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67–642 2011

INSPECTOR GENERAL AUDIT OF THE HOUSE’S 

FISCAL YEAR 2009 FINANCIAL STATEMENTS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

OF THE

COMMITTEE ON HOUSE 

ADMINISTRATION 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

Held in Washington, DC, May 26, 2011 

Printed for the use of the Committee on House Administration 

( 

Available on the Internet: 

http://www.gpoaccess.gov/congress/house/administration/index.html 


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COMMITTEE ON HOUSE ADMINISTRATION 

DANIEL E. LUNGREN, California, Chairman 

GREGG HARPER, Mississippi 

PHIL GINGREY, M.D., Georgia 

AARON SCHOCK, Illinois 

TODD ROKITA, Indiana 

RICHARD B. NUGENT, Florida 

ROBERT A. BRADY, Pennsylvania, 

Ranking Minority Member 

ZOE LOFGREN, California 

CHARLES A. GONZALEZ, Texas 

PROFESSIONAL STAFF

PHILIP KIKO, Staff Director & General Counsel 

JAMIE FLEET, Minority Staff Director 

SUBCOMMITTEE ON OVERSIGHT

PHIL GINGREY, M.D., Georgia, Chairman 

AARON SCHOCK, Illinois 

RICHARD B. NUGENT, Florida 

TODD ROKITA, Indiana 

ZOE LOFGREN, California 

CHARLES A. GONZALEZ, Texas 


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INSPECTOR GENERAL AUDIT OF THE 

HOUSE’S FISCAL YEAR 2009 FINANCIAL 

STATEMENTS 

THURSDAY, MAY 26, 2011 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT,

COMMITTEE ON HOUSE ADMINISTRATION, 

Washington, DC. 

The subcommittee met, pursuant to call, at 9:37 a.m., in room 

1310, Longworth House Office Building, Hon. Phil Gingrey (chairman of the subcommittee) presiding. 

Present: Representatives Gingrey, Schock, Nugent, and Lofgren. 

Staff Present: Kimani Little, Parliamentarian; Joe Wallace, Legislative Clerk; Yael Barash, Assistant Legislative Clerk; Salley 

Wood, Communications Director; Linda Ulrich, Director of Oversight; Reynold Schweickhardt, Oversight Staff; Katie Ryan, Oversight Staff; Jamie Fleet, Minority Staff Director; Kyle Andersen, 

Minority Press Secretary; Mike Harrison, Minority Professional 

Staff; and Matt Pincus, Minority Professional Staff. 

Mr. GINGREY. I now call to order the Committee on House Administration’s Subcommittee on Oversight for today’s oversight 

hearing on the Inspector General’s audit of the House’s 2009 financial statements. The hearing record will remain open for 5 legislative days so that members may submit any materials that they 

wish to be included therein. 

A quorum is present, so we may proceed. 

The Subcommittee on Oversight has the important task of conducting vigorous and effective oversight of our legislative agencies 

and their operations. As stewards of tax dollars, we have no more 

important task than to make sure this House’s administrative conduct and business is performed with the greatest efficiency, transparency, and ethical standards, which is why I was extremely disappointed when I received the results of the audit of fiscal year 

2009. 

As we will hear, the 2009 audit reports the demonstrable problems at the CAO, created by its former leadership. Several ‘‘material weaknesses’’—that is a phrase—were reported due to the lack 

of a management control program and ineffective controls over information security. It also highlights significant deficiencies in internal controls over financial reporting and controls over the payroll process. 

When this country is in financial dire straits, reports of financial 

misfeasance are outrageous and simply unacceptable. 


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Fortunately, the management of the CAO has been substantially 

improved, and we commend Mr. Strodel for his dedication for improving the efficiency and management of the CAO, Chief Administrative Office, and Officer; but we still have a way to go. And I also 

want to commend the IG, the Inspector General Theresa 

Grafenstine, for her commitment to ensuring financial accountability within this institution. 

I want to thank each of my colleagues for being here today. And 

I would now like to recognize our ranking member of the subcommittee, Congresswoman Zoe Lofgren, for the purpose of providing an opening statement. Ranking Member Lofgren. 

Ms. LOFGREN. Thank you very much, Mr. Chairman. As you have 

indicated, the House of Representatives, like other government 

agencies, gets its funding from the American people; and as stewards of tax dollars, it is our responsibility to use the funds responsibly and in a transparent manner. The public needs to have faith 

in the accounting and record keeping done by their government, 

and this is why the annual financial audits that we do here in the 

House are important. 

The 2009 financial statement audit report gave the House an unqualified or clean opinion for its financial statements. An unqualified or clean opinion means that the auditors found the financial 

statements fairly represented the House’s assets and liabilities. It 

also means the financial practices used by the House conform with 

generally accepted accounting principles. This is the 12th year in 

a row that the House has received an unqualified opinion on its financial audits. We should commend the CAO and the IG’s office for 

this positive track record. 

What is not commendable are the four significant internal control deficiencies that were highlighted in the 2009 audit report. I 

will come back to these internal control issues during the questioning period with the witnesses. 

Perhaps the most troublesome information to come out of the 

2009 financial audit was the apparent lack of cooperation and misleading information coming from the former Chief Administrative 

Officer and other senior CAO staff towards the auditors, the IG’s 

office, and even with this committee. 

Let me try and outline some of the events that took place just 

for the record. 

The auditors first raised concerns about the 2009 financial internal controls issues to the IG’s office on January 15, 2010. The IG’s 

office called a meeting with the auditors and the CAO to request 

additional cooperation from the CAO’s staff. The Chief Administrative Officer was invited, but he did not come to this meeting. He 

sent his staff in his place. In March of 2010 an adverse opinion on 

the 2009 audit appeared likely because of the continued lack of cooperation from the former CAO, which had made it difficult for the 

auditor to review necessary documents in a timely manner. 

On the morning of March 22, 2010, the IG’s office and the auditor jointly briefed House Administration Democratic and Republican staff on the problems they were encountering with the CAO. 

