<DOC> [107th Congress House Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:82306.wais] THE PRESIDENT'S MANAGEMENT AGENDA: GETTING AGENCIES FROM RED TO GREEN ======================================================================= HEARING before the SUBCOMMITTEE ON GOVERNMENT EFFICIENCY, FINANCIAL MANAGEMENT AND INTERGOVERNMENTAL RELATIONS of the COMMITTEE ON GOVERNMENT REFORM HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTH CONGRESS SECOND SESSION __________ FEBRUARY 15, 2002 __________ Serial No. 107-119 __________ Printed for the use of the Committee on Government Reform Available via the World Wide Web: http://www.gpo.gov/congress/house http://www.house.gov/reform U. S. GOVERNMENT PRINTING OFFICE 82-306 WASHINGTON : 2002 ___________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 2040-0001 COMMITTEE ON GOVERNMENT REFORM DAN BURTON, Indiana, Chairman BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California CONSTANCE A. MORELLA, Maryland TOM LANTOS, California CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York ILEANA ROS-LEHTINEN, Florida EDOLPHUS TOWNS, New York JOHN M. McHUGH, New York PAUL E. KANJORSKI, Pennsylvania STEPHEN HORN, California PATSY T. MINK, Hawaii JOHN L. MICA, Florida CAROLYN B. MALONEY, New York THOMAS M. DAVIS, Virginia ELEANOR HOLMES NORTON, Washington, MARK E. SOUDER, Indiana DC STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland BOB BARR, Georgia DENNIS J. KUCINICH, Ohio DAN MILLER, Florida ROD R. BLAGOJEVICH, Illinois DOUG OSE, California DANNY K. DAVIS, Illinois RON LEWIS, Kentucky JOHN F. TIERNEY, Massachusetts JO ANN DAVIS, Virginia JIM TURNER, Texas TODD RUSSELL PLATTS, Pennsylvania THOMAS H. ALLEN, Maine DAVE WELDON, Florida JANICE D. SCHAKOWSKY, Illinois CHRIS CANNON, Utah WM. LACY CLAY, Missouri ADAM H. PUTNAM, Florida DIANE E. WATSON, California C.L. ``BUTCH'' OTTER, Idaho STEPHEN F. LYNCH, Massachusetts EDWARD L. SCHROCK, Virginia ------ JOHN J. DUNCAN, Jr., Tennessee BERNARD SANDERS, Vermont ------ ------ (Independent) Kevin Binger, Staff Director Daniel R. Moll, Deputy Staff Director James C. Wilson, Chief Counsel Robert A. Briggs, Chief Clerk Phil Schiliro, Minority Staff Director Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations STEPHEN HORN, California, Chairman RON LEWIS, Kentucky JANICE D. SCHAKOWSKY, Illinois DAN MILLER, Florida MAJOR R. OWENS, New York DOUG OSE, California PAUL E. KANJORSKI, Pennsylvania ADAM H. PUTNAM, Florida CAROLYN B. MALONEY, New York Ex Officio DAN BURTON, Indiana HENRY A. WAXMAN, California J. Russell George, Staff Director and Chief Counsel Earl Pierce, Professional Staff Member Justin Paulhamus, Clerk David McMillen, Minority Professional Staff Member C O N T E N T S ---------- Page Hearing held on February 15, 2002................................ 1 Statement of: Everson, Mark W., Controller, Office of Federal Financial Management, Office of Management and Budget; J. Christopher Mihm, Director, Strategic Issues, U.S. General Accounting Office; and Gaston L. Gianni, Jr., inspector general, Federal Deposit Insurance Corp., vice chair, President's Council on Integrity and Efficiency........................ 7 Sessions, Hon. Pete, a Representative in Congress from the State of Texas............................................. 2 Letters, statements, etc., submitted for the record by: Everson, Mark W., Controller, Office of Federal Financial Management, Office of Management and Budget, prepared statement of............................................... 10 Gianni, Gaston L., Jr., inspector general, Federal Deposit Insurance Corp., vice chair, President's Council on Integrity and Efficiency, prepared statement of............ 43 Mihm, J. Christopher, Director, Strategic Issues, U.S. General Accounting Office, prepared statement of........... 27 Sessions, Hon. Pete, a Representative in Congress from the State of Texas, prepared statement of...................... 5 THE PRESIDENT'S MANAGEMENT AGENDA: GETTING AGENCIES FROM RED TO GREEN ---------- FRIDAY, FEBRUARY 15, 2002 House of Representatives, Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations, Committee on Government Reform, Washington, DC. The subcommittee met, pursuant to notice, at 10:30 a.m., in room 2154, Rayburn House Office Building, Hon. Stephen Horn (chairman of the subcommittee) presiding. Present: Representatives Horn. Staff present: J. Russell George, staff director and chief counsel; Bonnie Heald, deputy staff director; Henry Wray, senior counsel; Earl Pierce, professional staff member; Justin Paulhhamus, clerk; Michael Sazonov, intern; David McMillen, minority professional staff member; and Jean Gosa, minority clerk. Mr. Horn. A quorum being present, the Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations will come to order. Improving the performance of the Federal Government is central to the jurisdiction of this subcommittee. Making the Federal Government work more efficiently and effectively has taken on renewed importance in the wake of September 11th. The Federal Government suffers from a host of seemingly intractable management problems that undermine its ability to deliver the performance that American taxpayers expect and deserve. These problems affect virtually every area of the Federal Government. They include critical computer security weaknesses, pervasive financial management woes, and the inability to demonstrate what most Federal programs accomplish. As a subcommittee chairman, I have spent the last 7 years examining these problems. What I find most frustrating is that the problems do not need to persist. For the most part, solving them does not require new laws or major infusions of money; it does require strong leadership at the highest levels of the government. Such leadership must be coupled with sustained commitment to focus on the problem and to hold people accountable until the job is done. President Bush and his administration have demonstrated an unprecedented commitment toward solving these deeply ingrained governmentwide problems. The President's management agenda, which was unveiled last August, targets five major areas that need well-focused attention: hiring and retaining a skilled and motivated Federal workforce; eliminating the government's pervasive inability to properly manage its money; ensuring that Federal programs achieve effective results from their massive investment of tax dollars; expanding electronic government; and the last of the five areas, increasing public-private competition for commercial types of Federal functions. The President's new budget contains a scorecard showing how Federal agencies rate in each of these five areas. The scorecard uses a traffic light approach: green for success, yellow for mixed results, and red for unsatisfactory. Not surprisingly, the scorecard is ablaze in red. The budget also includes a roadmap of specific goals to help agencies move from red to green. The Office of Management and Budget did the scoring. We understand that the President personally discussed the scores with agency leaders during their budget reviews. The Office of Management and Budget will evaluate agencies every 6 months on their progress toward improving their performance in each of the five areas. A new round of scores is to be in each part of the budget in the future. In addition to the management scorecard, the President's budget includes specific assessments of the effectiveness of selected agency programs and activities. Poor performers do not like scorecards. However, after using scorecards extensively as an oversight tool, I can attest they work. They focus attention on the problem, they provide a framework for assessing progress, and they promote accountability. The budget scorecard follows the approach the subcommittee used to focus the executive branch and agency attention on the Y2K computer challenge. With sustained attention, the scorecard can have similar success in resolving these important governmentwide problems. I welcome today's witnesses, and I look forward to working with each of you to ensure the success of the President's management improvement agenda. I am delighted to have as one of our Members today the gentleman from Texas, Mr. Pete Sessions, who is the head--and began it--of the Results Caucus. He has Members from both parties in the House of Representatives, and it is wonderful to have him here again. He was in this work for many years, and then he went to the Rules Committee. I am delighted to have Pete Sessions here, and if you would like to give an opening statement, please do. I have read it, so it is good. STATEMENT OF HON. PETE SESSIONS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS Mr. Sessions. Mr. Chairman, thank you so much. It is a great honor not only to be with you today, but a cadre of people who are assembled today for the purpose of not only having a better government and living up to that, but also for accountability within the U.S. Government. It is no surprise to me that the people who are here today are those that have been around for quite some time and have watched not only your leadership but your skill at making sure, Mr. Chairman, that this issue is in the forefront of not only the Members of Congress' minds, but also the administration. This administration, I believe, has a focus not only upon the things that this committee and this subcommittee have been attempting to accomplish for quite some time, but they came into the job with the knowledge that for our government to work effectively, it is not about throwing money in it; it is about throwing results and accountability, which will allow us the chance to have a government which, in the long run, works best when we need it. As I have stated many times, Mr. Chairman, the goal of all of this is for us to give every single dollar to the government that it needs, but not a penny more. And when