<DOC>
[109th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:24250.wais]
GUARDING AGAINST WASTE, FRAUD, AND ABUSE IN POST-KATRINA RELIEF AND
RECOVERY: THE PLANS OF THE INSPECTORS GENERAL
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 28, 2005
__________
Serial No. 109-51
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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------------------------------
COMMITTEE ON ENERGY AND COMMERCE
JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida Ranking Member
Vice Chairman HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia BART GORDON, Tennessee
BARBARA CUBIN, Wyoming BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
HEATHER WILSON, New Mexico BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING, ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman GENE GREEN, Texas
VITO FOSSELLA, New York TED STRICKLAND, Ohio
ROY BLUNT, Missouri DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania JIM DAVIS, Florida
MARY BONO, California JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon HILDA L. SOLIS, California
LEE TERRY, Nebraska CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey JAY INSLEE, Washington
MIKE ROGERS, Michigan TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee
Bud Albright, Staff Director
David Cavicke, Deputy Staff Director and General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Oversight and Investigations
ED WHITFIELD, Kentucky, Chairman
CLIFF STEARNS, Florida BART STUPAK, Michigan
CHARLES W. ``CHIP'' PICKERING, Ranking Member
Mississippi DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon JAY INSLEE, Washington
MIKE FERGUSON, New Jersey TAMMY BALDWIN, Wisconsin
MICHAEL C. BURGESS, Texas HENRY A. WAXMAN, California
MARSHA BLACKBURN, Tennessee JOHN D. DINGELL, Michigan,
JOE BARTON, Texas, (Ex Officio)
(Ex Officio)
(ii)
?
C O N T E N T S
__________
Page
Testimony of:
Feaster, H. Walker, III, Inspector General, Federal
Communications Commission.................................. 40
Frazier, Johnnie E., Inspector General, U.S. Department of
Commerce................................................... 35
Friedman, Gregory H., Inspector General, U.S. Department of
Energy, and Vice Chair of the President's Council on
Integrity and Efficiency................................... 16
Gimble, Thomas F., Acting Inspector General, Department of
Defense.................................................... 23
Rabkin, Norman J., Managing Director, Homeland Security and
Justice Issues, U.S. Government Accountability Office...... 9
Skinner, Richard L., Inspector General, U.S. Department of
Homeland Security, and Chair, PCIE/ECIE Homeland Security
Roundtable................................................. 19
Tinsley, Nikki L., Inspector General, Environmental
Protection Agency.......................................... 32
Vengrin, Joseph E., Deputy Inspector General for Audits, and
Michael E. Little, Deputy Inspector General for
Investigations, U.S. Department of Health and Human
Services................................................... 27
(iii)
GUARDING AGAINST WASTE, FRAUD, AND ABUSE IN POST-KATRINA RELIEF AND
RECOVERY: THE PLANS OF THE INSPECTORS GENERAL
----------
WEDNESDAY, SEPTEMBER 28, 2005
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:10 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Ed
Whitfield (chairman) presiding.
Members present: Representatives Whitfield, Pickering,
Walden, Burgess, Blackburn, Stupak, Schakowsky, Inslee, and
Waxman.
Staff present: Mark Paoletta, chief counsel; Anthony Cooke,
majority counsel; Peter Spencer, professional staff; Jonathan
Pettibon, legislative clerk; Chris Knauer, minority
professional staff; and Chris Treanor, assistant.
Mr. Whitfield. Good morning, and I want to bring this
hearing to order this morning.
The subject of our Oversight and Investigations hearing is
guarding against waste, fraud, and abuse in post-Katrina relief
and recovery, and the plans of the Inspectors General, and we
have a number of them here today. I would also like to make the
comment that it came up rather sudden, but there is a markup of
Energy and Commerce taking place as we sit here this morning,
on refinery capacity, and an energy bill relating to some
refinery issues, so we may be called periodically to go down
for votes in the committee, which is two floors down, and of
course, we will always have events going on on the House floor,
but we genuinely appreciate all of you witnesses being with us
this morning, and we will do everything that we possibly can to
expedite this hearing. We certainly consider it to be an
important hearing, and one of many that we will be having. And
so with that, I will give my opening statement, and then, I
will recognize Mr. Inslee for his opening statement.
Today, the subcommittee will examine an area that really
involves a lot of tension. We want to protect the taxpayers. As
you know, the Congress has appropriated $62.3 billion in post-
Katrina aid. We want to make sure that the taxpayers are
protected, and that we minimize waste, fraud, and abuse. At the
same time, it is essential that this money be delivered in a
timely manner to expedite the recovery process for individuals
and projects in affected areas. As I said, Congress has already
appropriated more than $60 billion in disaster funding. These
funds, dispersed principally through the Department of Homeland
Security, along with other Federal spending, will provide much-
needed support in recovery. The size of this Federal support is
unprecedented, dwarfing any other single disaster request. In
point of fact, Katrina now accounts for fully 40 percent of all
funds that have been authorized for the Disaster Relief Fund
over the past 30 years.
The size of this post-Katrina funding is matched by the
scope and complexity of the task of recovery assistance. This
task, while still unfolding, will entail the resources and
activity of scores of programs across the government. Many of
these involve issues that come under this committee's
jurisdiction, such as public health, energy, environmental,
telecommunications, and economic policies.
With this increased size and complexity also comes
increased opportunity for problems. As is necessary for such
emergency relief and recovery, regulations are waived, contract
requirements loosened, safeguards to ensure careful spending
are lifted to speed relief. Today's hearing will help the
subcommittee take measure of efforts to address the threats of
waste, fraud, and abuse. The hearing will also help us
understand how the agency watchdogs, the Inspectors General,
are policing areas and programs that may require close tracking
as resources are shifted to address recovery.
What has been the past experience with disaster relief?
Where have agency efforts and assistance been inefficient and
wasteful? With increased funds and program activity, there
easily can be areas of overlap and duplication, as well as
calls for work in the name of relief that, in fact, may not be
so urgent.
Let me note at the outset that this hearing is just the
beginning of our oversight of recovery issues. The facts we
gather today will provide necessary initial guidance. As we
move forward on this front, we will rely on regular feedback
from the Inspectors General. The Inspectors General perform a
critical function in agency and program oversight, and are
essential for informing Congressional oversight.
With this in mind, I would like to request that each of the
Inspectors General before us today provide directly to us, to
the committee, in 3 months, a progress report of what you are
finding, so that we can more effectively ensure with you that
money gets to the right people and projects.
Today, we will hear from a number of Inspectors General or
their deputies from the Department of Homeland Security, which
is managing the disaster relief, the Department of Defense,
which, at this point is responsible for a large, or share of
the spending, as well as from agencies within the committee's
core jurisdiction, to gather information on their plans and the
issues that they will confront in this rebuilding effort. We
will also hear from the Government Accountability Office,
another key player in the oversight community, which will
provide testimony on larger issues raised concerning disaster
response, coordination, and planning.
I would like to thank all of the witnesses for taking the
time to attend this morning on such short notice and amidst all
of the burdens of the relief effort. Let me extend a special
welcome to Richard Skinner, the Inspector General for the
Department of Homeland Security. You have been heading up the
main coordinating effort among the various IGs working on
disaster relief auditing plans, and I look forward to your
contribution to the discussion today.
There are a lot of topics for us to examine this morning,
and so I will now turn to my good colleague and friend, Mr.
Inslee, the ranking member, for this hearing, and for his
opening statement.
Mr. Inslee. Thank you, Mr. Chairman. A very important
matter, obviously, I know Americans are very concerned about
the propriety and how we assure that these tax dollars are
spent wisely.
It is very unfortunate that we are going to be short-handed
today because we could not reschedule the markup on the energy
bill that is being heard, but we are going to do the best we
can, and we will have as many folks as we can hear today.
I just wanted to make one personal note that is somewhat
associated with this issue, and that is to note for Americans,
while we are talking about how to ensure the proper expenditure
of their taxes, I want to note the incredible gratitude and
appreciation of those folks who now are in extremis from these
two hurricanes. And the reason I say that, the reason I know
that is I went to down to the Houston Astrodome on Labor Day to
join about 10,000 Texans who are volunteering--I am from the
State of Washington--to help folks in the Houston Astrodome,
and I met these family that had, obviously, just shortly have
been removed from the Super Dome in New Orleans, and the
message I wanted people to know from those folks is those folks
are the most resilient, gracious, dignified under pressure, and
most importantly, appreciative of what other Americans are
doing for them right now, and I think they would want to spread
that message around the country of how grateful folks whom we
are we helping in some way, including these Federal dollars
that we hope to use in an efficient--because we do have about
200 letters from my constituents to them, and they were just so
touched, and I think it is important for us to realize how
appreciative these folks, who are still scattered across the
country, are to the largesse and heartfelt wishes of all
Americans.
But it is important that we do this job right, as well, for
the taxpayers, and that is why I am glad we are having this
hearing today. The plight of many Americans from this region is
really akin to the displacement, once described by Steinbeck
about the mass movement of people during the Great Depression,
and perhaps, we should look at it on that dimension. And as we
move forward to help restore these communities--New Orleans,
Biloxi, Gulfport, Port Arthur, Grand Isle, Cameron, Slidell, to
name just a few--we have got to help to restore the Nation as a
whole, and we have got to make sure that this aid is properly
stewarded, and these precious tax dollars.
Now, Mr. Chairman, I have a great concern in the days to
come, we are going to be hearing stories about exotic,
unnecessary, grossly overpriced purchases of goods and services
under the guise of provided hurricane relief and recovery. We
are already seeing articles to that extent. We see in the New
York Times that 80 percent of the $1.5 billion of contracts
awarded by FEMA just in the first week were awarded without any
bidding whatsoever, and there are some concerns about the
contractors to whom these were rewarded. I think we need to ask
hard questions why we couldn't have a 15-minute bidding
process, even in an emergency situation on this situation when
we have seen political connections come into question about
these kind of contracts. We need to ask those hard questions.
And we see issues of this cruise ship situation, where--and
this is interesting, when I was in Houston, I was in a control
post, and there were real serious questions being asked whether
it made sense to rent these cruise ships, because people were
not going to get on them. Questions were already being raised
on Labor Day about this subject. But we see this cruise ship
deal that taxpayers are paying $21,475 a week when you can 7-
day Western Caribbean cruise for $599. We were asked some
pretty hard questions about that situation as well. These are
just two examples. We have heard of services paid for by the
Government that have been substantially overpriced.
It has been a month since Katrina hit, almost. To date,
billions have been appropriated; billions more will be needed.
And we need to have an aggressive accounting in that regard.
Today, we have got a very distinguished panel of Inspectors
General, and they will explain from each of their respective
roles how we need to manage these funds; yet--and with my full
respect for the work that we are both trying to do--it does not
appear that a single Inspector General is in full charge of
seeing that these moneys are wisely spent. Moreover, it does
not appear that there exists a single place in the Federal
Government where Katrina-related funds are being managed,
recorded, and evaluated for their effectiveness.
At a minimum, Mr. Chairman, I believe we need to know the
following: No. 1, in the short term, who is directing this
recovery effort from the 30,000-foot perspective, and who at
the Federal level is sorting out the priorities for the
billions of dollars in recovery money for the immediate cleanup
and recovery work? Is this effort centralized, so that
instances of contracts that are wasteful, duplicative in
nature, or even working at cross-purposes, to where the
contracts can be spotted? We can cite the one example we have
already talked about on this cruise ship. Is it economical to
continue this contract to house workers and evacuees? And who
already knows the answer to that question?
And second, is there a long-term, strategic plan for
rebuilding the Gulf Coast? Are we going to let four different
Governors and countless mayors and other politicians spend
money as they see fit, as they deem fit? Mr. Chairman, before
hundreds of millions of dollars are expended, it is essential
that the Congress and this administration develop a strategic
plan that not only represents the goals of this effort, but a
roadmap of how we are going to get there and why. The public
needs to know how their money will be spent, for what purposes
and that is being spent without political favor. And frankly,
we have already seen concerns about that that replicate some of
concerns regarding the contracting process in Iraq. Hard
questions need to be asked.
The citizens of the Gulf Coast need to know that the
rebuilding of their communities is a primary goal of all this
spending, and I can guarantee you that the CEO or CFO of any
private company would not begin such a massive project without
how certain money will be expended and what it will achieve. I
fear that 2 years from now, billions will have spent on
lucrative but unnecessary contracts, services, and other items,
but the recovery of the many communities affected by these
storms will not have been realized. Mr. Chairman, having a
strategic roadmap of what we are trying to do, and how we will
do it is perhaps the most important financial control we can
put in place to protect previous taxpayer dollars. To date, we
have no such plan.
Question No. 3: is there a central repository where all
recovery dollars can be tracked, so that the public can
actually see how its money is being spent? It is critical to
maintain the support of the American people in this effort.
That is a very important point that we can't let stories like
this diminish the political will to achieve this purpose, to
help these folks in these desperate plights. And this will
require immediate transparency in a publicly accessible data
base.
While I believe that each agency or department will be able
to consolidate and track funds related to their own missions,
there must be a central repository to consolidate the related
expenditures across all such agencies, so that duplication,
waste, or conflicting contracts can be identified and
eliminated. These contracts should not only be trackable, but
there should be enough sufficient detail to describe what they
are, why they are needed, and what they are intended to
accomplish.
Fourth question: even if there is a strategic spending
plan, is there a plan to make sure the money is being well
spent and accomplishes the plan? The American people are being
asked to dig very deep. These are significant sums of taxpayer
money, and this hurricane recovery, we may give $200 billion.
It is critical that we protect these funds from fraud, waste,
and abuse. As I have indicated, that there are already
questions about noncompetitive bidding, work being given to
nonlocal firms, which slows down the local economic recovery,
and there are many more contracts to be issued. Mr. Chairman, I
do not see in place an adequate, fully detailed structure to
prevent these abuses, which we have already seen, from
continuing to be replicated. And frankly, we still, after 3
years, have not solved our contracting problems overseas. We do
not want to see that replicated domestically.
Question No. 5: finally, Mr. Chairman, these Inspectors
Generals also need to look at what didn't work in their own
agencies during this catastrophe. The Department of Homeland
Security published a massive National Response Plan in December
of last year to establish ``a comprehensive national all-
hazards approach to domestic incident management across a
spectrum of activities including prevention, preparedness,
response, and recovery.'' It incorporated the ``best practices
and procedures'' from various incident management disciplines,
and one of its purposes was to provide a proactive and
integrated Federal response to catastrophic events.
We have had a catastrophic event. There was no proactive,
integrated Federal response. Mr. Brown, the former head of
FEMA, spent most of his testimony yesterday blaming the
Democratic Governor of Louisiana for all of the problems, even
though, as the New York Times documented yesterday, over 200
people died in Republican Mississippi, mostly because they did
not evacuate. This should not be a partisan-sniping session. We
need to know what good was this plan if it doesn't work. And I
just want to express--I know all Americans of both parties are
concerned about multiple failures on multiple government
levels. But speaking as a Federal official, when we tried to
get the active duty of the U.S. military into New Orleans to
rescue these people on rooftops, and when I called FEMA myself,
early in the week of this hurricane, when it was obvious that
the only resource on the planet Earth that could rescue these
people were the active-duty military personnel of the United
States Army and Marines and Navy, all we got was we are
thinking about it. And 48 hours passed until there was really
any decision to use the active-duty military personnel of this
country.
And speaking as a person who was watching these people on
these rooftops, as a Federal official, calling repeatedly to
the highest officials in FEMA that we could get a hold of, and
the United States military, to have no response for 48 hours
was a massive tragedy. And if you had gone down to the
Astrodome like I have done, and you have seen these people--and
still couldn't get it on Labor Day, just to tell you one little
story of how difficult this was. On Labor Day, the second
Monday, I tried to get someone to rescue an 80-year-old woman.
We couldn't get that job done with the entire forces of the
United States, the most powerful nation on Earth.
We have some questions we have to ask. I will try to be
brief here, Mr. Chair. You have been most gracious. I shall try
to wrap up there. I want to thank the witnesses for their
efforts. I look forward to their testimony, and I look forward
to a great bipartisan effort to try to assure for our
taxpayers, on our mission of saving these evacuees, we
accomplish our mission of being careful with taxpayer dollars
as well.
Thank you, Mr. Chairman.
Mr. Whitfield. Thank you, Mr. Inslee, and once again, I
want to welcome the witnesses. We want you to know how much we
appreciate your being here. We know that you have a difficult
task ahead of you, and we do look forward to your testimony.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Cliff Stearns, a Representative in Congress
from the State of Florida
Thank you, Mr. Chairman, for holding this hearing on guarding
against waste, fraud and abuse in post-Katrina relief and recovery.
There is no doubt that we need ongoing and thorough oversight and
accountability of this admittedly huge and difficult process.
We owe that much to our constituents, who are footing the bill for
relief and recovery.
We have already spent over $62 billion, according to some estimates
Congress will appropriate over $200 billion. This is approximately
$2,000 per U.S. household. Another way to look at it is, we can give
each of the 500,000 families who were adversely affected by Katrina
about $400,000. Even in today's housing market, that buys a pretty nice
home.
We want to get relief to those Americans who have been truly hurt
by Katrina. But what we have had here in some respects is a taxpayer-
funded shopping spree, in which $2,000 debit cards have been handed out
to tens of thousands of alleged victims of Katrina. This is surely not
the best way to ensure good stewardship of our constituents' tax
dollars.
Although I am sure these debit cards have helped in many cases,
there still have been several reports that some people have spent this
government-issued money at strip clubs and other disreputable
establishments.
In another example, an upscale store reported selling two
monographed luxury handbags for $800 each to women using these cards.
We will undoubtedly hear of more examples of waste, fraud and abuse
in the weeks and months to come.
There are also billions of dollars worth of federal contracts that
were awarded in the aftermath of Katrina, because of time restraints
caused by the disaster, via a streamlined process.
Although I understand it is sometimes necessary to waive certain
safeguards in order to respond in a prompt fashion to help those in
need, this only further proves that that we need to provide even more
oversight to ensure that waste, fraud and abuse are kept to a minimum.
Last week, an investigative report by the Orlando Sun-Sentinel
revealed that, in a recent five-year span, FEMA spent $330 million
taxpayer dollars on communities that were not adversely affected by
natural disasters. Money was allocated needlessly by the federal
government, and in many cases, individuals did their best to scam the
government:
``From California to the Carolinas, Florida to Michigan--FEMA
assistance is called free, easy money and scamming schemes are openly
discussed.''
Mr. Chairman, people who intentionally defraud FEMA are taking
money away from those who are truly in need. And FEMA is obligated to
ensure that taxpayer dollars go only to those people who suffered
legitimate losses.
I am still trying to get FEMA to fully reimburse counties in my
district from last year's hurricane season. It is extremely frustrating
to read how much money has been wasted or stolen in recent years, while
my own constituents are forced to eat the bill for last year's
hurricane season.
We must step up Congressional oversight of disaster relief and
recovery. It's vital that we do so for Katrina, and for whatever
natural disasters will inevitably come in the future. This hearing is a
good first step in making FEMA and other federal agencies involved in
disaster relief and recovery more responsible and accountable.
I look forward to the testimony of the witnesses we have here
today, especially the inspector generals' plans for oversight and
auditing of disaster relief and recovery funds.
______
Prepared Statement of Hon. Michael C. Burgess, a Representative in
Congress from the State of Texas
Mr. Chairman, thank you for having this important hearing today.
While many have called for an extensive investigation into the
aftermath of Hurricane Katrina, I feel that this committee should have
the primary oversight investigatory powers over this complicated
situation. Not only does this committee have both subpoena power and a
history of bipartisanship, this committee's jurisdiction will be
significantly affected in coming months as the rebuilding and
revitalization effort continues with programs related to public health,
environmental cleanup, telecommunications, and economic development.
Mr. Chairman, thank you for your leadership into this matter.
Never before has our country been faced with the challenges, and
perhaps opportunities, due to a natural disaster of this size and
proportion. My prayers continue to go out to the victims of Hurricane
Katrina, and I firmly believe that our great nation has shown in the
past that it can come together during times of great crisis; we will
continue to rise to that challenge again now. But we must do this in a
way that ensures we have accountability, not delinquency. We cannot let
the needs of our citizens in the Gulf Coast Region be compromised by
inefficient bureaucratic delay.
I share my colleagues' deep concern with regards to the
coordinating relief and recovery efforts at the federal, state, and
local level. Today, I hope this committee is able to learn of the
current oversight initiatives being undertaken at the represented
agencies before us. Hurricane Katrina taught us all that we need a
better system in place when responding to catastrophic events. As a
physician, I am particularly interested in hearing from the
representatives from the Department of Health and Human Services. I'm
still waiting for answers to basic questions such as why help was
turned away. I look forward to the opportunity to discuss this with you
in further detail, and to also learn of anticipated regulatory changes
needed to help ensure that our public health system isn't endangered.
Again, Mr. Chairman, I thank you for this crucial hearing in which
we can address some of these essential concerns regarding post-Katrina
relief and recovery.
______
Prepared Statement of Hon. Bart Stupak, a Representative in Congress
from the State of Michigan
Thank you Mr. Chairman for having this very important hearing.
Today's hearing is a very important hearing. The American taxpayers
have been asked to contribute more than $62 billion so far, and it is
expected that when all is said and done, we will be asked to contribute
$200 billion towards the relief effort and rebuilding of the Gulf
Coast. It is our duty and obligation to help our fellow Americans get
back on their feet.
As Congress moves forward in this effort, it is also out duty and
obligation to ensure that those billions of dollars are spent wisely
and not wasted on duplicative or fraudulent expenditures. Likewise, we
have an obligation to ensure that the no-bid contracts that are entered
into are not gauging the American Taxpayers. We have seen several
examples of how these no-bid or quick bid contracts are being given to
friends of the Bush Administration, former GOP Chair turned lobbyist,
turned Governor Haley Barbour, and former FEMA Director Joe Albaugh.
One glaring example of these contracts listed in a recent New York
Times article is a debris removal contract given to a company called
AshBritt who is a former client of Governor Barbour's lobbying firm.
AshBritt is receiving roughly $15 per cubic yard PLUS other costs for
disposal of the material in landfills. The article goes on to tell how
in a few Mississippi communities they found their own contractors to do
the job for considerably less and their fees include disposal costs.
Another issue I am concerned about is the protection of whistle
blowers who come forward with their concerns about fraud, waste or
abuse. The Army Corps of Engineers has demoted or fired several whistle
blowers recently after they expressed concern about no-bid contracts.
We cannot allow these people who are trying to save taxpayer dollars to
be harassed, intimidated or punished by their higher-ups. People need
to be encouraged to report such activities.
Mr. Chairman, we need to set up a central clearinghouse with one
person in charge of all Inspectors General. This clearinghouse should
be accessible to the public and should include detailed information
about how the monies are being spent. In addition, we need to have a
detailed plan for reconstruction before any monies are doled out. In
any business, you need a detailed business plan that shows you have a
well thought out process by which you will proceed before you can
obtain a loan from a bank. We should expect nothing less from our
government officials in their reconstruction efforts.
Lastly, Mr. Chairman, I would like to ask these Inspectors General
what their thoughts are about extending the statute of limitations by
which we can go after fraud, waste and abuse. I have been informed by
federal officials that quite often, they do not discover fraud until
many years after it has occurred. The officials I spoke with wanted us
to extend the statute of limitations to 15 or 20 years, so as they
discover the fraud, they can still pursue the offenders. Certainly with
a disaster the magnitude of Hurricane Katrin, the I.G.'s will not be
able to catch the fraud immediately. We will be discovering instances
several years down the line and I feel that we should give the I.G.'s
the ability to investigate such instances.
Thank you again, Mr. Chairman, for holding this important hearing.
I am disappointed that it is conflicting with the Energy Bill mark-up
going on downstairs, because I know that many more of our members on
this side of the aisle would have liked to give this hearing their
undivided attention rather than having to pop in and out of the two
hearings.
Mr. Whitfield. First of all, I am going to introduce the
names of everyone that is here testifying today, and then,
according to our procedures, because this is an Investigation
and Oversight hearing, I will ask that you be sworn in for your
testimony this morning.
Our first witness today will be Mr. Norman Rabkin, who is
the Managing Director of Homeland Security and Justice Issues.
We appreciate your being here. The Honorable Gregory H.
Friedman, Inspector General with the U.S. Department of
Energy--I am sorry. Mr. Rabkin, you are with the GAO. The
Honorable Richard Skinner, Inspector General of the Department
of Homeland Security, Office of Inspector General; the
Honorable Thomas Gimble, Acting Inspector General of the U.S.
Department of Defense; Mr. Joseph Vengrin, the Deputy Inspector
General, Audits; and Mr. Michael Little, Deputy Inspector
General, Investigations, with the U.S. Department of Health and
Human Services; the Honorable Nikki Tinsley, Inspector General,
Environmental Protection Agency; the Honorable Johnnie Frazier,
Inspector General, U.S. Department of Commerce; and the
Honorable H. Walker Feaster, Inspector General at the Federal
Communications Commission.
So once again, I want to thank all of you for being here.
As I mentioned, this is an investigative hearing, and when
doing so we do have the practice of taking testimony under
oath. Do any of you object to testifying under oath this
morning?
The Chair would also advise you that under the rules of the
House, and certainly, the rules of this committee, you are
entitled to be advised by counsel. Do any of you desire to be
advised by counsel during your testimony today?
In that case, if you would, please rise and raise your
right hand, I will swear you in.
[Witnesses sworn.]
Mr. Whitfield. Okay. All of you are now under oath, and we
look forward to your testimony, and Mr. Rabkin, if you will,
begin with your 5-minute opening statement.
TESTIMONY OF NORMAN J. RABKIN, MANAGING DIRECTOR, HOMELAND
SECURITY AND JUSTICE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY
OFFICE; GREGORY H. FRIEDMAN, INSPECTOR GENERAL, U.S. DEPARTMENT
OF ENERGY, AND VICE CHAIR OF THE PRESIDENT'S COUNCIL ON
INTEGRITY AND EFFICIENCY; RICHARD L. SKINNER, INSPECTOR
GENERAL, U.S. DEPARTMENT OF HOMELAND SECURITY, AND CHAIR, PCIE/
ECIE HOMELAND SECURITY ROUNDTABLE; THOMAS F. GIMBLE, ACTING
INSPECTOR GENERAL, DEPARTMENT OF DEFENSE; JOSEPH E. VENGRIN,
DEPUTY INSPECTOR GENERAL FOR AUDITS, AND MICHAEL E. LITTLE,
DEPUTY INSPECTOR GENERAL FOR INVESTIGATIONS, U.S. DEPARTMENT OF
HEALTH AND HUMAN SERVICES; NIKKI L. TINSLEY, INSPECTOR GENERAL,
ENVIRONMENTAL PROTECTION AGENCY; JOHNNIE E. FRAZIER, INSPECTOR
GENERAL, U.S. DEPARTMENT OF COMMERCE; AND H. WALKER FEASTER
III, INSPECTOR GENERAL, FEDERAL COMMUNICATIONS COMMISSION
Mr. Rabkin. Thank you, Mr. Chairman. I am pleased to be
here today to discuss the plans for the oversight of the
Nation's response to Hurricane Katrina.
All of us at the U.S. Government Accountability Office, as
all Americans, were saddened by the destruction that Hurricane
Katrina caused throughout the Gulf Coast. One of the many roles
of government is to provide for its citizens at a time when
they are most in need. Although the role of auditors pales when
compared to those providing rescue, relief, and recovery, we
have our place in ensuring that Federal dollars are being
properly accounted for and are being spent wisely.
GAO has a long history of providing the Congress with
detailed and strategic analyses of issues related to the
government's response to disasters. For example, after
Hurricane Andrew devastated portions of South Florida in 1992,
we provided strategic insights into needed improvements in the
Nation's response to catastrophic disasters. Since the
terrorist attacks of September 11, 2001, we have been helping
the Congress assess the Federal actions to improve the
country's ability to respond to disasters, through both
strategic evaluations, as well as targeted reviews of specific
programs.
The question of how the accountability community should
participate in these efforts has been on the Comptroller
General's mind and agenda for the past month. He has had
extensive discussions with his colleagues in the Federal
Inspector General community, as well as with State and local
auditors. He has also met with leaders of the House and Senate
committees engaged in oversight activities. As a result of
these consultations, GAO and the Federal IGs have developed
complementary roles. As you will hear, the Inspectors General
of the various departments plan to conduct detailed work on
fraud, waste, and abuse in individual programs and Federal
agencies. GAO plans to support the Congress through analysis
and evaluation of the various issues related to how the Federal
agencies involved in Katrina activities performed and
coordinated with each other, and with State and local
governments and the private sector.
I would like to briefly discuss some of the lessons our
past work in areas under this committee's jurisdiction have
provided and some of the work we are planning to do with
Hurricane Katrina activities. Regarding healthcare issues, we
reported about 18 months ago that no State was fully prepared
to respond to the surge caused by large numbers of patients
that would seek service during a public health emergency. Some
of our future Katrina-related work will involve assessing
whether various Federal, state, and local preparedness plans
were adequate for dealing with the health consequences of this
hurricane.
Regarding energy issues, one of my GAO colleagues testified
last week about gasoline price trends and included comments on
the likely effects of Hurricane Katrina. We plan to conduct
further evaluations of determinants of gasoline prices, and the
viability of the Strategic Petroleum Reserves to respond to
disruptions like Hurricane Katrina. In the environmental area,
we have reported on how environmental resources can be affected
by both prevention of and recovery from natural disasters. We
plan further work on how EPA and other governmental agencies
are conducting water, soil, and air quality testing to
determine when it is safe for residents to return to flooded
areas.
Recognizing how important communications among emergency
personnel are in any disaster, we have reported on challenges
in developing interoperable communications for first
responders. We will focus attention in coming months to
determine the extent to which emergency units responding to
Hurricane Katrina were able to communicate with each other when
they needed to.
Mr. Chairman, we believe this work, when coupled with our
work on all of the other emergency support functions
contemplated under the National Response Plan, as well as the
results of the work of the IGs and the rest of the
accountability community, will enable us to comment on how well
the National Response Plan was designed and implemented, and to
offer suggestions for improving it.
Mr. Chairman, this concludes my statement. I will be
pleased to answer your questions.
[The prepared statement of Norman J. Rabkin follows:]
Prepared Statement of Norman J. Rabkin, Managing Director, Homeland
Security and Justice Issues
Mr. Chairman and Members of the Subcommittee: I am pleased to be
here today to discuss oversight of the nation's response to Hurricane
Katrina. As Comptroller General Walker has stated, while the Inspectors
General of the various departments plan to conduct detailed work on
fraud, waste, and abuse in individual programs in federal agencies, GAO
plans to provide support to Congress through analysis and evaluation of
the various issues related to coordination among different federal
agencies, and between these federal agencies and the state, local, and
private sectors. The Comptroller General has also stated that GAO will
be involved in reviewing the overall funding for and use of Katrina-
related funding by various federal agencies. In addition, GAO has
conducted several related reviews in the past--including reviews of
federal actions following Hurricane Andrew in 1992--that will be
helpful in evaluating the nation's response to Hurricane Katrina.
Before I begin my detailed comments, I want to say that, as you
know, all of us at the U.S. Government Accountability Office, as all
Americans, were saddened by the destruction that Hurricane Katrina
caused throughout the Gulf Coast in Louisiana, Mississippi, and Alabama
on August 29, 2005, and the ensuing days. One of the many roles of
government is to provide for its citizens at a time when they are most
in need. Because of Hurricane Katrina, it is clear that strengthening
the nation's emergency response efforts is at the top of the national
agenda. While this testimony is a dispassionate and analytical
discussion of some of the challenges faced by the nation, we recognize
the terrible costs of Hurricane Katrina in human terms and our hearts
go out to the victims and their families.
Hurricane Katrina will have an enormous impact on people and the
economy of the Gulf Coast as well as the United States. The hurricane
affected over a half million people located within approximately 90,000
square miles spanning Louisiana, Mississippi, and Alabama, and has
resulted in one of the largest natural disaster relief and recovery
operations in United States history. Many of the sectors affected by
the hurricane are within the jurisdiction of the Committee on Energy
and Commerce. In terms of public health, standing water and high
temperatures have created a breeding ground for disease, and public
health advisories have warned about the spread of disease in the
affected areas. The medical needs of evacuees will be an additional
challenge; many evacuees are without medical records and at risk of
losing their medical coverage. Hurricane Katrina also resulted in
environmental challenges, such as water and sediment contamination from
toxic materials released into the floodwaters. In addition, our
nation's energy infrastructure was hard hit. The Department of Energy
reported that 21 refineries in affected states were either shut down or
operating at reduced capacity in the aftermath of the hurricane.
Damaged transmission lines left as many as 2.3 million customers
without electricity. The hurricane also disrupted commerce. According
to the Department of Commerce, the ports damaged by Hurricane Katrina
accounted for 4.5 percent of total exports of goods from the United
States last year, and 5.4 percent of total U.S. imports. Finally, in
terms of telecommunications, the Federal Communications Commission
reported that Hurricane Katrina knocked out radio and television
stations, more than 3 million customer phone lines, and more than a
thousand cell phone sites.
In my statement today I will highlight some of GAO's previous work
on challenges faced by government preparedness, response, and recovery
programs, many of which are directly related to this committee's
jurisdiction. For future work, GAO will continue to provide this
committee and Congress with independent analysis and evaluations, and
coordinate our efforts with the accountability community to ensure
appropriate oversight of federal programs and spending. As provided for
in our congressional protocols, we plan to conduct Katrina-related work
under the Comptroller General's statutory authority since it is an
issue of interest to the entire Congress and numerous committees in
both houses.
My statement is based upon our extensive work spanning a wide
variety of topics over a number of years. Much of this work was done
relatively recently in the aftermath of the terrorist attacks of
September 11, 2001, and the subsequent creation of the Department of
Homeland Security in March 2003. In all, we have published over 120
reports on disaster preparedness and response, and other issues raised
by Katrina, which are useful in moving forward in addressing problems
encountered with the nation's response to the hurricane. At the end of
this statement is a comprehensive list of our related products.
SUMMARY
Our past work has noted needed improvements in government programs
related to preparing for, responding to, and recovering from natural
disasters such as Hurricane Katrina. Many of these challenges relate to
programs under the jurisdiction of the Energy and Commerce Committee.
For example, health care providers have not always been adequately
prepared for catastrophic events. The health care community has been
addressing some of these challenges, such as those involving
coordination efforts and communications systems, more readily than
others, such as infrastructure and workforce issues, which are more
resource-intensive. Our work on energy issues has described some of the
consequences of hurricanes on petroleum markets--such as rapid gasoline
price increases. Our environmental work has indicated that the loss of
wetlands has increased the severity of damage from hurricanes, and that
cleanup of contaminated sites takes a tremendous amount of coordination
and funding. Finally, our work on telecommunications issues has found
that first responders are challenged by a lack of interoperable
emergency communications. In these areas, among others, we have made a
number of recommendations, many of which are still pending completion.
