committee will come to order i apologize one for keeping both my colleagues and our witnesses waiting i am coming from a breakfast meeting i was hosting for pennsylvania national guard was the bargain when we talk about trying to rein in spending and defense spending that the army national guard costs five percent of the total budget for the military yet is forty percent of the army combat resources  d on the air guard seven percent of the budget and about a third of the air force resources in other words what a good bargain the guard is when we try to wrestle with spending how to deal with the out of control spending that we  currently have so a different issue but related to what we are going to talk about here today the subcommittee on government organization efficiency and financial management is gathered here today to talk a look at the fiscal year two thousand and ten consolidated financial report of the united states government prepared annually by the office of management and budget and treasury in conjunction with each other and audited by the government accountability office this hearing will set the stage for our oversight of executive branch financial management systems throughout the th congress examining both government wide accountability issues and the fiscal implications of program spending decisions the financial statements in the accompanying audit present two separate but equally important issues of concern for the subcommittee first is the story told by the numbers themselves what the statements reveal about our fiscal future second is a process by which those numbers are derived what the audit shows in terms of how well the government keeps the books and six we looked at this report every year and the issues seem to be almost the same five to eight years later and the challenges we are dealing with we would like to make some progress over the next two years particularly in the area of improving internal controls so that we can address the root causes of the problems that we are facing on the financial front we would also like to bring more attention to financial management issues at our first hearing we were pleased to hear from members of the task force assembled by the federal accounting standards advisory board to werfel controller and director of the office of federal financial management office of management and budget this office oversees financial management practices at federal agencies and prescribes the form and content of agency financial statements  finally the honorable richard gregg first assistant secretary of the department of the treasury mister gregg's office is responsible for compiling the consolidated financial report certainly thank each of you for being here today and most importantly your written testimony you provided and gave us a chance to look at ahead of time and your oral testimony here today as well as being willing to take questions the insights that each and all of you have are so important to this subcommittee's work and we are not just glad to have you here today but look forward to partnering with you as we go forward over the next two years of this session and really doing our utmost to have the federal government be more accountable more transparent more efficient in how we use the resources of the american people so thanks for your  the issue of the federal government's financial report for fiscal year two thousand and ten is very timely and important particularly as the body is working to finalize the nation's budget i thank you for holding it mis gone two weeks ago we held a hearing on how best to present the information contained in the consolidated financial report so that it is clear and usable by congress and the public today we get into the details of what the financial reports actually say about the financial conditions of this country for fourteen years in a row gao has been unable to give an opinion on the audit of the government's financial statements as we have seen in the past there are still serious financial management problems at the department of defense there is a continuing problem with government agencies not reconciling their balance sheets for transactions they do with each other and gao is telling us that the process of preparing the government's financial statement is ineffective gao has been reporting the same problems to congress year in and year out for more than a decade treasury reports that government agencies have greatly improved accounting for the transactions they do with each other happy to hear encouraging and we are looking for continued improvement i am also aware that some government agencies have made substantial improvements in preparing their financial statements it is commendable that thirty one out of thirty five of the largest government agencies have received clean audit opinions from gao others it seems have stood still didn't move the dod still needs to invest significant time and personnel resources in improving its financial statements it is good to note that omb and treasury are working with dod to resolve some of its more serious accounting weaknesses have been hearing constant references to the shrinking window of opportunity for making policy changes to meet our ongoing challenges in producing credible financial reports we still have too much work to do i hope that the window is not closed by now i thank our panel of witnesses for their testimony and look forward to their observations of what further policy government i commend you mister chairman and this subcommittee for having this hearing it is very important to make sure that there is sustained attention to look at the status of the outcomes of the financial audits across the federal government every year now this past year as was mentioned in the opening statements again at the government wide consolidated financial statement level gao was unable to give an opinion on the accrual based financial statements of the united states government there are three main reasons for that serious financial management problems at the department of defense the inability of federal agencies to properly account for intragovernmental activity and reconcile balances between agencies and last an ineffective process for preparing the consolidated financial statements we have made many recommendations to treasury and omb they have implemented many they are in the process of implementing others so we are hopeful that there is continued progress in