[Senate Report 114-406]
[From the U.S. Government Publishing Office]


  						Calendar No. 720

114th Congress }					{ Report
 2d Session    }                  SENATE                { 114-406
_______________________________________________________________________

                  BONUSES FOR COST CUTTERS ACT OF 2015

                               __________

                              R E P O R T

                                 OF THE

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                             TOGETHER WITH

                            ADDITIONAL VIEWS

                              TO ACCOMPANY

                                S. 1378

  TO STRENGTHEN EMPLOYEE COST SAVINGS SUGGESTIONS PROGRAM WITHIN THE 
                           FEDERAL GOVERNMENT




               December 20, 2016.--Ordered to be printed

   Filed, under authority of the order of the Senate of December 10 
                  (legislative day, December 9), 2016
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
RAND PAUL, Kentucky                  JON TESTER, Montana
JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
JONI ERNST, Iowa                     GARY C. PETERS, Michigan
BEN SASSE, Nebraska

                  Christopher R. Hixon, Staff Director
                Gabrielle D'Adamo Singer, Chief Counsel
       Patrick J. Bailey, Chief Counsel for Governmental Affairs
              Gabrielle A. Batkin, Minority Staff Director
           John P. Kilvington, Minority Deputy Staff Director
               Mary Beth Schultz, Minority Chief Counsel
 Katherine C. Sybenga, Minority Chief Counsel for Governmental Affairs
                     Laura W. Kilbride, Chief Clerk




                                                   Calendar No. 720
114th Congress}						{Report
                                 SENATE
                                                                 
 2d Session   }                                         {114-406

======================================================================
 
                  BONUSES FOR COST CUTTERS ACT OF 2015

                                _______
                                

               December 20, 2016.--Ordered to be printed

   Filed, under authority of the order of the Senate of December 10 
                  (legislative day, December 9), 2016

                                _______
                                

 Mr. Johnson, 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. 1378]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 1378) to strengthen 
employee cost savings suggestions programs within the Federal 
Government, 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..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History..............................................3
 IV. Section-by-Section Analysis......................................3
  V. Evaluation of Regulatory Impact..................................4
 VI. Congressional Budget Office Cost Estimate........................4
VII. Additional Views.................................................6
VIII.Changes in Existing Law Made by the Bill, as Reported............7


                         I. Purpose and Summary

    S. 1378, the Bonuses for Cost-Cutters Act of 2015, seeks to 
strengthen employee cost savings suggestions programs within 
the Federal Government by improving incentive structures for 
Federal employees to report unneeded funds that can be returned 
to the Treasury for the purposes of deficit reduction and 
reallocation.