In the afternoon of March 22, the House Administrative Committee 

Staff Director had a meeting with the Chief Administrative Officer. 

The Chief Administrative Officer’s statements at this meeting led 


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the Staff Director to believe that the CAO understood the serious 

nature of the situation and would fully cooperate with the auditors. 

On June 30, 2010, the IG and the auditor informed House Administration Democratic and Republican staff that the House 

would receive an adverse opinion on the internal control portion of 

the financial statement for 2009. At that point, then Chairman 

Brady called Mr. Lungren to let him know that we would be meeting with the CAO. The following morning on July 1, Chairman 

Brady, Representative Capuano and myself had a meeting with the 

Chief Administrative Officer, Mr. Beard. Following the meeting Mr. 

Beard announced his resignation. 

On July 10, Dan Strodel was appointed as the new Chief Administrative Officer. I look forward to hearing the testimony of CAO 

Strodel and IG Grafenstine on the current working relationship between the CAO and the IG’s office. I also look forward to hearing 

from them on what progress is being made in the development of 

new internal controls for the House. 

I yield back. 

Mr. GINGREY. I thank the ranking member. Does any other member wish to be recognized for the purpose of making an opening 

statement? 

I would now like to introduce our two witnesses. The Honorable 

Theresa Grafenstine was appointed Inspector General of the House 

on July 30, 2010. Ms. Grafenstine has been with the House Office 

of the Inspector General since 1998, starting as a staff level auditor 

and has served in each of the House OIG, Office of Inspector General, organizational units. She led the first-ever review of the 

House complex fire and emergency response program as well as numerous security and internal control assessments. Prior to joining 

the House OIG, Ms. Grafenstine served in the Department of Defense’s Office of Inspector General. She has numerous certifications 

and is active on numerous boards and committees related to auditing governance and accounting. 

Our second witness, the Honorable Dan Strodel, was sworn in as 

Chief Administrative Officer, CAO, of the United States House of 

Representatives on January 5, 2011. He also served as the Chief 

Administrative Officer during the last 6 months of 2010. Mr. 

Strodel leads an organization created during the 104th Congress 

which has now more than 700 employees charged with carrying out 

the administrative functions of the House, including things such as 

operating budgets, financial management, procurement, and payroll. Mr. Strodel has a wealth of experience in this institution— 

over 26 years, I might say, to be exact. He began in the Office of 

Finance under the Office of the Clerk and has since then held positions with the United States Capitol Police, the House and Senate 

Sergeant at Arms and in other capacities within CAO. We thank 

both of you for being here today. 

As I mentioned in my opening statement, I was shocked to read 

this report, and I am anxious to hear about the corrective measures 

necessary to make sure that these systemic problems do not reappear. 

The committee has received your written testimonies. At the appropriate time, I will recognize each of you for 5 minutes to present 

a summary of that submission. And to help you keep time, we have 


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a timing device near the witness table—I think right in front of 

you. The device will emit a green light for 4 minutes and then turn 

yellow, letting you know that just 1 minute remains. When the 

light turns red, it means your time has expired. I probably won’t 

hit the gavel quite as hard as I did to convene us, but we will try 

to stay on time. 

Inspector General, we will start with you, and you may proceed. 

STATEMENTS OF THE HON. THERESA GRAFENSTINE, INSPECTOR GENERAL, UNITED STATES HOUSE OF REPRESENTATIVES; AND THE HON. DAN STRODEL, CHIEF ADMINISTRATIVE OFFICER, UNITED STATES HOUSE OF REPRESENTATIVES 

STATEMENT OF THE HON. THERESA GRAFENSTINE 

Ms. GRAFENSTINE. Terrific. Thank you. Good morning, Chairman 

Gingrey, Ranking Member Lofgren, and members of the subcommittee. I am both pleased and honored to appear before you 

today in my capacity as the Inspector General of the U.S. House 

of Representatives. Thank you for this opportunity to brief you on 

the results of the fiscal year 2009 financial statement audit of the 

House. Since I have submitted my written comments for the record, 

I will try to keep this brief. 

The process of preparing financial statements instills discipline 

in the financial recording and reporting processes. Financial statements also provide transparency and accountability and tell the 

public that the House can and does accurately account for its financial activity. 

The 2009 financial statement audit tells two stories. The first is 

one of staff heroics, where a dedicated few put in an amazing 

amount of effort and long hours to assure that the House maintained its clean audit opinion. And for that reason I can say, for 

the 12th year in a row, the House received an unqualified or clean 

opinion on its financial statement. 

Getting a clean opinion is a significant accomplishment, given 

that this was the first year that the CAO prepared its House financial statements in accordance with generally accepted accounting 

principles for Federal agencies, otherwise known as FedGAAP. Understand that changing the basis in accounting is a really big deal 

and requires a lot of effort. FedGAAP also puts the House in alignment with government best practices. 

The second story is one of mismanagement, disengagement, and 

at times obstruction. In contrast to the clean opinion that the 

House received on its financial statement, the external auditor expressed an adverse opinion on the CAO’s internal controls. So what 

does that mean in nonaccounting language? An adverse opinion 

means that the CAO did not have effective controls over financial 

reporting. Consequently, the CAO and, therefore, the House is at 

greater risk of not detecting an error in the financial statements 

or in the processing of payroll, finding inaccuracies in payroll, and 

not catching overpayments to vendors or not realizing that it is 

missing assets. 

So what did the external auditor find that led them to this conclusion? Among a variety of control weaknesses they identified two 


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material weaknesses, the most severe. The material weaknesses 

were the lack of an internal controls program and ineffective controls over information technology, or IT. While the absence of the 

formal internal control program and the ineffective controls over IT 

are significant and require management action and attention, I believe the deteriorating control environment in the CAO and the 

lack of action by management played a greater role in the House 

receiving an adverse opinion on its internal controls in 2009. 

Let me explain. For several years, the external auditor had advised the CAO with increasing urgency and formality of the need 

for an internal controls program. Despite their concurrence with 

this recommendation, as of 2009 the CAO still had not made any 

notable progress. Even more troubling was that the CAO environment at the senior management level had become one which was 

generally unsupportive of the financial statement process, exhibiting disinterest, lack of cooperation, and even obstruction to auditors’ requests for information. 