PAST GAO WORK HAS HIGHLIGHTED NEEDED IMPROVEMENTS IN MANY PROGRAMS
RELATED TO PREPAREDNESS, RESPONSE, AND RECOVERY
There are a host of challenges to government programs related to
Hurricane Katrina and other natural disasters in terms of preparedness,
response, and recovery. Our work on preparedness--programs to prevent
disasters or prepare to respond in advance--has identified needed
improvements in a number of areas, including balancing efforts to
prepare for terrorism with efforts related to natural disasters and all
hazards; planning preparedness efforts and setting goals and measures;
providing training, exercises, evaluations, and lessons learned to
first responders; providing flood control and protection; improving
public health preparedness; and providing federal grants to state and
local governments. Similarly, our work on response to disasters has
identified a number of problems. These relate to federal, state and
local roles in coordinating the response; the role of the military, to
include the National Guard; and the medical and public health response
capabilities. Furthermore, our work on recovery--programs to help
communities and victims get back to normal--has also identified
challenges related to federal assistance to recovery areas, private
nongovernment assistance efforts, and lessons from overseas recovery
programs. In many of these areas we have made a number of
recommendations, some of which have still not been implemented. Below
are some examples of our previous and planned work related to the
jurisdiction of this committee regarding preparedness, response, and
recovery issues related to health care, energy, the environment, and
telecommunications.
Health Care Issues
Hurricane Katrina raised a number of health care concerns, and the
preparedness of health care providers, their response capabilities, and
health care agency and hospital capacity are all important in a major
disaster. The National Strategy for Homeland Security had a specific
initiative to prepare health care providers for catastrophic events,
such as major terrorist attacks.<SUP>1</SUP> However, in April 2003, we
reported that many local areas and their supporting agencies may not
have been adequately prepared to respond to such an event.<SUP>2</SUP>
Specifically, while many state and local officials reported varying
levels of preparedness to respond to a bioterrorist attack, they
reported that challenges existed because of deficiencies in capacity,
communication, and coordination elements essential to preparedness and
response. These included workforce shortages, inadequacies in disease
surveillance and laboratory systems, and a lack of regional
coordination and compatible communications systems. Some of these
challenges, such as those involving coordination efforts and
communications systems, were being addressed more readily, whereas
others, such as infrastructure and workforce issues, were more
resource-intensive. Generally, we found that cities with more
experience in dealing with public health emergencies were generally
better prepared for a major disaster (such as a bioterrorist attack)
than other cities, although challenges remain in every city. Almost a
year later, in February 2004, we reported that although states had
further developed many important aspects of public health preparedness,
no state was fully prepared to respond to a major public health
threat.<SUP>3</SUP> Specifically, states had improved their disease
surveillance systems, laboratory capacity, communications capacity, and
workforce needed to respond to public health threats, but gaps in each
remained. Moreover, regional planning among states was lacking, and
many states lacked surge capacity--the capacity to evaluate, diagnose,
and treat the large numbers of patients that would present during a
public health emergency.
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\1\ See the National Strategy for Homeland Security, the White
House, July 2002.
\2\ See GAO, Bioterrorism: Preparedness Varied Across State and
Local Jurisdictions, GAO-03-373 (Washingon, D.C.: Apr. 7, 2003).
\3\ See GAO, Public Health Preparedness: Response Capacity
Improving, but Much Remains to Be Accomplished, GAO-04-458T,
(Washington, D.C.: February 12, 2004).
---------------------------------------------------------------------------
In terms of health care agencies and hospital capacities, we also
found major deficiencies. In May 2003 we testified that while the
efforts of public health agencies and health care organizations to
increase their preparedness for major public health threats have
increased, significant challenges remained.<SUP>4</SUP> Specifically,
we found most emergency departments across the country lacked the
capacity to respond to large-scale infectious disease outbreaks. For
example, although most hospitals across the country reported
participating in basic planning activities for large-scale infectious
disease outbreaks, few had acquired the medical equipment resources--
such as ventilators--that would be required in such an event. Further,
because most emergency departments already routinely experienced some
degree of overcrowding, they may not be able to handle the sudden
influx of patients that would occur during a large-scale infectious
disease outbreak. Regarding hospital capacity, in August 2003 we
reported that the medical equipment available for response to certain
incidents (e.g., as a biological terrorist incident) varied greatly
among hospitals.<SUP>5</SUP> Additionally, many hospitals reported that
they did not have the capacity to respond to the large increase in the
number of patients that would be likely to result from incidents with
mass casualties.
---------------------------------------------------------------------------
\4\ See GAO, SARS Outbreak: Improvements to Public Health Capacity
Are Needed for Responding to Bioterrorism and Emerging Infectious
Diseases, GAO-03-769T (Washington, D.C.: May 7, 2003).
\5\ See GAO, Hospital Preparedness: Most Urban Hospitals Have
Emergency Plans but Lack Certain Capacities for Bioterrorism Response,
GAO-03-924 (Washington, D.C.: Aug. 6, 2003).
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In our April 2003 report on preparedness, we made a number of
recommendations to help state and local jurisdictions better prepare
for a bioterrorist attack and to develop a mechanism for sharing
solutions between jurisdictions. In response to this report, the
Departments of Health and Human Services and Homeland Security
concurred with GAO's recommendations.
We plan future work related to Hurricane Katrina regarding public
health and health services, including mental health services
issues. Specifically, we plan to conduct evaluations of
evacuation plans for inpatient and long-term care health
facilities; federal, state, and local preparedness plans for
dealing with the health consequences of natural and man-made
disasters; and provision of mental health services for evacuees
and first responders.
Energy Issues
The wide-ranging effects of Hurricane Katrina on gasoline prices
nationwide are a stark reminder of the interconnectedness of our
petroleum markets and reveal the vulnerability of these markets to
disruptions, natural or otherwise.<SUP>6</SUP> These markets have
become stressed over time, in part because of a proliferation of
special gasoline blends that have raised costs and affected operations
at refineries, pipelines, and storage terminals.<SUP>7</SUP> As we
noted in our recent testimony on energy markets, Hurricane Katrina did
tremendous damage to, among other things, electricity transmission
lines, and oil producing, refining, and pipeline
facilities.<SUP>8</SUP> Because the Gulf Coast refining region is a net
exporter of petroleum products to all other regions of the country,
retail gasoline prices in many parts of the nation rose dramatically. A
variety of factors determine how gasoline prices vary across different
locations and over time. For example, gasoline prices may be affected
by unexpected refinery outages or accidents that significantly disrupt
the delivery of gasoline supply. Future gasoline prices will reflect
the world supply and demand balance and will continue to be an
important factor affecting the American consumer for the foreseeable
future. The impact of gasoline prices is felt in virtually every sector
of the U.S. economy. Some of our more significant open recommendations
are that (1) the Environmental Protection Agency (EPA), with the
Department of Energy (DOE) and others, develop a plan to balance the
environmental benefits of using special fuels with the impacts these
fuels have on the gasoline supply infrastructure, and (2) if warranted,
EPA work with other agencies to identify what statutory or other
changes are required to implement this plan. EPA declined to comment on
our recommendations and did not signify agreement or disagreement with
them.
---------------------------------------------------------------------------
\6\ For a primer on gasoline prices, see GAO, Motor Fuels:
Understanding the Factors That Influence the Retail Price of Gasoline,
GAO-05-525SP, Washington, D.C.: May 2, 2005).
\7\ See GAO, Gasoline Markets: Special Gasoline Blends Reduce
Emissions and Improve Air Quality, but Complicate Supply and Contribute
to Higher Prices, GAO-05-421 (Washington, D.C.: June 17, 2005).
\8\ See GAO, Energy Markets: Gasoline Price Trends, GAO-05-1047T
(Washington, D.C.: Sept. 21, 2005).
We plan future work on energy issues in order to better understand
the vulnerability of the nation's energy infrastructure to
natural or manmade disasters. Specifically, we plan to conduct
evaluations of determinants of gasoline prices in particular,
and the petroleum industry more generally. Included will be
evaluations of world oil reserves; security of maritime
facilities for handling and transporting petroleum, natural
gas, and petroleum products; viability of the Strategic
Petroleum Reserve to respond to disruptions such as Hurricane
Katrina; and impacts of the potential disruption of Venezuelan
oil imports.
Environmental Issues
Hurricane Katrina resulted in significant impacts on Gulf Coast
environmental resources. The condition of environmental resources has
an important role in both the prevention and of recovery from natural
disasters. In the area of prevention, the U.S. Army Corps of Engineers
has responsibility for constructing hurricane prevention and flood
control projects throughout the country. The Lake Pontchartrain and
Vicinity Hurricane Protection Project was one such project that was
authorized by Congress in 1965 to provide hurricane protection to New
Orleans from a fast-moving Category 3 hurricane.<SUP>9</SUP> Similarly,
wetlands, once regarded as unimportant areas to be filled or drained
for agricultural or development activities, are now recognized for the
variety of important functions that they perform, including providing
flood control by slowing down and absorbing excess water during storms;
maintaining water quality by filtering out pollutants before they enter
streams, lakes, and oceans; and protecting coastal and upland areas
from erosion.<SUP>10</SUP> Moreover, it has been suggested that
wetlands act as a speed bump, slowing down storms almost as dry land
does. The Fish and Wildlife Service reports that more than half of the
221 million acres of wetlands that existed during colonial times in
what is now the contiguous United States have been lost. There is no
reliable set of wetland acreage estimates to be used to evaluate the
progress made in achieving the goal of ``no net loss'' of the remaining
wetlands. In the area of recovery, Hurricane Katrina poses an enormous
challenge in terms of the cleanup of hazardous materials in the area.
Industrial discharges, sewage, gas and oil from gas stations, household
hazardous materials, pesticides, and chemicals contaminated the
floodwaters. The long-term effects of these hazardous materials, the
level of effort and coordination needed and the cost of decontamination
and cleanup will take some time to determine.
---------------------------------------------------------------------------
\9\ See GAO, Army Corps of Engineers: Lake Ponchartrain and
Vicinity Hurricane Protection Project, GAO-05-1050T, (Washington, D.C.:
Sept. 28, 2005).
\10\ See GAO, Wetlands Overview: Problems With Acreage Data
Persist, GAO/RECED-98-150, (Washington, D.C.: July 1, 1998).
---------------------------------------------------------------------------
In situations where such contamination exits, EPA serves as the
lead agency for the cleanup of hazardous materials, including oil and
gasoline. EPA emergency response personnel are working in partnership
with FEMA and state and local agencies to help assess the damage, test
health and environmental conditions, and coordinate cleanup from
Hurricane Katrina. They are conducting water, air, and sediment
testing, assessing drinking water and wastewater facilities, examining
superfund and other hazardous waste sites affected by the storms,
issuing environmental waivers, and providing public advisories
regarding drinking water and the potential for hazardous debris in
homes and buildings.
We plan future work on environmental issues, such as evaluations of
how EPA and other federal, state, and local agencies conduct
water, soil, and air quality testing to determine when it will
be safe for residents to return to New Orleans. We also plan to
evaluate efforts to treat hazardous materials during the
cleanup efforts and restore drinking water and wastewater
facilities. We also plan to review the Army Corps of Engineers
efforts to repair the integrity of the hurricane protection
structures in the New Orleans area and assess issues relating
to wetland losses.
Telecommunications Issues
Hurricane Katrina knocked out a wide variety of communications
infrastructure and communication among emergency personnel is important
in any disaster. The National Strategy for Homeland Security called for
seamless communications among all first responders and public health
entities. However, in our August and November 2003 reports, we noted
that insufficient collaboration among federal, state, and local
governments had created a challenge for sharing public health
information and developing interoperable communications for first
responders.<SUP>11</SUP> For example, states and cities had implemented
many initiatives to improve information sharing, but these initiatives
had not been well coordinated and risked creating partnerships that
limited access to information and created duplicative efforts. Another
challenge involved the lack of effective, collaborative,
interdisciplinary, and intergovernmental planning for interoperable
communications. For instance, the federal and state governments lacked
a coordinated grant review process to ensure that funds were used for
communications projects that complemented one another and added to
overall statewide and national interoperability capacity.<SUP>12</SUP>
Moreover, we testified in April 2004 that the Wireless Public Safety
Interoperable Communications Program, or SAFECOM, had made very limited
progress in achieving communications interoperability among all
entities at all levels of government and had not achieved the level of
collaboration necessary.<SUP>13</SUP> Finally, in our October 2003
report on public health preparedness, we reported that challenges
existed in ensuring communication among responders and with the
public.<SUP>14</SUP> For example, during the anthrax incidents of 2001,
local officials identified communication among responders and with the
public as a challenge, both in terms of having the necessary
communication channels and in terms of making the necessary information
available for distribution.
---------------------------------------------------------------------------
\11\ See GAO, Homeland Security: Efforts to Improve Information
Sharing Need to Be Strengthened, GAO-03-760, (Washington, D.C.: Aug.
27, 2003); and Homeland Security: Challenges in Achieving Interoperable
Communications for First Responders, GAO-04-231T (Washington, D.C.:
Nov. 6, 2003).
\12\ See GAO, Homeland Security Federal leadership and
Intergovernmental Cooperation Required to Achieve First Responder
Interoperable Communications, GAO-04-740 (Washington, D.C.: July 20,
2004).
\13\ See GAO, Project SAFECOM: Key Cross-Agency Emergency
Communications Effort Requires Stronger Collaboration, GAO-04-494
(Washington, D.C.: Apr.16, 2004).
\14\ See GAO, Bioterrorism: Public Health Response to Anthrax
Incidents of 2001, GAO-04-152 (Washington, D.C.: Oct. 15, 2003).
---------------------------------------------------------------------------
We made a number of recommendations that DHS, in conjunction with
other federal agencies, complete a database on communication
frequencies, determine the status of wireless public safety
communications nationwide, tie grant funding to statewide
interoperability plans, and review the interoperability functions of
SAFECOM. DHS has agreed to take some, but not all, of the corrective
actions we recommended.
CONCLUDING OBSERVATIONS
We have issued a number of reports relevant to evaluating Hurricane
Katrina. In addition, the accountability community--including the IGs
and GAO--has an active future agenda for evaluating the nation's
response to the hurricane. Congress has recently passed legislation
that provided $15 million for the DHS IG to audit and investigate
Hurricane Katrina response and recovery activities.<SUP>15</SUP> The
DHS IG has developed a plan for oversight of the funds being spent
directly by DHS components and the IGs of the 12 other departments and
agencies that account for almost all of the remainder of the funds
appropriated thus far. The primary objective of the IG plan is to
ensure accountability, primarily through ongoing audit and
investigative efforts designed to identify and address waste, fraud,
and abuse. Each IG will be issuing an individual report to ensure that
the affected people, organizations, and governments receive the full
benefit of the funds being spent and to be spent on disaster response
and recovery programs. The DHS IG will coordinate the work of the
respective IGs through regular meetings, and the overall account of
funds will be coordinated with us through regular meetings with our
senior officials.
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\15\ Second Emergency Supplemental Appropriations Act to Meet
Immediate Needs Arising from the Consequences of Hurricane Katrina,
2005, Pub. L. 109-62, 119 Stat. 190, 191 (2005).
---------------------------------------------------------------------------
As the IGs focus on fraud, waste, and abuse, GAO can provide
Congress with more strategic evaluations on such issues as coordination
among various agencies and state and local government and the private
sector. Some of our past strategic work included reports in the wake of
Hurricane Andrew in 1992 <SUP>16</SUP> and the terrorist attacks of
September 11, 2001.<SUP>17</SUP> Other strategic-level reports have
covered such topics as barriers to interagency coordination,
<SUP>18</SUP> issues related to continuity of operations planning for
essential government services, <SUP>19</SUP> and DHS's efforts to
enhance first responders' all-hazards capabilities.<SUP>20</SUP> Many
of our past reports, which provide a firm foundation for doing Katrina-
related work, contain recommendations to improve top-level
coordination. While several changes have occurred in terms of the
government's structure and process for emergency preparedness and
response, the extent to which many of our earlier recommendations have
been fully implemented remains unclear.
---------------------------------------------------------------------------
\16\ See GAO, Disaster Management: Improving the Nation's Response
to Catastrophic Disasters, GAO/RCED-93-186 (Washington, D.C.: July 23,
1993).
\17\ See GAO, Combating Terrorism: Selected Challenges and Related
Recommendations, GAO-01-822 (Washington, D.C.: Sept. 20, 2001).
\18\ See GAO, Managing for Results: Barriers to Interagency
Coordination, GAO/GGD-00-106 (Washington, D.C.: Mar. 29, 2000).
\19\ See GAO, Continuity of Operations: Improved Planning Needed to
Ensure Delivery of Essential Government Services GAO 04-160
(Washington, D.C.: Feb. 27, 2004).
\20\ See GAO, Homeland Security: DHS's Efforts to Enhance First
Responders' All-Hazards Capabilities Continue to Evolve, GAO-05-652
(Washington, D.C.: July 11, 2005).
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In closing, we will continue to work with the accountability
community and have already reached out to the relevant congressional
committees, federal IGs, and state and local auditors in the affected
states to coordinate our efforts, avoid unnecessary duplication, and
most effectively utilize our resources. Comptroller General Walker has
been personally and extensively involved in this effort and he plans to
continue to be heavily involved.
Mr. Chairman, this concludes my statement. I would be pleased to
respond to any questions that you or other members of the subcommittee
may have at this time.
Mr. Whitfield. Thank you very much, Mr. Rabkin. At this
time, we will recognize Mr. Friedman for his opening statement.
TESTIMONY OF GREGORY H. FRIEDMAN
Mr. Friedman. Good morning, Mr. Chairman and members of the
subcommittee. As the Department of Energy's Inspector General,
and as Vice Chair of the President's Council on Integrity and
Efficiency, I am pleased to be here today at your request to
discuss Inspector General plans to guard against waste, fraud,
and abuse in the hurricane relief and recovery efforts.
The impact that Katrina and Rita have had on the citizens
and businesses in the Gulf States and other communities has
been nothing short of catastrophic. The goal of the Inspector
General community is to aid in the efforts to ensure that funds
appropriated for hurricane relief are spent for their intended
purpose: that is, to assist the affected citizens and
businesses in recovering from his tragedy.
Several months ago, in my role as Vice Chair of the
President's Council on Integrity and Efficiency, I established
a special working group to address homeland security issues. I
asked Rick Skinner, who is sitting to my left, the Inspector
General of the Department of Homeland Security, to head the
group. On August 29, 2005, a major challenge for this working
group became evident with the devastation associated with
Hurricane Katrina. The IG community mobilized, and is providing
on-the-ground, proactive support in overseeing the billions of
dollars appropriated for relief. The working group has
implemented a comprehensive, community-wide program, which
identifies specific risks and control weaknesses of various
programs and operations. In carrying out the plan, the IG
community is reviewing the award and administration of
contracts and grants, operating an OIG hurricane relief and
reconstruction hotline, and aggressively addressing allegations
of wrongdoing.
In addition to the working group, within days of Katrina,
many in the IG community volunteered to assist with relief
activities. Further, PCIE members, in efforts related to the
specific missions of their own agencies, are aggressively
working audit and investigative issues arising from Katrina,
and now, from Hurricane Rita. The massive Federal hurricane aid
package may attract those who are inclined to abuse the system
and defraud the U.S. taxpayers.
Based on my experience, Mr. Chairman, prevention is the key
to minimizing fraud and misuse. Thus, it is vitally important
that agency management establish effective controls and
procedures for expenditures relating to hurricane relief. We
are working with each agency to identify the extra safeguards
which are needed to deal effectively with the increased risk
environment, and then, we will be determining if they have
achieved any success.
These challenges primarily reside with agency senior
management, including those responsible for agency budget,
planning, procurement, and program management functions. The
Inspectors General play a critical role in the process of
identifying vulnerabilities in government programs and
operations, recommending needed management improvements, and
bringing to justice those attempting to defraud the Federal
Government. In working toward these goals, specifically as they
relate to hurricane relief, we are collaborating with auditors
and law enforcement agencies at all levels of government to
achieve common objectives.
Regarding my role and responsibilities within the
Department of Energy, the Department has a significant role to
play in disaster relief relating to the restoration of damaged
energy systems as part of the National Response Plan which was
alluded to earlier, Emergency Support Function 12, which is the
``Energy Annex.'' My office has implemented an audit plan to
review this effort. Consistent with the Energy Annex, we are in
the process of examining the Department of Energy's actions
related to collecting, assessing, and providing information on
energy supply, demand, and prices, and identifying supporting
resources needed to restore energy systems.
In addition, the Department has begun to make oil available
from the Strategic Petroleum Reserve, which contains
approximately 695 million barrels of oil, and serves as the
Nation's first line of defense against an interruption of
petroleum supplies. We have initiated an audit of the Strategic
Petroleum Reserve sales and exchange program which was
designed, in the current environment, to ensure that refineries
have the petroleum they need to keep gasoline, diesel fuel and
other petroleum products flowing to American consumers. Other
audits, inspections, and investigative efforts will be
undertaken as needed.
In conclusion, let me emphasize that the Federal Inspector
General community is committed to doing its utmost to ensure
that the national interests and those of Katrina's victims are
well served.
Mr. Chairman and members of the subcommittee, this
concludes my statement, and I would be pleased to answer any
questions that you might have.
[The prepared statement of Gregory H. Friedman follows:]
Prepared Statement of Gregory H. Friedman, Inspector General, U.S.
Department of Energy
Good morning Mr. Chairman and members of the Subcommittee. As the
Department of Energy's Inspector General and as Vice Chair of the
President's Council on Integrity and Efficiency, I am pleased to be
here today at your request to discuss Inspector General plans to guard
against waste, fraud and abuse in the post-Katrina relief and recovery
efforts. The impact Katrina has had on the citizens and businesses in
the Gulf States and in other communities has been nothing short of
catastrophic. The goal of the Inspector General community is to aid in
the effort to ensure that funds appropriated for Hurricane Katrina
relief efforts are spent properly and effectively. It is imperative
that the $63 billion appropriated for the immediate relief effort, as
well as all future special and other direct funding, is used for its
intended purpose; that is, to assist the affected citizens and
businesses in recovering from this tragedy.
Several months ago, in my role as Vice Chair of the President's
Council on Integrity and Efficiency, I established a special working
group to address homeland security audit and investigative issues. This
working group's efforts impact programs and operations at nearly every
Federal agency. I asked Rick Skinner, the Inspector General of the
Department of Homeland Security, to head the group. On August 29, 2005,
a major challenge for this working group became evident with the
devastation associated with Hurricane Katrina. Under Rick's leadership,
the IG community has mobilized, and is providing on-the-ground,
proactive support in overseeing the billions of dollars appropriated
for Katrina relief. The working group has implemented a comprehensive
community-wide plan which identifies specific risks and control
weaknesses of various programs and operations. In carrying out the
plan, the IG community is reviewing the award and administration of
contracts and grants; operating a Katrina OIG Hotline; and,
aggressively addressing allegations of wrongdoing.
In addition to the working group, within days of Hurricane Katrina,
many IG special agents, auditors, and inspectors volunteered to assist
with relief activities. Further, PCIE members, in efforts related to
the specific missions of their own agencies, are aggressively working
audit and investigative issues arising from Katrina.
As has been widely recognized, the massive Federal Katrina aid
package may attract those inclined to abuse the system and defraud the
U.S. taxpayers. Based on my experience, prevention is the key to
minimizing fraud and misuse. Thus, it is important that agency
management establish effective controls and procedures for expenditures
relating to hurricane relief. We are working with each agency to foster
a culture of accountability and responsibility. These challenges
primarily reside with agency senior management, including those
responsible for agency budget, planning, procurement and program
management functions.
The Inspectors General play a critical role in the process of
identifying vulnerabilities in government programs and operations;
recommending needed management improvements; and, bringing to justice
those attempting to defraud the Federal Government. In working toward
these goals, specifically as they relate to Katrina, we are
collaborating with auditors and law enforcement agencies at all levels
of government to achieve common objectives.
Regarding the Department of Energy, the Department has a
significant role to play in disaster relief relating to the restoration
of damaged energy systems as a part of the National Response Plan,
Emergency Support Function 12. My office has implemented an audit plan
to review this effort. Consistent with Emergency Support Function 12,
we are in the process of examining the Department's actions related to:
Collecting, assessing, and providing information on energy supply,
demand and prices; and,
Identifying supporting resources needed to restore energy systems.
In addition, the Department has announced actions to make oil
available from the Strategic Petroleum Reserve, which contains
approximately 695 million barrels of oil and serves as the Nation's
first line of defense against an interruption of petroleum supplies. We
have initiated an audit of the Strategic Petroleum Reserve sales and
exchange program which was designed, in the current environment, to
ensure that refineries have the petroleum they need to keep gasoline
and diesel fuel flowing to American consumers. Other audits,
inspections and investigative efforts will be undertaken as needed.
In my role as Vice Chair of the President's Council on Integrity
and Efficiency, let me emphasize that the Federal Inspector General
community is committed to doing its utmost to ensure that the national
interests and those of Katrina's victims are well-served.
Mr. Chairman and members of the Subcommittee, this concludes my
statement. I will be pleased to answer any questions.
Mr. Whitfield. And thank you, Mr. Friedman. At this time,
we will recognize Mr. Skinner for his opening statement.
TESTIMONY OF RICHARD L. SKINNER
Mr. Skinner. Mr. Chairman, thank you for the opportunity to
be here today.
I would like to summarize briefly a couple points that I
made in my prepared statement, which I have submitted for the
record, and that is the OIG community's oversight initiatives
and my office's oversight efforts. First, concerning the OIG
community oversight. Through the PCIE Homeland Security
Roundtable, which I chair, the inspector general community has
been working together to coordinate our respective oversight
efforts from the beginning. Collectively, we have prepared
plans to provide oversight of 99 percent of the $63 billion
appropriated to date for Katrina relief efforts.
As with all Presidentially declared disasters, FEMA
coordinates the Federal Government's relief efforts. To this
end, they administer some of the funds directly, but the bulk
of the funds are distributed to other Federal agencies through
mission assignments, or through State agencies through grants.
As of September 21, FEMA has made grants to Katrina-affected
states totaling about $4 billion, and mission assignments
totaling about $7 billion, over $6 billion of which went to the
Department of Defense.
The overriding objectives of the OIG plans are to ensure
accountability, promote efficiencies, and to detect and prevent
fraud, waste, and abuse. Insofar as the bulk of the funds
obligated to date have been or will be spent for contractor
support, the OIG's current plans will naturally focus on
contract management. This includes performing internal control
assessments of procurement systems, monitoring contract
transactions, and reviewing the award and management of all
major contracts, particularly no-bid or limited competition
contracts.
In this regard, the OIGs will be looking at the evidence to
support the no-bid decision, the criteria used to select one
contractor over another, the reasonableness of the costs
associated with the service or product to be delivered, the
qualifications of the contractors selected, and the support for
the payments made to the contractor. Also, using data mining
techniques, the OIGs will be reviewing the use of the expanded
micro-purchase authority on a real-time basis.
Notwithstanding our best efforts to prevent problems
through an aggressive oversight program, history has shown that
there are some who will try to beat the system through
fraudulent means. The OIGs will be working closely with the
newly established Hurricane Fraud Taskforce, which is chaired
by the Assistant Attorney General of the Criminal Division. The
Taskforce is designed to investigate and prosecute disaster-
related crimes, such as contractor fraud, government benefit
fraud, and insurance fraud. It will track referrals of
potential cases and complaints, coordinate with law enforcement
agencies to initiate investigations, match referrals with the
appropriate U.S. Attorney's offices, and ensure timely and
effective prosecution of cases. In this regard, an OIG
Hurricane Relief Hotline has been established and will be
widely publicized to allow for the effective screening and
followup of allegations of fraud, waste, and abuse. To date,
the OIGs have committed a total of over 300 auditors,
investigators, and inspectors to this combined effort.
Now, with respect to my office's oversight initiatives.
Based on my experiences as a Deputy Inspector General at FEMA,
I recognize that a disaster of this magnitude will require a
long-term commitment of resources. Accordingly, to ensure that
we remain focused, not just on short-term response initiatives
or operations, but also on long-term recovery initiatives,
which could require our involvement for the next 3, 5, or even
10 years to come, I have created an Office of Katrina Oversight
within the OIG, to focus solely on Hurricane Katrina relief
operations. I just recently hired an Assistant Inspector
General with very extensive FEMA and OIG experience to manage
this effort on a full-time basis. My office has already
assigned 60 auditors, investigators, and inspectors, and will
be hiring over 30 more over the next 3 months. We are prepared
to add resources, providing funding is made available, as the
need arises. We have had personnel monitoring FEMA
headquarters' operations since day one, September 1, and
currently have auditors assigned to the joint field offices in
Baton Rouge, Louisiana, Montgomery Alabama, and Jackson,
Mississippi.
In addition to the oversight activities that I have already
discussed, we will provide oversight of FEMA's individual
assistance program and, in coordination with HUD's OIG, provide
oversight of FEMA's temporary housing program; monitor and, as
necessary, audit public assistance and mitigation projects
approved by the State and FEMA; continue to monitor FEMA's
assignments of responsibilities under mission assignments; and
coordinate our work with the work of the other OIGs and the
GAO, to ensure that there are no major gaps in oversight and
conversely, to mitigate the potential for duplication of
effort.
And finally, we will be working very closely with our
counterparts at the State and local level, to leverage against
our efforts. Already, for example, Louisiana's Legislative
Auditor and Inspector General, have dedicated 36 auditors to
review transactions flowing through the State's Office of
Emergency Preparedness. We intend to do this in Mississippi,
Alabama and Texas as well. Finally, we have initiated a review
that will focus on FEMA's preparedness for and response to the
devastation caused by Hurricane Katrina. This review will be
done in close coordination with GAO, of course.
In conclusion, I would like to say that, collectively, the
OIG community is uniquely qualified and positioned to provide
the most timely and effective oversight of Hurricane Katrina
operations. You can be sure that the OIG community stands
united in its efforts to ensure that taxpayers' dollars are
spent wisely, today, and in the years to come, as the
communities and victims in the Gulf region begin to get back to
normal.
Mr. Chairman, that concludes my statement. I will be happy
to answer any questions.
[The prepared statement of Richard L. Skinner follows:]
Prepared Statement of Richard L. Skinner, Inspector General, U.S.
Department of Homeland Security
Good morning Mr. Chairman and Members of the Subcommittee. Thank
you for the opportunity to be here today to discuss the plans of the
Inspectors General to guard against waste, fraud, and abuse in post-
Katrina relief and recovery.
OVERVIEW OF OIG HURRICANE KATRINA OVERSIGHT
On August 29, 2005, Hurricane Katrina hit the Gulf Coast states of
Louisiana, Mississippi, Alabama, and Florida with Category IV winds and
torrential rains. By September 9, 2005, Congress had passed legislation
that provided over $63 billion to the Department of Homeland Security
(DHS) for disaster relief, including $15 million for the DHS Office of
Inspector General (OIG) to oversee the management and expenditure of
those funds. Although the Federal Emergency Management Agency (FEMA) is
responsible for coordinating response and recovery efforts, it will
take the combined efforts of many federal, state, and local government
entities to restore the Gulf Coast. Therefore, the oversight task
encompasses more the just the DHS OIG. The circumstances created by
Hurricane Katrina provided an unprecedented opportunity for fraud and
mismanagement, and some estimate that the cost to recover from the
storm and rebuild the affected areas could reach $200 billion and more.
In addition to its own activities related to Hurricane Katrina,
FEMA tasked other federal departments and agencies through Mission
Assignments. As of September 13, 2005, FEMA had made mission
assignments totaling just over $7 billion, over $6 billion of which
went to the Department of Defense (DOD) and the Army Corps of
Engineers. Departments use mission assignment funds to award contracts
or provide direct support for response efforts. In addition, some
departments and agencies, including DOD, received direct appropriations
for Hurricane Katrina activities. We expect more disaster relief funds
and direct appropriations for Katrina relief in the weeks and months
ahead.
To answer the call for oversight in the face of this unprecedented
disaster, my office and other Inspectors General have been working
together to coordinate our efforts from the beginning. We are
collectively focused on our departments' and agencies' response and
recovery efforts and the related disaster assistance spending. The
overriding objective of the OIGs' plan is to ensure accountability and
preventing problems before they occur. Our plans focus heavily on
prevention, including reviewing internal controls; monitoring and
advising department officials on contracts, grants and purchase
transactions before they are approved; and meeting with applicants,
contractors and grantees to advise them of the requirements and assess
their capability to account for the funds. The plans also encompass an
aggressive and ongoing audit and investigative effort designed to
ensure that disaster relief funds are being spent wisely and to
identify waste, fraud, and abuse as early as possible.
The OIGs are currently coordinating through regular meetings of the
President's Council on Integrity and Efficiency (PCIE) Homeland
Security Round Table, and the overall effort will be coordinated with
the Government Accountability Office (GAO) through regular meetings
with GAO senior officials.
Plan Coordination
DHS OIG has developed a plan for oversight of the funds to be spent
directly by DHS components. The OIGs of the departments and agencies
who account for the vast majority of the initial FEMA mission
assignment allocations have also developed plans for the oversight of
their respective agency's Katrina spending. To date, the OIGs,
collectively, have committed a total of over 300 auditors,
investigators, and inspectors to this combined effort. For example, DHS
OIG has already assigned 60 auditors, investigators, and inspectors,
and will be hiring over 30 more over the next three months. Over the
next several months, the total DHS OIG staff assigned to this effort
will double as we aggressively hire additional auditors under limited
term appointments.
Many of DHS OIG's personnel are already on the ground at FEMA
Headquarters and at the Joint Field Offices (JFO) in Louisiana,
Mississippi, and Alabama. In addition, we will be leveraging the OIGs'
efforts with those of the state and local audit organizations in the
three states. Already, Louisiana's Legislative Auditor and Inspector
General have dedicated 36 auditors to review transactions flowing
through the state's Office of Emergency Preparedness.
The other OIGs and the GAO also plan to have personnel on site as
necessary to conduct their oversight and investigative activities and
these efforts will be closely coordinated. For example, the DOD OIG,
the Army Audit Agency, the Naval Audit Service, the Air Force Audit
Agency, the Defense Contract Audit Agency, and the defense criminal
investigative organizations will employ a cadre of well over 100
auditors, investigators, and inspectors who will provide immediate
oversight of DOD contracts, grants, and operations related to Hurricane
Katrina relief efforts.
I do not believe that additional authorities are needed to allow
appropriate coordination of these efforts. However, it is clear that
additional resources will be needed and I will be preparing appropriate
requests for supplemental appropriations.
DHS OIG Activities
Within days of Katrina's landfall, the DHS OIG had a presence
onsite at FEMA Headquarters to monitor operations. We quickly increased
this staffing level so that we could have a larger presence and monitor
operations at FEMA's Emergency Operations Center on a near-continuous
basis. Through this presence, we stay current on all disaster relief
operations and provide on-the-spot advice on internal controls and
precedent setting decisions. Auditors also closely monitor FEMA's
assignment of responsibilities and funding to other federal
organizations under mission assignments. This effort will be
coordinated with the respective agency OIG reviews and will continue
through project execution to identify questionable activities early,
and thus decrease the risk of misspending while ensuring compliance
with federal laws and regulations.