addressing these weaknesses also i would note in the two thousand and ten statements we were unable to give an opinion on the statement of social insurance which in the prior two years we were able to  statement of sustainability which shows the federal government's fiscal path over a long period of time this is something that is a very good development and should aid the congress and the citizens in understanding a long term path now this report and statement disclosed similar to what was disclosed in gao and cbo long range simulations that the federal government is on an unsustainable fiscal  path over a long period of time so we think this new statement of sustainability along with the citizens guide that has been prepared now for a while will be added education tools that can be used to help illustrate the se rious financial challenges facing the federal government now if you go down from the government wide to the agency financial statements the picture there is a big more encouraging twenty of the twenty four largest federal departments and agencies in the federal government were able to obtain an unqualified opinion that is up from six in fiscal year one thousand nine hundred and ninety six which was the first year that all departments and agencies across the federal government were actually required to prepare financial statements and to have them audited they have also been able to produce these statements on an accelerated time frame and have moved now to being able to produce them forty five days after the close of the fiscal year which is a good development as well now in addition our report points out a couple of material weaknesses across the federal government one is the problem of improper payments the current estimate in the report is one hundred and twenty five dollars billion i am very encouraged however to report that by actions by the administration and the congress and this committee's support through passage of the improper payments elimination and recovery act last year there are efforts under way to tackle this problem but it is probably going to get worse before it gets better because not all agencies and programs are reporting right now any improper payments but targets are being set you have a two hundred and ninety dollars billion tax gap between taxes owed and taxes collected so these areas are important for the federal government to tackle going forward so in summary mister chairman i think that it is very important  for sustained attention to be made by the congress i would encourage this committee to have continuing hearings on these subjects we just updated our high risk list and testified before the full committee a couple areas came off the list but the lesson learned is through high level attention by departments and agencies with sustained congressional oversight progress is possible it is needed and given the  pressure facing our nation going forward i believe financial management needs to be a top priority of the administration and the congress i thank you for your time and attention i would be happy to answer questions at the appropriate time  werfel thank you chairman platts ranking member towns congressman cooper congressman connolly and congressman gosar and other members of the subcommittee for the invitation to be here today to discuss the consolidated financial report of the united states and federal financial management improvements in financial management are paramount to the effectiveness stewardship of taxpayer dollars the annual results of agency financial statement audits are an important indicator of progress in carrying out our stewardship responsibilities effectively for the past several years the vast majority of federal agencies have achieved an unqualified or clean opinion on their annual financial statements and auditor identified weaknesses across the government have been steadily declining as mister dodaro just pointed out fiscal year two thousand and ten was somewhat of a high watermark for us in terms of twenty of the twenty four major cfo act agencies achieving a clean opinion also worth noting that we reported thirty one auditor identified material weaknesses across government when you compare that to the sixty one material weaknesses that were reported in two thousand you see that steady progress was made across the dodaro also pointed out that all major agencies are meeting the forty five day deadline for producing audited financial statements a time frame that actually exceeds the official statutory deadline of reporting by more than one hundred days of course although we are making great progress not all of our financial audit goals have been met in particular four agencies did not achieve a clean opinion in fiscal year two thousand and ten which in part led to the disclaimer on the government wide financial statement our office is committed to working with those agencies to make the necessary improvements in financial reporting practices so that all agencies achieve acceptable results on their annual  while audit results signal financial management success in many areas there are critical financial management objectives not currently evaluated or addressed through standard financial statement audit activities informed by recent discussions surrounding the twenty year anniversary of the cfo act and my experience as the day to day leader of federal financial management efforts across government i believe there are three improvements to our financial reporting model that represent the greatest opportunity to drive bottom line results for taxpayers first improving reporting on where federal taxpayer dollars are spent second instituting stronger internal controls to mitigate government waste and error and third increasing access to reliable information on the cost of agency operations as highlighted in my written testimony while the current financial audit process does not address these issues directly or comprehensively the administration and the federal financial management community are focused on improving results in these areas in particular through the accountable government initiative launched by this administration we are preventing and increasing the recoveries of improper payments eliminating unused real estate turning around underperforming technology modernization projects creating performance benchmarks for improved financial operations and providing unprecedented transparency into federal spending important early results