partners LLC in New York City, testified to 
the market forces that have created this surge in the use of 
Internet pharmacies. He explained that the capacity to screen 
and inspect packages for imported pharmaceuticals was, at that 
time, only 1% of the total packages moving through IMB's. Mr. 
Giuliani stressed the need for an effective solution to this 
difficult problem. Marvin Shepherd, Ph.D., Director for 
Pharmacoeconomic Studies at the College of Pharmacy at The 
University of Texas at Austin, testified that, until an 
acceptable solution can be implemented that would place 
Internet pharmacies under the scrutiny of the FDA or equivalent 
body, he is opposed to any legislative effort to allow drug 
importation from Canada. He explained that many of the drugs 
being sold on the Internet from Canada have their country of 
origin elsewhere, due to an insufficient inventory of 
pharmaceuticals within Canada. He testified that most of the 
drugs imported by Canada from other countries were in violation 
of FDA regulations, posing a significant health risk to the 
American consumer.
    The final panel consisted of two women who had lost loved 
ones due to overdoses of prescription drugs obtained in large 
quantities without prescriptions, doctors visits or follow-up 
of any kind. Elizabeth Carr of Sacramento, CA, related the 
story of her husband's death due to an overdose of Darvon, a 
controlled substance. He purchased the drug through Internet 
pharmacies located all over the world. After his death, Ms. 
Carr worked with the California Medical Board to try to hold 
someone accountable for the delivery of controlled substances 
to her husband. Because her claim did not implicate doctors 
licensed in California, there was nothing they could do. She 
testified that they said something had to be done on the 
Federal level. Francine Hahn Haight of Orange County, CA, 
testified to the loss of her son to an overdose of narcotics 
that he had easily purchased on the Internet. The drugs were 
delivered with no instructions, safety precautions, or 
physician consultation. In this case, the operators of the 
pharmacy where he had obtained the drugs were arrested by the 
DEA and were found guilty of illegally selling drugs on the 
Internet.
    On July 22, 2004, the Subcommittee held the second of two 
hearings on the health and security issues related to 
purchasing pharmaceutical products on the Internet. At the time 
of the hearing, Federal agencies lacked a uniform approach to 
screening and processing imported pharmaceuticals, no reliable 
estimate of the quantity or quality of the drugs being 
imported, and most disturbingly, more prescription drugs were 
being released without ever being inspected. Senator Coleman 
noted that the Federal Government had been aware of the problem 
since 1999, and that proposals at the hearing were strikingly 
similar to the proposals made 5 years earlier. On the other 
hand, the private sector had been taking some swift and 
proactive steps to curb access to rogue Internet pharmacies in 
an attempt to control the illegal importation of controlled 
substances and counterfeit or unsafe pharmaceuticals. Even with 
these measures in place, however, the resolution to this 
problem was far from apparent and the hearing focused on the 
actions needed to reduce, and finally eliminate, this difficult 
problem.
    Richard M. Stana, Director of Homeland Security and Justice 
Issues at the U.S. Government Accountability Office, testified 
that the volume of drugs coming into the United States due to 
Internet purchases had overrun the inspection system in place 
at International Mail Branches (IMBs) across the country. He 
pointed out that the severity and scope of the problem could 
not even be determined, though he estimated that approximately 
two million packages containing illegal drugs entered the 
country per year. He expressed concern over the already large 
and dramatically increasing flow of controlled substances that 
go directly to the purchaser, without ever going through 
inspection. Mr. Stana explained that, even when large shipments 
were identified, the paperwork and processing required to seize 
those shipments created a backlog of hundreds of man-hours. He 
testified that a reduction in processing requirements for the 
seizure of controlled substances coming through IMBs, and a 
more concerted risk management approach to inspections might 
begin to help reduce the inflow of dangerous drugs into the 
American market.
    Karen P. Tandy, Administrator of the Drug Enforcement 
Administration, testified that the scope of the problem is too 
broad for the DEA or any single agency to tackle alone. She 
explained that the Federal agencies had enlisted the support of 
the private sector to prevent access to rogue Internet 
pharmacies, prevent illegal purchases, and stem the flow of 
illegal drugs entering the country through the mail. Lee R. 
Heath, Chief Inspector of the U.S. Postal Inspection Service, 
outlined the law governing the Inspection Service and the 
limits of their jurisdiction. He explained that a possible 
application of existing statutory authority would allow the 
Postal Service, in cooperation with FDA and Customs, to handle 
illegally mailed drugs in a similar manner to the way they 
handle lottery mailings.
    Jayson P. Ahern, Assistant Commissioner at the Office of 
Field Operations for the Bureau of Customs and Border 
Protection (CBP), discussed the interagency efforts to 
determine the type and scope of pharmaceuticals imported 
through international mail into the United States. He testified 
that the volume discovered was enormous, and that a significant 
number of the drugs contained no active ingredient. He further 
explained that, during an inspection blitz conducted in June 
2004, 46 percent of the packages identified were suspected of 
containing controlled substances. John M. Taylor, III, 
Associate Commissioner for Regulatory Affairs at the U.S. Food 
and Drug Administration in Rockville, MD, testified that the 
FDA did not support efforts to legalize the importation of 
drugs from Canada and that they could not support the ``buyer 
beware'' approach. He explained that, during recent inspection 
blitzes, 88 percent of the drug products that were examined at 
IMBs were unapproved by the FDA or otherwise illegal. He warned 
that until quality control assurances could be made as to 
imported drugs, importation should be strictly regulated.
    William Hubbard, Associate Commissioner for Policy and 
Planning at the U.S. Food and Drug Administration in Rockville, 
MD, testified that at that time it was nearly impossible to 
determine the actual location of Internet pharmacies purporting 
to be located in Canada. He explained that an Internet site 
could be located in Canada, the business in Vietnam, and the 
pharmaceuticals shipped from Chile and South Africa. He 
referenced the Wisconsin State endorsed Internet pharmacy 
program and a study that concluded that one-third of the drugs 
purchased through that program did not meet the State's 
agreement. For example, 237 impermissible drugs have been 
dispensed, many of them non-FDA approved drugs, from an 
Internet pharmacy that was sanctioned by the State of 
Wisconsin.
    John Scheibel, Vice President of Public Policy for Yahoo! 
Inc., testified that Internet pharmacies must meet strict 
standards, including being licensed with Square Trade, an 
industry approved third-party trust infrastructure company, in 
order to advertise with Yahoo! He discussed their current 
cooperation with law enforcement, and testified that Yahoo! had 
worked to create a safe environment for the advertisement of 
online prescription drugs. Sheryl Sandberg, Vice President of 
Global Online Sales and Operations for Google, Inc. in Mountain 
View, CA, testified that, in order for online pharmacies to 
advertise with Google, they had to be certified by Square 
Trade. Ms. Sandburg was careful to point out that such 
licensing only applied to advertisements, and not to other 
results displayed during a search. She explained that, because 
Google and Yahoo! are impartial information gatherers, they 
could not remove sites from their database that are not illegal 
per se without violating company policy.
    Robert A. Bryden, Vice President for Corporate Security at 
FedEx Corporation in Memphis, TN, testified to the growing 
level of cooperation between FedEx and the law enforcement 
community. He also testified that, while many Internet 
pharmacies use the FedEx logo, none are authorized to do so. 
Daniel J. Silva, Vice President and Director of Security at 
United Parcel Service in Atlanta, Georgia, testified that they 
have created a computer program called Target Search, which 
allows Customs to search manifest records for suspicious 
activity. Mr. Silva explained that, like FedEx, UPS tracks 
online pharmacies that offer UPS services and display the UPS 
trademark. He testified that sites found using the UPS logo are 
sent cease and desist letters, and appropriate legal actions 
are taken wherever possible.
    Joshua L. Peirez, Senior Vice President and Assistant 
General Counsel for MasterCard International Incorporated in 
Purchase, New York, testified that MasterCard's Merchant 
Security Team had shut off the acceptance of MasterCard at over 
370 illicit websites. He testified that requiring Internet 
pharmacies to be licensed or approved to sell over the Internet 
would be helpful in providing a clear understanding of whether 
particular pharmacies are engaged in legal or illegal 
activities. Steve Ruwe, Executive Vice President of Operations 
and Risk Management at VISA U.S.A. Inc. in Foster City, CA, 
testified that Visa had engaged in a similar monitoring effort, 
which resulted in discussions with some of its member banks 
regarding their merchants who appear to be involved in selling 
controlled substances. He testified that any merchant found to 
be selling illegal substances had their licenses terminated or 
restricted. Mr. Ruwe recommended that a list of legal Internet 
pharmacies be published so that Visa could more easily comply 
with the law.

