<DOC>
[107 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:76805.wais]
S. Hrg. 107-211
NOMINATION OF MARK W. EVERSON
=======================================================================
HEARING
before the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
ON THE
NOMINATION OF MARK W. EVERSON TO BE CONTROLLER, OFFICE OF FEDERAL
FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET
__________
OCTOBER 11, 2001
__________
Printed for the use of the Committee on Governmental Affairs
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COMMITTEE ON GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan FRED THOMPSON, Tennessee
DANIEL K. AKAKA, Hawaii TED STEVENS, Alaska
RICHARD J. DURBIN, Illinois SUSAN M. COLLINS, Maine
ROBERT G. TORRICELLI, New Jersey GEORGE V. VOINOVICH, Ohio
MAX CLELAND, Georgia PETE V. DOMENICI, New Mexico
THOMAS R. CARPER, Delaware THAD COCHRAN, Mississippi
JEAN CARNAHAN, Missouri ROBERT F. BENNETT, Utah
MARK DAYTON, Minnesota JIM BUNNING, Kentucky
Joyce A. Rechtschaffen, Staff Director and Counsel
Susan E. Propper, Counsel
Jason M. Yanussi, Professional Staff Member
Hannah S. Sistare, Minority Staff Director and Counsel
Robert J. Shea, Minority Counsel
Johanna L. Hardy, Minority Counsel
Darla D. Cassell, Chief Clerk
C O N T E N T S
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Opening statements:
Page
Senator Lieberman............................................ 1
Senator Thompson............................................. 2
Senator Bunning.............................................. 3
WITNESSES
Thursday, October 11, 2001
Mark W. Everson, to be Controller, Office of Federal Financial
Management, Office of Management and Budget.................... 4
Biographical and financial information....................... 11
Pre-hearing questions and responses.......................... 18
NOMINATION OF MARK W. EVERSON TO BE CONTROLLER, OFFICE OF FEDERAL
FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET
----------
THURSDAY, OCTOBER 11, 2001
U.S. Senate,
Committee on Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 9:35 a.m., in SD-
342, Dirksen Senate Office Building, Hon. Joseph I. Lieberman,
Chairman of the Committee, presiding.
Present: Senators Lieberman, Thompson, and Bunning.
OPENING STATEMENT OF SENATOR LIEBERMAN
Chairman Lieberman. Good morning. Welcome to the hearing
today. We are considering your nomination, Mr. Everson, to be
the Controller of the Office of Federal Financial Management at
the OMB, which, as you know, means you would be overseeing the
financial management of all agencies in the executive branch.
This is a tall order under any circumstance, but I do want to
just take a moment to say that I think the next controller has
an additional set of challenges, because the current
financial--good morning, Senator Thompson.
Senator Thompson. Good morning.
Chairman Lieberman [continuing]. Current financial
condition of many agencies within the Federal Government is
unacceptable because of inadequate financial systems and
controls. The GAO, as you probably know, has identified
financial management at the Department of Defense, the Forest
Service, the Federal Aviation Administration and the IRS as
high-risk because of the significant systemic problems within
those agencies.
More specifically, many agencies are using outdated systems
that cannot provide the kind of timely and accurate information
federal managers need today for daily decision-making. Efforts
are underway, I know, to upgrade those systems, but this is a
major undertaking that involves a substantial commitment of
time. The fact is that the financial systems in place at many
agencies do not comply with the most basic accounting
standards.
Again, progress has been made and is being made, but some
major agencies still cannot produce an auditable financial
statement, showing the agency's financial position at the end
of the year, and those flaws naturally have a ripple effect.
The ineffective systems at many agencies prevent them from
tracking and reporting progress on performance goals under the
Government Performance and Results Act. Accurate and reliable
performance data, of course, are basic to making proper
decisions about which programs are meeting the objectives that
are set down for them.