It is important to note that between these two stories that are 

being told by the 2009 financial statement audit, the first story on 

the clean opinion on the House financial statements is more significant and fundamental. This should give the public confidence that 

the House can and does accurately account for its financial activities. 

The second story, while dire, is one that can be corrected through 

decisive actions and commitment. So what has the House and the 

CAO done to correct these issues? 

As Ms. Lofgren pointed out, in January of 2010, within days of 

my being appointed by the then-acting Inspector General, the external auditor informed me of their growing concerns about the 

2009 financial statements. I called an emergency meeting with the 

external auditor, the former CAO, and all managers associated 

with the financial statement process. I wanted to make sure that 

we were all on the same page as to the importance of the financial 

statements and to stress the need for cooperation and participation. 

Although the former CAO did not participate in this initial emergency meeting or any of the weekly sessions held thereafter, all 

other senior CAO managers did. 

While this intervention helped to reemphasize the importance of 

the financial statements and being responsive to the external auditors’ request, a lack of commitment and participation was still pervasive. By the spring of 2010, it appeared more likely that the 

House would receive either an adverse opinion or a disclaimer because of scope limitations and the inability for the auditor to get 

required information. 

In the OIG’s efforts to support the Committee on House Administration’s governance and oversight duties, the external auditor and 

I jointly briefed the committee of this possibility in March of 2010. 

After it became clear that the House would receive an adverse 

opinion on its internal controls, the external auditor and I again 

jointly briefed the Committee on House Administration on June 30 

of that same year. 

On a bipartisan basis, the Committee on House Administration 

took decisive and immediate actions to address the control environment or tone at the top deficiencies. The Committee on House AdVerDate Mar 15 2010 21:14 Aug 16, 2011 Jkt 067642 PO 00000 Frm 00007 Fmt 6633 Sfmt 6602 E:\HR\OC\A642.XXX A642

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ministration understood the seriousness of these internal control 

issues. 

The former CAO announced his resignation the following day 

and a new CAO, Mr. Strodel, was appointed immediately thereafter. As soon as Mr. Strodel was appointed, he made sweeping 

changes, including the appointment of a director of internal controls, creating a senior assessment team to oversee the implementation of an internal control program, appointing a new senior 

management team, one with a commitment to transparency and accountability of House financial activity through the issuance of reliable financial statements. 

The Committee on House Administration’s decisive actions, combined with Mr. Strodel’s leadership, have resulted in a complete reversal in tone within the CAO and have contributed to a much 

more effective and timely audit process during the 2010 audit cycle. 

Before closing, I would like to give you a brief status on where 

we are at in the 2010 and 2011 audits. In contrast to the 2009 

cycle in which it took the CAO nearly 14 months to issue finalized 

financial statements, they were able to do so in 2010 within 2 

months after the fiscal year end. It is important to note, however, 

despite all these significant changes that have occurred since Mr. 

Strodel’s appointment, the House will receive an adverse opinion 

again in 2010. During an audit, the controls that were in place during the period of review are what are considered. Since many of 

these corrective actions did not occur until July 2010, when Mr. 

Strodel was appointed, there was not enough time to make those 

types of corrective actions before the end of the fiscal year. 

A robust control program will help to ensure processes are repeatable and will enable the CAO to be proactive in addressing 

issues rather than reactive. We also believe that many of the IT 

control weaknesses will be addressed with the internal controls 

program. 

With that, I concede back. Sorry for running over. 

Mr. GINGREY. I should have let you finish that last sentence at 

least. But thank you. And of course, as you know, your entire report is submitted for the record, and we appreciate that. 

We will now go ahead to our second witness Mr. Dan Strodel, the 

Chief Administrative Officer. 

STATEMENT OF THE HON. DAN STRODEL 

Mr. STRODEL. Good morning, Chairman Gingrey, Ranking Member Lofgren, Congressman Nugent. I am Dan Strodel, the Chief Administrative Officer. And I will go as quickly as I can through the 

summary. I know you will want to get quickly to questions and you 

have other business for today. 

The most important thing I want to start with is to recognize the 

contributions that the Inspector General has made, Terry 

Grafenstine, and the management advisories that she has provided 

has helped me personally as well as the entire House officer corps. 

As so we continue to work together, and it is my hope to always 

remain on her good side. 

With that said, when I reviewed the audit findings, the independent report from Cotton & Company and the materials provided 

by the Inspector General, there were some 21 recommendations. 


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Whether they were determined to be material or significant deficiencies, there was still a fairly large number of findings. The lead 

finding was one material weakness, the primary finding of a lack 

of an internal controls program. That struck me because the following 20 were very specific and ultimately provided a road map 

for us. I spent some time trying to figure out, why is this the number one recommendation, and why is the number one material 

weakness the lack of internal controls program? That told me the 

primary driver to the situation that evolved was the tone at the top 

of the organization. There is a group of extremely professional dedicated staff and, as the Inspector General referenced, who have been 

on staff for a while, that have been through these processes before, 

and were trying to continue to do good work. However there 

seemed to be a disengagement. This struck me as the long-term 

focus I have to make to begin to put in place the structures that 

are going to help the organization evolve and transform into a 

high-performing organization again. We can get into more details 

about the particular internal controls, but that is my primary 

point. 

[The statement of Mr. Strodel follows:] 


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Mr. GINGREY. Have you completed your testimony? 

Mr. STRODEL. Yes, sir. 

Mr. GINGREY. You surprised me. It is not very often that we get 

someone that only takes half of his or her time. Certainly we appreciate very much both witnesses’ testimony. 

Let me yield to myself for the first set of questions. We will each 

take 5 minutes, and if we have more questions and sufficient time, 

we will have a second round. 

I will direct my first line of questioning to Ms. Grafenstine. It 

took the previous CAO 14 months to prepare the financial statements. How did his delay and deliberate withholding of information, if it was deliberate withholding of information, impact the 

overall cost of the audit? The outside auditor cost. 