L. Money Laundering and Foreign Corruption: Enforcement and 
        Effectiveness of the Patriot Act (July 15, 2004)
    From 1999 until 2001, at the request of Senator Levin, the 
Subcommittee held a series of hearings on the vulnerability of 
U.S. financial institutions to money laundering. After the 
September 11 terrorist attack, Congress enacted legislation in 
October 2001 to strengthen U.S. anti-money laundering laws. 
These new anti-money laundering provisions, which were based in 
large part upon the Subcommittee's work, were included 
primarily in Title III of the Patriot Act. Among other 
provisions, these new Patriot Act provisions obligated U.S. 
financial institutions to exercise due diligence when opening 
and administering accounts for foreign political figures, and 
authorized U.S. money laundering prosecutions of any U.S. 
financial institution that opened accounts with funds suspected 
to be the product of corrupt financial activities by foreign 
officials.
    In 2004, at Senator Levin's request, the Subcommittee held 
a hearing on July 15, 2004, and oversaw the issuance of a 
Minority staff report examining implementation of these and 
other anti-money laundering provisions of the Patriot Act, 
using Riggs Bank in Washington, D.C. as a case history. The 
investigation featured two sets of accounts at Riggs Bank, one 
involving Augusto Pinochet, former President of Chile, and the 
other involving Equatorial Guinea, an oil-rich country in 
Africa.
    The Subcommittee investigation determined that, from 1994 
until 2002, Riggs Bank opened at least nine accounts for Mr. 
Pinochet with aggregate deposits of up to $8 million, without 
asking about the source of the funds. In addition, among other 
actions, while Mr. Pinochet was under house arrest in the 
United Kingdom and his assets were subject to a worldwide asset 
freeze, Riggs established two offshore corporations for him, 
secretly transferred over $1 million from a Pinochet account in 
London to a U.S. account held in the name of one of the 
offshore corporations, and later supplied Mr. Pinochet with 
nearly $2 million in cashiers checks so that he did not have to 
disclose the existence of his U.S. Riggs accounts. Riggs also 
concealed its Pinochet-related accounts from Federal bank 
examiners for 2 years, finally closing them in 2002, only after 
an anti-money laundering examination by its primary regulator, 
the Office of the Comptroller of the Currency (OCC), identified 
the accounts and questioned the source of the funds.
    The Subcommittee's investigation also determined that, from 
1995 until 2004, Riggs Bank administered more than 60 accounts 
for the Government of Equatorial Guinea (EG), EG officials, or 
their family members. By 2003, the EG accounts represented the 
largest banking relationship at Riggs Bank, with aggregate 
deposits ranging from $400 to $700 million. Among other 
actions, Riggs established offshore corporations for the EG 
president and his son, accepted cash deposits from the 
president and his wife of up to $3 million at a time, and 
allowed millions of dollars in oil proceeds to be wire 
transferred from EG government accounts to unfamiliar offshore 
corporations, all without asking questions about these or other 
suspicious transactions. The investigation also discovered bank 
records showing substantial payments by U.S. oil companies to 
EG officials, their family members, and entities controlled by 
them.
    The investigation exposed a troubling failure by Federal 
banking regulators to require Riggs Bank to comply with 
statutory and regulatory anti-money laundering requirements. 
From 1997 to 2003, the OCC examiners repeatedly identified 
major anti-money laundering deficiencies at Riggs Bank, yet 
allowed them to continue year after year without forceful 
action to correct them. Testimony by the OCC acknowledged that 
there was a failure of supervision and that deficient anti-
money laundering controls were allowed to fester too long 
without formal enforcement actions.
    During the hearing, the Subcommittee heard testimony from a 
variety of witnesses. The Riggs private banker who handled the 
EG accounts, Simon Kareri, a former Senior Vice President and 
Senior International Banking Manager, asserted the Fifth 
Amendment rather than testify. Riggs officials who did testify 
were Lawrence Hebert, President and CEO; Raymond Lund, Former 
Executive Vice President of the International Banking Group; 
and R. Ashley Lee, Riggs Executive Vice President and Chief 
Risk Officer, and formerly the OCC Examiner-in-Charge of Riggs 
Bank. The OCC officials who testified were Jennifer Kelly, 
Deputy Comptroller, Mid-Size and Credit Card Bank Supervision; 
John Noonan, former Assistant Deputy Comptroller; Daniel 
Stipano, Deputy Chief Counsel; and Lester Miller, the current 
Examiner-in-Charge of Riggs Bank. The Subcommittee also heard 
from three persons associated with the oil companies that made 
payments to EG officials: Andrew Swiger, Executive Vice 
President, ExxonMobil Production Company; Albert Marchetti, 
Vice President, International and Federal Relations, Amerada 
Hess Corporation; and Steven Guidry, Central Africa Business 
Unit Leader, Marathon Oil Company.
    In connection with the hearing, the Subcommittee's Minority 
staff issued a 114-page report which detailed Riggs actions 
related to the Pinochet and Equatorial Guinea accounts and the 
poor oversight exercised by the OCC and Federal Reserve of 
Riggs' anti-money laundering controls. In addition, on March 
16, 2005, the Subcommittee issued a supplemental bipartisan 
staff report providing further information on U.S. accounts 
used by Augusto Pinochet. This report established that Riggs 
Bank had opened 28 accounts for Mr. Pinochet (instead of the 
nine identified in the original staff report) in a banking 
relationship that spanned 25 years. The report also disclosed 
that Mr. Pinochet had a total of 125 bank accounts at more than 
a half-dozen U.S. banks, including Riggs, Citibank, and Banco 
de Chile-United States, many of which had been opened under 
deceptive names or in the names of offshore entities or 
Pinochet associates. This report showed that banks other than 
Riggs had also failed to implement U.S. anti-money laundering 
controls.
    In January 2005, Riggs Bank entered a guilty plea and paid 
a $16 million fine to the U.S. Treasury related to its failure 
to report suspicious activity in connection with the Pinochet, 
EG, and other accounts. In February 2005, to settle civil and 
criminal charges filed by Spanish authorities for violating a 
court order directing financial institutions to freeze Pinochet 
assets, Riggs Bank paid about $1 million in court costs and 
another $8 million to a foundation to assist victims of the 
Pinochet regime.
    Following the hearing, Senators Levin and Coleman 
introduced the Bank Examiner Postemployment Protection Act, S. 
2814, which imposed a one-year cooling off period before a 
senior Federal bank examiner may be employed by a financial 
institution that he or she had overseen. This legislation was a 
result of the Subcommittee's finding that the Federal bank 
Examiner-in-Charge of Riggs Bank, Ashley Lee, appeared to have 
functioned as more of an advocate for the bank than an arm's-
length regulator. In 2002, for example, Mr. Lee ordered that 
examination workpapers acknowledging the existence of the 
Pinochet accounts at the bank not be retained in the OCC's 
electronic database. One month later, he was hired by Riggs 
Bank, creating an appearance of a conflict of interest. A 
Levin-Coleman amendment imposing the one-year cooling off 
provision for Federal bank examiners was included in S. 2845, 
the National Intelligence Reform Act of 2004, which was enacted 
into law on December 17, 2004, as the Intelligence Reform and 
Terrorism Prevention Act (P.L. 108-458).

M. How Saddam Hussein Abused the United Nations Oil-for-Food Program 
        (November 15, 2004)
    In April 2004, Chairman Coleman directed the Permanent 
Subcommittee on Investigations to initiate an investigation 
into evidence of abuse and misconduct associated with the U.N. 
Oil-for-Food Program (the ``Program''). Following 7 months of 
investigation, the issuance of 21 document requests--including 
numerous subpoenas and Chairman's letters--numerous interviews 
with key participants, and the receipt of more than one million 
pages of evidence, the Subcommittee held its first hearing to 
examine corruption associated with the Program on November 15, 
2004. The Subcommittee's hearing assessed the stunning 
magnitude of the corruption arising from the Program and 
examined how such widespread abuse was perpetrated.
    The Subcommittee introduced at the hearing an estimate 
conducted by the Majority staff of the total illicit revenue 
raised by the Hussein regime in contravention of U.N. sanctions 
from 1991 through 2002. The Majority staff estimated that the 
Hussein regime gathered more than $21.3 billion in 
contravention of U.N. sanctions during that timeframe. This 
figure built on previous estimates by the U.S. General 
Accounting Office ($10.1 billion) and the figure contained in 
the Duelfer Report ($10.9 billion), which will be described 
below. The $21.3 billion estimate is based upon evidence 
discovered during the Subcommittee's investigation and was 
formulated with the assistance of experts from the Joint 
Economic Committee, Congressional Budget Office and GAO. The 
estimate of $21.3 billion includes:

     Loil smuggling facilitated through trade protocols 
with Iraq as well as unauthorized smuggling including ``topping 
off'' of oil tankers ($13.6 billion);
     Lsurcharges on oil purchases ($241 million);
     Lkickbacks on humanitarian goods ($4.4 billion);
     Lsubstandard goods purchased under the OFF Program 
($2.1 billion);
     Labuses in the Northern Kurdish Region ($405 
million); and
     Linvestment of illicit revenues ($403 million).

