U.S. GOVERNMENT PRINTING OFFICE

56–026 CC WASHINGTON : 1999

WASTE, FRAUD AND ABUSE AT THE DEFENSE

DEPARTMENT, VETERANS AFFAIRS, AND DEPARTMENT OF STATE

HEARING

BEFORE THE

SUBCOMMITTEE ON NATIONAL SECURITY,

VETERANS AFFAIRS, AND INTERNATIONAL

RELATIONS

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

FEBRUARY 25, 1999

Serial No. 106–2

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

BOB BARR, Georgia

DAN MILLER, Florida

ASA HUTCHINSON, Arkansas

LEE TERRY, Nebraska

JUDY BIGGERT, Illinois

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

JOHN T. DOOLITTLE, California

HELEN CHENOWETH, Idaho

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

GARY A. CONDIT, California

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

CHAKA FATTAH, Pennsylvania

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

HAROLD E. FORD, JR., Tennessee

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

DAVID A. KASS, Deputy Counsel and Parliamentarian

CARLA J. MARTIN, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON NATIONAL SECURITY, VETERANS AFFAIRS, AND INTERNATIONAL

RELATIONS

CHRISTOPHER SHAYS, Connecticut, Chairman

MARK E. SOUDER, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

DAVID M. MCINTOSH, Indiana

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

LEE TERRY, Nebraska

JUDY BIGGERT, Illinois

HELEN CHENOWETH, Idaho

ROD R. BLAGOJEVICH, Illinois

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

GARY A. CONDIT, California

JOHN F. TIERNEY, Massachusetts

THOMAS H. ALLEN, Maine

EDOLPHUS TOWNS, New York

BERNARD SANDERS, Vermont

(Independent)

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

LAWRENCE HALLORAN, Staff Director and Counsel

ROBERT NEWMAN, Professional Staff Member

JONATHAN WHARTON, Clerk

DAVID RAPALLO, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on February 25, 1999 ....................................................................... 1

Statement of:

Hinton, Henry L., Jr., Assistant Comptroller General, National Security

and International Affairs Division, U.S. General Accounting Office, accompanied by Steve Backhus, Director for Veterans’ Affairs and Military Health Care Issues; Lisa G. Jacobson, Director for Defense Financial Audits; Ben Nelson, Director for International Relations and Trade;

Eleanor Hill, Inspector General, U.S. Department of Defense, accompanied by Robert J. Lieberman, Assistant Inspector General; Richard

J. Griffin, Inspector General, U.S. Department of Veterans Affairs,

accompanied by Michael Sullivan, Assistant Inspector General; and

Jacquelyn Williams-Bridgers, Inspector General, U.S. Department of

State ............................................................................................................... 3

Letters, statements, etc., submitted for the record by:

Blagojevich, Hon. Rod R., a Representative in Congress from the State

of Illinois, prepared statement of ................................................................ 80

Griffin, Richard J., Inspector General, U.S. Department of Veterans Affairs, prepared statement of ......................................................................... 84

Hill, Eleanor, Inspector General, U.S. Department of Defense, prepared

statement of ................................................................................................... 42

Hinton, Henry L., Jr., Assistant Comptroller General, National Security

and International Affairs Division, U.S. General Accounting Office, prepared statement of ........................................................................................ 6

Williams-Bridgers, Jacquelyn, Inspector General, U.S. Department of

State, prepared statement of ....................................................................... 92

(1)

WASTE, FRAUD AND ABUSE AT THE DEFENSE

DEPARTMENT, VETERANS AFFAIRS, AND

DEPARTMENT OF STATE

THURSDAY, FEBRUARY 25, 1999

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON NATIONAL SECURITY, VETERANS

AFFAIRS, AND INTERNATIONAL RELATIONS,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:12 a.m., in room

2203, Rayburn House Office Building, Hon. Christopher Shays

(chairman of the subcommittee) presiding.

Present: Representatives Shays, Biggert, Blagojevich, and

Tierney.

Staff present: Lawrence Halloran, counsel; J. Vincent Chase,

chief investigator; Robert Newman, professional staff member; Jonathan Wharton, clerk; David Rapallo, minority counsel, and Ellen

Rayner, minority chief clerk.

Mr. SHAYS. I am going to call the hearing to order, because I

know you all have busy schedules and Members will be coming in

and out. I welcome all of you here.

Two weeks ago in testimony before the full Government Reform

Committee the Comptroller General, General David Walker, described programs posing a high risk of waste and abuse and ‘‘the

serious challenges that must be confronted to achieve more efficient, effective and economical Federal operations, and to build

greater public respect for and confidence in their Government.’’

To improve performance and accountability Governmentwide, he

called for greater emphasis on program results, closer alignment of

organizational structures to program missions and improved coordination of multi-agency or cross-cutting efforts. Today, we invite our

oversight partners, the General Accounting Office, GAO, and the

Inspector Generals [IGs], to help us answer the Comptroller General’s call as we focus on high risk operation and program

vulnerabilities at three crucial departments: Defense, State, and

Veterans Affairs.

At the Department of Defense [DOD], weak financial controls al- lowed $1 billion in excess payments to contractors in a single year.

Inventory systems cannot account for another $9 billion. Although

GAO acknowledges some recent improvements, daunting obstacles

confront the effort to bring DOD financial management and financial managers to the level required to support the Department’s

vastly complex and enormously costly mission.

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At the Department of Veterans Affairs, both the GAO and IG

note structure and operational issues affecting the quality of health

care and chronic problems with the timeliness and integrity of data

needed by VA managers to measure performance. At the State Department, GAO points to a number of complex challenges, most notably the need to enhance embassy security, upgrade crucial information and financial systems, and improve goals and measures

under the Government Performance and Results Act.

Our oversight mission is to improve the effectiveness and efficiency of national defense, international relations, intelligence and

veterans programs. We begin that effort today by asking the GAO

and Inspector Generals to address broad but fundamental questions about the mission, management and performance of the departments within their purview, and ours as well. Next Thursday,

witnesses from DOD, VA and State Department will address the

same issue.

Let me at this time welcome our witnesses: Henry Hinton, Jr.,

Assistant Comptroller, National Security and Internal Affairs Division, U.S. General Accounting Office, accompanied by Steve

Backhus, Director for Veterans Affairs and Military Health, Lisa

Jacobson, Director for Defense Financial Management, and Ben

Nelson, Director for Internal Relations and Trade.

Also we have Eleanor Hill, Inspector General, U.S. Department

of Defense, accompanied by Robert J. Lieberman, Assistant Inspector General, U.S. Department of Defense. Then we have Richard

Griffin, Inspector General, U.S. Department of Veterans Affairs, accompanied by Michael Sullivan, Assistant Inspector General, U.S.

Department of Veterans Affairs. Finally, we have Jacquelyn Williams-Bridgers, Inspector General, U.S. Department of State.

I know we have a lot of you here. We could have had two separate panels. This is a general overview. It is really to acknowledge

the fact that you all are the most important part of this process,

and to begin some dialog. Some of what we are going to do is going

to be a bit superficial, since we obviously are not going to have just

one of you here talking in real depth about the issue. Obviously we

are going to have you speak for more than 5 minutes, because even

though there are a lot of you, we need to, and I know some are accompanying and not making statements, but it is important to put

on the record some key points.

So we are going to be doing a little bit more listening today than

asking. But I do need to, before we begin, to swear you in. I will

also say to you that, you wonder, do I do the GAOs first, the Inspector Generals, we are all a family here, we are partners. Sometimes the Inspector General will go first and sometimes the GAO

will go first and sometimes they will come separately and all that

stuff.

Would all of you please rise, and raise your right hands.

[Witnesses sworn.]

Mr. SHAYS. Thank you. We will note for the record that everyone

responded in the affirmative. And we are going to go in the order

that I called you. Mr. Hinton, you can begin, then we will go to Eleanor Hill and then to Richard Griffin, and then to Jacquelyn Williams-Bridgers.

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STATEMENTS OF HENRY L. HINTON, JR., ASSISTANT COMPTROLLER GENERAL, NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION, U.S. GENERAL ACCOUNTING

OFFICE, ACCOMPANIED BY STEVE BACKHUS, DIRECTOR FOR

VETERANS’ AFFAIRS AND MILITARY HEALTH CARE ISSUES;

LISA G. JACOBSON, DIRECTOR FOR DEFENSE FINANCIAL AUDITS; BEN NELSON, DIRECTOR FOR INTERNATIONAL RELATIONS AND TRADE; ELEANOR HILL, INSPECTOR GENERAL,

U.S. DEPARTMENT OF DEFENSE, ACCOMPANIED BY ROBERT

J. LIEBERMAN, ASSISTANT INSPECTOR GENERAL; RICHARD

J. GRIFFIN, INSPECTOR GENERAL, U.S. DEPARTMENT OF

VETERANS AFFAIRS, ACCOMPANIED BY MICHAEL SULLIVAN,

ASSISTANT INSPECTOR GENERAL; AND JACQUELYN WILLIAMS-BRIDGERS, INSPECTOR GENERAL, U.S. DEPARTMENT

OF STATE

Mr. HINTON. Thank you, Mr. Chairman. I am pleased to be here

today to discuss major management challenges and program risks

confronting the Departments of Defense, State and Veterans Affairs. As requested, my prepared statement focuses on one, the

management challenges Defense, State and VA must address to

improve the efficiency of their support operations, and two, whether these departments are meeting performance and accountability

goals and measurements that are required under the Government

Performance and Results Act of 1993.

With your permission, Mr. Chairman, I would like to have my

statement entered into the record and I will summarize.

In summary, Mr. Chairman, four themes emerge from the performance and management challenges we have identified that can

adversely affect the operational effectiveness of the departments if

not addressed. First, Defense, State and VA are struggling like

other Federal agencies to implement the basic results-oriented tenets of performance-based management.

I need to point out right at the start here, Mr. Chairman, that

Defense is second to none in its combat effectiveness. But what we

are really talking about here are business functions that I think

offer a lot of room for improvements in economies and efficiencies

of operations.