Ms. GRAFENSTINE. Yes. As you know, we do use external auditors 

to manage the financial statement audit, and we oversee their activity. It increased our efforts. We had a lot of coordination done 

on the inside from the IG perspective. But it did result in real additional modifications to contracts where we would have to pay the 

external auditor additional funds because it was consuming more 

of their time than traditionally it would have consumed. 

Mr. GINGREY. So the costs involved were more to not only the 

Cotton firm, the outside auditor, but also led to more work internally. 

Ms. GRAFENSTINE. Internally. So what that would do is, it would 

detract from our internal resources, from being able to focus on 

other areas of concerns in the House. 

Mr. GINGREY. For that particular fiscal year, though, you don’t 

have a number, a dollar amount? 

Ms. GRAFENSTINE. I could definitely get you the extra contract 

costs. But from an internal perspective, from the opportunity cost 

aspect, I could probably impute that and get that back to you for 

the record. 

Mr. GINGREY. Well, if you would do that and submit it for the 

record because I think it is important to know what we are talking 

about in regard to an efficient operation versus an inefficient operation. It leads to increase costs, obviously. And thank you. 

[The information follows:] 


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Mr. GINGREY. For the internal controls you have suggested, how 

do you compare other industries and other government entities to 

the internal control, or lack of, that exists within CAO? 

Ms. GRAFENSTINE. If we compare ourselves to other governmental entities, 2006 was when OMB’s A–123 internal controls 

program was put into place and became a requirement. So the rest 

of the government would be significantly ahead of us because they 

have been working on this for 5 years. So while they may not necessarily all have perfect unqualified opinions on their internal controls, they are still going to have more solidified programs in place, 

just because they have been working on it for about 5 years. 

Mr. GINGREY. Thank you, Ms. Grafenstine. I will ask Mr. Strodel 

in my next couple of minutes, it is referenced in the Inspector General’s report that minimal resources, staff, were assigned to assist 

the financial reporting process. To correct this problem, you are utilizing both consultants and staff. Do you envision needing consultants indefinitely to maintain the program? How do you plan to allocate resources in this area in the future? 

Mr. STRODEL. The consultants, Chairman Gingrey, were brought 

on to assist us in responding to that number one recommendation 

and the material weakness, which was to establish a robust internal controls program. The House went from commercial GAAP, 

generally accepted accounting principles, to what is referred to as 

FedGAAP during this time. FedGAAP brings along with it additional requirements related to internal controls, whether that is financial reporting or information technology. There is a very clear 

path and a guideline. There is actually a large document that provides guidance on how to implement an internal controls program 

and conduct a risk assessment under that program. 

We decided to bring that function, that responsibility, to the top 

of the organization, which includes all aspects of the organization, 

including our counsel, HIR, the technical team, assets, furnishings, 

and logistics, finance, and every part of the organization that is applicable. 

Mr. GINGREY. Let me interrupt you just for a second. 

Mr. STRODEL. Yes, sir. 

Mr. GINGREY. Clear this up for me. Are you suggesting that the 

government way of looking at things—the internal controls I think 

you referred to as FedGAAP—is a better system than the commercial way of doing things, commercial GAAP? The general public 

would probably think that that sounds like an oxymoron. 

Mr. STRODEL. I was not suggesting that since the decision was 

made beyond my involvement. It is this committee that sets the 

rules, responsibilities and functions of the officers; and how we are 

going to do our business. My point is that, whether it is commercial 

GAAP or FedGAAP, you still have to do internal controls. It should 

be a part of how you do your business. There is a unique requirement on the government side, as you have instructed us, with regard to transparency and providing reliable financial reporting for 

the citizens, for the Members of Congress, and for this committee. 

This is not as much a recommendation of mine, but I think a collective decision. 

Mr. GINGREY. Well, I have gone over my time. And I will yield 

to the ranking member for her 5 minutes, plus. And hopefully other 


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members might want to further address this particular issue. I 

wasn’t suggesting that I thought that the Federal Government was 

less efficient in that regard than the commercial sector. It certainly 

shouldn’t be, but it was a general impression of the public, I think, 

that I was referring to. 

Ms. Lofgren. 

Ms. LOFGREN. First, before I ask any questions, let me thank 

both of you for your service to the House. You are both career professionals. You have worked here for many, many years and are 

now leading your organizations. And I appreciate what you do, the 

leadership that you have provided your team, and the confidence 

that you will instill in the taxpayers by making sure that identified 

problems get resolved and that we can move forward with our 

heads held high. 

Let me ask you, Mr. Strodel, in Ms. Grafenstine’s testimony, she 

stated that during the 2009 auditing process, the CAO environment at the senior management level had become—I think she said 

generally unsupportive of the financial statement process and there 

had seemed to be disinterest and a lack of cooperation. 

Have you made any personnel changes at the senior management level since becoming the CAO to make sure that we have a 

responsive team and we are all over anything that has been identified? 

Mr. STRODEL. Ranking Member Lofgren, my observations and experience in not just reading the report but from my time working 

for your committee, was that the direction of the organization 

seemed to wander away from its core mission. As I may have mentioned earlier, we are kind of the blue collar officer corps. We are 

the people who move the furniture. We are the people who pay the 

bills. We are the people who make sure your computer is working. 

That is our core mission. That is what we are focused on. It occurred to me that some of the staff didn’t understand that message 

and there was a communication gap between our core mission and 

the direction we were going. 

Some individuals did move on; and throughout the fall, we made 

some personnel changes. We have a new Chief Financial Officer, 

Traci Beaubian, who has been with the House for a very long time. 

We have a new Director of Audit, Bill Leibach, a new HIR deputy, 

and other personnel changes. It is an evolution, but we have begun. 

Ms. LOFGREN. Let me ask you, in the 2009 audit report, they 

have identified these deficiencies, four of them which have already 

been referenced. You outlined in your testimony some of the 

progress that has been made in these areas. Do you think all of 

these deficiencies will be rectified by the time of the 2011 audit? 