During the past week, we established offices with auditors and
investigators at the Joint Field Offices (JFO) in Baton Rouge,
Louisiana; Montgomery, Alabama; and Jackson, Mississippi. The auditors
will provide advice and perform proactive procedures related to the
JFOs' internal activities to ensure the appropriate control and use of
FEMA funds. The emphasis will be to provide a visible OIG presence to
prevent misspending on questionable contracts and grants. In
particular, the auditors will perform the following functions:
Oversee contract activities as requirements and awards are developed.
Participate in FEMA applicant briefings and kickoff meetings.
Provide advice on applicants' accounting systems and sub-grant
administrative policies, procedures, and practices.
Oversee FEMA property management to ensure that property and
equipment acquired for use at the JFOs are safeguarded against
loss and pilferage.
Perform audits, as necessary, of contracts and grants awarded by
FEMA.
The investigators will coordinate with the respective federal,
state, and local law enforcement agencies and prosecutors as part of
their ``fraud awareness'' initiatives. They will also handle
allegations received through a single, OIG-wide, Katrina ``Hotline.''
Further, I have just selected an Assistant Inspector General for
Katrina Oversight with extensive FEMA and OIG experience to manage the
overall effort on a full time basis.
Auditing Contracting and Procurement Activities
We plan to maintain proactive and aggressive audit oversight of
contracting activities resulting from Hurricane Katrina. Our objectives
will be to determine the extent: (1) federal acquisition regulations
are being adhered to, (2) effective contracting practices are being
used on these procurements, and (3) the expenditures are necessary and
reasonable. Auditors will review the award and administration of all
major contracts, including those made in the first two weeks, and each
department's implementation of expanded micro purchase authority to
ensure that appropriate federal acquisition regulations and guidelines
are being adhered to, and expenditures are necessary and reasonable.
Data mining techniques will provide continuous oversight of purchase
card transactions to identify spending anomalies for further review.
Monitoring Financial Controls
Financial statement auditors will provide oversight of their
agency's control environment, financial and operational processes, and
the effectiveness of internal controls to identify financial reporting
issues early. Under this effort, where material, auditors will
identify, document, and test key internal controls for operating
effectiveness.
Monitoring Public Assistance Projects and other Grants
DHS OIG auditors will closely monitor FEMA's Individuals and
Households Program (IHP) and Temporary Housing Program, as well as
FEMA's approval of Public Assistance projects. Reviews will start early
in project execution and remain ongoing to identify questionable
activities early, prevent misspending, and ensure compliance with
federal laws and FEMA regulations. We will be leveraging our resources
by working in partnership with state and local audit organizations.
Other OIGs overseeing grant operations will follow similar procedures.
For example, DOJ OIG will be reviewing $5 million in grants to be
awarded by the Office of Justice programs.
Review of FEMA's Disaster Management Activities in Response to Katrina
DHS OIG has initiated an assessment of FEMA's performance as it
conducted its disaster management responsibilities in response to
Hurricane Katrina. It will encompass three of the four major phases of
disaster management--Preparedness, Response, and Recovery (with more
focus and emphasis being placed upon Preparedness and Response)--as
well as some Emergency Support Functions within the National Response
Plan for which FEMA is the primary agency: Emergency Management; Mass
Care, Housing, and Human Services; Urban Search and Rescue; Long-term
Community Recovery and Mitigation; and External Affairs. We will
coordinate our review with GAO to avoid duplication to the extent
possible.
Monitoring the ``Katrina'' HOTLINE
While each of the OIGs has its own HOTLINE for receiving
allegations of waste, fraud, and abuse, a single Katrina HOTLINE will
be established and widely publicized to avoid confusion and allow for
effective screening and follow-up.
Reporting OIG Progress and Results
Each OIG will be reporting their progress to me biweekly, and my
office, in turn, will provide consolidated biweekly status reports to
key Administration officials and Congressional committees. Each IG will
also be issuing individual reports as weaknesses or problem areas
needing attention are identified. ``Flash reports'' will be prepared
and distributed by each OIG when issues and problems that need
attention are identified, and more extensive audit and inspection
reports will be issued as completed.
DHS OIG will prepare regular status reports on the consolidated OIG
efforts (initially every two weeks) to key administration and
congressional officials. Briefings will be provided as and when
requested.
I believe that, collectively, the Inspectors General are uniquely
qualified and positioned to provide the most timely and effective
oversight of Hurricane Katrina activities, and to ensure that the
affected people receive the full benefit of the funds to be spent on
the recovery.
Mr. Chairman, that concludes my prepared statement. I would be
happy to answer any questions you or the Members may have.
Mr. Whitfield. Thank you, Mr. Skinner. At this time, Mr.
Thomas Gimble, with the U.S. Department of Defense, for his
opening statement.
TESTIMONY OF THOMAS F. GIMBLE
Mr. Gimble. Mr. Chairman, thank you for the opportunity to
appear before you today to address the DoD audit and
investigative oversight efforts regarding the Hurricane Katrina
relief and recovery. The DoD and the Army Corps of Engineers
were provided direct appropriations and FEMA mission
assignments for recovery, repair, and protection of shorelines
of the affected Gulf States. We are working in close
coordination with all Inspectors General through the PCIE
Homeland Security Roundtable to ensure effective utilization of
DoD oversight resources in the relief and recovery efforts.
Specifically for DoD, the DoD Office of Inspector General,
the Army Audit Agency, the Naval Audit Service, the Air Force
Audit Agency, the Defense Contract Audit Agency, and the
Defense criminal investigative organizations will employ a
cadre of auditors, investigators, and inspectors to provide
immediate and professional oversight of all DoD contracts,
grants, and operations related to the hurricane relief and
recovery efforts. To fulfill our statutory obligation/oversight
responsibilities, we either have started or plan to start the
following efforts. Our oversight effort will be on a real-time
basis and provide immediate feedback as new issues are
identified.
The DoD Office of Inspector General is initially planning
work in five specific audit areas regarding the relief and
recovery efforts: contract support and administration,
increased purchase card limits, use of DoD resources and
readiness and logistics support, contingency plans for
information technology systems, and the accounting and
oversight of obligations and expenditures. The audit of the DoD
contract support for hurricane relief will review the award and
administration of DoD contracts used in the recovery effort.
The audit of the expanded micro-purchase authority will focus
on the reasonableness and appropriateness of expenditures and
the early identification of questionable spending issues, and
determine whether DoD policies and procedures need to be
changed regarding the Hurricane Katrina-related efforts.
Third, we will review the use of military forces and DoD
civilian personnel supporting the relief efforts, and determine
the impacts on readiness and logistic support. We will also
review the contingency operations and associated plans for
information technology resources affected by Hurricane Katrina.
The Office of Inspector General will also determine whether the
DoD obligations and expenditures related to construction
efforts are timely and efficiently executed in accordance with
the applicable laws and regulations.
The Army Audit Agency is in the process of providing audit
oversight of funds that the Army received for support provided
by active Army and Army National Guard units, as well as the
Corps of Engineers. The overall objective is to determine
whether the Army appropriately is using the funds it is
receiving for the Hurricane Katrina relief and recovery
efforts. They have met with the Corps of Engineers to initiate
this effort, and in addition, the Assistant Secretary of the
Army Financial Management and Comptroller has requested audit
support with the financial accounting and reporting of the
relief funds.
The Naval Audit Service has been tasked by senior Navy
management to provide audit oversight of the Navy and Marine
Corps roles in the recovery effort. The Naval Audit Service
plans audits on cash accountability, purchase cards, contracts,
reimbursable arrangements, as well as financial accounting and
reporting. In addition, the Naval Audit Service will provide
independent and objective advice and oversight concerning
relief for Navy and Marine Corps families affected by the
hurricane.
The Undersecretary of Defense (Comptroller) designated the
Assistant Secretary of the Air Force (Financial Management and
Comptroller) as the as the Financial Manager for Joint Task
Force Katrina. The Air Force Audit Agency has been tasked with
auditing the financial management activities related to the
relief operations. These auditors will review the Air Force
procedures for receiving and disbursing funds in support of the
relief operations, as well as tracking and requesting of FEMA
reimbursements.
The Defense Contract Audit Agency has been requested by the
Army Corps of Engineers Internal Review Team to provide
contract and audit financial advisory services to the Corps of
Engineers in support of the relief and reconstruction
contracting activities. Currently, 14 DCAA auditors are in the
Louisiana and Mississippi area providing contract audit
assistance on Corps of Engineer contracts regarding debris
removal and temporary roofing missions. Coordination is
underway to identify contract audit requirements related to the
Corps of Engineers relief and recovery missions. DCAA is also
examining potential contract costs and pricing issues directly
related to the hurricane, such as the loss of equipment and
facilities, equitable adjustment claims, loss of in-process
work, and loss of accounting records.
The Defense Criminal Investigative Service has 43 agents in
its Southeast Field Office who are prepared to assist in the
investigation of fraud, abuse, corruption, and other crimes
associated with the use of the DoD funds for the relief effort.
DCIS could augment that force with resources from five other
field offices, if the investigations warrant. Some of the
initial activities which have already begun include
coordinating with DoD procurement agencies, such as the Corps
of Engineers, the Defense Logistics Agency, and the Defense
Contract Management Agency, and the FEMA Office of Inspector
General; partnering with various Federal, state, and local law
enforcement agencies, relative to Joint Task Force Katrina; and
also, conducting fraud awareness briefings to DoD contractors
and procurement officials.
The Army Criminal Investigative Command, the Navy Criminal
Investigative Service, and the Air Force Office of Special
Investigations have been performing missions in support of law
enforcement, military personnel, and the overall Force
Protection of DoD military and civilian personnel involved in
the relief efforts. Additionally, the Army Criminal
Investigative Command is performing general crimes
investigations relating to the recovery efforts.
The DoD Hotline is supporting the Department of Homeland
Security and other agencies by standing up a Hurricane Fraud
Hotline which will log, relay, and track incoming complaints
and allegations of wrongdoing.
This concludes my oral statement, and I would be happy to
answer any questions.
[The prepared statement of Thomas F. Gimble follows:]
Prepared Statement of Thomas F. Gimble, Acting Inspector General,
Department of Defense
Mr. Chairman and Members of the House Energy and Commerce
Subcommittee on Oversight and Investigations: Thank you for the
opportunity to appear before the committee today to address the DoD
audit and investigative oversight efforts regarding the Hurricane
Katrina relief and recovery. The DoD and Army Corps of Engineers were
provided direct appropriations and Federal Emergency Management Agency
(FEMA) mission assignments for recovery, repairs, and protection of
shorelines in the affected Gulf States. We are working in close
coordination with all Inspectors General through the PCIE Homeland
Security Roundtable on Hurricane Katrina to ensure effective
utilization of DoD oversight resources in the relief and recovery
efforts. Specifically for DoD, the DoD Office of Inspector General, the
Army Audit Agency, the Naval Audit Service, the Air Force Audit Agency,
the Defense Contract Audit Agency, and the Defense criminal
investigative organizations will employ a cadre of auditors,
investigators, and inspectors who will provide immediate and
professional oversight of DoD contracts, grants, and operations related
to Hurricane Katrina relief and recovery efforts. To fulfill our
statutory oversight responsibilities, we have either started or plan to
start the following efforts. Our oversight effort for Hurricane Katrina
relief and recovery will be on a ``real-time'' basis and provide
immediate feedback as issues are identified.
DOD OFFICE OF INSPECTOR GENERAL--AUDITING
The DoD Office of Inspector General is initially planning five
specific audit areas regarding the Hurricane Katrina relief and
recovery efforts--contract support and administration, increased
purchase card limits, use of DoD resources in readiness and logistics
support, contingency of information technology systems, and the
accounting and oversight of obligations and expenditures. The ``Audit
of DoD Contract Support for the Hurricane Katrina Recovery Effort''
will review the award and administration of DoD contracts used for the
Hurricane Katrina recovery effort. The ``Audit of Expanded Micro-
Purchase Authority for Purchase Card Transactions Related to Hurricane
Katrina'' will focus on the reasonableness and appropriateness of
expenditures and the early identification of questionable spending
issues and determine whether DoD policies and procedures need to be
changed regarding the Hurricane Katrina related effort. Thirdly, we
will conduct an ``Audit of the Use of DoD Resources Supporting the
Hurricane Katrina Disaster'' and determine the impact on readiness and
logistics support. Additionally, we will perform an ``Audit of the
Effects of Hurricane Katrina on DoD Information Technology Resources in
Affected Areas.'' Lastly, the DoD Office of Inspector General will
conduct an ``Audit of Accounting and Oversight of Obligations and
Expenditures related to the Department of Defense Hurricane Katrina
Reconstruction Effort'' to determine whether DoD obligations and
expenditures related to the construction effort are timely and
efficiently executed and in accordance with applicable laws and
regulations.
ARMY AUDIT AGENCY
The U.S. Army Audit Agency is in the process of providing audit
oversight of the funds the U.S. Army received for support provided by
Active Army and Army National Guard units and the U.S. Army Corps of
Engineers. The overall objective is to determine whether the Army
appropriately used funds it received for Hurricane Katrina relief and
recovery efforts. They met with the Corps of Engineers to initiate this
effort. In addition, the Assistant Secretary of the Army (Financial
Management and Comptroller) has requested audit support with the
financial accounting and reporting of the Hurricane Katrina relief
funds.
NAVAL AUDIT SERVICE
The Naval Audit Service has been tasked by senior Navy management
to provide audit oversight of the Navy and Marine Corps roles in the
recovery effort. The Naval Audit Service plans audits on cash
accountability, purchase cards, contracts, reimbursable arrangements,
as well as financial accounting and reporting. In addition, the Naval
Audit Service will provide independent, objective advice and oversight
concerning relief for Navy and Marine Corps families.
AIR FORCE AUDIT AGENCY
The Undersecretary of Defense (Comptroller) assigned the Office of
the Assistant Secretary of the Air Force (Financial Management and
Comptroller) as the Financial Manager for Joint Task Force Katrina. The
Air Force Audit Agency has been tasked with auditing the financial
management activities related to the Hurricane Katrina relief
operations. Auditors will review the Air Force procedures for receiving
and disbursing funds in support of Hurricane Katrina relief operations
and the tracking and requesting of FEMA reimbursements.
DEFENSE CONTRACT AUDIT AGENCY
The Defense Contract Audit Agency has been requested by the Army
Corps of Engineers Internal Review Team to provide contract audit and
financial advisory services to the Corps of Engineers in support of the
relief and reconstruction contracting activities. Fourteen Defense
Contract Audit Agency auditors are currently in Louisiana and
Mississippi providing contract audit assistance on Corps of Engineers
contracts regarding debris removal and temporary roofing missions.
Coordination is underway to identify other contract audit requirements
relating to Army Corps of Engineers relief and recovery missions.
Defense Contract Audit Agency is also examining potential contract cost
and pricing issues directly related to Hurricane Katrina such as loss
of equipment and facilities, equitable adjustment claims, loss of in-
process items, and loss of accounting records.
CRIMINAL INVESTIGATIVE SERVICES EFFORTS
The Defense Criminal Investigative Service has 43 agents in its
Southeast Field Office who are prepared to assist in investigation of
fraud, abuse, corruption, and other crimes associated with the use of
DoD funds designated for Hurricane Katrina relief and recovery efforts.
The Defense Criminal Investigative Service could augment that force
with resources from five other field offices if the volume and
complexity of investigations warrants. Initial activities, some of
which have already begun, include coordinating with the DoD procurement
agencies (i.e., the U.S. Army Corps of Engineers, the Defense Logistics
agency, and the Defense Contract Management Agency) and the FEMA Office
of Inspector General, partnering with various Federal, state, and local
law enforcement agencies relative to the Joint Task Force Katrina, and
conducting fraud awareness briefings to DoD contractors and procurement
officials.
The Army Criminal Investigative Command, the Navy Criminal
Investigative Service, and the Air Force Office of Special
Investigations have been performing missions in support of law
enforcement and military personnel and the overall Force Protection of
DoD military and civilian personnel involved in the relief efforts.
Additionally, the Army Criminal Investigative Command is performing
general crimes investigations.
In addition, DoD Hotline is supporting Department of Homeland
Security and other agencies by standing up a Hurricane Fraud Hotline
which will log, relay, and track incoming complaints and allegations of
wrongdoing.
Mr. Whitfield. Thank you, Mr. Gimble. Now, it is my
understanding that from the Department of Health and Human
Services, that Mr. Vengrin and Mr. Little will give a joint
opening statement.
Mr. Vengrin. Yes.
Mr. Whitfield. And so I would assume, Mr. Vengrin, you will
begin, then.
Mr. Vengrin. Yes.
Mr. Whitfield. Joseph Vengrin.
Mr. Vengrin. That is correct, Mr. Chairman. Thank you.
Mr. Whitfield. Okay.
TESTIMONY OF JOSEPH E. VENGRIN AND MICHAEL E. LITTLE
Mr. Vengrin. I am here today to describe the initial
activities of that the HHS OIG Office of Audit Services, in
guarding against fraud, waste, and abuse in the post-hurricane
relief and recovery efforts. Mr. Little will present the
investigative response.
We share your concern, and the concerns of all Americans
for the thousands of children and families affected by the
recent hurricane. To be responsive, necessary relief services
must be provided quickly and effectively. In that regard, HHS
has announced a number of relief steps, including a relaxation
in controls to make health and human services available to
hurricane victims without the usual documentation requirements.
Unfortunately, the difficult circumstances created by
Katrina provides an enormous opportunity for fraud, waste, and
abuse. To curb those intent on gaming the system and to
safeguard taxpayer dollars, we are continuously updating our
post-hurricane work plans. The audit efforts are a major
challenge and are further complicated by the state of change in
waiving certain programmatic requirements, the delivery of
service, the need for expedited contract activities, and the
long-term nature of the Federal response.
This morning, I will describe how we plan to meet those
challenges; specifically, I will explain our oversight planning
process, and our coordination effort with other agencies. In
our oversight planning process, we are particularly committed
to ensuring that funds are used for authorized transactions
that comply with procurement standards, and the goods and
services are properly delivered.
Immediately following Katrina, OIG established a Hurricane
Relief Working Group comprised of senior managers from the OIG
offices. Under the direction of this group, OIG is reviewing
proposed program changes to identify potential vulnerabilities
for fraud, waste, and abuse that require increased scrutiny.
For each major HHS program and activity, OIG is assessing
initial risks associated with the relaxation of the internal
controls over expedited payments. We are considering the
complexity and magnitude of the program or activity, the extent
of changes in the control environment, and the materiality of
funds exposed to the increased risk. Based on these risk
assessments, we are developing specific work plans, focused on
the most vulnerable programs and activities.
In implementing our work plan, we will test the
effectiveness of the internal controls within the Department,
at State governments, contractors, grantees, and health service
providers. We will focus on compliance with procurement
standards, pricing guidelines, and other Federal requirements.
We will also search for aberrant patterns of payments to
contractors and health service providers, and perform detailed
tests of selected transactions.
Our program evaluation and inspection work plan is on a
similar track. We are identifying issues to gauge the
effectiveness of the HHS response. Potential areas include
evaluating evacuation planning for institutions such as
hospitals, and for foster care children. As we develop and
execute our hurricane relief work plan projects, we are
coordinating with several organizations. GAO and OIG are both
committed to conducting oversight work in a non-duplicative
manner. Additionally, as a member of the PCIE's Homeland
Security Roundtable, we have actively participated in the
coordination of the government-wide OIG hurricane response.
I will now turn to Mr. Little to present the investigative
response.
Mr. Little. Good morning.
I am very proud of the response of the HHS OIG in the
aftermath of Hurricane Katrina, and would like to briefly
describe some of the steps that our office took to provide
immediate support. Secretary Levitt declared a public health
emergency for the Gulf Coast states as a result of Hurricane
Katrina, and sent HHS employees to provide immediate medical
assistance to the survivors and evacuees. In order to ensure
the safety of HHS personnel and equipment in the impact area,
Secretary Levitt asked the Inspector General to provide
security assessments of the facilities being set up, as well as
to provide security to HHS personnel.
On September 2, I sent out an email message to all criminal
investigators in OIG. Within the first 24 hours, we had
received over 60 volunteers. By September 8, two 11 person
teams were deployed to Mississippi and Louisiana. The OIG teams
provided physical security assessments for the mobile medical
sites, and performed 120 protective service missions for HHS
personnel deployed in the New Orleans area.
The destruction of Hurricane Katrina has resulted in a
number of allegations relating to the deaths of patients in
healthcare facilities in the New Orleans area. We have been
informed of over 20 incidents in which healthcare providers
abandoned or possibly engaged in other activity resulting in
the deaths of Medicare or Medicaid beneficiaries. We are
conducting investigations of those allegations, along with our
Federal and State partners, to ascertain if criminal laws were
violated, and appropriate actions will be taken at the
conclusion of our investigations.
Mr. Vengrin. Mr. Chairman, the approach that Mike and I
have outlined involves continuous evaluation and modification,
as required, to ensure that OIG accomplishes its mission of
protecting the integrity of HHS programs. We believe that our
results will provide the subcommittee and other decisionmakers
with important information on accountability for Federal
response dollars.
Thank you for the opportunity to testify. We welcome your
questions.
[The prepared statement of Joseph E. Vengrin and Michael E.
Little follows:]
Prepared Statement of Joseph E. Vengrin, Deputy Inspector General for
Audit Services and Michael E. Little, Deputy Inspector General for
Investigations, Department of Health and Human Services
Chairman Whitfield and members of the Subcommittee, I am Joseph
Vengrin, Deputy Inspector General for Audit Services. Accompanying me
is Michael Little, Deputy Inspector General for Investigations.
We are appearing before you today to describe the initial
activities of the Office of Inspector General (OIG) of the U.S.
Department of Health and Human Services (HHS) to guard against fraud,
waste, and abuse in the post-Katrina relief and recovery efforts.
We share your concern, and the concern of all Americans, for the
thousands of children and families affected by the recent hurricanes.
The loss of life, property, and livelihoods is tremendous. To be
responsive, necessary relief services must be provided to victims
expeditiously and effectively. It is vital that funds and services be
appropriately directed to ensure that people in the affected areas have
their immediate needs met and recover as soon as possible. At the same
time, we must work to ensure that funds spent on this endeavor are not
mismanaged or used fraudulently, which would deprive people of the
intended benefit.
HHS has announced a number of steps in response to Katrina. These
steps include a relaxation in controls to make needed health and human
services accessible under these very difficult circumstances. This
flexibility is intended to permit hurricane victims to receive benefits
and services without the usual documentation requirements. Services
with immediate new flexibilities include Medicaid, Temporary Assistance
for Needy Families (TANF), child care, foster care assistance, mental
health services, and substance abuse treatment services. In another
announced step, HHS continues to furnish health care providers and
medical supplies to the Gulf area.
Unfortunately, the difficult circumstances created by Katrina
provide an enormous opportunity for fraud, waste, and abuse. The sheer
magnitude of these disasters and the still-evolving costs of the relief
efforts present challenges. As we continue our work planning efforts,
we must also consider the current state of flux in waiving certain
programmatic requirements in the delivery of departmental services, the
need for increased and expedited contracting activities, and the long-
term nature of the Federal response. OIG's work plan will be
continuously updated to reflect changes in the Department's response.
This morning we will describe OIG's oversight planning process,
particularly as it relates to auditing; some of our initial activities
on the investigative oversight and enforcement front; and finally, HHS/
OIG's coordination with other agencies.
OIG'S OVERSIGHT PLANNING PROCESS
With the destruction of infrastructures, systems, and communities
and the dislocation of populations caused by Hurricane Katrina, OIG is
particularly committed to ensuring that funds are used for valid and
authorized transactions that comply with appropriate procurement
standards, that goods and services are procured and delivered
correctly, and that problems are prevented rather than identified after
the fact.
Immediately following the hurricane, OIG established an OIG-wide
Hurricane Relief Working Group, which is addressing issues as they
arise in the aftermath of Hurricane Katrina. The group comprises senior
managers from our Offices of Audit Services, Investigations, Evaluation
and Inspections, Counsel, and Management and Policy. This group is
focusing OIG resources to address both immediate and longer term needs.
Under the direction of this group, OIG is reviewing proposed program
changes to identify potential vulnerabilities for fraud, waste, and
abuse that require increased scrutiny. Detailed below are some of OIG's
specific actions to date in response to Katrina.
Risk Assessment
For each major program and activity identified by the Department,
OIG is assessing the initial risks associated with relaxing internal
controls over expedited payments. The assessments are covering such
programs as Medicare, Medicaid, and TANF; the activities of the Centers
for Disease Control and Prevention (CDC); and funds transferred from
the Federal Emergency Management Agency. We are considering factors
such as the complexity and magnitude of the program or activity and the
extent of changes in the control environment. As part of this process,
we are considering the materiality of funds exposed to increased risk
and any implemented mitigating controls.
Special Work Plans
Using the results of these risk assessments, we are developing
special work plans, focusing our audit and inspection efforts on the
most vulnerable programs and activities.
In implementing our audit work plan, we will use standard audit
procedures to test the effectiveness of internal controls both within
the Department and at State governments, contractors, grantees, and
health service providers. The audits will occur as the relief effort
continues and will collectively provide ongoing testing and monitoring
of the programs. Where appropriate, our audits will determine whether
contract and grant awards, as well as payments to health service
providers, comply with procurement standards, pricing guidelines, and
other Federal requirements. Selectively, we will audit costs incurred
and determine whether goods and services were delivered to the intended
recipients. Using advanced audit techniques as necessary, including
data mining capabilities, we will search for aberrant patterns of
payments to contractors and health service providers.
In conducting audits such as these, OIG will examine the
organizational structures associated with the disaster response to
determine whether clear lines of authority and communication and
appropriate oversight have been established. We will review recent
legislation and the status of proposed statutory and regulatory changes
for program administration and eligibility. In a high-risk environment
such as this, we will particularly focus on changes in existing
internal controls and the impact of those changes on the risk of fraud,
waste, and abuse.
If audits identify potentially fraudulent acts, our Offices of
Investigations and Counsel will consult with the Department of Justice
to determine whether and what enforcement actions are warranted. We
will also rely on our existing fraud hotline. We anticipate that the
hotline is capable of receiving and processing all allegations of
fraud, waste, and abuse that may be received.
In addition to initiating audit activities and relying on our
hotline, we are developing a program evaluation and inspection work
plan. A body of work completed subsequent to September 11, 2001, which
examines preparedness for responding to public health disasters, will
facilitate OIG's ability to conduct reviews of disaster response
relative to Katrina. OIG is identifying issues to gauge the
effectiveness of the HHS response. Potential areas include evaluating
evacuation planning for institutions such as hospitals and nursing
homes and for children in foster care.
INVESTIGATIVE OVERSIGHT AND ENFORCEMENT
In addition to assessing current and future audit and inspection
requirements, OIG has provided onsite support and investigative
oversight and enforcement for the Katrina response. OIG's agents are
providing this onsite support in response to the Secretary's request.
Following is a brief chronology of OIG's interaction with the
Department to provide immediate support and investigative oversight and
enforcement.
As Hurricane Katrina approached landfall, the Secretary stressed to
departmental officials that this was HHS's moment to be truly
about health and human services, in the humanitarian sense.
During these discussions, the Inspector General was asked to
provide security to HHS's onsite operations and any other
services that he deemed necessary. Accordingly, OIG assessed
the types of assistance it could initially provide.
On September 2, OIG requested volunteers from among its criminal
investigators nationwide. Within 24 hours, over 60 special
agents had volunteered to go to the Gulf States area to assist
in the hurricane relief efforts. For these agents to perform
onsite security activities in this unusual context, a Special
Deputation by the U.S. Marshals Service was necessary.
By September 8, the first 2 teams of 11 OIG agents were deployed to
Louisiana and Mississippi. The initial need for OIG agents was
to provide security assessments for the mobile medical care
sites established by the Department and staffed by HHS
employees. If the site was not secure, OIG agents secured the
area and reported to the U.S. Public Health Service (USPHS)
Commissioned Corps Admiral (the individual the HHS Secretary
had placed in charge of a consolidated HHS hurricane response),
requesting assistance to properly secure the facility if
necessary before moving on to evaluate the next facility.
By September 14, the team in Mississippi had performed security
assessments at several hospital sites being established in
Waveland and Meridian. The team had also provided personal
security to HHS staff who performed outreach in the community
to ensure that those in need knew of and took advantage of the
health care services available to them. At the request of the
USPHS Admiral on site, the OIG team also conducted a physical
security survey of three hotels where HHS staff were lodged.
To date, OIG has provided protection for three visits to the region
by the Secretary.
After securing all HHS operational sites in Louisiana as well,
including Kindred Hospital in New Orleans, which became an
operational center, this team performed personal security of
CDC personnel who were going into communities to collect water
and dust samples from the flood-affected areas and perform
outreach activities. Several protection operations occurred
daily, all of which were coordinated with the Admiral's staff.
On September 21, OIG special agents assisted in the safe evacuation
of HHS medical officials and scientists operating out of New
Orleans to avoid danger from approaching Hurricane Rita.
The impact of Hurricane Katrina has resulted in a number of
allegations relating to deaths of patients under questionable
circumstances at several health care facilities throughout the New
Orleans area. We have been informed of over 20 instances within the
past weeks in which health care providers abandoned or possibly engaged
in activity resulting in the deaths of Medicare/Medicaid beneficiaries.
We have initiated investigations in which we are working with
appropriate Federal and State partners to determine if Federal or State
violations have occurred. This will be no small task, as the
individuals who need to be interviewed are now scattered across the
country.
To date, over 120 of OIG's agents have volunteered to assist with
the disaster response. This activity is being funded from OIG's
discretionary appropriation.
The duration of OIG agents' onsite presence is unknown at this
point, but we will continue to support the relief effort. We are
carefully controlling these deployments of agents due to the obvious
drain on normal investigative workloads. Because of the massive Federal
dollars needed to rebuild the New Orleans health and human services
infrastructure, we expect a very high potential for waste, fraud, and
abuse.
OIG'S COORDINATION WITH OTHER AGENCIES
Government Accountability Office
OIG has met with the Government Accountability Office to discuss
ways to maximize our effectiveness by coordinating Katrina-related work
projects that may overlap. Both offices are committed to conducting
oversight work in a complementary, nonduplicative manner.
Department of Justice
OIG will meet within the next week with its Department of Justice
colleagues to discuss the role OIG can play in civil fraud legal
matters relating to Katrina.
President's Council on Integrity and Efficiency
As a member of the President's Council on Integrity and Efficiency,
Homeland Security Roundtable, HHS OIG has been actively participating
in the coordinated Inspectors General response to Hurricane Katrina. As
part of that response, our office provided a plan to the Inspector
General of the Department of Homeland Security outlining activities to
ensure the integrity of response dollars spent by HHS. Our office will
continue to play an active role in the OIG community-wide response to
the hurricane.
State Auditors and Independent Public Accounting Firms
OIG will coordinate its efforts in affected States with the offices
of the State auditors and with Independent Public Accounting firms,
which perform audits of non-Federal recipients of HHS funds. This
coordination could increase audit coverage of Katrina relief and
recovery efforts.
CONCLUSION
The approach outlined here forms the basis for a comprehensive
program of testing, monitoring, and investigative oversight of programs
placed at increased risk as a result of Hurricane Katrina. We are
focusing the appropriate level of resources on the Department's
programs with the greatest risk of fraud and abuse. The approach
involves continuous evaluation and modification, as required, to ensure
that OIG accomplishes its mission of protecting the integrity of the
Department's programs and the health and welfare of the beneficiaries
of those programs. We believe that our results will provide the
Subcommittee and other decisionmakers with important information on
accountability for Federal response dollars.
Thank you for this opportunity to testify. Your questions are
welcome.
Mr. Whitfield. Thank both of you, and at this time, I will
recognize Nikki Tinsley, with the Environmental Protection
Agency.
TESTIMONY OF NIKKI L. TINSLEY
Ms. Tinsley. Good morning, Mr. Chairman. I am pleased to be
here to discuss Katrina-related work of the Environmental
Protection Agency Office of Inspector General.
Like the rest of the country, I watched in horror as
Katrina devastated the lives of residents in Louisiana,
Mississippi, Alabama, and Florida, and wreaked havoc on the
environment on an unprecedented scale. While EPA has not
received any direct appropriation in either the emergency
supplementals, it has received $136 million from the Federal
Emergency Management Agency and about $3 million from the Army
Corps of Engineers. More than half of this money is passed
through to the Coast Guard.
Our office has auditors, program evaluators, and
investigators who have already begun reviewing contracts and
operations related to EPA's hurricane response efforts. Our
current work includes monitoring EPA operations, internal
controls, expanded micro-purchase authority, and EPA's disaster
management activities. An overarching objective of all our
efforts is to work with EPA to prevent or minimize problems,
and to advise EPA on the potential ramifications of its
precedent setting decisions as emergency response and recovery
activities continue.
We will look at whether EPA provided high quality and
timely information to Gulf State residents and others about the
safety of their drinking water, addressing issues including
whether potential sources of waterborne diseases caused by
contaminated drinking water are identified and contained, and
whether EPA's protocols, including the lessons learned from the
World Trade Center, and the responsibilities delineated in the
National Response Plan, reduced citizen exposure to
contaminated water.
We will look at whether EPA provided accurate and timely
data to the public and others about the health and
environmental risks of hazardous material spills and sediment
contamination, addressing issues including how EPA determined
the nature, magnitude, and impact of oil and hazardous material
spills and sediment contamination, and how EPA distinguished
between hazardous and non-hazardous hurricane debris and waste,
and if those distinctions were applied consistently across the
Gulf Coast region.
Because the EPA's work crosses Federal, state, and local
jurisdictions, we use existing partnerships with Federal,
state, and local audit and investigative organizations to
coordinate and ensure adequate, cost-effective oversight.
Finally, I want to tell you about an effort our office is
leading that looks at ways to improve grant accountability.
Rick Skinner mentioned that much of the Katrina recovery effort
will be funded through grants to states, to local governments,
and to others. With the input and assistance of over 20
Federal, state, and local audit organizations, our office has
developed a Guide to Grant Accountability that will provide
leaders at all levels of government with proven practices to
ensure that grant expenditures produce the products and
services envisioned when the grants are awarded. We expect to
issue this guide next month. The guide will be useful. It will
be a useful and timely tool for those involved in the Katrina
response and rebuilding efforts.
As the Gulf States begin to rebuild, my office, in
partnership with my colleagues at GAO and in the Inspector
General community, is committed to ensuring that Katrina funds
are properly managed and spent.
This concludes my oral comments, and I would be happy to
respond to any questions.
[The prepared statement of Nikki L. Tinsley follows:]
Prepared Statement of Nikki L. Tinsley, Inspector General, U.S.
Environmental Protection Agency
Good morning Mr. Chairman and Members of the Subcommittee. I am
pleased to be here today to discuss the current and planned work of the
Environmental Protection Agency (EPA) Office of Inspector General (OIG)
to detect and guard against fraud, waste, and abuse during post-
Hurricane Katrina response and rebuilding efforts. Like the rest of the
country, I watched in horror as Katrina devastated the lives of
residents in Louisiana, Mississippi, Alabama, and Florida, and wreaked
havoc on the environment on an unprecedented scale, the impact of which
is still to be determined. Some estimate that the final cost for the
response and rebuilding effort in the affected areas could reach $200
billion. The final figure may be even higher given the damage caused by
Hurricane Rita in Texas and Louisiana this past weekend. As these Gulf
States begin to rebuild, the EPA-OIG, in partnership with my colleagues
in the Inspector General community, is committed to ensuring that
Katrina funds are properly managed and spent, and that fraud and abuse
are deterred and detected.