are being achieved i thank mister dodaro for recognizing the efforts that  undertaking to attack the improper payments problem in fiscal year two thousand and ten we saw a decrease in the overall government wide improper payment rate and that decrease helped prevent three dollars eighty cents billion in improper payments that would have otherwise been made also federal agencies recaptured six hundred and eighty seven dollars million in improper payments made to contractors and vendors that is a three hundred percent increase in recoveries from the prior year fiscal year two thousand and nine despite this progress more work and tools  needed to address improper payments i think it is important for me to note that the president's two thousand and twelve budget recognizes this and includes in that budget a suite of program integrity proposals that if enacted would result in over  hundred and sixty dollars billion in savings over ten years i would like to also mention that the president's budget includes a bold new proposal related to civilian real estate in two thousand and ten the president directed agencies to accelerate efforts to real n civilian real property and save three dollars billion by fiscal year two thousand and ten the president's new proposal builds on the success so far and expands that savings opportunity to fifteen dollars billion this is achieved through the creation of an independent board that will make recommendations for up or down vote by congress on the elimination or consolidation of excess federal civilian assets including realignment and streamlining of agency field offices in sum we have built a foundation of strong accounting practices internal controls and reporting processes that are leading to better audit results this has positioned us to achieve better bottom line results in terms of error reduction and cost efficiencies but our work is not done platts ranking member towns members of the subcommittee for inviting me to testify today on the financial report for fiscal year two thousand and ten and the audit your interest in improving financial management is greatly appreciated the financial report is prepared from all the financial statements of the thirty five largest federal agencies and other information provided by more than one hundred smaller independent agencies in fiscal year two thousand and ten thirty one of the largest agencies earn unqualified or clean audit opinions on their financial statements for fiscal year two thousand and ten as gene had mentioned the gao was again unable to express an opinion on the government wide financial statements including the statement of social insurance the disclaimer on the remainder of the statements stems from three longstanding material weaknesses first serious financial reporting issues at the department of defense second the government's inability to adequately account for and reconcile intragovernmental activity and balances between agencies and third the government's deficiencies in the process for preparing the consolidated financial statements i will cover a few key issues included in the financial report and following that i will talk about the public and five dollars seventy cents trillion in federal employee and veteran liabilities the financial report also discusses the long term fiscal challenges of funding social security medicare and other social insurance programs the government's financial statements currently project a social insurance shortfall of thirty one dollars trillion over seventy five years the important message conveyed in this year's report is consistent with previous years that the sooner action is taken to resolve these shortfalls the smaller the revenue increases andor spending decreases necessary to return the nation to a fiscally sustainable path the department of treasury in cooperation with gao and omb issues a annual citizens guide and this ten page document utilizes user friendly graphs and charts to provide a summary of the financial report's key information to the public i would like to not talk about a number of initiatives that were taken over the  past year to improve this report and financial management in general we have reduced differences in transactions between agencies in fiscal two thousand and ten from one hundred and two dollars billion to forty dollars billion on an absolute value basis processes we will then move on and broaden the scope of the work of dod another issue we are working on is creating a general fund and this fund will provide dual entry accounting for some of the central government activities  this was not included in the accounting system that we have developed over the years this has been a gap in my view of the accounting process and we are in the process of filling that gap treasury is also expanding the government wide electronic invoice portal that will enable government agencies and vendors to improve control streamline purchases and reduce cost we are also working with omb and agencies to develop a system and process that will resolve longstanding differences in transactions when one agency does business with another also treasury has in the last six months or so expanded the use of electronic transactions for payments savings bonds and tax collections these three initiatives when fully implemented will save six hundred dollars million over the first five years we have also taken steps to sharply increase the debt collection within treasury we are looking to expand that to at least five dollars billion over the next ten years in a couple days you will have a hearing with commissioner lebryk on debt collection finally treasury is supporting omb to reduce improper payments by establishing and supporting the administration's verifiedpayment gov portal to prevent ineligible recipients from receiving payments from the federal government treasury looks forward to continuing its good working and we do look forward to our hearing on friday on debt collection and working closely with treasury and your recommendations of changes in law that may be necessary to strengthen debt collection efforts we will begin  included in your written statement that we cannot sustain the level of public debt that we are taking on driven by a number of issues demographics and medical costs in particular in the big picture and i think i answer you are going to give but i don't want to put words in your mouth when we look at that issue of sustainability the direction