              II. Background and the Need for Legislation

    The practice by Federal agencies of expending funds at the 
end of the fiscal year has long been a concern for the 
Committee. For example, in 1980, the Committee issued a report 
titled ``Hurry-Up Spending,'' which found that the rush to 
spend money at the end of the year led to unnecessarily high 
prices, lack of competition, and generally poor adherence to 
contracting regulations.\1\ In 2006, then-Chairman of the 
Subcommittee on Federal Financial Management Tom Coburn held a 
hearing titled ``Unobligated Balances at Federal Agencies,'' 
that examined how various Federal agencies work around 
unobligated balances at the end of the year.\2\
---------------------------------------------------------------------------
    \1\Subcomm. on Oversight of Gov't Mgmt. of the S. Comm. on 
Governmental Affairs, ``Hurry-Up'' Spending (1980), U.S. Gov't Printing 
Office.
    \2\Unobligated Balances at Fed. Agencies: Hearing Before the 
Subcomm. on Fed. Fin. Mgmt., Gov't Info. & Int'l Sec. of the S. Comm. 
on Homeland Sec. & Governmental Affairs, 109th Cong. (2006).
---------------------------------------------------------------------------
    Continuing this oversight, on September 30, 2015, the 
Committee's Federal Spending Oversight and Emergency Management 
Subcommittee held a hearing titled ``Prudent Planning or 
Wasteful Binge? A Look at End of the Year Spending.''\3\ The 
hearing examined the incentive structure currently in place for 
Federal managers making decisions about how to use money at the 
end of each fiscal year.\4\ Witness Dean W. Sinclair, from 
Changing the Culture of Washington, argued that the problem is 
with the incentives for the use of funds: ``if a manager 
returns money to the Treasury, it will have a negative career 
impact.''\5\
---------------------------------------------------------------------------
    \3\Prudent Planning or Wasteful Binge? A Look at End of the Year 
Spending: Hearing Before Subcomm on Fed. Spending Oversight & Emergency 
Mgmt. of the S. Comm. on Homeland Sec. & Governmental Affairs, 114th 
Cong. (2015).
    \4\Id.
    \5\Prudent Planning or Wasteful Binge? A Look at End of the Year 
Spending: Hearing Before Subcomm on Fed. Spending Oversight & Emergency 
Mgmt. of the S. Comm. on Homeland Sec. & Governmental Affairs, 114th 
Cong. 60 (2015) (statement of Dean W. Sinclair, Changing the Culture of 
Washington).
---------------------------------------------------------------------------
    The Bonuses for Cost-Cutters Act of 2016 directly addresses 
this incentives problem by expanding the existing awards 
program for Federal employees to disclose waste, fraud, or 
mismanagement that result in cost savings. Under the provisions 
of the bill, an employee can identify unnecessary surplus 
salary and expenses and refer them to the inspector general of 
the agency or other agency employees designated to undertake 
such reviews, as well as the Chief Financial Officer of the 
agency for review. If both concur that the funds are not 
necessary for their intended purpose, and the rescission of the 
funds would not be detrimental to the execution of that 
purpose, then the head of the agency shall transfer the surplus 
or unnecessary funds to the general fund of the Treasury 
Department. However, the head may retain up to ten percent of 
any funds for reprogramming, or also for the purpose of paying 
a cash award to the employee who identified the surplus. The 
remainder of the funds would be used by the Treasury Department 
for the purpose of deficit reduction.

                        III. Legislative History

    S. 1378, the Bonuses for Cost-Cutters Act of 2015, was 
introduced on May 19, 2015, by Senator Rand Paul (R-KY) with 
Senators Mark Warner (D-VA), Michael Enzi (R-WY), Gory Gardner 
(R-CO), and Pat Toomey (R-PA). Senators Kelly Ayotte (R-NH), 
Michael Bennet (D-CO), John Cornyn (R-TX), Steve Daines (R-MT), 
Joni Ernst (R-IA), Ron Johnson (R-WI), James Lankford (R-OK), 
Mike Lee (R-UT), Claire McCaskill (D-MO), David Perdue (R-GA), 
and Rob Portman (R-OH) later joined as co-sponsors. The bill 
was referred to the Committee on Homeland Security and 
Governmental Affairs.
    The Committee considered S. 1378 at a business meeting on 
May 25, 2016. A substitute amendment was offered by Senator 
Paul. The substitute amendment adds protections that limit 
spending affected by the bill to ``salaries and expenses'' and 
truly ``use it or lose it money'' and also adds a six-year 
sunset on the program.
    The Committee adopted the Paul substitute amendment by 
unanimous consent, and ordered the bill, as amended, be 
reported favorably by a roll call vote of nine in favor and 
five against. Senators voting in the affirmative were Johnson, 
Portman, Paul, Lankford, Ayotte, Ernst, Sasse, McCaskill, and 
Heitkamp. For the record only, Senators McCain and Enzi voted 
in the affirmative by proxy vote. Senators voting in the 
negative were Carper, Tester, Baldwin, Booker, and Peters.