we go about marrying up accountability with the budget process, then we will find that accountability, in fact, happens. Mr. Chairman, I do have an opening statement that I would like to ask unanimous consent to enter into the record. Mr. Horn. Without objection. Mr. Sessions. I would like to make several comments this morning about the nature of my participation. OMB Director Mitch Daniels said that the budget should not be merely how much but how well it accomplishes its goals. Results are now going to be the focal point of the Bush administration. I testify today in support of this portion of the administration's budget that offers a reform-based plan to ensure accountability to taxpayers. Now, more than ever, this government needs money to be spent properly. Now, more than ever, we need to make sure that the focus of the needs for that money go properly, and as we have seen demonstrated as a result of September 11th, the need stretches all across government. It is not just about FEMA, it is not just about welfare or assistance programs that we have, it is not just about making sure that our military has the things that they need to combat terrorism, it is not just about a sharing of information to ensure that our intelligence community is working properly, it is about making sure that all of these are done effectively and efficiently so that we are prepared to avoid the next problem; and certainly inefficiency by itself breeds inaction and the inability to be prepared. Mr. Chairman, I am sure you are aware of this, but there is a new example of this Congress taking the initiative on behalf of appropriators. In the House Appropriations Transportation Subcommittee, Hal Rogers has already made sure that he became engaged in this when he cut the bonus pool for fiscal year 2002 at the Federal Aviation Administration by half and the bonus money of the Department of Transportation by one-seventh because these agencies failed to meet their target under the 1993 Government Performance Results Act. Mr. Chairman, this is how you marry up with getting results. If we hold people accountable, if we give them the things they need and they do not measure up to what we have asked them to do and what they have committed to do, in fact there should be something at risk, and certainly a bonus pool is a quick way to do that. Mr. Chairman, as you know, our President has talked many times about the need to make sure that government is efficient; but in particular, I believe this administration has gone as far--or what I would say, further than perhaps what the roadmap would have talked about. Today we are going to hear a great deal of testimony about what is called the red light, yellow light, green light. And I believe that when you come into a job, any job, you should do an evaluation of where you are to know where you are going to head. In particular, I believe what is called the executive branch management scorecard is something that will offer us not just a red light, green light, or yellow light as to their total success, but rather to break it down into the categories that are necessary: human capital, competitive sourcing, financial management, e-Government, and performance and budget integration. These are the areas which I believe President Bush has focused on, and he will direct each of his Cabinet-level officers, and in fact the entire government, to make sure that it is not just a matter of living within the budget, it is not just a matter of looking at one part of the business, but rather a bold initiative and a plan which will offer his administration the ability to take resources, the meager resources, the humble resources, that come from the taxpayers, and make sure they are turned into action. I would like to quote the President because, by and large, this is what the President has said as part of the initiative. President Bush said, ``It is a bold plan, and it is matched by a bold agenda for government reform.'' Mr. Chairman, for the first time in a long time, I can tell you that I believe that the Congress of the United States, much of it through your leadership and the leadership of Chairman Dan Burton, has offered an opportunity for this administration to work hand-in-hand so that this administration and every single government employee will recognize that we value their jobs, we value the time that they spend; but more importantly, that their time adds up to be a value-add for the taxpayer and for the effort of the American people. I am one person who believes that America's greatest days lie in our future; I do not believe they are behind us. But if we do not transform effectively and efficiently those things that we have, we will find that people will look to other sources, other than the government, because it will be inefficient and sooner or later become corrupt. I believe that our President and the people of this administration, as well as your leadership, offer a vision of hope and a real chance to say that if we continue down the path we are going, that when it is our time to leave and the President's time to leave, that we can say we did a job that was well done. I think that is the ultimate compliment and an ultimate goal which we should aim for. Thank you for allowing me to be here today. Mr. Horn. Without objection, we want you here and your statement. Mr. Sessions. Thank you. I want you to be aware that your leadership makes a huge difference, and I appreciate you very much. [The prepared statement of Hon. Pete Sessions follows:] [GRAPHIC] [TIFF OMITTED] 82306.001 [GRAPHIC] [TIFF OMITTED] 82306.002 Mr. Horn. Thank you. I want to echo what you previsouly said and say that Hal Rogers did an outstanding job. I have never seen an appropriator or any authorizer--and when he got all of the airlines and different security groups these last few months, he brought them in at 10 a.m. and said, ``We are not letting you out of here until 5 o'clock, and we are going to find out what happens, and we want you to come back a week or so later.'' He did, and he went right down the line. I told him, ``I wish every authorizer and appropriator would do exactly what you are doing,'' because we finally got progress. People had to talk to each other. So that was very worthwhile, and he ought to get a statue somewhere around this Capitol. Now we are going to start with our fine witnesses here, and we, as you know, are an investigative committee, so we give the oath to our guests. If you will raise your right hands, and any of your assistants that are going to whisper in your ear, I want them under oath, too. [Witnesses sworn.] Mr. Horn. The clerk will note that all the witnesses affirmed the oath. Now we will begin with the Honorable Mark W. Everson, Controller, Office of Federal Financial Management, Office of Management and Budget. Mr. Everson has a very fine record, and we are glad to have him before us. This is exactly what is needed. The controller role in the Office of Federal Financial Management within OMB is a statutory office, and the work he can do will make a real difference in the executive branch. He is also vice chairman of the President's Management Council, and prior to coming to the Bush administration in August, Mr. Everson served as group vice president, Finance, of S.C. International Services, Inc., which is a $2-billion, privately owned, Dallas-based food services company with leading market positions in both airline catering and home meals solutions. If you had stayed there and turned that into security, you would probably be a billionaire. But that is one of our major problems. So we are delighted to have you. If you could, we have read your text, and if you could summarize it, we would appreciate it. A lot of people have airplane trips and whatnot. So please proceed. STATEMENTS OF MARK W. EVERSON, CONTROLLER, OFFICE OF FEDERAL FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET; J. CHRISTOPHER MIHM, DIRECTOR, STRATEGIC ISSUES, U.S. GENERAL ACCOUNTING OFFICE; AND GASTON L. GIANNI, JR., INSPECTOR GENERAL, FEDERAL DEPOSIT INSURANCE CORP., VICE CHAIR, PRESIDENT'S COUNCIL ON INTEGRITY AND EFFICIENCY Mr. Everson. Certainly. Thank you, Mr. Chairman, Congressman Sessions. I would note, I just learned since my moving up here, he would have been my Congressman, I gather, shortly, with the changes in Texas. But thank you both for your interest in this subject. This is my first time before the Congress since I was confirmed, and I am delighted that it is on this subject, because your leadership, Mr. Chairman, on scorecarding, on accountability, is something that we are trying to emulate and further in the work that we are doing. I will cover two principal subjects in my brief remarks, and one third, on the particular initiative that I think merits some reflection. You both have well articulated the President's management agenda. There are five governmentwide initiatives that were selected to be focused upon because they are pervasive, they cut across all of the departments in terms of a lot of work is left to be done, no matter where you turn. That does not mean that we are not focusing on additional areas. As you know, there are nine additional initiatives that are department-specific that we are looking at, that the President is tracking as well. But the bulk of the commentary and the effort in the management scorecard that you have mentioned pertains to the five. They are the strategic management of human capital, competitive sourcing and improving financial management, expanding electronic government, and also budget and performance integration. The scorecard itself, as you indicated--and we have it over here--shows a lot of very poor marks. Eighty-five percent of the initial evaluations which we conducted as of the end of September 2001, this last fiscal year, were red. That means that against standards that we