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[Senate Report 113-276]
[From the U.S. Government Publishing Office]

113th Congress 
 2d Session                      SENATE                          Report
                                                                113-276
_______________________________________________________________________

                                     

                                                       Calendar No. 606

 
     SECURITY CLEARANCE ACCOUNTABILITY, REFORM AND ENHANCEMENT ACT

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                S. 1744

TO STRENGTHEN THE ACCOUNTABILITY OF INDIVIDUALS INVOLVED IN MISCONDUCT 
                      AFFECTING THE INTEGRITY OF 
     BACKGROUND INVESTIGATIONS, TO UPDATE GUIDELINES FOR SECURITY 
                   CLEARANCES, AND FOR OTHER PURPOSES

                December 1, 2014.--Ordered to be printed
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                  THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin             KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota

                  Gabrielle A. Batkin, Staff Director
               John P. Kilvington, Deputy Staff Director
                    Mary Beth Schultz, Chief Counsel
       Lawrence B. Novey, Chief Counsel for Governmental Affairs
         Troy H. Cribb, Chief Counsel for Governmental Affairs
               Keith B. Ashdown, Minority Staff Director
         Christopher J. Barkley, Minority Deputy Staff Director
               Andrew C. Dockham, Minority Chief Counsel
           Mark K. Harris, Minority U.S. Coast Guard Detailee
                     Laura W. Kilbride, Chief Clerk
                                                       Calendar No. 606
113th Congress
                                 SENATE
                                                                 Report
 2d Session                                                     113-276

======================================================================

     SECURITY CLEARANCE ACCOUNTABILITY, REFORM, AND ENHANCEMENT ACT

                                _______
                            

                December 1, 2014.--Ordered to be printed

                                _______
                                

 Mr. Carper, from the Committee on Homeland Security and Governmental 
                    Affairs, submitted the following

                              R E P O R T

                         [To accompany S. 1744]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 1744), to 
strengthen the accountability of individuals involved in 
misconduct affecting the integrity of background 
investigations, to update guidelines for security clearances, 
and for other purposes, having considered the same, reports 
favorably thereon with a substitute amendment and recommends 
that the bill, as amended, do pass.

                                CONTENTS

                                                                   Page
  I.  Purpose and Summary.............................................1
 II. Background and Need for the Legislation..........................2
III.  Legislative History.............................................7
 IV. Section-by-Section Analysis of the Bill, as Reported.............8
  V. Evaluation of Regulatory Impact.................................10
 VI.  Congressional Budget Office Estimate...........................10
VII.  Changes in Existing Law Made by the Bill, as Reported..........11

                         I. PURPOSE AND SUMMARY

    This bill seeks to make the vetting of federal government 
personnel more reliable by requiring that, if someone works for 
an agency or a contractor on conducting background 
investigations and submits false information into the record of 
an investigation, or otherwise engages in conduct that 
undermines the integrity of the investigation, the individual 
must be removed from performing further work on background 
investigations. Moreover, to help ensure that personnel are 
vetted appropriately for security-sensitive jobs, the bill 
requires the President to issue updated guidance to assist 
agencies in designating the level of sensitivity of positions 
in the government and in determining what level of background 
investigation to conduct for positions with various levels of 
sensitivity.