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

    Section 1 establishes the short title of the bill as the 
``Bonuses for Cost-Cutters Act of 2016.''
    Section 2 amends the sections of the U.S. Code that provide 
for awards for cost-savings disclosures awards by expanding 
them to include surplus salaries and expenses funds that are 
determined to be unnecessary.
    Subsection (a)(1) defines key terms, such as ``surplus 
salaries and expenses funds.''
    Subsection (a)(2) establishes a process by which an 
employee may identify surplus salaries and expenses that are 
unnecessary. The agency Inspector General and Chief Financial 
Officer will review the disclosure to determine whether the 
funds are necessary and the recession of which would not be 
detrimental to the full execution of the purposes for which the 
amounts were made available. The remaining funds must be 
transferred to the Treasury for the purposes of deficit 
reduction, except that the head of an agency may retain up to 
10 percent for reprogramming or to provide awards to the 
employee or employees who identified the surplus funds. This 
subsection also contains reporting requirements so that 
Congress can assess the efficacy of the disclosure program.
    Subsection (a)(3) modifies the table of sections in statute 
to reflect the changes made by this bill.
    Subsection (a)(4) provides that the authorities will sunset 
six years after the date of enactment.
    Subsection (b) identifies certain employees who are 
prohibited from receiving a cash award: an individual serving 
in a position at level I of the Executive Schedule; the head of 
the agency; or a commissioner, board member, or other voting 
member of an independent establishment. This subsection also 
makes a technical amendment.

                   V. 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 and determined 
that the bill will have no regulatory impact within the meaning 
of the rules. The Committee agrees with the Congressional 
Budget Office's statement that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would impose no costs 
on state, local, or tribal governments.

             VI. Congressional Budget Office Cost Estimate

                                                     July 29, 2016.
Hon. Ron Johnson, 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. 1378, the Bonuses 
for Cost-Cutters Act of 2016.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

S. 1378--Bonuses for Cost-Cutters Act of 2016

    Under current law, inspectors general (IG) of agencies can 
pay bonuses to federal employees who identify waste, fraud, or 
mismanagement of funds. S. 1378 would authorize agencies to pay 
bonuses to employees who identify unnecessary expenditures from 
amounts provided for agencies' salaries and expenses. Under the 
bill, if an agency's IG and its Chief Financial Officer agree 
that funds appropriated to the agency are no longer required 
then 90 percent of those surplus amounts would be transferred 
to the Treasury. The agency would retain 10 percent of the 
surplus funds and could pay a bonus to the employee who 
identified those surplus amounts.
    To the extent that the process envisioned under S. 1378 
results in fewer unnecessary expenditures, implementing the 
bill could reduce federal spending; however, CBO has no basis 
for estimating any reductions in spending under the bill.
    Because salaries and expenses for some agencies are 
mandatory appropriations, enacting the bill could affect direct 
spending; therefore, pay-as-you-go procedures apply. Enacting 
S. 1378 would not affect revenues.
    CBO estimates that enacting S. 1378 would not increase 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2027.
    S. 1378 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contacts for this estimate are Megan Carroll 
and Matthew Pickford. The estimate was approved by H. Samuel 
Papenfuss, Deputy Assistant Director for Budget Analysis.

                         VII. Additional Views

        ADDITIONAL VIEWS OF SENATORS CARPER, BALDWIN, AND PETERS

    While we support efforts to provide incentives for federal 
employees to find savings within their agencies, we have 
serious concerns with the way this bill would delegate 
Congress' spending authority to executive branch officials.
    We believe we can all agree that it is important to curb 
wasteful spending, including wasteful spending at the end of a 
fiscal year when agency managers might fear that they need to 
use the funds they've been appropriated or lose them. However, 
this bill goes much further than that. If this bill were 
enacted, it would allow agency Inspectors General and Chief 
Financial Officers to make decisions on whether or not funds 
appropriated for a specific purpose are necessary and redirect 
that funding without congressional approval. Congress would 
have no power to ensure that the money appropriated to a 
specific purpose is actually used for that purpose and would 
have no power to redirect the funding to other projects and 
priorities.
    During consideration of this bill, Senator Carper suggested 
additional changes that would have helped address some of these 
concerns by requiring that agencies return 50 percent of 
surplus funds identified by this bill to the Treasury when they 
expire, while allowing an agency to reprogram the remaining 50 
percent for other uses. Senator Carper also suggested that the 
bill should include a role for the head of an agency, an 
official that is held accountable by Congress, in determining 
which funds are actually surplus. We believe that with these 
changes the bill would still provide an incentive for agencies 
to make smarter spending decisions at the end of the year 
without Congress ceding its spending power.
    Allowing executive branch officials to determine whether or 
not funds Congress has already appropriated for a particular 
use are necessary effectively takes away Congress' ability to 
control where these funds are spent and places far too much 
power in the hands of unelected agency officials. Therefore, we 
oppose this flawed measure.
                                                  Thomas R. Carper.
       VII. Changes in Existing Law 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 
S. 1818 as reported are shown as follows (existing law proposed 
to be omitted is enclosed in 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 III--EMPLOYEES