EPA KATRINA RELIEF FUNDING
Congress has enacted two emergency supplemental appropriations
providing over $63 billion for Katrina relief. Those funds have been
appropriated to the Department of Homeland Security (DHS) and the
Department of Defense. While EPA has not received any direct
appropriation in either spending measure, it has received $135.1
million in mission assignments from the Federal Emergency Management
Agency (FEMA). FEMA has authorized EPA to perform relief and recovery
work such as providing technical assistance, conducting environmental
assessments and removal and disposal activities so long as costs do not
exceed this amount. EPA has also received $3 million from the U.S. Army
Corps of Engineers. Of this $138.1 million, $67.3 million is a direct
pass-through to the Coast Guard. To date, EPA has obligated $57.1
million, with $41.3 million going to the Coast Guard.
OIG OVERSIGHT PLAN OF EPA'S KATRINA RESPONSE EFFORTS
The OIG has auditors, program evaluators, and investigators who can
provide immediate and continuing oversight of contracts, grants, and
governmental operations related to EPA's Hurricane Katrina response
efforts. Our current work includes monitoring the following areas: EPA
operations; internal controls; contracts, grants, and expanded micro-
purchase authority; and EPA's disaster management activities in
response to Katrina. These are the areas we believe need aggressive
oversight immediately so that steps can be taken to address
vulnerabilities before they might lead to fraud, waste, or abuse.
As part of our initial oversight effort, the OIG intends to devote
approximately five investigators, eight program evaluators, and six
auditors to provide Katrina oversight, as well as two Information
Technology Specialists for data mining. We will use existing hotline
capabilities to handle all complaints of fraud, waste, and abuse
involving EPA funds. We will also use existing partnerships established
through the U.S. Comptroller General's Domestic Working Group, the
President's Council on Integrity and Efficiency's (PCIE) Homeland
Security Roundtable, and the Intergovernmental Audit Forum to
coordinate and ensure adequate, cost-effective audit coverage. We also
have an existing interagency agreement with the Defense Contract Audit
Agency that we can use to provide additional financial audit coverage
of contractors.
Beyond these immediate activities, our plan provides for continuing
oversight of EPA response efforts. Within six months, we intend to
complete reviews of whether EPA provided accurate and timely data to
the public along with Federal, State, and local decision makers
regarding the safety of drinking water and waste water and on the
health and environmental risks of Superfund sites, hazardous material
spills, sediment contamination, and other hurricane debris. Finally, we
plan to issue a guide on promising practices developed by Federal,
State, and local agencies to improve grant accountability through the
Domestic Working Group chaired by the U.S. Comptroller General. Our
plan is detailed below.
Overseeing EPA Operations
We will monitor EPA operations to stay current on all disaster
response operations and provide advice as necessary. Our objective in
this effort is to help EPA design and implement internal controls and
advise EPA on the potential ramifications of its precedent-setting
decisions as emergency response and recovery activities continue.
We have deployed an advance team of Special Agents to evaluate the
conditions on the ground in Mississippi and Louisiana. This team will
coordinate with FEMA and to assess housing and facilities to support
another team to be deployed in the near future. We are organizing a
second team to serve as backup support with a secondary emergency
response capability to Galveston and Houston, Texas. A third group of
agents are on standby, preparing equipment for deployment. These EPA-
OIG investigators will coordinate and monitor EPA contracting activity,
liaison directly with EPA On-Scene Coordinators and contract personnel,
and coordinate with Federal, State, and local law enforcement. OIG
investigators will handle criminal allegations developed through field
activity, liaison, and on-site observation, as well as allegations
received as a part of the Department of Justice task force, our OIG
hotline, or other means.
Monitoring Controls
Effective internal controls are vital to safeguarding funds and
operations. We will review contracting and other controls to ensure
that transactions are properly authorized and documented; funds are
properly accounted for; property and equipment is safeguarded against
loss; questionable activities, including activities not in support of
mission requirements, are identified; timely and accurate analyses of
samples by laboratories are conducted; misspending is prevented or
minimized; and Federal laws and regulations are followed.
Reviewing Contracts, Grants, and Expanded Micro-Purchase Authority
We will review contract and grant award administration, along with
EPA's expanded micro-purchase authority to ensure that Federal
acquisition regulations are adhered to. Expenditures will be reviewed
on a real-time basis to ensure they are necessary and reasonable. This
is critical given that the purchase card threshold has been raised from
$2,500 to $250,000 for Katrina-related expenditures, and that the
requirement for competitive bids on Katrina-related contracts has been
eliminated. Data mining techniques will provide continuous oversight of
purchase card transactions to identify spending anomalies for further
review. OIG efforts in these areas will be focused on preventing or
minimizing problems.
We have expanded our work on EPA's financial statements to include
EPA's activity related to the Katrina response effort. Our audit work
will include tests of EPA's internal controls for identifying and
charging costs for Katrina response. We will also test disbursement,
obligation, and payroll transactions related to Katrina response for
the month of September 2005, which is the end of the financial audit
period. These tests will include statistical sampling of transactions,
analytical reviews, and overall account analysis of activity.
EPA has set up new codes in its accounting system to record Katrina
response transactions. We will analyze the costs charged to those codes
to see if they appear reasonable in relation to the nature and types of
costs. When we identify questionable transactions or trends, we will
follow up with EPA to make recommendations to strengthen controls.
While our current work will primarily address activity in September
2005, it will provide a basis for continuing analysis of Katrina
activity for fiscal 2006.
Evaluating EPA's Disaster Management Activities in Response to
Hurricane Katrina
We will evaluate the effectiveness of EPA's role in protecting the
health of citizens, responders, volunteers, and the environment under
the National Response Plan (NRP) and statutes governing EPA operations,
including the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; the Clean
Water Act; the Safe Drinking Water Act; and the Clean Air Act. We will
also evaluate any subsequent modifications or waivers to these plans
and statutes. Specifically, we will look at whether EPA provided high-
quality and timely information to Gulf State residents and others about
the safety of their drinking water. Among the issues we will be
addressing are whether potential sources of waterborne diseases caused
by contaminated drinking water are identified and contained; and
whether EPA's protocols, including those lessons learned from the World
Trade Center and the responsibilities as delineated in the NRP, reduce
citizen exposure to contaminated drinking water. We will look at
whether EPA provided accurate and timely data to the public and others
about the health and environmental risks of hazardous material spills,
Superfund sites, and sediment contamination in the affected regions.
Among the questions we will ask are how EPA determined the nature,
magnitude, and impact of oil and hazardous material spills and sediment
contamination; and how EPA made distinctions between hazardous and non-
hazardous hurricane debris and waste, and if those distinctions were
applied consistently across the Gulf Coast region.
Developing a Guide on Grant Accountability
On behalf of the U.S. Comptroller General's Domestic Working Group,
the OIG is leading an effort to look at ways to improve grant
accountability so that the billions spent in Federal grants each year
are properly used and the desired results achieved. With the input and
assistance of over 20 Federal, State, and local audit agencies, the end
product will be a guide to grant accountability that will provide
Government leaders at all levels with ideas to ensure that grant
expenditures produce the products and services envisioned when they are
awarded. We expect to issue this guide in October. The guide can be a
useful and timely tool for those Government agencies involved in the
Katrina response and rebuilding efforts.
COORDINATION WITH THE PRESIDENT'S COUNCIL ON INTEGRITY AND EFFICIENCY
We will also be working closely with the President's Council on
Integrity and Efficiency Homeland Security Roundtable, chaired by the
DHS Inspector General. This group is composed of Inspectors General
from the 12 other departments and agencies that have been issued the
largest mission assignment allocations from FEMA. We will continue to
assist the Roundtable by providing information about EPA's use and
management of its funds whenever called upon.
CONCLUSION
As EPA assists in the response and rebuilding efforts in the months
ahead, the OIG will work to ensure that funds are guarded against
fraud, waste, and abuse without impeding the progress of those efforts.
I believe the OIG has developed an excellent oversight plan, but given
the fluidity of the situation in the Gulf States, we will reassess our
plan and make any necessary adjustments as events unfold. This
concludes my written statement. I would gladly answer any questions the
Subcommittee may have at this time.
Mr. Whitfield. Thank you, Ms. Tinsley. At this time, we
will recognize Johnnie Frazier, with the Department of
Commerce.
TESTIMONY OF JOHNNIE E. FRAZIER
Mr. Frazier. Good morning, Mr. Chairman. Thank you for the
opportunity to appear before the subcommittee today.
The Department of Commerce is a diverse organization,
capable of bringing a broad array of scientific and economic
resources to bear, both before and during times of need. As
Americans and the world watched just about every move
associated with the government's post-Katrina relief and
recovery efforts, and demand real-time oversight, two key
points emerge. First, the Federal Government faces an
unprecedented challenge that demands unprecedented and flexible
solutions. And second, the bureaucratic flexibility and large
infusions of resources that may accompany the rebuilding effort
inherently increase the potential for fraud, waste, and abuse.
Thus, vigilant oversight of agency efforts by the Inspectors
General, working cooperatively and collaboratively, and quite
candidly, smartly, is critical to helping prevent and detect
unauthorized activities and expenditures.
I believe that the Inspectors General are well positioned
to help in this regard. We know our agencies well, the good,
the bad, and the ugly. Each year, for example, Inspectors
General identify the top management challenges facing their
agencies, and hence, are aware of their agencies' strengths,
and more importantly, their weaknesses. Each year, the IG
community compiles and reviews this information to reveal any
trends that may be facing our government. Across all agencies
and departments, the areas of procurement, financial, and
grants management, and information technology security have
consistently been cited as very vulnerable to fraud, waste, and
abuse. Not surprisingly, these are some of the key areas and
means by which government agencies will deliver and manage
their relief efforts. These trends, combined with the Federal
Government's need to respond quickly to the urgent economic
recovery of the Gulf region highlight the importance of
stringent, and again, real-time oversight by the Inspectors
General.
The Department of Commerce plays a critical role in
rebuilding and safeguarding economic infrastructure, and
assisting in business recovery. For example, everyone knows of
NOAA's critical weather forecasting and other responsibilities,
but our Economic Development Administration, and the National
Institutes of Standards and Technology, the Bureau of Industry
and Security, and others are also playing important roles in
the Gulf region.
In the important category of lessons learned, I will note
that my office has overseen activities related to hurricane
relief and recovery before, including EDA's administration of
grant programs to fund infrastructure and business development.
In September 1998, we issued a report on the evaluation of
EDA's handling of Hurricane Andrew assistance program. I have
recently shared that report with senior EDA and departmental
officials, reminding them that after that hurricane hit, EDA
did a good job of quickly selecting and funding projects;
however, there were serious problems with some projects that
were late in starting, and extremely slow in being completed.
These projects also tied up millions of dollars that should
have been put to better use for other disaster recovery
purposes. Our key findings in that report, and clearly lessons
learned relevant to Katrina-related recovery effort, are that
Commerce and other Federal agencies that will use grants as a
form of financial assistance need to very forcefully focus
immediate rebuilding efforts on vital infrastructure and
commercial concern, enforce standard monitoring principles, for
example, insist on the status reports, stay involved, and
provide consistent, ongoing oversight both onsite and from
agency headquarters, and quickly rehabilitate or terminate
projects that are failing to meet milestones, and transfer
those funds to other disaster recovery purposes.
In the interests of time, let me conclude by telling you
that we are already working with a wide array of people in the
Department, the IG community, and others to actively monitor
Commerce programs. We also understand the importance of
enhancing public trust as we determine whether appropriate
management controls and procedures are in place. And we will
work to resolve any weaknesses we identify, so that Congress
and the American public can have increased confidence that
taxpayers dollars are being spent as intended.
Thank you.
[The prepared statement of Johnnie E. Frazier follows:]
Prepared Statement of Johnnie E. Frazier, Inspector General, U.S.
Department of Commerce
Chairman Whitfield, Congressman Stupak, and Members of the
Subcommittee: Thank you for the opportunity to appear before the
subcommittee today on the plans of the inspectors general to guard
against waste, fraud, and abuse in post-Katrina relief and recovery.
The Department of Commerce is a diverse organization, capable of
bringing a broad array of scientific and economic resources to bear
both before and during times of need. It was, for example, reassuring
that the Department's National Weather Service's early forecasts of the
location and intensity of Hurricane Katrina saved lives. Now, Commerce
agencies' roles in relief and recovery are crucial in helping rebuild
damaged ports and transportation infrastructure and in hastening the
return of economic vitality to the Gulf region.
The President's National Response Plan relies on the Department to
provide direct support to the Department of Homeland Security (DHS) in
preparing for, responding to, and recovering from major natural
disasters: from tracking and providing advance warning of hurricanes
and other weather-related phenomena to assessing structural damage and
costs, from administering developmental and financial assistance to
prioritizing the procurement of goods from the private sector to meet
critical needs.
As Americans and the world watch just about every move associated
with the government's post-Katrina relief and recovery efforts, two key
points emerge: (1) the federal government faces an unprecedented
challenge that demands unprecedented and flexible solutions; and (2)
the bureaucratic flexibilities and large infusions of resources that
may accompany the rebuilding effort inherently increase the potential
for fraud, waste, and abuse. Thus, vigilant oversight of agency efforts
by the inspectors general, working cooperatively and collaboratively,
is crucial to helping prevent and detect unauthorized activities and
expenditures.
Each year inspectors general identify the top management challenges
facing their agencies. The President's Council on Integrity and
Efficiency compiles and reviews this information to reveal any trends
that may be facing our government. Across all agencies and departments,
the areas of procurement, financial and grants management, and
information technology security have been consistently cited as areas
vulnerable to waste, fraud, and abuse. These trends combined with the
federal government's need to respond quickly to the urgent economic
recovery needs of the Gulf region highlight the importance of stringent
oversight by inspectors general.
My statement will briefly summarize the Department's different
roles and responsibilities in responding to emergencies, including some
specifics on recovery actions in the aftermath of Katrina, findings
from our relevant evaluation of post-Hurricane Andrew recovery efforts
and their implications for Katrina, and my office's oversight role in
helping prevent and detect unauthorized activities in the aftermath of
Hurricane Katrina.
COMMERCE'S EMERGENCY RESPONSE ROLE IS DIVERSE
The Department plays a critical role in rebuilding and safeguarding
economic infrastructure and assisting business recovery, and has thus
been mobilizing resources to help the Gulf region recover. The National
Oceanic and Atmospheric Administration (NOAA) tracks and forecasts
weather and provide advance warning about the potential severity and
impact of natural occurrences on the United States. I have been
encouraged by Congress's positive assessments of the National Weather
Service's work in tracking Katrina and providing information before and
after the hurricane made landfall. These timely predictions undoubtedly
saved lives. Through the years, I have personally met with many of
these talented and committed professionals, who are passionate about
making accurate predictions to help victims prepare for and recover
from weather events.
But NOAA plays a much broader role in economic recovery post-
Hurricane Katrina: surveying ports and waterways via aircraft and
satellite imagery to assess damage and assist vessel movement, helping
federal and state agencies mitigate environmental hazards, and
conducting salvage operations. In addition, stewardship of our
ecosystems is critical during emergencies, and NOAA is assessing the
hurricane's impacts on habitat and fisheries in the Gulf while at the
same time reviewing options to ease regulatory burdens on commercial
and recreational fisherman. To date, NOAA has received over $2 million
from DHS for recovery efforts.
The Economic Development Administration (EDA) works in partnership
with state and local government, regional economic development
districts, and other entities to help communities address problems
associated with long-term economic deterioration as well as recent,
severe economic dislocations such as those the Gulf region is
undergoing. EDA administers a diverse range of grants programs and
funds infrastructure and business development to induce private
investment in the types of business activities that contribute to long-
term economic stability and growth. These programs are key elements in
comprehensive economic recovery and have great potential to assist in
the current situation.
The National Institute of Standards and Technology (NIST) is at the
forefront of the U.S. government's efforts to develop and promote
measurement, standards, and technology to enhance productivity,
facilitate trade, improve quality of life, and bolster national
security. As part of the federal government's National Response Plan,
NIST, for example, is working with the Federal Emergency Management
Agency (FEMA) to assess structural damage in the Gulf area. Through the
Hollings Manufacturing Extension Program, NIST also plans to review the
impact of the hurricane on small manufacturers in those areas affected
by the storm.
The Bureau of Industry and Security (BIS) must assure the timely
availability of industrial resources to meet emergency preparedness
requirements under the Defense Priorities and Allocations System
Program (DPAS). DPAS allows the Department to prioritize the delivery
of critical resources from commercial sources to ensure that federal
and private sector entities can support recovery operations during
emergency situations. BIS is using DPAS authority to assist with
critical infrastructure restoration projects related to the Gulf's
recovery. In addition, FEMA has been delegated authority to use BIS'
DPAS regulations to place priority contracts for materials, services,
and facilities in support of Hurricane Katrina recovery operations,
including rescue, medical, health and sanitation services; essential
debris clearance; and immediate repair or restoration of damaged vital
facilities.
The Bureau of Economic Analysis (BEA) produces economic accounts
statistics that enable government and business decision-makers,
researchers, and the American public to follow and understand the state
of the nation's economy. These accounts impact critical decisions
affecting monetary policy, tax and budget projections, and business
investment plans. Natural disasters like Hurricane Katrina have two
major economic effects: destruction of property and disruption of the
flow of production, income, and spending. BEA will be estimating
hurricane costs as part of the 3rd quarter gross domestic product and
other indicators for August and September.
The International Trade Administration (ITA), working in
conjunction with DHS, the White House, and other agencies, has launched
a Hurricane Relief Call Center to match community needs with private
sector donations or saleable goods. Through access to DHS' National
Emergency Resource Center database and information received directly
from the business community, the Department aims to put donors and
those in need in direct contact within 24 hours of a match. In
addition, ITA recently worked with other agencies to allow U.S. apparel
importers to release goods embargoed under China textile safeguard
actions for the purpose of providing aid to Katrina victims.
The Office of the Secretary has made the combined efforts of
Commerce bureaus in responding to Katrina a top priority. The Secretary
is holding weekly executive-level meetings during which each bureau
head must report on Katrina activities and related expenditures. To its
credit, the Department's Offices of Budget, Acquisition Management, and
Financial Management immediately began working to implement appropriate
internal controls and special project codes for capturing and reporting
costs related to Katrina. The Department has advised that controls and
processes are now in place to track and monitor its Katrina-related
program activities, and its integrated financial management system
allows for detailed reporting of obligations and expenditures.
ACCOUNTABILITY, OVERSIGHT, AND LESSONS LEARNED
The rebirth of the Gulf region relies first and foremost on the
recovery of businesses and reconstruction of vital infrastructure. This
process will require an influx of resources and a possible loosening of
ordinary requirements [I don't understand what you mean by ``ordinary
requirements''] to expedite the delivery of assistance to communities.
Huge infusions of dollars, coupled with more flexible rules, create an
environment ripe for possible fraud, waste, and abuse. Thus, the
oversight role of the inspectors general, working cooperatively and
collaboratively, is crucial to preventing and detecting unauthorized
activities during recovery efforts.
My office has overseen activities related to hurricane relief and
recovery before. In September 1998, we issued a report on our
evaluation of EDA's handling of its Hurricane Andrew assistance
program. In particular, we examined EDA's process for selecting
projects and its management and monitoring of the projects funded. We
focused on issues related to the completion of these projects and, more
important, on lessons learned from those activities. These findings
provide valuable insight and guidance to direct EDA's actions in
response to Hurricane Katrina.
Before I discuss specific issues in that report, I'd like to note
that in 1992, Congress appropriated about a billion dollars to various
federal agencies under the Dire Emergency Supplemental Appropriations
Act, including $80 million to EDA to provide disaster relief
assistance. When we look at the more than $60 billion already
appropriated for Hurricane Katrina relief, coupled with the likelihood
of yet more funds being needed for Hurricane Rita relief and
rebuilding, any lessons learned from our earlier report and the ongoing
vigilance of inspectors general will be critical.
Much of the billion-dollar emergency appropriation for Hurricane
Andrew was aimed at addressing the immediate needs of protecting life
and property and providing food, shelter and other basic services. But
Congress intended that the EDA monies fund projects for longer-term
economic recovery and growth. Just as with the recent appropriations
for Hurricane Katrina, few restrictions were placed on EDA's use of the
disaster funds and the agency was instructed to ``use all existing
administrative flexibility to waive local match requirements and to
expedite the delivery of assistance to communities.'' To further
expedite EDA grant-making, Congress appropriated $5 million to
supplement the agency's operating budget.
Between 1992 and 1995, EDA received Hurricane Andrew relief
proposals requesting a total of more than $130 million, and the agency
funded 28 projects totaling $50.9 million. EDA did a good job of
quickly selecting the projects, and for the most part, chose projects
that were both sound in concept and appeared responsive to the economic
recovery needs of the area. However, there were serious problems with 9
projects that were late in starting and slow in being completed. These
projects also tied up millions of dollars that could have been put to
better use for other disaster recovery purposes.
The delayed construction projects had two common traits--purpose
and location. Specifically, all but three were located outside the
direct path of the hurricane and all nine were designed to mitigate or
accommodate the out-migration of businesses or enhance or encourage
tourism in areas affected by the storm, as opposed to repairing or
replacing storm-damaged buildings and infrastructure. In contrast, all
of the projects that were finished on time were located within the 20-
mile path of the hurricane and were more traditional repair-and-replace
public works projects. The location and purpose of the delayed projects
made them less urgent than the others and therefore more vulnerable in
part because they lacked sufficient local impetus to proceed on their
own. These findings are key when we look at the scope of the area
affected by Hurricane Katrina and the competing requests for
assistance.
Our report highlighted a number of management issues that have
relevance for current recovery efforts and can help ensure that
taxpayer dollars spent on today's disasters go to the intended
recipients; are used effectively, efficiently, and in a timely manner;
and thus accelerate economic recovery. It is critical that agencies do
not overlook the need to give close attention to shortcomings in
project oversight in light of the monumental rebuilding effort required
post-Hurricane Katrina. Officials must follow basic procedures to
monitor projects, such as obtaining routine performance reports that
notify the agency about delays and the reasons for them. For example,
EDA requires grantees to submit quarterly status reports before
receiving disbursements in order to protect the government's financial
interest. These reports are the early warning system for advising the
agency of a project in trouble. If officials recognize the symptoms of
problem projects early on, they can promptly act to fix them, where
possible, or terminate the award and redeploy the remaining funds. In
addition, monitoring projects onsite is critical so that officials gain
first-hand knowledge and can provide direct oversight of how funds are
being expended.
PLANS FOR PREVENTING AND DETECTING UNAUTHORIZED ACTIVITIES
In the aftermath of as devastating an event as hurricane Katrina,
there is a distinct tension between the desire to aid affected
businesses, communities, and individuals as quickly as possible and the
need to ensure that sufficient controls are in place to prevent
desperately needed funds from being wasted. Inspectors general play a
critical role in ensuring that federal funds designated for recovery
are used wisely. To that end, my office has been working closely with
Department of Commerce and DHS officials to identify all funds being
spent by Commerce on Katrina-related activities.
I mentioned earlier that the Department has established internal
controls to identify and monitor Katrina funding and expenditures. We
plan to assess these financial and procurement controls before dollars
are spent, and the Department's Chief Financial Officer has agreed to
work closely with my office to monitor the effectiveness of these
controls on a continuing basis.
Once expenditures are identified, my office will determine which
ones are funding repair of Commerce buildings and equipment in the Gulf
region and which are providing economic assistance to businesses,
communities, and individuals affected by Katrina. We will evaluate how
effectively these projects are progressing and whether they are in fact
targeting the most critical needs.
At this point we have paid particular attention to the Department's
decision to utilize procurement flexibilities made available in the
aftermath of Katrina. The Department recently raised the spending
ceiling for NOAA purchase card users to $15,000 for Katrina-related
expenditures. In light of the well-publicized history of problems with
federal employees' use of purchase cards and the related lessons
learned, we know the importance of closely monitoring individual users
for these cards. Likewise, the Department raised the simplified
acquisition threshold from $100,000 to $250,000 post-Katrina, which
again increases risks for fraud and misuse--problems we have noted in
prior audits of this procurement method. We will actively monitor
transactions impacted by these changes to ensure that only authorized
personnel are involved, government funds are being used appropriately,
and purchases clearly comply with applicable requirements.
With regard to economic assistance provided by Commerce bureaus
such as EDA, we plan to monitor any instances where traditional
financial assistance terms and conditions are bypassed. While we
recognize the need for flexibility in the current environment,
deviating from normal procedures governing such awards increases the
risk of fraud, waste, and abuse. It is critical that appropriate
controls are in place.
Similarly, while appropriate contract oversight is always
important, given the procurement flexibilities the Department will be
able to exercise, aggressive monitoring is essential. While we will not
be able to audit all Katrina-related contracts and grants, my office
will determine which activities seem most at risk and will focus our
audit efforts on those projects.
CONCLUSION
The Department of Commerce plays a critical role in preparing for,
responding to, and recovering from natural disasters such as Hurricane
Katrina, and thus in promoting the economic well-being of the nation.
The immense public support to aid victims and rebuild the Gulf region
through large infusions of resources and expedited regulatory processes
increases risks that taxpayer dollars will be misused. My office, in
coordination with DHS and other agencies, will vigilantly oversee
departmental programs, determine whether appropriate management
controls and procedures are in place, and work to resolve any
weaknesses we identify so that Congress can have confidence that tax
dollars are spent as intended.
Mr. Whitfield. And thank you, Mr. Frazier, and at this
time, I will recognize Mr. Feaster--which agency is Mr. Feaster
with? The FCC. Thank you.
TESTIMONY OF H. WALKER FEASTER III
Mr. Feaster. Thank you, Mr. Chairman. Mr. Chairman and
members of the subcommittee, I appreciate the opportunity to
come before you today to discuss the FCC's plans for
participation in Hurricane Katrina rebuilding activities and
our plans to provide oversight of these activities.
The FCC has announced it will be using four existing
support mechanisms of the Universal Service Fund to provide
$211 million to Katrina recovery assistance, as follows.
The Low Income program will be used for evacuees and
persons in affected areas without telephone service wireless
handsets and a package of 300 minutes. The fund will also be
used to provide support for reconnecting consumers as the area
is rebuilt. The FCC has estimated this will amount to $51
million.
The Rural Health Care program will allow public and for-
profit healthcare providers to apply for assistance with the
cost of telecommunications services under relaxed participation
requirements. The FCC has estimated this will amount to $28
million.
The E-rate program will be used to reconnect schools and
libraries in the affected areas to telecommunication and
network services. The FCC estimates a range from $96 million to
$132 million in E-rate funds for the 600 schools and libraries
hit by the hurricane.
The High Cost program will allow greater flexibility for
telephone carriers to use high cost funds to prioritize
facilities affected by Katrina.
I applaud the Commission's effort in the post-Katrina
recovery, and I am supportive of all the agency has done to
assist. However, I am mindful that in my role as Inspector
General, I am responsible for ensuring that the relief efforts
do not present unacceptable risks to the agency and the
taxpayer's dollar. I would like to discuss my plans for
oversight of the Katrina-related efforts.
The myriad of rule waivers and special temporary
authorities the Commission has granted has only a small impact
on audits conducted by my office. Our primary audit role in
these functions is to ensure that adequate internal controls
are in place and operating effectively to ensure regulatory
compliance, and that financial cost accumulation and reporting
are current, accurate, and complete. My financial statement
audits for 2005 and 2006 are the best tools I have to make this
assessment.
We have testified before this committee on three occasions
on the special risks this program carries and my concerns about
the Universal Service Fund. I will discuss the four parts of
the USF, our efforts to provide oversight of the fund, and new
concerns as a result of the Hurricane Katrina efforts.
The E-rate program has expended $10 billion since its
inception in 1998. We have identified specific concerns about
the E-rate program that will have a direct impact on the
disaster assistance funding. These programmatic weaknesses will
be compounded by the confusion of overworked school and library
administrators trying to rebuild shattered information systems
under less than ideal circumstances. Additionally, I fear these
rule waivers or exemptions will be taken advantage of by
unscrupulous E-rate service providers that Federal criminal
investigations have turned up time and time again.
Our auditors will incorporate appropriate steps in the
audit programs currently in use to ensure the Katrina rule
waivers are considered in audit planning and fieldwork. On a
less positive note, I do not have the resources that approach
being adequate to provide effective oversight of the E-rate
program. However, we will continue to work in close
coordination with USAC internal auditors, independent auditors
under contract to USAC, and other Federal auditors conducting
E-rate audits.
Another large USF program is the High Cost program. The
program provides support to telecommunications carriers to
ensure that consumers in all regions of the United States have
access to, and pay rates for telecommunications services that
are reasonable. This program has averaged over $2.5 billion in
annual expenditures, and my office is aware of what we need to
expand in the area; however, we do not have the resources to
establish an effective oversight program.
The Low Income program assists eligible lower income
consumers to establish and maintain telephone service by
discounting services provided. To the best of my knowledge,
this support mechanism has not been used in the past to provide
wireless handsets and free minutes of service in the past. I am
not yet fully briefed on how the Commission intends to
implement the intended hurricane relief, and I will give
careful consideration as to what sort of oversight to bring to
this unique solution. I anticipate, at a minimum, I will direct
my staff to perform an audit of how eligibility for this help
is determined and verified, and measures the Commission has
taken.
I would like to make an observation about the overall risk
to the USF as presented by the Katrina devastation. Since the
inception of the E-rate program in 1998, over $184 million has
been expended in Louisiana, and over $79 in New Orleans alone.
As well as E-rate funds, the High Cost program has expended
$550 million in the State of Louisiana since 1998. Rebuilding
the shattered infrastructure is critical. Financial needs are
huge and risk of misspent funds must be taken into account.
This risk is certain to be impacted by errors on the part of
public and private participants who are overworked and
stressed. Further, you can be sure this level of funding will
attract the less honest service providers to the area who might
hope to take advantage of additional funds being expended.
This concludes my testimony. I will be happy to answer any
questions.
[The prepared statement of H. Walker Feaster III follows:]
Prepared Statement of H. Walker Feaster III, Inspector General, Federal
Communications Commission
Mr. Chairman and Members of the Subcommittee, I appreciate the
opportunity to come before you today to discuss the FCC's plans for
participation in Hurricane Katrina rebuilding activities and our plans
to provide oversight of these activities. Since the majority of the
actual funds used by the FCC in the recovery efforts will come from the
Universal Service Fund (USF), I will place emphasis on the plans to use
the USF in the rebuilding efforts. However, I will also discuss other
FCC efforts and discuss the overall risks that I believe we must
consider in our oversight of Katrina-related activities.
FCC USE OF THE USF IN KATRINA REBUILDING SUPPORT
The Commission took the unprecedented step of holding an Open
Meeting in Atlanta, Georgia on September 15, 2005. At this meeting, the
Commission announced that it would use $211 million of funds from the
USF to assist recovery efforts in the disaster area. The FCC will use
the four existing support mechanisms of the USF to provide this
assistance, as follows:
The Low Income program will be used to provide evacuees and persons
in the affected areas still without telephone service wireless
handsets and a package of 300 minutes. This fund will also be
used to provide support for reconnecting consumers as the area
is rebuilt. The FCC has estimated this will amount to $51
million of Low Income support.
The Rural Health Care program will allow public and for-profit health
care providers to apply for assistance with the cost of
telecommunications services under relaxed participation
requirements. The FCC has estimated this will amount to $28
million of Rural Health Care support.
The Schools and Libraries program (or E-rate) will be used to
reconnect schools and libraries in the affected areas to
telecommunication and network services. Using a variety of
program rule waivers, the FCC will be able to authorize an
amount estimated to range from $96 million to $132 million in
E-rate funds for the 600 schools and libraries hit by the
hurricane.
The High Cost program will allow greater flexibility for telephone
carriers to use high cost funds to prioritize facilities
affected by Katrina.
OTHER REBUILDING SUPPORT BY THE FCC
The Commission has also announced the creation of a new Bureau--the
Public Safety/Homeland Security Bureau. This Bureau will be comprised
of existing functions currently in other FCC bureaus and offices and
will have responsibility for the FCC's public safety, national
security, disaster management programs.
Additionally, the Commission has undertaken several actions that
allow the telecommunications industry regulatory flexibility in
rebuilding efforts. Through the issuance of temporary rule waivers and
special temporary authorities, the FCC is assisting in re-establishing
emergency communications, providing assistance and relief to television
and radio stations in getting back on the air, extending regulatory fee
payments, extending filing due dates for licensees, and performing a
host of activities to contribute to the recovery efforts. The FCC is
coordinating with the Federal Emergency Management Agency and the
National Communications System, as well as state and local governments
and organizations to communicate the FCC's flexibility in eligibility
standards and processes to aid in the Hurricane Katrina relief efforts.
AUDIT OVERSIGHT OF THE FCC'S KATRINA-RELATED EFFORTS
I applaud the Commission's efforts to be a positive force in the
post-Katrina recovery, and I am supportive of all that this agency can
do to assist. However, I am mindful that in my role as Inspector
general, I am responsible for ensuring that these relief efforts do not
present unacceptable risks to the agency and the taxpayer's dollar. I
would like to discuss my plans for oversight of the FCC's Katrina-
related efforts.
The myriad of rule waivers and special temporary authorities the
Commission is granting has only a small impact on audits conducted by
my office. I have not received any indication from agency management
that, insofar as appropriated funding goes, any additional costs or
requests for budgetary resources are contemplated for Katrina-related
efforts. The primary cost to the FCC appears to be in terms of
personnel costs such as overtime and travel. Our primary audit role in
these functions is to ensure that adequate internal controls are in
place and operating effectively to ensure regulatory compliance and
that financial cost accumulation and reporting are current, accurate
and complete. While the reorganization and formulation of a new bureau
carries a higher level of risk, our concerns are the same--are the
financial and operational controls in place to ensure that the agency's
programs and functions are operating in an effective and efficient
manner and in compliance with applicable laws and regulations. My
financial statement audits for FY 2005 and 2006 are the best tools I
have available to make this assessment. My staff is coordinating with
our contracted independent public auditors to ensure that testing under
our financial statement audit will address any concerns.
OIG OVERSIGHT OF THE USF KATRINA FUNDING
The FCC's financial contribution to the recovery is via the USF. In
regards to the USF, this Subcommittee is aware of the special risks
this program carries and my concerns about the fund. We have testified
before this Subcommittee on three occasions, as well as other House and
Senate committees, about concerns regarding the E-rate program, one of
the two large USF mechanisms. I will summarize the four parts of the
USF, our efforts to provide oversight of the fund, and new concerns as
a result of the Hurricane Katrina efforts.
The FCC has issued an Order on September 21, 2005, that details
several rule waivers for USF recipients in the hurricane-affected area.
This Order allows State Commissions, carriers, and program
beneficiaries to postpone filing certain USF forms, payments and data
for a period of up to one hundred and fifty (150) days. At this time I
have not been advised as to whether these waivers represent all of the
actions needed to implement the Commission's USF Katrina relief or if
more rule waivers will be forthcoming.
