<DOC>
[109 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:28243.wais]
S. Hrg. 109-520
NOMINATION OF DAVID L. NORQUIST
=======================================================================
HEARING
before the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
ON THE
NOMINATION OF DAVID L. NORQUIST TO BE CHIEF FINANCIAL OFFICER FOR THE
U.S. DEPARTMENT OF HOMELAND SECURITY
__________
MAY 8, 2006
__________
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia
Michael D. Bopp, Staff Director and Chief Counsel
Jennifer A. Hemingway, Professional Staff Member
Michael L. Alexander, Minority Staff Director
Adam R. Sedgewick, Minority Professional Staff Member
Trina Driessnack Tyrer, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Collins.............................................. 1
Senator Lautenberg........................................... 2
Senator Warner............................................... 3
Senator Lieberman............................................ 8
Senator Levin................................................ 14
Senator Dayton............................................... 17
Prepared statement:
Senator Akaka................................................ 24
WITNESS
Monday, May 8, 2006
David L. Norquist to be Chief Financial Officer for the U.S.
Department of Homeland Security:
Testimony.................................................... 5
Prepared statement........................................... 27
Biographical and professional information.................... 28
Letter from U.S. Office of Government Ethics................. 35
Responses to pre-hearing questions........................... 36
Responses to post-hearing questions.......................... 76
APPENDIX
Exhibits A through R submitted for the record by Senator
Lieberman...................................................... 95
March 1, 2006, letter to Secretary Chertoff re: City of Roseau,
from Senator Dayton............................................ 143
NOMINATION OF DAVID L. NORQUIST
----------
MONDAY, MAY 8, 2006
U.S. Senate,
Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 3:31 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Susan M.
Collins, Chairman of the Committee, presiding.
Present: Senators Collins, Warner, Lieberman, Levin, Akaka,
Dayton, and Lautenberg.
Chairman Collins. The Committee will come to order.
Today the Committee will consider the nomination of David
Norquist to be the Chief Financial Officer for the Department
of Homeland Security, a department with a budget that exceeds
$40 billion.
DHS is now in its third year of operations, yet it remains
the only cabinet-level department without a CFO appointed by
the President and confirmed by the Senate.
The DHS Financial Accountability Act, passed in October
2004, directed the President to name a CFO within 180 days. In
October 2005, 6 months after the deadline passed, many of my
Committee colleagues and I wrote to Secretary Chertoff urging
him to bring DHS into compliance. The passage of time has only
served to confirm the urgent need for this position. It was
clear from the start of DHS that the effective melding of 22
agencies into one cohesive department would depend to a
considerable extent on the effective management of its
financial resources.
This Committee's investigation of the preparation for and
response to Hurricane Katrina has revealed the consequences of
not having an effective financial management system. From the
fraud in the disaster relief payments to the wasteful ice
shipments to the manufactured home debacle, it is clear that
any attempts at the sound well-planned use of taxpayers'
dollars were overwhelmed by a spending frenzy and a lack of
adequate controls. Future disasters are, unfortunately,
inevitable. The 2006 hurricane season is now less than a month
away, and the need for financial accountability at DHS is as
urgent as ever.
Our nominee brings 16 years of experience working on
financial management issues to this challenge. Mr. Norquist
currently serves as Deputy Under Secretary of Defense for
Budget and Appropriations Affairs, and he has also held other
key financial positions within the Pentagon.
Earlier in his career, Mr. Norquist served on the
professional staff of the House Appropriations Committee, so he
brings a welcome understanding of Congress to this process and
position as well.
In its first 3 years, the Department of Homeland Security
has made some progress in its vital mission to improve the
security of our Nation, but that progress at times has been
impeded by persistent difficulties in financial management.
From the Department's very beginning, the Government
Accountability Office has warned that DHS has faced some
considerable financial management challenges, including the
absence of effective internal controls and conflicting or
redundant financial management systems in its legacy agencies.
These warnings from GAO, like the warnings that preceded
Hurricane Katrina, have not been adequately addressed. Bringing
accountability, efficiency, and good old fashioned thrift to
this sprawling department is a tremendous challenge. It will
require strong leadership by the CFO, and I look forward to
hearing from our nominee this morning.
I would note that the nominee is very fortunate to be
accompanied by one of our most distinguished colleagues, the
Chairman of the Senate Armed Services Committee. Before I turn
to Senator Warner for his introduction, in the absence of
Senator Lieberman, I would like to give Senator Lautenberg an
opportunity, if he would like to make some opening comments.
Senator Lautenberg.
OPENING STATEMENT OF SENATOR LAUTENBERG
Senator Lautenberg. Thank you very much, Madam Chairman.
I am pleased that you have called this hearing today. This
is a very important job. And one of the things I am struck by
to begin with is that Mr. Norquist has his, apparently,
budgeting team with him, sitting behind him. I hear them, and
there is nothing I would rather hear than children's voices.
That is a kind of thing with me, with 10 grandchildren up to
the age of 12 and down to the age of 2.
So I know that when you do your work, Mr. Norquist, you are
going to be keeping those beautiful faces in mind as part of
your responsibility. And I am encouraged by that.
This is such a challenging assignment and one of the most
important for our entire government. I am impressed with the
fact that Mr. Norquist's experience is vast in financial
management for the Federal Government.
There are a couple of things that I am concerned about that
we will have a chance to review, and I am pleased to note that
our very distinguished colleague and friend is presenting you.
That mostly augers well for you, Mr. Norquist.
I want to discuss, which again we will do with questioning
here, about Mr. Norquist's involvement in overseeing the
Development Fund for Iraq. It dispersed at least $1.6 billion
to Halliburton, much of it in questioned costs. Madam Chairman,
you are aware that I had sent several letters asking for an
opportunity to have Halliburton come in and examine their
egregious overcharges, no bid contracts that cost taxpayers
billions of dollars.
The fact that we have been unable to have a hearing on this
raises a question. How do we expect Mr. Norquist to do his job
if we do not get to ours? We have a responsibility, in terms of
this review, as well. We know that Mr. Norquist had a role in
overseeing these Halliburton contracts. And I want to ask some
questions about the role in the Defense Department efforts to
protect Halliburton by covering of its abuses.
That is why I was so anxious to get some hearings in this
Committee because the question has been lingering. The
questions are here but the answers are lingering. And while you
are here, I think it also behooves us to use the firsthand
knowledge that you have of these contracts to shed just a
little bit of light on what Halliburton is spending, how it
spends the taxpayers' money.
Finally, Madam Chairman, I think we ought to know under
just what circumstances Mr. Norquist believes it is acceptable
for the Executive Branch to hold back information from Congress
and the public. I will pursue that line of questioning when my
turn comes.
I thank you very much.
Chairman Collins. Senator Warner, we are very pleased to
have you here to present the nominee to the Committee. Please
proceed.
OPENING STATEMENT OF SENATOR WARNER
Senator Warner. Thank you, Madam Chairman. And to my good
friend, Senator Lautenberg, I rather enjoyed relaxing and
listening to your opening statement, both of you. It was very
moving. As a matter of fact, there is very little left for me
to say. I will ask unanimous consent if I might put my prepared
statement in the record.
Chairman Collins. Without objection.
[The prepared statement of Senator Warner follows:]
PREPARED STATEMENT OF SENATOR WARNER
Thank you, Madam Chairman for holding this hearing today. One of
our greatest responsibilities as members of the U.S. Senate is to
provide advice and consent regarding the President's nominees for
Executive Branch positions. Today I have the pleasure to introduce an
accomplished public servant, David Norquist, to be the Chief Financial
Officer of the Department of Homeland Security.
David Norquist has spent his entire 16 year career in government
service, starting as a program and budget analyst for the Department of
the Army, later working on the House Appropriations Committee, and most
recently serving as the Deputy Under Secretary of Defense for Budget
and Appropriations.