In some cases, the damage is actually even more costly. The
Committee has been particularly concerned about improper
payments that agencies estimate that they have made in recent
years, which caused a major loss of funds that the government
should and could otherwise be using for certainly better
purposes. So we need real strong leadership within the
controller's office to enforce financial accounting standards
throughout the executive branch to supervise the implementation
of new systems and to guide agencies in tracking and reporting
their assets and obligations. The President's management agenda
places a high priority on improving the government's financial
performance, and hopefully this will be incentive for
significant improvements in this area.
Mr. Everson, I have reviewed your background, which is
impressive. I have reviewed your responses to the Committee's
pre-hearing questions, and I appreciate your thoughtfulness. I
know you have had a lot of experience managing the finances of
two major corporations, which will help you as you come into
the Federal Government, but these are different and important
challenges that will test your skills. Having seen most
significantly in your background that you are a graduate of
Yale University, I know that you will meet every challenge that
you face, and I welcome you to the Committee this morning. Your
nomination is certainly on track, and I look forward to working
with you in the coming years.
Senator Thompson.
OPENING STATEMENT OF SENATOR THOMPSON
Senator Thompson. Yes, thank you, Mr. Chairman. This is a
very important position, as we all know, and I appreciate your
scheduling this hearing today so that we can get Mr. Everson in
place. Recently, the General Accounting Office released a
report required under the Federal Financial Management
Improvement Act that detailed the poor state of the Nation's
financial management systems. In that report the GAO said:
``Most agencies' financial management systems are unable to
routinely produce timely, reliable and useful information.
Having such financial information is the goal of the Federal
Financial Managers Improvement Act and the Chief Financial
Officers Act. Agency managers and other decision-makers need
this information for managing day-to-day operations
effectively, efficiently and economically, measuring program
performance, executing the budget, maintaining accountability
and preparing financial statements.''
Unfortunately, we just seem to be unable to do it. We have
been trying to get the Nation's financial management cleaned up
for many years now, and progress has been very slow, to say the
least. There has been some progress. Although few agencies have
systems in place that can routinely provide reliable financial
information, many more are able to produce auditable financial
statements even if it is 6 months after the end of the year.
Last year, 18 of 24 Federal agencies received clean
opinions on their financial statements. Next year, we trust we
will see even greater progress. The person we will be looking
to, to make that happen, is the Nation's Controller, the
director of the Office of Federal Financial Management. The
President has nominated Mark Everson for this position, and
after knowing him only briefly I think the President has made a
very wise choice.
Mr. Everson has a master's degree in accounting from New
York University Business School, and a bachelor's degree from
Yale. He has 25 years of experience in both business and
government, holding positions of leadership at Arthur Andersen,
the Department of Justice, the United States Information
Agency, the American National Can Company, and most recently
with Sky Chef International.
Mr. Chairman, Mr. Everson has more experience in financial
management than we have had in the Office of Federal Financial
Management for many years, and he will need every bit of that
experience to keep up the momentum in improving the
government's financial management. Let me just say that we
cannot afford to lose the momentum that we have gained in
improving Federal financial management because of the current
crisis. Agencies, especially those like the Department of
Defense and State, need to know now more than ever just how
much money they have, where the assets are and whether they are
getting what they paid for.
We are going to have billions and billions of dollars
flowing around this town, in addition to what we normally have,
and it is going to be extremely important that we have the
financial management systems in place to know that taxpayers
know that this money is not being wasted. So I support Mr.
Everson's nomination without reservation and look forward to
working with him as we make progress on this front in the years
ahead.
Thank you, Mr. Chairman.
Chairman Lieberman. Thank you, Senator Thompson.
Senator Bunning.
OPENING STATEMENT OF SENATOR BUNNING
Senator Bunning. Thank you, Mr. Chairman. I recently had
the opportunity and privilege to meet with Mr. Everson in my
office last week. I thought our meeting went quite well.
