[Senate Report 113-111]
[From the U.S. Government Publishing Office]


113th Congress                                                  Report
                                 SENATE
 1st Session                                                    113-111
_______________________________________________________________________

                                     

                                                       Calendar No. 199

 
        SECURITY CLEARANCE OVERSIGHT AND REFORM ENHANCEMENT ACT

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                         WITH ADDITIONAL VIEWS

                         [to accompany S. 1276]

TO INCREASE OVERSIGHT OF THE REVOLVING FUND OF THE OFFICE OF PERSONNEL 
 MANAGEMENT, STRENGTHEN THE AUTHORITY TO TERMINATE OR DEBAR EMPLOYEES 
   AND CONTRACTORS INVOLVED IN MISCONDUCT AFFECTING THE INTEGRITY OF 
  SECURITY CLEARANCE BACKGROUND INVESTIGATIONS, ENHANCE TRANSPARENCY 
REGARDING THE CRITERIA UTILIZED BY FEDERAL DEPARTMENTS AND AGENCIES TO 
DETERMINE WHEN A SECURITY CLEARANCE IS REQUIRED, AND FOR OTHER PURPOSES




  September 25 (legislative day, September 24), 2013.--Ordered to be 
                                printed
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                  THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin             KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota         JEFF CHIESA, New Jersey

                   Richard J. Kessler, Staff Director
               John P. Kilvington, Deputy Staff Director
                    Beth M. Grossman, Chief Counsel
       Lawrence B. Novey, Chief Counsel for Governmental Affairs
Anthony S. McClain, Staff Director, Subcommittee on the Efficiency and 
      Effectiveness of Federal Programs and the Federal Workforce
               Keith B. Ashdown, Minority Staff Director
         Christopher J. Barkley, Minority Deputy Staff Director
               Andrew C. Dockham, Minority Chief Counsel
     Catharine A. Bailey, Minority Director of Governmental Affairs
                     Laura W. Kilbride, Chief Clerk


                                                       Calendar No. 199
113th Congress                                                  Report
                                 SENATE
 1st Session                                                    113-111

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




        SECURITY CLEARANCE OVERSIGHT AND REFORM ENHANCEMENT ACT

                                _______
                                

  September 25 (legislative day, September 24), 2013.--Ordered to be 
                                printed

                                _______
                                

 Mr. Carper, from the Committee on Homeland Security and Governmental 
                    Affairs, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 1276]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 1276) to increase 
oversight of the Revolving Fund of the Office of Personnel 
Management, strengthen the authority to terminate or debar 
employees and contractors involved in misconduct affecting the 
integrity of security clearance background investigations, 
enhance transparency regarding the criteria utilized by Federal 
departments and agencies to determine when a security clearance 
is required, and for other purposes, having considered the 
same, reports favorably thereon with an amendment in the nature 
of a substitute and recommends that the bill, as amended, do 
pass.

                                CONTENTS

                                                                   Page
  I. Purpose and Summary..............................................2
 II. Background and Need for Legislation..............................2
III.  Legislative History.............................................3
 IV. Section-by-Section Analysis of the Bill, as Reported.............4
  V. Congressional Budget Office Cost Estimate........................4
 VI. Evaluation of Regulatory Impact..................................5
VII. Changes in Existing Law..........................................7

                         I. Purpose and Summary

    The purpose of S. 1276 is to ensure that the Office of 
Personnel Management's (OPM's) Inspector General (IG) has the 
authority to obtain funding needed to audit and investigate 
critical OPM activities that are currently off limits to 
oversight by the IG due to an existing lack of authority. OPM 
oversees human resources-related matters for federal employees, 
such as hiring and benefits, as well as the pension and 
insurance plans for federal retirees. It also provides a range 
of commercial-like services to other federal agencies including 
human resource management, leadership training, and background 
investigations for security clearances. For these services, OPM 
collects customer-agency's funds and deposits them into a 
Revolving Fund, which in turn pays for the personnel and other 
resources OPM uses to do its work for other agencies.
    Because OPM's IG may currently not access Revolving Fund 
money to cover the costs of oversight, the IG is left to 
operate without the resources or personnel required to carry 
out thorough oversight of this $2 billion Revolving Fund and 
the services administered out of the Fund. S. 1276 will remedy 
this problem by authorizing the use of the Revolving Fund to 
pay for OPM's IG to audit and investigate OPM activities paid 
for out of that Fund.