His experience in the budget and appropriations process coupled
with his financial management work have served Mr. Norquist well and
prepared him for the challenges ahead at the fast growing Department of
Homeland Security.
This Committee has worked very closely with the Department in its
oversight role with specific reference to financial efficiency and
accountability. Since the creation of DHS in 2003 we have seen great
improvements in their overall financial accountability and the
President's nomination of David will help to build on that incremental
success. His clear understanding of the relationship between the
Executive and Legislative branches, and their roles, will serve this
Nation well.
In my pre-hearing meeting with Mr. Norquist he expressed his
excitement with the opportunity ahead and shared with me the most
important reasons why he is ready for the challenges before him--his
family with him here today. At this point I would like to recognize
them: Father--Warren Norquist. Wife--Stephanie, three children:
Warren--5 years old; Elise--2 years old; and Vivian--6 months old.
I am impressed by his willingness to serve his country in the best
way that he could stretching all the way back to his days as an
undergraduate at the University of Michigan where he was in the ROTC.
The Armed Services Committee has, over the years, worked with David
on the Department of Defense's $400 plus billion annual budgets and in
the Administration's various supplemental appropriations requests.
He is ready, willing, and able to get to work. I applaud his
willingness to serve this President, the Secretary of the Department of
Homeland Security, and the American people and urge the Committee to
quickly report his nomination to the full Senate.
Senator Warner. I think it is most appropriate, to follow
on from Senator Lautenberg's observation, that you introduce
your family, sir.
Mr. Norquist. I would be honored to.
If I can introduce my family, I have with me my father,
Warren Norquist, who is down from Massachusetts. Sitting next
to him is my son, Warren Norquist as well. Sitting next to him
is my wife Stephanie, and she is holding our baby, Vivian. Next
to her, being held by a friend of ours, Michelle, is my middle
one, Elise.
And they keep me very busy.
Chairman Collins. We are delighted that your family could
be with you today.
Senator Warner. Thank you, Madam Chairman.
Madam Chairman, I think the most important thing that I
could say at this point in time, I have been discussing the
nomination with the nominee, and that is that he has worked
with the Armed Services Committee, of which you are a very
distinguished and valued member, for over several years now on
our budget of $400-plus billion. You have decided to drop down
to a mere $40 billion; is that correct?
Mr. Norquist. $42.7 billion, yes, sir.
Senator Warner. That is pretty good. You ought to take your
little machine with you. I hope it will work on those numbers
over there.
But anyway, this man is eminently qualified, Madam
Chairman, and we are fortunate to get him at Homeland Security
because I happen to think that the Department, over which this
distinguished Committee provides helpful guidance and
oversight, is in need of a person with his qualifications. And
I respectfully say to the Chairman and the Members of the
Committee, he has them and we are fortunate. I think it is a
loss at the Department of Defense that does concern me though.
That will be my problem now.
Good luck to you, young man. You are on your own.
Chairman Collins. Thank you, Senator.
Mr. Norquist has filed responses to a biographical and
financial questionnaire, answered pre-hearing questions
submitted by the Committee, and had his financial statements
reviewed by the Office of Government Ethics. Without objection,
this information will be made part of the hearing record, with
the exception of the financial data, which are on file and
available for public inspection in the Committee's offices.\1\
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\1\ The letter from the Office of Government Ethics appears in the
Appendix on page 35.
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Our Committee rules require that all witnesses at
nomination hearings give their testimony under oath. Mr.
Norquist, if you would please stand and raise your right hand
so I can administer the oath.
Do you swear that the testimony you are about to give to
the Committee will be the truth, the whole truth, and nothing
but the truth, so help you, God?
Mr. Norquist. I do.
Chairman Collins. Please be seated, and I would ask that
you would proceed with your statement at this time.
TESTIMONY OF DAVID L. NORQUIST,\1\ NOMINEE TO BE CHIEF
FINANCIAL OFFICER, U.S. DEPARTMENT OF HOMELAND SECURITY
Mr. Norquist. Thank you, Chairman Collins, Members of the
Committee.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Norquist appears in the Appendix
on page 27.
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It is an honor to appear before you today as President
Bush's nominee to be Chief Financial Officer of the Department
of Homeland Security.
I am humbled by the confidence that the President and
Secretary Chertoff have shown in recommending me, and I thank
this Committee for its consideration of my nomination.
I would like to thank Senator Warner for his very kind
introduction.
On a personal note, I would like to thank my parents,
Warren and Carol Norquist, for their unwavering support, strong
values, and thoughtful guidance.
I thank my wife, Stephanie, for her love, her dedication to
our family, and her patience with the long hours and endless
demands of my government service.
Finally, I would like to thank my children, Warren, Elise,
and Vivian, whose presence reminds me every day about the
importance of building a better future for America.
I began my career as a Federal civil servant, a GS-9
Program Budget Analyst working for the Department of the Army.
Over the course of my 16 years of government service, I have
worked financial management issues at virtually every level at
which the Federal Government spends or oversees the expenditure
of money, positions ranging from the professional staff of the
House Appropriations Committee to Director of Resource
Management at an Army field site overseas.
Currently, I am the Deputy Under Secretary of Defense for
Budget and Appropriations Affairs in the Office of the
Undersecretary of Defense (Comptroller).
The office for which I have been nominated has the dual
mission of protecting this Nation's security and protecting the
taxpayers' money. It is a profound responsibility, but these
are things I believe in passionately. It is what I do for a
living. It is why I enjoy my job.
If confirmed, strengthening the internal controls needed to
meet these challenges would be among my highest priorities. As
Chief Financial Officer, I would constantly be mindful that the
security of the American homeland depends on wise decisions in
both the Legislative and Executive Branches of the Federal
Government and on the effort of our State and local partners.
Over the course of my career, I have also learned that on
matters of national security, bipartisanship and cooperation
are essential. I would look to bring that perspective and
experience with me to the Department of Homeland Security.
In closing, I would like to thank the Committee for its
consideration of my nomination, and I look forward to answering
your questions.
Chairman Collins. Thank you very much.
We will start with an initial round of questions limited to
8 minutes each. But first, I will begin by asking you the three
standard questions that we ask of all nominees.
First, is there anything that you are aware of in your
background which might present a conflict of interest with the
duties of the office to which you have been nominated?
Mr. Norquist. Not to my knowledge.
Chairman Collins. Second, do you know of anything personal
or otherwise that would in any way prevent you from fully and
honorably discharging the responsibilities of the office?
Mr. Norquist. No.
Chairman Collins. And third, do you agree without
reservation to respond to any reasonable summons to appear and
testify before any duly constituted committee of Congress, if
you are confirmed?
Mr. Norquist. Yes.
Chairman Collins. Thank you. You got those correct.
Mr. Norquist, you served, as Senator Lautenberg mentioned
in his opening remarks, as an official observer to the
International Advisory and Monitoring Board for the Development
Fund for Iraq for some 7 months. During your service as an
observer, the IAMB asked that the Department of Defense provide
audits of the restore Iraqi oil contracts between the Army
Corps of Engineers and Kellogg, Brown and Root without
redaction.
Could you tell us, first, who was responsible for the
decision on whether or not to release copies of the audits
without redactions in response to the request from the Board?
Mr. Norquist. The Corps of Engineers, as the contracting
office, has the authority to decide what, if anything, is
releasable from a DCAA audit.
Chairman Collins. Did you play any role at all in that
decision?
Mr. Norquist. The role I played was to ask a lot of
questions. My concern was that the Corps of Engineers concluded
that the audits could not be released unredacted without the
consent of the contractor, and the contractor had not
consented. They were concerned about violations of what I
believe is called the Trade Secrets Act. And so the approach
they took was to have the contractor do the redactions.