    The first witness at the Subcommittee's hearing was Charles 
Duelfer, Special Advisor to the Director of Central 
Intelligence for Strategy Regarding Iraqi Weapons of Mass 
Destruction Program. Mr. Duelfer testified about the report he 
prepared that detailed Iraq's abuse of the Oil-for-Food 
Program. The Duelfer Report concluded that Saddam Hussein's 
primary goal was to have U.N. sanctions lifted. In addition, he 
found that the introduction of the OFF Program was a key 
turning point for the regime. The perversion of the Program, 
according to the Duelfer Report, provided additional illicit 
billions of dollars in revenue streams of kickbacks and 
surcharges. More importantly, Duelfer found that the program 
rescued Iraq's economy from U.N. sanctions by increasing 
economic activity and reducing international support for U.N. 
sanctions. Duelfer reported that OFF abuses, particularly 
vouchers to well-placed individuals and entities favoring Iraq, 
and kickbacks and surcharges, which went unhindered by the U.N. 
Security Council despite their knowledge of them, emboldened 
Saddam Hussein to finance and procure missile delivery systems, 
dual-use items, and military munitions.
    On the second panel, investigative counsels from the 
Subcommittee presented new evidence to demonstrate three of the 
principal ways that the Hussein regime abused the Oil-for-Food 
Program. First, Subcommittee Counsel Mark L. Greenblatt 
testified about how Saddam converted oil into influence under 
the Program. In his testimony, Mr. Greenblatt examined of how 
Saddam gave so-called ``oil vouchers'' to foreign officials, 
journalists, and possibly even terrorist entities, in order to 
peddle influence and reward friends. In doing so, the 
Subcommittee revealed previously undisclosed evidence that 
illustrated what oil vouchers were and how the voucher process 
worked. For instance, a number of documents were introduced to 
demonstrate how high-ranking officials in Saddam's regime, such 
as Tariq Aziz, were personally involved in handing out these 
favors.
    Mr. Greenblatt presented a step-by-step review of how 
voucher recipients turned those favors into cash. For instance, 
Mr. Greenblatt introduced evidence of how Vladimir Zhirinovsky, 
a prominent Russian politician, invited an American oil company 
to ``negotiate'' the sale of an oil voucher. The Subcommittee 
showed how vouchers were then translated into formal oil 
contracts that were approved by the U.N. As an example, Mr. 
Greenblatt traced a voucher given to a Syrian journalist named 
Hamida Na'Na and showed how that voucher ended up as a formal 
contract for the sale of oil under the Oil-for-Food Program. In 
doing so, the Subcommittee explained how Saddam turned the U.N. 
sanctions on their head and actually used the Oil-for-Food 
Program to his own advantage.
    The Subcommittee also examined a second method that Saddam 
used to abuse the OFF Program through the imposition of oil 
surcharges. Mr. Greenblatt testified that, while the vouchers 
scheme was a ploy to peddle influence, the surcharges were a 
simple way to generate under-the-table revenue for Saddam's 
cash-strapped regime. Mr. Greenblatt presented evidence of how 
Saddam managed to generate roughly $230 million in revenue 
through the oil surcharges. Mr. Greenblatt's testimony 
introduced new evidence of who made under-the-table payments to 
the regime and explored how they made those payments. For 
instance, Mr. Greenblatt presented evidence about one 
transaction that involved an American oil company in which more 
than $1 million in illegal payments were made to the Hussein 
regime. Finally, Mr. Greenblatt introduced an excerpt of a 
document created by the Government of Iraq that detailed each 
and every under-the-table surcharge payment made to the Hussein 
regime.
    In addition to evidence of the Hussein regime's influence-
peddling through oil vouchers and illicit revenue through 
surcharges, the Subcommittee heard testimony about the regime's 
scheme to siphon off billions of dollars for itself by 
demanding kickbacks on contracts for humanitarian goods. 
Subcommittee Counsel Steven A. Groves testified that the regime 
cut illegal side-deals that were in their own best interests 
and to the detriment of the humanitarian needs of the Iraqi 
people.
    Mr. Groves described, for example, the kickbacks paid by a 
Scottish company called The Weir Group, which conducted more 
than $80 million of business under the Oil-for-Food Program. 
The story of The Weir Group is particularly disturbing since it 
demonstrates that legitimate, reputable corporations were 
complicit in enriching the regime of Saddam Hussein. The 
Subcommittee's investigation revealed that in June 2000 the 
Iraqi regime demanded kickbacks from The Weir Group. Rather 
than reject the demand, The Weir Group agreed to enter into an 
arrangement to pay a portion of every subsequent contract back 
to Saddam. Mr. Groves detailed this arrangement with a step-by-
step description of how Weir inflated its contracts by marking-
up the price of its products and by overstating the quantity of 
parts shipped.
    According to Mr. Groves' testimony, The Weir Group, at the 
direction of the Iraqi regime and over the course of 4 years 
and 15 contracts, paid more than $8 million into a secret Swiss 
bank account in the name of a non-existent corporation called 
``Corsin Financial Limited.'' Mr. Groves testified that Weir 
and Iraq were able to transact business in this manner with 
impunity, under the nose of the United Nations, and without 
regard of the sanctions imposed by the international community. 
Mr. Groves stated that the Office of the Iraq Program, the U.N. 
entity that oversaw the Oil-for-Food Program, approved Weir's 
contracts even though the prices of the contracts were 
sometimes inflated by 30 to 40 percent.
    The third panel witness was Assistant Secretary of Treasury 
Juan Zarate, head of the interagency Iraqi Asset Tracking Task 
Force. Mr. Zarate provided valuable information on the efforts 
of the U.S. Government and its coalition partners to identify, 
locate, and repatriate the assets of the Iraqi people. At the 
time of the hearing, the Treasury Department and other U.S. 
agencies had identified and frozen almost $6 billion in Iraqi 
assets worldwide. The majority of the $6 billion in frozen 
assets was from the bank accounts of State Oil Marketing 
Organization (SOMO) at the Central Bank of Iraq, the Rafidain 
Bank, and the Rasheed Bank. Although the Department of 
Treasury's primary mission is the recovery of Iraqi assets, one 
tangent to this recovery effort has been the uncovering of 
information pertaining to the illegal kickbacks, surcharges and 
other fraudulent activities committed by the former Iraqi 
regime under the Oil-for-Food Program. Mr. Zarate provided 
examples of Treasury's efforts to undermine terrorist actions 
through the identification and freezing of assets as well as 
the designation of terrorist individuals and organizations.
    At the hearing, Senator Levin presented the conclusions of 
the Duelfer Report that, despite Saddam Hussein's efforts to 
circumvent and undermine the OFF Program and his success in 
obtaining significant illicit revenues, U.N. sanctions were 
effective in constraining his efforts to re-arm or re-build 
Iraq's military forces. The Duelfer Report stated: ``Sanctions 
imposed constrains on potential WMD programs through 
limitations on resources and restraints on imports. The 
sanctions forced Iraq to slash funding that might have been 
used to refurbish the military establishment and complicated 
the import of military goods.'' Senator Levin also presented 
the similar conclusions of the U.S. General Accounting Office 
that ``there is no indication that Iraq has purchased large-
scale weapons systems, such as aircraft, ships or armor. Iraq's 
conventional rearmament efforts are limited to purchases of 
small arms and spare parts to keep weapons and vehicles not 
destroyed during the Gulf War operations.--U.N. controls have 
limited the amount that Iraq can spend on arms.'' Senator Levin 
concluded that, despite Saddam's actions to corrupt the OFF 
Program, the evidence established that U.N. sanctions had been 
effective in preventing Iraq from re-arming.