Due to materiality and our assessment of audit risk, we have
focused much of our attention on the USF mechanism for funding
telecommunications and information services for schools and libraries,
also known as the ``Schools and Libraries Program'' or the ``E-rate''
program. The E-rate program has expended $10 billion since its
inception in 1998. Our involvement in E-rate audits and investigations
has highlighted numerous concerns with this program. The Commission has
announced that they will distribute additional funds in the hurricane
affected areas by setting all schools and libraries in the disaster
area at the 90% level of support, which is the highest level of support
available under the program. They will open a new 2005 funding window
for schools and libraries in the affected areas to request new or
additional support, and they will allow schools and libraries serving
evacuees to amend their 2005 funding to account for increased student
populations.
We have specific concerns about the E-rate program that will have a
direct impact the disaster assistance funding. For example, we have
cited a lack of clarity in the program's rules as being a catalyst for
both inadvertent errors and deliberate waste and abuse. We have also
described weaknesses in the competitive procurement requirements used
to purchase E-rate goods and services and the ineffective use of
purchased goods and services. These kinds of programmatic weaknesses
will be compounded by the confusion of overworked school and library
administrators trying to rebuild shattered information systems under
less than ideal circumstances. Additionally, I fear these rule waivers
or exemptions will be taken advantage of by unscrupulous E-rate service
providers that federal criminal investigations have turned up time and
again.
Fortunately, we have an aggressive audit plan for E-rate
beneficiary compliance in place, and our auditors will incorporate
appropriate steps in the audit work programs currently in use to ensure
the Katrina rule waivers are considered in audit planning and
fieldwork. On a less positive note, I do not have resources that
approach being adequate to provide effective oversight of the E-rate
program. However, we have worked and will continue to work in close
coordination with USAC internal auditors, independent auditors under
contract to USAC, and other federal auditors conducting E-rate audits
under interagency memoranda of understanding. We will ensure that the
special risks that the FCC's proposed rules bring are addressed in the
conduct of future audits.
Because we have focused our limited resources on the E-rate
program, we have not been able to devote a great deal of attention to
the other USF mechanisms. The other large USF program is the High Cost
program. This program provides support to telecommunication carriers to
ensure that consumers in all regions of the United States have access
to and pay rates for telecommunications services that are reasonably
comparable to those services provided and rates paid in urban areas.
This program has averaged over $2.5 billion in annual expenditures and
my office is aware that we need to expand our oversight in this area.
However, we have not had the resources to establish an effective
oversight program. In the breakdown of the $211 million of Katrina
relief there does not appear to be additional funds contemplated for
High Cost and I believe that the primary effect of the Katrina support
will be the redistribution of existing support. At the present, we are
assessing risks in the High Cost program in anticipation of being able
to institute an audit program in the future and will ensure our plans
to address any considerations brought by the Katrina relief.
I find the proposed Low Income Katrina-related support very
interesting. The Low Income program assists eligible low-income
consumers to establish and maintain telephone service by discounting
services provided by local telephone companies. The USF reimburses the
telephone companies for the discounts under the Low Income program.
This program provided $759 million in support in 2004 and is considered
to be of lower audit risk than the E-rate or High Cost programs. To the
best of my knowledge, this support mechanism has not been used in the
past to provide wireless handsets and free minutes of service in the
past. I am not yet fully briefed on how the Commission intends to
implement the intended hurricane relief, and I will give careful
consideration as to what sort of oversight to bring to this unique
solution. I anticipate that, at a minimum, I will direct my staff to
perform an audit of how eligibility for this help is determined and
verified and measures the Commission has taken to ensure the products
provided are in the hands of the people who need the help.
The Rural Health Care program is the smallest USF program, having
disbursed $38 million since 1999. The FCC's proposed $28 million of
disaster assistance to emergency health care providers in the affected
region will represent a dramatic increase in Rural Health Care
expenditures. This is being accomplished by increasing the discount
rate, which is the portion of costs covered by the support mechanism to
50% for qualified providers in the affected areas and for health care
providers providing assistance to disaster victims nationwide.
Additionally, the FCC will allow health care providers to file new or
amended applications for funds in the current year. We are still
assessing the requirement for oversight represented by the additional
disaster relief funds.
I would like to make an observation about the overall risk to the
USF as represented by the Katrina devastation. The Commission is making
a commendable effort to provide extra relief to the area in the form of
rule waivers and temporary exemptions. However, this effort pales in
consideration of the tremendous loss in the networking and
telecommunications capability in the schools, libraries and homes of
Louisiana, Mississippi, and other devastated areas. Since the inception
of the E-rate program in 1998, over $184 million has been expended in
Louisiana, and over $79 million in New Orleans alone. As well as E-rate
funds, the High Cost program has expended $555million in the state of
Louisiana since 1998. Rebuilding the shattered infrastructure is
critical. While the FCC's authorization of additional funding will go a
long way in restoring these services for the citizens affected by
Hurricane Katrina, the area will require a higher level of support for
years before it reaches a level of technological capability that it had
before the hurricane. The financial needs will be huge and the risk of
misspent funds must be taken into account. This risk is certain ti be
impacted by errors on the part of public and private participants who
are overworked and stressed. Further, you can be sure this level of
funding will attract the less honest service providers to the area who
might hope to take advantage of the additional funds being expended
under relaxed rules.
CONCLUSION
The Office of Inspector General has been and remains committed to
meeting our responsibility for providing effective independent
oversight of the USF. My office will dedicate as much of our resources
as possible to ensure that the extra measure of support provided by the
Commission is utilized in a manner that best benefits the people whose
lives have been so horribly uprooted by Hurricane Katrina.
Thank you. I will be happy to answer any of your questions.
Mr. Whitfield. Mr. Feaster, thank you, and thank all of you
for your opening statements. I want to welcome all of the
members of the Oversight and Investigations Subcommittee. As I
explained before they arrived, we do have a markup going on
downstairs on an energy bill relating to refineries, and so
they are displaying great enthusiasm by being in both places at
once, so I want to thank all of you for joining us.
I notice that since 1974, there has been a total of $83,
$84 billion appropriated for the Disaster Relief Fund in all
those years, and as a result of Katrina, Congress has
appropriated $62.3 billion just for Katrina, so that takes up
the vast amount of money that has gone through the Disaster
Relief Fund. Now, in his opening statement, Mr. Inslee made a
comment, and I may not get this exactly correct, but he raised
the question, is anyone really in control here? Does anyone
have ultimate responsibility in the coordinating of this effort
of oversight and investigation, of watching to prevent waste,
fraud, and abuse?
And Mr. Skinner, I would ask you the question. Is that
valid criticism to say there is no one central place that has
authority to really be in control of this effort?
Mr. Skinner. No, I don't believe it is a valid criticism.
Quite frankly, I think the OIG community, collectively, is well
equipped to provide that oversight by working through the PCIE
Roundtable for Homeland Security, which I chair. I think we
have mechanisms in place to coordinate those activities, so
that we can work together to ensure that there are no gaps in
oversight, and also, to ensure that there is no duplication or
unnecessary expense in providing oversight of those funds.
Mr. Whitfield. And is that through the President's Council
of Integrity, is there----
Mr. Skinner. Yes, sir. Yes, Mr. Chairman.
Mr. Whitfield. [continuing] the coordination takes place?
And do all of the Inspectors General have representatives that
attend the meetings of that group?
Mr. Skinner. Yes, we do. Currently, we have approximately
13 members participating with regards to Katrina operations
alone. Like I said earlier, with those 13 IGs, we can provide
oversight for approximately 99 percent of all the funds that
have been appropriated to date with regards to Katrina
operations.
Mr. Whitfield. Now, of the $62.3 billion that have been
appropriated, how much has been spent so far?
Mr. Skinner. Approximately about $18 to $19, or $20--it
changes daily. We are spending money at a rapid pace, but
approximately $18 to $19 billion has, in fact, been obligated,
and the outlays are in and around the $4 billion range, that
is, where the bills have come in, and we have paid bills
against those obligations.
Mr. Whitfield. Do you serve as the Chairman of the
President's Council of Integrity?
Mr. Skinner. No, Mr. Chairman. That is Greg Friedman, who
is to my right, who has asked me to take the lead on or to set
up a Roundtable for Homeland Security initiatives.
Mr. Whitfield. Okay.
Mr. Skinner. From that Roundtable, we have brought together
those individuals that have oversight or have involvement in
disaster operations.
Mr. Whitfield. So Mr. Friedman, you serve as the Chairman,
then.
Mr. Friedman. Let me just clarify, if I can. There is a
President's Council on Integrity and Efficiency, which is the
Presidentially appointed, Senate-confirmed Council, and I am
the Vice Chair of that Council. The Chair, is by virtue of the
Executive Order which established us, the Deputy Director of
OMB. There is an Executive Council on Integrity and Efficiency,
and we work hand in glove together. Those are the agency-
appointed Inspectors General. In total there are 57 IGs within
the Federal IG community.
Mr. Whitfield. Now, Mr. Skinner mentioned the amount of
money that has already been obligated, which is a quickly
changing figure, but how do you actually go about tracking that
on a daily basis?
Mr. Friedman. Well, as Chair of the PCIE Homeland Security
Roundtable, let me ask Mr. Skinner to address that question, if
you don't mind.
Mr. Skinner. Those funds are being currently tracked
through FEMA's accounting systems. We have people embedded over
there at FEMA, at their FEMA headquarters, where we monitor
those expenditures, and we obtain daily reports as to the
progress that we are making with regards to our financial
activities.
Mr. Whitfield. Now, we hear a lot of criticism about
awarding contracts without competitive bidding. What is the
rationale for that, and is some of the criticism valid?
Mr. Skinner. It may or may not be. That is something that
we are giving a sense of high priority to. The basis for these
no-bid contracts is essentially to protect property, save
lives, things of that nature, in an emergency environment. That
is, if we had obtained competition, we run the risk of reducing
our ability, or reducing the government's ability to respond in
a timely manner to protect property and save lives. What that
we are doing, collectively, in the OIG community, in the DHS
OIG, is stepping back and looking at all of the no-bid, and
even those limited competition contracts. The questions that we
are going to be asking, as I said in my statement, is there
evidence to support the need for a no-bid contract? We want to
look at the criteria that you use to select a particular
vendor. We want to look at the qualifications of that vendor.
We want to look at the value, the pricing, of those no-bid
contracts, to ensure that they are reasonable and fair. And
then, as the bills come in, we also want to take a very close
look to ensure that the product or services being delivered
has, in fact, been delivered as promised.
Mr. Whitfield. I noticed in a recent New York Times article
you had mentioned that you were apprehensive about these kinds
of contracts, and it is easy to be--you can find a lot of
things wrong with it--but when you are trying to respond in a
timely fashion, and quickly, in emergencies, you do have this
tension between the possibility of making a lot of mistakes and
spending money incorrectly, versus the need to act speedily, so
you are trying to balance it out, I am sure.
Mr. Skinner. That is correct. That is why I am not willing
to make a blanket statement that all no-bid, or limited
competition contracts are bad. In many circumstances, I have
been involved with FEMA disaster operations since 1991, and I
know, oftentimes, that that is the only alternative we have
available to us, we the Federal Government, to get support and
services to the people in a timely manner. But nonetheless,
that said, by using no-bid contracts, we do increase our
vulnerability for waste. And that is what we want to take a
very, very close look at.
Mr. Whitfield. Now, in May of this year, your office
completed an audit of certain FEMA programs as related to
Hurricane Frances in the Miami-Dade County area, and in there,
you talked about some real problem areas, and I would just like
to walk you through several of your findings, and ask you to
tell us what has changed, from your perspective, to make
certain that Katrina funds don't meet a similar fate,
recognizing that by the nature of the disaster, mistakes are
going to be made, but trying to minimize them.
One of the things you point out was that no provisions
existed for inspectors to recuse themselves from inspections
that may present possible conflicts of interest.
Mr. Skinner. That is correct, and FEMA has advised us that
they have tightened those controls, but we have not yet
validated them. In fact, that is what we will be doing,
retesting those controls, as we walk through Katrina and Rita
operations.
Mr. Whitfield. Okay.
Mr. Skinner. We have embedded people at the National
Service Processing Center within FEMA. We have embedded people
at the Disaster Finance Center. And we will be looking to see
if those controls have, in fact, been put in place. And their
response to our report was just issued this past spring or
summer, I believe. FEMA recognized, yes, we do need to tighten
our controls, and yes, we intend to tighten our controls. Have
they, in fact, been tightened? Our current oversight will
validate that.
Mr. Whitfield. So that is one area, we don't have a
conclusive answer on that.
Mr. Skinner. No, we don't, at this point.
Mr. Whitfield. All right. No. 2, FEMA designated Miami-Dade
eligible for individual assistance programs without a proper
preliminary damage assessment.
Mr. Skinner. That is correct. It is my understanding from
Katrina that has, in fact, been corrected. It was very obvious,
in many of the counties and communities, that there was
wholesale devastation, and therefore, just a flyover will
demonstrate that a declaration was supportable in those
outlying counties, as we go north in Mississippi, Alabama. I
believe in Alabama, we only declared four counties as a result
of the changed procedures, and the same holds true in Texas and
Louisiana. They did do preliminary damage assessments to
validate whether those outside of harm's way were, in fact,
entitled to be included in the declaration.
Mr. Whitfield. I would like to ask--my time is running out.
Mr. Frazier, I want to ask you a question. I notice in your
testimony you referred to, back in Hurricane Andrew, that EDA
received requests for $130 million for various projects, that
the agency funded 28 projects for a total of $50 million. But
then, you pointed out that there were serious problems with
nine out of 28 of those projects. They were slow in getting
started. They were slow in being completed, and it sounded like
those nine out of 28 projects really did not--you were not
satisfied with the results of those projects at all. Would you
elaborate on that for me?
Mr. Frazier. Yes, Mr. Chairman. Definitely, we were very
disappointed, because one of the things that we concluded was
that those funds could have been redeployed. One of the
problems that we saw was that it is not good enough just to put
the money out there. EDA did a great job of getting the money
out there, but then, you have to put people there to make sure
that the contractors and the grantees are living up to the
terms and conditions of those projects.
In the process, we found that they gave projects to people
who didn't really know what they were doing. When they did
that, those projects were dismal failures. When they gave them
to people that knew what they were doing, who had a track
record, and were in areas that they had the expertise, we
didn't see those problems. But, in the haste to get the money
out, often there was very little followup, very little
monitoring. And in fact, 5 years after the hurricane, some of
the funds still hadn't been spent. They were still sitting
there un-obligated. And again, you saw millions of dollars that
just sat idle during the period when they could have been
redeployed.
Mr. Whitfield. And so do you think there has been any
significant changes that would prevent that from happening this
time, or----
Mr. Frazier. Yes, one of the things is, that you have
different people there, and I think that has a lot to do with
it. One of the things that we have been constantly hammering
the Department about is the importance of monitoring and
overseeing the projects--I mean on an ongoing basis. One of the
problems is that a lot of the problems that we expect to see
with Hurricane Katrina are things that we deal with every day,
the problems associated with how well you do grants, how well
you do contracts. If you don't do it fairly well on an ongoing
basis, when you have an emergency or a catastrophe like this,
you are not going to all of a sudden become experts at doing
it.
At the Department, I can tell you when contracts come out
of one particular agency, we don't have many problems with
them. If they come out of another agency in the Department, we
have real concerns, so a lot of it has to do with the
infrastructure and the controls that are put in place, and that
exist now. So we think the Department has made some significant
strides since 1998, and in fact, we have spoken with the Acting
Assistant Secretary to discuss that report, and he has assured
us that these kinds of problems will not happen this time
around.
Now, one of the concerns that we have is whether, when the
money starts to come into the Department to fund grants,
whether there will be adequate moneys given to the Department
to do the monitoring and the oversight over the long term, or
whether it will take the money, and just get it out there, and
then, just walk away, and then, let these kinds of problems
materialize.
Mr. Whitfield. Okay. My time has expired, so I recognize
the gentleman from Washington, Mr. Inslee.
Mr. Inslee. Thank you. I want to ask kind of a broad
question to anyone who wants to tackle this. One of our
concerns, my concern, is that we need a proactive effort to
prevent waste, fraud, and abuse, rather than just a
retrospective effort to deal with this issue. Many of us,
myself included, believe we ought to have a Chief Financial
Officer appointed in the structure of this to define
proactively how to establish a financial prospective means to
prevent this from happening in the first place, prevent
occurrences such as having cruise ships folks that we could
actually send people on 6 month cruises for half the price that
we are paying to actually have people sit at the dock at these
cruise ships for a company that I won't make any comments
about.
So many of us feel that we need to get ahead of the curve
here, and set a prospective structure that prevents overlap,
wasteful spending, rather than just the function that you
largely, and I think quite well, in almost all instances, do,
which is a sort of pay and chase system. They pay, and then,
you chase the defaulters and the folks who have made wasteful
decisions. But we feel that, and I don't think I am alone, that
we need a prospective system to handle this massive, perhaps
$200 billion system across multiple states, to prevent, in
part, politics from entering into those decisions as well,
prospectively.
Can you give us comments about that? I know this idea has
been floated about a Chief Financial Officer prospectively. Do
you have any thoughts about that, about how to structure this
system in advance, rather than just retrospectively, as you
traditionally do? That is to anyone who has thoughts about
that. Mr. Skinner?
Mr. Skinner. Let me comment on that from an OIG
perspective. We are not simply a pay-and-chase operation. We
are involved very, very early in the operations here. We are
looking now at internal controls and processes, and contracts
and contract proposals as they are going through the system. We
are involved upfront with applicant briefings, those that are
receiving grants. We are doing pre-award reviews to make sure
that they have the means to account for funds. We are
cautioning them, and briefing them, on the things that could go
wrong, so we are upfront trying to prevent poor or bad
decisionmaking with regards to these expenditures. That is from
an OIG perspective.
From a CFO perspective, you could probably dice that 120
different ways. You can get 30 CFOs in a room and they will
probably come up with 30 different conclusions. I think that,
most certainly, there needs to be a central place where the
Congress, where the public, can go, and expect answers with
regards to where we are spending our money. And so that there
is some individual that is providing the broad oversight, to
ensure there is no duplication or replication in benefits, for
example. Could that be in a Department? Yes. Could it be
separate, outside of the Department? Yes, it could go that way
as well. But there most certainly needs to be broad oversight,
someone within government. Could that be in OMB? Could that be
in DHS, or down at FEMA? As long as the authority is there to
provide that oversight and get cooperation from the others, the
other departments that are participating in these relief
efforts, it could work.
The important thing here is to remember that we are in the
early stages of this recovery, reconstruction phase, the very,
very early stages. The big recovery, reconstruction programs
are yet to come, and the expenditures right now are generally
being increased by DoD and DHS. As we go on through recovery, I
know other departments and agencies are going to become very
heavily involved, and I imagine that they will be receiving
direct appropriations. Commerce, for example, with regards to
recovery zones in the Gulf region. EPA, Energy, others will
probably be receiving funds. Who is going to provide oversight
from a governmentwide perspective?
Mr. Inslee. Right. Right.
Mr. Skinner. That authority needs to be clarified. I agree.
It could exist in OMB, or within DHS. In any case, the
President has to make it perfectly clear who has the authority
to coordinate and provide oversight of all those funds.
Mr. Inslee. Well, I appreciate your comments, because
obviously, you may not know what is going on in Energy or
Commerce or one of the others, and vice versa; they don't know
what is going on in yours; so we are going to pursue that, and
I hope that all the members of the panel will at least actively
consider, and make suggestions, to the White House and the
administration how to fashion such a centralized system,
because this is such a massive effort.
And frankly, you know, these are obviously not totally
analogous, but the abuses and failures we have seen in Iraq, we
don't want to duplicate that at home, and having a centralized
system, that these multiple agencies, I think, would be
helpful. By the way, I noticed, you made reference to the
Council of Integrity.
Mr. Skinner. The President's Council of Integrity and
Efficiency.
Mr. Inslee. Yeah, is the Council, was the Council of
Integrity responsible for the civilian contracting in Iraq?
Mr. Skinner. No, sir.
Mr. Inslee. Should they have been?
Mr. Skinner. There was a special IG appointed for oversight
in Iraq, and was given the authority to provide that oversight,
so I don't think it was necessary that the PCIE, the
President's Council on Integrity and Efficiency, actually
become involved. I know that the IG for Iraq reconstruction
coordinates very, very closely with the IG in the Department of
State, and the IG at the Department of Defense.
The other departments, as far as I am aware, and please,
gentlemen, ladies, correct me if I am wrong, probably did not
have a large role play in the reconstruction effort.
Mr. Inslee. And when was the special IG appointed? Was that
at the beginning of the war, or in the middle, or----
Mr. Gimble. I think it was actually about 2 years ago, but
the CPA, or Coalition Provisional Authority, had an IG
position, and then, it became the special Iraqi IG. It was
about 2\1/2\ years ago that they stood that up.
Mr. Inslee. Would any of you others like to give your
thoughts about if we are going to, as Mr. Skinner has talked
about, increase our coordination and consolidation of this, on
how to structure that?
Mr. Gimble. Could I make a comment?
Mr. Inslee. Yes. Yeah, Mr. Gimble, yeah.
Mr. Gimble. I guess the first thing I would offer up is we
do have oversight, if you are looking at it from the IG
perspective. We have an extensive amount of oversight
capabilities throughout the Federal Government, through both
the PCIE, but let me just talk about how we do it in Defense.
If you recall from my testimony, we identified a number of
audit agencies that are within the Department, and they are
loosely fitted under the oversight of the DoD Inspector
General. We have periodic meetings and coordinations with the
other DoD agencies, and there is a consolidated semiannual
report that all IGs provide to the Congress. I think we fairly
effectively manage this oversight and our responsibility to
avoid duplication through our coordinating efforts and
consolidated reporting, at the end of every 6 months.
Now, going back to your point about what would have
happened on the Iraqi contracting issues. The issue there,
really, is more--the oversight, you are right, it comes in a
lot of cases. However, I think you have to consider that in
this case, it is a different issue. We are in the U.S.,
continental U.S., and I know at least in the Department of
Defense, and I am sure all of the other departments, we have
some fairly rigid contracting procedures. That is not to say
that they won't be misused or circumvented or whatever. That is
the role that we have to go into. But the basic contracting
structures are in place; they should avoid or minimize this
kind of risk.
Mr. Inslee. I want to ask you about specific--I am going to
get a flavor of what really happens in the real world. Which of
you approved this contract for this cruise ship at $1,275 a
week? That is assuming that all of the beds are filled. It
turned about a third of them will, so it actually cost the
taxpayers about $3,500 a week, and you can go on a cruise for
$599 a week. Which of you approved that in advance?
Mr. Skinner. None of us approved that in advance, nor do we
have the authority to approve something like that. That is the
responsibility of the program offices to do that. Nonetheless,
with regards to the cruise ship, that is something that
concerns us as well, and we are looking at that, as we speak,
in coordination with DoD IG. DoD IG will be looking at how did
we let the contract, was it done properly? Are we getting the
best value for our dollar? And we will be looking at it from an
operational perspective, that is, do we continue to need these
cruise ships? Are there better alternatives out there that we
should be considering? So this is something we are currently
looking at.
Mr. Inslee. Right. And we hope that the Congress, in a
bipartisan fashion, and you will help us have a way to
prospectively make those decisions, rather than just
retroactively. By the way, I want to just--we are all great
Monday morning quarterbacks in Congress, and it is a
traditional activity here, and we know that there were
decisions made by people in emergency situations in responding
to this, that in retrospect won't look like the best decisions,
in a lot of circumstances.
We understand that there is intrinsically in an emergency
response duplication, to some degree, but we understand the
nature of that. For instance, in this cruise ship situation, I
indicated there was angst because a lot of people didn't think
anyone was going to get aboard. It turned out they were right.
And nonetheless, maybe those are judgment decisions. But we
just want to make sure that political connections do not
influence the Federal Government decisions. I believe that has
already happened in this situation to some degree, because it
happened in Iraq, and I am seeing it happen already, so we are
looking forward to working with you in a way to make sure that
does not occur. Thank you.
Mr. Whitfield. Thank you, Mr. Inslee. At this time, I will
recognize Dr. Burgess for his 10 minutes.
Mr. Burgess. Thank you, Mr. Chairman.
I guess, Mr. Skinner, if it is all right with you, let us
stay with the Department of Homeland Security for a moment.
There was a newspaper article right after we passed the second
supplemental 2 weeks ago about the purchase of a number of
trailers, I guess to house evacuees. It seems like the number
given was 100,000, but I may not remember that exactly. The
rumor was that those trailers had actually already been
purchased before we voted on that appropriation. Can you shed
any light on that?
Mr. Skinner. They may have. Some of those may, in fact,
have been purchased prior to the second supplemental. FEMA did
have funds available in its disaster relief account to respond
to unexpected or new disasters, and they may have turned to
those funds to actually purchase some of those trailers. But I
am not exactly sure on how much money, additional money, they
needed to buy the additional trailers that you are referring
to, right after the second supplemental.
Mr. Burgess. Was any thought given to placing people in
available rental units that are dispersed around the country? I
don't think the country is at 100 percent occupancy. Trailers
are expensive. They take some time to build, and then, there is
always the question of what do you do with them? I mean what--
and I haven't talked to the mayor of Baton Rouge, but I kind of
figure he doesn't want 100,000 trailers to deal with right
outside his city, but that may--I may be assuming something
there.
But what about putting people in actual housing that is
available?
Mr. Skinner. That is an excellent point, and at that point
in time, those decisions were being made independently by the
independent FCOs in the states of Mississippi, Alabama, and
Louisiana. Since then, the Department has realized that may not
have been a wise decision. So although we may have committed to
buy these things, we could also terminate that commitment
through the convenience of the government. And what we have
done is put a freeze on the delivery of many of those trailers.
We are reassessing our housing policy on a more global scale:
one, we must determine how many we could actually put into
vacant condominiums or apartments, through the temporary
housing program; two, we must identify those that may have been
homeless, or have been living in public housing programs, and
working with HUD--put those people into the HUD vouchering
program. Then, three, those that are left, we have to work with
them to determine whether they want to return to Louisiana or
Mississippi, or do they want to stay where they are at? And if
they want to stay where they are at, and there is not available
housing, then we can make trailers available to them.
So what I think this will do is reduce considerably the
number of trailers that we, in fact, thought we needed
originally. That program, incidentally, I think was announced
by Secretary Chertoff last Friday. However, it has yet to be
implemented. They are still putting together the guidelines and
coordinating with HHS and HUD on how the delivery will work,
and the timing and the costs.
Mr. Burgess. Yeah. It just calls into question the
effective contracting practices that you talk about in your
testimony, if we are rushing out and buying 100,000 trailers.
Oftentimes, you don't get your best bargains that way.
And on the same, you know, it is going to sound like I am
complaining about the expenditure on one side, but then, the
slow pace of reimbursement. I have got cities in my district in
North Texas, the city of Fort Worth, the city of Dallas, the
city of Denton, that have been told by, I guess, both FEMA and
the State that if you have people that you want to move out of
shelters, put them in apartments or hotels or motels, pay the
bills, and we will get back to you 1 day. And all of that
discretionary money, $3 million, I believe, in the case of the
city of Fort Worth, is now used, and it has been 4 weeks, and I
have signed on to two big appropriations bills, and taken a
heck of a lot of heat about it at home. When does Fort Worth
get their money?
Mr. Skinner. That has historically been a problem
oftentimes in certain programs, and this is one of them. The
reason for the delay, in my opinion, is because that the
Department had yet to work out its national housing policy, and
until they had done that, which they had just done recently,
like I said, they announced it Friday, and until they do that,
they were reluctant to pay those bills.
It is my understanding that program is going to be rolled
out this week, if not this week, then next week. Part of that
program includes reimbursing states and locals for their costs
associated with providing temporary housing through the public
assistance program, and I would suspect that you will see the
funds flow very shortly.
But the reason for the slowness is because we didn't have a
global policy up front, or the policy that we did have was not
the most efficient policy.
Mr. Burgess. Well, we should have a policy up front. There
should be something on the shelf that you can pull off. We are
going to have another disaster, hopefully, never anything of
this order of magnitude, but there will be some other disaster
that we will have----
Mr. Skinner. Yes.
Mr. Burgess. [continuing] that will require multiple people
to be displaced. I guess my concern is, back home, the Resource
Connection spent all of its money to feed senior citizens next
month to house evacuees this past month. They are out of money,
and what are they going to feed their Meals on Wheels program,
or how are they going to fund that in the month of October? I
mean they don't run like we do, with the ability to run a big
deficit. They need their bills paid, and I will just tell you,
it is hard for me to go back home when I have the city of the
Fort Worth, and the Resource Connection on one side saying you
told us you would help us pay our bills if we did, basically,
what I saw as the Federal Government's job, in many instances,
and now, you are telling me the bureaucracy can't move fast
enough to get these bills paid, and it is just a very
uncomfortable position to be in. I am criticized for funding
the money, and then, I am criticized because the money can't be
spent. And I don't like that position, and I want that fixed. I
don't know, Mr. Chairman, if there is anything that we can do
at this committee level, but I will just tell you, it is making
me crazy at home.
The other thing that just bothers us, and I don't know if
anyone has already brought it up, but there was another story
in the newspaper about a big lobbyist meeting over on the
Senate side earlier this week, where they were promised $200
billion, and people were lining up. Does this fall in line with
what you call the proactive procedures in your testimony?
Mr. Skinner. No, Congressman. This is the first I have
heard about a lobbyist meeting on the Senate side, or at the
Senate, with regards to any activities associated with Katrina.
With regards to the policy on housing, however, there is, in
fact, a housing policy, but that policy, I think, was more
directed to providing support for anywhere from 2,000, 5,000,
to 10,000 people. This went way beyond the capability of FEMA,
we are dealing with well over 150,000 people, if not more,
scattered over 44 different States.
And I sympathize with you and your community on the
reimbursement issues, and it is something that FEMA has to take
a very, very close look at, and do a better job of reimbursing
these cities, states, nonprofits, and others for costs that
they have incurred.
Mr. Burgess. What about the--now, you talk about a hotline
that you have set up, the FEMA Hotline, during the height of
the crisis, no one could get an answer. Are we going to do a
better job on your hotline for reporting waste, fraud, and
abuse?
Mr. Skinner. Absolutely. I recognize those problems, and--
--
Mr. Burgess. If I called that number right now, would I get
a busy signal?
Mr. Skinner. Probably not. I hope not. We have partnered
with the DoD, and we are going to have that thing manned with
live voices, at least 8 hours a day. If volume increases, we
may increase that to 16 hours a day, and we will evaluate that
on a weekly basis. But we have, in fact, partnered with DoD to
ensure that----
Mr. Burgess. Right.
Mr. Skinner. [continuing] we have adequate coverage.
Mr. Burgess. On the biweekly reports, are those going to
come to the committee? Will those come to us as individual
members? How are we going to receive those?
Mr. Skinner. Those would come to the committee----
Mr. Burgess. Okay. And would the committee----
Mr. Skinner. [continuing] for distribution.
Mr. Burgess. [continuing] then disburse that to us as
individual members? Because I would like to be kept----
Mr. Skinner. Yes.
Mr. Burgess. [continuing] up to date on those biweekly
reports.
Mr. Skinner. You will.
Mr. Burgess. Just one other point, and it came up this
morning in the conference meeting. What about the issue of
illegal dumping in the State of Louisiana? Are we watching
that, both from DHS' standpoint, from EPA's standpoint? We
don't want to create problems that we then have to come back
and clean up at great expense in months and years to come.
Mr. Skinner. May I comment on that as well? We are
providing very, very close oversight of all debris removal
operations, and if there is illegal dumping, that is something
that we will address immediately. But debris removal operations
has historically, after each disaster, has always presented a
problem for FEMA and it has also been a concern of ours. As to
the oversight that is provided to those operators out there,
that is something that we most certainly would be looking at.
Mr. Burgess. All right. In the few seconds I have left, let
me go to HHS, and just very briefly, you must have already
disbursed a ton of money in this effort. Is that a fair
statement?
Mr. Vengrin. Not quite yet, Congressman. Money is still
rolling in, and much of the expedited waivers under Medicaid
and TANF are just beginning. In terms of inflow of transfer
moneys, in the mission from the homeland, HHS has just outlaid,
I think, approximately $119 million. A lot of that was for the
replenishment of the stockpile. That typically goes under the
VA contract, and also CDC contract. But the big game yet to be
played is the Medicaid program, TANF, and programs of that
sort.
Mr. Burgess. Well, again, same deal. A lot of providers out
there have really extended themselves. It has been 4 weeks.
Many of them have worked without a day off, doctors and nurses
without a day off, without a break. They need to be reimbursed.
At the same time, I would like assurances that you have got
someone onsite in those areas to make certain that those
dollars are not disbursed inappropriately, because I can think
of no greater tragedy for the people who have been displaced by
the hurricane, the providers who stepped up and done the job
that we have asked them to do, and then to have those funds
stolen from them here at the last would be something I don't
want to see.
Mr. Vengrin. We absolutely will be looking at that.
Mr. Burgess. Yes, sir. Thank you, Mr. Chairman. I will
yield back.
Mr. Whitfield. Dr. Burgess, thank you. We need to run
downstairs. They are having a vote in committee, and we are
going to recess for about 5 minutes, while we vote downstairs,
and we will be right back. So thank you for your patience. We
will be right back.
[Brief recess.]
Mr. Whitfield. And I would recognize the gentleman from
Michigan, who is the ranking member on this subcommittee, Mr.
Stupak, for his 10 minutes of questions.
Mr. Stupak. Thank you, Mr. Chairman, and I apologize again
for not being able to be here. I have been downstairs at the
hearing on subsidies and price gouging on gas prices, and we
will be bouncing back and forth all day. We have a great,
distinguished panel, and I wish I had been able to spend some
more time with them before we're sent down for the next vote.
It would have been great to do this hearing uninterrupted.
Let me ask a couple questions, and Mr. Skinner, you have
been sort of answering a lot of questions, so how about if I
start with you. The way I take it, each department, their
Office of Inspector General is in charge of these contracts,
and things like that. Right?
Mr. Skinner. Correct.
Mr. Stupak. But it is always after the fact. You release a
contract, then you get a chance to see it? There is no pre-
approval process?
Mr. Skinner. No. In this case, here, we are trying to be as
proactive as we can.
Mr. Stupak. But still, a contract is let, then you have the
right look at it, right?
Mr. Skinner. No. We have the right to look at that contract
before it is awarded, as well.
Mr. Stupak. So you have a right to----
Mr. Skinner. Oftentimes, we are asked to look at contracts
before they are awarded, to ensure the integrity of the
contractor or----
Mr. Stupak. So the only way you can look at it before it is
awarded is if you are asked?
Mr. Skinner. No, Not always.
Mr. Stupak. Well, I am trying to figure out who pre-
approves this stuff? That is what I want to know.
Mr. Skinner. Pre-approves?
Mr. Stupak. Who pre-approves contracts? Who approves the
contracts?
Mr. Skinner. The contracting officer ----
Mr. Stupak. In each department.
Mr. Skinner. [continuing] is the only one authorized to
approve or----
Mr. Stupak. Okay.