I was concerned about the need to provide as full an answer
as possible to the IAMB. So I asked questions such as: Is there
a way we can provide this unredacted without the contractor's
consent? Do we have to accept the contractor's redactions? Or
can you, as the Corps, do your own version of the redactions? I
asked, if the IAMB members signed a nondisclosure agreement,
could we, in fact, turn it over that way so they would have the
unredacted audits?
And finally, one area we were actually able to get some
positive ground on was: Could they provide it to a third party?
And the answer was if they were under contract to the U.S.
Government, like an independent auditing firm, or an IG, we
could.
And so I proposed that we give the unredacted audits to
them so that they could advise the IAMB, as a neutral party, as
to the contents and the efficiency and effectiveness of a DCAA
audit.
Chairman Collins. What was your personal opinion as to
whether or not the Board should have had access to unredacted
audits?
Mr. Norquist. I felt the Board should have as much
information as the law would let us provide. The decision as to
whether or not the law would permit redacted or unredacted
audits I left to the General Counsel Office in the Corps of
Engineers. They are the ones with the expertise in the law to
make that determination.
Chairman Collins. While at the Department of Defense, were
you responsible for informing the Board of the management and
expenditures of monies from the Development Fund for Iraq?
Mr. Norquist. No, I was an observer. The Coalition
Provisional Authority regularly briefed the Board on their
management of the DFI. My function was to help provide
transparency by observing the Board's proceedings.
Chairman Collins. As you may be aware, this Committee held
extensive hearings into the response to Hurricane Katrina,
including three hearings in which we examined how taxpayer
dollars meant to help the victims recover from Hurricane
Katrina were instead lost to egregious waste, fraud, and abuse,
and poor management and decisionmaking.
The Inspector General and the GAO both reported to us that
the Department, and FEMA in particular, lacked basic management
controls that would have prevented wasteful spending when it
came to providing individual assistance and, of course, the
debacle with the purchase of some $750 million worth of
manufactured housing, much of which still sits in a field in
Hope, Arkansas.
What immediate steps do you believe should be taken in
preparing for the 2006 hurricane season to better protect the
taxpayer's dollars?
Mr. Norquist. I think at this stage, rather than focusing
on doing an additional study, I would look at the reports that
have been done to date. Inspector General Skinner did an
examination of this issue. He looked both at the trailers as
well as the Expedited Assistance Program and others. This
Committee and others have looked into these issues, and there
is an established series of recommendations from different
organizations.
So what I would do, should I be confirmed, would be to get
together with the CFO and the procurement officers at FEMA and
say where do you stand in implementing these recommendations?
What controls have you added? Have they been tested? Do you
have the means in place to be more confident about the way you
would handle the next hurricane season when it arrives?
Chairman Collins. I guess what is particularly troubling to
me is that this Committee held hearings on FEMA's management of
assistance in the wake of the Florida hurricanes and found
exactly the same kinds of ineffective or absent controls that
allowed similar waste, although on a far greater scale, to
happen with the hurricanes that affected the Gulf region. I
would urge you to make this a priority.
I think the American people are very generous, but they do
not want to see their hard-earned money lost to waste and fraud
and abuse. That is exactly what happened in the wake of both
hurricanes.
Mr. Norquist, the Department has had financial problems
with several of its component agencies, most notably
Immigration and Customs Enforcement. The component CFOs in
those individual agencies do not have a direct reporting
relationship to the Department CFO, something that I think
needs to be rectified.
Without that direct relationship, how are you going to
ensure sound financial management and reporting throughout the
Department?
Mr. Norquist. I think there are a number of ways to
approach it. First, there is a CFO Council, which provides a
vehicle to meet regularly with the CFOs of the components. I
would also look to strengthen the personal connection, meeting
regularly with the individual CFOs.
In addition, there are some authorities and some
opportunities that the CFO at Homeland Security has which we do
not actually have at the Department of Defense. The CFO at
Homeland Security has a role to play in the selection of a
component CFO, has a role to play in determining their
performance standards and evaluating their success against
their performance standards and evaluating their bonuses. So
these provide some additional tools.
So I think between the cooperation and the council that we
should be able to be successful in building that relationship.
Chairman Collins. Thank you. Senator Lieberman.
OPENING STATEMENT OF SENATOR LIEBERMAN
Senator Lieberman. Thanks very much, Madam Chairman.
Apologies to you, my colleagues, and Mr. Norquist. The
plane landed at 2:45, but did not empty until 3:30 at National,
coming from Hartford. So I apologize.
I am going to enter my opening statement in the record and
just paraphrase.
Chairman Collins. Without objection.
[The prepared statement of Senator Lieberman follows:]
PREPARED STATEMENT OF SENATOR LIEBERMAN
Thank you, Madam Chairman, and welcome to this hearing, Mr.
Norquist.
I can't stress enough how important this hearing is. The person
stepping into the job of Chief Financial Officer of the Department of
Homeland Security faces enormous challenges.
The CFO will have to steer the 22 different agencies that makes up
DHS to financial stability so that DHS will finally get a clean audit.
Previous audits have detailed serious shortcomings and poor
financial management that has resulted in agencies running out of money
for critical missions or having to improve sudden hiring freezes.
We cannot have these types of disruptions to the Department charged
with securing our homeland.
And the CFO must work closely with the Chief Procurement Officer of
the Department to bring an end to the embarrassing waste we have seen
in many large DHS contracts.
The CFO will also need to decide what to do with the financial
modernization project called EMERGE2--or Electronically Managing
Enterprise Resources for Government Effectiveness and Efficiency.
The system was originally designed as a total transformation of
DHS' financial systems, but has been downscaled in the President's FY07
budget request.
Given the importance of this job, in 2004, Congress changed the law
to make the position of Chief Financial Officer subject to Senate
confirmation.
Serving as Chief Financial Officer will require a commitment not
only to sound financial management, but also to openness and
transparency.
If you are confirmed, Mr. Norquist, we would expect you to
cooperate closely with the Inspector General and GAO, and to provide
information promptly to Congress.
In that spirit, I intend to ask you about your involvement in a
troubling incident that relates to these important principles.
While working at the Department of Defense, you led a team of
government officials that decided not to disclose to a United Nations
oversight board that KBR--a subsidiary of Halliburton--was suspected of
overcharging Iraq millions on dollars.
In December 2003, the Defense Contract Audit Agency (DCAA)
announced that its draft audit had found overcharges by KBR of as much
as $61 million for importing Kuwaiti fuel into Iraq, DCAA also said
that significant additional overcharges were likely in the months to
come.
The contract was largely paid for from the Development Fund for
Iraq, also known as DFI, which was established by UN Secretary Council
Resolution 1483.
The money in this fund belongs to the Iraqi people. It came from
Iraqi oil sales, assets that had been frozen in bank accounts outside
the United States, and $8 billion in funds transferred from the UN Oil-
for-Food program.
The UN gave control of the DFI to the Coalition Provisional
Authority. The UN also established the International Advisory and
Monitoring Board for Iraq to monitor our government's administration of
DFI.
Resolution 1483 required that the Iraqi funds be ``used in a
transparent and equitable manner'' and for the benefit of the Iraqi
people.
Beginning in April 2004 and continuing through September, the UN
oversight board made repeated requests for the DCAA audits of the KBR
contracts.
During that period, you were the U.S. Department of Defense's
observer and liaison to the Board.
Accordingly, as you've told the Committee's staff investigators,
you headed up the process that considered whether the audits would be
given to the UN Board.
In October 2004, you provided the oversight board redacted copies
of the DCAA audits that struck every reference to every overcharge in
every audit--463 redactions in all.
Had they not been redacted, the DCAA audits would have shown that
more than $177 million in overcharges and more than $17 million in
unsupported costs were funded with Iraqi money.