         III. Legislative Activities During the 108th Congress

    The Permanent Subcommittee on Investigations does not have 
legislative authority, but because its investigations play an 
important role in bringing issues to the attention of Congress 
and the public, the Subcommittee's work frequently contributes 
to the development of significant legislative initiatives. The 
Subcommittee's activities during the 108th Congress were no 
exception, with Subcommittee hearings and Members playing 
prominent roles in the development of a number of legislative 
initiatives.
A. Tax Haven and Tax Shelter Reform Act (S. 2210--by Senators Levin and 
        Coleman)
    Following a year-long investigation and Subcommittee 
hearing in 2003, on April 12, 2004, Senators Levin and Coleman 
introduced the Tax Haven and Tax Shelter Reform Act, S. 2210, 
to correct many of the problems identified by the Subcommittee. 
Among other provisions, S. 2210 contained language to 
strengthen penalties for promoting, aiding, or abetting abusive 
tax shelters by increasing the maximum penalty from $10,000 per 
violation under current law to 150 percent of the gross income 
derived by the tax shelter promoter, aider, or abettor of 
abusive tax shelter activity. The bill also sought to require 
transactions to have economic substance apart from tax 
avoidance, prohibit accountants from accepting fees contingent 
on achieving a specified tax benefit, and impose penalties on 
offshore tax haven jurisdictions which the U.S. Treasury 
Secretary determined were uncooperative with U.S. tax 
enforcement.
    In May 2004, the Senate adopted the Jumpstart Our Business 
Strength (JOBS) Act, S. 1637, which included a number of tax 
shelter reform provisions, including a proposed 50 percent 
penalty on a promoter's gross income derived from abusive tax 
shelters. During the Senate debate on the bill, a Levin-Coleman 
amendment was accepted which increased the penalty to 100 
percent of the gross income derived by a promoter, aider, or 
abettor of an abusive tax shelter. Unfortunately, the final 
bill approved by Congress, H.R. 4520, adopted only the lower 50 
percent penalty and confined it to promoters, leaving Federal 
tax shelter penalties in need of additional reform.

B. Bank Examiner Postemployment Protection Act (S. 2814--by Senators 
        Levin and Coleman)
    Following a year-long investigation, hearing, and staff 
report, Senators Levin and Coleman introduced the Bank Examiner 
Postemployment Protection Act, S. 2814. This legislation 
addressed a troubling situation uncovered during a Subcommittee 
investigation which, in part, examined how the Office of the 
Comptroller of the Currency (OCC) oversaw the anti-money 
laundering efforts at Riggs Bank. The investigation determined 
that the OCC Examiner-in-Charge at Riggs Bank appeared to have 
functioned more as an advocate than an arm's-length regulator 
during the years he was responsible for overseeing the bank. In 
2001, for example, he had advised more senior OCC officials 
against taking formal enforcement action against Riggs, because 
the bank had promised to correct identified money laundering 
deficiencies, even though the bank had repeatedly failed to 
correct these deficiencies since they were first identified in 
1997. In addition, in 2002, he ordered that examination 
workpapers identifying the existence of Pinochet accounts and 
deficiencies in Riggs anti-money laundering procedures be 
removed from the OCC's electronic database and kept only in 
paper boxes, contrary to internal requirements. Because of this 
action, the subsequent Examiner-in-Charge was unaware of the 
existence of the Pinochet-related examination.
    Less than 2 months after ordering the removal of the 
Pinochet electronic materials, the Examiner-in-Charge retired 
from the OCC and was hired by Riggs Bank. During his employment 
at the bank, the former examiner attended a number of meetings 
with OCC personnel related to Riggs' poor anti-money laundering 
procedures, despite OCC rules barring former Federal employees 
from attending meetings with the agency on matters they worked 
on while at the OCC. To address these and related conflict of 
interest concerns, the bill proposed a one-year cooling off 
period for senior examiners from the OCC, Federal Reserve 
Banks, Federal Deposit Insurance Corporation, Office of Thrift 
Supervision, and National Credit Union Administration before 
such an examiner can take a job at a financial institution that 
he or she oversaw. To ensure flexibility, the bill allowed each 
banking agency head to issue waivers for former employees on a 
case-by-case basis. A Levin-Coleman amendment containing these 
provisions was included in S. 2845, the National Intelligence 
Reform Act of 2004, and enacted into law on December 17, 2004, 
as part of the Intelligence Reform and Terrorism Prevention Act 
(P.L. 108-458).

C. The Central Contractor Registry Act (S. 2838--by Senators Coleman, 
        Levin, Collins, Lieberman, Reed, Akaka, and Dayton)
    Following the Subcommittee's hearing into Department of 
Defense (DOD) contractors who are delinquent on their taxes, on 
May 5, 2004, Senators Coleman, Levin, and others introduced The 
Central Contractor Registry Act of 2004, S. 2838. The principal 
purpose of the bill was to codify a requirement that Federal 
contractors provide their Taxpayer Identification Numbers 
(TINs) in DOD's Central Contractor Registry database, and 
provide DOD with statutory authority to validate each TIN in 
the database with the IRS. Validated TINs would then increase 
the ability of the Federal tax levy program to identify 
contractors with unpaid taxes and capture a portion of their 
contract payments to satisfy any outstanding tax debt. The bill 
was referred to the Committee on Finance. While the bill was 
not enacted into law, DOD and the IRS subsequently agreed to 
make the recommended reforms to the lax levy program.

D. Prevention of the Illegal Importation of Controlled Substances Act 
        of 2004 (``The Todd Rode Act'') (S. 2465--by Senator Coleman)
    An investigation by the Permanent Subcommittee on 
Investigations has revealed that tens of thousands of dangerous 
and addictive controlled substances are streaming into the 
United States on a daily basis from overseas Internet 
pharmacies. For example, on March 15 and 17, 2004, at JFK 
airport, home to the largest International Mail Branch in the 
United States, at least 3,000 boxes from a single vendor in the 
Netherlands containing hydrocodone and Diazepam (Valium) were 
seized by Customs and Border Protection (CBP).
    Senior CBP inspectors at JFK estimate that 40,000 parcels 
containing drugs are imported on a daily basis. During a 2004 
FDA/CBP blitz, 28 percent of the drugs tested were controlled 
substances. Extrapolating these figures, 11,200 drug parcels 
containing controlled substances are imported through JFK 
daily, 78,400 weekly, 313,600 monthly and 3,763,200 annually. 
Top countries of origin include Brazil, India, Pakistan, 
Netherlands, Mexico, and Romania. Likewise, as of March 2003, 
senior CBP officials at the Miami International Airport 
indicated that as many as 30,000 packages containing drugs were 
being imported on a daily basis. A large percentage of these 
are controlled substances. At mail facilities across the United 
States, CBP regularly seizes shipments of oxycodone, 
hydroquinone, tranquilizers, steroids, codeine laced product, 
GHB (date rape drug), and morphine. CBP is simply overwhelmed.
    In order to comply with paperwork requirements, CBP is 
forced to devote investigators solely to opening, counting, and 
analyzing drug packages, filling out duplicative forms, and 
logging into a computer all of the seized controlled 
substances. It takes CBP at least one hour to process a single 
shipment of a controlled substance. This minimizes the 
availability of inspectors to screen incoming drug packages. 
CBP acknowledges that, because of the sheer volume of products, 
bureaucratic regulations, and lack of manpower, the vast 
majority of controlled substances that are illegally imported 
are simply missed and allowed into the U.S. stream of commerce.
    The Todd Rode Act addresses this burgeoning and potentially 
lethal problem by enabling CBP to immediately seize and destroy 
any package containing a controlled substance that is illegally 
imported into the United States without having to fill out 
duplicative forms and other unnecessary administrative 
paperwork. The Act allows CBP to focus on interdicting and 
destroying potentially addictive and deadly controlled 
substances.