Mr. STRODEL. Ms. Lofgren, it is my hope and I think my reputation is on the line at this point. I have been in the position for 10 

months. We have developed a senior assessment team which includes a representative from Ms. Grafenstine’s office. Additionally 

all of our senior staff are engaged in the process, meet on a monthly basis and hit our milestones. It is not a stand-alone process. 

Once a year we don’t bring out the audit woman or man and then 

talk about it. It is a part of how we are managing the organization. 

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Ms. LOFGREN. Very good. Are there any other issues related to 

the House financial statements or internal control procedures or 

the auditing process that you feel the committee should be made 

known of at this time? 

Mr. STRODEL. It has always been my understanding and my experience that the responsibilities, particularly of the CAO, are delegations from this committee. In the past, you may recall in the finance area, vouchers, which are reimbursements for official expenses, were ultimately approved at the committee level. House Information Resources used to be a subcommittee of this committee. 

We feel a unique connection and an added responsibility that we 

ensure the committee is aware of what we are doing, that transparency is external, internal, and also with the committee. 

We need to continue internally coalescing as a management and 

leadership group, and that will bring itself to bear with our interaction with our stakeholders at your level and others in the institution. 

Ms. LOFGREN. I guess we will have a second round. So I will get 

to ask Ms. Grafenstine her questions at that time. But I would also 

like to thank the staff of the House Administration Committee. We 

work together on a bipartisan basis to try to deal with issues about 

the House. It is like being mayor of the city. And I know that the 

Members of the House may have different philosophical views on 

policy issues, but our staff works very closely together to deal with 

these issues. And I would like to publicly thank them for their hard 

work and good efforts as well. 

I yield back, Mr. Chairman. 

Mr. GINGREY. Thank you, Ms. Lofgren. We will now turn to the 

gentleman from Illinois for his 5 minutes of questions, Mr. Aaron 

Schock. 

Mr. SCHOCK. Thank you, Mr. Chairman. And thank you both for 

your testimony and your work on behalf of the committee and the 

Congress. I just have a couple of follow-up questions for Mr. 

Strodel. 

In your testimony, you referenced September 30 of this year as 

a deadline for implementation of the internal control recommendations. My question is whether or not you are on track to meet that 

deadline and what conversations, if any, you have had with the 

auditors to ensure that you are doing everything necessary to obtain a clean opinion from them. 

Mr. STRODEL. Thank you, Mr. Schock. The short answer is, we 

are on track, but I would like to provide additional information. 

Our senior assessment team, which has been driving this change 

and the effort to set milestones for hitting our goals, has been 

working with a staff member from the Office of Inspector General. 

Also, we have met from time to time, as recently as this week, with 

the independent auditors at Cotton and they are ready to start 

looking at our data. We are focusing on providing a preliminary 

round of information to them after June 30 so we can hit that September 30 target. 

I would defer to Ms. Grafenstine, but I feel we are on track. 

Mr. SCHOCK. Ms. Grafenstine, would you care to address that? 


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Ms. GRAFENSTINE. I can say that Mr. Strodel’s group has put a 

significant amount of time and attention on this, and I do believe 

that they are on track. 

Mr. SCHOCK. Also, Mr. Strodel, in your testimony, you did not 

address the significant deficiencies in the processing and reporting 

of the payroll data. And I am just wondering, in the report, it noted 

that payroll certifications were not performed, which led to overand underpayments. What are you currently doing to fix that area 

of concern? 

Mr. STRODEL. Mr. Schock, the question related to one of the significant deficiencies. There was a hierarchy of levels of importance 

or emphasis on, whether it is material or a significant deficiency. 

One was related to payroll. The House is a unique environment. 

Where a typical Federal agency may have one payroll office for the 

entire organization, we have 441 offices and 20-some committees 

that are essentially their own business unit. We are centrally processing payroll on their behalf. Each month, there is a certification 

process that the Member, the committee chair, and so on, has to 

sign and submit to us, certifying that those individuals are due 

pay. There is a little bit of a difference in understanding the requirement between the auditors and us regarding that unique environment. It is hard to find a similar organization as it relates to 

payroll processing. We have internal controls that aren’t necessarily typical in a Federal agency environment. Therefore, we 

work with the auditors to show how our unique operating environment works and the various types of internal controls in our organization. The segregation of duties where a person can’t pay themselves through another Member’s account is an example of internal 

controls. 

We do have internal controls that mitigate risk but the concern 

was, they don’t meet OMB’s A–123 Internal Control Program as it 

is laid out. This was a dialogue between us and the auditors showing what we do have, which we hope will go from a significant deficiency to a deficiency or go away altogether. 

Mr. SCHOCK. Are there recommendations in how we do payroll 

processing that you suggest different from the process now that 

would lead to better controls? 

Mr. STRODEL. Slightly, yes. The verification and certification 

processes, at the end of the period, need to have tighter deadlines. 

During each monthly payroll cycle, certifications should not go beyond the following month without closing the process out. On our 

side, we must interact more effectively with the Member offices and 

the other employing authorities to make sure they understand the 

requirements and that we are here to assist them in meeting these 

deadlines. 

Mr. SCHOCK. Okay. I understand that it may not be a similar organization as most companies would be run, but I can’t imagine 

that it is that much different. I actually personally sign my payroll 

certifications. I think it is requested that Members do each month. 

And while we may all be individual offices, there is one central 

payment processing point, and it would seem to me that it is up 

to the Member on whether I make a mistake on paying someone 

too much or too little. But based on what I submit to you is how 


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it should be paid. I guess I question why the processing center 

would make a mistake based on what I sign or don’t sign. 

Mr. STRODEL. Sometimes errors are due to a delay in receiving 

the certifications, either between us or the employing entity. There 

are reconciliation processes that happen during the pay period and 

those that follow the pay period. The close-out and the reconciliation is done, in the auditor’s opinion, too far away from the actual 

event. Sometimes it is an error on our side as well. It is that reconciliation process where we can do a better job reaching out to the 

Member office and making sure that certification comes in on time. 