                II. Background and Need for Legislation

    OPM is tasked with managing the federal workforce in a 
variety of ways, working with government agencies and employees 
on issues from recruitment to the resolution of labor disputes. 
Another major OPM function is the conducting of background 
investigations through its Federal Investigative Services (FIS) 
division. Currently, FIS conducts more than 90 percent of the 
background investigations for government employees and 
contractors, including most Defense Department 
investigations.\1\
---------------------------------------------------------------------------
    \1\U.S. Office of Personnel Management, ``Background 
Investigations.'' Accessed Sept. 20, 2013. http://www.opm.gov/
investigations/background-investigations.
---------------------------------------------------------------------------
    Following leaks of classified data by National Security 
Agency contractor Edward Snowden, the Senate Homeland Security 
and Governmental Affairs Subcommittees on the Efficiency and 
Effectiveness of Federal Programs and the Federal Workforce and 
Financial and Contracting Oversight held a joint hearing on 
June 20, 2013, titled ``Safeguarding our Nation's Secrets: 
Examining the Security Clearance Process.'' Witnesses from OPM 
and FIS testified that while FIS used OPM's Revolving Fund to 
collect payments from federal agencies to finance background 
investigations, the Fund has never been audited in its entirety 
because the costs of audits, investigations, and other 
oversight activities are prohibited from being charged against 
the Fund. At the hearing, due to the many concerns raised about 
the quality of the background investigations being carried out 
by OPM, the OPM Inspector General, Patrick E. McFarland, 
testified that the current insufficient level of oversight of 
the Fund and activities carried out with its resources was a 
``clear threat to national security.''\2\
---------------------------------------------------------------------------
    \2\Testimony of Patrick E. McFarland, Inspector General, U.S. 
Office of Personnel Management, before the Senate Committee on Homeland 
Security and Governmental Affairs, Subcommittee on the Efficiency and 
Effectiveness of Federal Programs and the Federal Workforce: 
``Safeguarding our Nation's Secrets: Examining The Security Clearance 
Process,'' June 20, 2013. http://www. hsgac.senate. gov/subcommittees/ 
fpfw/hearings/ examining- the-workforce-of- the-us-intelligence- 
community-and-the- role-of-private-contractors.
---------------------------------------------------------------------------
    Although FIS comprises the largest program within the 
Revolving Fund, there are numerous other programs and 
activities financed by the Fund. Currently, through the Fund, 
OPM interacts with over 200 Federal entities, including all 
major Federal departments and agencies, on activities such as 
Human Resources Solutions, USAJOBS, Human Resources Line of 
Business, HR Tools & Technology, Enterprise Human Resource 
Integration, and the Presidential Management Fellows 
Program.\3\
---------------------------------------------------------------------------
    \3\Testimony of Patrick E. McFarland, Inspector General, U.S. 
Office of Personnel Management, before the House Committee on Oversight 
and Government Reform, Subcommittee on Federal Workforce, U.S. Postal 
Service and the Census: ``OPM's Revolving Fund: A Cycle of Government 
Waste?'', June 5, 2013. http://oversight. house.gov/wp-content/ 
uploads/2013/06/ McFarland-Testimony- Final2.pdf.
---------------------------------------------------------------------------
    Indeed, OPM devotes more resources to administering the 
programs funded through the $2 billion Revolving Fund than to 
any of its other operational programs.\4\ Because of the 
security and fiscal implications of properly administering and 
financing this Fund, thorough oversight is a critical 
necessity.
---------------------------------------------------------------------------
    \4\Id.
---------------------------------------------------------------------------
    S. 1276 would ensure that such oversight occurs. It does so 
by authorizing Revolving Fund monies to be spent on the costs 
of audits, investigations, and oversight activities by the IG. 
This same legislative proposal was included in the President's 
Fiscal Year 2014 budget request.\5\
---------------------------------------------------------------------------
    \5\Office of Management and Budget, Fiscal Year 2014 Budget of the 
U.S. Government, Appendix, 2013, at page 1031, http:// www.whitehouse. 
gov/sites/default/ files/omb/budget/ fy2014/assets/ appendix.pdf.
---------------------------------------------------------------------------