E. Internet Pharmacy Consumer Protection Act (``The Ryan Haight Act'') 
        (S. 2464--by Senator Coleman)
    The Ryan Haight Internet Pharmacy Consumer Protection Act 
addresses the growing problem of prescription drug sales over 
the Internet without a valid prescription by (1) providing new 
disclosure standards for Internet pharmacies; (2) barring 
Internet sites from selling or dispensing prescription drugs to 
consumers who are provided a prescription solely on the basis 
of an online questionnaire; and (3) allowing State Attorneys 
General to go to Federal court to shut down rogue sites.
    Purchasing drugs online without a valid prescription can be 
simple: A consumer just types the name of the drug into a 
search engine, quickly identifies a site selling the 
medication, fills in a brief questionnaire, and then clicks to 
purchase. The risks of self-medicating, however, can include 
potential adverse reactions from inappropriately prescribed 
medications, dangerous drug interactions, use of counterfeit or 
tainted products, and addiction to habit-forming substances. 
Several of these illegitimate sites fail to provide information 
about contraindications, potential adverse effects, and 
efficacy.
    Regulating these Internet pharmacies is difficult for 
Federal and State authorities. State medical and pharmacy 
boards have expressed the concern that they do not have 
adequate enforcement tools to regulate practice over the 
Internet. It can be virtually impossible for States to 
identify, investigate, and prosecute these illegal pharmacies 
because the consumer, prescriber, and seller of a drug may be 
located in different States.
    S. 2464 amends the Federal Food, Drug, and Cosmetic Act to 
address this problem in three steps. First, it requires 
Internet pharmacy websites to display information identifying 
the business, pharmacist, and physician associated with the 
website. Second, the bill bars the selling or dispensing of a 
prescription drug via the Internet when the website has 
referred the customer to a doctor who then writes a 
prescription without ever seeing the patient. Third, the bill 
provides States with new enforcement authority modeled on the 
Federal Telemarketing Sales Act that will allow a State 
attorney general to shut down a rogue site across the country, 
rather than only barring sales to consumers in his or her 
State.

F. Policies on Filling the Strategic Petroleum Reserve (Amendments to 
        H.R. 2691 and S. Con. Res. 95--by Senators Levin and Collins)
    In response to a year-long Subcommittee investigation and 
Minority staff report showing how the Administration's policy 
of continuously filling the Strategic Petroleum Reserve (SPR) 
without regard to price reduced available U.S. commercial oil 
supplies and increased pressure on U.S. oil prices, Senators 
Levin and Collins offered two amendments during the 108th 
Congress to address some of the identified problems. Both 
amendments were adopted by the full Senate, but not enacted 
into law during the Congress.
    In 2003, a Levin-Collins amendment to the FY2004 Interior 
appropriations bill (H.R. 2691) was adopted by the Senate but 
dropped from the final conference report. This amendment would 
have directed the Department of Energy (DOE) to develop and use 
cost-effective procedures for filling the SPR, including 
procedures to acquire oil in a manner that would maximize the 
overall domestic supply of oil and minimize the cost to 
taxpayers, consistent with national security. In 2004, a Levin-
Collins amendment to the FY2005 Senate budget resolution (S. 
Con. Res. 95) would have cancelled oil deliveries into the SPR 
during FY2005, sold the undelivered oil on the open market, and 
used the funds for deficit reduction and homeland security. 
This amendment, which had the potential to produce estimated 
taxpayer revenues of over $1.7 billion, while reducing gasoline 
prices by 10 to 25 cents per gallon, was accepted by the Senate 
but never enacted into law, because the Senate and House were 
unable to reach agreement on a final FY2005 budget resolution.

                         IV. Reports and Prints

A. U.S. Strategic Petroleum Reserve: Recent Policy has Increased Costs 
        to Consumers but not Overall U.S. Energy Security (Report 
        prepared by the Minority Staff of the Permanent Subcommittee on 
        Investigation) (S. Prt. 108-18)
    On March 5, 2003, the Subcommittee oversaw the release of a 
288-page report prepared by the Minority Staff entitled, ``U.S. 
Strategic Petroleum Reserve: Recent Policy Has Increased Cost 
to Consumers But Not Overall U.S. Energy Security.'' This 
report found that the U.S. Department of Energy's recent 
program to fill the U.S. Strategic Petroleum Reserve (SPR) had 
increased crude oil prices and hurt U.S. consumers and 
taxpayers, without actually increasing overall U.S. oil 
supplies. It also identified multiple weaknesses in the 
functioning of U.S. energy markets, calling for greater 
transparency and regulatory oversight to prevent, detect, and 
stop price manipulation.
    The report, which was released by Senator Levin, was the 
result of a year-long investigation that built upon a prior 
Subcommittee investigation into the pricing of U.S. retail 
gasoline, by examining how crude oil prices affect gasoline and 
other fuel prices. The report determined that, in early 2002, 
despite warnings from career officials about ``explosive price 
swings,'' higher taxpayer costs, and lower overall oil supplies 
that would result, the Department of Energy (DOE) began filling 
the SPR without regard to the high price of oil. The report 
found that DOE's actions removed about 40 million barrels of 
crude oil from the marketplace in 2002, became a significant 
factor driving up U.S. crude oil prices to a 12-year high of 
nearly $40 per barrel, and hurt U.S. consumers by also driving 
up the price of gasoline, home heating oil, jet fuel, and 
diesel fuel.
    The report showed that, at the end of 2001, U.S. oil 
supplies totaled about 880 million barrels, with about 560 
million barrels in the SPR and 320 million in commercial 
inventories in the private sector. At the end of 2002, the 
overall crude oil inventory was approximately the same, but 
with 600 million barrels under government control in the SPR, 
and only 270 million barrels in the private sector, an 
unusually low level at which U.S. refineries risk disruptions 
due to inadequate supplies of oil. With crude oil prices at a 
12-year high in 2002, and U.S. commercial crude oil inventories 
at record lows, the report cautioned that DOE plans to add 
another 40 million barrels to the SPR in 2003, if carried out, 
would drive U.S. oil prices even higher and impose more costs 
on U.S. consumers and taxpayers, with no assurance of a net 
increase in overall U.S. oil supplies.
    The report traced key changes in DOE policy regarding the 
filling of the SPR. It showed that, prior to 2002, DOE had 
routinely granted oil company requests to defer scheduled oil 
deliveries to the SPR when prices were high in return for 
deposits of extra oil at a later date, saving taxpayers over 
$175 million and adding 7 million barrels to the SPR in 2000-
2001. By denying deferral requests for most of 2002, however, 
DOE had missed opportunities for taxpayer savings and extra SPR 
oil. Also, by using high-priced royalty oil from off-shore 
leases for the SPR instead of selling it on the market, DOE had 
reduced revenues used to support taxpayer-funded programs. For 
example, at the 2002 SPR fill rate of 100,000 barrels per day, 
filling the SPR with $30 per barrel oil rather than $20 per 
barrel oil cost taxpayers an additional $1 million per day.
    The report also traced the history of regulatory oversight 
of commodity markets, and action taken by Congress, in 2000, to 
exempt energy commodities from normal market oversight through 
enactment of the so-called ``Enron loophole.'' The report 
described the resulting rise of unregulated over-the-counter 
(OTC) markets and showed that crude oil prices were being 
formed by trading, not only on regulated exchanges like the 
NYMEX, but also on the unregulated OTC markets which had become 
major trading centers for energy contracts and derivatives. The 
report found that the lack of OTC pricing information and 
oversight made it difficult, if not impossible, for government 
regulators and others to determine whether traders were 
manipulating crude oil prices.
    The report made a number of recommendations to improve the 
functioning of U.S. crude oil markets, including increasing 
disclosure and oversight of OTC energy markets to prevent, 
detect, and deter price manipulation; deferring additional SPR 
deposits until U.S. oil supplies increased and energy prices 
fell; and restoring DOE procedures that permitted the deferral 
of SPR deliveries when crude oil prices were high or commercial 
crude oil supplies were tight.