           *       *       *       *       *       *       *


CHAPTER--INCENTIVE AWARDS

           *       *       *       *       *       *       *



Subchapter I--Awards for Superior Accomplishments

           *       *       *       *       *       *       *



[SEC. 4509. PROHIBITION OF CASH AWARD TO EXECUTIVE SCHEDULE OFFICERS.

    [No officer may receive a cash award under the provisions 
of this subchapter, if such officer--
          [(1) serves in--
                  [(A) an Executive Schedule position under 
                subchapter II of chapter 53; or
                  [(B) a position for which the compensation is 
                set in statute by reference to a section or 
                level under subchapter II of chapter 53; and
          [(2) was appointed to such position by the President, 
        by and with the advice and consent of the Senate.]

SEC. 4509. PROHIBITION OF CASH AWARDS TO CERTAIN OFFICERS.

    (a) Definitions.--In this section, the term `agency'--
          (1) has the meaning given that term under section 
        551(1); and
          (2) includes any entity described in section 4501(1).
    (b) Prohibition.--An officer may not receive a cash award 
under this subchapter if the officer--
          (1) serves in a position at level I of the Executive 
        Schedule;
          (2) is the head of an agency;
          (3) is a commissioner, board member, or other voting 
        member of an independent establishment.

Subchapter II--Awards for Cost Savings Disclosures

           *       *       *       *       *       *       *



SEC. 4511. [DEFINITION] DEFINITIONS AND GENERAL PROVISIONS.

    (a) For purposes of [this subchapter, the term] this 
subchapter--
          (1) the term ``agency'' means any Executive 
        agency[.]; and
          (2) the term `surplus salaries and expenses funds' 
        means amounts made available for the salaries and 
        expenses account, or equivalent account, of an agency--
                  (A) that are identified by an employee of the 
                agency under section 4512(a) as unnecessary;
                  (B) that the Inspector General of the agency 
                or other agency employee designated under 
                section 4512(b) determines are not required for 
                the purpose for which the amounts were made 
                available;
                  (C) that the Chief Financial Officer of the 
                agency determines are not required for the 
                purpose for which the amounts were made 
                available; and
          (D) the recession of which would not be detrimental 
        to the full execution of the purposes for which the 
        amounts were made available.

           *       *       *       *       *       *       *


SEC. 4512. AGENCY AWARDS FOR COST SAVINGS DISCLOSURES.