The Office of Federal Financial Management is the Executive
Branch's central office for developing financial management
policy for the Federal Government. The office is responsible
for several key functions, including financial management
planning, financial management systems, accounting integrity
and accountability. Mr. Everson has a varied background,
working in both the public and private sectors, as my two
colleagues have already said, along with working overseas. I
look forward to hearing his perspective on serving as
Controller at the Office of Federal Financial Management and
the challenges he expects to face.
My advice to Mr. Everson, whether you like it or not, it is
as to all those who testify and serve, please always tell us
the truth and be brutally honest with us no matter what.
Without the truth there is no trust, and without trust there is
no point in any of this.
I thank you, Mr. Chairman.
Chairman Lieberman. Thanks, Senator Bunning.
For the record, Mr. Everson has submitted responses to
biographical and financial questionnaires, has answered pre-
hearing questions submitted by the Committee and additional
questions from individual Senators, and has had his financial
statement reviewed by the Office of Government Ethics. Without
objection, this information will be made part of the hearing
record, with the exception of the financial data, which is on
file and available for inspection in the Committee's offices.
In addition, the FBI file has been reviewed by Senator
Thompson's and our staff, pursuant to Committee rules.
Chairman Lieberman. Mr. Everson, before we proceed, I would
like to give you an opportunity to introduce any family members
that may be in the audience this morning.
Mr. Everson. Yes, sir. I would like to introduce my wife,
Nanette, and as you indicated, a fellow Yale graduate. She was
a little modest when you asked her what she does. In addition
to being--right now--a full-time mom, she is an attorney and
was working until we came up here from Dallas. I would point
out that, while I just sort of got through Yale, she was phi
beta kappa.
Chairman Lieberman. Hear. Hear. It was obvious to me when I
met her. [Laughter.]
Mr. Everson. In addition, really we have three children.
Our first is a foster daughter, a Cambodian refugee who came
into our lives when we were--when I was with INS, and actually
her family came from--obviously, from the camps in Thailand,
after they fled Cambodia, and she lost her dad to Pol Pot. I
became her dad, and Nanette a second mom. She cannot be with us
today. She is married and has her own children now in Illinois.
Our son, Leonard, is off in school. He goes to boarding school
in Scotland. So subbing for them is Emma, who is a sixth grader
at St. Agnes in Arlington.
Chairman Lieberman. Great. Welcome to both of you. Thank
you for being here. Thank you for supporting your husband and
dad.
Mr. Everson, our Committee rules require that all witnesses
at nomination hearings give their testimony under oath, so
would you please rise and raise your right hand? Do you
solemnly swear to tell the truth, the whole truth and nothing
but the truth, so help you God?
Mr. Everson. I do.
Chairman Lieberman. Thank you very much. Please be seated.
If you have a statement, now would be the time to make it.
TESTIMONY OF MARK W. EVERSON,\1\ TO BE CONTROLLER, OFFICE OF
FEDERAL FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET
Mr. Everson. Yes, I do. It is brief. Good morning, Mr.
Chairman, Senator Thompson, Senator Bunning. As you know, my
name is Mark Everson and I am the President's nominee to become
the Controller of the Office of Federal Financial Management
within OMB. The Chief Financial Officers Act of 1990 is
definitive in vesting lead responsibility for federal financial
management in one entity. The sphere of influence of the Office
of Federal Financial Management, and of the controller who
heads it, is limited to financial management, but extends to
all its elements: Human, systems, processes and policies. This
portfolio is significant in its own right, but it is also a
central component of the overall management responsibilities of
OMB.
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\1\ The biographical and financial information appears in the
Appendix on page 11.
\2\ Pre-hearing questions and responses from Mr. Everson appear in
the Appendix on page 18.
---------------------------------------------------------------------------
I believe that in order to function efficiently and to
deliver desired results, an organization must be well managed
in all regards. Strong management, including sound financial
management, is a sine qua non for sustained achievement. This
is as true in government as in the private sector, and it is
why improved government management must continue to be an area
of focus even and perhaps especially now, when the stakes of an
effective government are so high.