Too often we find that the Government’s performance is limited

by a failure to manage on the basis of a clear understanding of the

results that agencies are to achieve and how performance will be

gauged. This is true of Defense, State and VA. For example, our

review of Defense’s plans disclose many areas where improvements

could be made. The principal shortcoming in Defense’s plan centers

on weaknesses; in one, establishing results-oriented performance

goals with explicit strategies and timeframes for achieving them,

and two, addressing what Defense has done or plans to do to resolve its performance management problems that you referred to in

your opening statement.

Our review of State and VA’s plans identified some strong points,

but generally, they fell short of the expectations in the Government

Performance and Results Act.

Second, Defense, State and VA depend on information technology

to improve their performance and meet mission goals. The chalVerDate 11-MAY-2000 14:41 Aug 22, 2000 Jkt 065822 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 E:\HEARINGS\56026 pfrm08 PsN: 56026
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lenge is to ensure that modern information technology practices are

consistently defined and properly implemented.

As we all know, resolving the year 2000 computing problem is

the most pervasive, time-critical risk facing Government today. For

an organization as large as Defense, with over 1.5 million computers, 28,000 systems, 10,000 networks, addressing the year 2000

problem is a formidable task and progress on the year 2000 program is slow.

State, too, has been slow. VA has made progress in addressing

its year 2000 challenge, but it still has a number of associated

issues to address. For example, VA faces significant information

system challenges. It does not know the full extent of its challenges

and could face widespread computer system failures at the turn of

the century, if the systems cannot distinguish the year 2000 from

the year 1900. Thus, veterans who are due to receive benefits and

medical care could appear ineligible.

Third, Defense, State and VA must have reliable and timely performance in financial information to ensure adequate accountability, manageable results, and make timely and well-informed

judgments. Widespread financial system weaknesses, problems

with fundamental recordkeeping, incomplete documentation, and

weak internal controls prevented the Government from adequately

reporting a large portion of its assets, liabilities and costs.

For example, the material deficiencies in Defense’s financial operations represent the single largest obstacle that must be effectively addressed to obtain an unqualified opinion on the entire Government’s consolidated financial statements. State received, for the

first time, an unqualified opinion on its 1997 statements, but needs

to bring its systems into full compliance with Federal accounting

and information management requirements.

State also must work on solving related material internal control

weaknesses, if it is to adequately protect its assets and have timely, reliable data for cost-based decisionmaking, reporting and performance management.

Fourth, the leading performance-based organizations understand

that effectively managing the organization’s employees or human

capital is essential to achieving results. Only when the right employees are on board and provided with the training, tools, structure, incentives and accountability to work effectively, is organizational success possible.

For example, Defense is a department that has experienced problems in finding and retaining staff with the technical training it

needs. To achieve the wide ranging reforms necessary to address

its longstanding financial management deficiencies, Defense must

upgrade the skills of its financial personnel. Defense’s vast financial operations include a cadre of about 32,000 financial management personnel. A survey we completed of over 1,400 key Defense

financial managers—individuals often serving in comptroller, deputy comptroller and/or budget officer positions—showed that over

half of those folks received no financial training in fiscal years 1995

and 1996.

To summarize, Mr. Chairman, GAO is committed to help the

Congress and Federal agencies better serve the American people

and prepare for the demands of the 21st century. We have identiVerDate 11-MAY-2000 14:41 Aug 22, 2000 Jkt 065822 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 E:\HEARINGS\56026 pfrm08 PsN: 56026
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fied, as my statement points out, the critical challenges facing Defense, State and VA. These challenges, again, if not addressed, can

adversely affect the operational effectiveness of these departments.

We stand ready, Mr. Chairman, when we get through with the

witnesses, to address your questions.

[The prepared statement of Mr. Hinton follows:]

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Mr. SHAYS. Thank you, Mr. Hinton.

It is really appropriate, I think, to have the GAO go first, since

you were covering all three, as a nice introduction. At this time, Eleanor Hill.

Excuse me, Ms. Hill, I really should acknowledge that we have

a Member here from Massachusetts, John Tierney, and it is wonderful to have him on the committee. It is nice to have him here.

I am going to take advantage of just doing some bookkeeping, if I

could, given that we have a Member on both sides of the aisle. I

would ask unanimous consent that all members of the subcommittee be permitted to place any opening statement in the

record and that the record remain open for 3 days for that purpose.

Without objection, so ordered.

And I also ask further unanimous consent that all witnesses be

permitted to include their written statement in the record. Before

giving you the floor, I would just ask the gentleman if he has any

comments.

Mr. TIERNEY. Actually, I do not. I am here prepared to listen and

learn.

Mr. SHAYS. OK, thank you.

Ms. HILL. Thank you. I am going to briefly summarize my statement. As you pointed out, Mr. Chairman, we will have the full

statement in the record.

Mr. SHAYS. It is amazing, this is the first time we do not have

a clock, and all of you are going to be punctual. [Laughter.]

Ms. HILL. We are trying.

I am pleased to have this opportunity to discuss the Department

of Defense’s vulnerabilities to waste, fraud and abuse, as well as

opportunities for continuing the momentum developed over the

past few years toward management reform and improvement.

There are 10 areas where we in the IG’s office believe further

management improvement is particularly important, based on recent audit and investigative results. About 98 percent of the audits

conducted by my office and most of our approximately 1,700 open

criminal investigative cases relate directly or indirectly to those top

10 high risk areas. In each of those areas, there are numerous

problems that are inter-related, complex, and involve a wide range

of organizations. Many specific problems are relatively long-standing. Others have emerged only recently.

Briefly, the 10 problem areas are as follows. No. 1, and this is

something Mr. Hinton has already alluded to, financial management. The DOD remains unable to comply with the various laws

requiring auditable financial statements for its major component

funds and for the Department as a whole. For fiscal year 1997, only

the Military Retirement Trust Fund financial statements received

a clean audit opinion. We were unable to provide favorable opinions

on any other major statement.

We anticipate similar results when we issue opinions next week

on DOD statements for fiscal year 1998. The inability of DOD’s systems to produce reliable annual financial statements means that

DOD managers and commanders lack much of the timely, accurate

and useful financial information that they need for program decisionmaking on a day-to-day basis.

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The second area we have concerns about is weapons system acquisition. Increasing the weapons procurement share of the budget

is a high priority DOD budget goal. There are compelling technological and financial reasons to accelerate the acquisition cycle and

to cut per unit costs, especially overhead costs. It is by no means

certain, however, that support costs can be cut enough to sustain

a robust modernization effort. In addition, despite many positive

acquisition reform initiatives, we have seen no significant across

the board improvement yet in cycle time and unit cost.

The third area involves other procurement issues. The vast majority of the several million annual DOD contracting actions involve

equipment, ammunition, supplies and services, rather than major

weapon end items such as ships and missiles. DOD administers

over $800 billion in open contracts and plans to award $135 billion

of new contracts in the current fiscal year. The sheer volume and

great variety of DOD contracting activity makes this a high risk

area.

While the Department has made progress in initiating acquisition reform initiatives, more needs to be done to ensure that the

DOD acquisition work force is capable of transitioning to new practices, and that those new practices include reasonable controls to

safeguard against the continuing threat of procurement fraud and

mismanagement.

The fourth area is health care. The Defense health program

serves 8.2 million eligible beneficiaries through a combination of

DOD in-house and outsourced care. Total DOD health care costs

are nearly $16 billion annually. The Defense health programs cost

containment challenges are exacerbated by the continued lack of

good cost information and significant levels of fraud, particularly

by some private sector providers. We currently have about 500

open criminal investigations on health care fraud.

I should point out that traditionally, the biggest priority area in

our office in criminal investigations, was procurement fraud which

started back in the early to mid-1980’s, the emphasis on that. In

recent years, while the largest category of our cases are in procurement fraud, the No. 2 priority, involving a significant amount of

our work is in the health care area. So this, in recent years has

become a bigger and bigger problem for the Department. More of

our resources are now devoted to health care fraud.

The fifth area is supply inventory management. The Department

had reduced wholesale supply stocks by nearly a third and is pursuing a number of logistics reform initiatives.

However, spare parts shortages are being reported more frequently by operational units. Audits continue to show that war reserves are overstocked in some locations, but short of critical items

in others. Fraud and inappropriate disposal practices remain particular problems in the disposal area, where we have almost 70

open criminal investigations.

The sixth problem area is the year 2000 conversion. The Department of Defense depends heavily, as Mr. Hinton has mentioned, on

automated information processing by about 28,000 systems, 2,274

of which are considered mission critical. DOD faces a $2.5 billion

cost and a monumental management challenge because of the scale

of the year 2000 conversion problem, a belated start in seriously

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addressing it and the legacy of past inattention to good information

technology and management practices.

As of January 1999, approximately 77 percent of mission critical

systems have been certified as Y2K compliant. We believe that the

number and severity of the remaining Y2K issues will not be readily apparent until at least June 1999, when more testing results become available.

The seventh area we have designated as other information technology issues, aside from the Y2K problem. As indicated in 21 recent audit reports, the Department faces major problems related to

the acquisition of computer systems, and the security of both old

and new systems. Automated system development projects have

tended to overrun budgets, slip schedules, evade data standardization and inter-operability requirements and shortchange use needs.

Audits continue to show lax security measures and inadequate

focus by program managers on the threat to information systems,

despite clear awareness at senior levels of the need for a very high

priority for information assurance. Estimates of the number of intrusions attempted by hackers into DOD systems each year run as

high as 250,000.

The eighth area is other infrastructure issues. Key infrastructure

areas, such as transportation, maintenance and facilities, offer

many opportunities to cut costs. However, many logical measures

are highly controversial, and it is important not to create readiness

shortfalls when trimming infrastructure. Difficulty in collecting reliable cost information with which to make outsourcing or restructuring decisions is a major infrastructure management problem.

There are continued problems in determining facility requirements,

especially for housing, where estimates of the cost of modernizing

DOD facilities run as high as $30 billion.

No. 9, readiness. We have assessed how readiness posture is affected by the changing threat environment, which now includes

bona fide information warfare threats and concerns about weapons

of mass destruction in the hands of terrorists. Accurate reporting

of unit level readiness status remains a major concern. Units have

indicated weaknesses related to chemical and biological defense

preparedness and communications capability.