Mr. SCHOCK. Thank you. 

Mr. GINGREY. Thank you, Mr. Schock. And now we will refer to 

the gentleman from Florida for 5 minutes, Mr. Nugent. 

Mr. NUGENT. I would like to expand a little more to the issue of 

the payroll issue. The process that we use today in regards to payroll, have we looked at any other processes that could speed that 

up for you in regards to automation? 

Mr. STRODEL. Mr. Nugent, the Lawson payroll system is what we 

use. It is very effective. There are so many different employing offices, and there is an education process on our end—that means on 

the payroll end—for how payroll is processed. This includes the 

forms required, and the cutoff dates to have things in so they can 

be processed in that particular pay period, in effect. Yes, is the 

short answer. Prior to PeopleSoft, we had a mainframe-based system. The House’s monthly pay cycle is an exception based process. 

This means once you put individuals on the payroll, they keep getting paid until you tell us otherwise, whether it is an increase, decrease, or removing those individuals from the payroll. The control 

of these payroll actions and related to Mr. Schock’s question, rests 

entirely with the employing entity, the 441 Members, committee 

chairs, and so on. 

On a monthly basis, we are processing changes and all of them 

come in ultimately manually. There are certainly efficiencies we 

can make and it is something that we should move slowly on. We 

implemented a new financial system for the House called 

PeopleSoft Financials which interacts with Lawson. We are moving 

forward with some efficiencies on the voucher, the official expense 

reimbursement. Payroll is also an area we want to work on with 

this committee to make sure that any changes we make are good, 

in your opinion, for the House. 

Mr. NUGENT. With reference to internal controls, and particularly on the general ledger aspect, where do we stand today? 

Mr. STRODEL. Well, I am extremely glad our Chief Finance Officer is here today, sir, Traci Beaubian. 

Mr. NUGENT. And that is a good answer. 

Mr. STRODEL. Traci, could you address that briefly? 

Ms. BEAUBIAN. We have made significant progress on the general 

ledger accounts. To date we have identified a number of transactions where we have changed the posting models and associated 

general ledger accounts for proper financial reporting. Additionally 

we have posted a number of entries required for the upcoming financial statements for fiscal year 2011. We are on target for closing 

out many of the general ledger-type issues. 


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Mr. NUGENT. Well, as a past CEO of a government agency, obviously the last thing you want to see is an adverse report come 

back. And I would think that your Chief Financial Officer is a key 

driver behind making sure that you get the information that is necessary but also make sure of the internal controls. And so that is 

one of the areas that is always of concern in regards to the internal 

controls and the separation of duties to make sure that you are not 

having people authorizing payments that are also making a request 

for payment. And have we addressed all that from the IG’s perspective? 

Ms. GRAFENSTINE. Yes, sir. I do agree that that is very important. And that is one of the basic things we look at. Whether it is 

within Lawson or PeopleSoft, we would look at the roles and responsibilities to make sure that there is adequate segregation of 

duties. We didn’t find any significant deficiencies in either of those 

areas. The payroll deficiencies that we did find pertained to the 

lack of offices submitting those certifications in a timely manner. 

Mr. NUGENT. Do you have any recommendations on how you can 

get offices to comply? 

Ms. GRAFENSTINE. There are rules that explicitly say that Members and committees need to submit those payroll certifications in 

a timely manner. I do see that as a big deal. And I think with Mr. 

Strodel proactively reaching out through the payroll counselors and 

giving folks a reminder—because they do get distracted because 

they are working on legislation. But if they reach out proactively 

and remind them, I think that that may help to improve your overall situation because when you look at the House financials, personnel costs are our biggest expense. So those payroll certifications 

are our biggest control over that. 

Mr. NUGENT. I just want to take this opportunity again to thank 

both of you for trying to right the ship. I understand that we are 

going to wind up with a possible adverse. But that is okay as long 

as we show that we are making progress to reverse that so our 

next audit will be crystal clean. That is our hope. 

Mr. GINGREY. I thank the gentleman from Florida for his questions. And that essentially completes the first round. It went quickly. And we actually have a few more questions. So we will start a 

second round and, again, allow each of the Members up to 5 minutes of questioning. And I will yield to myself the first 5 minutes. 

Ms. Grafenstine, as a result of the fiscal year 2009 audit, we 

know that the House did not have effective internal controls in 

place for financial reporting. That is a compelling factor behind 

why it took 14 months to do something that should have taken no 

longer than—you said I think 3 months. Without an internal control program, there is no reasonable assurance that the House’s financial statements can be complete or accurate. That is why an adverse rating was assigned on the internal controls related to financial reporting. 

Here is my question, and this seems a little counterintuitive: 

How can the financial statements themselves receive what I now 

know about a ‘‘clean opinion’’ while the internal controls receive an 

adverse opinion? Can you elaborate on that and help explain that 

to the members? 


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Ms. GRAFENSTINE. Yes, I can. And I do agree that it would seem 

counterintuitive, sir, that you could have a clean opinion on the financials while receiving an adverse on the internal controls. How 

they differ is that with the financial statements, you can tick and 

tie all the numbers. You can trace them back and realize that they 

are, through substantive testing, making sure that the numbers 

are supported. It just takes a whole lot longer because you can’t 

rely on the internal controls. If adequate internal controls were in 

place, typically they would find the mistakes and there would be 

some type of monitoring process in place where they would detect 

the mistakes and then fix them. But because they didn’t have those 

processes in place, you have to do a lot more testing to validate the 

numbers that they are, in fact, correct. 

So that was one of the other reasons why it extended the amount 

of time and effort, from an audit perspective, added testing and increasing contract costs and those sorts of things, to make sure that 

we could validate the numbers from the financial statements. 

Mr. GINGREY. Let me shift to the Chief Administrative Officer, 

Mr. Strodel. I wanted to just ask you some factual questions. How 

many employees are actually under your supervision within the office? 

Mr. STRODEL. In the entire Office of the Chief Administrative Officer, currently there are 684 people onboard. 