articulated, developed, and vetted with outsiders--financial management, for instance, we took them to the Comptroller General, to the Secretary of the Treasury, my boss, Mitch Daniels--it was not just an OMB, effort, though--to make sure that we did good, strong standards in each area. The way the scorecard works, to get the green you have to meet a whole series of what we call ``core criteria'' for well- managed enterprises, a private-sector-like standard, if you will, applied in the government context. But on the other hand, you are red if you have any one of a number of serious flaws. Again, in financial management, my area, an example of that would be if the auditor is unable to express an opinion on your financial statements. So, unfortunately, in 85 percent of these measured categories, the government agencies and departments are red as of the end of the last fiscal year. I think there is a lot of opportunity for progress. We will be tracking the progress side. Agencies are currently finalizing their plans to get themselves out of the ditch, if you will. That is an active and ongoing discussion between OMB and also OPM, which is the leader in human capital, that initiative, and the departments and agencies. The second subject I would very briefly touch on is what you talked about, performance and results. You will notice as you go through this document--and I really do commend it to you, a whole new approach--we are trying to tie together performance of programs. As you know, GPRA had six principal objectives. One of them was certainly performance. This document for the first time goes through and highlights major programs, and not only those by any means, and takes a shot at an honest evaluation of the effectiveness of the program: Is the money getting the desired outcome that the taxpayer can expect? It is a first effort, it has a long way to go, and we welcome the input of the committee and other interested parties in helping us develop a performance budget-based concept. I want to close with just one particular--a plug for one particular initiative. It is in the accounting area. The budget has made a change in the accounting for certain of the retirement costs. There was an inconsistency in law. The bulk of the retirement costs under the first program in the military retirement system is already charged directly to programs, but some of the retirement costs for the older system, the predecessor system, were still held centrally. We have taken a first step, which was conceptually called for by the AIGA, the Association of Government Accountants, and endorsed in principle by the Joint Financial Management Improvement Program, which again includes the Secretary of the Treasury and the Comptroller General, to change this presentation so all the retirement costs for employees will actually be charged in the budget against programs. We think that is greater transparency, greater accountability, and an important first step in trying to marry up dollars and results. Those are sort of the three points I would like to emphasize this morning, Mr. Chairman. [The prepared statement of Mr. Everson follows:] [GRAPHIC] [TIFF OMITTED] 82306.003 [GRAPHIC] [TIFF OMITTED] 82306.004 [GRAPHIC] [TIFF OMITTED] 82306.005 [GRAPHIC] [TIFF OMITTED] 82306.006 [GRAPHIC] [TIFF OMITTED] 82306.007 [GRAPHIC] [TIFF OMITTED] 82306.008 [GRAPHIC] [TIFF OMITTED] 82306.009 [GRAPHIC] [TIFF OMITTED] 82306.010 [GRAPHIC] [TIFF OMITTED] 82306.011 [GRAPHIC] [TIFF OMITTED] 82306.012 [GRAPHIC] [TIFF OMITTED] 82306.013 [GRAPHIC] [TIFF OMITTED] 82306.014 [GRAPHIC] [TIFF OMITTED] 82306.015 [GRAPHIC] [TIFF OMITTED] 82306.016 [GRAPHIC] [TIFF OMITTED] 82306.017 Mr. Horn. I am glad you mentioned that. I have asked the staff to take a look at the accounting practices of various regulatory authorities within the executive branch to see if we are making some mistakes here. You are apparently on top of that, and I am glad to hear about that. Mr. Everson. Thank you. Mr. Horn. I might say, since all you Dallas people are here, there is one important Dallas person that wanted to come here very badly, but he had a longtime commitment. But he has been with us from the very beginning on the GPRA, so-called, the performance and results, and that is the majority leader of the House of Representatives, Mr. Armey. He is retiring this year and I am retiring this year, and we would like to get a lot of things done before all these things happen. But he has been, from the very beginning, fighting for performance and results, so we are sorry he is not with us today. But Dallas seems to be doing good. Mr. Sessions. I will second that, Mr. Chairman. Mr. Horn. Gee, I thought you would. I have been in your fine city. Next is the gentleman from the General Accounting Office, our right arm, and that is Christopher Mihm, the Director for Strategic Issues in the U.S. General Accounting Office. For those that do not know, that office has been in the legislative branch since 1921, and the head of it is the Comptroller General of the United States. They do excellent work, and at every hearing we get into we try to give them a 6- month or 4-month lead, and we always like to hear what they have to say on the issue at hand. Mr. Mihm, welcome here again. Mr. Mihm. Thank you, Mr. Chairman and Mr. Sessions. Once again, it is always a great honor to appear before you. Of course, I will take your guidance and just hit the highlights of my written statement. My major point this morning is that the administration's plan to use the scorecard to highlight the agencies' progress in achieving the goals embodied in the management agenda is a very promising first step. As we have seen by your example, Mr. Chairman, grading agencies on their progress can be an effective incentive to improve. Mr. Sessions, as your efforts in leading the Results Caucus have underscored, many of the challenges agencies face are longstanding and complex, and will require some inspired and sustained attention. Therefore, as this subcommittee has emphasized by the topic of this hearing, the value of the scorecard is not in the scoring, but in the degree to which the scores lead to demonstrable improvements. As you mentioned in your opening statement, Mr. Chairman, what we need now is leadership, hard work, and accountability until the job is done. With that in mind, there are three points that I just want to touch on very briefly. First, the President's five governmentwide initiatives cannot be successfully addressed in an isolated or piecemeal fashion, separate from one another or from other management challenges and in high-risk areas facing the agencies. The administration clearly appreciates this, as their budget documents demonstrate. We believe that the initiatives must be addressed in an integrated way to ensure that they drive a broader transformation of cultures within Federal agencies. At its essence, this cultural transformation must seek to have Federal agencies become less hierarchical, less process-oriented, less stovepiped and inwardly focused, and more flat, partnerial, results-oriented, integrated, and externally focused. This integrated thinking also needs to be applied to programs and mission areas, as you pointed out, Mr. Sessions, in your comments about government post-September 11th. My second point this morning is that while agencies will have to undertake the bulk of the effort in addressing their respective management weaknesses, the improvements needed have important implications for the central management agencies as well. OMB, OPM, the General Services Administration, the Department of the Treasury will need to remain actively engaged throughout the planning and implementation of the President's initiatives in order to ensure that the agencies bring to bear the resources and capabilities they need to make real progress. The central management agencies, therefore, need to ensure that they, too, have the capabilities in place to support and guide efforts. These will be critical to help agencies identify root causes of their management challenges, pinpointing specific actions, providing agencies with tools and additional support, including targeted incentives where needed, to address shortcomings and assist agencies in monitoring and reporting progress. Third and finally, in implementing the President's management agenda, it will be important to ensure that improvement plans and status information are made available so that Congress, other interested parties, and the public can help identify solutions and assess progress. It can only be through the continued attention of Congress, the administration and Federal agencies that progress can be sustained and, more importantly, accelerated. Transparency, therefore, will be crucial to making lasting and effective changes. In summary, Mr. Chairman and Mr. Sessions, highlighting attention to longstanding management weaknesses through the President's management agenda and the executive branch management scorecards are certainly important steps in the right direction. At the same time, it is well recognized that consistent progress in implementing these initiatives will be key to making real improvements in performance and management across the Federal Government. We are pleased that this subcommittee and others in Congress have turned to GAO for assistance on Federal management issues, and of course, we look forward to continuing to assist Congress and agencies in this regard, and would certainly be pleased to provide any additional assistance that you may request. I would be happy to take any questions that you may have. Mr. Horn. Well, thank you very much. [The prepared statement of Mr. Mihm follows:] [GRAPHIC] [TIFF OMITTED] 82306.018 [GRAPHIC] [TIFF OMITTED] 82306.019 [GRAPHIC] [TIFF OMITTED] 82306.020 [GRAPHIC] [TIFF OMITTED] 82306.021 [GRAPHIC] [TIFF OMITTED] 82306.022 [GRAPHIC] [TIFF