Last, we have designated as area No. 10, turbulence from

change. For most of the past decade, all functional areas within the

Department of Defense have been engaged in fundamental reform

and process re-engineering efforts at the same time. Conflicting priorities, downsizing, outsourcing, dependence on new and unproven

systems or processes, de-emphasis on management controls and

oversight, reorganization, sustained requirements growth, despite

resource constraints, and the continued unexpectedly intensive

need for frequent U.S. military deployments are putting considerable strain on the Department’s human resources. This turbulent

period is one of increased vulnerability to waste, fraud and mismanagement.

In sum, as the largest and most complex government agency in

the world, the Department of Defense faces huge management

challenges. In all of the areas that I have discussed, there is a mix

of significant recent progress toward reform and continuing major

problems. Department managers have agreed with about 96 perVerDate 11-MAY-2000 14:41 Aug 22, 2000 Jkt 065822 PO 00000 Frm 00044 Fmt 6633 Sfmt 6602 E:\HEARINGS\56026 pfrm08 PsN: 56026
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cent of our audit recommendations, and have completed action on

over 5,200 audit recommendations over the past 5 years, realizing

estimated monetary benefits of $18.6 billion. We will continue to do

our best to highlight the Department’s high risk areas, both in our

audit and investigative work, and in the semi-annual reports from

my office to the Congress.

Thank you, Mr. Chairman.

[The prepared statement of Ms. Hill follows:]

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Mr. SHAYS. Thank you. Ms. Hill.

Richard Griffin, who is the Inspector General, U.S. Department

of Veterans Affairs.

We’ve been joined by the ranking member of this committee,

really a partner in this whole process, Mr. Blagojevich. I welcome

you here. I do not know if you’d just like to make a statement for

the record.

Mr. BLAGOJEVICH. Thank you very much, Mr. Chairman. I will

be very brief. Let me first of all say good morning to our distinguished witnesses on the panel, and just say, this is the subcommittee’s first hearing of the new Congress. It is also my first

hearing as a ranking member. If I could say a couple of things, No.

1, I want to extend my special appreciation to our very able chairman, Mr. Shays, and say how much I am looking forward to working with you over the next 2 years.

And second—what do I do next? This is my first hearing as ranking member.

I have a statement for the record. In the interest of time and

brevity, I will just allow the rest of it to be entered into the record,

then allow the witnesses to testify. Thank you.

[The prepared statement of Hon. Rod R. Blagojevich follows:]

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Mr. SHAYS. Thank you very much. I didn’t read the third page

of my statement, and I would just like to read this paragraph, now

that you are here, and just say, as we proceed to narrow our focus

further in the weeks and months ahead, I want our oversight to be

constructive and I want it to be bipartisan. I view our work as a

zero-sum proposition, with the benefits of increased efficiency and

reduced waste accusing to existing underfunded priorities like force

readiness at DOD, health care quality at the VA, and embassy security enhancements, for example.

It really is a joy to have you as the ranking member, and I know

that we will work well together. I know we will be working with

our colleagues at GAO and the Inspectors General. I know that

they know what the ranking member wants from you all, as if we

were asking it for the committee. DOD is responsible to both sides

of the aisle, as you always have been.

Thank you. I am sorry for that slight interruption.

Mr. GRIFFIN. Mr. Chairman and members of the subcommittee,

I am pleased to be here today to discuss major performance and

management challenges facing the Department of Veterans Affairs

and the Department’s progress in meeting performance and accountability measurements and goals under the Government Performance and Results Act. I will also highlight contributions of the

Office of Inspector General in combating waste, fraud and abuse in

VA programs and administrative activities.

Last November, I responded at length to Chairman Burton’s request for the Office of Inspector General’s views on the 10 most serious management problems facing the Department. These issues

appear in an abbreviated form in my full statement which is being

submitted for the record for this hearing. While most of these challenges are long term in nature, I am pleased to report that the Department has made great strides in addressing the Y2K issue and

expects to complete the implementation of all applications into production next month.

I will briefly highlight recent activities of my office that focus on

some of the other top 10 issues. Monitoring the quality of health

care is a top priority for my organization. This year, I directed that

my Office of Audit, Office of Health Care Inspections and Office of

Investigations initiate a Combined Assessment Program to conduct

recurring reviews of VA medical centers. These collaborative assessments of medical center operations will focus on key indicators

or ‘‘pulse points’’ if you will, to provide medical centers and veterans integrated service network management with timely feedback on the status of local operations and program effectiveness.

In the area of workers’ compensation, a collaborative pilot

project, involving OIG investigators and VHA, was initiated to

identify VA employees who were fraudulently receiving workers’

compensation benefits. Indictments were obtained against 14 individuals, all were convicted. Fines and restitution exceeded

$550,000, and savings to VA resulting from this pilot project

amounted to $4.4 million.

In 1998, we audited the workers’ compensation program at the

request of the Department and concluded the program was not effectively managed, and that by returning current claimants to work

who were no longer disabled, VA could reduce future payments by

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$247 million. To help ensure the integrity of VA’s workers’ compensation program, we are developing a protocol package for VA

managers for enhanced case management and fraud detection.

In the area of improper payments, we recently conducted an

audit to determine if the disability benefit payments to incarcerated veterans were appropriately adjusted as required by Public

Law 96–385. We reviewed a sample of veterans incarcerated in

State and Federal prisons, and found that 72 percent of the cases

were not adjusted as required. We estimated that nationwide,

about 13,700 incarcerated veterans have been or will be overpaid

by $100 million.

Additionally, overpayments to newly incarcerated veterans total- ing approximately $70 million will occur over the next 4 years if

VA does not establish appropriate controls.

Prior reviews of the implementation of GPRA in VA showed that

while VA had made progress implementing strategic plans, the Department required additional efforts to achieve the ultimate goal of

using performance measurement as a tool for improving the

efficiency, effectiveness and economy of VA operations. We recommended establishing more specific and quantifiable performance

measurements and holding managers accountable for the development and implementation of the Department’s strategic plan.

During fiscal year 1998, the Office of Inspector General made significant contributions to the economy, efficiency and effectiveness of

the Department’s programs and operations. Audits, investigations

and other reviews identified over $734 million in monetary benefits, including $31 million in recoveries. These monetary results

constituted a return on investment of $21 for every dollar expended

on OIG operations.

Additionally, our oversight of Departmental operations identified

opportunities to improve benefit services and the quality of health

care provided to VA patients. Finally, our criminal investigations

and special inquiries resulted in 111 criminal convictions and 223

administrative sanctions involving patient homicide and assault,

drug diversion, theft of Government property, bribery, kickbacks

and benefits fraud.

This concludes my oral statement. I will be pleased to respond

to any questions the Members may have.

[The prepared statement of Mr. Griffin follows:]

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Mr. SHAYS. Thank you, Mr. Griffin.

We will now go to Jacquelyn Williams-Bridgers.

Ms. WILLIAMS-BRIDGERS. Mr. Chairman, members of the subcommittee, thank you for the opportunity to testify before you

today on the major management challenges facing the Department

of State.

The Office of Inspector has identified several significant challenges facing the agencies that we oversee, including the need to

strengthen border security, consolidate the foreign affairs agencies,

correct weaknesses in financial management and improve management and maintenance of real property overseas. I discuss each of

these in more detail in the statement which I appreciate being submitted into the record.

I would like to focus my short statement on the Department’s

progress in addressing security vulnerabilities, especially overseas,

the Y2K compliance and implementation of GPRA. No greater challenge exists for the Department today than that of providing safety

and security for our people, our facilities and our information. The

scope and gravity of this challenge was brought into clear focus by

the attacks on our embassies in Africa late last year.

The Department faces an immediate need to address physical security vulnerabilities and to enhance emergency planning at our

overseas posts. For several years, my office has reported that the

Department faced the challenge of managing and funding the security of personnel, data and our buildings. The devastation caused

by the terrorist strikes on our embassies in Nairobi and Dar Es Salaam fundamentally changed the approach to security at our missions.

The Department now assesses the vulnerability of mission buildings, the actual buildings, to terrorist attack, coming across national borders, in addition to the threat levels emanating from the

cities in which our embassies are located. My office has made corresponding changes in our oversight to security.

The State Department Office of Inspector General provides the

only regularized security oversight of all U.S. Government nonmilitary facilities overseas. I have recently taken a number of steps

to significantly enhance the security oversight component of OIG.

First, we have expanded our security oversight by including experienced security officers on our routine post-management inspection teams. The security officer’s attention focuses on physical security and the emergency preparedness of personnel at the post in

times of crisis. This year, we plan to complete inspections of 31

posts.

In addition, we will complete security audits of our card access

control programs at our missions, protective details, handling of

classified information and overseas telecommunications security.

Second, we will provide oversight of the $1.4 billion in emergency

security funds recently appropriated to the Department. A large

portion of the emergency supplemental funds will go to procuring

goods and services and construction of new facilities. Our office

plans to perform pre-award contract audits to ensure that costs are

reasonable.

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laam. In addition, we will examine the security for construction

personnel, onsite construction and logistics for transporting and installing items to be used in controlled access areas.

We also are pressing the Department for improvements in emergency preparedness. As a result of our recent audit in emergency

evacuations, the Department reinstated its crisis management exercise program, which trains emergency action committees at posts

on how to manage crises more effectively.

The Department also faces challenges in information systems security. Our own work has pointed to deficiencies in the Department’s mainframe and communications systems security, including

incomplete and unreliable security administration, inadequate

training of information systems security officers, and the lack of

controls over who accesses our information systems. GAO, as was

mentioned earlier, reiterated our findings on the need for improved

management of information security.

Another critical challenge facing the foreign affairs agencies is

our vulnerability to the Y2K problem. Despite the Department’s

steady progress to prepare systems for the year 2000 date change,

we are concerned that the Department’s Y2K certification process

is proceeding much too slowly. Failure to meet the Y2K challenge

could create havoc in our community, including disruption of messaging systems, impediments to embassy operations, such as visa

and passport processing, and failures in the administrative functions, such as payroll and personnel processing in the year 2000.