    (a) The Inspector General of an agency, or any other agency 
employee designated under subsection (b), may pay a cash award 
to any employee of such agency whose disclosure of fraud, 
waste, or mismanagement or identification of surplus salaries 
and expenses funds to the Inspector General of the agency, or 
to such other designated agency employee, has resulted in cost 
savings for the agency. The amount of an award under this 
section may not exceed the lesser of
          (1) $10,000; or,
          (2) an amount equal to 1 percent of the agencys cost 
        savings which the Inspector General, or other employee 
        designated under subsection (b), determines to be the 
        total savings attributable of the employees disclosure 
        or identification.
    For purposes of paragraph (2) the Inspector General or 
other designated employee may take into account agency cost 
savings projected for subsequent fiscal years which will be 
attributable to such disclosure or identification.
    (b) * * *
    (c)
          (1) The Inspector General of an agency or other 
        agency employee designated under subsection (b) shall 
        refer to the Chief Financial Officer of the agency any 
        potential surplus salaries and expenses funds 
        identified by an employee that the Inspector General or 
        other agency employee determines meets the requirements 
        under subparagraphs (B) and (D) of section 4511(a)(2), 
        along with any recommendations of the Inspector General 
        or other agency employee.
          (2)
                  (A) If the Chief Financial Officer of the 
                agency determines that potential surplus 
                salaries and expenses funds referred under 
                paragraph (1) meet the requirements under 
                section 4511(a)(2), except as provided in 
                subsection (d), the head of the agency shall 
                transfer the amount of the surplus funds or 
                unnecessary budget authority from the 
                applicable appropriations account to the 
                general fund of the Treasury.
                  (B) Any amounts transferred under 
                subparagraph (A) shall be deposited in the 
                Treasury and used for deficit reduction, except 
                that in the case of a fiscal year for which 
                there is no Federal budget deficit, such 
                amounts shall be used to reduce the Federal 
                debt (in such manner as the Secretary of the 
                Treasury considers appropriate).
          (3) The Inspector General or other agency employee 
        designated under subsection (b) for each agency and the 
        Chief Financial Officer for each agency shall issue 
        standards and definitions for purposes of making 
        determinations relating to potential surplus salaries 
        and expenses funds identified by an employee under this 
        subsection.
    (d)
          (1) The head of an agency may retain not more than 10 
        percent of amounts to be transferred to the general 
        fund of the Treasury under subsection (c)(2).
          (2) Amounts retained by the head of an agency under 
        paragraph (1) may be--
                  (A) used for the purpose of paying a cash 
                award under subsection (a) to 1 or more 
                employees who identified the surplus salaries 
                and expense funds; and
                  (B) to the extent amounts remain after paying 
                cash awards under subsection (a), transferred 
                or reprogrammed for use by the agency, in 
                accordance with any limitation on such a 
                transfer or reprogramming under any provision 
                of law.
    (e)
          (1) Not later than October 1 of each fiscal year, the 
        head of each agency shall submit to the Secretary of 
        the Treasury a report identifying the total savings 
        achieved during the previous fiscal year through 
        disclosures of possible fraud, waste, or mismanagement 
        and identifications of surplus salaries and expense 
        funds by an employee.
          (2) Not later than September 30 of each fiscal year, 
        the head of each agency shall submit to the Secretary 
        of the Treasury a report that, for the previous fiscal 
        year--
                  (A) describes each disclosure of possible 
                fraud, waste, or mismanagement or 
                identification of potentially surplus salaries 
                and expenses funds by an employee of the agency 
                to have merit; and
                  (B) provides the number and amount of cash 
                awards by the agency under subsection (a).
          (3) The head of each agency shall include the 
        information described in paragraphs (1) and (2) in each 
        budget request of the agency submitted to the Office of 
        Management and Budget as part of the preparation of the 
        budget of the President submitted to Congress under 
        section 1105(a) of title 31.
          (4) The Secretary of the Treasury shall submit to the 
        Committee on Appropriations of the Senate, the 
        Committee on Appropriations of the House of 
        Representatives, and the Government Accountability 
        Office an annual report on Federal cost saving and 
        awards based on the reports submitted under paragraphs 
        (1) and (2).
    (f) The Director of the Office of Personnel Management 
shall--
          (1) ensure that the cash award program of each agency 
        complies with this section; and
          (2) submit to Congress an annual certification 
        indicating whether the cash award program of each 
        agency complies with this section.
    (g) Not later than 3 years after the date of enactment of 
this subsection, and every 3 years thereafter, the Comptroller 
General of the United States shall submit to Congress a report 
on the operation of the cost savings and awards program under 
this section, including any recommendations for legislative 
changes.

                                  [all]