we are heading and the amount of debt we have and are taking on without significant changes what would be the num ber one recommendation that you think we as a congress should be looking at to change that trend that debt level trend to get us back onto a sustainable level what category spending or area and discretionary spending everything needs to be looked at in the federal budget and dealt with in order to bring this problem under control and i think it is being driven largely by rising  spending and health care costs and demographic changes as you point out those are the primary drivers but the solution is something that needs to be holistically looked at across the spectrum of the federal government's activities if that is not done this will not be solved mister platts is it accurate for me to say though and i agree with everything has to be on the table and looked at to be more responsible in our spending but the specific issue of entitlements that given that they are now roughly two thirds of our expenditures that while we can make improvements in discretionary  across the board including defense unless we get our hands around entitlements and specifically medicare spending that everything else will almost be for naught if we don't deal with that issue that is correct entitlement spending has to be dealt with in order to deal with this problem that is the primary driver behind the cost increases and needs to be an effective part of the solution if there is going to be a material change in this path  insurance that really i think we all agree is not an accurate reflection of the cost of medicare in particular because of assumptions that were made regarding medicare costs going down in response to the health care bill passed just over a year ago if all three of you could address that and how you look at those assumptions and the accuracy of inaccuracy of the assumptions made in the state being whether or not the scheduled reductions in cutting back the payments for medicare providers was going to take place as scheduled over the period of time it was about a thirty percent reduction over a thirty year period was assumed and of course as we know congress last year deferred that scheduled payment reduction by the first year during the first year second there are assumptions in the estimates about productivity gains that would be enhanced by other providers in the system and there is real uncertainty as to whether or not those productivity improvements would be realized at the size they are estimated and more importantly sustained over a period of time so given those uncertainties the auditors for hhs which originally looked at the statement of social insurance disclaimed an opinion and in response is that i would argue that historically accounting and the process that we have gone through has looked back on the previous year or years and the effort is to capture the transactions capture the value of our assets the value of our liabilities what we are entering into now with things like the statement of social insurance and the statement of fiscal sustainability is forward looking accounting where we are doing projections and some of the projections he noted are seventy five years into the horizon and that creates additional elements of uncertainty when you are looking to establish metrics and measures looking out over a seventy five year  qualifying statements and concerns about some of those uncertainties and when you apply the auditors scrutiny to that what typically is looking backwards at whether the books are kept to looking forward to a seventy five year projection i believe there are going to be times where those uncertainties are going to cross a threshold and create a discomfort level for the auditor in order to render opinion and there will be times where those uncertainties will not cross that threshold i think the last two years the uncertainties did not cross that threshold and what that tells me is that the process that we have the process that hhs and social security and the other agencies undergo to develop their tables to develop their numbers to report this information is generally sound but there will be moments in time where those uncertainties exceed a threshold by which the auditors don't feel comfortable rendering an opinion i would urge that the values that are reported still have value and they still should be looked at closely and considered by congress but i think that we have to recognize that when you get into the business of auditing statements that are projecting seventy five years into the future you are going to run into situations where issues of uncertainty affect the audit opinion danny said first of all the huge piece of legislation and trying to figure out what is going to happen seventy five years out is very difficult and secondly i think as a result  historically the record shows we won't do that as we did not in the very first year we didn't even make it one year without reversing that legislation given that reversal my hope is that when the statement of social insurance is issued for achieved so that we get a more realistic understanding of where medicare stands because unless we are realistic and honest about medicare we will never be honest about our fiscal picture and truly getting our hands around this challenge were overpayments and some were underpayments some were made without sufficient documentation to support them and some should not have been made at all in recent years federal agencies have been given more even though not all improper payments are an indication that fraud has taken place the potential for fraud waste and abuse remains extremely high mister greg tremendous on the agencies and treasury at the same time i think we can and we are doing a lot more until fairly recently under the direction of omb we really hadn't had agencies starting doing business intelligence assessments of going into the payment files and looking for potential problems before the payments reached treasury and i think that is a very important step there are tools out there find those debtors and go out and collect the money even though the payments have already been out and the debt is there we are looking for ways to use better tools that we now have available to find people who  file may say jack mcdonald we now have tools that will help us identify whether or not that is the same person we obviously don't want to try to collect a debt that isn't owed by