                        III. Legislative History

    On July 10, 2013, Senator Tester introduced S. 1276, with 
Senators McCaskill, Portman, Coburn and Ron Johnson as 
cosponsors, and the bill was referred to the Senate Committee 
on Homeland Security and Governmental Affairs. In the House of 
Representatives, similar legislation, H.R. 2860, has been 
introduced by Reps. Blake Farenthold and Stephen Lynch.
    As introduced, S. 1276 contained three provisions: (1) the 
provision related to the Revolving Fund described above; (2) a 
provision codifying the need for the Office of Personnel 
Management to have a quality assurance process in place to 
handle cases in which background investigations are 
compromised; and (3) a provision requiring the federal 
government to update its policies for determining which 
employees require a security clearance.
    The Committee considered the bill at a business meeting on 
July 31, 2013. Senator Tester offered a substitute amendment 
striking the provisions other than the one authorizing the use 
of Revolving Fund resources for oversight activities. The 
Committee adopted the substitute amendment, as modified, and 
ordered the underlying bill reported favorably, both en bloc by 
voice vote. Members present for the vote on the amendment and 
on the bill were Senators Carper, Levin, McCaskill, Tester, 
Begich, Baldwin, Coburn, Johnson, Ayotte, and Chiesa.

        IV. Section-by-Section Analysis of the Bill, as Reported

    Section 1--Short Title. This section states that the Act 
may be cited as the ``Security Clearance Oversight and Reform 
Enhancement Act.''
    Section 2--Oversight of the Revolving Fund of the Office of 
Personnel Management. This section amends 5 U.S.C. 
Sec. 1304(e), to authorize the costs of OPM Inspector General 
audits, investigations, and oversight activities relating to 
the Revolving Fund and the functions financed by the Fund, to 
be charged against the Fund.
    Specifically, 5 U.S.C. Sec. 1304(e)(1) currently states 
that the Revolving Fund is available to OPM for financing 
investigations and other services that other agencies request 
OPM to perform on a reimbursable basis. Section 2(a) of the 
bill amends Sec. 1304(e)(1) to also make the Fund available to 
OPM for the cost of audits, investigations, and oversight that 
are conducted by OPM's IG and that relate to the Fund and the 
functions financed by the Fund.
    In addition, 5 U.S.C. Sec. 1304(e)(5) currently requires 
that OPM must prepare a budget each year for the operations 
financed by the Revolving Fund, and that the budget must be 
submitted to Congress for consideration. Section 2(b) of the 
bill amends Sec. 1304(e)(5) to require OPM's IG to estimate the 
amount that will be needed for adequate oversight of the Fund 
and of the functions financed by the Fund, and to require that 
OPM must include that estimate in its annual budget for the 
Fund. The legislation also specifies that the estimate from 
OPM's IG may not exceed 0.33 percent of the total amount of 
expected expenditures from the Revolving Fund that OPM includes 
in the budget for Congress.