              II. BACKGROUND AND NEED FOR THE LEGISLATION

    Processes for Vetting Government Personnel. Federal 
agencies conduct background investigations for the purpose of 
vetting individuals to provide service to the government. The 
level of detail of the investigation depends on the nature of 
the job. Background checks help determine whether an individual 
is appropriate for employment by a federal agency or a federal 
contractor, and investigations are also used to determine 
whether to allow an individual to have access to government 
facilities or information technology systems. More intensive 
investigations are used to determine whether an individual is 
eligible to hold a ``Public Trust'' position (i.e., a position 
that could have a relatively large adverse impact on an 
agency's efficiency or integrity),\1\ to have access to 
classified information, or to occupy a national security 
sensitive position with the government.
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    \1\Agency positions are designated at a ``high, moderate, or low 
risk level as determined by the position's potential for adverse impact 
to the efficiency or integrity of the service,'' and those at the high 
or moderate risk levels would normally be designated as ``Public 
Trust'' positions. 5 C.F.R. 731.106 (a)-(b). OPM's regulations explain: 
``Such positions may involve policy making, major program 
responsibility, public safety and health, law enforcement duties, 
fiduciary responsibilities or other duties demanding a significant 
degree of public trust, and positions involving access to or operation 
or control of financial records, with a significant risk for causing 
damage or realizing personal gain.'' Id.
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    Because unauthorized disclosure of classified information 
can cause damage to national security and loss of human life, 
federal civilian employees, military personnel, and contractor 
employees are allowed access to classified information only 
after the government conducts a rigorous background 
investigation and issues them a security clearance.\2\ The 
levels of security clearance correspond to the levels of 
sensitivity of classified information to which the individual 
may have access--``Top Secret,'' ``Secret,'' and 
``Confidential.''\3\ Some security clearances allow access to 
``Sensitive Compartmented Information,'' which involves 
intelligence matters and is particularly sensitive.\4\
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    \2\See Exec. Ord. 12968 ``Access to Classified Information'' (Aug. 
2. 1995) (50 U.S.C. 3161 note).
    \3\See Exec. Ord. 13526 ``Classified National Security 
Information'' (Dec. 29, 2009) (50 U.S.C. 3161 note). To indicate access 
to sensitive nuclear information and materials, ``Q'' clearances and 
``L'' clearances are issued, with Q clearances allowing access to the 
more highly sensitive level. See U.S. Department of Energy, Order DOE O 
472.2, Personnel Security'' (Approved: July 21, 2011), https://
www.directives.doe.gov/directives-documents/400-series/0472.2-BOrder; 
U.S. Nuclear Regulatory Commission, Information Security (Last 
Reviewed/Updated October 31, 2013), http://www.nrc.gov/security/info-
security.html. 
    \4\See Office of the Director of National Intelligence, Number 
704.1, Intelligence Community Policy Guidance, Personnel Security 
Investigative Standards and Procedures Governing Eligibility for Access 
to Sensitive Compartmented Information and Other Controlled Access 
Program Information (ICPG 704.1, Oct. 2, 2008), http://www.ncix.gov/
publications/policy/docs/ICPG_704-1_Investigative%20Standards.pdf. 
---------------------------------------------------------------------------
    Moreover, positions within an agency are designated as 
``sensitive positions'' if an individual occupying a position 
could bring about ``a material adverse effect on the national 
security.''\5\ Most sensitive career civil-service positions 
and some others are categorized among three levels of 
sensitivity: ``Noncritical-Sensitive,'' ``Critical-Sensitive,'' 
and ``Special-Sensitive.''\6\ Positions that require access to 
classified information are always considered sensitive 
positions. And aside from whether a position may have an impact 
on national security, positions within an agency are ``moderate 
risk public trust'' positions or ``high risk public trust 
positions,'' depending on the level of risk that someone in the 
position could harm the efficiency or integrity of the 
agency.\7\
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    \5\See Exec. Ord. 10450 (April 27, 1953) (5 U.S.C. 7311 note).
    \6\See 5 C.F.R. part 732 (The requirement to designate sensitive 
positions at one of these three levels of sensitivity applies to 
positions in the competitive service (i.e., positions filled according 
to the Office of Personnel Management's competitive-hiring regulations) 
and to Senior Executive Service positions filled by career appointment, 
and agencies may apply the requirement to other positions); Office of 
Personnel Management, Position Designation Tool, Position Designation 
of National Security and Public Trust Positions (October 2010), http://
www.opm.gov/investigations/background-investigations/position-
designation-tool/oct2010.pdf. 
    \7\See 5 C.F.R. 731.106.
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    The head of each agency must designate positions in terms 
of whether they require access to classified information (and, 
if so, at what level of classification), whether the positions 
are national-security sensitive (and, if so, at what level of 
sensitivity), and whether it is a position of public trust 
(and, if so, at what level of risk). Then, when an individual 
is under consideration for a position, the scope of the 
background investigation for the individual must be appropriate 
for the designations associated with the position.\8\ In 
addition, individuals in security-sensitive positions 
(including those requiring access to classified information) or 
in public-trust positions are subject to routine periodic 