someone but through those tools we are going to be able to really hone in would start by saying that progress is being made the error rates in key programs are going down and they are going down at the government wide level but the challenge and the mathematical reality is as outlays outpace raises how important this is because as more money goes out the door it raises the stakes for how important it is to get these payments right because a one percent error when one hundred dollars is going out is very different than a one percent error when one thousand dollars is going out and that is the situation we have right now more money is going out the door even though the error rates are declining improper payment amount goes up why is this happening we are doing i think a better and better job of understanding what makes up our errors in some situations you still have agencies making basic mistakes it is within their direct control and they should in the immediate term be able to take steps to better address the errors whether the payments are going to clearly ineligible individuals whether they have been suspended or debarred or something that is very basic but in many situations congressman the effort to identify whether someone is eligible for a payment is extraordinarily complicated and involves a variety of different factors and when you go down and audit that payment you find that mistakes are made i think a good example of that is in the earned income tax credit which has the highest error rate of any program the  eligibility characteristics for someone to be eligible for the earned income tax credit are very challenging for example an individual has to have lived with their dependent child for more than six months we don't have a global childhood residency database to validate that and we find a lot of improper payments occur when we go down an audit and find they didn't live with their dependent child for more than three months or something of that kind so part of the challenge is finding those third party data sources and figuring out better ways to validate eligibility that chairman you can sort of understand in terms of dealing with the public and private sector but when government agencies deal with each other it seems to me that we should be able to correct this and be able to move forward is there anything else that we need to do i am talking about the congress mister werfel well first if i could just jump back to improper payments i mentioned in my testimony in my oral and both my written that in the president's budget we have a suite of proposals that relate to driving down improper payments in key programs in social security hhs irs and labor that if enacted we believe would save  hundred and sixty dollars billion over ten years so the first thing would be to call your attention to those provisions and ask for help in getting them enacted in terms of the intragovernmental transactions i think that the process that we have today defining a solution but with mister gregg's leadership solutions are emerging right now for improvements on intragovernmental transactions so what i would ask of the congress is to continue to call us before you and hold us werfel you referenced the percentage of mispayments and fraud i actually question the accuracy of those numbers because these are self reported numbers and as a businessman i understand how those things can be skewed of those numbers so i also believe in a checks and balance system especially when we are grasping accurate numbers for policy assumptions were entities like congress the american people the cbo misled when calculating the cost of papaca or obama care as we know it by using bad accounting methods report with that all the assumptions that were made and those assumptions can be challenged this is somewhat of a thick book and it is thick because there are footnotes and alternative analyses and alternative presentations and  i think that what we have empowered is a situation where academics think tanks members of congress and gao can debate these numbers and have a healthy dialogue about whether the estimates and the werfel i need a clarification on the question how do we do the accounting of what mister gosar how do you do accounting on the new sixty eight nebulously written discretionary grants as described in health and human services policy appropriation should be clear in terms of what its amounts are the question then becomes what information about those dollars are you interested in understanding and then i can talk more about how they might be you almost to a daily basis exactly how much money has gone out the door if you are asking how much would be spent in the future by a particular grantee that is not something that we estimate in the financial to take it down to the provider level you know you can skew numbers any which way for example in dialysis we are actually withholding payment from dialysis patients to show better numbers on self reporting numbers this is where the fraud is and we can't even get a grip on this what we need to be able to do is have numbers that are apples to apples for comparison and if congress can't get this neither can the american people and we can't even look at what agencies look at and this is just the tip of the iceberg so i question even the reality of what these numbers actually are do you understand my frustration here mister werfel in the area of medicare fraud and improper payments i could not agree with you more we have a significant problem an estimate that exceeds sixty dollars billion and it is unacceptable i can sit here today and tell you that the error rates are trending down but i can't say that we are at an acceptable level so i completely agree with and it is not just those mispayments it is also misuse from the agency itself in not paying out providers and hospitals and patients it is on the same aspects it is not just mispayments it is withholding of payments  at a time when record numbers of americans are questioning the federal government's ability to manage its own affairs it is kind of amazing this hearing is in one of the smallest hardest to find rooms on capitol hill is not even covered by c span three this is a missed opportunity for anyone who is concerned about the future of the federal government because what you gentlemen are discussing is in my opinion the most comprehensive report on how the federal government is doing it is the only one that uses real business