              V. Congressional Budget Office Cost Estimate

                                                   August 23, 2013.
Hon. Tom Carper,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1276, the Security 
Clearance Oversight and Reform Enhancement Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

S. 1276--Security Clearance Oversight and Reform Enhancement Act

    S. 1276 would permit activities of the Office of Personnel 
Management's (OPM) Office of the Inspector General (IG) to 
receive funding through the OPM Revolving Fund. The bill also 
would set a limit on the funds available. Under current law, 
the OPM Revolving Fund provides about $2 billion a year for a 
variety of functions, including background investigations to 
determine an individual's suitability for a security clearance, 
but the IG is not permitted to use those funds to audit and 
provide oversight of the fund's finances.
    Based on information from the OPM IG, CBO estimates that 
implementing this legislation would enable the IG to begin 
auditing the OPM Revolving Fund at a cost of $13 million over 
the 2014-2018 period, assuming appropriation of the necessary 
funds. Enacting the bill would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    S. 1276 would impose no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.

                  VI. Evaluation of Regulatory Impact

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of this bill. The enactment of 
this legislation will not have a significant regulatory impact. 
There are no intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act and no costs on 
State, local, or tribal governments. The legislation contains 
no other regulatory impact.

                            ADDITIONAL VIEWS

    At the June 20, 2013 hearing witnesses also testified about 
the lack of government-wide standards in background 
investigations and awarding security clearances, and the need 
for improved guidance. A third provision requiring the federal 
government to update its policies for determining which 
employees require a security clearance was included in the 
original draft of the bill. This third provision was removed in 
the amendment offered by Sen. Tester pending OPM-ODNI guidance 
of ``sensitive'' national security designations. The Committee 
continues to be concerned about the lack of government wide 
standards in national security designations and will monitor 
the OPM-ODNI guidance.

                                                       Ron Johnson.
     VII. Changes in Existing Statute Made by the Bill, as Reported

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic and existing law, in which no 
change is proposed, is shown in roman):

UNITED STATES CODE

           *       *       *       *       *       *       *


TITLE 5--GOVERNMENT ORGANIZATION AND EMPLOYEES

           *       *       *       *       *       *       *


PART II--CIVIL SERVICE FUNCTIONS AND RESPONSIBILITIES

           *       *       *       *       *       *       *


CHAPTER 13--SPECIAL AUTHORITY

           *       *       *       *       *       *       *



Sec. 1304. Loyalty investigations; reports; revolving fund.

    (a) * * *

           *       *       *       *       *       *       *

    (e)(1) A revolving fund is available, to the Office without 
fiscal year limitation, for financing investigations, training, 
and such other functions as the Office is authorized or 
required to perform on a reimbursable basis, including 
personnel management services performed at the request of 
individual agencies (which would otherwise be the 
responsibility of such agencies), or at the request of 
nonappropriated fund instrumentalities, and for the cost of 
audits, investigations, and oversight activities relating to 
the fund and the functions financed by the fund, conducted by 
the Inspector General of the Office. However, the functions 
which may be financed in any fiscal year by the fund are 
restricted to those functions which are covered by the budget 
estimates submitted to the Congress for that fiscal year. To 
the maximum extent feasible, each individual activity shall be 
conducted generally on an actual cost basis over a reasonable 
period of time.

           *       *       *       *       *       *       *

    (5) The Office shall prepare a business-type budget 
providing full disclosure of the results of operations for each 
of the functions performed by the Office and financed by the 
fund, and such budget shall be transmitted to the Congress and 
considered, in the manner prescribed by law for wholly owned 
Government corporations. Each budget submitted under this 
paragraph shall include an estimate from the Inspector General 
of the Office of the amount required to pay the reasonable 
expenses to adequately audit, investigate, and perform other 
oversight activities relating to the fund and the functions 
financed by the fund for the applicable fiscal year, which 
shall not exceed 0.33 percent of the total budgetary authority 
requested in the budget estimates submitted to Congress by the 
Office for that fiscal year.

           *       *       *       *       *       *       *


                                  
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