When Mitch Daniels raised with me some months ago the
possibility of joining his team at OMB, I, of course, in no way
imagined the extraordinary events that were fast approaching.
Let me close by saying that I believe it is always an honor to
serve in government. However, I think it is a distinct
privilege to be nominated by the President and to be considered
by the Senate to serve at this time in our Nation's history. If
confirmed, relying in no small measure upon the support of my
wife, Nanette, and my family, I will do my utmost to
successfully meet the responsibilities of the Office of
Controller.
Thank you.
Chairman Lieberman. Thanks, Mr. Everson, for an excellent
statement. I am going to start by asking you certain questions
that we ask of all nominees. First, is there anything you are
aware of in your background which might present a conflict of
interest with the duties of the office to which you have been
nominated?
Mr. Everson. No, sir.
Chairman Lieberman. Do you know of anything personal or
otherwise which would in any way prevent you from fully and
honorably discharging the responsibilities of Controller of
OMB?
Mr. Everson. No, sir.
Chairman Lieberman. Do you agree to respond to any
reasonable summons to appear and testify before any duly-
constituted Committee of Congress if you are confirmed?
Mr. Everson. I do.
Chairman Lieberman. Thank you. Let me just ask a couple of
questions. In my brief opening statement I mentioned that the
financial management systems in four agencies have been
designated as high-risk by GAO because of severe problems they
face. These difficulties are probably most acute at the
Department of Defense, given the department's vast size and
resources, but those at the Forest Service, FAA and IRS are
also significant.
I wonder what do you think as you approach the new
responsibilities it will take to remove these agencies from the
high-risk list, and what role you see for yourself as
controller in bringing that about?
Mr. Everson. Obviously, you have to attack these issues
generically, across the government, and set high standards, and
then you do have to work with targeted agencies. The list would
go, I would suggest, beyond the four that you have mentioned,
because as you delve into this area, and you mentioned systems
particularly, there are other agencies that have acute problems
in those areas.
I think that what OMB has tried to do is to move forward to
articulate firmer and clearer standards in the area of systems
development. There is something you may be familiar with called
the JFMIP, the Joint Financial Management Improvement Program.
That is a joint operation established by GAO, Treasury, OMB and
OPM. That is a group that has started to set standards for all
these systems, so that the vendors know what they have to meet.
As those newer systems come into operation, I think things will
improve.
As to individual agencies, obviously the controller and OMB
must intervene directly with the ones that have the greatest
problems. You can set standards, and I believe in setting a
high standard, and most organizations will attempt to meet
those standards. Remedial or repair work requires personal
intervention, and I will have to do that.
Chairman Lieberman. I appreciate the answer. Another issue
that has been of concern to the Committee involves the amount
of improper payments made each year by Federal agencies to
beneficiaries, grant recipients or vendors. These can be the
result of fraud or a mistake or mismanagement. GAO reported
that for fiscal year 1999, 12 of the largest agencies in the
government estimated making over $20 billion in improper
payments. You may know that Senator Thompson and I sent letters
to these largest agencies and to their IGs earlier this year,
asking them what they were doing to address this problem.
OMB recently issued guidance to agencies directing them to
estimate and report the amount of their improper payments, but
did not specifically offer suggestions on how they should do
this. So I wanted to give you a chance to talk to us just a bit
about what you might do if confirmed as controller to help
agencies fill in these gaps, and if you would consider
reporting to Congress on the amount of improper payments
reported by the agencies and the extent to which they are
meeting their targets to reduce them, so we can make incentives
here as specific as possible.
Mr. Everson. Yes, and, of course, we will report on how we
do in this area. As I think you also know, improved financial
management, as you mentioned, is one of the five government-
wide objectives that the President has established as part of
his management agenda, and embedded within the improve
financial management initiation is a very clear component to
address erroneous payments. What OMB has done as part of the
spring instructions for the preparation of the budget, as you
indicated, was to request an estimate by a series of agencies
that cover a total of about $1.2 trillion of the programmatic
funds of the government we asked them to estimate what they
believe is a baseline rate on erroneous payments, to develop
plans to attack this, and to basically work with us to get
going on it.