OMITTED] 82306.023 [GRAPHIC] [TIFF OMITTED] 82306.024 [GRAPHIC] [TIFF OMITTED] 82306.025 [GRAPHIC] [TIFF OMITTED] 82306.026 [GRAPHIC] [TIFF OMITTED] 82306.027 [GRAPHIC] [TIFF OMITTED] 82306.028 [GRAPHIC] [TIFF OMITTED] 82306.029 [GRAPHIC] [TIFF OMITTED] 82306.030 Mr. Horn. We have one more witness, and then we will go to questions. The Honorable Gaston L. Gianni is Inspector General, Federal Deposit Insurance Corp., vice chair of the President's Council on Integrity and Efficiency. We are glad to have you here. Thank you. Mr. Gianni. Thank you, Mr. Chairman, Mr. Sessions. It is a pleasure to be here today to discuss the President's management agenda and the role of the Inspectors General community in accomplishing this agenda. Specifically, this morning, I would like to share with you some information about the community's expertise, the views of the agenda itself, and then our role in overseeing, as well as facilitating, the accomplishments and progress under this. Almost 24 years ago, the Congress created the IG concept and developed and enacted it into law. While the act has been amended several times over the years and added new IGs and clarified reporting responsibilities, the basic tenets of the act's intended mission have remained constant and strong. The role of the IG is to protect the integrity of government programs through traditional audits and other reviews; improvement of program effectiveness; and preventing fraud, waste, and abuse. The Offices of Inspector General bring to bear a longstanding historical perspective on the challenges and opportunities facing our government. Offices of Inspector General offer stability and broad-based knowledge and expertise on individual agencies and the government as a whole. In addition to our agency-specific reports, each OIG summarizes its report semiannually to the Congress. The community recently has provided assistance to the House Committee on Government Reform, and played a significant role in advancing the implementation of the Government's Performance and Results Act. Many Offices of Inspector General have been providing independent assessments, as well as insights and advances, to help promote this important legislation. We envision the implementation of the management agenda to be quite similar to the GPRA effort, and because of past contributions, believe we are well qualified to offer our assistance. We recently put together a strategic framework which lays out our mission and operations for the next 3 years, which will try to be providing support to our agencies and leadership in government. Our annual report to the President last year detailed the pivotal role IGs have played in the area of information technology, GPRA, financial management, and program integrity. Through our results, we have uncovered potential savings of $9.5 billion, and identified $5.5 billion as possible recoveries. For the past 3 years, we have been summarizing the management challenges facing our agencies and submitting that report to the Congress. We are prepared to support and help the administration make progress on our agencies achieving results in the five areas. Members of the IG community believe that major management challenges are not only for their respective entities, but also within their own organizations. The theme of our recent Journal on Public Integrity emphasizes the challenges for the government in the area of human capital. In the March 2001 management's challenges summary, 18 of 27 IGs cited human capital as their top agency challenge, compared to 7 in the previous year. Many Offices of Inspector General are addressing this. In the competitive sourcing area, as the Federal Government increases its competitive resource programs, oversight of agency contract activities will take on added importance. As a note of caution, the Federal Government has been lax in its contracting oversight. Our annual report to the President lists example after example of poor oversight. More than 27 IGs identified this as a major challenge. We note that appropriate internal controls and oversight in these areas must be in place to ensure that the goods and services are not only meeting the needs of the government and the public, but that they are provided in the most cost- effective manner. In the financial management area, since the 1990's, we have been working with our CFOs to help them get to a clean opinion. Last year, 18 of the 28 CFOs reached a clean opinion status. We are continuing to work with our CFOs and to assist them to move to the green. One area of caution: As the administration pushes and has setup a goal for more timely financial statements, this is going to put on an added burden and challenge for the government agencies. We are working with the CFOs to think through these challenges and how this goal might be accomplished. In expanding electronic government, Offices of Inspector General have a substantial amount of expertise in this area. Appropriate controls, again, need to be in place to safeguard sensitive data and critical systems of our government. All 27 IGs have identified this as a major challenge. We have helped the Congress with both the GPRA as well as the Y2K, and we are positioned to help again to see that the management agendas are initiated. In the area of budget and performance, the IG community continues to consider GPRA implementation a significant agency challenge. Last year, we provided to Chairman Burton an analysis of each of our agency's management objectives under GPRA, and whether those goals were quantifiable and how they might better achieve them. Overall, we believe the initiatives contained in the President's management agenda are a promising first step. Having said that, success of these initiatives can only be achieved through updated, integrated information systems. As such, agencies will need to invest in updating their financial and program information systems and ensure that these systems are developed and approved in accordance with standard system architect programs. We are in a position to help. We stand ready. Our strategic framework tasks us to be ready and responsive to our agencies and their needs. We are working with the CFO community as it addresses the erroneous payments situation. Individually, IGs build relationships with their agency heads and strive to be influential forces in identifying vulnerabilities and facilitating excellence. Simply put, our job is to oversee operations and recommend ways to make them better. We view ourselves as agents of positive change. An IG is clearly in a position to oversee the progress an agency makes in moving from red to green on the scorecard, and to offer them insights on opportunities to further advance the agency's progress. Depending on the need of the individual agency, an OIG can offer feedback on the scorecard measures and verify and validate the measures and processes. An OIG can target its audits to advance the agenda that would be of the greatest help to its agencies. While challenge and vulnerability and risks have affected the focus of Offices of Inspector General's work and priorities over the year, we have adapted to these challenges and these changes and remain relevant and on point. I believe that the management agenda offers us another opportunity to align our forces. While I cannot speak for each IG or how they will approach their work, I am confident that each IG is mindful of the importance of the management agenda, and will develop strategies to provide the most valuable input to their agencies. In summary, IGs were given the authority to be independent voices of economic efficiency and effectiveness within the Federal Government. We take this authority and responsibility very seriously as we are committed to promoting integrity, accountability, and transparency within our respective agencies. As always, Mr. Chairman, we appreciate your support of the IG mission and the community, and look forward to a continuing dialog to maintain a constructive relationship with you and the committee. Mr. Horn. Thank you very much. That is a very thorough statement. [The prepared statement of Mr. Gianni follows:] [GRAPHIC] [TIFF OMITTED] 82306.031 [GRAPHIC] [TIFF OMITTED] 82306.032 [GRAPHIC] [TIFF OMITTED] 82306.033 [GRAPHIC] [TIFF OMITTED] 82306.034 [GRAPHIC] [TIFF OMITTED] 82306.035 [GRAPHIC] [TIFF OMITTED] 82306.036 [GRAPHIC] [TIFF OMITTED] 82306.037 [GRAPHIC] [TIFF OMITTED] 82306.038 [GRAPHIC] [TIFF OMITTED] 82306.039 [GRAPHIC] [TIFF OMITTED] 82306.040 Mr. Horn. We'll now go to questions. The questioning will be by my colleague, the gentleman from Texas, Mr. Sessions. Mr. Sessions. Thank you, Mr. Chairman. I will remind this group, and I hate to do this, I do have a plane to catch. Unfortunately or fortunately, I chose to spend the night, but my son has a campout this afternoon, and I promised to help him pack. Boy, that road to being an Eagle Scout is a long one, and it does take parents to be involved. My questions have now been provided to Mr. Everson. I would like to run through those very quickly. I am going to leave, but will be interested and will read this testimony. First of all, I would like to say that when you walked in today, you were preceded by a staff that is second to none. The opportunity that you have to come from Dallas, TX, from the private sector is an incredible opportunity for the President of the United States to take your expertise directly from where efficiency and the models of success come from. But your ability to transform the laws that have been passed, and the intent of this Congress for the last few years, the flavor and spirit of which we are attempting to accomplish, is embodied directly by each of your staff members. I know many of them personally and have worked with them, and they are men and women of high caliber. It is my hope that when we have some time