reinvestigations, and agencies may require reinvestigations any 
time there is reason to believe the individual may no longer 
meet the standards for the position.
---------------------------------------------------------------------------
    \8\See, e.g., Memorandum for Heads of Agencies, subject: ``Aligning 
OPM Investigative Levels with Reform Concepts,'' from John P. 
Fitzpatrick, Asst. Dep. Director of National Intelligence for Security, 
Office of the Director of National Intelligence, and from Kathy L. 
Dillaman, Assoc. Director, Federal Investigative Services, Office of 
Personnel Management (Aug. 24, 2010), http://www.opm.gov/
investigations/background-investigations/federal-investigations-
notices/2010/aligning_opm_investigative_levels.pdf. 
---------------------------------------------------------------------------
    The great majority of background investigations (over 90 
percent) are performed by the Federal Investigative Services 
(FIS) within the Office of Personnel Management (OPM), at the 
request of other agencies,\9\ though several agencies, many of 
which are in the Intelligence Community, are authorized to 
conduct their own.\10\ OPM hires contractors to conduct much of 
the information collection, and other agencies also use a mix 
of contractors and federal employees to gather the information 
needed for a background investigation.\11\
---------------------------------------------------------------------------
    \9\Office of Management and Budget, ``Suitability and Security 
Processes Review: Report to the President,'' conducted by the 
Suitability and Security Clearance Performance Accountability Council 
(February 2014) (``120-day Suitability and Security Report''), at page 
2.
    \10\See id. at pages 2-3, http://www.whitehouse.gov/sites/default/
files/omb/reports/suitability-and-security-process-review-report.pdf.
    \11\See id. 
---------------------------------------------------------------------------
    Following a background investigation, and based on the 
information collected, comes the adjudication stage, in which 
the sponsoring agency assesses the information collected and 
determines whether to allow the individual to occupy the 
position, and, if relevant, have access to classified 
information.
    Integrity of Background Investigations by Federal and 
Contractor Employees. Several high-profile leaks of classified 
information and other crimes in the last few years by 
individuals with security clearances have highlighted weakness 
in our processes for vetting federal personnel and have 
demonstrated the urgent need to strengthen these processes:
     During 2010 and 2011, an Army intelligence 
analyst, then named Bradley Manning, stole and leaked enormous 
quantities of classified documents regarding military 
operations in Iraq and Afghanistan to a whistleblower website 
called Wikileaks.\12\
---------------------------------------------------------------------------
    \12\See Department of Defense, ``Internal Review of the Washington 
Navy Yard Shooting: A Report to the Secretary of Defense'' (November 
20, 2013) (``DoD Internal Review'') at page 16, http://www.defense.gov/
pubs/DoD-Internal-Review-of-the-WNY-Shooting-20-Nov-2013.pdf. In April 
2014, Manning's name was legally changed to Chelsea Elizabeth Manning, 
at Manning's request. See Ernesto Londono, ``Convicted leaker Bradley 
Manning changes legal name to Chelsea Elizabeth Manning,'' Washington 
Post (April 23, 2014), http://www.washington post.com/world/national-
security/convicted-leaker-bradley-manning-changes-legal-name-to-
chelsea-elizabeth-manning/2014/04/23/e2a96546-cb1c-11e3-a75e-
463587891b57_story.html.
---------------------------------------------------------------------------
     During June 2013, computer systems administrator 
Edward Snowden leaked to the news media enormous quantities of 
National Security Agency classified documents that he obtained 
while working for intelligence contractors Dell and Booz 
Allen.\13\
---------------------------------------------------------------------------
    \13\See ``Safeguarding our Nation's Secrets: Examining the Security 
Clearance Process,'' joint hearing before the Subcommittee on the 
Efficiency and Effectiveness of Federal Programs and the Federal 
Workforce and the Subcommittee on Financial and Contracting Oversight, 
Senate Committee on Homeland Security and Governmental Affairs, 113th 
Cong, 1st Sess. (June 20, 2013), S.Hrg. 113-316; testimony of James R. 
Clapper, Director of National Intelligence, ``Open Hearing: Current and 
Projected National Security Threats Against the United States,'' before 
the Senate Intelligence Committee, January 29, 2014, http://
www.intelligence .senate.gov/hearings.cfm? hearingid=138603a26950ad 
873303535a630ec9c9& witnessId=138603a26950ad 873303535a630ec9c9-0-1, 
unofficial transcript at http://www.washingtonpost.com/world/national-
security/transcript-senate-intelligence-hearing-on-national-security-
threats/2014/01/29/b5913184-8912-11e3-833c-33098f9e5267_story.html. See 
also, Mark Hosenball, ``Snowden downloaded NSA secrets while working 
for Dell, sources say,'' Reuters (Aug. 15, 2013), http://
www.reuters.com/article/2013/08/15/usa-security-snowden-dell-idUSL2N0GF 
11220130815.
---------------------------------------------------------------------------
     Most recently, on September 16, 2013, Aaron 
Alexis, while a Navy contractor with a Secret-level security 
clearance, fatally shot 12 U.S. Navy civilian and contractor 
employees and wounded several others in a mass shooting inside 
the Washington Navy Yard in Washington, D.C.\14\
---------------------------------------------------------------------------
    \14\See DoD Internal Review, note 12 above, http://www.defense.gov/
pubs/DoD-Internal-Review-of-the-WNY-Shooting-20-Nov-2013.pdf; 
Department of Defense, ``Security from Within: Independent Review of 
the Washington Navy Yard Shooting'' (November 2013) (``DoD External 
Review''), http://www.defense.gov/pubs/Independent-Review-of-the-WNY-
Shooting-14-Nov-2013.pdf.
---------------------------------------------------------------------------