accounting so called accrual accounting that is not cruel it just tries to take into account what is on the government credit card which lord knows every family every business every government needs to focus on so it is amazing to me when people are concerned not only about government finances but their own personal finances and people worry about the stocks that they holding in the stock market and they look at the annual report they get from a company and here you gentlemen have worked hard to present a report to the american people even with its own handy citizens guide to make it extra easy for people to understand people are getting their favorite companies annual report somehow they don't even know their favorite country's annual report exists what we are discussing here today is one of the best kept secrets in america to my knowledge there is not one businessman i have ever met who knows this report exists there is not one business lobby that makes this a priority to focus on this there is not one newspaper in america that regularly uses accru accounting to describe the situation we are in and this is an amazing well it is a missed opportunity for my friends in the other party because the first plank of the republican contract with america was no more congressional hypocrisy we should play by the same rules we require of the regular citizens and regular businesses of any size have to use real accounting but not the federal government so why aren't we holding ourselves up to the private sector standard so you gentlemen know this already because you are accounting experts and it is hard for you sometimes to translate your knowledge to average members but in response to doctor gosar question i would urge him to look at the conclusion section of the citizens guide handy citizens guide which says two very helpful sentences here the united states took a potentially significant step towards fiscal sustainability in tw by enacting the aca what he chooses to call obama care it also says the legislative changes for medicare and medicaid and other parts of the health care system hold the prospect of lowering the long term growth trend for health care costs and significantly reducing the long term fiscal gap that should be our primary job here on the hill to lower the fiscal gap now accounting will never be perfect it is just an approximation of what goes on but this is the best report we have and very few people know about it so i look forward to the first lobbying group in washington celebrating and spreading this report i look forward to the average rotarian back home being able to access and know about this report it is true it is available on the web but nobody knows when they are reading the wall street journal everyday as i did this morning that they are reporting cash numbers only so they really don't know what is on the national credit card and i think they are entitled to know that there are many things we could go into into the details of your report i thankful that you gentlemen prepared this report and you sometimes get grief and misunderstanding when you do it let's work on improving the mistake in payments let's reduce that to the bare minimum you gentlemen are working hard on that already but the key thing miss the big picture that this is a more important look at the federal government than probably any other document and if you were to poll members of congress most of them have never read it have never heard of it and don't know its significance even though they guard their investments pretty carefully and care about which stocks they invest in well this is our only country and we need to make sure that the american people are aware of this because in simple terms the deficit if you want to call it of course the proper term here is net operating cost is much higher than the cash number and it is higher for some very specific reasons and reasons that aren't necessarily fun to go into because a of that discrepancy has to do with veteran spending and military retiree spending and civil service spending and things like that that using traditional cash measures we are keeping up with we are not admitting what is on our c the release of it and again raising awareness also mister cooper i know in the past you have introduced legislation regarding accrual accounting and i share with you today that i would like to work with you this session on the possibility back for the accountability side of that is a very big deal while we are busy looking forward to seeing what is happening next which is important for all of us accountability we have got to know what was just behind us so we are able to be able to do our task as well  and to learn the lessons that we have seen behind us your report is very good in being able to mention several items that are up i don't know if we have mentioned before the real property comments that you made in it extrapolate a little more on what you anticipate as far as the release of some of these properties the jobs that are related to those and how we begin to transition from a piece of property that is underutilized or not utilized at all to having that then gone what do you see as the process mister werfel thank you for the question congressman  identified as excess but there are an additional fifty five thousand assets beyond that that have been classified as underutilized by agencies but have not yet been placed in excess and therefore are not in the  gotten rid of and then i have concerns that beyond that fifty five thousand there are additional assets that have not been scrubbed closely and looked at for realignment opportunities the process that we have today is somewhat warehouse in a rural location or an office building in a downtown location that is no longer needed needs to go through the very same process which depending on how good the agency is at doing it could take anywhere from a year to two years which is unacceptable in terms of the more critical needs we have to not be maintaining these assets at a cost to taxpayers the second reason is incentives and financing it costs money to relocate it costs up front money to get an asset ready for sale and often we allow these short term costs to be a barrier to long term and broader savings so we need to think about how to address that and the third area is politics we have found it in many case to be difficult to remove the federal presence from an asset that is underutilized because local officials or  