Mr. GINGREY. And how does that compare to how that trended 

over the past several years? 

Mr. STRODEL. In the last 5 years, that is an increase of I would 

say approximately 10 percent. 

Mr. GINGREY. Would you say today that you are right sized with 

regard to the number of folks that you have? 

Mr. STRODEL. I would say that I think we are soon to be right 

sized by the budget cut that is coming. I wouldn’t necessarily agree 

with it, but we are going to have to live with it, sir. In returning 

to our core mission, we are looking at what it is that we do and 

how we do it. 

Mr. GINGREY. Yeah. Well, you have said, of course, that your reputation is on the line. All of our reputations are on the line every 

day when we come to work. But I certainly understand what you 

are referring to based on the past performance in the office that 

you hold, the position that you hold. Clearly the budget cuts are 

tough on everybody. But with $1.6 trillion and 40 percent borrowed 

money every year, you can understand—I think everybody can understand it is time to do a little belt-tightening. 

The other thing I wanted to ask you, although you have 600-plus 

folks that work for you, that work directly for you at the management level, operational level. But you have many, many more folks 

that work for the House of Representatives. 

Do you have an idea of what that total number is that you have 

jurisdiction over? 

Mr. STRODEL. Well, the entire House population is a little over 

10,000. This includes members of your staff, for example, here and 

in the district, the committee staffs, the entire House population 

and payroll community, if that is responsive. 

Mr. GINGREY. That is exactly what I was talking about. And the 

reason I ask that question is because I think that it is really imporVerDate Mar 15 2010 21:14 Aug 16, 2011 Jkt 067642 PO 00000 Frm 00025 Fmt 6633 Sfmt 6602 E:\HR\OC\A642.XXX A642

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tant for us to understand the scope of your operation. This is my 

ninth year, my fifth term. And you know, the choosing of a Chief 

Administrative Officer or Clerk of the House or Sergeant at Arms 

or Parliamentarian, you know, these things, you just don’t pay a 

lot of attention to. At least I didn’t. But all of a sudden, in this position as chairman of the Subcommittee on Oversight of the House 

Administration Committee, it comes home to you, and you realize 

this is one heck of an operation to control and to do it right. 

So I share with my colleagues in commending both of you for the 

great job that you are doing in this short period of time. But you 

have a huge challenge going forward to get everything—well, to get 

the House in order. Well, thank you. 

My time has expired, and I will yield to the ranking member, Ms. 

Lofgren. 

Ms. LOFGREN. Thank you, Mr. Chairman. I just wanted to ask 

a couple of quick questions for the IG. In your written testimony, 

you reference that during the 2009 auditing process, the CAO environment at the senior management level had been kind of 

unsupportive and disinterested and not very cooperative, and you 

made the changes. Do you feel these attitudes of a lack of cooperation exist today in the CAO’s office? 

Ms. GRAFENSTINE. Absolutely not. It was night and day, the complete sweeping changes that occurred since last summer with the 

amount of cooperation and the commitment and the focus on not 

only with the financial statement process but overall, the internal 

control program which impacts—that is a broader program. That is 

going to hit IT. It is going to hit procurement. It is going to hit all 

facets of CAO operations. It is completely reversed. 

Ms. LOFGREN. You pointed out also in your testimony that despite the changes that had been made by Mr. Strodel, the adverse 

opinion on internal controls was made part of the audit because he 

came in late into the process. I know you probably can’t say for 

sure, but with the changes you have seen so far that have been 

made in the CAO’s office, do you have any confidence that the internal control deficiencies will be resolved for the 2011 audit? 

Ms. GRAFENSTINE. I believe that they are on track. However, 

since it is the external auditor’s opinion, I wouldn’t be able to make 

assurances on their behalf. But I do believe that the CAO is doing 

everything that is possible to make sure that they do meet that 

deadline. 

Ms. LOFGREN. We are kind of a unique environment here. The 

Members of the House have our own staffs, and we can all think 

of some of our colleagues who aren’t the most cooperative, might 

not get things in on time, might think that they don’t need to, and 

certainly Mr. Strodel has to deal with that. We answer to our constituents, not to the CAO. So it is a difficult environment, and 

some of the Members sometimes make it more difficult. Certainly 

no one sitting here in this room today. But I do commend you. And 

I guess the only thing is that the chairman and ranking member 

sometimes are called upon to assist with difficult Members. So I 

know that Mr. Lungren and Mr. Brady stand ready to assist you 

in those circumstances as well so that we can have a smoothly operated system here. 


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And with that, I don’t have additional questions, Mr. Chairman. 

I yield back. 

Mr. GINGREY. Thank you, Ms. Lofgren. I yield now to the gentleman from Illinois, Mr. Schock. 

Mr. SCHOCK. Thank you, Mr. Chairman. A couple of follow-up 

questions. First, just going back to my original question about the 

payroll reporting, one suggestion I might have is that we move towards an electronic system where you would have a secure entrance point for either myself or an assigned staff person that you 

can update payrolls as necessary. But the idea of me physically 

signing a piece of paper that then has to travel to an office in the 

21st century seems a bit outdated. And I would think electronically, it would make your lives a lot easier from a payroll standpoint for mistakes not to happen. So for what it is worth. 

Second, you had mentioned—and Ms. Lofgren’s comments had 

made reference to the fact that there had been several months between the time at which we recognized there was a problem with 

the previous CAO and the point at which there was a resignation. 

I am just wondering if the two of you could speak to that and if 

there are certain things that this committee could be doing it ensure that something like that doesn’t happen down the road. 

Ms. GRAFENSTINE. I was not privy to the behind-the-scenes communications with the former CAO and the committee. However, 

from my perspective, it would seem that they were providing him 

constructive feedback in trying to get his team on board. It just 

didn’t seem to have a lasting effect. So we were keeping the committee up to date on what was going on with the audit. But again, 

as soon as it became clear that we had reached the point of no return, it was swift and immediate. And with the former CAO resigning, that is not going to be the first path, the first option that a 

committee would take. They obviously wanted to make sure that he 

had as much time to readjust the course. 