in the near future, I will have a chance to sit down with you, now that you have gotten your feet on the ground. The essence of my three questions that I would like to have you at least ponder--and if you would like to provide written feedback later, I'm sure the chairman would be pleased to include that in the record. Mr. Horn. Without objection. Mr. Sessions. Thank you, Mr. Chairman. They are boiled down to three points. No. 1, I would like to know what your evaluation schedule is on yellow, green, and red-light. What do I mean by this? You are taking this as an initiative that does not override the laws of the U.S. Congress. This is the Bush administration's plan about how they are going to offer their own initiative to get them on track to then comply with GPRA and other laws that the Congress has mandated. But I am interested in hearing from you something that we then will put as a marker in our file to get back with you, to find out what you have done. We do not want you to trudge along this path without two things, No. 1, a mark that you have set. You are here today establishing not only a precedent about where the Bush administration will be, but also a roadmap for us. We don't want you to trudge a mile in your own sandals, we want to help you along, so that evaluation period would help us. No. 2, I am interested in the feedback to GAO that is the arm of the U.S. Congress on being held accountable on your plan. How should we look at you? How are we going to evaluate you? It is one thing for you to come up here and to talk about the administration, but I believe we should hold you accountable for your words and your expectations, also. I believe Mr. Mihm is very astute at not only carefully understanding this, but establishing something where we might have a working relationship. I would like for you, too, to establish what those goals and objectives will be, because you will be before us, hopefully, many times to offer that. And unfortunately, in this offer and evaluation, Mr. Mihm is our scorekeeper. I trust him, and I think it is fair to establish that goal up front: once again, feedback to the GAO on how you want to be held accountable on your plan, the President's plan. Last, for quite some time I have been concerned about the integration of Inspectors General into the overall management of an organization. There are certainly, over the years, opportunities where there are success models, and there are opportunities where there have been unsuccessful role models. I am interested in hearing from you, even if it is in written testimony to follow this up, on your plan, the administration's plan, about the use of IGs. Their role which is as defined in law is something you will have to deal with. I am interested in an open and honest evaluation, how they can become value-added in a new role, not in a different way, but in a new way for them to become more integrated, so that this administration can accomplish those goals. I will tell you that the three of you who are on this panel before us are honest people who are not only well-intended, but who I expect to be very successful. So I say this with a sense of hope and optimism, not with a sense of reluctance or a challenge that cannot be met. But I encourage you to make sure, Mr. Everson, that we are hearing from you as the President's lead initiative person on how we are going to hold you not only accountable, but to work through this. And last, please tell us what we can do to help you out, because it would be insincere of me to say ``Go get them'' without me saying that we are here to help, also. With that said, Mr. Chairman, unfortunately I am going to leave. I have teed up three or four issues and provided them to Mr. Everson in writing, scratched out on a pad, but I believe that he has a good sense of the spirit of what I am asking. I want to thank you, Mr. Chairman, for allowing me the opportunity to be in front of this subcommittee today. I want to thank Henry Wray, who is the gentleman to my right, who is a kind and caring gentleman who has a long background in government efficiency. I am delighted that he is with this subcommittee today. Mr. Horn. Thank you. We are delighted, and may you have a good trip. We are now going to go to some questions. One of the things that interests me is, I put a non-tax- delinquent debt situation in the public laws about 4 or 5 years ago, and I notice on your page 5, at the bottom, Mr. Gianni, it says that ``Last year, 21 of 27 Inspectors General considered financial management as a continuing management challenge,'' and I am delighted to see that. One area where the IG community identified a governmentwide problem in financial management and provided recommendations was on the Federal collection of the non-tax-delinquent debt that amounted to over $46 billion. Now, does that pretty well-- that did come back into the Treasury? Mr. Gianni. Mr. Chairman, that money has not yet come back into the Treasury. There are a variety of reasons. We identified some of the reasons in our initial study, and made some recommendations to the respective agencies as to how they could improve the overall collections of those. We still have some agencies that have yet to take a hard look at how the debt is being collected, but I go back to the President's management reform on erroneous debt. They are focusing on trying to figure out a methodology of estimating that debt, and then once that methodology is arrived at and agreed upon, agencies will then determine how they can best go back collecting that debt. So we are taking a more thoughtful process, and the IGs are working with the CFOs on this Presidential initiative. Mr. Horn. One of the things that I have tried to get when I was looking at this from the IRS view, which is the tax debt-- and what got me into this was when I saw one pile of money, $100 billion, that they had not collected. The then- Commissioner said, ``Well, I have $60 billion that maybe we could collect.'' I said, ``Did you ever think about private collectors?'' ``Oh, my heavens, it is privacy.'' Well, it isn't privacy. Give them the address, tell them what the IRS says they owe, and if they have some objection to how they did it, then fine, get the IRS personnel there to do that. But we need to pick it up, and it is just crazy to have all of the rest of us in the United States pay our taxes and these people get away with it. I have never seen any executive branch suggestion with us on the tax debt. I would hope that the President, since we need to scrape around here for a little money for all the things we have got--a war in Afghanistan, $40 billion to try and help the city of New York, and so on and so on and so on--now we ought to be going after that tax debt. Commissioner Rossotti is a very fine person, and I was delighted that the administration kept him over, because we asked President Clinton to look for somebody who really knew what they were talking about in computers and taxation and so forth. He has been that. But what we have to do is collect that tax debt, and that is what has not been done. I would hope President Bush and OMB would zero in on it. In terms of the non-tax debt, Secretary Rubin was the one that helped us the most. He got the executive branch, under President Clinton, and we had some pick-ups of money to the tune of billions. I have not talked to the Secretary of the Treasury, but I think he would be of the same view, to tell his colleagues in Education, in Agriculture, in HUD, all of those where there is a lot of defaulting, that we need to do something about it. What is your feeling on that? Maybe you have not had a chance to look at it, Mr. Everson. Mr. Everson. I think you are raising important issues that go to the heart of financial management, and those are at the core of what obviously are two thrusts in the improved financial management initiative. One is accurate and timely information that you use for financial purposes and operating purposes to make decisions about what you are doing and whether you are going to spend money on A or B, but the second is clearly just controlling the funds. Debt recovery is a very real element of this. We have not yet focused on that specific element to the degree that I believe we will down the road. We are starting with the erroneous payments component of this, which is the current generation of overexpenditures in programs, or in some cases, underexpenditures where a beneficiary is not receiving the moneys that they are entitled to. As my panel colleague indicated, we have moved forward and I think sort of--it gets to Congressman Sessions' question in a collaborative manner where OMB asked the CFO counsel to work jointly on erroneous payments with the PCIE. I am not sure, Gaston, that has been done too often in the past in a very deliberate, joint committee structure, but that is an important initiative, just to start on that process. We are going to--we have over 53 programs where we are tracking the error rates, and we have plans that have been developed. We are going to work with the agencies to see how they improve the controls over the expenditure of funds and drive down those error rates. Going to the debt recovery itself is another element that is covered in one instance in the specific initiative of the Education Department on the student loans, where recovery is something we are working for. You are suggesting it be broadened, and I think we should consider that. Mr. Horn. Mr. Gianni, do you have any thoughts on that? You are involved with the President's Council on Integrity and Efficiency, and I just wondered, what is your look at that in terms of both tax debt and non-tax debt? Mr. Gianni. Certainly, Mr. Chairman, I think all my colleagues would be interested in ensuring that their agencies have active programs to collect the debt that is owed them. Interestingly