These redactions were made at KBR's request. The Department of
Defense did not dispute a single one.
It would have been proper to redact information of a strictly
proprietary nature.
But when KBR handed over the redacted audits to the Department of
Defense, it stated that it had struck information other than propriety
information.
KBR explained that it had also redacted statements that the company
believed were incorrect or misleading and that could damage KBR's
ability to win and negotiate new work.
It is also very troubling that a contractor implicated in an
overcharging scandal would be given the final say on what information
to provide to the UN oversight board. After all, the UN board was the
legal entity responsible for oversight of misspent Iraqi funds.
Mr. Norquist, I would like to hear more about your role in this
incident.
I think this episode is relevant to today's hearing because DHS
needs a CFO who puts taxpayers first; who is committed to sound
financial management and transparency, and who is willing to confront
agencies that may be shirking their legal responsibilities.
In preparing for the hearing Committee staff reviewed many
documents that had been produced by the Department of Defense, as well
as others that are publicly available. I ask that a selection of the
documents be entered into the hearing record so that I can ask the
nominee about them.
I would also note that the Department of Defense refused to provide
us with many hundreds of pages of responsive documents, but did let
Committee staff review the documents at the Pentagon. In my questions I
may refer to documents that our staff reviewed but we do not have.
Thank you, Madam Chairman.
Senator Lieberman. First, welcome to you and your family,
who I presume are the people behind you. And I would like to
say that this position of Chief Financial Officer of DHS is one
that faces very significant challenges.
The CFO is going to have to steer the 22 different agencies
that make up DHS to the higher ground of financial stability so
that DHS will get what it has not gotten yet, which is a clean
audit.
As you know, previous audits have detailed serious
shortcomings and poor financial management that has resulted in
agencies running out of money for critical missions or having
to impose sudden hiring freezes. Now that is something we
cannot afford, those kinds of disruptions, in this Department,
which is charged with securing our homeland.
The CFO must also work closely with the Chief Procurement
Officer of the Department to bring an end to the embarrassing
waste we have seen in some of the large DHS contracts. And you
will also need to decide what to do with the financial
modernization program called EMERGE2 or Electronically Managing
Enterprises Resources for Government Effectiveness and
Efficiency.
I want to go to this question that I know has been raised
already by others, which is that during the time you worked at
the Department of Defense, you led a team of government
officials that ultimately decided not to disclose to a UN
Oversight Board that KBR, a subsidiary of Halliburton, was
suspected of overcharging Iraq millions of dollars. This was
Iraqi money collected and funneled through the UN, which we
were spending at the outset for the benefit of the Iraqi
people.
As you know, the Defense Contract Audit Agency, in December
2003, in its draft audit, found overcharges by KBR of as much
as $61 million for importing Kuwaiti fuel into Iraq. So they
were overcharging for that. And additional significant
overcharges that were likely to come in the months after.
I would just jump ahead to say that in October 2004 you
provided the Oversight Board redacted copies of the DCAA audits
that struck every reference to overcharge in every audit, 463
redactions in all, which is what KBR had asked. Had they not
been redacted, the DCAA audits would have shown more than $177
million in overcharges and more than $17 million in unsupported
costs were funded with Iraqi money.
Just continuing to pick out here, when KBR handed over the
redacted audits to the Department of Defense, it stated that it
had struck information other than proprietary information.
That is correct, to your knowledge, is it not?
Mr. Norquist. That is my understanding, yes.
Senator Lieberman. KBR explained that it had also redacted
statements that the company believed were incorrect and
misleading and that could damage KBR's ability to win and
negotiate new work.
I must say, to me it is really unacceptable that a
contractor implicated in an overcharging scandal would be given
the final say on what information to provide the UN Oversight
Board. After all, that board was the legal entity responsible
for oversight of misspent Iraqi funds.
I want to say what is probably obvious, but I want to say
it for the record. Nobody says that you are involved in any of
this wrongdoing yourself, at all.
I think the appropriate question for the Committee, as we
consider you for this position, and you bring an impressive
background, personal skills, and background in government
agencies, is the way you handled this.
And let me pose it as directly as I can because I have
heard at least one person looking over this record say to me
that though you made some efforts to unredact, which I think
was the right thing to do, ultimately you may have been caught
between two bureaucracies and a private interest here and
simply resolved it in what might be called the most manageable
way.
In other words, I want to confront you with this question,
which is: Should your handling of this very difficult but
important situation lead us to conclude that you would not be
as strong a decision maker--including making decisions that
make people unhappy--as I think will be necessary in this Chief
Financial Officer position?
Mr. Norquist. Sir, I made a number of recommendations that
made people unhappy in the process, but it was out of a desire
to provide as much information as possible. There was, for
example, initially only going to be redacted executive
summaries. And I made the point that if we are going to do
this, you ought to deliver the full audit.
There was some concerns about how much would be missing
from those. And I said fine, but we owe the IAMS as much
information as we can give them. And if you feel, as the Corps,
that it needs to be redacted, that is your jurisdiction and
your authority.
But I was quite willing and stood very strongly in favor of
pushing this everywhere I believed I could, except when I ran
up against the advice of lawyers. When our General Counsel at
OSD concurred with the advice of the Army's General Counsel
that there was not a way to provide these audits unredacted,
that was the point at which I was not in a position where I
could take an alternative position.
So the Corps had to make the call. Their lawyers gave them
advice that I bounced off our lawyers to ensure that there was
not a different reading of the law, that we could not find a
way around this.
And the answer was pretty consistent. The people with an
expertise agreed you could not do it unredacted because of the
way the Trade Secrets Act was written.
But nevertheless, I continued to push. Is there a way we
can find another precedent or something that will let us go
forward? Can the Corps do the redacting instead of the company?
Can we do nondisclosure agreements? I consistently pushed to
get people to think of alternative ways of solving this problem
so that we did not default into the ``this is the easiest way
forward'' approach.
Now in the end it was a hard way forward, and it was an
awkward situation to be in. But I wanted to ensure that they
had properly evaluated the alternatives and had not simply
fallen in on the easiest answer.
Senator Lieberman. I am sure my colleagues will have other
questions about this. And I would just say finally, in
preparing for the hearing, Committee staff reviewed many
documents that had been produced by the Department of Defense,
as well as others, that are publicly available.
Madam Chairman, I would like to ask that a selection of
those documents be entered into the hearing record at this
point.\1\
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\1\ The Exhibits submitted by Senator Lieberman appear in the
Appendix on page 95.
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Chairman Collins. Without objection.
Senator Lieberman. Thank you. Thanks, Mr. Norquist.
Chairman Collins. Senator Lautenberg.
Senator Lautenberg. Thanks very much, Madam Chairman.
It is obvious, Mr. Norquist, that all of us are concerned
about the redaction and the redaction process.
In the beginning, did you express your view of what the
Trade Secrets law might say? Because as we look at this first
chart, and we have others which we will not bother the
Committee with right now, but when you look at it, it is
awfully hard to understand what the trade secrets are that were
being redacted. When they say KBR proposed, and now it is
common knowledge, $252 million rounded for unleaded gas, and
other numbers, in the schedule.
I wonder how in the world can it be suggested that is a
trade secret? I mean the taxpayers pay for it. It is not a
practice that you find in very many places in our business
world. And certainly in government, when we are much more
obliged to operate with transparency.
The other things, to go on, the highlights there, ``our
audit found purchase orders and procurement files related to
the Kuwait supplier did not contain data to support the
reasonableness of the negotiated purchase orders.''
Trade secret? And it goes on like that. It is very
disappointing to see that government acted in response to what
looks like a dictate by Halliburton or KBR to define these as
trade secrets and have it hidden from the public view.
Does that strike you that way? And I am going to give you
credit, Mr. Norquist, because as I read some of the history
here, it was obvious that you disagreed or at least voiced an
objection to this redaction. But then I think it took almost 6
months, am I correct, in order to provide the unredacted
documents?