Mr. Skinner. [continuing] enter into a contract for the
government.
Mr. Stupak. So in this whole scheme of things, every
department, and probably sub-department within the department,
have contracting officers who must approve things. And they may
or may not come to you to ask for your advice.
Mr. Skinner. That is correct.
Mr. Stupak. Okay. So like the cruise ship one, we don't
know who did it, a contracting officer, right?
Mr. Skinner. That is correct. Early on, and----
Mr. Stupak. Would this be a contracting officer----
Mr. Skinner. [continuing] in the disaster response----
Mr. Stupak. [continuing] in the Department of Homeland
Security?
Mr. Skinner. I beg your pardon?
Mr. Stupak. Would that be a contracting officer in the
Department of Homeland Security?
Mr. Skinner. Probably not. GSA is serving as our
contracting officer----
Mr. Stupak. GSA.
Mr. Skinner. [continuing] for the disaster activities, or
it could also have been, and I think in this case, it was
actually the Corps of Engineers.
Mr. Stupak. Well, see, the problem I am having is who is in
charge here? You got eight different departments here
represented, or seven different departments, and everybody has
contracting officers underneath them, and people are approving
these contracts. You don't know what contracts were approved in
EPA, nor would I expect you to. Nor would EPA know for cleanup,
for environmental cleanup, any contract you may approve or Army
Corps may approve. So shouldn't there be someone who is in
charge of this effort? Chief Financial Officer, Chief
Contracting Officer, Chief of Police, anybody?
Mr. Skinner. Well, as far as the Katrina operations, the
primary contracting officials are either with DoD or with the
GSA, through the mission assignment operations.
Mr. Stupak. How many contracting officers are in DoD, then,
who would have right to have contracts?
Mr. Skinner. Tom, would you know the answer to that?
Mr. Gimble. I will have to get back with an answer on the
number.
[The following was received for the record:]
Estimates indicate that there are over 6,000 warranted
contracting officers currently within the Department of
Defense. This data is based on the latest information from the
Defense Manpower Data Center database and updated input from
the component/defense agency.
Mr. Stupak. More than one, right?
Mr. Gimble. Oh, there are several, yes.
Mr. Stupak. Okay. Several. Now, DSA, same thing, several?
Mr. Gimble. Correct. There are multiple contract officers
throughout the government. But let me just say this.
Mr. Stupak. Sure.
Mr. Gimble. The basic rules of the game governing contracts
are the Federal Acquisition Regulations, so there is a
framework that all contracting officers should be adhering to,
so it is not like there is no policy or procedures out there,
but each individual contracting officer is warranted up to a
certain amount of what they are authorized to contract to.
Mr. Stupak. Sure.
Mr. Gimble. And then, they are personally liable and
responsible for that. No one else is----
Mr. Stupak. They are personally liable?
Mr. Gimble. I believe so.
[The following was received for the record:]
Contracting officers can be held personally and financially
liable for their actions. Criminal, civil penalties and
administrative remedies apply to conduct that violates such
requirements as those identified in the standards of Conduct
(FAR 3.101), the Procurement Act (FAR 3.104 and 41 U.S.C. 423)
and the Antideficiency Act (Title 31, U.S Code).
Mr. Stupak. Well, then answer me this question, because I
have been on this committee for 10 years, and we have gone
through this a million times. It seems like credit cards,
everyone likes to abuse the heck out of their government credit
cards. Who approved to increase the limits for purchase on
government credit cards from $2,500 to $250,000?
Mr. Gimble. I am not exactly sure who did that.
Mr. Skinner. That was done through the supplemental
appropriation process, with stipulations that----
Mr. Stupak. So it was in----
Mr. Skinner. [continuing] it was--GSA----
Mr. Stupak. [continuing] the bill that Congress voted on,
that----
Mr. Skinner. Yes.
Mr. Stupak. [continuing] we would increase it?
Mr. Skinner. That is correct. And it is my understanding,
and I believe that there are also stipulations on how that
authority could be used. GSA was required to issue guidelines
to ensure that----
Mr. Stupak. Okay. So----
Mr. Skinner. [continuing] there were controls. Those
guidelines have never been issued, so no one is actually, in
fact, using that authority at this point in time. Under
emergency----
Mr. Stupak. Well, then, will your department put some
controls on this credit card?
Mr. Skinner. Absolutely. At GSA, we are prepared, I know,
we have met with the procurement officials within DHS, and----
Mr. Stupak. And if they----
Mr. Skinner. [continuing] our counterparts----
Mr. Stupak. [continuing] go over, they will be----
Mr. Skinner. [continuing] as well.
Mr. Stupak. And if the holder of that credit card goes
over, that person will be personally responsible?
Mr. Skinner. That is correct. And there are controls on how
they can use those cards. Right now, those limits are set at
$15,000, not $250,000, and there----
Mr. Stupak. Sir, with all due respect----
Mr. Skinner. [continuing] are multiple approvals----
Mr. Stupak. With all due respect, I have sat here for 10
years and listened to how these controls we have on credit
cards, and all the time, if there was a place they abused the
hell out of things, it is the credit cards, and I was just
shocked to read that, that it was from $2,500 to $250,000. And
so that is what I am concerned about. And do you feel we need
someone in charge, like a czar, or a Chief Operating Officer,
or do you like the process we have got now?
Mr. Skinner. Right now, I would like to focus on the OIGs'
oversight role.
Mr. Stupak. Sure.
Mr. Skinner. And I most certainly believe that we are now
well equipped, well positioned, to provide that oversight, not
only----
Mr. Stupak. But only within your department. Only within
your department.
Mr. Skinner. We can coordinate----
Mr. Stupak. How?
Mr. Skinner. [continuing] through the PCIE, the President's
Council on Integrity and Efficiency, and through the Homeland
Security Roundtable.
Mr. Stupak. The President's Council on Integrity Fitness,
you said?
Mr. Skinner. Efficiency.
Mr. Stupak. Efficiency, I am sorry.
Mr. Skinner. The President's Council on Integrity and
Efficiency.
Mr. Stupak. Is that appointed? Is that an appointed
position?
Mr. Skinner. That is established by Executive Order, and it
is co-chaired by the IG from the Department of Energy----
Mr. Stupak. Will they be held accountable, personally
liable, if things go awry on these contracts?
Mr. Skinner. No, not personally liable. The contract----
Mr. Stupak. Well, what good is it to have a council, if no
one is going to be held accountable?
Mr. Skinner. The contracting officers will be held
accountable.
Mr. Stupak. Contracting officers, okay.
Mr. Skinner. Yes.
Mr. Stupak. What would happen to the contracting officers,
then? Lose their job, or something like that?
Mr. Skinner. If there is abuse, yes. Well, there could be
criminal penalties, civil penalties, or----
Mr. Stupak. Will this Council----
Mr. Skinner. [continuing] administrative penalties.
Mr. Stupak. Will this Council review contracts before they
are let?
Mr. Skinner. To the extent we can, our approach right now
is we are reviewing the internal control processes over
procurement to ensure that those processes are compliant with
the FAR, and they have the appropriate internal controls,
checks and balances, so that abuses cannot happen. If we find
gaps, we are going to recommend immediately----
Mr. Stupak. These controls----
Mr. Skinner. [continuing] they be closed.
Mr. Stupak. Do you have any kind of data base that will
have all the purchases listed, or each contract let, so all
your AGs can have access to it? Do you have----
Mr. Skinner. Yes.
Mr. Stupak. [continuing] a central data base?
Mr. Skinner. Yes. That is the first thing we do, is----
Mr. Stupak. Is that up and running now?
Mr. Skinner. [continuing] develop an--we are in the process
of developing an inventory of all contracts let, for example,
under DHS, and each----
Mr. Stupak. And this is across----
Mr. Skinner. [continuing] department----
Mr. Stupak. [continuing] all the agencies, then?
Mr. Skinner. Yes, each of those that have received----
Mr. Stupak. And these contracting officers will punch into
it, so we all know what is going on?
Mr. Skinner. Well, these contracting officers do--already
punch into this system. I mean that is how they track their----
Mr. Stupak. It is all going to be completely accessible.
Mr. Skinner. I beg your----
Mr. Stupak. It will be accessible to everybody? They can
key in all these contracting officers for----
Mr. Skinner. I can't say they are going to be accessible to
everybody.
Mr. Stupak. Yes.
Mr. Skinner. But they will be----
Mr. Stupak. Wouldn't that be helpful if everybody was
accessible to this data base, so we know what is being awarded,
so we don't have duplication and waste?
Mr. Skinner. [continuing] accessible when? You have to
define for everybody, Mr. Congressman.
Mr. Stupak. Well, so your contracting officers, all your
OIGs.
Mr. Skinner. Yes, that will be----
Mr. Stupak. And the contracting officers.
Mr. Skinner. [continuing] made accessible to us, yes.
Mr. Stupak. To us? OIGs?
Mr. Skinner. The OIGs, yes.
Mr. Stupak. Okay. But not the contracting officers.
Mr. Skinner. Yes, of course, they are accessible to them.
And----
Mr. Stupak. Okay.
Mr. Skinner. As well as the officials responsible for
managing those contracting officers.
Mr. Stupak. Do you think we should slow down some this--
letting these contracts, until you have this central data base
established, until there is plan for recovery? I have a little
bit of a problem putting all this money in the Army Corps to
rebuild some levees that breached, so why are we rebuilding the
things that breached? Shouldn't we have people look at it, and
get a strategic plan on how we should redo the levee system in
New Orleans, so we don't have this problem again, or are we
just going to put money at it, and let them build on a system
that didn't hold up.
Mr. Skinner. Well, I don't think we should be slowing down
as far as providing support in stopping the canal breaches at
this point in time.
Mr. Stupak. I agree.
Mr. Skinner. But as far as----
Mr. Stupak. Stop the flow of the water.
Mr. Skinner. [continuing] long term, as far as----
Mr. Stupak. [continuing] the water----
Mr. Skinner. [continuing] long term planning, yes, I----
Mr. Stupak. Recovery. But all----
Mr. Skinner. [continuing] agree, and----
Mr. Stupak. [continuing] these other contracts----
Mr. Skinner. [continuing] the Department and the government
needs to assess how we want to provide our long--or
reconstruction effort--and how we want to provide----
Mr. Stupak. Well, don't you think----
Mr. Skinner. [continuing] recovery.
Mr. Stupak. Things that are nonessential, they are not life
threatening, don't you think we should slow down and get a
plan, and say here is what we are going to do, because there is
no strategic plan, right?
Mr. Skinner. To our knowledge, there is no overall
strategic plan. That is being developed right now. We are still
in a response mode.
Mr. Stupak. Right. Yeah, we are just feeling our way
through this thing.
Mr. Skinner. And we are going to be going into phase 2 of
our operations, and that would be individual assistance,
temporary housing----
Mr. Stupak. Sure.
Mr. Skinner. [continuing] and then phase 3 is the
reconstruction and I believe, in fact----
Mr. Stupak. See, we are reading----
Mr. Skinner. [continuing] being those----
Mr. Stupak. We are reading articles that people who blow
the whistle, especially the 3 or 4 with the Army Corps, have
been fired or let go, or have been given very difficult job,
demoted, because they said things weren't going right. They
shouldn't have done. And we are still trying to--don't have any
plan, people are trying to watch the buck. Those who are
watching the buck are being demoted, and things like that, so
shouldn't we really slow things down a little bit, and make
sure we know what we are doing, before we throw billions of
more dollars out there?
Mr. Skinner. As far as long-term reconstruction, there is
no doubt we need to take a very close look at how do we want to
approach these types of issues.
Mr. Stupak. Let me ask you this, you know, and based on
responses and again, I noticed a lot of questioning was focused
to you earlier, Mr. Skinner, it sounds like, or let me put it
like this, would DHS be willing to become the CFO or the head
agency to coordinate all this relief effort, which may go up to
$200 billion?
Mr. Skinner. You would have to ask DHS officials, but I
would say, right now, I believe they do view themselves as the
coordinator for all of this activity.
Mr. Stupak. Well, then would you view yourself, then, as
the lead coordinator of the IGs, then?
Mr. Skinner. That is correct.
Mr. Stupak. Okay. I say this respectfully, but the GAO
report I read here about a week ago indicated that DHS, in its
current status, or I should say, is at a high risk for
effectiveness because its procurement activities have not
achieved the level of sophistication and control that we
expect. So my concern is if DHS is going to be the lead agency,
DHS Office of Inspector General is going to be sort of like the
CFO of $200 billion----
Mr. Skinner. No, we would not be the CFO. We are----
Mr. Stupak. Well, I thought you----
Mr. Skinner. [continuing] not accountants.
Mr. Stupak. [continuing] said earlier, you----
Mr. Skinner. We are not the accountants. No, we provide the
oversight to ensure that----
Mr. Stupak. Okay. The oversight, but your procurement has
not reached the level of sophistication and control that it
should, according to GAO. So should we hand this off to some
other agency?
Mr. Skinner. DHS has come a long way since that report was
issued. They have increased their resources considerably. Yes,
they still have a long way to go to be referred to as a model
procurement operation. But with the resources, I am confident
that it is something they can do. It is also something that
they would probably do in partnership with other Federal
agencies, such as GSA----
Mr. Stupak. Sure.
Mr. Skinner. [continuing] for example.
Mr. Stupak. Sure. And I heard Mr. Feaster say in the little
bit of testimony I came in, he was--needed more funds to do
some of this stuff, and it sounds like funds are lacking within
the Department of OIGs to help us out here. I guess my concern
is this: I think we need a plan, No. 1, which we don't have.
No. 2, we need someone in charge, who is going to be
accountable. And No. 3, if you don't have the authority to do
that, should Congress then do that, and designate a czar or
somebody who would be held responsible. Because I just really
think that we are throwing a lot of money out there, you know,
visions of this $2,000-debit card that turned out to be a
little bit of a disaster when everybody was getting it. There
was no accountability there. We want to react, and we want to
help people, but at the same time, we just got to have some
accountability and someone in charge.
Thank you. Sure. Go ahead.
Mr. Skinner. Go ahead.
Ms. Tinsley. I am afraid we are confusing managing this
overall recovery and oversight, and those are by design
different responsibilities.
Mr. Stupak. I don't disagree with you, but all I want to
know is, is there is a plan, who is in charge, who is
accountable? I don't want a quagmire like we----
Ms. Tinsley. Right.
Mr. Stupak. [continuing] got going right now. And it is a
mess out there. And I don't mean that disrespectful to anybody.
But----
Ms. Tinsley. And you have mentioned a couple times about a
CFO to do this----
Mr. Stupak. Sure.
Ms. Tinsley. [continuing] and just like there is the
President's Council on Integrity and Efficiency, that is
coordinating on oversight, there is a CFO Council that is
headed by OMB, and that might be the group that you would want
to think about----
Mr. Stupak. Maybe, but most of the thing----
Ms. Tinsley. [continuing] as far as----
Mr. Stupak. [continuing] I am hearing, it is DHS,
Department of Homeland Security, and GSA, those are the two I
am hearing right now. Maybe this Council should step forward
and say we will be accountable, but I hope before they do any
of this, they at least have a plan before we get going.
And excuse me a minute, I have got a vote downstairs----
Mr. Whitfield. Mr. Rabkin, Mr. Stupak had mentioned this
GAO report, and would you like to make any comments about some
of the issues that he raised?
Mr. Rabkin. Mr. Chairman, the GAO has been looking at the
transformation of the Department of Homeland Security, as it
was formed, and the movement of different component agencies
into the Department, looking at the overall management issues,
as well as the performance, and we put it on our high risk
list, even before the Department was created, concerned about
that transformation, and how coming together as a department
might affect the ability of the individual components to carry
out their missions.
Two-and-a-half years later, we are still concerned about
that, and I agree with Mr. Skinner that the--in this case, we
are talking about procurement and acquisition activities, that
they have made progress, but they are still not at the level
where we would consider them to be out of the woods, let us
say.
Mr. Whitfield. Okay.
Mr. Rabkin. And we continue to monitor that, and we will do
so as they carry out their functions with Hurricane Katrina.
Mr. Whitfield. Okay. Well, thank you. At this time, I will
recognize Mr. Walden for his 10 minutes.
Mr. Walden. Thank you very much, Mr. Chairman.
Mr. Skinner, I have a question for you. Do you think
Members of Congress should be held personally liable when these
funds aren't right? We vote for this stuff, and give you this
authority. I sort of wonder.
Mr. Skinner. No comment.
Mr. Walden. Thank you. And I think we all are, in effect,
liable, because we are responsible to our constituents, and I
appreciate the work that all of you do in your IG roles. It is
essential to our work here, to learn from you what works and
what doesn't, and how we can get it right. And so I appreciate
your testimony, your counsel, and the work you do with your
folks within these agencies.
I want to go to this issue of the credit card that Mr.
Stupak raised. Can you explain, based on what you have seen,
why we would extend the credit limit increase from, what was
it, $2,500 or $2,000, to a higher level, in an emergency?
Mr. Skinner. Generally, after a disaster, the credit card
levels are increased to, I believe, from $2,500 to $15,000.
Mr. Walden. Okay.
Mr. Skinner. To allow for quick buys of supplies, things of
that nature, to help us set up disaster service centers,
disaster field offices, things of that nature. This is my first
experience with having that level raised to $250,000. Although
it has been raised to $250,000, that authority has not yet been
exercised.
Mr. Walden. It has not, and that is because the guidelines
have not been written yet?
Mr. Skinner. Part of the stipulation was that GSA would
issue regulations on how those credit cards, or the holders of
those credit cards, would operate, and you are correct, those
regulations have yet to be published.
Mr. Walden. And do you anticipate, in those situations,
that such use at those levels would require more than one
person to authorize?
Mr. Skinner. No doubt. There is a whole series of internal
controls that have to be imposed over the users of those credit
cards. They are not going to go to everyone. They will simply
go to those, to a very select few. There is documentation
requirements to ensure that there is a demonstrated need. There
will be supervisory approval, and there will be checks and
balances. With regards to the OIG oversight of the use of those
credit cards, we do have data mining capabilities, where we
review the day to day use of those cards, and we intend to
employ that software, regardless of whether it stays at
$15,000, or goes to $250,000, so that we can monitor the use of
those credit cards on a daily basis.
Mr. Walden. Good, because I concur with my colleague from
Michigan, having been on this subcommittee for a couple of
years now. We have seen evidence elsewhere in the government
where credit card abuse has been a real problem, where things
have been purchased that never should have been, and
eventually, it seems like it gets uncovered, and people are
eventually held accountable. But wherever we can prevent that,
and certainly, various signoffs and chain of command, and
review is----
Mr. Skinner. Yes, and again, we are going to be providing
oversight on a day-to-day basis, and we are going to make that
known to all the users of those credit cards.
Mr. Walden. All right. Very good. And can you tell us, in
some of the examples we are reading about in the news media and
elsewhere, of potential contract abuses, what are the penalties
that exist today, if you have a contractor that engages in some
sort of fraudulent agreement, doesn't deliver the services,
goes way over----
Mr. Skinner. For false claims, yes, there are both criminal
and civil penalties. Criminally, I think they could be subject
to a $250,000 fine and 10 years imprisonment if convicted. If
we could take this through civil court, we could get get treble
damages for false claims, or if it doesn't rise to that level,
we could take administrative actions against the contractor.
That is, debar them----
Mr. Walden. From being able to contract in the future.
Mr. Skinner. Discontinue the contract, and fines, things of
that nature.
Mr. Walden. Do you need additional authority from the
Congress to deal with the situation, because it is so unique,
with Katrina and Rita? Are there any additional penalty needs
that you have, or do you think the law is sufficient for----
Mr. Skinner. No, I believe we cuttently have all the
authorities that we need to do our job. We just need to
implement these authorities.
Mr. Walden. Do you have adequate resources to provide the
oversight, and if not, what do you need?
Mr. Skinner. Currently, without tapping into the resources
we have--and I am speaking for the Department of Homeland
Security--without tapping into the resources that we have
dedicated to other activities----
Mr. Walden. Right.
Mr. Skinner. [continuing] providing oversight over the
other $40 billion that is appropriated to the Department of
Homeland Security on an annual basis. Yes, we will need
additional resources. Congress has given us an additional $15
million to get us started----
Mr. Walden. On Inspectors General, right?
Mr. Skinner. [continuing] for the Inspector General, so we,
over the next 3 months, can hire about 40 people. Based on the
size of this particular disaster, and the long-term recovery
that is going to ensue, I would anticipate that we would
probably need even additional funds and would need hire
additional staff, to provide the adequate oversight that is
going to be necessary.
Mr. Walden. And do you feel you have the ability, the
authority, to request fully what you think you will need?
Mr. Skinner. Yes.
Mr. Walden. Does anybody try and stop you from asking this?
Mr. Skinner. Absolutely not. I could say the Department,
from the top all the way down, has been very cooperative in
working with us, and supporting any requests that we have made.
Mr. Walden. All right.
Mr. Skinner. We have already made one request, and it came
to Congress, and it was approved. We are at a process of
working with the Department and OMB for additional funds, and
everyone has been very cooperative and understanding as to what
our requirements are.
Mr. Walden. So I am sure you can imagine the lights next
time could be even brighter than this time, with the passage of
time, in terms of us holding you all accountable, because we
get held accountable.
Mr. Skinner. Sure.
Mr. Walden. We get a lot of questions on this level of
money, and how it is being spent, and all of that.
Mr. Feaster, I want to go to some of the communications
issues, if I could, and I don't know to what level you have
been involved. In terms of what happened during the emergency,
what happens now, can you describe for me, in terms of the
FCC's response during the emergency, and what sort of equipment
needs may be necessary, how the systems work? Do you look at
all of that?
Mr. Feaster. We do, but we haven't done that yet. But
basically, the regulatory flexibility offered to the TV and
radio stations was very flexible, and I haven't seen or heard
any negative comments on what happened. I think the FCC reacted
in a very positive manner, establishing taskforces and making
people available on a 7-day, 24-hour basis.
Mr. Walden. Will you be evaluating how the Emergency Alert
System worked, both on broadcast and cable? Does your office do
that?
Mr. Feaster. Yes, we do that. As I said earlier, we have
very limited resources. Unlike my colleagues down there, my
staff is 10 people, and we are looking at many more people than
that----
Mr. Walden. We have Inspector jealousy here, is that--four
star, and you are the one star.
Mr. Feaster. A million dollars is big money to me.
Mr. Walden. Yes.
Mr. Feaster. But we will try to use contract funds to do
the necessary, appropriate audits, and we can certainly put
that on our list of things to do.
Mr. Walden. Because I know one of the issues was basically
a lot of the broadcast facilities went dark.
Mr. Feaster. Yes, sir.
Mr. Walden. Either their towers went down, or they ran out
of emergency fuel, or electricity, and there were a few
stations that were able to stay on the air, and continue to
communicate, but----
Mr. Feaster. And it had always been hoped, when I was
involved, before I was Inspector General, that backup power
would work, and keep them on the air, but it was just too much,
too long.
Mr. Walden. Yeah. Yeah. And can you describe the situation
today, in terms of the communications structure that is
operating, and the FCC's response? I know there is some
discussion I have heard about, and I think you reference in
your testimony, about perhaps dipping into the E-rate moneys to
do various things.
Mr. Feaster. Yes. That situation, they are basically
planning to spend about approximately $211 million out of E-
rate funds from the USF fund, for various programs, including
High Cost, Low Income, and the E-rate--E-rate, used to rebuild
the school's telecommunications infrastructure; the Rural
Health Care, making services available to the various clinics,
so that they can use telemedicine. The big one is from the High
Cost--not the High Cost, but from the--excuse me, it is High
Cost--cell phones, and 300 minutes of service that people have
been without phone service can get their lives back and start
moving ahead.
Mr. Walden. All right. Well, as you know, this subcommittee
has done a lot of work on the E-rate fund, and we----
Mr. Feaster. Yes, sir.
Mr. Walden. [continuing] found some abuses, in how all that
process work, so I assume you are going to be looking very
carefully at controls.
Mr. Feaster. We will continue our oversight of that----
Mr. Walden. So we are not building like TV studios and
things of that nature.
Mr. Feaster. We are very much aware of that, and we will
continue that.
Mr. Walden. And there may be some equipment still in a
warehouse somewhere.
Mr. Feaster. Out in Puerto Rico, I think.
Mr. Walden. Puerto Rico. You might be able to facilitate.
Thank you, Mr. Chairman. Thank you, ladies and gentlemen, for
your participation in this hearing.
Mr. Whitfield. Thank you, Mr. Walden. At this time, we will
recognize Ms. Schakowsky for 10 minutes.
Ms. Schakowsky. Mr. Chairman, if I could, I would like to
defer to Mr. Waxman, who just came in.
Mr. Whitfield. Okay. Go ahead, Mr. Waxman.
Mr. Waxman. Thank you, Ms. Schakowsky and Mr. Chairman.
Gentleman, and all of you, ladies. Looking to see what your
name is. All of you Inspectors General, we are very pleased to
have you here, and I want to tell you all I appreciate the goal
that you have set out, providing oversight for the Gulf Coast
recovery and reconstruction efforts. But unfortunately, we have
been down this road before, and the record is not a good one.
Twice in the last 5 years, the Bush Administration embarked on
mammoth spending binges. The first was the frenzied and poorly
planned award of huge homeland security contracts, after the
September 11 attacks, and the second was the massive
reconstruction effort in Iraq. We were assured in both cases
that the Administration Inspectors General and other government
auditors would protect the interests of the taxpayers, yet both
cases resulted in unmitigated disasters, with the
administration squandering literally hundreds of millions of
dollars.
But today, most of that money has been spent, and oil and
electricity production remain below pre-war levels. I am
talking, of course, about the reconstruction in Iraq. So we
have virtually nothing to show for our investment for
reconstruction in Iraq, for the oil and electricity production.
The domestic record is no better. Contract after contract
issued by the Department of Homeland Security has been plagued
by poor management and huge cost overruns. In some instances,
the problem was that the Inspector General pulled a punch. In
other instances, the Inspectors General did their job, but
their findings were ignored by the administration.
The truth is that this administration simply cannot be
trusted to oversee itself. Mr. Rabkin, GAO warned that both
Iraq reconstruction and the reorganization at the Department of
Homeland Security were ``high risk endeavors that needed
diligent and robust oversight.'' Are you satisfied that the
administration provided adequate oversight in these two areas?
Mr. Rabkin. I don't think I am in a position to comment on
the oversight in Iraq. For the Department of Homeland Security,
the oversight that the IG is providing has been growing with
the Department. The IG started slowly, with a small contingent,
and it has grown, and it is much more robust than it was. And I
think also, that the Congress' oversight has grown, likewise,
as the Department has taken on additional responsibilities.
Mr. Waxman. Well, I am sorry you can't comment on Iraq, but
the Government Accountability agency has commented on Iraq, and
it has been a very negative one. It was indicated as a high-
risk endeavor, and then, they have come up with subsequent
reports that have raised serious questions about the hundreds
of millions of dollars that don't seem to justified.
Mr. Rabkin. Yeah, I am just personally not----
Mr. Waxman. Okay.
Mr. Rabkin. [continuing] prepared to talk about that.
Mr. Waxman. But let me go down the line, and maybe not
everyone on the panel is able to answer the question, but I
would like to know whether any of you believe the procurement
approach in Iraq was in the best interests of the U.S.
taxpayers, and whether it could have been done better? Mr.
Friedman?
Mr. Friedman. To be honest with you, Mr. Waxman, the only
thing I know, frankly, is what I read in the newspaper, and
what I have learned through other media, so I really am not in
a position to comment.
Mr. Waxman. Okay. If you have a comment, Mr. Skinner.
Mr. Skinner. I am sorry, Congressman. Likewise, I am not in
a position to comment.
Mr. Waxman. Okay. And Mr. Gimble.
Mr. Gimble. Congressman, I think the answer to the one
question, could the procurement have been done better? I think
the answer to that is yes. I think the oversight community has
stepped up and identified some significant problems, of which
some are still under active criminal investigation. So I think
the answer is yes, absolutely, it could have been better. But
it was under hard circumstances that those folks had to
operate.
Mr. Waxman. And there is criminal investigation as to
unsubstantiated charges, is that correct?
Mr. Gimble. There are some active criminal investigations
ongoing still, and normally, we don't----
Mr. Waxman. Relating to private contracting in Iraq.
Mr. Gimble. Correct.
Mr. Waxman. Okay. Well, do you feel that you could say that
the procurement approach in Iraq was in the best interest of
the taxpayers of the country?
Mr. Gimble. If you are asking me for the national strategy
on whether we should have rebuilt Iraq, or committed those
funds, I am not in a position to----
Mr. Waxman. No, not whether we have done it, whether we did
it, once we committed those funds, whether we spent those funds
appropriately and wisely, in the best interests of the
taxpayers.
Mr. Gimble. I don't think I am in a position to comment on
that.
Mr. Waxman. Okay. Anyone else?
Mr. Vengrin. No comment, Congressman.
Mr. Waxman. Yeah.
Mr. Little. Not in a position to comment.
Mr. Waxman. Okay.
Ms. Tinsley. Nor am I.
Mr. Frazier. Nor am I.
Mr. Waxman. Okay. Now, well, I want to tell you what I
think, because I have been looking at this matter for some
time, trying to exercise oversight, even though there has been
resistance in the Congress to do that. I think unless
fundamental reforms are put in place, and we create a truly
independent oversight body, the taxpayers are going to get
ripped off again.
That is why I joined in legislation a couple days ago
called the Hurricane Katrina Accountability and Clean
Contracting Act. This legislation would create a panel of
independent experts to guard against waste, fraud, and abuse,
and it would require transparency in contracting, something
that I think has been sorely missing.
Americans want their government to act quickly and
generously to meet the needs of the hurricane victims and their
communities, even if the ultimate price tag is measured in
hundreds of billions of dollars, but if we don't radically
change course, what we are likely to get is another round of
boondoggle contracts that enrich private contractors while
squandering vast sums and driving the Nation deeper into debt.
Mr. Chairman, I have some other questions, but I am trying
to inquire about the time. I notice that there have been bells
ringing.
Mr. Whitfield. Yes, Mr. Waxman, you have about 3 minutes
left.
Mr. Waxman. Okay. Well, let me----
Mr. Whitfield. But we have two votes on the House floor,
and then, we will adjourn for about 25 minutes and come back.
Mr. Waxman. Okay. Well, let me see if I can get into some
of these other questions in the few minutes I have left. Mr.
Skinner, I want to ask you whether you plan to investigate
FEMA's failure to set up appropriate contingency contracts
before Hurricane Katrina struck. Greg Rothwell, the Chief
Procurement Officer at the Department of Homeland Security, has
already expressed concern about this, and yesterday, Michael
Brown was asked about it. Specifically, he was asked why FEMA
did not have in place a contingency contract to recover dead
bodies after the hurricane struck. This is a very unpleasant
subject, but I am sure you recall the scores of bodies remain
on the streets of New Orleans in plain view, decomposing for 2
to 3 weeks after the hurricane. Now, this was a travesty, these
corpses lay there after news stories reported their exact
positions, the specific street corners.
When asked about this yesterday, Mr. Brown answered, and I
will quote him for you: ``That was a mistake, one that we
should look at, and make sure we don't do in the future.'' Are
you looking into this?
Mr. Skinner. Yes, we are, sir. Two weeks ago, we initiated
an inspection just to address those types of issues. We are
going to be focusing on how well FEMA was, in fact, prepared
for this particular disaster, and not only that, how prepared
should they have been for this particular type of disaster. We
anticipate having our review complete in early 2006, with a
report to Congress no later than the end of March.
Mr. Waxman. What is so tragic about this is that Mr. Brown
was warned, even a year earlier, that such a storm could have
come about, and FEMA had noticed that it could have been just
like it was, yet he did nothing to prepare for it. Are you
looking at the larger question of what contingency contract
FEMA should have put in place, given the specific warnings of
the Hurricane Pam exercise?
Mr. Skinner. Yes, we will be. We will be using that as our
baseline, the exercise held last year in New Orleans.
Mr. Waxman. And the very sad thing here, as we have seen,
and which hopefully we will learn from, is that FEMA brought on
a company called Kenyon Worldwide Disaster Management to
recover dead bodies, of course, after the hurricane hit, but
after a week of dealing with FEMA's bungling, the company quit
and started working directly for Governor Blanco of Louisiana.
The company even wrote to Congress, and this is what they said
about FEMA: ``In spite of our best efforts and honorable
intentions, numerous roadblocks, hindrances, and interferences
have resulted.'' They told FEMA the present situation is
unacceptable, and the company had no choice but to transfer its
participation to Governor Blanco. Are you examining this
contract, Mr. Skinner?
Mr. Skinner. Yes, we are. As part of our inspection of our
preparedness, how prepared were we, and how prepared should we
be, we are also going to be putting the response activities
under very close scrutiny from the end of August all the way
through September 30.
Mr. Waxman. Well, we look forward to your report. We have
got to, I think, ask for accountability for what has happened
and then be sure this sort of thing never happens again.
Thank you, Mr. Chairman.
Mr. Whitfield. Thank you, Mr. Waxman. We are going to take
a break. We are going to let Ms. Blackburn ask her questions,
and I am going to ask her to come and chair the meeting, and
then after that, we are going to have a recess for about 30
minutes, because we want to come back after these votes, and we
want to address some of these issues that we have outstanding.
So Ms. Blackburn, if you will come up and take over the
chair, we have about 5 minutes left in this vote, and I can't
miss any more votes this year myself, so I am going to go vote.
I am going to let Ms. Blackburn chair the meeting and ask her
questions for the allowable time, and go from there.
Ms. Blackburn. [continuing] we come back----
Mr. Whitfield. Yeah. And we will come back, and we will be
back here at 1.
Ms. Blackburn [presiding]. Thank you all for your patience.
I know we are running back and forth, and several of us do have
questions, and want to ask them. And I appreciate that you are
hanging with us and we are back and forth from the floor, and
from downstairs.
One thing I want to address before I get into my questions,
my colleague had just mentioned that they are, you know,
favoring an independent panel to review what happened with
Katrina, and I will tell you, quite honestly, listening to my
constituents in Tennessee, they expect us, as Members of
Congress, and as those who take the responsibility for
appropriating, to work with you all to find out exactly what
happened, and then, to take the responsibility and the
appropriate legislative action.
And I think most of us welcome that responsibility, and we
appreciate that you are willing to come before us. Mr. Rabkin,
I want to go to you first. Somebody had mentioned a lack of
transparency with the financial transactions. I want to go back
to something that came up last year, as we worked with GAO
through the Government Reform Committee, on the financial
structure, the enterprise architecture, that exists for most
departments, as they keep their financial records.
Have we made any greater movement to having all of our
departments through their CFO act, have a financial enterprise
architecture, department-wide, system-wide, where there is
transparency, where you can follow financial transactions on a
more timely manner, or are we still in the process of trying to
go in-house and build these, and have that transparency at some
point in the future?
Mr. Rabkin. Ms. Blackburn, it is my understanding that the
government is moving in that direction. I don't have specific
information on how far the government has come, in DHS or the
other departments at this time.
Ms. Blackburn. Would you like to get back to us on where
they stand, how much they have spent, and how soon they think
they are going to be compliant with being able to have the
transparency that has been sought, that they have been tasked
to perform.