Embassies and consulates rely on their respective host country

government’s infrastructures to provide essential day to day services, such as water, power, and telecommunications. In some countries, these services could be disrupted if critical infrastructure

components and control systems are not made Y2K compliant.

Many Americans living, traveling, working overseas will certainly

seek the services from our embassies should there be massive, sustained outages in a country.

My office has been actively engaged in Y2K efforts in three major

areas. First, we helped the Department establish a process to certify Y2K compliance of its mission critical systems. We helped them

write the guidelines that the bureaus now use to document that

every necessary step has been taken to ensure that their most critical business processes will continue after January 1. In addition,

we are reviewing the adequacy of the documentation they provide.

Clearly, for the certification process to work, the Department

must speed up its processes to ensure that there is sufficient time

to make any changes if they should be necessary before December

31st.

The second area of our focus in Y2K is in reviewing the Department and USIA efforts overseas to prepare for the millennium

change. We have conducted assessments in 25 posts in 20 countries

within the past 6 months to determine if our embassies are prepared. Early on, we found very little contingency planning in the

event of failure of basic infrastructure services. The Department is

aware of this problem and has sent a contingency planning tool kit,

if you will, to all embassies.

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Finally, because our U.S. embassies and Americans abroad might

be vulnerable to Y2K failures, we are assessing the Y2K readiness

of host countries where the U.S. Government maintains a presence.

In conclusion, I would like to make some observations on the Department’s planning process, and its progress in implementing

GPRA. As you know, the Results Act requires Federal agencies to

set measurable goals for program performance and to annually report on their results in achieving those goals. Over the past 3

years, strategic planning efforts as required by GPRA have prompted notable improvements in the Department’s planning process.

For example, at posts overseas, there is increased focus on and

discussion by U.S. Government entities at posts about their collective sense of U.S. policy goals in a country. Also, there is a much

improved collective assessment of all U.S. Government resources

available at each post to be dedicated toward specific U.S. foreign

policy goals. Prior to the GPRA mandate, our chief submissions

could not readily identify the total U.S. Government resource commitment to U.S. foreign policy goals in a country.

The challenge that exists for the Department and its partners in

the foreign affairs community is to define the goals stated in mission, bureau and Department plans in measurable terms and in

terms of outcome. For example, what does the U.S. Government

hope to achieve within countries and within regions?

Also, the Department needs to establish a credible system that

will reallocate resources across geographic boundaries as changes

in priorities and resource requirements are dictated by strategic decisionmaking.

This concludes my statement, Mr. Chairman. I would be happy

to answer any questions that you or members of the subcommittee

may have.

[The prepared statement of Ms. Williams-Bridgers follows:]

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Mr. SHAYS. Thank you very much.

I am going to recognize Mr. Tierney from Massachusetts first.

But I am going to make a request of all of you for the question I

am going to ask, and I wanted to give you some time to think about

it. I want each of you—and I would like, when I say each of you,

not just those of you who have testified, but all of you at this

table—to give me your top two priorities, if you were the chairman

or ranking member of this committee, as to what you would look

at if you were on this committee.

Mr. Lieberman, I am going to be asking you to do the same

thing, and Ms. Hill, and I know you have the kind of relationship

that you may come up with two different answers. That is all right.

Because it will be more helpful that way. I hope we have that independence. So I am going to ask each of you here, and you will not

tell me right this second, because Mr. Tierney will be asking you

some questions, then we will go to the ranking member. Then we

will go back and forth.

I thank you for all of your testimony.

Mr. TIERNEY. I thank you. I would almost rather hear that answer first than ask questions.

Mr. SHAYS. We have to give them time to think of it.

Mr. TIERNEY. Ms. Hill, you indicated in your testimony that some

estimated monetary benefits of the number of audits that were

done in compliance was about $18.6 billion. Can we anticipate savings in that ball park as we go forward, if we continue the processing of auditing and cooperation?

Ms. HILL. You cannot guarantee that you will have the same

amount of savings. But I can say that we have consistently come

up with high savings figures not only in terms of audits, but also

in terms of our recoveries from civil and criminal cases. Recovery

figures have been consistently high. I would echo what Mr. Griffin

said about VA. Historically, at the OIG’s office in Defense, there

has been a substantial return on costs. In other words, the cost of

operating the Inspector General’s office is far outweighed by the

dollar we are able to return to the Department.

Mr. TIERNEY. Thank you. You also testified that there were barriers, in your remarks on that. Would you expand on that a little

bit, what effect does that have on this?

Ms. HILL. I think there are a couple of things to consider. One

thing that strikes me about the Department is that it is simply

huge to start with. It is a massive task for anybody to manage the

Department. And that is compounded by the fact that within the

Department, because it is so huge, you have the services and you

have all sorts of other, I call them fiefdoms, out there, whether

they are agencies or commands or services.

Historically, it has been a stovepiped organization. Everybody

has had a separate chain of command. So it is very difficult to

break down that historical culture, if you will, and try and integrate the Department and get, not only the services, but all the different parts and the components of the civilian side of the Department to focus on these common problems. It is very, very difficult.

An example is in the financial management area, where the Department has had to combine systems, financial systems and accounting systems, that historically were developed among the servVerDate 11-MAY-2000 14:41 Aug 22, 2000 Jkt 065822 PO 00000 Frm 00114 Fmt 6633 Sfmt 6602 E:\HEARINGS\56026 pfrm08 PsN: 56026
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ices. They have tried to bring those together. One of the big problems now is to get good financial information into DOD’s finance

and accounting systems, which need to be vastly improved to get

clean audit opinions. Part of the problem is that the information

that comes into those systems comes from all sorts of what we call

‘‘feeder systems’’ throughout the Department that are run by separate entities. So you have to get them integrated with the finance

and accounting systems to try to get a smooth transition and accurate information.

So, it is still very fragmented, there are a lot of walls, and barriers and there is a lot of parochialism. One of the biggest challenges is simply to get so many different organizations or different

components to work together on common problems.

Mr. TIERNEY. Mr. Hinton, did you want to make a remark on

that?

Mr. HINTON. We have the same concerns that Ms. Hill does

across this whole area, where you have the individual components

that are very difficult to cut across. That is one of the cultural

issues that we see within the Department in trying to move to

achieve efficiency across all the issues I think we have been talking

about, particularly Ms. Hill and myself, as it relates to the business

activities, whether it be financial management, logistics, or acquisitions. We have that phenomenon that is out there, and we have to

find ways to find more jointness across those business activities to

get the efficiencies that we need.

Mr. TIERNEY. Let’s talk about that for a second. When we look

at recommendations from the different branches to those of the F–

22, the FA–18, the joint strike fighter or whatever, those recommendations to build simultaneously all of those, moving in the

direction, are those likely to be affected by this kind of parochialism and culture?

Mr. HINTON. I think that is an ultimate issue for the Congress

and the administration, because it is one of affordability. As we

look at all the priority needs for the Department, we have to ask

ourselves the question that Congress has to ask, where do we have

the highest priority needs, do we need three separate tactical aircraft programs working at one time. That is a judgment that has

to be made in part up here.

Our work has looked at the individual systems to try to keep the

facts and analyses up here around the individual systems on cost,

schedule and where they are against performance for the individual systems. But the ultimate question is going to be, can we

afford all three, and will that meet the top needs that we have

going into the next century?

Mr. TIERNEY. In view of the larger amounts we are now talking

about in the national defense system on this, the missile defense

system on that, are you of a mind that the Department of Defense

is being overly optimistic with regard to the maturity of this particular system?

Mr. HINTON. I think that what we have seen over our work has

been mixed across the various programs, whether they are aircraft,

national missile defense and those things. A lot of this evolves

around technology, where are we and how ready are we to launch

programs. Do we have the knowledge that the technology will

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work? Where we have seen some of the concerns that we’ve had in

the past was, we would move too quick to launch programs, hence

you come up with a lot of the concerns that we’ve raised in the acquisition programs that we’ve exceeded costs, it has taken longer

to produce the systems, and we did not get what we started out to

get for those systems to do. That was because of technology, unit

costs rose as we did not have all those answers at the beginning.

National missile defense, I think that is a tremendous challenge.

The counsel that we would offer is that we need to move slowly to

make sure that we have a good system that works. I think that is

part of the debate that has to occur as DOD comes up for its funding to support the programs for that.

Mr. TIERNEY. Ms. Hill, do you have a comment on that?

Ms. HILL. We have not looked specifically at that proposal. But

I would share what Mr. Hinton just said, that historically there

have been problems in starting out down the road to get something, and then we find out it has either slipped the schedule, or

it is not what we really wanted in the first place. Those sorts of

things happen repeatedly.

I would think if they are going to embark on something like that,

it needs to be done very carefully. Hopefully all the lessons learned

from the past mistakes, will be considered.

Mr. TIERNEY. Thank you.

Mr. SHAYS. Mr. Blagojevich, you have the floor.

Mr. BLAGOJEVICH. Thank you.

Mr. Hinton, I would like to talk a little bit about the discrepancy between the administration’s request of $3 billion over 5 years to

bring the U.S. embassies into compliance with security standards

and a group headed by Admiral Crowe, which recommends the

spending of $14 billion over 10 years to meet those security needs.

I am hopeful, first of all, that you saw the reports, and second,

rather than tell us who you think is right, could you give us your

assessment with regard to the financial and management processes

used by the two groups, Admiral Crowe’s group and the administration, to determine these estimates?

Mr. HINTON. Congressman, we have not looked specifically behind the estimates on these programs. I think as Ms. Bridgers

mentioned in her statement, and I kind of reinforced across the

three agencies here, our concern at the Federal level has been over

whether or not the systems give you good data in terms of the cost

of the programs. That is one issue I think that is very important

as we think through the cost of these programs. That is a key issue

we really have to define, what are the requirements and what are

the true costs.

I would also echo something that Ms. Bridgers raised, too, is a

challenge in this area and that is knowing what the Government’s

full presence is overseas. Not just State, but look at the other agencies over the years where there has been growth in the overseas

deployment of their resources. So you have to factor that into the

total picture and determine your requirements. Then you have to

come up with good methodology to assess the cost.