enough, at the Federal Deposit Insurance Corp., we do have a substantial amount of debt and restitutions that have been ordered to be paid to the corporation. The Corporation does have a program that continuously is seeking to try to collect those funds. In addition to that, we partner with the Corporation, my investigative staff--in those instances where individuals for some reason happen to be misleading the Corporation about the size of their funds, the locations of their funds, and lie to the Federal Government, my investigative staff have been successful in working with the Corporation in identifying these revenues and bringing additional revenues back to the Corporation. So I think it is possible for more to be done, and I certainly will take your concerns back to my colleagues at the IRS and make known your concerns about the tax debt that needs to be collected. Mr. Horn. Yes. We used to have a sort of 6-month review of the IRS, and Commissioner Rossotti has been very supportive. And Finance in the Senate, Ways and Means, the House, Government Reform, Government Relations, and so forth, we would get to this and put a little heat on it once in a while; and I have not seen that happen in the last few months. They seem to be just drifting off and letting all these things go right and left. But I am delighted that the IGs are involved, and I think that certainly is something that is just sad. If they are not involved and are not getting results out of the bureaucracy, then I think that is something that ought to be going to the Comptroller General, going to Congress and the authorizers as well as the appropriators, and say, hey, get with it. So I am glad the IGs are doing this. And again, the private collectors need to be involved. There is no reason they cannot be used. I think it was 1994- 1995, and the IRS at that time, much before Mr. Rossotti, they had a hokey little operation, when they said, we will give them that little teeny-weeny bundle and they can go out and collect it. What they gave them was a 5-year-old debt, and they didn't do anything about it. They hadn't received letters, and all the rest. Of course, if you do not get after the debt, pretty soon everybody says, ``Gee, that was a good grant they gave me.'' We can do better than that. We have to do better. We have balanced the budget, but we have got a lot of expenditures that have not been met, and we need to get at this when we have people who are going into bankruptcy and everything else. I want to help the farmer who has a problem with bankruptcy. I grew up on a farm, and I cry when people in South Dakota, North Dakota and Iowa have problems. But I do not cry when these jokers come and milk the Federal Government, milk the taxpayers, and they just--it is wrong. I would hope this administration will be vigorous on that and tax scofflaws, I guess. When I was in Bangladesh, that is what they used to call a lot of these people. Anyhow, we ought to work at that. Let me ask you about another area that this subcommittee has been very active on, and that is computer security. What is the situation with the IGs on that? Because we had a number of major agencies and independent departments and all that, and we could do better than that. So what are we getting at under the rubric of financial management? How about computer security, because a lot of that relates to how do you manage something, where you keep hackers out and all the rest of it? What can you tell us about OMB's thinking in this area? Mr. Everson. I think you are probably familiar, Mr. Chairman, that one of the first things that Mitch Daniels did when he came in was he wanted to provide greater attention to IT in general, and computer security is certainly a central element of that. He appointed Mark Foreman Associate Director for Information Technology. Clearly, one of the major thrusts of what Mark has been doing, as we organized that area, is to build on the work that you have done in the past, and others, in this important area-- it is another area--as in those that we have already discussed this morning, where we are very deficient across the government. The stakes are clearly higher now because of recent events, and I think there is more of an understanding and more of an impetus to have true change. I can only tell you that as we go through on the e- Government piece in each of our discussions with the agencies, an adequate security plan is a central piece of what we are requiring. So it is a subject that is being aggressively attacked even on the President's Management Council. We have scheduled for our April meeting a forum on this very topic so that the Chief Operating Officers, the Deputy Secretaries, if you will, focus on what their proper role is from a managerial point of view. It's not going to be presentations on the technical issues, of course, but just how do you make sure that they have the proper information to assess the management of this critical area. So we are clearly attentive to it, Mr. Chairman. Mr. Horn. Well, I am delighted to hear that. So you have obviously made an impact. Mr. Everson. We haven't made an impact yet. We're going to make an impact. Mr. Horn. The Deputy Secretaries are the ones that really have to be responsible for this, but it doesn't bother me having an IG looking over their shoulders. Mr. Gianni. Mr. Chairman, I might just add that last year Congress did pass the Government Reform Information Security Reform Act, which required all of the IGs to put together with their chief information officer a report on their government computer security. We've completed the first round of reports, provided that information to OMB. OMB has recently issued a consolidated report on government security, the condition of our security within the government agencies, and the IGs are in the process right now of working on the second round of reports that will come out later this year. Mr. Mihm. Mr. Chairman, I guess what you can add onto that is that one of the things that the administration committed to in the report that came out earlier this week on information security was to better inform security concerns within the President's scorecard. It's kind of implicitly covered both in the e-Government and certainly in the financial management areas, but now it will be an explicit mention as--at least as I read the report that came out. Mr. Horn. Was that a blue book that you gentlemen---- Mr. Mihm. This was an OMB report. Mr. Everson. Yes. It just indicated it--what it does is, it pulls together a lot of Gaston's colleagues and some of our own internal assessments and it runs through the major agencies. Mr. Horn. Well, can we get copies of that for those of us that have an interest in this? Mr. Everson. I certainly think we can get those copies to you, yes, sir. Mr. Horn. OK. Now, how can we be sure that the Federal Government is not vulnerable to some of these so-called ``potential Enron situations?'' For example, what are the safeguards that protect against evaluation and accounting gimmicks in agencies' financial statements? Mr. Everson. I want to tread carefully here. Enron is obviously a subject that is subject to very intense scrutiny at this time. I think it's important, that we on the government side, who are looking at the financial management of the government, draw back and reflect very carefully before trying to make a comparison between what happened there and our own situation. First, I would say that the most important thing that is happening there right now--and it started even before these recent events--was a new and strengthened focus on financial management. This is due in part, I would say, largely, to the players themselves; and I must commend here the leadership of General Walker who, as the chairman of the Joint Financial Management Improvement Program, pretty well insisted that a group that had been, if you will, dormant for decades but was in--established in statute in the 1950's, consisting of the Secretary of the Treasury, the Director of OMB, and the head of GAO, get together and start to tackle these issues. So the first thing that will avoid an Enron-like situation is commitment from the top that financial management matters. I think we have that now; so I think that all the parties would agree that--and we've met, I would say to you, three times just since my arrival. There was a meeting in August and a meeting in October and a meeting just 3 weeks ago where we have developed a long laundry list of things to tackle. It's preliminary, but an example of this was the decision that was taken that the Comptroller General mentioned recently in principle to explore audit committees for departments and agencies. This is another pressure point to hold people like Gaston and myself accountable. The question came from Congressman Sessions, how do you hold OMB accountable? Well, one way you do it is to have independent parties not tied either to the Department or the people who are auditing the Department or the people who are monitoring the Department, meaning folks such as myself, take a fresh look and say, well, do the books and records and does the conduct of the audit--does this make sense to those independent parties? We are going to move toward that model, and we're going to do other things as well to make sure that the disclosures are adequate. And, clearly, one of the problems whether you believe that the accounting was correct in terms of off-balance-sheet, the disclosures clearly were inadequate if the financial community couldn't understand the financial information. I think that we don't have that problem as much in government. The accounting and the integration, as we spoke before, on the retirees' side is one small example. We want to make progress there, but I do believe that the issue of Enron itself is not an exact parallel because we have