Those submissions are just coming in now. They will be
analyzed by the Office of Federal Financial Management. One of
the questions that the Committee directed to me in the pre-
hearing process was, as you just indicated, would you be more
specific perhaps after you have received those responses--of
course we will. If we see trends or common problems or more
importantly, common solutions, we will issue appropriate
guidance. I would suspect that this also would be a topic of
the Chief Financial Officers Council, so that we can make sure
there is a sharing of information and that what works one place
is put into effect somewhere else.
Chairman Lieberman.: Good. Well, we look forward to working
with you on that important matter and being able to support in
any way we can. Thanks.
Senator Thompson.
Senator Thompson. Thank you very much, Mr. Chairman. Mr.
Chairman, I think you touched on the major concerns that I
have. This figure you mentioned of $20 billion, as you point
out, is just 12 agencies, so we have no idea how large the
total figure of improper payments is in the government. But
that is really mind-boggling in some respects to know that in
relatively few agencies there are $20 billion of improper
payments going out at a time when we are obviously going to be
very concerned about spending our surpluses and whether or not
we are going to have a surplus anymore. Improper payments alone
in government might make the difference. I was surprised to
learn that we do not even require agencies to make reports as
to their improper payments.
Mr. Everson. Yes.
Senator Thompson. We criticize these agencies for their
improper payments, but at least they are reporting it, and they
are not even required to do that, as I understand it. I
understand that the OMB has put into place some methods that
hopefully will be used to better estimate erroneous payment
rates, but what about from a big picture standpoint? Do you
think that either OMB or Congress, through legislation should
require all agencies to keep up with it and make these
estimates and determinations as to what the payments are, as a
basis for trying to figure out a way to reduce the numbers?
Mr. Everson. Well, Senator, I think that, in essence, that
is what we are moving toward with this request that we made as
part of the 2003 budget submission, and certainly we are not
going to let go of it. We are going to embed that as part of
the ongoing reporting. To attack this, though, I would suggest
that true progress will come when you have addressed a lot of
the broader issues that you and your colleagues have already
discussed, in terms of systems, overall internal controls.
You cannot attack this area to the exclusion of others. So
we will work to improve the overall controls, and this will be,
I would suggest to you, a leading indicator if we are making
progress.
Senator Thompson. That makes a certain amount of sense. I
guess it is difficult for me to see which is the best way to
even begin to approach it. You could make a lot of progress in
terms of your overall systems, but we would still have billions
of dollars going out the door that should not, and we would
still be in a situation where we would not really know how much
was being improperly spent. But, along those lines of your
systems, one of the things that, we have been concerned about
is, as the Chairman mentioned, the inability for agencies to
get clean opinions. We are making some progress on that; 18 of
24 now are able to get clean opinions, but according to the
GAO, at least 19 of 24 have in place such poor financial
systems that they are unable to provide managers with
information to guide their decision-making.
There is a reason for this, other than to just have a
hearing or an assessment. It is designed to give managers a
tool to use and to see how they are doing. What we are seeing
now is that when we ask them for clean financial statements,
they come up with them. I guess they figure that we will never
be happy, but we are learning that even though more and more
are coming up with clean financial statements, they are doing
it by heroic efforts at the end of the year crunching a bunch
of numbers after the fact. They are still late many times, and
they finally come up with a so-called clean statement. But it
has provided them with no management tool during that year to
use as they try to manage these agencies.
Is that a correct assessment? How do we move from focusing
on just getting clean opinions to ensuring that agencies have
systems in place that a manager can use?