Mr. STRODEL. If I could just add a few points. There were other 

areas of CAO that I think at the time were also suffering from that 

sense of disengagement. In particular in the finance area, where I 

used to work, there were problems. There were delays in processing 

vouchers. Some vouchers were even lost and the IG provided some 

information about this issue. The financial audit wasn’t a standalone issue. I think there were others that were percolating that 

came to a head around that time. That is where I saw this issue, 

again, the core mission seemed to be not the priority. 

Ms. GRAFENSTINE. I would agree with that. It was not the priority. 

Mr. SCHOCK. Thank you. That is all. 

Mr. GINGREY. I thank you, Mr. Schock. The chairman now will 

yield to the gentleman from Florida for an additional 5 minutes, 

Mr. Nugent. 

Mr. NUGENT. I appreciate Mr. Schock’s comments and reference 

to the automated payroll system. That is what I was leading up to 

in that questioning that I had. I think it would be an improvement 

across the board, particularly in timeliness. 

What is the overall amount of money that moves through the 

CAO? 


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Mr. STRODEL. Congressman Nugent, the House appropriation is approximately $1.3 billion annually. In addition to that, there are 

also revolving funds that receive moneys. So it is close to 1.5 billion, 1.4, 1.5 that moves through the system. If that gives you a 

sense of the scope of it. 

I also wanted to follow up on your point and Mr. Schock’s as 

well. In moving towards electronic and other efficiencies, the 

PeopleSoft System, the financial system that was implemented this 

past October, replaced a legacy system that was about 15 years old. 

That was a massive undertaking, and several years in the process. 

What it has brought us and what we hope to continue to do is more 

electronic processing. We are moving forward in the area of vouchers, those official reimbursements, where the financial points of 

contact in offices in the future and the not so distant future, can 

access the financial system and see where a voucher is in the disbursement process on a particular date. Whereas before offices did 

not see it come through the system during the give or take 7 day 

process until disbursement. There is a pilot currently being conducted. 

That is an example of where we have made that leap. We have 

efficiencies and we think there will be more capabilities down the 

road, even where member offices can be the ones to submit that 

voucher on line electronically. There is a movement in working 

with the committee—again, perhaps too slow for some—to make 

sure that this is the right way to go and that it is ready to be rolled 

out. 

On the payroll side, the Lawson System can be linked to 

PeopleSoft, the financial engine, but it is something that I would 

want to work with the committee and go very slow. I would rather 

it be pushed than kicked. I think we can get there, but I would 

rather go methodically. 

Mr. NUGENT. I would appreciate that you keep us informed on 

all those avenues with regards to upgrading and the ability to do 

it electronically across the board. So any help that we can give you 

in regards to working with other Members, that is I believe part 

of our responsibility, not just to lay it back on you, but also as this 

committee we can do things to help educate Members to make sure 

we are working as a team because the amount of dollars that are 

going through your office are—it is a staggering amount of money 

and it certainly is one that requires excellent controls. So anything 

that we can do to assist in that, particularly I am sure your Finance Director would appreciate that, to help in that regard. 

One last thing. The reference to controls as it relates to IT, 

where do we stand? 

Mr. STRODEL. The two material weaknesses—one was having an 

overall program for internal controls and then, second, and very detailed, I think there were 12 to 15 specific recommendations as it 

related to IT and finance security. Working with the senior assessment team, Mr. Leibach and our outside consultants, we developed 

milestones along the way that our group, including 5 or 6 senior 

leaders in HIR, the House Information Resources Division, are engaged in their specific areas of particularly developing system security plans, for example, in the IT area. Again, we are on target. 

This information is going to be presented to the outside auditors 


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soon after June 30th. We are to the point where we are ready to 

provide this preliminary documentation and information to them. 

Mr. NUGENT. One last question, and this one is probably going 

to be difficult. The sense of the prior CAO, what priorities did he 

lay out for your office or was that muddled? 

Mr. STRODEL. I am not really sure. 

Mr. NUGENT. That is a good answer. So obviously it was somewhat muddled. 

Mr. STRODEL. I must say being a little further away from it and 

not working directly at the time, I am not sure. 

Mr. NUGENT. Okay. That was probably an unfair question to ask, 

but it is one that needed to be asked. Thank you very much for 

both of your testimonies. 

Mr. GINGREY. I thank the gentleman. And I don’t think it was 

necessarily an unfair question, but definitely a tough question, and 

obviously our two witnesses have given us good testimony today regarding their concerns and our concerns. I wasn’t on the committee 

in the 111th and I wasn’t on the committee when the previous 

Chief Administrative Officer was hired and would like to commend 

the former majority for having the insight and the good judgment 

to make obviously a needed change, whether it was because of misfeasance or malfeasance. I don’t guess that is digging up bones and 

we don’t really need to do that. 

But this has been a good opportunity for we members, we new 

members in particular, to get a real in depth understanding of both 

the breadth and the depth of the job that you have and we appreciate very much you being here. 

I might ask one real quick last of Mr. Strodel. I think you said in the aggregate, your budget was about $1.5 billion. How much of 

that or what percentage of that is personnel expense, and does it 

include the Office of the Inspector General? 

Mr. STRODEL. The figure I was referring to about the 1.4 to the 

$1.5 billion was the entire House. As it relates to the Chief Administrative Officer’s office, our entire budget was $130 million until 

the CR brought it down to 127, and I imagine it is going further 

down. 

Mr. GINGREY. Okay. Thank you very much. I want to ask the 

committee unanimous consent to enter the following document into 

the hearing record. The document is the United States House of 

Representatives audit report which you have been talking about, 

audit of the financial statements for the fiscal year ending September 30, 2009. Without objection to the request, it is so ordered. 

[The information follows:] 


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98 

Mr. GINGREY. I want to thank the witnesses for their testimony 

and all of the members for their participation and now I adjourn 

the subcommittee. 

[Whereupon, at 10:40 a.m., the subcommittee was adjourned.] 


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