good disclosure here; the issues are known with the watchdogs that we have sitting beside me, their--and CBO also from your side of the government, looking at these issues. So I think we've got a lot more tools. They just have to be pulled together in some of the ways I mentioned. Mr. Gianni. Mr. Chairman, I might add, one other thought is that the General Accounting Office recently issued standards. They issued the standards for auditing in the Federal Government and the Comptroller General took a stand and issued a stronger standard on independence and the mixing of auditing and other services. So I think the government is out in front on this particular issue and has a rather stronger concept and approach to ensuring that the difficulties won't arise. You have the GAO, you have the IGs, you have OMB, as well as the oversight from the Congress, which apparently isn't as strong in the private sector. Mr. Horn. The group of us that care about management up here and care about any type of honesty and all, we look toward those IGs that you are representing here. That was about 20, 22 years ago, the bipartisan basis, then the Chief Financial Officers, then the Chief Information Officers, so forth and so on; and I was delighted when last year I was told that the Comptroller General and the Secretary of the Treasury and the Director of OMB get together and talk about these things. That hasn't happened for 50 years. We've had a few people of the old type in GAO with Mr. McCarl and others in the 1940's. We don't want to go back to that, but when Congress put programmatic reviews, Mr. Rayburn wasn't happy with that and Mr. Cannon, head of Appropriations, wasn't happy with that. But after they died, things changed, and the GAO has done an outstanding job. I couldn't think of a better person than Dave Walker to be Comptroller General of the United States. He's a straight- shooter, and he does things that probably upset a few people, but that is the way it is, and that's the way the Congress created GAO. And so we thank you all for the GAO work that you have done. As I said earlier, I'm interested in seeing what the Federal Government has to do with accounting and if they brought it up to date and---- Mr. Everson. If I could just mention one other thing that I neglected to indicate that is pertinent to this, one of the decisions we took in August and formalized it in this last January meeting after discussion to change the composition of something called a Federal Accounting Standards Advisory Board from a government-dominated majority of 6-3, to flip that so that the private sector membership would be in the majority, 6 to 3. It's toward this same end of having a greater independence and a clearer integrity in the process so that it isn't just a spat between GAO and OMB on what the proper accounting, or CBO, that there is an independent frame of reference that is addressing all of these issues. And that is the starting point on the technical side, and if we marry it up with the change in the audit committees, I think we can go through and address the issues you're getting at. Mr. Horn. Yes. I haven't spent any time on the Enron thing except for my own constituents, but we've got committees all over this place that do that. But here's one that certainly relates to good management and bad management: What safeguards protect against conflicts of interest by outside firms that both audit agency books and provide consulting services to those agencies? What do you feel? Is there a feel on this? Mr. Mihm. The Comptroller General recently issued an amendment to the yellow book standards, which are the generally accepted standards for government auditing. This amendment had been in the works for 3 years or so, and there had been extensive public comments. Basically, it requires much more independence, stronger firewalls between the auditing sides of organizations and the side providing consulting services. In essence, audit agencies are not to be, first, engaged in management decisions; and second, they're not to be providing consulting services on things that are within the scope of their audit. We are allowed to make available our information to audited entities, but we are not to be consulting with them. So this greater degree of independence was recently underscored by the new requirements. Mr. Horn. And you didn't have to put a 60-day look at it? Mr. Mihm. No, sir. I mean, it did go through extensive comment, including some push-back from the private sector, but the Comptroller General held firm on this. I mean---- Mr. Horn. Good. Mr. Mihm [continuing]. He does not believe that firms should be providing management consulting services on the issues that are directly the subject of their audits. Mr. Gianni. Mr. Chairman, I was on the advisory board, the Comptroller General's advisory board that worked on those independent standards for the past 3 years. My term is up. I put in my 3 years on the advisory board. I'm just happy that we were able to get those standards on the street. But they did go through a process that exposed them preliminarily to the public, considered the comments, reexposed it to the public, and then recently came out with the final revision. What this does is that it prevents auditing firms in a substantial and a material way of having consulting-type activities, and it sets-up a process, a criteria that the firms must meet if they're going to do any of this type work. And if it does hit the materiality standpoint and they're also doing the financial statements, they just--it's prevented, it's prohibited under the new standards. Mr. Horn. Let me ask just a couple more questions and--you have done such a good job with your statements that we're very proud to see them. The General Accounting Office reviewed the criteria for success in improving financial management that are used in the budget scorecard. Now, did GAO review the criteria for the President's other four governmentwide initiatives, and what do you think of these criteria? Mr. Mihm. We've looked generally at the criteria across the board, and we were very pleased that OMB had a staff level turned to us when they were in draft and asked for our input and took some of our input. Of course they had to make their own judgments about what worked and what didn't work. Clearly, our guidance and products, the OMB scorecard, other messages that the agencies are seeing from Congress; the important thing is that they're all pulling agencies in the same and similar directions, and that's the important issue as far as we're concerned. For example, in the human capital area, the issues that OMB lays out on the need for integration between people considerations and program decisionmaking is exactly a point the Comptroller General has been making for some time. You and Mr. Sessions mentioned in your opening statements about the need for greater accountability and instilling a greater performance culture within agencies. That's in the President's scorecard. That's certainly something that we spend a great deal of time looking at. In summary, we've looked at the scorecard criteria in a broad sense and they're certainly consistent with where we've been taking our message and where we're urging agencies to move. Mr. Horn. I've got a personal interest here where about 2 years ago I put in a bill--and it is law now--the Chief Financial Officer in the Executive part of the Presidency; and that individual, I think, has been appointed now. I don't know if you can, but the question would be if you have a CFO in the Executive Office of the President, will that CFO be involved with the other CFOs, or will they be looked at in the Presidency to be the person that would have a lot of things to say about CFOs? Usually in control agency kinds of things like OMB, that certainly goes on the CFO agenda, and I am just curious if anything has occurred so far. Mr. Everson. I think you probably know, Mr. Chairman, one of the things the administration is trying to do is to draw together the Executive Office of the President, and that is one of the budget proposals that be a specific--one account or a lot of--simplified, so that it can be pulled together and you can get just that kind of professional approach to it where you have a Chief Financial Officer--as you say, one has been appointed--and to pull that all together and make that kind of good, smooth operation happen. And obviously, in my capacity as the acting Chair of the CFO Council, the input of that person is certainly something that is desirable and should be done; and I will make sure that they participate fully in what we are doing governmentwide to support the management agenda and to help share best practices and to attack all of these areas that we've been talking about this morning. Mr. Horn. We had, as you know, a lot of different investigations, like the Travel Office and all that---- Mr. Everson. Yeah. Mr. Horn [continuing]. And it sure was simple that we needed some people to really get the accounts down there and make some sense. Mr. Everson. Yes. Mr. Horn. And so the Clinton administration said, we won't have any--we don't want a CFO. And I said, well, how about the next President? Oh, sure, he can do that. So that is one way we get things done around here, to put it off and the time is here. Mr. Everson. Well, this is an administration--you mentioned earlier that the President himself has been using these scorecards. That is correct. I was at a meeting of all senior appointees earlier this week and he mentioned them again. So you have an administration that is entirely in line with accountability, strong support of the functions that are represented on this panel with me to just try and bring a spotlight on these issues. Mr. Horn. Along this line, will you provide the scores of progress assessments and agency improvement plans to the Congress