congressional delegations rally around keeping that federal presence there even if there is an opportunity for realignment and consolidation we looked at different ways of addressing these three areas and one area that we had some success is in the defense department's base realignment and closure program whereby vesting the process in an independent commission and giving them the werfel ever since the president's budget came out and we had this proposal in there we have been getting contacted by commercial real estate experts and other community development experts around the country who would like to soon we will begin putting together this commission we propose a seven member commission or seven member board and we are already starting to gather names for that but i think it would be premature to get started should be pushing on and continue to move forward to get those things into the private sector i would encourage you as well to continue to push on your fifty five thousand number i am skeptical with you that that is all we have based on the fact that you can look at i am in oklahoma if you look  to the west of oklahoma almost all the country is owned or controlled by the federal government when you look west there are a lot of properties and pieces that are sitting out there that should be available to the public sector that are now very tightly controlled by the federal government so whether that is a building or whether  is in local government we value property based on highest best use so it is one thing to say x property is excess and if we decide that that is going to go to oklahoma city as a park that has one value if on the other hand we decide no we are going to actually develop it as a research park with office buildings and lots of workers well that has a very different value and i guess i would be concerned about how we value property and when we dispose of excess property talk about politics from the federal government's point of view if we really mean it about the fiscal situation and addressing it we want to sell it or dispose of it for the highest best use not the lowest use and that i assure you is not so easy with the best of intentions it is not so easy would that not be correct mister werfel mister werfel it is in fact one of the questions that i sometimes get when i raise this issue of why politics can prevent the assets is if you have an asset that is mostly empty why would the local jurisdiction have concerns and it is really about what happens to the property afterwards it is the competing stakeholder interests that emerge whether someone wants it for a park or someone wants to develop it commercially or sometime wants it gifted to a local university for education purposes all noble objectives the problem is those competing interests come into play and there isn't a rational process to reconcile them mister connolly right mister werfel that is why this independent board we believe is the correct solution because it would be empowered to move quickly to determine what the right impact dollars billion are civilian agency payments half of which are in medicare and medicaid although in medicare the part d prescription drug program does not yet have an estimate so that will have to be added in the future  six the idea that we can project seventy five years into the future with any accuracy and anticipating actions by a congress by a series of presidents by the public technology i mean think  back seventy five years and ask oneself how accurate would we have been in one thousand nine hundred and thirty six in predicting two thousand and eleven so i guess i would ask you to comment on how valuable is a seventy five year time horizon really mister dodaro well i think it is very important recognizing there are a lot of uncertainties and inherent difficulties in doing it for the government to have a longer term view of some of its policy decisions at the time one of the concerns that we have had is if you look at just the next budget year or even five years out you really don't understand comprehensively the long term consequences of policy decisions so i think some things have to be there in some of these areas we know the population is already here and will turn a certain age at a certain period of time so there is relative certainty to some of the assumptions in the estimates terms i mean if you look at for example demographics if you looked at a seventy five year horizon i assure you demographic projections were profoundly inaccurate in terms of population estimates and fertility rates and human behavior and spacing of families for example so i just think that yes i agree with you we need a longer time horizon but seventy five may be not the tool we hope it to be that is something anyone could rely upon except for population based notions which turn out to be more accurate than perhaps some others i note on page twelve of  entered into what has turned out to be the deepest recession since the end of world war ii gross domestic product fell four point one percent from the beginning of the recession through the second quarter two thousand and nine then you note that gdp has grown slowly unemployment remains at a high level in the second paragraph you note the economic recovery that the government's actions to stabilize the financial markets and to promote economic recovery resulted in assets of four hundred dollars billion which is a net of about seventy five dollars billion in valuation losses now this is a very little talked about notion we always hear about this recovery of some of these assets break them down many would be surprised perhaps in a short period of time investments in particular that the treasury made as part of our economic recovery act either through the hera legislation or the issa legislation were set out with an expectation of a  return where money is paid back to us or investments that we are made provide value to us that improve the bottom line associated with these financial statements and i would agree that it is a point that sometimes gets lost when of being repaid and part of that is due to the fact that investments that were made by the united states continue to have value and in some cases the government and the taxpayer actually have made a profit on those investments gone out in investments have been repaid and the quote is that we are looking to have little or no money actually for those types of investments actually cost the taxpayers