Then I think the true challenge that is out there, and it goes

back to some work that we have done in the early 1990’s, where

we had issues around the capacity to carry out and actually do the

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programs that we set up for enhancing the security of our overseas

missions and folks that we had deployed overseas. We found issues

of not having adequate resources, both on the human side, questions around contract management issues, site selection issues, and

a host of those programmatic issues that have to be carefully

looked at as we advance into this area.

Mr. BLAGOJEVICH. Mr. Hinton, some of those deficiencies, can

you give us an illustration of what you are talking about?

Mr. HINTON. Well, I think that you have to look at the data behind cost estimates. And you have to look at the assumptions and

see whether or not we agree with the assumptions upon which the

estimates are made. That is going to be very key to the members

of this committee and also the appropriations committees, as we

decide the amount of money to go forward to support the estimates.

I think that remains to be seen in terms of the total costs.

We have the varying estimates out there, and I think we have

to look carefully at them, and we have to ask ourselves the capacity

question. Do we have a good program to launch, do we have the

right people, do we have the right designs, do we have the right

location for the security issues that Jackie brought up to you. I

think they are the fundamental types of questions we need to ask.

Mr. BLAGOJEVICH. OK. Ms. Williams-Bridgers, are you familiar

with the report by Admiral Crowe and the administration’s position?

Ms. WILLIAMS-BRIDGERS. Yes, I am generally familiar with the

findings.

Mr. BLAGOJEVICH. Could you just kind of free flow and tell us

what you think?

Ms. WILLIAMS-BRIDGERS. I would be glad to. I would like to make

three points about Admiral Crowe’s report. First, I would like to

say he provided invaluable information to the community. Some of

the recommendations, in fact, reiterated some of the same types of

recommendations OIG had made about the need for emergency preparedness, the need for duck and cover drills. When you hear the

indications of a bomb going off, do not go to the windows and look

out and see what is happening. Find some place to hide under and

prevent the glass from injuring your body, which so often occurred

in the two attacks last August.

Three points about the Crowe report. One is the $1.4 billion that

he estimated for annualized costs of embassy security. It is just an

estimate. It was based on his review, the panel’s review of what

happened in Africa. The $1.4 billion may not be enough. Because

Africa is not representative of all the types of threats in security

vulnerabilities that we have throughout the world, first point.

A couple of years ago, OIG looked at what is the security posture

of DS given its current levels, then-current levels of funding. What

we found was that security resources for diplomatic security had

declined by 12 percent between 1991 and 1996. They were providing minimal levels of safety to personnel overseas, minimal levels of security to our buildings overseas, at that point in time.

So I think we need to look behind the $1.4 billion. We did not

look at all the methodology used to come up with that estimate.

No. 2, we must go beyond the Crowe report. As I mentioned, the

Crowe report looked at Africa, looked at what happened in Africa

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as any accountability review board should do. But what it did not

take into account as adequately as we think should be taken into

account is the trans-national threat. In Africa what happened was,

we had embassies where we never suspected there would be a terrorist strike. Because those were low terrorist posts.

The threat came across the borders, from places that we least

suspected. So we have to take that into account now, and we are

taking that into account now, with the revised methodology, to analyze the integrity of our buildings to sustain any attack, regardless

of where that attack comes from.

A third point, some of our posts will never be secure, given where

they are now. Are we going to move London? Are we going to move

Paris? Can we afford to relocate to places to provide adequate setback? It would be tantamount to buying a Manhattan city block,

the investment that we would have to make.

Another point I would like to make, though, about the cost estimates of the Department, one of the things we are most concerned

about in the representation of the budget is that there is no allowance for recurring costs, the maintenance, the operating, the life

cycle costs associated with equipment that the Department intends

to procure. The costs that we see as represented in the budget are

for procurement only. So we have to look long term, what is the

investment going to be.

Mr. BLAGOJEVICH. Thank you.

Mr. SHAYS. What I’d like to do is, Mr. Backhus, I will start with

you. Basically you have the VA responsibilities. What would be the

first two priorities?

Mr. BACKHUS. May I have a third as it relates to the DOD?

Mr. SHAYS. You may have a third. Let me just say, the purpose

for this is that this committee has the resource of 11 members on

the majority side and 2 on the minority, but they also have other

responsibilities as well. So our resources are limited, and we want

to really make sure we are spending them well.

And I also will say, you may give us a very important issue, all

of you, to look at. But we may determine that another committee

is going to be doing that extensively. But yes, you may have three.

Mr. BACKHUS. Obviously, limiting issues to two probably puts

this in the realm of those that are the most difficult to deal with.

Understand that.

The two issues I would really concentrate on working on in VA

are first, as far as the health care side of VA goes, the infrastructure of that system. If you were going to build a health care system

today, it would not look like the current VA health care delivery

system. They are not structures that are built to provide health

care in the next century. They were built to provide health care a

long, long time ago.

The future for health care is not in that kind of a delivery system. Consequently, they have hundreds of facilities that are not

well suited for that mission. Roughly, we are talking about approximately 25 percent of the health care budget is consumed by the

cost of keeping those buildings maintained.

If there was a way to potentially close hospitals and open more

ambulatory kinds of health care facilities that can do outpatient

surgeries on a more efficient basis, that could be located closer to

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veterans, I think care would improve, access would improve and

costs would probably be less.

Mr. SHAYS. An excellent suggestion. I am going to suggest that

that is going to be Mr. Blagojevich’s suggestion, to have a VA

BRAC.

Mr. BACKHUS. Good luck.

Mr. TIERNEY. How does that play into your community based

outpatient clinic? Is that the alternative?

Mr. BACKHUS. That is the step in the right direction, that is correct. And it is great to open up those community based outpatient

clinics. But there is a limit to how many there are going to be that

they can open, given that VA is burdened and saddled with this

huge infrastructure that they have to continue to fund and maintain.

So if that money from those huge over-built, inefficient facilities

could be transferred into these community based outpatient clinics,

you have a much more efficient and effective health care delivery.

Mr. SHAYS. Kind of like a base closing bill, though. But it is very

significant. What is No. 2?

Mr. BACKHUS. Switching over now to the benefits side, the VA pays some $20 billion a year in compensation to veterans with disabilities. They have struggled for years to do and adjudicate claims

in a timely fashion. In fact, there was an article in the paper the

day before yesterday about this, and their re-engineering attempts

to reduce that backlog and the timeframe; they have just been unsuccessful.

So we are talking about a need to really re-engineer and to restructure this whole benefits area to be more responsive to the veterans. In some cases, appeals to the initial adjudication take 2

years to resolve. So we have veterans who are waiting upwards of

3 years for a determination as to whether their claim will be approved.

Mr. SHAYS. One thing this committee could do would be to look

at how long it takes claims to be resolved and decide how that

process could be sped up.

Mr. BACKHUS. Yes, I think we are really talking about a technology infusion here that is going to be needed. This is a paperintensive kind of activity.

Mr. SHAYS. You asked for three.

Mr. BACKHUS. I did, because I also have responsibility for evaluating the military health care system.

Mr. SHAYS. That is wonderful that you are connected to the two.

That is the advantage GAO has.

Mr. BACKHUS. There is an opportunity here, I think, for a lot

more jointness between the DOD and the VA. I heard these folks

talk about the stovepiping that occurs within the Department of

Defense. Well, there has also been historically a lack of cooperation

and collaboration between the VA and the military health care systems.

They do a lot of things alike, health care is health care in many

respects. They have facilities that they could share considerably

more. There is purchasing they could share considerably more.

There are personnel that they could share significantly more. And

it goes on and on and on.

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I have to say there is progress that has been made over the years

to get the two departments to work together more collaboratively.

It is, however, probably just a pittance of what the potential really

is though.

Mr. SHAYS. One of the advantages GAO has is that you can cross

different departments. I know Inspector Generals speak with one

another and so on, and there is coordination. But you can do it

more directly. But the committee can do the same thing.

In my former life as chairman of the Human Resources Subcommittee in Government Reform, we oversaw all of HHS and VA.

So we brought in one of the employees we had then, and we

thought to ask her to do just particularly your third recommendation. How we can coordinate the two? I can see coordinating and

having some impact with No. 2 as well—the benefits side.

Mr. BACKHUS. Is that Marcia? Yes, we have been working with

her.

Mr. SHAYS. Did she put this idea in your bonnet? Because this

is—I was going to change her responsibilities, now I am going to

say, OK, we are going to go back to plan A.

That is very helpful, thank you. I think, Ms. Williams-Bridgers,

if we could come to you, if you would give me your suggestions. You

are not accompanied at the desk by anyone formally introduced. So

you get to jump right in. What would they be?

Ms. WILLIAMS-BRIDGERS. I would have two. One is security. Security of the U.S. Government’s——

Mr. SHAYS. I am sorry, I meant VA. I apologize. We are going

to start with you, Mr. Sullivan.

Mr. SULLIVAN. Thank you. With Steve here, as often comes about

in these situations, Mr. Backhus over at GAO, we are very consistent in our view of the VA.

Mr. SHAYS. I like consistency.

Mr. SULLIVAN. VA, just in their purpose for being part of the

Government, is to serve the veteran. Service is their No. 1 priority.

And he picked the absolute two things that the VA is here for.

Mr. SHAYS. Would you just pick your two issues, though?

Mr. SULLIVAN. The two issues are, one, to provide good quality

health care to the veterans, first the disabled vets and then the

other veterans who may not be disabled on a space available basis.

Steve is right on target, it is the structure of those facilities, the

movement from inpatient to outpatient needs to be looked at, and

how VA can move construction money and any of their operating

moneys to do so, to allow these large, vacant structures that have

been built over the years to be converted to outpatient clinics. And

then the further establishment of these CBOCs, these community

based outpatient clinics.

The second issue, of course, is the benefit aspects. The VA provides compensation, pension and education benefits to all veterans.

Our concern over the years has been the timeliness in which claims

are processed, as well as when one does try to speed up those

claims, what are the vulnerabilities to fraud and misuse of that

money if you go too far in those system changes, by eliminating

some of the controls established, did we look at that.

So the two areas are very consistent with Mr. Backhus.