and the public? Mr. Everson. Yes. We're going to be working with this tool on a quarterly basis, and our expectation is that twice a year we will actually make the evaluations public, probably at the midsession review, which will take place this summer. An important point that I'd like to make is that just as we did in the budget document, where the management agenda is imbedded in the text itself, the midsession review takes a look at how you're doing in terms of your financial projections. That's the right time to do it again. We want to emphasize again and again to everybody that this management focus is closely aligned to program delivery. If you don't improve the efficiency of the government, you're not going to be able to sustain program delivery. So you're going to see these things linked each time. So I imagine we'll be seeing where we stand publicly and asking for your help on--maybe if there are any laggards out there, come this summer. Mr. Horn. I'll tell you, when we were in the Y2K bit--and it took us 2 years to get the President then, Mr. Clinton, to finally face up to it, and so we did have these scorecards; and one Cabinet member of his, who was a good friend of mine, he said, ``Steve, put as many as you can in that score.'' He said, ``I am banging mine on my door, and every single member of this particular department when they go through to see me, they're going to see we got an F, and what are they going to do about it?'' So they used this to beat a few of these people over the head and think about it. So we're obviously glad to help, and Dr. Raines was very supportive of all this in OMB; and I said, hey, it's your job to do that inventory. We've been doing it; if you do it, we'll look at it. And he did, and we had regular quarterly reports that way. And, you know, trying to keep ahead of hackers on computer security is a real problem. Mr. Everson. Yes. Mr. Horn. And I hope, gentlemen, that you look at the CIA operation. We can't get them to respond. We've got five subcommittees here that are hurt by their lack of respect for the Congress, and I think that ought to upset a few people down there; because if they feel that way about Congress, I wonder what they feel about the Presidency. So that bothers me. And Chairman Burton isn't happy, and about three or four of the subcommittee chairs, including me, are not happy about this computer bit. We don't know what they're doing. But some of the services are doing terrific jobs in the Department of Defense. The Air Force has done a marvelous job over the years, and especially on Y2K they really--when Defense was going down the drain, the Air Force was getting A's. And so we'd like to have your thoughts on what we can do to be helpful, and if you have any other points you want to make now and like to get on the record, we're glad to have it, and we'll wrap it up. Mr. Everson. I really have nothing to add from what's already been stated very eloquently by yourself and Congressman Sessions and then what we said as a panel. I think they'll say, ``Well begun is half done.'' I'd to think that's where we are right now. For the first time, rather than just responding to GAO watch lists and congressional investigations, the executive branch is articulating standards that should govern the way we manage our business. That's the first step. We have fostered a climate of accountability. That is coming from the top, from the President himself. That's the second step. The rest is just mechanics. Now, that is a lot of mechanics, obviously, but the pieces of this are starting to engage. I see it because I go around in my capacity as vice chair of the President's Management Council and speak at the Department of Education to all the senior appointees, they're using the scorecard and more detailed scorecards on all of their management initiatives. So this is starting to happen, and with your help and the help of my colleagues on the panel, putting the spotlight on it, I don't think that this will slip. The reason I suggest that is because, look what happened 5 months ago in September. That was a watershed point. This initiative, this agenda, could have died in the delivery room, but it didn't. It gathered steam because of the events of September and because people recognized we have to manage ourselves better to be able to do all the things that are so central for our government. So I'm optimistic, and I thank you. Mr. Horn. Well, I thank you because that is exactly what Congress wants, which is, keep at it in terms of management. We have to. We can't--it isn't something that we can just say, oh, well, push it aside. And I'm delighted to hear your eloquent statement that you didn't push it aside, and the President is deeply involved in it. Mr. Mihm. Mr. Mihm. I think, Mr. Chairman, there've been, interestingly, three broad themes that have been coming out of here this morning, that we're all in agreement on; and I think that you touched on them right in your opening statement. And that is leadership, and that we've got to be serious and keep going forward with this and keeping drilling into agencies how serious we are about this. Second, it's going to take plenty of hard work and that there are roles for certainly the agencies, the central management agencies, Congress, GAO and the IG community to play constructively, recognizing that we have different institutional arrangements, but these are issues that we can work together on. I think third and most important, as you underscored, is the importance of accountability, that we need to start making clear that there are consequences of success and there are consequences of failure on this. People who are making progress and organizations making progress will be rewarded appropriately. There are new regulations within the last year or so that the Office of Personnel Management has issued for performance appraisals for senior executives which are, as I mentioned in my written statement, a ready-made vehicle for taking the President's scorecard and drilling them right into organizations and drilling them into the contracts that we have for our senior executives. And as you mentioned, Chairman Rogers is interested---- Mr. Horn. Well, on that point, I think every single executive in the executive branch, when they go out to make a speech somewhere on their program, they ought to go to a community college or a college, private and public, and say, we have need for talent, we have a---- Mr. Mihm. Absolutely. Mr. Horn [continuing]. Lot of people that are retiring, and you have great opportunities to serve your country, be it in uniform or be it in civilian clothes. The military groups have done this for the last 50 years to increase the talents of their people, and that is getting them into schools to get them a Master's degree, or Ph.D. We have generals all over the place that have a Ph.D., and the reason is, they know that if you don't improve your human capital, then you can't get this agency to do what needs to be done. So we ought to be doing that. I am going to try to do it everywhere I am holding a hearing, and I am holding a number of them across the country. So I would hope that your people could get out there and put themselves in, just let young people say, well, gee, you know, I didn't know the Federal Government had these good opportunities. They're marvelous. They're marvelous. Any thoughts, Mr. Gianni? Mr. Gianni. I would agree with you, Mr. Chairman, from the standpoint of, I have an optimistic view on the youth of America. I think if we present the mission of the government to the youth of America, they will come and they will serve just like I did and just like my colleagues did, to step forward to serve our country. I think if we present the government and the important responsibilities of our government in providing services to the public--it's a mission; it's a noble mission--they will step up to the challenge. Unfortunately, for too long, the Federal Government hasn't done a lot of hiring, and we've lost touch with our colleges and universities. But as the workforce has matured, we now find that we are in this crisis situation, and I think we'll start getting back to the colleges and campuses to educate our youth on the important mission and service that they can provide to our country. I just want to thank you, Mr. Chairman, for inviting me here today and let you know that the IG community stands ready to serve; and we'll continue our individual license and help the agencies make progress in this important area. Mr. Horn. We ought to have OMB have different little booklets that they can give to one of the senior civil servants when they're out doing this work, so we sing from the same hymnal; and I would think that they've got a printing press down there in OMB. So I want to thank you all for coming. It's been very useful. And I want to thank my staff that put this together and put everything together. J. Russell George, staff director and chief counsel; Bonnie Heald, deputy staff director, right next to help; and you all know Henry Wray. And Pete certainly did; he helped him a lot in the Results Caucus. And Henry Wray is the senior counsel here and he has been great help over the years in the executive branch and the Senate committee. We're delighted to have him here, and we're delighted he put this together. Earl Pierce, professional staff--where is Earl? He isn't around today. And Justin Paulhamus, the majority clerk; and Michael Sazonov, intern. They're back working. Minority staff, David McMillen, he's a regular and we count on him for a lot of help and work. We thank you for being there; and Jean Gosa, the minority clerk, is also very helpful to us. And our court reporters today are Leanne Dotson and Lori Chetakian. So thank you very much, and with that, we are adjourned. 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