    On June 20, 2013, shortly after the massive release of 
classified information by Mr. Snowden, very troubling 
information about the integrity of the background-investigation 
program was presented at a joint hearing before two of this 
Committee's subcommittees.\15\ The Inspector General of OPM, 
Patrick McFarland, testified at the hearing about the 
fabrication of background investigations within OPM's Federal 
Investigative Services.\16\ Mr. McFarland stated that ``one of 
the most flagrant criminal violations that we encounter is the 
falsification of background investigation reports'' and that 
there are situations where the ``Federal Investigative 
Services' background investigators, either Federal employees or 
contractors, report interviews that never occurred, record 
answers to questions that were never asked, and document 
records checks that were never conducted.''\17\
---------------------------------------------------------------------------
    \15\Joint hearing of the Subcommittee on the Efficiency and 
Effectiveness of Federal Programs and the Federal Workforce, and the 
Subcommittee on Financial and Contracting Oversight, of the Senate 
Committee on Homeland Security and Governmental Affairs, ``Safeguarding 
our Nation's Secrets: Examining the Security Clearance Process'' (June 
20, 2013) (``June 20, 2013 hearing'').
    \16\Testimony of Patrick McFarland, Inspector General, U.S. Office 
of Personnel Management, before the Senate Committee on Homeland 
Security and Governmental Affairs, Subcommittee on the Efficiency and 
Effectiveness of Federal Programs and the Federal Workforce, 
``Safeguarding our Nation's Secrets: Examining the Security Clearance 
Process'' (June 20, 2013), http://www.hsgac.senate.gov/download/
?id=c11fa433-8f01-440f-a306-741e879ce8a8.
    \17\Id. 
---------------------------------------------------------------------------
    Among the examples Mr. McFarland provided was a record 
searcher who fabricated 1,600 credit checks that she never 
actually completed. Moreover, her own background investigation 
had been falsified by a background investigator who had been 
convicted in a different fabrication case. Since the OPM Office 
of the Inspector General began investigating that type of case 
in 2006, twenty-four background investigators and records 
searchers have been criminally convicted, resulting in court-
ordered restitution of at least $1,866,382 to OPM's Revolving 
Fund.\18\
---------------------------------------------------------------------------
    \18\Information provided to Committee staff by the OPM Office of 
Inspector General on November 13, 2014.
---------------------------------------------------------------------------
    Further troubling allegations questioning the integrity of 
the background check program emerged on October 30, 2013, when 
the Department of Justice joined a civil fraud lawsuit claiming 
that a contractor, which was performing a large share of the 
investigative work contracted out by OPM and other agencies, 
had engaged in a systemic failure to adequately conduct 
security clearance background investigations.\19\ Specifically, 
the Department of Justice alleged that the senior management of 
the company ``dumped'' incomplete investigations on OPM in 
order to increase the company's revenue and profit. This began 
at least as early as March 2008, according to the complaint, 
and continued through at least September 2012, and involved 
665,000 background investigations--approximately 40 percent of 
the total investigations conducted by the contractor during 
that time frame.\20\
---------------------------------------------------------------------------
    \19\U.S. Department of Justice press release (Oct. 30, 2013), 
http://www.justice.gov/opa/pr/2013/October/13-civ-1158.html. 
    \20\See id. and the United States' Complaint in the case referred 
to there.
---------------------------------------------------------------------------
    In situations where misconduct by an employee of an OPM 
contractor was found, the Federal Investigative Services has 
shown itself to be able to take prompt administrative action to 
remove the employee from the contract. However, just removing 
the individual from the contract is, as Mr. McFarland said, 
``insufficient,''\21\ because such an employee may obtain a 
position performing background investigations working under 
another contract. In one instance, for example, the OPM Office 
of the Inspector General found that a contract background 
investigator, who had been removed by OPM for falsifying 
reports, was later granted contract employment performing 
background investigations for another federal agency while 
awaiting criminal indictment for fabricating reports.
---------------------------------------------------------------------------
    \21\See testimony of McFarland, note 16 above.
---------------------------------------------------------------------------
    To prevent this kind of abuse in the future, S. 1744 would 
require agencies that hire background investigators, whether as 
employees of the agency or as a contractor to the agency, to 
implement certain practices to help keep these employees 
accountable. Any federal employee who is found to have engaged 
in misconduct affecting the integrity of a background 
investigation would be deemed unfit for such employment and 
would be permanently barred from conducting background 
investigations as an employee of any agency. Likewise, if an 
employee under a contract has engaged in such misconduct, that 
individual would then be deemed ineligible to perform a 
background investigation for any contractor from that point 
forward.
    This bill also requires that a contract to provide 
background-investigation services must require that, if the 
contractor discovers any instance of misconduct affecting the 
integrity of a background investigation, the contractor must 
disclose the situation to the agency within 24 hours. Finally, 
the bill requires annual Presidential reports to the 
appropriate congressional committees detailing the number of 
individuals determined unfit for federal employment or 