Mr. Rabkin. I would be glad to.
[The following was received for the record:]
A recently issued GAO report--Financial Management:
Achieving FFMIA Compliance Continues to Challenge Agencies
(GAO-05-881, Sept. 20, 2005)--deals with this issue (the report
is available at www.gao.gov). In summary, we found that in
spring 2004, OMB launched task forces to conduct a government
wide analysis of five lines of business supporting the
President's Management Agenda goal to expand electronic
government. OMB and the designated agency Line of Business Task
Forces plan to use enterprise architecture-based principles and
best practices to identify common solutions for business
process, technology-based shared services, or both to be made
available to government agencies. Officials at OMB stated that
the financial management line of business continues to evolve
with four agencies (GSA, the Department of Interior's National
Business Center, The Department of the Treasury's Bureau of the
Public Debt, and DOT) being selected to become Centers of
Excellence through the fiscal year 2006 budgetary process. We
have ongoing work to analyze the financial management line of
business.
Ms. Blackburn. Thank you. Mr. Feaster, talking a little bit
about communications, I had some questions that I wanted to
direct to you, pertaining to VoIP and VoIP technology. I was on
the ground on Mississippi, and nothing worked. And I think one
of the failings of this is that the cell towers all went down.
We had hardwired phones that didn't work. We had emergency
communicators that forgot to power, fill the generators, and to
have a backup supply, so that they could run the generators to
run the equipment that we had. And cable service, when you talk
about having cable TV down there, there are some areas I have
talked to where they are saying it will be a year before that
infrastructure is back in place. And I know you were saying
your staff is small, and that it is going to take you all
around--but talk, just for a moment, as you look at this in
hindsight, and looking at the fact that most of your
telecommunications failed, and if you had VoIP technology, if
you were more reliant on satellite for news and information,
what difference would it have made?
Mr. Feaster. I really am not qualified to answer that
question, ma'am.
Ms. Blackburn. Can you have someone get back to me----
Mr. Feaster. I will.
Ms. Blackburn. [continuing] and provide that. I think it is
an important part of our debate, as we move forward. A DHS
question that I have. Mr. Skinner, we are hearing a good bit
about illegal immigrants who are accessing benefits, and I want
to know if--and then, also, we are hearing about individuals
claiming to be residents of Louisiana, Mississippi, or Alabama,
and coming in to try to access benefits. We are seeing some of
this in Tennessee.
I would like to know what type of measures you all have put
in place to help with verification of individuals, to be
certain that we are not dealing with a lot of identity theft or
fraud, or individuals who are claiming to have been from
somewhere they are not.
Mr. Skinner. Yes. There are several initiatives ongoing
with regards to the individual assistance program. The
Department, for one thing, has developed software packages,
which is relatively new, and they haven't used in the past, to
match applicant's names, addresses, and other information
against ChoicePoint software to validate that these people, in
fact, live where they say they are going to live. At the same
time, we are embedding our own auditors and investigators with
the FEMA folks, so that we can be there on a real-time basis,
and review applications on a sample basis, or test basis, and
look at internal controls, to ensure that as applications are
processed through the processing center, that we have internal
controls and checks in place to ensure, that to the extent we
can,----
Ms. Blackburn. Okay. If I may interrupt you right there.
Mr. Skinner. Yeah.
Ms. Blackburn. So what I am hearing you say is that you
have people in the fields----
Mr. Skinner. Yes. Right.
Ms. Blackburn. [continuing] that are doing--and then, you
are doing a double check as the information comes in-house.
Mr. Skinner. That is correct.
Ms. Blackburn. Okay.
Mr. Skinner. And we are going to embed people in our
disaster finance center as well. So that will be a third check,
where we can look at the controls as the payments go out, to
ensure that certain checks have been made before these
individuals have, in fact, been determined to be eligible, and
a check is mailed. Once the check is mailed, we are inserting
in all envelopes a fraud warning, and the penalties associated
with submitting an application with false information to FEMA.
Also, we are working with the Attorney General's Fraud
Taskforce. Our emphasis is going to be on individual assistance
fraud. We are working with the Postal Service, the FBI, and
with the local U.S. Attorneys to prosecute individuals that may
make fraudulent application. As you know, many of these
individuals, the max you possibly could receive under any
particular grant would be about $26,000. This, of course,
doesn't rise to a threshold that most U.S. attorneys would
prosecute across the country, but nonetheless, under this
taskforce, they recognize this as a priority of the Attorney
General, and they have agreed to work with us, and prosecute as
many cases as possible. We have already prosecuted one case
just last week. We have dozens coming down the pike.
Ms. Blackburn. Well, sir, I can assure you, $26,000 is
something that excites my constituents, when they see the fraud
taking place.
Mr. Skinner. And it adds up. It certainly adds up.
Ms. Blackburn. Yes, sir. It does. And that is the thing.
You know, I had a constituent tell me mind your pennies, the
dollars will take care of themselves.
Mr. Rabkin, Section 428(a) on the supplemental, the Katrina
supplemental, allows the micro-purchases of $250,000, where you
don't have to have a bid. It is a no competition, single source
contracting, through that provision. Now, I want to know what
measures you all are taking, or have put in place on the front
end to be certain that that does not get abused.
Mr. Rabkin. I think that is more the responsibility of the
agencies that these people that have the credit cards and can
use them, what controls they have on----
Ms. Blackburn. Okay. Then, in the interests of time, if I
can just direct to each and every one of you. If you will
address that in writing, to let us know what you are going to
do to be certain that 428(a) does not just become an ongoing
account, and does not become something that is openly abused.
One other question I want to throw out to you all before I
go to cast my vote, and it has to do with minority contracting,
and Mr. Skinner, I guess this is going to come to you and Mr.
Frazier, primarily. In my district, I am having some complaints
from minority businesses who are trying to get inside these
contracts. We have contractors who have received prime
contracts, and then, the subcontractors are having a very
difficult time, and I would like to know specifically what are
the requirements that are being placed, so that our small
businesses and our minority businesses have the opportunity to
fairly compete in this process for the cleanup and the
reconstruction, and if you all will just submit that to me in
writing, I am going to go vote, and we will be in recess for 25
minutes, and then, the chairman will resume.
[Brief recess.]
Mr. Whitfield. There are a couple of additional questions
that I wanted to touch base on. I want to thank Ms. Tinsley for
pointing out the significant difference between managing for
this recovery and oversight of this recovery, and that is
something that a lot of members, I think, through their
exuberance, enthusiasm, whatever, get into different areas,
without recognizing and thinking about the differences.
There has been a number of stories written recently, and
sometimes, we can believe what we read in the newspaper, and
sometimes, we cannot. But one of the things they pointed out
was that on the levee system in New Orleans, which was
breached, which was responsible for most of the flooding, that
there was a defective construction of the levee by one of the
contractors, subcontractors, whatever. Now, I am assuming that
as Inspectors General, one of you that has the responsibility
for that area, which maybe it would be Mr. Gimble, I am
assuming that is something that you will be looking into.
Mr. Gimble. Yes, sir.
Mr. Whitfield. Is that correct?
Mr. Gimble. Yes, sir.
Mr. Whitfield. And were you already looking into it prior
to these stories, or had you had any information prior to the
newspaper stories about it, or how did it come to your
attention?
Mr. Gimble. Well, I am not sure. First of all, either we
will look at it, or the Army Audit Agency will look at it, and
to my knowledge, no one was looking at it prior to yhr
newspaper stories. But I can't speak for the Army Audit Agency.
Mr. Whitfield. Okay. You can't speak for the Army Audit
Agency.
Mr. Gimble. Not on that issue. I just simply don't know.
I----
Mr. Whitfield. But would you have any responsibility in the
oversight of that issue?
Mr. Gimble. We have oversight responsibility over the Army
Audit Agency, as part of our role as the DoD IG, but we also
have the ability to go in, if we want to go in, and look at a
particular issue within the Corps of Engineers, we have that
authority also.
Mr. Whitfield. But if a contractor used defective methods,
or was negligent in some way, obviously, you all will make
every effort to get to the bottom of it, and would have the
authority to bring criminal penalties, civil penalties, or
whatever. Is that correct?
Mr. Gimble. Correct.
Mr. Whitfield. Okay. And you would be pursuing that.
Mr. Gimble. I take it that we will pursue.
[The following was received for the record:]
Currently the Department of Defense, Office of the
Inspector General (DoD OIG) is not performing work with regard
to allegations that the construction of the New Orleans levee
system was defective. The Army Audit Agency is conducting
audits of the U.S. Army Corps of Engineers contracts and
reconstruction efforts, their on-going and planned audits do
not address the allegations.
Three teams, the National Science Foundation, the American
Society of Civil Engineers and the State of Louisiana, are
currently conducting investigations of the floodwall breaches.
Further, Secretary Rumsfeld announced on October 19, 2005, that
the National Academies of Science will convene an independent
panel of national experts to evaluate the performance of the
hurricane protection system in New Orleans and the surrounding
areas. This panel will conduct a forensic study and expects to
issue a report by July 2006.
After the above investigations and studies are completed,
the DoD OIG will assess the results of these efforts and
determine if additional audit or investigative work is
appropriate. The DoD OIG will coordinate with other groups and
audit organizations, such as the Government Accountability
Office, in determining the extent of any future work.
Mr. Whitfield. Okay. Now, let me ask another question.
There has been a lot of discussion today. Some of the news
media here ask us questions about it outside, about the
necessity for some, for lack of a better term, special
Inspectors General to oversee all of this, and of course, we do
have a special Inspectors General in Iraq for reconstruction,
and there has been a lot of criticism of that situation. Is
there any one of you that would support, that believes that
Congress should act in some way, or the President should act in
some way, to set up a different structure for oversight in
dealing with an issue of the magnitude of Katrina, or do you
feel like the current system is adequate to deal with it? I
would just like to just go down the line.
Mr. Friedman. Mr. Chairman, in an event as complex and
convoluted, there will never be a perfect governing system, nor
will there ever be a perfect oversight system. But we have
looked at it--as the President's Council on Integrity and
Efficiency, and on the Executive Council on Integrity and
Efficiency, and we have taken a position on this issue. We have
a consensus position, and that is that the structure that we
have set in place is the most effective structure that we can
think of to address precisely the stewardship issues that you
are referring to.
Mr. Whitfield. Okay.
Mr. Friedman. Right now, as I think has been evidenced by
the testimony this morning, Mr. Skinner and his staff have a
very good sense of what is going on in DHS, Ms. Tinsley at EPA,
etc. We have created the working group, the Homeland Security
Working Group, and we are interacting effectively. We are going
to be reporting to one another, in essence. So, I think we have
the experience in our respective agencies. Setting up a new IG,
you essentially lose all of the learning curve that we have
built up over many years of experience. And Mr. Frazier, I
think, alluded earlier to the fact that as the sitting IGs, we
know both the strengths and weaknesses of our respective
agencies. We have identified the main management challenges,
and we honestly believe that while there may be arguments, I
mean there are at least 4 or 5 different proposals that I have
heard about on Capitol Hill currently, while there are lots of
alternatives and people can tweak the system, we think we have
got everybody working together to do the best possible job that
we can do in this oversight business.
So I think creating another entity, another layer that has
to start recreating what we have, already, like relationships
with the U.S. Attorneys around the country. We also have
relationships with the State and local auditors. These are
relationships that we have built up over many years. We are
experienced in the grants making process, and a lot of this
money will be spent, of course, by the states and local
governments. So we have a tremendous body of experience that we
think we bring to the task, and we think what we have created
here, with the Homeland Security Working Group, Mr. Skinner's
leadership, and the participation of all the IGs, that we have
the best formulation that we can think of.
Mr. Whitfield. Now, is there anyone on here that would
disagree with that.
Mr. Rabkin. Yes. I am not going to disagree, but I guess
you could say that GAO is probably the only organization here
without a dog in the fight, and I have talked to the
Comptroller General about this, and he is very confident in the
organizational structure that has been set up through the
existing IGs, as Mr. Friedman has described, and would support
the--you know, he is confident in their capabilities, their
expertise, their coordination activities, and doesn't see the
need for any special IG.
Mr. Whitfield. Okay. All right. Thank you. At this time, I
would recognize Ms. Schakowsky for her 10 minutes.
Ms. Schakowsky. Thank you, Mr. Chairman. I apologize for
getting here a bit late. Thank you for giving me the time to
address this really important issue. I wanted to first
associate myself with the questions that Mr. Stupak and others
raised about the purchase cards, about the credit cards. I
served as the ranking Democrat on the Government Efficiency
Subcommittee of the Government Reform Committee, at the time
that Steve Horn was here, and we requested a number of GAO
reports that revealed these blatant abuses, and the really
frustrating part was, and many people have expressed
frustration, we would come back, and focus on just another,
instead of over here, just over here a little while later, and
the same thing would be there, and you got the feeling that
wherever the light of day was focused, you would find, coming
out from under that rock, all of these problems, and so forgive
us if we have the certain skepticism about the kind of
oversight that is being done.
What I really wanted to focus on, in particular today, oh,
and Mr. Chairman, if I could have unanimous consent to put my
opening statement in the record, I would appreciate that.
[The prepared statement of Hon. Jan Schakowsky follows:]
Prepared Statement of Hon. Jan Schakowsky, a Representative in Congress
from the State of Illinois
Thank you Chairman Whitfield and Ranking Member Stupak. I am
pleased that this committee will have the opportunity today to address
what can be done to guard against waste, fraud, and abuse in the post-
Katrina recovery period. A thorough discussion on the policy of
employing contractors to perform inherently government work is long
overdue.
More than 80 percent of the $1.5 billion worth of contracts signed
by FEMA for work in the Gulf region were awarded without bidding or
with limited competition. As thousands of contractors head into the
Gulf region, President Bush jumped at the chance to suspend the Davis-
Bacon fair labor law, condemning reconstruction workers to an endless
cycle of poverty and lack of opportunity, while leaving profits of
contractors in the reconstruction effort unchecked. Clearly, disaster
victims should have the priority for Katrina recovery jobs and job
training. I am looking forward to hearing what plans FEMA, and other
agencies responsible for disaster relief, had in place before Katrina
and what plans are being developed now, to make sure every taxpayer
relief dollar is spent wisely, effectively, and fairly. The residents
of the Gulf Coast and the American taxpayers deserve to have this
information. And members on both sides of the aisle should demand
accountability.
I'm concerned about the Department of Homeland Security's hiring of
private security contractors to perform work such as ``securing
neighborhoods'' and ``confronting criminals'' in New Orleans. Time and
time again, from Columbia to Iraq, and now to New Orleans, we have seen
how the federal government has unwisely and irresponsibly utilized the
services of private military firms. Private military contractors should
not be tasked with security operations in the Gulf Coast because they
continue to fall outside the official command structure and operate
without clear protocols or responsibility. Ask any American if they
want thugs from a private, for-profit company with no official law
enforcement training, roaming the streets of their neighborhoods. The
answer will be a resounding NO.
I would like to submit for the record an article from The Nation
entitled ``Blackwater Down'', which depicts the author's firsthand
observations of military contractors in New Orleans. In one instance,
after a potentially deadly exchange of fire involving employees of the
security firm Bodyguard and Tactical Security, their security chief
reports: ``the Army showed up, yelling at us and thinking we are the
enemy. We explained to them that we were security. I told them what had
happened and they didn't even care. They just left.'' This was
reportedly after staff from the private firm opened fire with automatic
weapons in the middle of the streets of New Orleans.
Members of Congress and the public rightfully questioned the
President's suggestion that we may need to change the posse comitatus
law to make it easier for the military to enforce U.S. laws in times of
crisis. I doubt any of them would prefer to have for-profit companies
doing it instead. Do we want to be placing the same security
contractors on the ground in New Orleans who committed sadistic abuses
of Iraqi prisoners at Abu Ghraib? Do we want to have fully-armed
security contractors on the ground in the United States who have just
returned from Iraq, with a war-like mentality, and possible post-
traumatic stress disorder? Who is responsible when something bad
happens and who gives them their orders?
And what about the costs? Why should New Orleans fire and police
personnel and all the patriotic first responders on loan from other
states and localities continue to receive their regular salaries while
these contractors are making the equivalent of six figure salaries off
the taxpayers? It doesn't make sense.
This Committee must not allow the Bush Administration to re-import
the contracting practices linked to spending abuses in Iraq as it
begins the largest and costliest rebuilding effort in U.S. history.
Taking advantage of a national tragedy to line the pockets of federal
contractors and friends of the President should not be tolerated. I
look forward to hearing how the Inspectors General and GAO plan on
helping us to avoid fraud and abuse as we rebuild the Gulf Coast. I
want to thank the witnesses for being here today.
Ms. Schakowsky. I am very concerned about the Department of
Homeland Security hiring private security contractors to
perform law enforcement work, and I wanted to ask a bit about
that. There is an article called ``Blackwater Down'' in the
Nation, and I don't see a date here, 9/28, talking about a
company now that also has a contract for work in Iraq, a
company right now, by the way, whose Chief Operating Officer
and General Counsel is Joseph Schmitz, who just resigned as the
Pentagon's Inspector General, and now, he is head of Prince
Group, which is the parent company of Blackwater.
So here is what it says about what is going on, on the
ground, in New Orleans. ``Some patrolled the streets in SUVs
with tinted windows, and the Blackwater logo splashed on the
back. Others sped around the French Quarter in an unmarked car
with no license plates. They congregated on the corner of St.
James and Bourbon in front of a bar called 711, where
Blackwater was establishing a makeshift headquarters. From the
balcony above the bar, several Blackwater guys cleared out what
had apparently been someone's apartment. They threw mattresses,
clothes, shoes, and other household items from the balcony to
the street below. They draped an American flag from the
balcony's railing. More than a dozen troops from the 82nd
Airborne Division stood in formation on the street watching the
action.
``In an hour-long conversation, I''--the reporter--``had
with four Blackwater USA men, they characterized their work in
New Orleans as `securing neighborhoods' and `confronting
criminals.' They all carried automatic assault weapons, and had
guns strapped to their legs. Their flak jackets were covered
with pouches for extra ammunition.
``When asked what authority they were operating under, one
guy said, `We're on contract with the Department of Homeland
Security.' Then, pointing to one of his comrades, he said, `He
was even deputized by the Governor of the State of Louisiana.
We can make arrests and use lethal force if we deem it
necessary.' ''
So I wanted to ask you, Mr. Skinner, is this an unusual
scenario?
Mr. Skinner. It certainly is. This is the first I have
heard of that. I suspect, just based on the little information
you have just given me, that that contract is probably a
contract through the state or the city of New Orleans. However,
they are probably using FEMA or Department of Homeland Security
or Federal funds to support that activity, and it is something
we will look into.
Ms. Schakowsky. Okay. Would you let me know----
Mr. Skinner. Certainly.
Ms. Schakowsky. [continuing] and this committee know, as
soon as possible, if they are, in fact, under contract with the
Department of Homeland----
Mr. Skinner. Yes.
Ms. Schakowsky. [continuing] Security? I am concerned that,
you know, we are debating right now whether or not even men and
women in uniform, if the Federal Government, under Posse
Comitatus, can carry out law enforcement activities. I am just
wondering what both of you actually, Mr. Skinner and Mr.
Gimble, think about having these private contractors which, you
know, while it seems clearly unusual to me in New Orleans,
quite frankly, it seems in many ways as unusual to me in Iraq
as well. And we need a lot of oversight on what it is that
these private military contractors, questioning the chain of
command and the Military Code of Conduct and all those things.
But right here on our soil, I just wondered what you think,
both of you, on you know, comparing that to Posse Comitatus.
Mr. Skinner. I have serious concerns in using contractors
in this capacity, and the reason I have concerns with that is
because one, with the Department of Homeland Security, we have
well over 80,000 law enforcement officers that have authority,
preexisting authority, and in coordination with the state, we
could provide those services. I also know that the PCIE IG
community went out, and under Greg's leadership, and recruited
well over, I believe, 300 volunteers, law enforcement officers,
who are on call, and have agreed to provide law enforcement
services on behalf of the Federal Government. So to use a
contractor, I question whether this is something that was done
directly by the Department of Homeland Security, but
nonetheless, these are services that would have been made
available to the city or the State upon request, and this is
something I am going to follow up on, you can rest assured.
Ms. Schakowsky. Okay. Mr. Gimble.
Mr. Gimble. Yes. I would be very concerned about the
implications of that, but I would also be very concerned if
this is, in fact, the, you know, the truth on what they were
contracted for. Did they, in fact, have arrest powers, and were
they authorized to use lethal force? And I read that in the
newspaper article myself, so I guess if you had somebody you
contracted, and you gave them those powers, I would question by
what authority you would do that.
Ms. Schakowsky. Let me read you a little bit more. And Mr.
Chairman, I would like to put this article in the record.
[The article referred to follows:]
Blackwater Down
by JEREMY SCAHILL
This article can be found on the web at http://www.thenation.com/doc/
20051010/scahill
The men from Blackwater USA arrived in New Orleans right after
Katrina hit. The company known for its private security work guarding
senior US diplomats in Iraq beat the federal government and most aid
organizations to the scene in another devastated Gulf. About 150
heavily armed Blackwater troops dressed in full battle gear spread out
into the chaos of New Orleans. Officially, the company boasted of its
forces ``join[ing] the hurricane relief effort.'' But its men on the
ground told a different story.
Some patrolled the streets in SUVs with tinted windows and the
Blackwater logo splashed on the back; others sped around the French
Quarter in an unmarked car with no license plates. They congregated on
the corner of St. James and Bourbon in front of a bar called 711, where
Blackwater was establishing a makeshift headquarters. From the balcony
above the bar, several Blackwater guys cleared out what had apparently
been someone's apartment. They threw mattresses, clothes, shoes and
other household items from the balcony to the street below. They draped
an American flag from the balcony's railing. More than a dozen troops
from the 82nd Airborne Division stood in formation on the street
watching the action.
Armed men shuffled in and out of the building as a handful told
stories of their past experiences in Iraq. ``I worked the security
detail of both Bremer and Negroponte,'' said one of the Blackwater
guys, referring to the former head of the US occupation, L. Paul
Bremer, and former US Ambassador to Iraq John Negroponte. Another
complained, while talking on his cell phone, that he was getting only
$350 a day plus his per diem. ``When they told me New Orleans, I said,
`What country is that in?' '' he said. He wore his company ID around
his neck in a case with the phrase Operation Iraqi Freedom printed on
it.
In an hourlong conversation I had with four Blackwater men, they
characterized their work in New Orleans as ``securing neighborhoods''
and ``confronting criminals.'' They all carried automatic assault
weapons and had guns strapped to their legs. Their flak jackets were
covered with pouches for extra ammunition.
When asked what authority they were operating under, one guy said,
``We're on contract with the Department of Homeland Security.'' Then,
pointing to one of his comrades, he said, ``He was even deputized by
the governor of the state of Louisiana. We can make arrests and use
lethal force if we deem it necessary.'' The man then held up the gold
Louisiana law enforcement badge he wore around his neck. Blackwater
spokesperson Anne Duke also said the company has a letter from
Louisiana officials authorizing its forces to carry loaded weapons.
``This vigilantism demonstrates the utter breakdown of the
government,'' says Michael Ratner, president of the Center for
Constitutional Rights. ``These private security forces have behaved
brutally, with impunity, in Iraq. To have them now on the streets of
New Orleans is frightening and possibly illegal.''
Blackwater is not alone. As business leaders and government
officials talk openly of changing the demographics of what was one of
the most culturally vibrant of America's cities, mercenaries from
companies like DynCorp, Intercon, American Security Group, Blackhawk,
Wackenhut and an Israeli company called Instinctive Shooting
International (ISI) are fanning out to guard private businesses and
homes, as well as government projects and institutions. Within two
weeks of the hurricane, the number of private security companies
registered in Louisiana jumped from 185 to 235. Some, like Blackwater,
are under federal contract. Others have been hired by the wealthy
elite, like F. Patrick Quinn III, who brought in private security to
guard his $3 million private estate and his luxury hotels, which are
under consideration for a lucrative federal contract to house FEMA
workers.
A possibly deadly incident involving Quinn's hired guns underscores
the dangers of private forces policing American streets. On his second
night in New Orleans, Quinn's security chief, Michael Montgomery, who
said he worked for an Alabama company called Bodyguard and Tactical
Security (BATS), was with a heavily armed security detail en route to
pick up one of Quinn's associates and escort him through the chaotic
city. Montgomery told me they came under fire from ``black
gangbangers'' on an overpass near the poor Ninth Ward neighborhood.
``At the time, I was on the phone with my business partner,'' he
recalls. ``I dropped the phone and returned fire.''
Montgomery says he and his men were armed with AR-15s and Glocks
and that they unleashed a barrage of bullets in the general direction
of the alleged shooters on the overpass. ``After that, all I heard was
moaning and screaming, and the shooting stopped. That was it. Enough
said.''
Then, Montgomery says, ``the Army showed up, yelling at us and
thinking we were the enemy. We explained to them that we were security.
I told them what had happened and they didn't even care. They just
left.'' Five minutes later, Montgomery says, Louisiana state troopers
arrived on the scene, inquired about the incident and then asked him
for directions on ``how they could get out of the city.'' Montgomery
says that no one ever asked him for any details of the incident and no
report was ever made. ``One thing about security,'' Montgomery says,
``is that we all coordinate with each other--one family.'' That co-
ordination doesn't include the offices of the Secretaries of State in
Louisiana and Alabama, which have no record of a BATS company.
A few miles away from the French Quarter, another wealthy New
Orleans businessman, James Reiss, who serves in Mayor Ray Nagin's
administration as chairman of the city's Regional Transit Authority,
brought in some heavy guns to guard the elite gated community of
Audubon Place: Israeli mercenaries dressed in black and armed with M-
16s. Two Israelis patrolling the gates outside Audubon told me they had
served as professional soldiers in the Israeli military, and one
boasted of having participated in the invasion of Lebanon. ``We have
been fighting the Palestinians all day, every day, our whole lives,''
one of them tells me. ``Here in New Orleans, we are not guarding from
terrorists.'' Then, tapping on his machine gun, he says, ``Most
Americans, when they see these things, that's enough to scare them.''
The men work for ISI, which describes its employees as ``veterans
of the Israeli special task forces from the following Israeli
government bodies: Israel Defense Force (IDF), Israel National Police
Counter Terrorism units, Instructors of Israel National Police Counter
Terrorism units, General Security Service (GSS or 'Shin Beit'), Other
restricted intelligence agencies.'' The company was formed in 1993. Its
website profile says: ``Our up-to-date services meet the challenging
needs for Homeland Security preparedness and overseas combat procedures
and readiness. ISI is currently an approved vendor by the US Government
to supply Homeland Security services.''
Unlike ISI or BATS, Blackwater is operating under a federal
contract to provide 164 armed guards for FEMA reconstruction projects
in Louisiana. That contract was announced just days after Homeland
Security Department spokesperson Russ Knocke told the Washington Post
he knew of no federal plans to hire Blackwater or other private
security firms. ``We believe we've got the right mix of personnel in
law enforcement for the federal government to meet the demands of
public safety,'' he said. Before the contract was announced, the
Blackwater men told me, they were already on contract with DHS and that
they were sleeping in camps organized by the federal agency.
One might ask, given the enormous presence in New Orleans of
National Guard, US Army, US Border Patrol, local police from around the
country and practically every other government agency with badges, why
private security companies are needed, particularly to guard federal
projects. ``It strikes me . . . that that may not be the best use of
money,'' said Illinois Senator Barack Obama.
Blackwater's success in procuring federal contracts could well be
explained by major-league contributions and family connections to the
GOP. According to election records, Blackwater's CEO and co-founder,
billionaire Erik Prince, has given tens of thousands to Republicans,
including more than $80,000 to the Republican National Committee the
month before Bush's victory in 2000. This past June, he gave $2,100 to
Senator Rick Santorum's re-election campaign. He has also given to
House majority leader Tom DeLay and a slew of other Republican
candidates, including Bush/Cheney in 2004. As a young man, Prince
interned with President George H.W. Bush, though he complained at the
time that he ``saw a lot of things I didn't agree with--homosexual
groups being invited in, the budget agreement, the Clean Air Act, those
kind of bills. I think the Administration has been indifferent to a lot
of conservative concerns.''
Prince, a staunch right-wing Christian, comes from a powerful
Michigan Republican family, and his father, Edgar, was a close friend
of former Republican presidential candidate and antichoice leader Gary
Bauer. In 1988 the elder Prince helped Bauer start the Family Research
Council. Erik Prince's sister, Betsy, once chaired the Michigan
Republican Party and is married to Dick DeVos, whose father,
billionaire Richard DeVos, is co-founder of the major Republican
benefactor Amway. Dick DeVos is also a big-time contributor to the
Republican Party and will likely be the GOP candidate for Michigan
governor in 2006. Another Blackwater founder, president Gary Jackson,
is also a major contributor to Republican campaigns.
After the killing of four Blackwater mercenaries in Falluja in
March 2004, Erik Prince hired the Alexander Strategy Group, a PR firm
with close ties to GOPers like DeLay. By mid-November the company was
reporting 600 percent growth. In February 2005 the company hired
Ambassador Cofer Black, former coordinator for counterterrorism at the
State Department and former director of the CIA's Counterterrorism
Center, as vice chairman. Just as the hurricane was hitting,
Blackwater's parent company, the Prince Group, named Joseph Schmitz,
who had just resigned as the Pentagon's Inspector General, as the
group's chief operating officer and general counsel.
While juicing up the firm's political connections, Prince has been
advocating greater use of private security in international operations,
arguing at a symposium at the National Defense Industrial Association
earlier this year that firms like his are more efficient than the
military. In May Blackwater's Jackson testified before Congress in an
effort to gain lucrative Homeland Security contracts to train 2,000 new
Border Patrol agents, saying Blackwater understands ``the value to the
government of one-stop shopping.'' With President Bush using the
Katrina disaster to try to repeal Posse Comitatus (the ban on using US
troops in domestic law enforcement) and Blackwater and other security
firms clearly initiating a push to install their paramilitaries on US
soil, the war is coming home in yet another ominous way. As one
Blackwater mercenary said, ``This is a trend. You're going to see a lot
more guys like us in these situations.''
Ms. Schakowsky. ``A possibly deadly incident involved
Quinn's''--this is referring to Patrick Quinn III, who brought
private security to guard his estate and his luxury hotels,
which are under consideration for a lucrative Federal contract
to house FEMA workers--``a possibly deadly incident involving
Quinn's hired guns underscores the danger of private forces
policing American streets. On his second night in New Orleans,
Quinn's security chief, Michael Montgomery, who said he worked
for an Alabama company called Bodyguard and Tactical Security,
was with a heavily armed security detail en route to pick up
one of Quinn's associates and escort him through the chaotic
city. Montgomery told me they came under fire from `black
gangbangers' on an overpass near the poor Ninth Ward
neighborhood. `At the time, I was on the phone with my business
partner,' he recalls. `I dropped the phone and returned fire.'
``Montgomery says he and his men were armed with AR-15s and
Glocks, and that they unleashed a barrage of bullets in the
general direction of the alleged shooters on the overpass.
`After that, all I heard was moaning and screaming, and the
shooting stopped. That was it. Enough said.'
``Then, Montgomery says, `the Army showed up, yelling at us
and thinking we were the enemy. We explained to them that we
were security. I told them what had happened and they didn't
even care. They just left.' ''
So you know, we heard a lot about looters, and we heard a
lot about disorder, and we heard a lot of things about lack of
security and law enforcement there, but I am just wondering if
we have people there who are paid now to supposedly secure law
and order who themselves are shooting at will, maybe killing
and/or hurting people, and that the Army and the Department of
Homeland Security is just standing by. So even in the case of
private contractors for a private purpose, what are they doing
there, and how, in this instance, is the military reacting to
that?
Mr. Gimble. I would have to get back you on the specific
incident of the 82nd Airborne. I am not actually familiar with
what actually happened down there that day.
[The following was received for the record:]
The 82nd Airborne presence in New Orleans was part of
``Joint Task Force All American.'' As part of the joint task
force the 82nd Airborne provided support as requested by the
Federal Emergency Management Agency and directed by the
Department of Defense. The support included humanitarian relief
and activities including medical, logistical, and
communications support, as well as clean-up assistance.
The DoD OIG has contacted the Department of the Army, the
Army Inspector General, and the 82nd Airborne for information
pertaining to the previously described instance. There is no
formal record of an incident involving the 82nd Airborne as
described in, ``Blackwater Down,'' Nation, October 10, 2005.
Ms. Schakowsky. Okay. All right. I think this whole area
really, really needs to be explored. The use of private
military contractors hired by the Federal Government, and those
who may be carrying out illegal activities while the military
stands by and lets it happen.
Thank you very much. I yield back.
Mr. Whitfield. And Mr. Skinner, would you get back to the
committee, and verify if that contract was with the Federal
Government or agency or----
Mr. Skinner. Yes, I will, sir.
Mr. Whitfield. [continuing] or through the state, and we
would appreciate that.
Mr. Skinner. Yes.
Mr. Whitfield. At this time, I am going to recognize Mr.
Stupak. We had agreed on a second round of questions, and since
our Republican member we were anticipating is not here, Mr.
Stupak, I would recognize you for 10 minutes for your second
round.
Mr. Stupak. Do you want to follow up?
Ms. Schakowsky. No, go ahead.
Mr. Stupak. Thank you. One of the things I saw in the
newspaper recently was that the Federal Government is going to
reimburse the American Red Cross $100 million of the money that
they have donated toward the victims in Hurricane Katrina. If
that is true, what is that $100 million going to be for? Does
anyone know, and who would have oversight on that?
Mr. Skinner. I could only speculate. I know after 9/11,
that FEMA entered into a prearranged agreement, pre-disaster
agreement with the Red Cross, to reimburse them for their
extraordinary expenses in assisting and providing aid early on
in the disaster. Those expenses could possibly be for overtime
for their staff, for the cost of extraordinary type expenses,
for sheltering, food, things of that nature. And it is a
contract; it is a prearranged contract; and it has been
longstanding, at least since 9/11.
Mr. Stupak. My only concern was like 9/11, we had this,
sort of like the same type of situation, where they went on TV,
and solicited funds from the American people, and the American
people are so generous they open up their wallets and their
hearts, and they give the American Red Cross money, only to
find that it is not for disaster relief. I am sure this $100
million will not go for the disaster relief, but sounds like
operating costs, and unless it is directly related to Hurricane
Katrina, I think you are going to be really on some weak ground
there, and I think the American people would be upset.
The American Red Cross has raised close to $1 billion
through the generosity of the American people, and I just want
to make sure it is not going to be used in that $100 million
for general operating costs. That is a real concern of mine.
When you have waste, fraud, or abuse, and you want to bring
charges against somebody, do you follow the State statute of
limitations if you are going to bring a charge, a criminal
charge?
Mr. Skinner. We use Federal statute.
Mr. Stupak. Okay. What is the statute of limitations there?
Mr. Skinner. I believe it is 7 years. I believe it is 7
years from the time that we----
Mr. Stupak. Has that time been adequate? I have had one or
two officials tell me that they wish the length of time was
further, because it seems like it is 4 or 5 years out, after
one of these disasters, that is when we find out that there has
been duplication and waste and things like that. Should it be
longer, in your estimation?