Mr. Norquist. Let me just clarify. Although they were
requested in April, the audits were not actually completed
until the last days of August to the middle part of October. So
at the point the audits were available for review until they
were delivered, there was only a matter of a few weeks of going
both through the review and the redaction process and the back
and forth with the Corps of Engineers. Up until that point, the
DCAA audits were only in draft stage, and we were not in a
position to move forward.
But to get to your first question that you asked me, about
my reaction to seeing the redactions, I did, in fact, raise the
very same types of concerns you did. I did not necessarily see
this particular page. But I said, I am a layman, I do not have
an expertise in this area, but I do not see why this would be--
and I used the euphemism--``proprietary'' data. I do not know
if that is actually cited in the Trade Secrets Act as a
criteria.
But it did not strike me as proprietary data. And that is
why I encouraged the Corps to go back and take a look at this
information and to make their own independent judgment as to
what should or should not be redacted, as opposed to simply
following what the company had sent forward.
Senator Lautenberg. Senator Lieberman discussed with you in
detail something that relates to the question I am going to ask
you. The fact that one department decided that the government,
we were entitled to refunds of some $61 million in overcharges.
And that was agreed upon.
But then there was a decision not to accept or not to
demand these refunds. How did that come about?
Mr. Norquist. Sir, I cannot speak to how that came about. I
think what you are talking about is the difference between what
DCAA recommended and the actions the Corps of Engineers chose
to take.
I was not part of the process of managing this contract. My
involvement was as an observer with the request for the audits.
And so I do not know the story behind how the Corps reacted to
the recommendations from DCAA as to what----
Senator Lautenberg. Of the independent audit?
Mr. Norquist. I am referring to the DCAA audit. If there is
a different one, then I am not familiar with it.
Senator Lautenberg. One is the first stage of an audit
process. And then on, would you say it was on appeal that the
refunds were ordered not to be collected?
Mr. Norquist. Let me walk through, to the extent I
understand it, the mechanics of this. And I apologize that I am
not an expert in this area.
But the Corps of Engineers negotiates and sets up the
contract with the company. They ask the Defense Contract Audit
Agency, particularly in a contract like this, to review the
pricing and the procedures that the company followed to
determine that they were only charging a fair and reasonable
price.
The auditors then identify what I think they call
questioned costs, meaning either they disagreed with it or they
simply did not see enough documentation to support it. And it
provides the basis for the contracting officer to negotiate, to
either insist upon being provided that documentation or to make
decisions as to whether or not to pay.
It is not a decision of the government. The audit is an
advisory document given to the contracting officer. So again,
how the contracting officer uses it, whether they were right to
accept or reject those, I cannot speak for the contracting
officer on that.
Senator Lautenberg. It borders on the outrageous that an
audit agency, after its review, has its recommendation
overturned by another department. An audit, as I see it, an
audit is an audit. That is a check on what is going on. The
tactics here are hard to understand.
The Defense Contract Audit Agencies have shown that
Halliburton has billed more than $1.4 billion in unsupported or
questioned costs. Has the Department of Defense paid
Halliburton for these costs?
Mr. Norquist. Sir, I cannot speak to that. I think the
number you said might have been the total contract, but I am
not certain.
Senator Lautenberg. The total contract was larger.
Mr. Norquist. I am not familiar with the underlying
contract or the dollar amounts involved there.
Senator Lautenberg. I would have thought that these had
become somewhat under your purview, Mr. Norquist.
Mr. Norquist. No, the contracting involvement was the Corps
of Engineers. I was involved in this because I was an observer
at the IAMB, and specifically on the issue of the request for
the copy of the DCAA audits, not the actual resolution of those
comments.
Senator Lautenberg. Were you the senior financial person in
the Department of Defense?
Mr. Norquist. No, I was one of the Deputy Under
Secretaries, and contracting is an acquisition authority, not a
financial management authority.
Senator Lautenberg. Madam Chairman, I am out of time here.
I would like to talk further to Mr. Norquist.
Chairman Collins. Senator Levin.
OPENING STATEMENT OF SENATOR LEVIN
Senator Levin. Thank you very much, Madam Chairman.
Let me pursue this redaction because I am mystified, first
of all, that we allow a company being audited to do the
redacting. What is the precedent for that?
Mr. Norquist. I do not know. I asked if there was a way we
could do it instead, but the advice was, from the Corps of
Engineers lawyers, that to change the contractor's redactions--
and again, let me cite their words because this is not an area
where I have an expertise--they said, the Corps counsel noted
that there were significant legal risks to include potential
individual criminal violations associated with changing the
redactions provided by KBR. So that was the advice of the Corps
lawyers. That is what they said was the proper way forward. And
since they are the ones who make the call on this one, I did
not have much----
Senator Levin. Potential criminal liability to whom?
Mr. Norquist. To the individual who releases the document,
to the actual individual who couriers it to the recipient is my
understanding.
Senator Levin. That would be to you?
Mr. Norquist. Actually, I made sure the Corps of Engineers
couriered the document.
Senator Levin. To the UN?
Mr. Norquist. To the UN.
Senator Levin. And the UN objected to this, did they not?
Mr. Norquist. No, they did not. When they received it, I
provided a letter to the chairman to explain that the audits
had just been completed, to walk through what was in it, to
note that the contractor had done the redactions, and what the
law was that created the obstacle. They were pleased to have
received them. They understood that we were operating within
limitations set by U.S. law.
But I also put forward at that time an alternative option
of providing the unredacted audits to a third party because I
wanted to show the good faith effort, that they would not have
to take my word for it, or the Corps word for it. We could give
it to a third party. That third party could read it over and
tell them DCAA audits are good, sound audits, or whatever the
words----
Senator Levin. Where did that proposal go?
Mr. Norquist. They originally went--again----
Senator Levin. Who were you proposing that to?
Mr. Norquist. I proposed it to the IAMB, and I said would
you like us to do this? We are prepared to do this if you chose
to.
I stopped working with the IAMB on October 11. We handed
over this responsibility to other offices. But let me give a
summary of what I understand happened.
They first went to the option of seeking an outside
auditing firm to look it over. That ran into some obstacles. So
I think they provided it to the Special Inspector General for
Iraq, who reviewed the documents. But here I am outside my
expertise.
Senator Levin. The redacted documents?
Mr. Norquist. No, they were provided the unredacted in
order to be able to provide an opinion or a view to the IAMB. I
wanted somebody else to be able to see the full document and be
able to give their advice to the IAMB.
Senator Levin. And a UN Council saw the unredacted
documents?
Mr. Norquist. No, the requirement to avoid the Trade
Secrets Act is they have to have a relationship with the U.S.
Government.
Senator Levin. Who was it specifically that saw the
unredacted document?
Mr. Norquist. It is my understanding, again I am not
certain on this, that it was the Special Inspector General for
Iraq.
But if you like, I will take that for record so I can be
certain about who was the recipient and provided the report.
Senator Levin. If you would.
And that person was satisfied that it was properly
redacted?
Mr. Norquist. I do not know how they set it up, what they
were asked to do. They were asked to be available to support
the IAMB by reviewing it. But the terms of the agreement, I am
not familiar with.
That would have happened well after I had stopped working
on this.
Senator Levin. If you could supply that for the record, it
would be useful.
You say that the IAMB, the UN International Advisory and
Monitoring Board for Iraq, was satisfied with the redaction,
they did not object to it.
The press release that they issued on April 29 said the
following, ``that these reports indicate overcharges and
questionable amounts billed under the sole source contracts of
an amount in excess of $200 million. The IAMB notes with
regret''--that does not sound like they were satisfied with it.
It says they, ``note with regret that these findings have been
redacted in earlier DCAA reports submitted by the U.S.