ineligible to perform background investigation work, and the 
details of the covered misconduct that resulted in their 
removal.
    Guidance for Designating the Sensitivity Level of 
Positions. A further source of vulnerability in the vetting of 
federal personnel arises from the absence of updated and 
consistent guidance for agencies to use in designating the 
sensitivity level of positions that require security clearances 
or are otherwise sensitive in terms of national security. The 
Government Accountability Office (GAO) explained this weakness 
at the joint subcommittee hearing on June 20, 2013, and 
provided further explanation at a second subcommittee hearing 
on November 20, 2013.\22\
---------------------------------------------------------------------------
    \22\See testimony of Brenda S. Farrell, Director, Defense 
Capabilities and Management, GAO, ``Personnel Security Clearances: 
Further Actions Needed to Improve the Process and Realize 
Efficiencies,'' GAO-13-728T (June 20, 2013), submitted at June 20, 2013 
hearing, note--above; testimony of Brenda S. Farrell, Director, Defense 
Capabilities and Management, GAO, ``Personnel Security Clearances: 
Actions Needed to Help Ensure Correct Designations of National Security 
Positions,'' GAO-14-139T (November 20, 2013), submitted at hearing 
before the Subcommittee on the Efficiency and Effectiveness of Federal 
Programs and the Federal Workforce, Senate Committee on Homeland 
Security and Governmental Affairs, ``Safeguarding our Nation's Secrets: 
Examining the National Security Workforce'' (November 20, 2014).
---------------------------------------------------------------------------
    At these hearings, Brenda Farrell, Director of GAO's 
Defense Capabilities and Management team, explained that 
applying the currently available methods have resulted in 
inconsistency in position designations, such as designating 
positions at too high a level or at too low a level. Both kinds 
of errors are harmful. If a position is designated as more 
sensitive than it should be, the background investigation will 
be more costly and time-consuming than necessary for the 
position. For example, Ms. Farrell told the Committee that a 
background investigation for a top secret clearance requires 10 
times as many investigative staff hours as a secret 
clearance.\23\ And on the other hand, if a position is 
designated as less sensitive than it should be, the background 
investigation may not be sufficiently thorough and rigorous to 
ensure that an individual is sufficiently trustworthy to be 
given the highly sensitive national-security responsibilities 
of the position.
---------------------------------------------------------------------------
    \23\See Farrell, testimony submitted at November 20, 2013, hearing, 
note 16 above, at page 18.
---------------------------------------------------------------------------
    To address this deficiency, GAO recommend that clearly 
defined policies and procedures should be issued that federal 
agencies could follow in determining whether federal civilian 
positions require a security clearance or should be designated 
as a national security position. Moreover, since circumstances 
and the duties of positions change over time, GAO recommends 
that these designations of positions be reevaluated 
periodically.
    The Director of National Intelligence and the Director of 
OPM are currently working to finalize regulations, which were 
published in proposed form on May 28, 2013, to establish 
policies and procedures for agencies to follow in designating 
the sensitivity of federal civilian positions. Ms. Farrell 
testified that the proposed rules would, if finalized, meet the 
intent of GAO's recommendation to issue clearly defined 
policies and procedures for determining whether civilian 
positions need security clearances.\24\ However, the 
regulations have not yet been issued in final form, and they do 
not require a periodic reassessment of whether a position 
continues to need access to classified information or to 
otherwise be security sensitive.
---------------------------------------------------------------------------
    \24\Farrel testimony at November 20, 2013 hearing, note 16 above, 
at page 13.
---------------------------------------------------------------------------
    The Committee agrees with these recommendations put forth 
by GAO and has included requirements in S. 1744 that are 
similar to those recommendations. Specifically, the bill would 
require that, not later than 180 days after enactment, the 
President must review and update guidance for agencies in 
determining the sensitivity designation of positions and the 
appropriate background investigation to initiate for each 
position designation. The bill also provides that, at least 
every 5 years, the President must review and, if necessary, 
revise the position designations in accordance with the 
guidance. The President would act through relevant agencies, as 
determined by the President.\25\
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    \25\Under current delegations, the President would be expected to 
issue updated guidance through a collaboration of the Director of 
National Intelligence, as Security Executive Agent, and the Director of 
the Office of Personnel Management, as Suitability Executive Agency. 
See Ex. Ord. No. 13467 (June 30, 38103) (50 U.S.C. 3161 note) 
(designating the Director of National Security as the Security 
Executive Agent, responsible for developing policies and procedures 
with respect to eligibility for access to classified information and 
eligibility to hold a sensitive position; and designating the Director 
of the Office of Personnel Management as Suitability Executive Agent, 
responsible for developing policies and procedures with respect to 
determinations of suitability for federal employment and eligibility 
for access to facilities and systems). On the designation of positions, 
the President would be expected to act through the heads of each 
agency.
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                        III. LEGISLATIVE HISTORY