Mr. Skinner. Well, from a Federal law enforcement
perspective, of course, we would like to have it to be longer.
Mr. Stupak. Well, what length of time?
Mr. Skinner. I don't have----
Mr. Stupak. I mean if Congress has to act on it, we should.
Mr. Skinner. From my personal experience, the 7 years has
generally been adequate. For major fraud initiatives or fraud
efforts made by our office in any regard, it hasn't presented,
or prevented us from prosecuting. You may want to ask the FBI
or U.S. Attorney, someone that has more, a broader range of
responsibilities, outside disaster activities.
Mr. Stupak. If we put one of those no-bid contracts in, and
you find that it is not what it should be, or being paid too
much, what can you do? Can you go back and try to renegotiate
down that contract?
Mr. Skinner. Absolutely. The first thing we would do is
recommend that that contract be frozen, that we sit back down,
and depending on what the issues are, we either renegotiate it
or cancel it.
Mr. Stupak. Have any of these contracts been long-term? I
mean I know the cruise line is like 6 months or something like
that.
Mr. Skinner. Most of these contracts are, in fact, going to
be long-term. The technical assistance contracts, for example,
will probably run us for 2 to 3 years. The cruise thing is
somewhat of a short-term----
Mr. Stupak. Sure. That is----
Mr. Skinner. [continuing] finite.
Mr. Stupak. If some of these--and you said a lot of them
are 2, 3 years, then I guess it just really begs--and go back
to the question I had earlier, then. Why don't we know what our
strategic plan is, then, before we let these contracts,
especially technical contracts, which really have nothing to do
with saving lives or things like this?
Mr. Skinner. We certainly can do a better job in that
regard. I think that as part of your National Response Plan, we
need to be in a position to react to an incident of this
nature. Historically, FEMA has, in fact, a plan in place, a
National Response Plan. We also have contracts in place, but no
one, I don't believe, has ever anticipated that we would have
any devastation to the degree we have experienced in the Gulf
Coast.
Mr. Stupak. Will the Inspectors General, will they go back,
and then look, and see what went wrong here with Hurricane
Katrina?
Mr. Skinner. Yes, sir. We will. Matter of fact, we are
doing that as we speak. We initiated a review 2 weeks ago. We
are looking at how prepared FEMA was, and not only that, but we
are looking to assess how prepared should they have been,
particularly in light of the fact that we have had considerable
experience with exercises in the New Orleans area.
Mr. Stupak. Well, and speaking of that exercise, that Pam
exercise, what you learned from Pam, was that followed in
Katrina?
Mr. Skinner. No, evidently, it was not.
Mr. Stupak. Then why not? If there was a plan, and there
was, I know someone testified at one of our other hearings, Mr.
Chairman, that they had tabletop discussions about it, but why,
if it hasn't worked, the exercise didn't work, or it didn't
achieve the results you wanted, what would be the one thing you
would point to that said why it didn't work. Was it resources,
assets, what is it?
Mr. Skinner. I think the exercise, in itself, did work, in
that it uncovered the vulnerabilities that would exist if a
major hurricane would hit New Orleans. The issue is, although
the Federal Government learned a lot from that exercise, I
don't think there was an action plan to correct the issues that
were identified as a result of the exercise.
Mr. Stupak. So the weaknesses learned from the exercise
wasn't in place when Katrina hit.
Mr. Skinner. Precisely.
Mr. Stupak. Is that unusual, because it was over a year
later?
Mr. Skinner. I would suggest that those questions should be
directed at FEMA. My uninformed observation would be that no,
that is not unusual.
Mr. Stupak. Okay. Mr. Gimble, I mentioned earlier those
four employees with the Army Corps of Engineers. They fall
underneath your department, do they not, Army Corps of
Engineers?
Mr. Gimble. They do.
Mr. Stupak. Is someone going to look into why they were let
go or demoted? Or is that something you don't handle?
Mr. Gimble. Actually, the demotion, if we are talking about
the same one, is being looked at. It has been looked at by the
Army. It has been looked at by us, and the actual demotion, I
think, was found to be proper, unrelated to any other
allegations in criminal investigations that still may be
ongoing. I am not sure, when you say the four, I am not sure
who the other three are.
Mr. Stupak. Trying to find a question here I wanted to ask
you. Mr. Gimble, there has been some suggestion that DoD take
over evacuations in certain disasters, like we have seen here
with Rita and Katrina. Has any internal thought been given to
that at your level? Did you learn anything from Pam that would
make you believe that the military would be better equipped to
handle it than FEMA?
Mr. Gimble. The answer at my level is, no, there hasn't
been any great discussion about it. What we saw was that the
President announced that he thought that might be an idea to be
explored. I think there are some Posse Comitatus issues that
surround it, so, at this point I haven't been involved in any
discussion, and I think there would be a lot more discussion
that would have to take place before any decisions were made.
Mr. Stupak. Let me yield to you. I am going to yield by
remaining time to Ms. Schakowsky. She wanted to follow up on
some questions.
Ms. Schakowsky. Thank you. Thank you. You know, I am really
concerned that you seem so unaware of Blackwater's presence. I
am kind of reminded of the conversation with both Secretary
Chertoff and Michael Brown, we don't know anything about what
is going on at the Convention Center, at the Superdome. I am
looking now at the POGO website, the Project on Government
Oversight. I am looking at an article from the Virginian Pilot,
and I am looking at a press release issued by Blackwater. Let
me just read a little bit of this article. ``Blackwater USA,
the North Carolina-based security firm best known for
supplementing U.S. troops in Iraq, is now attracting
international attention''--obviously not here--``patrolling the
flooded streets of New Orleans.''
``Accounts of Blackwater personnel carrying M-16s and other
assault weapons around the devastated city have appeared on
dozens of Web sites, including sites in Europe, Canada, and
Australia. Many of the reports compare Blackwater's presence in
New Orleans to the company's work in Iraq.''
Okay. Here is from Blackwater. ``Blackwater USA continues
to support Katrina-devastated areas. Since first joining the
relief efforts on September 1, Blackwater USA has continued to
provide support to hurricane-devastated area, with a variety of
services, including search and rescue, helicopter support,
security services, and critical infrastructure protection.''
Anne Duke said, this is from the POGO site: ``Anne Duke, a
Blackwater spokeswoman, said Wednesday that the company has
about 200 personnel in the hurricane-ravaged area. The vast
majority, 164 employees, are working under a contract with the
Federal Protective Service, a division of the Department of
Homeland Security, to protect government facilities. The 30-day
contract can be extended indefinitely, she said.''
So explain to me how you could come here--there are 200
people there, ultimately under your auspices, and I am just
telling you for the first time?
Mr. Skinner. These people are not under our auspices. We,
right now, just deployed there last week. We are focusing on--
--
Ms. Schakowsky. Well, then explain to me what this means.
Mr. Skinner. Not that particular contract, but all
contracts, major contracts, if that is one of them, they will
fall under our purview, as far as reviewing it to determine
whether it is a worthwhile or legitimate contract.
Ms. Schakowsky. Well, then you----
Mr. Skinner. No one has brought that----
Ms. Schakowsky. [continuing] need to explain to me----
Mr. Skinner. [continuing] particular issue to my personal
attention.
Ms. Schakowsky. Okay. So then explain to me how the
organizational chart works. It says under a contract with the
Federal Protective Service, a division of the Department of
Homeland Security. So----
Mr. Skinner. Yes.
Ms. Schakowsky. So is that not the Department of Homeland
Security?
Mr. Skinner. Oh, yes.
Ms. Schakowsky. And you are--okay.
Mr. Skinner. In that regard, yes. If that is, in fact, a
subcontract, FEMA obviously issued a mission assignment to the
Federal Protective Service. The Federal Protective Service
then, in turn, contracted with Blackwater to provide security
within the New Orleans area. They would be under the DHS'
purview, of course. Has our office directed our attention to
that particular contract at this point? No, we have not. But
that is something that I can assure you we will.
Ms. Schakowsky. Okay. And how is the decision made to,
whether or not to hire these private security forces?
Mr. Skinner. We would have to look to see what type of
capabilities the Federal Protective Service has within their
own office. They may have competed for protective services
contractors, or they may have no-bid it. I don't have the
information at this point in time.
Ms. Schakowsky. Okay. Well, I know my time is up. Go ahead.
Mr. Stupak. Sorry. I am sorry, Jan. I think her question
just makes the point, it seems like we want to have the
authority to review the contracts, but we don't want to have
the authority to review the contracts, and it is probably why
we need a CFO, or someone in charge, someone accountable,
because you are all trying to run your own agencies and that,
and we need, on this one, need someone in charge, who can be
held accountable to this whole thing on these contracts.
Thank you, Mr. Chairman. Thank you.
Mr. Whitfield. Thank you. I want to go into one area just
briefly here. The cruise ship issue, which has been publicized
so much in today's Washington Post, and the amount of $236
million, who actually, if you were doing oversight on, who
would have the authority to enter into that contract? You
talked about contract officers, and I am assuming they have
responsibility to a certain level. Who would have the authority
to sign off on a $236 million contract?
Mr. Skinner. In this particular case, I believe it was the
Federal coordinating officer----
Mr. Whitfield. The Federal coordinating----
Mr. Skinner. [continuing] that had, from an operational
perspective, made a decision, yes, we need housing, and the
ships is an alternative to provide that housing.
Mr. Whitfield. Right.
Mr. Skinner. As far as entering into the contract, per se,
that would be a contracting officer, most likely within the
Department of Defense, who we have employed to act as a
contracting officer for the Department of Homeland Security.
Mr. Whitfield. The contract officers in most of your
agencies, what level of authority do they have to enter into
contracts? Is it different per agency, or----
Mr. Frazier. It varies, because in certain agencies, people
have warrants that give them the authority to obligate the
government up to $1 million. Sometimes, it is much higher. But
it varies by agency and by individual.
Mr. Whitfield. Okay. Okay. Because I know at the FCC, I
mean you all are, this is a minor item, but you have given out
cell phones to people through various programs, for
communication purposes. Correct?
Mr. Feaster. Yes.
Mr. Whitfield. Okay. Okay. Now, one of the values in having
a hearing like this, is that you all come in here with a lot of
expertise and experience, and we value that. From your
perspective, and if you were giving advice to Congress, or if
you were sitting down at a town meeting in New Orleans, let us
say, with people who have been affected by this disaster, I
would like to give all of you an opportunity to tell us, as
Members of Congress, some needs that you have that could make
your program more effective, if you have any thoughts on that.
I know that you have indicated that from your perspective,
you feel pretty good about the organization, the way it works
right now. Recognizing that there are shortcomings, recognizing
there are all sorts of problems, but when you look at
alternatives, you feel pretty good about what you have. So I
would like to open it up, and give you an opportunity for some
specific suggestions that you might have to do a better job at
what you are doing.
And Mr. Rabkin, we can start with you, and if you don't
have any, that is fine, too.
Mr. Rabkin. Well, generally, Mr. Chairman, we look for
criteria when we go in to audit how well an organization has
performed. We would like to know how well were they supposed to
perform, and the National Response Plan is supposed to be that
criteria. It was, as you heard, it was just developed and
implemented earlier this year, or late last year. This is
really the first test of it, and also, within each of the
agencies, we look for criteria, regulations, et cetera. So and
I just hope that the, as we do our work, that the agencies are
cooperative with not just the GAO, but also with all the IGs,
in making people and documentation available, so that we can do
our jobs.
Mr. Whitfield. Now, just the preliminary information that
you have in relating to this National Response Plan, do you
have any assessment of how it has worked to this point, or is
it too early?
Mr. Rabkin. Well, I think it is too early, but you know,
having glanced at the plan, you know, it has got, I think, an
appropriate structure. The question is depth, and the question
is, you know, how much of a catastrophe did it anticipate, and
those are some of the questions that we are going to be looking
at.
Mr. Whitfield. Okay. Mr. Friedman.
Mr. Friedman. Well, a couple of points, if I can, Mr.
Chairman. First of all, on a more narrow level, you made a very
good point when we began the afternoon session, and I would be
more than happy to meet with majority counsel and minority
counsel to make sure there is no lack of clarity about the role
of the Inspectors General, and the distinction, which is an
important distinction, between our role and that of management.
If we get too close to management, we lose our independence,
and so I think there may be some lack of clarity, and we would
be more than happy to work with you to clear that matter up.
In a crisis of this magnitude, with the amount of money
that is being spent, there are enhanced or increased
vulnerabilities. The point that we have been trying to push
within the PCIE, and Mr. Skinner has picked up on that, and
others have as well, is prevention. The key is preventing the
dollars from going out the door, rather than performing an
after-the-fact exercise. And we in the IG community are
attempting to do that, and do that aggressively. In other
words, concurrent reviews, contemporaneous reviews, not after-
the-fact reviews. And we are trying to do that. I think to the
extent that this subcommittee and others, who have cognizance
over this huge amount of money that is being spent, should look
to that sort of model.
I think, though, there is one important point, and may get
back to my original point, and that is the responsibility of
management. When we talk about prevention, it is critically
important that the various agencies and the senior managers set
the tone from the top. This in terms of making sure that there
are the right controls, management processes, and procedures in
place, so there is a discipline, from the get-go, that is
applied to the people who are working this crisis at all
levels, that there are performance metrics in place, to make
sure that there are ways in which the management can evaluate
the progress, the success they have had. The people should be
held accountable and responsible for what goes right and what
goes wrong.
Mr. Whitfield. Okay.
Mr. Friedman. So I think there are lots of people involved,
including the Congress, obviously, which plays a major role.
There are some lessons that we can, from past experiences, if
applied to this experience, I think we will all be better off.
Mr. Whitfield. Mr. Skinner, do you have any comments?
Mr. Skinner. Thank you. Yes. First of all, I would like to
just echo what Mr. Friedman has said with regards to a
clarification or clarity as to what our roles are vis-a-vis,
the role of program managers and the people that are charged
with delivering the services. Keeping in mind that our role is
to ensure that the program people do their job, and they do it
properly, and that they apply the proper internal controls, and
that they act as good stewards of Federal dollars. And that is
exactly what our role is.
In something as large as this, what do we need? Obviously,
it goes back to resources. There are thousands of contracts out
there, and Blackwater may be an example. We don't have the
resources to look at every one, every contract action out
there. We are focusing on the big dollar tickets, those that
are the most vulnerable to fraud, waste, or abuse, that being
the no-bid contracts, things of that nature. There is no office
that can provide 100 percent coverage----
Mr. Whitfield. Right.
Mr. Skinner. [continuing] of all activities or all
expenditures that are being incurred out here as a result of
Katrina. Yes, there needs to be some type of accountability.
That can take place in a variety of places. If we are looking
for a nationwide office to turn to, as to provide accounting
for where these funds are going, I would suggest that could be
OMB, because all moneys eventually flow through OMB, from
Congress, into the states, in the reports back, flow back to
OMB. Our responsibility is to provide oversight. I think we
have an excellent mechanism in place right now to provide that
oversight, both individually, for our individual programs, and
collectively, overall, in the Federal Government, through the
PCIE Homeland Security Roundtable, and we are, in fact, through
that working group, doing that as we speak.
Mr. Whitfield. Do you, or does anyone else have any
specific suggestions on places this could be improved? Mr.
Frazier?
Mr. Frazier. Yes, Mr. Chairman, the only thing that I would
say is that I think that if the IGs should work closer with the
Congress: one of the things that I heard many of the members of
the subcommittee talking about, repeatedly was credit cards and
the purchase cards. That is something that is going to be a
very important tool as we go forward, but if you recall, 4 or 5
years ago, the purchase cards in government were just in
shambles.
And then, once the Congress starting holding hearings, and
the IGs did quite a bit of work in that area, and while it is
still not perfect, it is a much better system than we have ever
had before. It forced the IG community to work together. We
have put together a data base that is on the IG net, where we
share all of the work and reports that we do in the areas of
purchase cards. We have more consistent guidelines, so that
people now can get fired when they abuse those cards. So when
we are in a position, now, where these limits are going to be
raised, we know there are going to be some problems. But, you
are not going to have the level of problems that you would have
had if the Congress and the IGs had not worked together in the
last few years.
So I guess if I had one message here, it is that Katrina
gave us a mess, but there is a message that will come out of
this, and that is the importance of us working together on
issues before the problems actually come up. One of the things
that you have heard just about everybody on this panel talk
about: we are concerned about procurements. But if you read our
semiannual reports, and the annual reports put out by the
President's Council on Integrity and Efficiency, it is almost
at the top of everybody's list of the problems that exist in
government and in this area.
So if we deal with these problems before there is a crisis,
it better prepares us, if you will, when the crises come, and
they will come. We are in a better position to deal with it. So
if I had to add one thing, it would be that more of the
opportunities for the IG and the Congress to work together. We
work for you too, you know.
Mr. Whitfield. Well, thank you, Mr. Frazier. At this time,
I will recognize the gentleman from Mississippi for 10 minutes.
Mr. Pickering. Thank you, Mr. Chairman. I appreciate this
hearing. Let me first do something just for the entire panel.
It is going to be very important for us as policymakers, as we
look forward, as we learn lessons from Katrina and the
response, that we have very good reporting, that you will
document how the contracts were performed, if there was waste
and fraud, but one thing that I am particularly interested in
is the current contracting procurement methods, the contracts,
the national contracts on cleanup and recovery, that we are now
seeing implemented in the field. How efficient are those? How
much administrative costs are part of those contracts? And let
me tell you why.
For example, there is, in Mississippi, in the cleanup and
recovery, AshBritt, a large corporation, won a contract. Then
it is time to clean up. It takes them at least 5 to 7 days to
get into the State after the event. They are then working, I
believe, with the Corps of Engineers administering the
contract. They then hire subcontractors to find subcontractors
to find subcontractors. How much inefficiency is in that type
of process, of bureaucratic costs, or administrative costs,
from FEMA, to the Corps, to the contract, to the subcontractor,
to the subcontractor, to the subcontractor. And as you can
imagine, when you go through that process, one of the most
important things that you have a need of, and remember, this
whole area has been declared by the Secretary of Health and
Human Services as a health hazard, so cleanup of the health
hazard, very, very quickly, is critical to the wellbeing and
the health of the region, and it also becomes, very quickly, a
fire hazard. But as we are going down through the chains to get
people cleaning up, we still have a lot of debris that is
sitting on the ground, on the roads, in the streets, all over
the affected region, a month after the storm. And I imagine it
will be there, in some places, months from now.
So your commitment to give us reporting not only on fraud,
but whether this is the most efficient way to do business, is
going to be very critical, and I would just ask that you would
commit to reporting both the fraud, but also, is this the most
efficient administrative way to manage the contracts? That is
more of a statement than a question.
I would like to ask specifically Mr. Gimble, I believe that
you are managing the contracts through the Corps of Engineers
for the cleanup and recovery. Is that correct?
Mr. Gimble. The DoD IG is not managing the contracts. We
have the oversight of the contracts.
Mr. Pickering. Yeah, you have, but DoD Corps is
administering, and you are the oversight IG.
Mr. Gimble. And we have announced a project to look at the
very thing that you mentioned: are all of these contracts being
executed efficiently, effectively, and in accordance with the
laws and regulations. We have a team already working on that
very issue.
Mr. Pickering. When the Corps of Engineers administers,
what is their overhead cost?
Mr. Gimble. On overall contracts, or just on specific,
these----
Mr. Pickering. These specific for cleanup and recovery.
Mr. Gimble. I don't have an answer for you. I will have to
get back, and it may take some time to figure that out, but----
Mr. Pickering. I have heard anywhere from 7 percent to 30
percent. Would that be in the range?
Mr. Gimble. I don't know. I will have to get back to you on
that.
[The following was received for the record:]
The DoD OIG is working with the U.S. Army Corps of
Engineers, the Army Audit Agency, and the Defense Contract
Audit Agency to determine information on overhead rates
contained in debris removal contracts related to Hurricane
Katrina efforts. Ongoing audits by the Army Audit Agency and
the Defense Contract Audit Agency should provide the
information necessary to determine and compare contractor
overhead rates. Upon completion of these audits we will provide
the committee information on debris removal contract overhead
rates.
Mr. Pickering. I assume the thinking was, if we could have
a national contract prior to a storm, that that would be more
efficient. You get people working more--you don't have to go
into a contracting process prior to a storm. As you all know,
the way that the FEMA contract worked with AshBritt is that if
AshBritt does it, and there are subcontractors, the local
community gets 100 percent reimbursement. If the locality has
either a preexisting or they go out and contract on their own
with local companies, they only get a 75 percent reimbursement.
So you have a very strong bias toward the national FEMA Corps
contractor, and against the local contractor. Also, the
threats, not the threats, but the possibility of audits by FEMA
of the local contract also makes it almost 100 percent, not
quite, that they are going to go with the FEMA contractor.
Now, this is a devastated area that is trying to put people
back to work, working with companies from all over the country,
but not their own companies. As you can imagine, that creates
extreme frustration in the local communities, and in local jobs
and local contractors. And I just believe, and I need your
data, that local communities and the pulpwood haulers, and the
debris removers in my State could do it more cost effectively
than the way it is being done now. And should we give states,
instead of having FEMA do these huge national contracts, should
we say as part of national preparedness, that they will have
preexisting contracts with certain standards, and then after
the fact, the accountability and the documentation, but let it
be done more at the local level than at a national level that
includes so many different layers.
So as we go through this process, that type of comparative
analysis would be very helpful, to know what is the best way to
do this, not only in helping a local area recover with jobs,
but what is the most cost effective way to do this. And Mr.
Chairman, one thing that I would be interested in, if we can
get kind of an economic rate of cleanup based on debris,
whether it is on a volume amount, or in some type of
measurement, I would just as soon give a cap, and tell states
and localities you can do it. This is all you are going to get,
and I am sure they will find a way to do it with a cap. And I
tell you, they would be cleaning up the day after the storm,
not weeks after the storm.
So I hope we can find a more efficient way to get cleanup
and recovery, a less adversarial relationship between the
Federal Government and local communities and contractors. And
one way that we can predict costs, rather than having an
unpredictable surge of spending, and concern over fraud and
waste. I think there is a better way to get at the concern of
fraud and waste without the way it is being done now.
I gave a speech, and didn't ask many questions, Mr.
Whitfield, but these are all things that you can help us on
this committee, and in Congress, as we look at, and look for
lessons learned from Katrina, so that as we go forward,
hopefully we can have a more efficient way, a more
compassionate way, and a more effective way of doing this.
Thank you, Mr. Chairman.
Mr. Whitfield. Mr. Pickering, thank you. We have enjoyed
your speech very much, and look forward to some more, and I
would to say to Mr. Walden and Mr. Burgess, that Mr. Stupak and
I both had an opportunity to ask additional questions in a
second round. Do either of you have any additional questions
you would like to ask?
Mr. Pickering. Mr. Chairman, if I could. Mr. Gimble, when
can you give me the numbers on the administrative cost of the
Corps?
Mr. Gimble. I will get back to you as soon as I can. If I
can't get them, if they are not readily available, I will tell
you that, but short of that, I will get you the answers back.
Mr. Pickering. If you could get those back as soon as
possible.
Mr. Gimble. I will.
Mr. Pickering. And I assume that you will be giving the
information to Mr. Whitfield on the committee. And if there is
any, also, administrative costs to AshBritt, subcontractors and
subcontractors, if you can tell me how much are we spending on
the administrative overhead. So then, if we are spending $1
billion, and we have got 30 percent administrative overhead,
that is $300 million, to try to stop maybe $100 million of
fraud.
That is what I want to know.
Mr. Whitfield. Now, Mr. Walden, you are recognized for 5
minutes.
Mr. Walden. Thank you very much, Mr. Chairman. It just
strikes me that when you have got a crisis of this magnitude,
or an emergency with this level of disaster, the numbers of
people that had to be evacuated and all, government is almost
in a damned if you do, damned if you don't situation. Because I
have sat through several of these hearings now, where the first
barrage is the government didn't act quick enough, quickly
enough, and throw every resource at it, and everybody had a
million ideas about what should have happened, most coming from
people who weren't down there, and then, there is sort of this
phase. It is almost going through a grieving phase, now, what
did you do wrong? And we need to do that analysis, but I just
wonder how you get at these issues. My colleague and friend
from Mississippi talked about how you pre-position the assets
you may need in case of a disaster of this magnitude, although
it is rare we get one this bad, fortunately. And I know the
military does some of that, pre-positioning of pre-bid, pre-
position packages to do certain things.
Can maybe you speak about how the military does that,
versus in a domestic disaster, how we might benefit from that
knowledge and capability, be able to get in quickly? Because I
mean I don't know how you have time to go out and competitively
bid fixing a levee that just broke, while the waters are
rushing in flooding nursing homes and killing people. And there
is a lot of second guessing that can go on afterwards, but at
the time, I have to think for the most part, it is good
intentioned people trying to do the best they can to be
innovative to solve a crisis at hand, and take the flak for it
later. And I just--and I throw that out. How do you do pre-
positioning? What happens in the thrust of the emergency?
Mr. Gimble. I think there are two things. One is the pre-
positioning of war reserve stocks; that is what I think you are
talking about. Typically, that is not contracts. That is hard
supplies and equipment. If we think we are going to go to war
in Europe, we may put in that region a strategic supply of
fuels and ammunition that would be available to meet certain
surge rates. If we had to replace a wing of aircraft, for
example, where would the parts come from? So that is kind of
a----
Mr. Walden. That is the plan.
Mr. Gimble. [continuing] different scenario than when you
have a one-time flood that comes in on a random basis, and you
don't know exactly where it is. In the firct scenario, you know
the part of the world you are going to be in.
Mr. Walden. Right.
Mr. Gimble. And you would do whatever you could to pre-
position equipment over there now. When you get into the
emergency contracting, a lot of that is--you saw that in Iraq.
There was a lot of emergency contracting, and I said earlier, I
think that could have been done better by the Department than
it was. So I don't necessarily know that there is a parallel, I
guess that is my point.
Mr. Walden. Okay. Let me give you another potential
example, then. The way we fight forest fires, there are
national contracts out there for crews that can be moved
anywhere in the nation, wherever fire breaks out. Is that a
model that could be used during hurricane season, to have ready
attack crews, and I think actually some of those national
contractors have brought in in cleanup efforts, can you speak
to me about that, as an example?
Mr. Gimble. I think I would probably defer to----
Mr. Walden. That is fine.
Mr. Gimble. [continuing] Homeland Security on it, because
it is kind of out of the realm of what we do in Defense, but--
--
Mr. Walden. Sure. Mr. Skinner.
Mr. Skinner. Yes. In fact, it is my understanding that FEMA
does----
Mr. Walden. Is your mike on, by the way? Can't----
Mr. Skinner. Yes, it is.
Mr. Walden. There you go.
Mr. Skinner. Okay. It is my understanding that FEMA does,
in fact, have a program to pre-position supplies, staff, and
response capabilities, including preexisting contracts, who
also have, for example, preexisting contracts with the Corps of
Engineers that allow us to bring in MREs, ice, water, tarps for
homes, things of that nature. What happened here in the Gulf
Coast is that the storm grossly exceeded the capability of
those resources that were pre-positioned and brought in, and as
a result, that is where we had to go out, or FEMA had to go out
and do a 24 hour sole source contract to bring in additional
resources to supplement what they have already pre-positioned.
Mr. Walden. What would have happened if you had to
competitively bid that process, to deal with the overwhelming
need?
Mr. Skinner. Then----
Mr. Walden. What kind of timeline would you have been on?
Mr. Skinner. It could be done, you can do limited
competition, and to some extent, some of that was done. I was
not on the ground when FEMA had deployed, or no one from the IG
was actually on the ground----
Mr. Walden. Right.
Mr. Skinner. [continuing] when they were deploying in this
response mode, per se. You run the risk of delaying delivery of
services that could impact the protection of property or saving
lives, or getting people shelter, getting them water, getting
the basic essentials. You can't try to go out and get
competition in the middle of a battle, the resources were
needed yesterday. FEMA obviously has long term standing
relationships with many of the contractors, so they just turned
to them, and asked them to provide additional resources.
Mr. Walden. And will you be doing review of some of those
sole source----
Mr. Skinner. We are going back to day one, and looking at
all of the sole source contracts.
Mr. Walden. Okay. So you will be able to catch if there
was----
Mr. Skinner. Yes. We are going to look for evidence as to
whether it was justified to use sole source, whether there was
other alternative means, limited competition, or full
competition. We will be looking to see if the contracts that we
entered into were fair and reasonable, and the contractor was
qualified, and able to provide the services.
And then, of course, we will be looking to see if they did,
in fact, provide the services as agreed upon.
Mr. Walden. Right. Right. Thank you very much.
Mr. Whitfield. Mr. Burgess, did you have any additional
questions?
Mr. Burgess. Yes, Mr. Chairman. Mr. Skinner, one of the
things we heard about repetitively during the crisis was all
the various pinch points, and certainly, FEMA and the Federal
level seemed responsible or some of those, inability to get
material in, and inability to get ambulances in to patients
that needed to be evacuated from a ventilatory hospital. And
there also seemed to be difficulty with FEMA working with State
and local officials, and I guess the question then comes up in
my mind, for the going forward with oversight, what are you
going to do to make certain the DHS works well with State and
local officials, in order to keep that oversight in line?
Mr. Skinner. I am not quite sure I understand the question.
When we provide oversight, we will be looking at----
Mr. Burgess. Well, you will have to coordinate with State
and local officials. Your expensing of dollars, your
functioning as the wholesaler is going to produce material for
them. I got the impression, maybe it was the wrong impression,
during that first week after the hurricane, that that interplay
between FEMA and the local officials wasn't working, for
whatever reason, and not to assign fault to anyone for that,
but it wasn't working. Well, now, you have got the task of
oversight ahead of you, and how are you going to--and we have
got an enormous amount of money coming Louisiana's way, and it
is not all going to be administered by FEMA. Some of it will be
delegated from FEMA to State and local officials, and how are
you going to be certain that those moneys are spent
appropriately?
Mr. Skinner. That is one of the things we are doing in
Louisiana. We have already with the State legislative auditor
and the State Inspector General.
Mr. Burgess. When did that happen?
Mr. Skinner. This was about, I am going to say the week of
September 12, about 2 weeks after the incident. They have
agreed to put forward about 36 auditors to provide oversight of
all the applications that will flow to FEMA through the Office
of Emergency Preparedness, so that we will be working with them
hand in hand in that regard. We are also in meetings, as we
speak, with the State auditor in the State of Alabama, and the
State auditor in Mississippi as well, to develop partnerships
with them, so that we can collectively look at all the bills
that will be coming through.
Not just the bills, I should say, but all the applications.
What we want to make sure is that when these applications come
in, before they are even awarded or reviewed by FEMA, the State
auditors will be making a determination whether one, are you
eligible, two, do you have support for the estimate of your
costs associated with whatever you want to rebuild. Then, when
that comes into FEMA, we will be working with the FEMA folks in
reviewing those things at a second tier level, to make sure
that these people, in fact, have met all the minimum
requirements for eligibility, have the adequate documentation
to support their costs. If they are using contractors, which
they will, to reconstruct, we will determine whether they have
adequate procurement controls, things of that nature.
We are working with the State auditors to go out and visit
all of the parishes and the local towns, before they receive
any money, and to evaluate their ability to account for the
money, because many of these parishes and townships are so
small that they have never had to be held accountable for such
large sums of money. We will be advising them from our own
lessons learned, about types of things that are going to get
you in trouble. Instruct them on their documentation
requirements, accounting requirements, things of that nature.
During the pre-award phase, we will be using contractors to
supplement our staff to do pre-award audits of those local
entities and State entities that will be receiving FEMA funds.
Mr. Burgess. Who is going to have the jurisdiction to
prosecute if something goes wrong, and money is misapplied or
misspent?
Mr. Skinner. We have two places to go to. First, we will go
to the Department of Justice, and use the local U.S. Attorneys
there. And incidentally, we have a taskforce that is being run
right now by the Assistant Attorney General for the Criminal
Division, and involves all the local U.S. Attorneys. The IGs
participate on that taskforce, as well as the FBI, Postal
Service, and others. So we are pretty confident that we will
get attention at the Federal level, but in those cases where
they may choose not to get involved, or our cases may not reach
the threshold for Federal prosecution, we can work with the
State or local prosecutors as well. We have prosecuted at the
local level in the past, when we were unable to get prosecution
at the Federal level.
Mr. Burgess. Okay. Thank you, Mr. Chairman. I appreciate
the extra time.
Mr. Whitfield. Thank you, Mr. Burgess, and I want to thank
all of you for being with us today. I want to announce that the
record will be kept open for 30 days, in case any members who
were unable to be here want to submit an opening statement. I
want to confirm with you all as I had asked in the opening
statement, that at the end of 3 months, that you all would just
give us a progress report for each of your agencies on how you
are coming along with Katrina, and the problems you are facing
there, progress report.
Also, Mr. Gimble, if you would submit to the committee the
information that Mr. Pickering had asked for, and then I think
Mr. Skinner, you were also going to provide information that
Ms. Schakowsky had asked for about the Blackwater, and she was
asking about the contract in New Orleans, and whether it was
with the State or with the Federal Government.
Mr. Skinner. I will provide details on that contract,
amounts, the timeframes, and----
Mr. Whitfield. Okay.
Mr. Skinner. [continuing] and how that contract was let.
Mr. Whitfield. Okay. With that, the hearing is concluded.
Thank you all again for your patience, and we look forward to
working with you as we move forward.
[Whereupon, at 2:10 p.m., the Subcommittee was adjourned.]
[Additional material received for the record follows:]
U.S. Department of Commerce
Office of the Inspector General
The Honorable Marsha Blackburn
U.S. House of Representatives
509 Cannon House Office Building
Washington, D.C. 20515
Dear Representative Blackburn: I appreciated the pportunity to
testify at the September 28 oversight hearing regarding my office's
plans to monitor Commerce spending on hurricane relief and recovery
efforts. I am writing to follow-up on your question pertaining to
requirements on small and minority businesses to ensure opportunities
to compete fairly in hurricane cleanup and recovery.
Commerce has several initiatives to help ensure that small and
minority firms have access to information about contracting
opportunities. For example, the Department set up a Hurricane Contract
Information Center and a call center to help businesses, particularly
small, minority, and women-owned firms, learn about the contracting
process. In addition, the Minority Business Development Agency has
announced that it has diverted $300,000 in FY 2005 funds to an existing
Minority Business Development Center in Houston to help provide direct,
on-the-ground assistance for minority businesses seeking reconstruction
contracts.
My office is currently monitoring the Department's efforts to
provide assistance to the communities, businesses and individuals
affected by this year's hurricanes. As part of that work, we are
tracking the expenditure of Commerce funds, including those funds used
to assist small and minority businesses in competing for hurricane
relief and recovery contracts. As we continue monitoring the
Department's hurricane relief activities, my office will pay particular
attention to the Department's efforts to provide assistance to minority
businesses.
If you have any questions or require additional information, please
contact me at (202) 482-4661, or have your staff contact Susan
Carnohan, Congressional Liaison, at (202) 482-2187.
Sincerely
Johnnie E. Frazier
cc: Representative Ed Whitfield, Chair
Representative Bart Stupak, Ranking Member
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