Government to the IAMB.''
Mr. Norquist. At the time we provided it to them and gave
them the information to show what the extent of the DCAA audit
was, how thorough the DCAA audit was, what they covered, that
went a long way toward addressing some of their issues.
The fact that they would have liked to have seen more, I
would completely understand. And the fact that the redactions
created a challenge and that was a regret of theirs, I would
understand as well.
Senator Levin. It sounds a little different from saying
that they were satisfied.
Mr. Norquist. They did not express any concern at the time
we sent it to them. This is an issue that came up later on.
Senator Levin. When did you send it to them?
Mr. Norquist. We delivered it to the chairman, I think,
before the full IAMB meeting and then provided copies to the
rest of the members on October 11, 2004.
Senator Levin. You are familiar with that April 29, 2005,
press release?
Mr. Norquist. I actually only became familiar with it
afterwards when the questions started coming up and somebody
raised it to my attention.
Senator Levin. If you thought that the redaction was
improper, and you did, why did you not appeal that higher up
above the lawyers?
Mr. Norquist. I raised it to the OSD lawyers. The Corps of
Engineers lawyers had said it could not be released.
Senator Levin. Why did you not go above their head. Lawyers
are not the final determiners.
Mr. Norquist. If I have a set of lawyers that advise that
an action is illegal, and I confirm it with another, to then go
up and say you should engage in an action that your lawyers
will tell you is illegal, is not a very productive way forward.
If I had had dissent, if I had found----
Senator Levin. You think the client should be consulted?
The clients are not the lawyers. The lawyers do not have the
final say. It is the client. And you yourself, in your own good
conscience, and I think you were right, saw this as pure common
sense, as Senator Lautenberg went over these. These comments
are not trade secrets under any stretch of the imagination.
The Trade Secrets Act cannot possibly protect this kind of
redaction. ``The cost and pricing data and the information
other than cost or pricing data submitted by the offerer are
not adequate.'' That is not a trade secret.
``We consider KBR's estimating system to be inadequate.''
That is not a trade secret. That is not proprietary.
``In addition, KBR was unable to demonstrate their proposal
was based on actual cost.'' This goes to the heart of
overcharging. This is not trade secret stuff. This is
fundamental.
KBR cannot demonstrate here the costs behind their charges.
There is no trade secret. You were familiar with that. And just
because the lawyers say that there is some reason that should
be redacted is not the end of the matter. Clients are the ones
who make decisions, unless you are the client. Are you the
client?
Mr. Norquist. Sir, the Corps of Engineers was the one to
make the decision, and their lawyers were the ones who gave
them advice. I went above that to the OSD lawyers to see if
there was any dissent, to see if there would be a disagreement
by going up to the lawyers for the Department. But the OSD
lawyers had the same opinion as the Corps of Engineers lawyers.
Senator Levin. Did you ever think of going to the people to
whom those lawyers are responsible, the client for those
lawyers, and say, you know, your lawyers are saying this, but I
have got to tell you there is no common sense way, there is no
way you can read these and say there is a trade secret here.
I mean this is a cover-up of overcharging. Not by you. By
the way, I think Senator Lieberman is absolutely right. We all
ought to make that clear. This is not anything you did
improperly in terms of any cover-up.
But this redaction was a cover-up, and it was tolerated by
lawyers for reasons that we have trouble understanding. I have
trouble understanding. Senator Lautenberg does, too. There may
be others.
It seems to me that at a minimum your obligation would have
been to go to the clients for those lawyers, the people to whom
they are accountable, to say this is what your lawyers are
telling me, but it does not make sense.
I am wondering whether that thought crossed your mind? And
that is my last question.
Mr. Norquist. Sir, if there had been disagreement among the
advisors--again, I have no expertise. I am told the Trade
Secrets Act is very broadly written. I have no way of knowing
and judging whether or not they were being reasonable or
unreasonable in asserting that these things are protected by
that.
But if I had gotten dissent, if I had one office of lawyers
saying it was perfectly acceptable to release it and one saying
not, then I would have had a very sound basis upon which to go
and say the Corps of Engineers are holding this up but the OSD
lawyers think they are wrong.
But there was not. There was not a dissent. Those people
with an expertise in this area had a very similar opinion.
Senator Levin. Thank you. And if you could provide for the
record then the names of the lawyers that you spoke with, it
would be helpful so we can ask them. Because we have had an
investigation into the UN, improper UN kickbacks. And here we
have a situation where materials provided to the UN, which are
redacted, do not allow them to do their job, and there is no
action being taken here. It may not be your responsibility. You
may be right. But someone is responsible here for covering up
clearly charges which could not be justified.
Thank you. Thank you, Madam Chairman.
Chairman Collins. Senator Dayton.
OPENING STATEMENT OF SENATOR DAYTON
Senator Dayton. Thank you, Madam Chairman.
Mr. Norquist, I am wondering if you discussed this job and
its time demands with Warren, Elise, and Vivian?
Mr. Norquist. I have sir, and it is with some trepidation
that we have signed up for the hours that this involves. This
will be a tough job.
Senator Dayton. As the parent of a 25-year-old and a 22-
year-old, I encourage you to make sure they come first.
Mr. Norquist. Does it get easier?
Senator Dayton. Yes, they will not want to have anything to
do with you all too soon. I mean that facetiously and also
seriously.
The Congress has appropriated $62 billion, most of it going
through the Department of Homeland Security, for the Hurricane
Katrina cleanup. And the Senate just last week, in its
supplemental, appropriated another $27 billion. That is $89
billion then. I do not know what is a reasonable timeline, but
I would like to ask you within say a month, if possible, 2
months at the outside, after you have been confirmed for this
position, to provide this Committee with your best accounting
on how that money has been spent, at least where it has been
distributed. It may not be possible to get to the level of the
contractors, subcontractors and the like. But at least so we
have an accounting.
And I, at a Committee meeting last week, encouraged my
colleague from Minnesota, Chairman of the Permanent
Subcommittee on Investigations, to conduct a similar oversight.
Because I think it is imperative, particularly if, and I
expect when, we will have another request for additional funds
for Mississippi and Louisiana, that we understand at least as
fully as possible to that current date how that money has been
distributed.
Mr. Norquist. Should I be confirmed, I would be happy to do
the best I can to do that.
Senator Dayton. Thank you.
I hope this will be concluded before you are confirmed, but
I have had the greatest difficulty, to my frustration, getting
information from Secretary Chertoff from FEMA's handling in the
aftermath of a flood that devastated Roseau, Minnesota, in June
2002. FEMA has been more of an obstructionist, I regret to say,
than an ally in the effort to rebuild that city and some of its
key projects to both repair what occurred and also to prevent
future flooding.
The city began, in March 2003, that is over 3 years ago, a
request for $617,000 that 2\1/2\ years later was denied by
FEMA's Region V.
The incongruity of, on the one hand, $62 billion being
passed through with almost no feedback on how it is being
spent, and the 2\1/2\ year effort that a small city in
Northwestern Minnesota that is struggling, that is trying to do
its best to rebuild from a flood that wiped out its downtown
just as completely as Hurricane Katrina's flooding wiped out
parts of New Orleans. And yet here, 2\1/2\ years later, they
are denied what is--from everything I can determine--a very
responsible and certainly a very modest amount of money to
engage in some rebuilding projects.
They have then appealed that decision and now, 5 months
later, have not gotten a decision from FEMA as to the final
disposition of that appeal.
I handed a letter when Secretary Chertoff was before this
Committee on March 1 regarding this matter. Madam Chairman, I
would ask unanimous consent that a copy of that letter be
submitted for the record in this proceeding.
Chairman Collins. Without objection.\1\
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\1\ The March 1, 2006, letter to Secretary Chertoff re: City of
Roseau, from Senator Dayton appears in the Appendix on page 143.