    On November 20, 2013, Senators Tester, Baucus, Begich, Ron 
Johnson, McCaskill, Nelson, and Portman introduced S. 1744, and 
the bill was referred to the Committee on Homeland Security and 
Governmental Affairs. (S. 1744 is based on two provisions that 
Senator Tester had originally introduced on July 10, 2013, as 
part of, S. 1276, the Security Clearance Oversight and Reform 
Enforcement Act, but that were removed from that bill before it 
was ordered to be reported on July 31, 2013.)\26\
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    \26\On July 10, 2013, Senator Tester introduced S. 1276, the 
Security Clearance Oversight and Reform Enforcement Act, with Senators 
McCaskill, Portman, Coburn and Ron Johnson as cosponsors, and the bill 
was referred to the Senate Committee on Homeland Security and 
Governmental Affairs. As introduced, S. 1276 contained three 
provisions: (1) a provision providing the Inspector General of the OPM 
funds from OPM's Revolving Fund to perform oversight of the Revolving 
Fund; (2) a provision requiring OPM to terminate or debar a federal or 
contractor employee involved in misconduct affecting the integrity of 
background investigations; and (3) a provision requiring the federal 
government to update its policies for determining which employees 
require a security clearance. The Committee considered S. 1276 at a 
business meeting on July 31, 2013. Senator Tester offered a substitute 
amendment striking the provisions other than the one authorizing the 
use of Revolving Fund resources for oversight activities. The Committee 
adopted the substitute amendment, as modified, and ordered the 
underlying bill reported favorably, both by voice vote. The Senate 
passed S. 1276 on October 10, 2013. Similar legislation introduced in 
the House of Representatives regarding oversight of the Revolving Fund, 
H.R. 2860, was signed into law on February 12, 2014 (Public Law 113-
80).
---------------------------------------------------------------------------
    The Committee considered S. 1744 at a business meeting on 
May 21, 2014. Senators Tester, McCaskill, Begich, and Portman 
offered a substitute amendment. As introduced, S. 1744 required 
the Director of OPM to terminate or debar an individual 
intentionally involved in misconduct affecting the integrity of 
background investigations. The substitute directs this 
requirement more broadly across the government in order to 
include other agencies that conduct background investigations. 
The substitute also tightens deadlines for contractors to 
report misconduct from the requirements included in S. 1744 as 
introduced. The substitute also makes a number of changes to 
terminology based on staff discussion with the agencies that 
participate in the Suitability and Security Performance 
Accountability Council (PAC), which is the inter-agency 
committee responsible for promoting reforms related to 
background investigations and the decisions that are based on 
those investigations.\27\ Senator Tester also offered an 
amendment to change the title of the bill.
---------------------------------------------------------------------------
    \27\The PAC was established by Executive Order 13467, Reforming 
Processes Related to Suitability for Government Employment, Fitness for 
Contractor Employees and Eligibility for Access to Classified National 
Security Information (June 30, 2008). The PAC is chaired by the Deputy 
Director for Management of the Office of Management and Budget and also 
includes, among other agencies, the Office of the Director of National 
Intelligence and the Office of Personnel Management.
---------------------------------------------------------------------------
    The Committee adopted the substitute amendment, as 
modified, and the amendment to change the title, both by voice 
vote. The Committee reported the bill, as amended, favorably by 
voice vote. Senators present for the votes were Senators 
Carper, Pryor, Landrieu, McCaskill, Tester, Begich, Coburn, 
Johnson, Portman, and Enzi.