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Mr. SHAYS. I know we are talking about third rail issues in some

cases, but what we are dealing with is honesty before the committee. We may decide that there are only so many real heavy lifting issues. But it is really important to establish what you think

are the crucial issues. It is really very interesting. I am fascinated

with this.

Mr. Griffin.

Mr. GRIFFIN. The No. 1 issue in the eyes of my senior management team, which came out of a retreat that we had, is quality of

care in the VA. Notwithstanding the fact that Mr. Backhus put

that on the table, that is our No. 1 priority. That is why we created

this new combined assessment program, to get out to VA facilities,

to satisfy ourselves that the right quality controls are in place, that

the right level of service exists, waiting times are not excessive,

that the right medical professionals are in place at that facility.

All of these things are issues that when Dr. Kaiser came into VA

and started this movement, which parallels the movement in the

private sector of moving from inpatient care to primary care, that

creates a whole host of issues. Previously maybe your staff is loaded up with specialists as opposed to physicians that are primary

care physicians.

In addition to caring for patients, VA has a number of veterans

under their stewardship in nursing homes. There are a lot of posttraumatic stress syndrome vets who are in long term care facilities.

What they are trying to do to address that is, if we have excess capacity, which clearly exists in some of the 173 originally constructed hospitals, they are trying to convert some of that capacity

into long term care facilities. That requires budget money.

In the past 3 or 4 years, they have opened over 500 outpatient

clinics. That requires budget money also. So it is a balancing act

as to, where you cut your losses on that excess space? Is it most

prudent from a business standpoint to convert that space for long

term care, or do you pour the money into the outpatient clinics?

Their perspective has been that health care is not about buildings, it is about access to medical professionals, which is why they

have moved in the direction of outpatient clinics. But it takes a

long time to turn that aircraft carrier around, to get things up and

running in an efficient——

Mr. SHAYS. And your second issue?

Mr. GRIFFIN. The second issue is a combination of things. The

Department got a qualified opinion this year on their financial

statements. I think stewardship over this $43 billion or $44 billion

in a broad is the issue. If you do not have systems in place to address some of these items that I raised in my opening remarks, like

workers compensation, incarcerated veterans, where you cannot

show where those tax dollars that you were given are being spent,

then that is a major problem. I think that is an umbrella issue

which speaks to a lot of the shortcomings that are outlined in the

financial statement audit.

Mr. SHAYS. I am happy to jump back to my cause, but I would

like to finish, we’ve done State. Mr. Hinton, we left you out a little

bit on State. We’ve done VA. I am sorry. Now what I would like

to do is State. Mr. Nelson.

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Mr. NELSON. With respect to the State Department, I think there

will not be much disagreement that the primary challenge to the

Department is enhancing security over U.S. buildings and staff

overseas. The caution, however, is that as the Department receives

funds to deal with this issue that oversight must be vigilant. It is

important to have a clear game plan for how those funds will be

spent.

In the past, programs have been affected by lack of agreement

on design, construction problems, locations that changed from time

to time, resulting in increased costs. I believe for the last major

building program in the mid 1980’s, very few of the projects actually came in on time and at cost. So I believe that is a critical area

for the committee to focus on, as it is very important to have a

strong, capable overseas presence to carry out our foreign policy objectives, but to have those people be as safe and secure as possible.

I think that would rate No. 1.

I will be surprised if my colleagues here were to disagree on that.

That is a possibility, but I will be surprised.

The second area is the area of strategic planning and performance. I think the Department will not be able to address some of

the sub-issues or challenges absent some greater statement of what

the critical missions are and how the funds will be applied to these

missions are adequately funded, and there is a clear sense of where

the Department is trying to go. Their performance plans have been

good in some respects, but they have not been clear on performance

goals or on performance measures.

Now, I know we are limited to two. But I think in order for the

Department to address the second one, it has to deal with two

other items that are included in the statement.

Mr. SHAYS. A and B?

Mr. NELSON. Yes, A and B. You need better information in order

to make decisions about what it is you are going to do or not do,

because you need to understand what things really cost. In the

past, the Department has not had a good handle on what things

cost. We have had some difficulty when trying to make recommendations for the adoption of best practices, because of limited,

very limited financial information.

The other challenge facing the Department is the consolidation

of the Arms Control and Disarmament Agency and the USIA.

Mr. SHAYS. That is really three. In other words, the strategic

planning and performance, what’s its critical mission. One way

they have to deal with is better information. Do you have anything

else related to that, No. 2?

Mr. NELSON. Do you mean an example?

Mr. SHAYS. No. In other words, is there any other part to that?

You said, you had two things. So this really is a third issue you

want us to look at it?

Mr. NELSON. Yes, it is a third issue. And maybe I misspoke when

I said A and B. But you cannot accomplish either goal without good

financial information. With respect to the consolidation, you need

good information to make good decisions about what functions and

roles and missions you have to pursue.

Mr. SHAYS. Right, I’ve got you.

Mr. NELSON. So they are all tied together.

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Mr. SHAYS. Ms. Williams-Bridgers.

Ms. WILLIAMS-BRIDGERS. I certainly agree with Ben Nelson on

his assessment of security being the No. 1 area of focus, and the

need of congressional oversight and attention, for a couple of additional reasons, though. One is State Department, while it serves as

the platform for all U.S. Government entities overseas, it represents only 25 percent of our presence overseas. State Department, USIA and ACDA, sum total of those organizations is about

20,000 people, Americans.

Then we have, triple that number and you get the total U.S.

Government effort, if you will, if you include FSNs, for whom we

have some liability.

Mr. SHAYS. What are FSNs?

Ms. WILLIAMS-BRIDGERS. Foreign service national employees.

In Africa, we absorb the cost not only of the loss of life of Americans, but the loss of life of foreign service nationals as well. There

was a financial liability associated with our employees there. And

the foreign service nationals represent the largest part of our work

force overseas.

I think also that the reason it is important for this committee to

pay attention to security is that the Department cannot attend to

security alone. It needs the help of the Congress. We talked about

the costs of providing security facilities and secure networks for our

information overseas. We are going to need the help of Congress,

the commitment of resources, over a sustained period of time, in

order to fully address those security needs.

While I agree with Mr. Nelson that strategic planning is extremely important, and the lack of good information, financial systems, information systems, have been an impediment to good resource planning and goals, setting of goals, I think the more immediate problem is the failure of those information systems and financial systems to provide you the information after January 1, 2000.

So in terms of a short term goal, I would say the Y2K problem is

something that warrants this committee’s attention. Not only because of Department of State’s precarious position, although I

think they are making progress. But Department of State is taking

a lead in many ways in the rest of the world’s attention to Y2K.

From work that we have done with host country governments, we

know that there are varying levels of attention being paid to the

Y2K problem.

For the tens of millions of Americans that are traveling overseas,

in Rome alone they are celebrating a jubilee, January 1, 2000 millions of Americans are expected to attend this jubilee. There is a

lot of question of whether or not that country will be prepared on

January 1. So I think the Y2K is more of a short term need that

warrants this committee’s attention.

Mr. SHAYS. Thank you very much.

We have a vote, and I think what we will do is end with Defense.

Ms. Jacobson, you are in one area of the Defense area, but I still

want you to give me your two, even if one goes beyond your area.

And Mr. Hinton, I will ask you to comment on Defense.

Then we will ask the Inspector Generals, then come to you, Mr.

Lieberman. I think that is what we will do—do we only have one

vote? Sometimes we leave and we find out there is another vote,

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and that we should keep going. Why don’t we start with you, Ms.

Jacobson, and we will make sure there is only one vote.

Ms. JACOBSON. Mine is financial management and you are all

pretty aware of the issues in financial management at DOD. They

are not denying them. There are serious difficulties, both in the

stewardship of the assets, and in cost, and accumulating cost information and data.

Mr. SHAYS. When you all told me that in 1 year alone, vendors returned $1 billion of overpayment, I was shocked. And you all had

probably quite frankly become desensitized to it. That is not a criticism. It just tells me the challenge. For me, I thought, wow. At one

time, you all probably did, too.

Ms. WILLIAMS-BRIDGERS. When I first started, I did, too. When

you first come out of the private sector, and $1 million is a big

number, $1 billion kind of shocks you.

Mr. SHAYS. How much more is out there? All we need to do is

find out if we have more than one vote. OK.

Ms. WILLIAMS-BRIDGERS. I think one of the most serious issues

facing us, and challenges for GAO right now, in working with the

Department to try to help them address their financial management problems, is getting them to view financial management in

the broadest perspective.

We just issued a report on their biennial financial management

plan. In that report, they eliminate from the discussion of financial

management the budget side of the equation. That is a basic element of financial management. Until you look at financial management in a broad perspective, including how information is shared

not only upwards to the financial systems, but also between financial program systems that need that information to control the assets and provide stewardship over the assets, and you do not have

an adequate plan going forward to address the serious problems

that we’ve seen with financial management.

Mr. SHAYS. We are going to go vote. The bottom line I am hearing you say is, we have to connect the budget to financial management, that is one issue we need to look at. Give me another one

as well.

Ms. WILLIAMS-BRIDGERS. Connecting, providing the control element of the functional areas, feeding information to each other at

the same time as the financial management systems as well. For

example, when you acquire something, acquisition, provide that information to logistics, it is coming in, at the same time they provided it to accounting, pay for it. Then at the end of the day, accounting and logistics look and see if we got everything that we

paid for. That is a basic element of the financial management control system that is totally lacking in DOD, and not planned for

right now as far as we can tell.

Mr. SHAYS. Thank you very much.

We have been joined by Judy Biggert, and I do not know if Judy

is going to be able to come back afterward. I want to welcome you

to the committee. The purpose today is just to get a sense of where

we are going to begin our travels here. Welcome.

Ms. BIGGERT. Thank you. Unfortunately, I will not be able to

come back. But I have just been traveling in six countries in South

America, Latin America. I have visited so many of the embassies

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there, and the problems they are having, particularly those that

are street levels, four sides exposed, and how concerned they are

about the security there.

[Recess.]