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Senator Dayton. Thank you.
I did not hear anything back from him, not even the
acknowledgment of receipt of the letter, which I know he did
receive because I handed it to him.
I happened to meet him just outside the Capitol 2\1/2\
weeks ago, and I brought this matter to his attention again.
And one or two of his accompanying aides wrote down the
details, Roseau, Minnesota, and the like. I still have not
heard back anything from him or from anybody at FEMA. The city
of Roseau has not heard back.
I am incredulous that, regardless of the disposition, and
that is a determination for the proper FEMA officials to make,
but that I, in my responsibilities as a U.S. Senator
representing the city of Roseau, cannot get from the Secretary
or from anybody underneath him a response to first a letter and
then 2\1/2\ weeks ago a further direct inquiry about the status
of the review and the project.
So again, you have nothing to do with this. You do not have
any responsibility for it. But in your new position, when you
assume it, I would ask for your assistance getting somebody in
that vast bureaucracy to respond.
Mr. Norquist. I would be happy to assist you, Senator,
should I be confirmed.
Senator Dayton. All I can say is if that is indicative, and
unfortunately from some of my constituents' other experiences
with FEMA, and particularly it is Region V, if that is
indicative of the lack of responsiveness to elected
representatives of the people, and more importantly to the
people themselves, I seriously wish you the very best in this
undertaking because it badly needs people who are going to be
responsible for the expenditures of dollars and the reporting
of those dollars and feel some sense of responsibility to the
people whose tax dollars are paying their salaries and
providing the mission that they are supposed to honor and carry
out.
So I wish you well. Thank you, Madam Chairman. This
concludes my questions. Thank you.
Chairman Collins. Thank you. We will now have a second
round of questions for those who wish to participate, limited
to 4 minutes each.
Mr. Norquist, in 2003 the GAO designated the Department of
Homeland Security on its High Risk list of government
operations, and it has subsequently reaffirmed that
designation. An area of specific concern identified by the GAO
is the weak financial management of the Department.
In forming the Department, the Department had to combine
some 19 financial management systems. I think that now there
are eight.
What are your plans for specifically identifying the
financial weaknesses that the GAO has pointed out as the
justification for putting DHS on the High Risk list?
Mr. Norquist. Senator, there have been a number of reviews
of the Department of Homeland Security's financial practices.
You have the GAO reviews, you have the independent audit of the
financial statements that identified, I believe it was, 10
material weaknesses. There have been some other reviews, as
well.
I think the important task before us, and the task I would
take on should I be confirmed, is to get to the root cause of
those weaknesses, identify the corrective action, who is going
to take the action and by when, and begin the somewhat
difficult task of advancing the corrections across the board.
You have got corrective action you have to take in a number of
areas.
So I think the important thing is to identify them, lay out
the corrective action process, and then the challenge is
maintaining the discipline to stay on top of that issue while
other crises are happening that are distracting the
organization, to keep that focus on fixing the basic underlying
financial process.
Chairman Collins. In your response to the Committee's
written questionnaire, you indicated that you had experience,
including involvement in or direct oversight of financial
management transformation. I assume this is at the Department
of Defense; is that correct? Or were you referring to other
efforts?
Mr. Norquist. Actually, my experience with financial
management transformation began when I was with the House
Appropriations Committee. One of the accounts I had oversight
of included the Department's Financial Management Modernization
Program.
Chairman Collins. The Department of Defense?
Mr. Norquist. The Department of Defense's. And so there
were a number of challenges they had, one of which, for
example, was their CFO had difficulty enforcing compliance with
the intended architecture. And so we worked with the committee,
and the Congress adopted language to strengthen their hand in
forcing systems under development to comply with the
architecture.
We also were concerned about systems that were built and
were what in the Defense Department they called joint systems,
that were supposed to bring the services together. But
somewhere around year two of the program a service backs out,
then another service backs out, and eventually you have a
software solution that only works for one.
So we worked very closely with them on trying to help
prevent these types of challenges.
I was originally hired by the Department of Defense to
address those issues as my original position. But in the course
of a reorganization, my duties shifted, but I continued to work
alongside people who had that initiative.
Chairman Collins. One final question.
I mentioned earlier what I think is an anomaly of having
the CFOs of the component agencies of DHS not report to the
overall Department CFO. Is that a change that you think we
should make in the law?
Mr. Norquist. I am not shy. If I were confirmed and found
that was an insurmountable obstacle, I would certainly come
back and alert you to that challenge.
But in the Department of Defense, the Assistant Secretary
of the Army for Financial Management reports to the Secretary
of the Army. So it is similar to the structure I am used to
working in. Whether it proves to be sufficient and effective in
this environment, I would just have to get there, should I be
confirmed, and see how it goes.
Chairman Collins. Thank you. Senator Lieberman.
Senator Lieberman. Thanks, Madam Chairman.
I think you know, Mr. Norquist, because you are here, that
in 2004, Congress expressed its concern about the importance of
this job by making the position of CFO subject to Senate
confirmation. I think there is a message there, and it goes
back to the questions raised about the redacted materials,
which is how important this position is to the public.
To me that means a commitment, if you take this position
and are confirmed, to openness and transparency, that we would
expect you to cooperate closely with the Inspector General and
GAO and to provide information promptly to Congress when
requested.
Are you comfortable saying that you would do so, if
confirmed?
Mr. Norquist. Absolutely.
Senator Lieberman. Let me ask you a question about a
different part of that enactment of 2004.
The DHS Financial Accountability Act imposes a requirement
that the Department conduct audit opinions of the internal
financial controls starting in fiscal year 2006, the one we are
in now. These audits will be an important tool in putting DHS
on the path to financial stability because they will help DHS
uncover inherent weaknesses that we have referred to in one way
or another here this morning in its business practices.
As you may know, the former DHS CFO testified before a
House Subcommittee that the fiscal year 2006 audit of internal
controls--and here I quote from the former CFO--``Will be
taxing on a thin financial management cadre that is still
coping with the challenging organizational structure of DHS and
fixing the weaknesses already identified in the financial
audit.''
I am of the opinion, though, that despite the difficulties
that the audit poses, it is really important that the
Department proceed with this audit of internal controls. I
wanted to ask you where you come down on that question?
Mr. Norquist. My first inclination is always to comply with
the guidance that the Congress has provided. If the Congress
would like this done in 2006, then we need to work to provide
it in 2006.
If there is some overwhelming compelling reason why that is
not practical, then we owe it to the Congress to get back to
you and explain to you what the trade-offs are, what the
challenges are. But my going-in position would be to go with
the direction you have provided in the Congress.
Senator Lieberman. I think you have got the right
priorities. And I urge you, if you are confirmed for this
position, to focus on that early on in your tenure. If you feel
you cannot comply with the law, I would ask you to let this
Committee know as quickly as possible.
Let me ask this question about your credentials for the
job. As I mentioned earlier, you have had a series of
impressive positions throughout your career. In these you have
handled a broad range of budget appropriations and financial
matters. I think those experiences will serve you well should
you be confirmed for the CFO position.
You have had less experience in accounting and management
responsibilities, the kind that will face you as CFO if you are
confirmed. I wonder what steps you will take to better prepare
yourself for these central tasks of the position of CFO?
Mr. Norquist. In financial management, people come up
through different paths. And as you pointed out, I came up as a
program budget analyst. But during my time in financial
management I have, for example, when I was Director of Resource
Management at a field site in England, over seen the finance
and accounting office. They reported to me.
When I served as Acting Principal Deputy, the Deputy Chief
Financial Officer in the accounting office reported to me. So I
am familiar with the work they do, the important things they
do. I have worked very closely with them.
So I would look to draw on the strength of the people in
the field who are CPAs. But I am also familiar with what we
should expect them to be able to do in terms of providing
guidance and proper internal controls for organizations.