B. Profiteering in a Non-Profit Industry: Abusive Practices in Credit 
        Counseling (Report prepared by the Majority and Minority Staffs 
        of the Permanent Subcommittee on Investigations and reprinted 
        in S. Hrg. 108-545)
    On March 24, 2004, in conjunction with its hearing 
examining credit counseling practices, the Subcommittee issued 
a report prepared by the Majority and Minority staffs 
summarizing its investigation. The report indicated that 
traditional credit counseling agencies (CCA's) generally relied 
upon contributions from creditors or small fees from consumers 
to cover their operational costs. Certain new entrants into the 
industry, however, developed a completely different business 
model, using a for-profit model designed so that their non-
profit credit counseling agencies generate massive revenues for 
a for-profit affiliate for advertising, marketing, executive 
salaries, and any number of other activities other than actual 
credit counseling.
    The staff report established that many of the ``new'' non-
profit and for-profit companies were organized and operated to 
generate profits from an otherwise non-profit industry. 
Evidence of the new entrants' intention to create profits was 
indicated in several ways by the new entrants, including (1) 
the manner in which the new entrant was organized, (2) the 
extent of control exercised by a for-profit entity over its 
non-profit CCA affiliate, and (3) the revenue received by the 
for-profit entity from the non-profit agency.
    The staff report established that the primary effect of the 
for-profit model has been to corrupt the original purpose of 
the credit counseling industry--to provide advice, counseling, 
and education to indebted consumers free of charge or at 
minimal charge, and place consumers on debt management programs 
only if they are otherwise unable to pay their debts. Many of 
the new entrants practiced the reverse--the new entrants 
provided no bona fide education or counseling and placed every 
consumer onto a debt management program whether the consumer 
needed the program or not. The new entrants often charged 
unreasonable or exorbitant fees for their services.
    Based upon its investigation of the credit counseling 
industry, the Subcommittee made a number of findings and 
recommendations to end abusive practices, as follows:
    1. Abusive Practices. Some credit counseling agencies are 
engaged in abusive practices that hurt debtors, including by 
charging excessive fees, putting marketing before counseling, 
and providing debtors with inadequate educational, counseling, 
and debt management services.
    2. Profiteering. Some non-profit credit counseling agencies 
are funneling millions of dollars each year from cash-strapped 
debtors to insiders and affiliated for-profit businesses, in 
apparent violation of tax laws prohibiting tax-exempt charities 
from benefiting private interests.
    3. Creditor Standards. As part of ongoing efforts to halt 
abusive practices in the credit counseling industry, major 
creditors should review and strengthen their standards for 
credit counseling agencies with whom they do business, as well 
as their methods for monitoring and enforcing compliance. These 
standards should include requiring credit counseling agency to 
join an association such as NFCC or AICCCA and to comply with 
their membership requirements.
    4. Stronger Enforcement. The IRS and FTC should accelerate 
their enforcement efforts to review suspect credit counseling 
agencies and take appropriate action against agencies and 
others who are violating restrictions on tax exempt entities or 
engaging in deceptive or unfair trade practices. Federal 
enforcement personnel should also consider coordinating their 
actions with State enforcement agencies to make efficient use 
of government resources.
    5. Improved Bankruptcy Bill. The Senate should consider 
modifying credit counseling provisions in the pending 
bankruptcy legislation to strengthen protections against 
abusive practices, including determining whether a single 
authority, the U.S. bankruptcy trustee, should issue a central 
list of qualifying credit counseling agencies to provide 
counseling to bankruptcy petitioners and whether credit 
counseling fee limits would be appropriate.
    6. New Legislation. The Senate should consider introducing 
Federal legislation, either modeled on the Debt Repair 
Organizations Act of 1996 or expanding that law's application 
to reach non-profit entities, to strengthen protections against 
abusive practices in the credit counseling industry.

C. U.S. Tax Shelter Industry: The Role of Accountants, Lawyers and 
        Financial Professionals (November 18, 2003) (Report prepared by 
        the Minority Staff and reprinted in S. Hrg. 108-473 as S. Prt. 
        108-34)
    On November 18, 2003, in conjunction with two days of 
hearings, the Subcommittee oversaw the release of a Minority 
staff report entitled, ``U.S. Tax Shelter Industry: The Role of 
Accountants, Lawyers and Financial Professionals,'' describing 
the results of a year-long investigation led by Senator Levin 
into the role of accountants, lawyers, investment advisors, and 
bankers in the development, marketing, and implementation of 
abusive tax shelters.
    The report presented four case studies of tax products 
developed by KPMG, one of the leading accounting firms in the 
United States. The report traced how KPMG's Tax Services 
Practice underwent a fundamental change in the late 1990s, by 
embracing the development of tax products designed to reduce or 
eliminate taxes and pressing its tax professionals to sell them 
to KPMG clients. It then showed how the tax products were 
developed within the firm, mass marketed to prospective 
purchasers using such techniques as telemarketing calls and 
contacts with KPMG audit clients, and implemented with the 
assistance of law firms that provided favorable tax opinions, 
banks that provided needed financing, and investment advisors 
that provided key securities transactions.
    Three of the KPMG tax products examined by the 
Subcommittee, known as FLIP, OPIS, and BLIPS, functioned as 
``loss generators'' whose purpose was to generate paper losses 
that could be used to offset other income and shelter it from 
taxation. All three used a series of complex, orchestrated 
transactions involving shell companies, structured finance, and 
multi-million dollar loans not subject to any economic risk to 
accomplish their ends. The fourth tax product, known as SC2, 
was described by KPMG as a ``charitable contribution strategy'' 
and was directed at individuals seeking to shelter income from 
Chapter S corporations. SC2 was designed to generate a tax 
deductible charitable donation for the corporate owner, while 
also allowing for tax deferral and reduced taxation of the 
corporation's income by allocating--but not actually 
distributing--that income to a tax-exempt charity asked to hold 
the corporation's stock for a designated period of time. The 
IRS eventually listed all four types of transactions as abusive 
tax shelters.
    The report made a number of findings and recommendations. 
It found, for example, that the sale of potentially abusive and 
illegal tax shelters had become a lucrative business in the 
United States. It found that KPMG had devoted substantial 
resources to developing a steady supply of generic tax products 
to sell to multiple clients using aggressive marketing tactics. 
The report also found that major banks and investment advisory 
firms had provided critical lending and brokerage services in 
return for substantial fees, while law firms had provided KPMG 
clients with allegedly ``independent'' opinion letters claiming 
that a tax product would withstand an IRS challenge, also in 
return for substantial fees. To address these problems, the 
report recommended that Congress strengthen the penalties on 
promoters, aiders, and abettors of abusive tax shelters and 
increase IRS enforcement dollars. It also recommended that 
Federal regulators and professional organizations undertake 
reviews of accounting firms, banks, securities firms, and law 
firms to stop their participation in tax shelter activities. 
These and other measures were included in the Tax Shelter and 
Tax Haven Reform Act, S. 2210, introduced by Senators Levin and 
Coleman during the 108th Congress.