Mr. SHAYS. Are we all done? You have given me your two points,

and I will go to Mr. Hinton. We are taking Defense, first focus on

Defense. I did not want you to use up all your good ideas on the

other two.

Mr. HINTON. That is OK. My jurisdiction runs both to the international side, too. I will echo where they have been on that. I want

to spend my time right now on Defense.

When I got your invitation to testify, I was really thinking how

I would spread together all three departments in my statement. I

want to come back to one of my key points right at the beginning,

because I think it rises to Defense in a very important way. In the

last page of my prepared statement, you will see a list of high risk

areas which are about six or seven that we have had in DOD for

many years.

Ms. Hill touched on those as she went through. Our work parallels each other. I think the issue I would have, Mr. Chairman,

is GPRA implementation, to try to push the Department around to

try and identify measures, goals, that will move forward trying to

get some metrics out there that we can see progress going against

these high risk areas.

Those high risk areas form the basis of the challenges that we

have laid out in our reports here. I think that is very key, and as

more knowledge becomes available, and the Department is starting

to embrace that legislation more, I think you will see more measures, more metrics, and you will be in a position to look at the

progress.

The other important part that comes on is that at some point,

we tie the budget to some of these areas, so that we can see where

the dollars are going and what we are getting for the execution and

expenditure of those dollars against those goals and objectives. I

think your committee is in a very good position to kind of watch

that evolution of that and challenge the Department, are we getting where we want to go against these high risk areas?

I always think about these, I think that $1 that is not well spent

in these areas is $1 less that we have to devote to readiness and

modernization and those types of priority needs that the Department has been seeking additional moneys for.

My second one in DOD truly goes to the issue of financial management. The issues that Ms. Hill and I both talked about and Ms.

Jacobson raised here really has at its heart the execution of the

budget. Unless you have real good information, decisionmakers are

not in a very good position to make informed judgments. That ties

to the data itself and the systems we have in DOD. We are not in

good shape. I would put that right there second to the first one

that I mentioned.

Mr. SHAYS. Thank you very much.

Mr. Lieberman.

Mr. LIEBERMAN. I have a list of stuff written down on this paper,

and I have been trying to find some innovative way to squeeze it

all into two things.

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Mr. SHAYS. I am all up for creativity.

Mr. LIEBERMAN. I think the No. 1 priority for the Department is

military readiness. I believe that we cannot do too much oversight

in terms of looking for readiness inhibitors. I think there are plenty

of them out there.

Mr. SHAYS. I like the way you say that, readiness inhibitors.

Mr. LIEBERMAN. Questions arise such as, we spend $83 billion a

year, approximately, on logistics. Yet we have the operating forces

complaining, vehemently nowadays, about spare part shortages.

How can this be? Are we really ready to deal with weapons of mass

destruction, either in a war environment or in terms of counteracting terrorism, abroad or at home? There are others; it is certainly a long list. But I think, as a genre, that readiness is terribly

important.

Mr. SHAYS. In regard to readiness, a good chunk was dealt with

in your statement, Ms. Hill. You say accurate reporting of unit

level readiness status remains a concern. In addition, audits have

indicated weakness related to chemical and biological defense preparedness and communications capability. So did you inject that

into her report?

Mr. LIEBERMAN. Yes. [Laughter.]

Mr. SHAYS. It caught my attention.

Mr. LIEBERMAN. I trust it is OK to let the secret out here.

Mr. SHAYS. When you say communications capability, can you

elaborate a little more on that, Ms. Hill?

Ms. HILL. I think the one on communication, both of those are

very critical areas. I was going to say that——

Mr. SHAYS. I am going to come back to you, Mr. Lieberman.

Ms. HILL. My first problem would also be readiness. My biggest

concern is particularly in the chemical and biological area, where

we have done a series of reports, some of which are classified. We

cannot go into all the details here, but it is an area that I think

is worth looking at.

Mr. SHAYS. Not all of the 12 are in regard to chemical and biological?

Ms. HILL. No.

Mr. SHAYS. The 12 are readiness overall?

Ms. HILL. The communications one, I believe, is the audit report

on the frequency issue overseas, where we are using communications equipment where, and I am not a technical expert, and Bob

can correct me if I am wrong, they are not using approved frequencies and not complying with all the requirements of the host

nation. Therefore, the efficiency of the whole program or of the

equipment is seriously in doubt.

Mr. SHAYS. Let me have you give me your second one, or if you

wanted to elaborate more. I interrupted you.

Mr. LIEBERMAN. I think the second one relates to acquisition. Acquisition is the area of the Department where there is the most

money. Last September, the Under Secretary of Defense for Acquisition and Technology made a statement, a public statement, in

which he said the entire modernization program was in a death

spiral due to underfunding. We are spending approximately $60

billion a year on weapons acquisition. So again, the question is,

how can that be?

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There are a lot of different facets to that. It leads you into the

question of where do we go with acquisition reform. How have the

reforms so far worked, and what kinds of further changes, if any,

are necessary?

If I could impose and have a third?

Mr. SHAYS. Sure. For Defense, I think a third would be appropriate.

Mr. LIEBERMAN. Thank you. Information systems are really at

the heart of everything that the Department does. All of our processes are completely automated. All of us, as managers, are dependent on information coming out of automated systems. There is

a chronic lack of accurate day to day management information, as

has been mentioned earlier. I think that pervades every single part

of the Department’s operation.

It leads you into areas like Y2K and security, as well as systems

design. So how we can have 20 some thousand information systems

and still have bad information, is my third question.

Mr. SHAYS. Does Mr. Horn tend to get into those issues as well

into his committee, Ms. Jacobson? One of the things we have to decide is what we do in that regard.

Mr. HINTON. He is real key into the Y2K right now, but also in

the broader picture around some of the information technology and

systems development side.

Mr. SHAYS. Is it fair to say that GAO would tend to focus more

on management because you tend to get into less—let me preface

it by, I would think the Inspector Generals on occasion are going

to get into some very specific programs, sometimes fairly narrow in

focus, more micro. You can also get into macro issues as well. But

it would seem to me that GAO would tend to get into more macro

issues.

Mr. HINTON. Both. But largely on the macros. If we are going to

have, if you could give Bob a third one, I would like to come back

after Ms. Hill, because I have a couple at a broader national security level that go beyond Defense.

Mr. SHAYS. Great. I am going to ask Ms. Hill to give me her first

two, then I am going to ask each of you to tell me the question you

wish we had gotten into, the issue we wished, and each of you comment. And then I am going to let you get on your way, because this

is just kind of a general introduction for me and the committee.

Ms. HILL. I preface it by saying that the problem with Defense,

obviously, is there are so many important issues. Not only are

there so many, but they are so interrelated. If you pick one issue,

some other issue feeds right into it.

Mr. SHAYS. Fair enough.

Ms. HILL. But great minds must think alike, because Bob’s list

and mine are very similar here. My first would also be readiness,

and particularly from what I have seen in our audits, it would be

in the biological and chemical weapons area. Obviously, I would

put readiness first, because to me, that involves the safety of our

men and women in uniform. Although everything else, including financial management, is very important; readiness is a critical area

with obviously a huge potential for disaster if it is not the way it

should be.

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Second, I would suggest the general area of acquisition procurement, because the amount of dollars that is at risk in that area is

huge given the extent of the Department’s activity. There is also

a lot of reform going on in acquisition in the Department, some of

which is very good and some of which we have supported, not only

in the Department, but in the Congress, in the last few years.

There are some concerns that we have in that area. As the reform moves forward, there is a tendency to move more and more

toward commercial practices. My own concern is that we are talking about the largest acquisition system in the world here, where

a huge amount of taxpayers’ dollars are at stake. We need to make

very sure of what we are doing, before we implement commercial

processes.

Not only understand what the practice is, but also that it makes

sense in the Department of Defense, and that we do not just automatically implement something because its ‘‘commercial’’ before we

have the evidence to support doing so.

Second, there is a lot of concern about going so ‘‘commercial’’ that

we eliminate any of the traditional safeguards that we have had

in the acquisition area, such as the False Claims Act, the Truth in

Negotiations Act, cost accounting standards, and other internal

controls. I am not saying those are sacrosanct, because certainly

you can change things and moderate them where reasonable.

But I do not think we should throw everything out without looking at the risks there and making sure that whatever it is we put

in place in the new system, it is done carefully and with evidence

that it is going to work. So that would be my second area, and that

of course feeds into every part of the Department in terms of acquisition and systems.

If I had a third, it would also be in the information area, but it

would probably be more focused on information security. Everything we have seen and all the data and estimates suggest that

there is a huge vulnerability in the Department as to the security

of its information systems. Given the way the country and the

world are going in the way of computers and information systems,

I do not see that problem shrinking. I see that threat getting bigger.

The Department needs to be prepared to handle it again, because

the potential for disaster there, if the worst happened, would be a

terrible thing for the country and for the Department. That would

be my third area, if I had a third area.

Mr. SHAYS. Mr. Hinton, I am going to ask you and I will ask

John Tierney if he has any other questions before I go to that last

quick question.

Mr. HINTON. I too would associate myself with the issues Mr.

Lieberman and Ms. Hill had just brought up on readiness and the

other. Our body of work is the same as theirs in terms of coordination.

There are a couple others I would like to bring up for you, Mr.

Chairman, and one is broader than Defense. It is combating terrorism. It cuts across Government, it is a large effort. We have

been heavily involved, largely with this committee, looking at that

and identifying who the players were and combating the issue and

working the issue, what the funding trail has been and trying to

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assess the level of coordination amongst the Government team to

combat terrorism and the effectiveness of our efforts as a Government to deal with the issues. That is one.

The second is, I think, the issue of human capital. As we look

across all the issues, there are a lot of people working the issues

within the agencies. Whether or not we have the right number, the

right training, the right skills, good strategies as a Government to

deal with these many important issues that you are hearing, I

think, in itself, is a very key issue that we cannot lose sight of.

It is where we are today, because the public servants who work

these issues, and I think we have to look at it from one, making

sure we have a pipeline of people who are coming behind the ones

who are working them now that have the skills and the tools as

well as the focus for a lot of that. So I would add those two to the

list we’ve already discussed.

Mr. SHAYS. Thank you very much.