Senator Lieberman. OK, my time is up.
There is not time today, but I am going to submit for the
record a number of detailed questions about the KBR material
redacted and ask you to answer them for the record.
From what I know now, I would draw two conclusions that I
hope you have drawn from this experience that you had in this
matter. The first is that your personal instinct on this was
the right one, and therefore I hope you follow that kind of
personal instinct.
The second is lawyers are not always right. It is not so
bad sometimes to say thanks, Mr. Attorney, but that does not
seem right to me.
Thank you.
Chairman Collins. Senator Lieberman, I think that Senator
Lautenberg and I would agree that lawyers are not always right.
Senator Lieberman. It was a declaration against my own
interests.
Senator Lautenberg. I would be inclined to review the
Chairman's educational background.
Chairman Collins. Senator Lautenberg.
Senator Lautenberg. I come from the business side of the
ledger. I ran a fairly sizable company before I came to the
Senate. The audit was kind of the Bible in terms of how the
company did in its past year when it reported its financial
statements.
You sounded, very frankly, more obedient to the rule than I
think you might have to be, to the rules and the structure,
than you might have to be as the chief financial officer now of
DHS. Not unlike the Defense Department, this critical agency to
the manner in which we conduct ourselves, would it have been
appropriate, could it have been appropriate for you to go to
the IG and say look, this is not right, to defend your view
more aggressively?
I hear what you said, and I know you are apparently very
careful to stand by the rules. But is there a point in time
when you say the rule is not correct? I mean, the notion that
the company could tell you what to redact, what to take out of
the public notice, I think is outrageous. I ran a public
company.
Would the IG have been an appropriate party to go to in
terms of doubt?
Mr. Norquist. I do not know that the IG would have issued a
legal opinion. I would go to the IG if I thought there was
improper activity by someone, but I had no reason to suspect
that. I want to be very clear about this, however much I was
unhappy with the answers I was getting from the Corps of
Engineers, I had no reason to believe they were doing other
than their professional jobs as lawyers of the Department or as
contracting officers.
So if I had felt that there was an improper activity, I
would have indeed gone to an IG. But they were doing their job,
they were making their opinions. I just did not like the
answer.
Senator Lautenberg. But in terms of making certain that--
you had a very lofty position in terms of the Department of
Defense. Would it not have been appropriate for you to say this
does not seem right? You expressed your reservations about it.
But at some point, I hope that when you are confirmed for this
job that you will be aggressive in terms of asking the
questions that go beyond--the numbers tell you something about
the policy, it tells you a lot about it.
I think you are going to have to be fairly forceful if you
are going to manage a department like that.
The Chairman raised a question I thought was really
important, that is do the separate auditors, separate financial
executives in the different branches report in to a central
agency? Some place there is going to have to be an audit. An
audit is the confirmation of what is correct.
I think it might do you well to look at the structure, as
well as just being sure that the money is coming in and the
money is going out, etc.
I want to ask you one last question. You were in charge of
looking for grants to help with the reconstruction in Iraq to
go to a donor body; is that correct?
Mr. Norquist. Correct.
Senator Lautenberg. Who made up the donor body?
Mr. Norquist. We had an outreach effort to raise
international donations for Iraq reconstruction. The U.S.
Government team consisted of under secretaries from State,
Treasury, and Defense. The international community effort was
led by the IMF, the World Bank, and the UN. And so the
international donations that were made were made to trust funds
managed by those international agencies.
Senator Lautenberg. Am I correct in noting that you were
searching for $50 billion and the commitments we got were only
$13 billion? Is that accurate?
Mr. Norquist. I believe it was the World Bank and the UN,
if I have that correctly, that went into Iraq and did a needs
assessment to determine what it would take to reconstruct Iraq.
I believe their initial assessment was that over many years it
would take about $50 billion. And that would include funds from
the Iraqis, what they were going to spend on their own
reconstruction, international donations, and, of course, the
U.S. Congress made a very sizable appropriation to support that
reconstruction effort.
Senator Lautenberg. We would be defined as a donor?
Mr. Norquist. We were a donor country under the system.
Senator Lautenberg. So were we----
Mr. Norquist. We are by far the largest. The Japanese, I
believe their pledge was on the order of about $5 billion. They
were another large donor.
Senator Lautenberg. But the total raised, the total
committed was $5 billion, as I understand it?
Mr. Norquist. The total raised from all the parties against
the $50 billion dollar multiyear target----
Senator Lautenberg. It was $13 billion.
Mr. Norquist. It was $13 billion from the international
community in addition to about $18 billion or so from the
United States.
But again, let me point out, that is significantly larger
than a normal donor conference. I believe it is actually,
according to the State Department, I was told it was the single
largest donor conference result.
But for many countries it was a one-year pledge, for some
countries a multi-year.
So it was not everything that Iraq would need to get
reconstructed, but it was a very significant first step. I
would frankly say, given the situation, being able to bring the
international community together to be part of an effort to
rebuild Iraq was a very important political step forward for
the world. And I greatly appreciate all the countries that
participated in that.
Senator Lautenberg. Have those bills been paid? Do you
know? Have those pledges been paid?
Mr. Norquist. I do not know all of them. I know that they
have been coming in. When I was there, we were working with the
Japanese who were delivering things. So I am familiar with some
of them, but not the overall.
Senator Lautenberg. Thanks, very much, Madam Chairman.
Thank you, Mr. Norquist.
Chairman Collins. Thank you, Mr. Norquist. I want to thank
you for appearing before the Committee today.
I want to second my colleagues in saying that I am
impressed, with three such young children, that you are willing
to take on a job that is going to involve a tremendous
commitment on your part. I think that speaks very well as far
as your commitment to public service. And you obviously have a
very supportive family for them to allow you to do that.
Without objection, the record will be kept open until 6
p.m. on Tuesday, May 9, for the submission of any additional
written questions or statements for the record.
I do want to point out that Senator Akaka, who has been
very active in the area of financial management, does have
questions that he will be submitting for the record. Mr.
Norquist, I encourage you to complete your responses to those
questions as soon as possible. Senator Akaka also has a
prepared statement he submitted for the record.
[The prepared statement of Senator Akaka follows:]
PREPARED STATEMENT OF SENATOR AKAKA
Thank you very much Madam Chairman. I, too, welcome Mr. Norquist as
we consider his nomination to be the Chief Financial Officer (CFO) for
the Department of Homeland Security (DHS).
As one of the three sponsors of legislation that brought DHS under
the Chief Financial Officers Act, thus making the DHS Chief Financial
Officer a Senate-confirmed position, I understand the tremendous
challenges facing the CFO at this time. For a relatively new Federal
agency, which has very high expectations from Congress, a primary
challenge is integrating all financial management activities in the
Department.
Moreover, as the Ranking Member of the Armed Services Readiness
Subcommittee, I have worked with my colleagues to ensure that the
Department of Defense develops a financial management architecture to
integrate its systems and business processes. Unfortunately, we were
forced to mandate--by statute--timetables for implementation at DOD.
Hopefully we won't have to take the same action for DHS.
I look toward Mr. Norquist, if confirmed, to be a steadfast leader
who will work to overcome the internal stovepipes and barriers to
integrating Department operations. It is my expectation that he will
promote efficiency and transparency of the Department's financial
management efforts.
As CFO, Mr. Norquist will also be expected to take the necessary
actions to investigate and eliminate any waste and abuse of taxpayer
money, even in the face of political pressure. He must be accountable
to the taxpayers. I trust that should he be confirmed, he will be
steadfast and persistent in fulfilling the duties of this office.
Thank you.
Senator Collins. Thank you for being here today. This
hearing is now adjourned.
[Whereupon, at 4:43 p.m., the Committee was adjourned.]
A P P E N D I X
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