                    IV. SECTION-BY-SECTION ANALYSIS

Section 1--Short title

    This section establishes the short title of the legislation 
as the ``Security Clearance Accountability, Reform and 
Enhancement Act.''

Section 2--Definitions

    This section establishes that, for purposes of this Act:
    (1) The term ``agency'' has the meaning given in Executive 
Order 13467 (73 Fed. Reg. 38103), Reforming Processes Related 
to Suitability for Government Employment, Fitness for 
Contractor Employment, and Eligibility for Access to Classified 
National Security Information. This is a broad definition, 
encompassing Executive agencies, military departments, and 
other entities in the executive branch that come into 
possession of classified information or have designated 
positions as sensitive.
    (2) The term ``appropriate agency'' means, an agency with 
which a prime contractor enters a contract for background 
investigation work, or an agency on whose behalf a 
subcontractor is performing background investigation work.
    (3) The term ``appropriate congressional committees'' means 
the Committee on Homeland Security and Governmental Affairs and 
the Select Committee on Intelligence of the Senate, and the 
Committee on Oversight and Government Reform and the Permanent 
Select Committee on Intelligence of the House of 
Representatives.
    (4) The term ``background investigation'' means any 
investigation required for determining the eligibility of a 
covered individual for logical and physical access to federally 
controlled facilities or information systems; suitability or 
fitness of a covered individual for federal employment; 
eligibility of a covered individual for access to classified 
information or to hold a national security sensitive position; 
or fitness of a covered individual to perform work on or behalf 
of the United States Government as a contractor employee.
    (5) The term ``covered contract'' is defined to include 
both prime and subcontracts to conduct background 
investigations.
    (6) The term ``covered individual'' means an individual who 
performs work, or seeks to perform work, for or on behalf of an 
agency.
    (7) The term ``covered misconduct'' is defined as 
misconduct affecting the integrity of a background 
investigation, including falsification or other serious 
misconduct that compromises the integrity of a background 
investigation.
    (8) The term ``prime contractor'' means an individual who 
enters a contract with an agency.
    (9) The term ``subcontractor'' means an individual who has 
contracted with a prime contractor or with another 
subcontractor to perform a contract on behalf of an agency.