Mr. Everson. I agree entirely with that assessment, and I
know that Director Daniels does, as well, and the Comptroller
General. We have had discussions on just this very challenge. I
think what has happened over the last 4 years, as the
government has issued statements and they have been audited by
GAO, is that a great deal of progress has been made through
that understandable flag of a go, no-go audit. But, as you
point out, the audit timing is much-delayed. It is five or 6
months after the fact.
The only way you can get to where you have useful, timely
information that supports decision-making is if you reform the
business processes and the management. Our answer to that, if
you will, is to set a more ambitious standard for accelerating
those dates of when reporting is due, putting in interim
reporting and, if you will, forcing the agencies to address
those underlying business process and systems issues, because
you will not meet accelerated deadlines through heroic efforts.
You will have to reform the way you work, and when you reform
the way you work, you will add in performance reporting and
just what you are talking about, Senator, in terms of
supporting the policy makers.
Senator Thompson. Thank you very much. I have talked to you
and others at OMB about this, and I must say I am greatly
encouraged by what I hear. It seems to me that it gets down to
a pretty simple formula, and that is leadership, accountability
and flexibility. You have to have somebody at the top saying
this is important, and you have to have some response when it
does not work and people do not get the job done, and within
that, you have to have the ability to do what you need to do in
order to get the job done. You need to come to us and tell us
what you need in terms of the flexibility to accomplish that.
But I think that your thinking is on the right track on all
those things, and I appreciate it. Thank you very much.
Mr. Everson. Thank you.
Chairman Lieberman. Thanks, Senator Thompson. Senator
Bunning.
Senator Bunning. Thank you. I do not have a lot of
questions. It seems to me if my Senate office or Senator
Thompson's or Senator Lieberman's offices get a budget, X
amount of dollars to spend over fiscal year 2001, 2002, to keep
track of that money is not complicated. If we can figure out
how much we can pay our staffs and how many dollars we can use
for travel, it seems to me that each agency of the Federal
Government ought to be able to do that.
It is mind-boggling to me that--we are just talking about
1999 now--that 12 agencies cannot account for overpayments of
$20 billion. What was that in the year 2000? What was that in
the year 2001? If you come back to me in the year 2002 or 2003
and say, ``Oh, by the way, we cannot account for $40 billion,''
I am going to be very upset, along with, I am sure, the
Chairman and the ranking member. So I would suggest that all
the systems and all the things that you can control, and know
up front so that the managers of those agencies know exactly
what they are dealing with, that seems to me the most important
thing that we could do as a Congress, and your job as the chief
financial officer of OMB. So I am going to hold your feet to
the fire.
Mr. Everson. I welcome that, sir.
Senator Bunning. If you come back and tell us that, ``By
the way, in 2000 and 2001, it not only was 20, but it went to
30 and 40,'' and now, when your watch comes, I want to see that
go the other way and shrink. You have the wherewithal, you have
the knowledge, you have the background, education, and
everything you need to do it. It is just a question of making
sure that you do it, and I wish you godspeed.
Mr. Everson. Thank you, sir.
Senator Bunning. Thank you.
Chairman Lieberman. Thanks, Senator Bunning.
Mr. Everson, I do not know how well you know Senator
Bunning. He is a very good Senator. He is a very good man. In
my experience with him, I would say he is a man you do not want
to upset, and I am sure you will try your best not to.
[Laughter.]
Senator Thompson. Batters in the National League came to
that conclusion.
Chairman Lieberman. Right.
Thanks so much for your testimony. Your daughter has one of
the most captivating, adorable smiles that I have seen in
recent memory, so she will carry you through a lot of the tough
days in this job.
This completes the hearing. The record is going to remain
open for the rest of today for the submission of written
questions for the nominee and any written statements for the
record. We will try real hard to try to move your nomination
out of Committee and to the Senate floor and through
confirmation as soon as we possibly can. I thank you very much.
The Committee stands in recess.
[Whereupon, at 10:05 a.m., the Committee was adjourned.]
A P P E N D I X
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