Mr. Tierney.

Mr. TIERNEY. I only had one question, and I hope I am not repeating. Ms. Hill, I missed your first one.

Ms. HILL. It was readiness, particularly in the chemical and biological area.

Mr. TIERNEY. Do we have a real definition that is common right

across the board of what people are talking about in each of the

branches when they talk about readiness, or might they all be talking about different things and measuring it in different ways?

Ms. HILL. I do not know if there is an official definition. To me

it is a common sense thing, and obviously——

Mr. TIERNEY. You would think so, except sometimes in listening

to the different services, I wonder if we all have the same common

sense. [Laughter.]

Ms. HILL. Certainly there is some standardization, since they

look at readiness in terms of what they would be prepared to confront in a warfare situation. In that sense, I think they are pretty

much on the same wave length. But I do not know if we could

guarantee it is identical.

Bob, would you care to add to that?

Mr. LIEBERMAN. I think there is a tendency to miscategorize a

lot of things as either related to readiness or not related to readiness. Many times that gets inconsistent.

Frankly, it is a real plus for someone’s budget request to be able

to say, we need this for readiness purposes. So it is more a case

of everyone trying to jump on that bandwagon, rather than saying

what they do is not related to readiness. I think we have had problems in ascertaining the ability of individual units to perform various kinds of missions.

That is not so much a definitional thing, as it is making it clear

to people exactly what they are reporting and then being assured

that what they are reporting is really accurate. There is still a lot

of subjectivity in the process, which makes it difficult to accurately

measure force capability.

Mr. SHAYS. Let me do this. If I could, we will end with this, and

then I will just have a closing comment. Is there anything you wish

we had asked you to talk about? Obviously there may have been

a few, but any one particular thing you feel you would have liked

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to have addressed? I am not looking for a long comment, but an

explanation.

Mr. SULLIVAN. I have just one thing. Knowing the overall responsibility the subcommittee has over all three of these activities, I

could see further discussions of why VA and DOD cannot work

closer together. The portability of a veteran leaving the health care

system of Defense and moving into the VA system, the use of common records as a serviceman leaves his service and moves into the

VA, that sort of thing.

Mr. SHAYS. Great. Thank you.

Mr. GRIFFIN. I would say that in the area of workers compensa- tion, which I identified as $140 million a year budget item for VA,

and a $1.8 billion item Governmentwide.

Mr. SHAYS. Let me be clear. Why is that so large?

Mr. GRIFFIN. There are over 200,000 employees in the Department. Once someone gets placed on workers compensation——

Mr. SHAYS. These are the employees? What is the number again?

Mr. GRIFFIN. The dollar value for the chargeback, year of 1996, because you pay it in arrears, was $140 million, roughly. Governmentwide, it is $1.8 billion.

Those of us who are involved in investigating these things are

handcuffed somewhat by some of the existing rules. One of those

rules makes it very difficult to get access to income data. Part of

the deal, when you go on workers compensation, is you sign a claim

form wherein you say that you are unable to work or you are only

able to work and earn a certain amount of income. There is not an

easy way right now to do a data match with IRS records or Social

Security records in order to determine whether or not an employee

who is on workers compensation is in fact getting additional income on the side. This is something that we are going to be working through the system and seeking proposed legislation to fix.

Mr. SHAYS. I think we will also be encouraging the Civil Service

Subcommittee to take a look at that in Government Reform. It is

truly a very important issue. I got involved in the State. It is a big

problem sometimes.

Ms. WILLIAMS-BRIDGERS. One area I think that was touched on

briefly but I think warrants more attention is our overseas presence, the size of the U.S. Government’s presence overseas. Our

overseas presence has grown tremendously over the past several

years, and it has come at tremendous cost. Security increases, and

our vulnerability increases, with each American that establishes a

presence overseas. I think there needs to be some general oversight

over the reasons for increasing the numbers of Americans overseas,

and whether we are in the right places for the right reason.

Mr. SHAYS. What I am surprised about is the number of what I

call nontraditional State Department employees, like Commerce,

Agriculture and so on. But you are talking about private citizens

just being there?

Ms. WILLIAMS-BRIDGERS. No, I am talking about official U.S.

Government presence.

Mr. SHAYS. OK, just like what I was mentioning?

Ms. WILLIAMS-BRIDGERS. Yes, Commerce, State, Justice, Transportation, Agriculture. The list goes on, 34 different U.S. Federal

agencies.

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Mr. SHAYS. I would like to say to the committee that I do believe

that is something that would be logical for us to look at, and not

all that difficult. How could we do it with our limited resources?

That is something I think we can look at fairly easily. It is a fascinating issue.

Mr. LIEBERMAN. We mentioned human resources, and specifically, training people in financial management oriented jobs. I

would agree wholeheartedly that that is an important thing to do.

But I think the training in the acquisition area is even more critical. Also, the difficulty the Government has in retaining highly

skilled information technology experts is a major problem that cuts

across the whole Government.

So training tends to get short shrift. It sounds boring, but it really is critical, also.

Mr. SHAYS. Thank you.

Ms. HILL. The only one that I would mention fits into part of the

acquisition process, namely the requirements process, the method

by which the services, the components, whoever, set forth what

their requirements are. The issue is the basis on what they’re basing those requirements on, whether or not they are valid, whether

the method they used to arrive at those requirements was a legitimate method, and how convincing the ultimate requirement is if

you look at what is backing it up. We have certainly seen some

problems in that area. And that is an important area, because it

feeds right into the spending of dollars in the acquisition area.

Mr. HINTON. Two things, Mr. Chairman. One would be theft of

inventory due to weak controls. I think it is probably broader than

DOD, but particularly in DOD.

Mr. SHAYS. Do we see it in VA? Do we see it in State as much?

Ms. WILLIAMS-BRIDGERS. No. State Department, our largest assets are our real property. If you can walk off with the embassy—

[laughter]——

Mr. HINTON. The second issue I would put is the incentives to

effect change in behavior to address the many issues that are on

the table here, particularly as they relate to the high risk programs

in DOD.

Mr. SHAYS. Which programs?

Mr. HINTON. The high risk programs that are in DOD that we

have identified cut across acquisition and information management

and those things. I think also as it relates to the challenges that

cuts across all the issues. There have to be incentives to motivate

and to do things differently. You cannot operate the same way in

the future that we have in the past.

Ms. JACOBSON. I guess I would just answer a question you asked

earlier about other subcommittees’ interests. You asked if Congressman Horn gets involved in financial management. He certainly does, and in the security area as well.

Financial management in DOD is a very broad issue. It does cut

across national security and other areas of readiness and those

kinds of issues as well. No one committee can cover all of those

issues. I would be glad to work with you and your staff on identifying the specific aspects of financial management that might be of

interest to the committee.

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Mr. SHAYS. Something that we could get a handle on. I do not

know if I would be chairman of the committee. One, be back here;

two, be the chairman—would Republicans be in the majority or

Democrats? But I kind of think we almost have to have a 4-year

plan, and that is something I would talk to Rod about, so whoever

is there, we could continue. There is just a lot to deal with.

Mr. BACKHUS. This next decade, the VA is going to be faced with

the largest number of deaths of veterans it has ever had to confront. The peak years I think are projected to be 2007 and 2008,

World War II veterans and Vietnam veterans, and Korean War veterans.

The question is, will they have the capacity through the National

Cemetery Administration to meet that demand. There are efforts

underway to try to involve States in contributing to constructing

and maintaining cemeteries to meet this demand. But it is uncertain at this time whether they will be able to.

One last comment if I could make it, in terms of, if there was

another question that you had asked. I have taken a quick look at

the fiscal year 2000 performance plan for VA. I have seen where

they are making a substantial amount of progress in terms of being

responsive to the criticisms we have made in the past.

While we are not through reviewing it, we will be concentrating

on it the next month, it appears that VA is really doing a lot more

in the way of trying to identify more results-oriented measures to

which to track their progress, and engaging folks like the IG’s office in trying to improve the data reliability upon which they are

going to report. If they can do those two things, then I think next

year at this time, we might have a better report to give.

Mr. SHAYS. Mr. Tierney, do you have anything else?

Mr. TIERNEY. Nothing else, thank you, except to thank everybody

very much.

Mr. SHAYS. We are going to close, and I will make a few observations. One, I truly found this very interesting. My motivation was

primarily to get you here to make sure we develop a nice relationship. We have met privately, and one thing I would like to say on

the record is, all of you do very important reports. We want to

make sure that they do not just lie on the shelf and not get noticed.

You triggered, as you did in the beginning, Mr. Backhus, some

ideas that I want to just comment on. One of them is for instance,

for you to look at this issue of what will be there for our veterans

and their families, primarily, obviously, in terms of cemetery space.

That seems to be kind of this all encompassing forever kind of

study. I think we could get a pretty good handle on it and make

some suggestions and write a report that hopefully could be helpful

to other committees, and then pursue it in legislation.

That can be done with not as much of our time, maybe some of

yours. Then we could highlight it and make sure the public knew,

and make sure our colleagues knew and move forward. Obviously,

the one that becomes the most daunting would be this whole financial management.

I would ask, Ms. Jacobson, that maybe you can just get out some

niches of that. I do know that we are going to focus in on terrorism

in a big way and use more than one of our personnel for that from

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our staff. That really cuts across two in particular, and to some

measure the health care system of VA and DOD.

We are going to look at how we coordinate DOD and VA health

care. It is a natural for us, because we have 4 years of experience

in health care, so we come with a knowledge base. We are going

to obviously look at the public safety issue of embassies—and that

does get involved with the whole issue of terrorism.

All the suggestions that were made I think have tremendous

merit. Some of them we will not look at, simply, we will not have

the resources. I will conclude by saying that this truly is a partnership. Some of you all may be doing more of the work, we may do

some really concentrated effort, we will pool our resources, and we

will make sure the public knows about it and our colleagues know

about it, and that we make some intelligent recommendations.

This has been helpful, very helpful. Thank you, and we will

cause the hearing to adjourn, and we thank our recorder.

[Whereupon, at 12:19 p.m., the subcommittee was adjourned, to

reconvene at the call of the Chair.]

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