D. Money Laundering and Foreign Corruption: Effectiveness and 
        Enforcement of the Patriot Act--Case Study Involving Riggs Bank 
        (July 15, 2004) (Report prepared by the Minority Staff and 
        reprinted in S. Hrg. 108-633)
    On July 15, 2004, in conjunction with a hearing, the 
Subcommittee oversaw the release of a Minority staff report 
entitled, ``Money Laundering and Foreign Corruption: 
Effectiveness and Enforcement of the Patriot Act--Case Study 
Involving Riggs Bank.'' This report, which is the result of a 
year-long investigation initiated by Senator Levin, examined 
the enforcement and effectiveness of anti-money laundering 
provisions contained in Title III of the Patriot Act, using 
Riggs Bank as a case history. With the enactment of the Patriot 
Act in October 2001, U.S. financial institutions were obligated 
to exercise due diligence with opening and administering 
accounts for foreign political figures and to report to law 
enforcement suspicious transactions indicating that funds sent 
to the bank may have been the product of foreign corruption.
    The report found that, since at least 1997, Riggs had 
disregarded its anti-money laundering obligations and 
maintained a dysfunctional anti-money laundering program 
despite frequent warnings from its bank regulator, the Office 
of the Comptroller of the Currency (OCC). The report also 
showed that Federal regulators, including the OCC and Federal 
Reserve, had done a poor job of compelling Riggs Bank to comply 
with statutory and regulatory anti-money laundering 
requirements.
    To explain these findings, the report featured two sets of 
accounts at Riggs Bank, one involving Augusto Pinochet, former 
President of Chile, and the other involving Equatorial Guinea, 
an oil-rich country in Africa. The report detailed a number of 
suspicious transactions involving these accounts, including 
actions taken by the bank to conceal Pinochet funds from law 
enforcement and from its regulators, despite red flags 
involving the source of Mr. Pinochet's wealth, pending legal 
proceedings to freeze his assets, and public allegations of 
serious wrongdoing by this client. The report also detailed 
suspicious transactions involving more than 60 accounts opened 
at the bank for the Government of Equatorial Guinea (EG), EG 
officials, and their family members, including cash deposits of 
up to $3 million, accounts opened in the name of offshore 
corporations controlled by the president or his son, and 
transfers of millions of dollars in oil proceeds to unfamiliar 
offshore corporations, all taking place amid public allegations 
of EG corruption. The report found that the bank had turned a 
blind eye to evidence suggesting that it was handling the 
proceeds of foreign corruption, failed to follow its anti-money 
laundering policies and procedures, and failed to notify law 
enforcement contrary to Federal banking requirements. The 
Subcommittee also found that the OCC Examiner-in-Charge had 
advised against taking formal enforcement actions against Riggs 
Bank despite repeat anti-money laundering deficiencies, 
suppressed workpapers attesting to the existence of Pinochet 
accounts from the OCC's electronic database, and accepted a job 
at Riggs after retiring from the OCC, suggesting that he had 
become too close to Riggs during the years he was responsible 
for overseeing the bank.
    The report offered a number of recommendations to 
strengthen anti-money laundering enforcement. It recommended, 
for example, that Federal banking regulators make greater use 
of formal enforcement tools, including more timely use of civil 
fines; that regulators issue final regulations and revised 
examination guidelines implementing the due diligence 
requirements of the Patriot Act; and that Congress to impose a 
one-year cooling off period before Federal bank examiners can 
accept a position with the financial institution they oversaw. 
Senators Levin and Coleman subsequently introduced the Bank 
Examiner Postemployment Protection Act, S. 2814, to establish 
the cooling off period for senior Federal bank examiners. This 
provision was enacted into law as a Levin-Coleman amendment to 
the National Intelligence Reform Act of 2004, S. 2845, on 
December 17, 2004.
    In March 2005, the Subcommittee issued a supplemental 
bipartisan staff report with additional information about U.S. 
financial accounts used by Augusto Pinochet, not only at Riggs 
Bank but also at more than half a dozen other financial 
institutions operating in the United States. The report showed 
that Riggs Bank had 28 accounts used by Mr. Pinochet (instead 
of the nine identified in the original report) in a banking 
relationship spanning 25 years. In addition, Mr. Pinochet had 
constructed a secret network of at least 125 U.S. bank and 
securities accounts, involving millions of dollars, which he 
used to move funds and transact business, including accounts at 
Riggs, Citigroup, Banco de Chile-United States, Espirito Santo 
Bank, and others. These additional accounts present a 
cautionary tale about the ease with which a determined 
individual can manipulate the U.S. financial system. The report 
recommended that, to strengthen the U.S. financial system 
against these types of money laundering vulnerabilities, U.S. 
financial institutions should take steps to prevent suspect 
funds from being transferred to another U.S. financial 
institution, including by warning the institution under Section 
314(b) of the Patriot Act that the transfer is the result of an 
account closure due to possible money laundering or foreign 
corruption concerns. In addition, the report recommended that 
the United States work with the European Union to enable 
financial institutions with U.S. and E.U. affiliates to 
exchange client information across international lines to 
safeguard against money laundering and terrorist financing.

                 V. Requested and Sponsored GAO Reports

    In connection with its investigations, the Subcommittee 
makes extensive use of the resources and expertise of the U.S. 
General Accounting Office (GAO), the Offices of Inspectors 
General (OIGs) at various Federal agencies, and other entities. 
During the 108th Congress, the Subcommittee requested a number 
of reports and studies on issues of importance to Congress and 
to U.S. consumers. Among these reports were the following:

(1) Travel Cards: Internal Control Weaknesses at DOD Led to Improper 
        Use of First and Business Class Travel (GAO-04-88) October 24, 
        2003
    Due to ineffective oversight and management of the DOD's 
travel card program, GAO was asked to (1) identify the 
magnitude of premium class travel, (2) determine if DOD's key 
internal control activities operated effectively and provide 
examples of control breakdowns, and (3) assess DOD's monitoring 
and key elements of the control environment. Breakdowns in 
internal controls and a weak control environment resulted in 
improper first and business class travel and increased costs to 
taxpayers. Based on extensive analysis of records obtained from 
Bank of America, GAO found that DOD spent almost $124 million 
on about 68,000 premium class related tickets--primarily 
business class--during fiscal years 2001 and 2002.
    Each premium class ticket can cost the government thousands 
of dollars more than a comparable coach class ticket. GAO's 
work also indicated that civilian supervisors, managers, and 
executives and senior military officers accounted for almost 50 
percent of the premium class transactions. GAO considers travel 
by high-ranking officials to be a sensitive payment area 
because of its susceptibility to abuse. Breakdowns in key 
internal controls resulted in a significant level of improper 
premium class travel. GAO estimated that 72 percent of DOD's 
fiscal year 2001 and 2002 premium class travel was not properly 
authorized. Further, GAO found that 73 percent was not properly 
justified by the traveler. Further, DOD did not have accurate 
and complete data on the extent of premium class travel and 
performed little or no monitoring of this travel. In regard to 
the control environment, GAO found that DOD (1) issued policies 
that were inconsistent with General Service Administration 
government-wide travel regulations, (2) did not require 
military services to issue and update premium class policies to 
implement DOD's travel regulations consistently, and (3) did 
not issue guidance on how to document the authorization and 
justification of premium class travel.
    As a result of GAO's audit, DOD has begun updating its 
travel regulations to more clearly state when premium class 
travel can be authorized and to emphasize that it must only be 
used when exceptional circumstances warrant the additional 
cost. This report was featured in a Subcommittee hearing on 
this issue.

(2) Financial Management: Some DOD Contractors Abuse the Federal Tax 
        System with Little Consequence (GAO-04-95) February 12, 2004
    Senators Coleman and Levin requested that GAO determine the 
magnitude of unpaid Federal taxes owed by DOD contractors and 
whether any indications exist of abuse or criminal activity by 
the contractors. GAO was also requested to determine whether 
the DOD and the IRS had effective processes and controls in 
place to use the Treasury Offset Program to collect unpaid 
Federal taxes, and whether DOD contractors with unpaid Federal 
taxes are prohibited by law from receiving contracts from the 
Federal Government.
    The GAO reported that DOD and IRS records showed that over 
27,000 contractors owed about $3 billion in unpaid taxes as of 
September 2002. In addition, DOD has not fully implemented 
provisions of the Debt Collection Improvement Act of 1996, 
which was designed to assist the IRS in levying up to 15 
percent of each contract payment for the purpose of offsetting 
a contractor's Federal tax debt. Had that Act been fully 
implemented, GAO estimated that DOD could have collected at 
least $100 million in taxes during fiscal year 2002. This 
report was featured in a Subcommittee hearing on this issue.

(3) DOD Travel Cards: Control Weaknesses Led to Millions of Dollars 
        Wasted on Unused Airline Tickets (GAO-04-398) March 31, 2004
    In this report, at the request of Senators Coleman and 
Levin, GAO was asked to (1) determine whether, and to what 
extent, airline tickets purchased through the centrally billed 
accounts were unused and not refunded and (2) determine whether 
DOD's internal controls provided reasonable assurance that all 
unused tickets were identified and submitted for refunds. GAO 
found that control breakdowns over the centrally billed 
accounts resulted in DOD paying for airline tickets that were 
not used and not processed for refund. DOD was not aware of 
this problem before our audit and did not maintain data on 
unused tickets. We determined, based on airline data, that DOD 
had purchased--primarily in fiscal years 2001 and 2002--about 
58,000 tickets with a residual (unused) value of more than $21 
million that remained unused and not refunded as of October 
2003. We also identified more than 81,000 partially unused 
airline tickets with a purchase price of about $62 million that 
will require additional analysis to determine the residual 
value. It is possible that DOD purchased at least $100 million 
in airline tickets that it did not use and for which it did not 
claim refunds from fiscal years 1997 through 2003. The internal 
controls DOD had in place did not detect millions of dollars of 
unused airline tickets because DOD did not systematically 
implement compensating procedures to identify instances in 
which DOD personnel did not report unused tickets, or reconcile 
the centrally billed accounts to travel claims to determine 
whether airline tickets were used. This report was featured in 
a Subcommittee hearing on this issue.