anything so the money has been coming disservice not to report to the american people who were very concerned and rightly so that the government had to lay out so much money not to report every jot and tittle of every cent we have gotten back  every amount we may have made over what we expected and in what period of time for those who read deeply into the newspaper frankly to get back as much as we have gotten back in so short a period of time additional information that she is looking for we need to wrap up in about eight or nine minutes i am going to try to get through a couple more questions here for those who have i am going to kick it off on a specific issue and this goes to frustration i hear from constituents often that when we have either wrongful conduct in the federal government or just mismanagement there is never any consequences and one of the three major impediments identified by gao to a clean opinion entities did not adequately perform those reconciliations for fiscal years two thousand and ten and two thousand and nine i guess one question is general dodaro i don't know if you have with you today but what is a significant number how many of those thirty five did not adequately do it on a quarterly basis and then specifically to our treasury and omb witnesses what if any consequences occurred regarding those cfos failure to comply with your department and agency requirement was anyone disciplined suspended fired for not doing what they are required to do because when they don't do this as gao is telling us this is one of the major impediments to us fully specific number mister gregg might actually know the specific number but i couldn't agree with you more that there ought to be consequences mister platts mister gregg i don't know if you know of the thirty five how many agencies departments of those thirty five did not can easily identify that they are talking about the same transaction and then the role that i have also agreed to take on is that we are going to be following up with the agencies and if they don't get those reconciled quickly we are going to be after  will elevate it as high as we need to in the agency to get those taken care of we can't do this once a year and be successful this has got to be an ongoing process and it is not just quarterly it is an ongoing transaction process that we need to stay on top of and we haven't been doing it treasury hasn't been doing it no one has been doing it sitting in the seat of being responsible and holding the agencies responsible mister platts and that is my point here is accountability jobs it sounds like we have not had consequences in the past but treasury is trying to put in place a system to allow more stringent requirements and consequences to be imposed mister gregg treasury the financial management service does send out a report after each financial report comes in and in essence kind of grades the agencies on how they did the cfos at the agencies don't especially appreciate getting that giving him or her their own report card well as a parent i want to see my child's report card to hold them accountable let's make sure the agency head sees that report card so they can hold their cfo accountable because otherwise  subcommittee that we really have consequences again this is one of the three main criteria that is highlighted as why we can't get a clean opinion so i think it has to be one of the issues we are most serious about going after mister werfel i agree and i think alerting the agency head of some of these key metrics is something we are certainly interested in doing and we will work with treasury and you on that the other thing i would just add is that i do think there is a positive development that has occurred over the last five years of more and more a cfos not just the cfos themselves but their entire teams so i can't sit here and say that all the right people are seeing all the right impacts on their performance evaluations due to some of the weaknesses that we see but i can tell you that it igs often contract with independent audit firms although they don't all do that but the igs are overseeing the audits of their agencies and therefore are a central partner in helping figure out what the financial management weaknesses of the agency are and how to address them so they do play a central role it just so happens that they don't always write the audit report sometimes they hire an independent auditor to write the audit report for them but they bless it and they have to sign off on responsibilities to audit the emergency lending facilities at federal reserve and we are doing that now and expect a report by this summer mister gosar wonderful can i just follow up with a real quick question then do these accounting issues impact monetary clarify for the record that the trustees social security and medicare trustees are required by law to use the seventy five year number mister platts and i am going to close with two quick questions just to make sure my understanding is correct before we  referenced that the improper payments rate is going down medicare part d currently is not part of that number that they are not being assessed for what improper payments are is that correct mister werfel that is correct i was referring to medicare fee for service and payment requirement for medicare payments is that something that given a billion transactions that treasury is handling and the number that medicare is handling by having that thirty day payment requirement the goals of the improper payments legislation is to understand the root causes of these errors and understand what kind of adjustments need to be made and if there is a sense that the timing is too short to do the necessary due diligence that should come in  hhs's financial report and be reported out and then we would want to talk to you about those types of statutory changes but i think we need to certainly evaluate that as we go forward in terms of that timing mister platts thank you i certainly appreciate all three of you  don't know about after that but if we see as one of those major impediments being intragovernment payments i am going to be asking what did we do with that cfo report card where there wasn't adequate compliance on  at least a quarterly basis and that we are going after that issue so just to put you on fair notice we will keep the record open for seven days for any other additional information from witnesses or for member statements and our thanks