Section 3--Accountability of individuals involved in misconduct 
        affecting the integrity of agency background investigations

    Section 3(a) establishes that an employee found to have 
engaged in covered misconduct affecting the integrity of a 
background investigation is unfit for federal employment. 
Section 3(a) requires agencies, in determining whether an 
employee has engaged in such conduct, to act in accordance with 
any statutory, regulatory, or internal agency procedures 
applicable to investigating alleged misconduct by employees. 
The subsection further provides that if an individual has been 
deemed unfit for federal employment because of such misconduct, 
that individual may no longer occupy a position as a federal 
employee performing background investigations.
    Section 3(b) makes accountability measures similar to those 
in subsection (a) apply to contract employees performing 
background investigations. In doing so, it establishes that if 
an agency, prime contractor or subcontractor determines that an 
individual performing work under contract has engaged in 
covered misconduct, the individual shall be ineligible to 
perform background investigations under a contract. Section 
(3)(b) also requires any background investigation contract to 
include a mandatory disclosure provision requiring a prime 
contractor or subcontractor to disclose any allegation of 
covered misconduct by an employee within 24 hours to the agency 
responsible for the contract. The subsection also requires 
covered contracts to include a provision requiring that, not 
later than 5 business days after the date on which a prime 
contractor or subcontractor discloses an allegation of covered 
misconduct, the prime contractor or subcontractor must refer 
the allegation of covered misconduct to the agency for 
investigation. The subsection also clarifies that nothing in 
the provision shall be construed to prohibit an agency from 
conducting its own investigation into an allegation of 
misconduct.
    Subsection 3(c) requires the President to submit an annual 
report to the appropriate congressional committees on the 
number of individuals determined to be unfit for federal 
employment or ineligible to perform work under a covered 
contract as a result of this legislation, including the 
specific covered misconduct that led to such a determination.

Section 4--Review and update of position designation guidance

    Section 4 requires the President, at least every five 
years, to review and update, if appropriate, the guidance for 
agencies to determine position sensitivity designation and 
whether a position requires a security clearance. It further 
requires the President to submit a report to Congress on the 
content of the results of such a review.

                   V. EVALUATION OF REGULATORY IMPACT

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of this bill and determined 
that the bill will have no regulatory impact within the meaning 
of the rules. The Committee agrees with the Congressional 
Budget Office's statement that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would impose no costs 
on state, local, or tribal governments.

             VI. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

                                                     June 20, 2014.
Hon. Tom Carper,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1744, the Security 
Clearance Accountability, Reform, and Enhancement Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

S. 1744--Security Clearance Accountability, Reform, and Enhancement Act

    S. 1744 would require the Office of Personnel Management 
(OPM) to terminate or place on administrative leave any OPM 
employee that is involved in misconduct involving the security 
clearance process and debar employees of contractors and 
subcontractors involved in similar misconduct. Based on 
information from OPM, CBO estimates that implementing this 
legislation would have an insignificant cost. Enacting S. 1744 
could affect direct spending by agencies not funded through 
annual appropriations; therefore, pay-as-you-go procedures 
apply. CBO estimates, however, that any net changes in spending 
by those agencies would be negligible. Enacting the bill would 
not affect revenues.
    A security clearance is a determination that an individual 
(whether a federal employee or contractor) is eligible for 
access to classified national security information. A security 
clearance may be granted only by a federal agency, and 
generally only upon completion of a background investigation. 
Most background investigations are overseen by OPM's Federal 
Investigative Services (actual investigations may be conducted 
by private investigative firms).
    S. 1744 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.

     VII. CHANGES IN EXISTING STATUTE MADE BY THE BILL, AS REPORTED

    Because this legislation would not repeal or amend any 
provision of current law, it would make no changes in existing 
law within the meaning of clauses (a) and (b) of paragraph 12 
of rule XXVI of the Standing Rules of the Senate.
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