(4) Energy Markets: Effects of Mergers and Market Concentration in the 
        U.S. Petroleum Industry (GAO-04-96) May 17, 2004
    As part of an ongoing Subcommittee investigation into 
energy pricing, Senator Levin asked GAO to examine the impact 
of recent mergers among oil companies on the availability and 
price of gasoline sold in the United States.
    GAO examined: (1) mergers in the U.S. petroleum industry 
and why they occurred; (2) the extent to which market 
concentration (the distribution of market shares among 
competing firms) and other aspects of market structure in the 
U.S. petroleum industry changed as a result of these mergers; 
(3) major changes that have occurred in U.S. gasoline 
marketing; and (4) how mergers and market concentration in the 
U.S. petroleum industry have affected U.S. gasoline prices at 
the wholesale level.
    The report identified over 2,600 mergers in the U.S. 
petroleum industry since the 1990s, most frequently among firms 
involved in exploration and production. Industry officials 
cited various reasons for the mergers, particularly the need 
for increased efficiency and cost savings. The report found 
that market concentration had increased substantially in the 
industry, partly because of these mergers and partly due to 
consolidation amongst refiners. In highly concentrated markets, 
firms can raise prices above competitive levels. Evidence 
suggests mergers also have changed other factors that affect 
competition, such as the ability of new firms to enter the 
market. According to industry officials, two major changes have 
occurred in U.S. gasoline marketing related to these mergers. 
First, the availability of generic gasoline, which is generally 
priced lower than branded gasoline, has decreased 
substantially. Second, refiners now prefer to deal with large 
distributors and retailers, which has motivated further 
consolidation in distributor and retail markets.
    GAO's econometric analyses indicated that mergers and 
increased market concentration had generally led to higher 
wholesale gasoline prices in the United States from the mid-
1990s through 2000. Six of the eight mergers GAO modeled led to 
price increases, averaging about 1 cent to 2 cents per gallon. 
GAO found that increased market concentration, which reflects 
the cumulative effects of mergers and other competitive 
factors, had also led to increased prices, particularly in 
certain geographic areas. For conventional gasoline, the 
predominant type used in the country, the change in wholesale 
price due to increased market concentration ranged from a 
decrease of about 1 cent per gallon to an increase of about 5 
cents per gallon. For boutique fuels sold in the East Coast and 
Gulf Coast regions, wholesale prices had increased by about 1 
cent per gallon, while prices for boutique fuels sold in 
California had increased by over 7 cents per gallon.

(5) DOD Travel Cards: Control Weaknesses Resulted in Millions of 
        Dollars of Improper Payments (GAO-04-576) June 9, 2004
    In this report, at the request of Senator Coleman, GAO was 
asked to determine whether (1) DOD improperly reimbursed 
travelers for airline tickets DOD paid for using centrally 
billed accounts, (2) internal controls were effective in 
preventing issuance of unauthorized airline tickets, and (3) 
other control weaknesses led to compromised and fraudulently 
used centrally billed accounts. A weak control environment and 
breakdowns in key controls over centrally billed accounts 
resulted in DOD paying travelers for airline tickets they did 
not purchase, issuing and paying for unauthorized airline 
tickets, and paying for goods and services obtained with 
compromised centrally billed accounts. Based on limited fiscal 
year 2001 and 2002 data provided by the Army, Navy, and Marine 
Corps, GAO identified about 27,000 transactions totaling more 
than $8 million in which DOD reimbursed travelers for airline 
tickets paid for by DOD--not the travelers. Requesting 
reimbursement for items that the traveler knowingly did not pay 
for may be a crime that could result in imprisonment or a 
monetary fine, or both. GAO's subsequent tests of a selection 
of 124 individuals who submitted 204 of these 27,000 
transactions confirmed that DOD improperly paid 91 individuals 
almost $98,000 for 123 airline tickets DOD purchased with 
centrally billed accounts. Only four travelers voluntarily 
reimbursed DOD prior to GAO initiating the audit, even though 
typically, more than a year had passed since the improper 
payments occurred. Several travelers submitted multiple claims 
for airline tickets they did not purchase, which could indicate 
intent to defraud the government. In 2003, the Air Force Audit 
Agency reported that this same problem existed at the Air Force 
and estimated that it will cost the Air Force more than $6 
million over 6 years. GAO also determined that key internal 
controls did not provide DOD reasonable assurance that (1) 
airline tickets purchased and paid for with the centrally 
billed accounts were based on valid travel orders and (2) 
centrally billed account numbers were adequately protected 
against unauthorized use. To demonstrate weaknesses in DOD's 
system of internal controls, GAO submitted a fictitious travel 
order to a commercial travel office to obtain an airline ticket 
from Washington, DC, to Atlanta, GA. DOD issued GAO the airline 
ticket, established an obligation, and paid for the ticket 
without detecting the fictitious nature of the request. GAO 
also found instances where a lack of physical safeguards 
resulted in the centrally billed account numbers being stolen 
and used for personal gain. One DOD traveler stole a centrally 
billed account number to purchase over 70 airline tickets 
totaling more than $60,000, which he sold at a discounted rate 
to coworkers and their family members for personal travel. DOD 
disputed those fraudulent charges and did not pay for those 
tickets. However, not all DOD units dispute unauthorized 
charges and DOD remains vulnerable to paying for fraudulent 
charges on compromised centrally billed accounts.

(6) Internet Pharmacies: Some Pose Safety Risks for Consumers (GAO-04-
        820) June 17, 2004
    In this report, at the request of Senator Coleman, GAO 
examined the safety of purchasing pharmaceuticals over the 
internet.
    As the demand for and the cost of prescription drugs rise, 
many consumers have turned to the Internet to purchase drugs. 
However, the global nature of the Internet can hinder State and 
Federal efforts to identify and regulate Internet pharmacies to 
help assure the safety and efficacy of products sold. Recent 
reports of unapproved and counterfeit drugs sold over the 
Internet have raised further concerns. GAO was asked to examine 
(1) the extent to which certain drugs can be purchased over the 
Internet without a prescription; (2) whether the drugs are 
handled properly, approved by the Food and Drug Administration 
(FDA), and authentic; and (3) the extent to which Internet 
pharmacies are reliable in their business practices. GAO 
attempted to purchase up to 10 samples of 13 different drugs, 
each from a different pharmacy Web site, including sites in the 
U.S., Canada, and other foreign countries. GAO determined 
whether the samples contained a pharmacy label with patient 
instructions for use and warnings on the labels or the 
packaging and forwarded the samples to their manufacturers to 
determine whether they were approved by FDA and authentic. GAO 
also confirmed the locations of several Internet pharmacies and 
identified those under investigation by regulatory agencies. 
GAO obtained most of the prescription drugs it targeted from a 
variety of Internet pharmacy Web sites without providing a 
prescription. GAO obtained 68 samples of 11 different drugs--
each from a different pharmacy Web site in the U.S., Canada, or 
other foreign countries, including Argentina, Costa Rica, Fiji, 
India, Mexico, Pakistan, Philippines, Spain, Thailand, and 
Turkey. Five U.S. and all 18 Canadian pharmacy sites from which 
GAO received samples required a patient-provided prescription, 
whereas the remaining 24 U.S. and all 21 foreign pharmacy sites 
outside of Canada provided a prescription based on their own 
medical questionnaire or had no prescription requirement. Among 
the drugs GAO obtained without a prescription were those with 
special safety restrictions and highly addictive narcotic 
painkillers. GAO identified several problems associated with 
the handling, FDA approval status, and authenticity of the 21 
samples received from Internet pharmacies located in foreign 
countries outside of Canada. Fewer problems were identified 
among pharmacies in Canada and the United States. None of the 
foreign pharmacies outside of Canada included required 
dispensing pharmacy labels that provided instructions for use, 
few included warning information, and 13 displayed other 
problems associated with the handling of the drugs. For 
example, three samples of a drug that should be shipped in a 
temperature-controlled environment arrived in envelopes without 
insulation. Manufacturer testing revealed that most of these 
drug samples were unapproved for the U.S. market; however, 
manufacturers found the chemical composition of all but four 
was comparable to the product GAO ordered. Four samples were 
determined to be counterfeit products or otherwise not 
comparable to the product GAO ordered. Similar to the samples 
received from other foreign pharmacies, manufacturers found 
most of those from Canada to be unapproved for the U.S. market; 
however, manufacturers determined that the chemical composition 
of all drug samples obtained from Canada were comparable to the 
product GAO ordered. Some Internet pharmacies were not reliable 
in their business practices. Most instances identified involved 
pharmacies outside of the United States and Canada. GAO did not 
receive six orders for which it had paid. In addition, GAO 
found questionable entities located at the return addresses on 
the packaging of several samples, such as private residences. 
Finally, 14 of the 68 pharmacy Web sites from which GAO 
obtained samples were found to be under investigation by 
regulatory agencies for reasons including selling counterfeit 
drugs and providing prescription drugs where no valid doctor-
patient relationship exists. Nine of these were U.S. sites, one 
a Canadian site, and four were other foreign Internet pharmacy 
sites. In commenting on a draft of this report, FDA generally 
agreed with its findings and conclusions. This report was 
featured in a Subcommittee hearing on this issue.
      

                                 
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