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28–243 PDF 2006

S. Hrg. 109–520

NOMINATION OF DAVID L. NORQUIST

HEARING

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

ON THE

NOMINATION OF DAVID L. NORQUIST TO BE CHIEF FINANCIAL 

OFFICER FOR THE U.S. DEPARTMENT OF HOMELAND SECURITY

MAY 8, 2006

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs

(

(II)

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JENNIFER A. HEMINGWAY, Professional Staff Member 

MICHAEL L. ALEXANDER, Minority Staff Director 

ADAM R. SEDGEWICK, Minority Professional Staff Member 

TRINA DRIESSNACK TYRER, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Collins ................................................................................................. 1

Senator Lautenberg .......................................................................................... 2

Senator Warner ................................................................................................ 3

Senator Lieberman ........................................................................................... 8

Senator Levin .................................................................................................... 14

Senator Dayton ................................................................................................. 17

Prepared statement: 

Senator Akaka .................................................................................................. 24

WITNESS 

MONDAY, MAY 8, 2006

David L. Norquist to be Chief Financial Officer for the U.S. Department 

of Homeland Security: 

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 27

Biographical and professional information ..................................................... 28

Letter from U.S. Office of Government Ethics ............................................... 35

Responses to pre-hearing questions ................................................................ 36

Responses to post-hearing questions .............................................................. 76

APPENDIX 

Exhibits A through R submitted for the record by Senator Lieberman .............. 95

March 1, 2006, letter to Secretary Chertoff re: City of Roseau, from Senator 

Dayton ................................................................................................................... 143

(1)

NOMINATION OF DAVID L. NORQUIST 

MONDAY, MAY 8, 2006

U.S. SENATE, 

COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Committee met, pursuant to notice, at 3:31 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Susan M. Collins, 

Chairman of the Committee, presiding. 

Present: Senators Collins, Warner, Lieberman, Levin, Akaka, 

Dayton, and Lautenberg. 

Chairman COLLINS. The Committee will come to order. 

Today the Committee will consider the nomination of David 

Norquist to be the Chief Financial Officer for the Department of 

Homeland Security, a department with a budget that exceeds $40 

billion. 

DHS is now in its third year of operations, yet it remains the 

only cabinet-level department without a CFO appointed by the 

President and confirmed by the Senate. 

The DHS Financial Accountability Act, passed in October 2004, 

directed the President to name a CFO within 180 days. In October 

2005, 6 months after the deadline passed, many of my Committee 

colleagues and I wrote to Secretary Chertoff urging him to bring 

DHS into compliance. The passage of time has only served to confirm the urgent need for this position. It was clear from the start 

of DHS that the effective melding of 22 agencies into one cohesive 

department would depend to a considerable extent on the effective 

management of its financial resources. 

This Committee’s investigation of the preparation for and response to Hurricane Katrina has revealed the consequences of not 

having an effective financial management system. From the fraud 

in the disaster relief payments to the wasteful ice shipments to the 

manufactured home debacle, it is clear that any attempts at the 

sound well-planned use of taxpayers’ dollars were overwhelmed by 

a spending frenzy and a lack of adequate controls. Future disasters 

are, unfortunately, inevitable. The 2006 hurricane season is now 

less than a month away, and the need for financial accountability 

at DHS is as urgent as ever. 

Our nominee brings 16 years of experience working on financial 

management issues to this challenge. Mr. Norquist currently serves 

as Deputy Under Secretary of Defense for Budget and Appropriations Affairs, and he has also held other key financial positions 

within the Pentagon. 

2

Earlier in his career, Mr. Norquist served on the professional 

staff of the House Appropriations Committee, so he brings a welcome understanding of Congress to this process and position as 

well. 

In its first 3 years, the Department of Homeland Security has 

made some progress in its vital mission to improve the security of 

our Nation, but that progress at times has been impeded by persistent difficulties in financial management. From the Department’s very beginning, the Government Accountability Office has 

warned that DHS has faced some considerable financial management challenges, including the absence of effective internal controls 

and conflicting or redundant financial management systems in its 

legacy agencies. 

These warnings from GAO, like the warnings that preceded Hurricane Katrina, have not been adequately addressed. Bringing accountability, efficiency, and good old fashioned thrift to this sprawling department is a tremendous challenge. It will require strong 

leadership by the CFO, and I look forward to hearing from our 

nominee this morning. 

I would note that the nominee is very fortunate to be accompanied by one of our most distinguished colleagues, the Chairman 

of the Senate Armed Services Committee. Before I turn to Senator 

Warner for his introduction, in the absence of Senator Lieberman, 

I would like to give Senator Lautenberg an opportunity, if he would 

like to make some opening comments. Senator Lautenberg. 

OPENING STATEMENT OF SENATOR LAUTENBERG 

Senator LAUTENBERG. Thank you very much, Madam Chairman. 

I am pleased that you have called this hearing today. This is a 

very important job. And one of the things I am struck by to begin 

with is that Mr. Norquist has his, apparently, budgeting team with 

him, sitting behind him. I hear them, and there is nothing I would 

rather hear than children’s voices. That is a kind of thing with me, 

with 10 grandchildren up to the age of 12 and down to the age of 

2. 

So I know that when you do your work, Mr. Norquist, you are 

going to be keeping those beautiful faces in mind as part of your 

responsibility. And I am encouraged by that. 

This is such a challenging assignment and one of the most important for our entire government. I am impressed with the fact 

that Mr. Norquist’s experience is vast in financial management for 

the Federal Government. 

There are a couple of things that I am concerned about that we 

will have a chance to review, and I am pleased to note that our 

very distinguished colleague and friend is presenting you. That 

mostly augers well for you, Mr. Norquist. 

I want to discuss, which again we will do with questioning here, 

about Mr. Norquist’s involvement in overseeing the Development 

Fund for Iraq. It dispersed at least $1.6 billion to Halliburton, 

much of it in questioned costs. Madam Chairman, you are aware 

that I had sent several letters asking for an opportunity to have 

Halliburton come in and examine their egregious overcharges, no 

bid contracts that cost taxpayers billions of dollars. 

3

The fact that we have been unable to have a hearing on this 

raises a question. How do we expect Mr. Norquist to do his job if 

we do not get to ours? We have a responsibility, in terms of this 

review, as well. We know that Mr. Norquist had a role in overseeing these Halliburton contracts. And I want to ask some questions about the role in the Defense Department efforts to protect 

Halliburton by covering of its abuses. 

That is why I was so anxious to get some hearings in this Committee because the question has been lingering. The questions are 

here but the answers are lingering. And while you are here, I think 

it also behooves us to use the firsthand knowledge that you have 

of these contracts to shed just a little bit of light on what Halliburton is spending, how it spends the taxpayers’ money. 

Finally, Madam Chairman, I think we ought to know under just 

what circumstances Mr. Norquist believes it is acceptable for the 

Executive Branch to hold back information from Congress and the 

public. I will pursue that line of questioning when my turn comes. 

I thank you very much. 

Chairman COLLINS. Senator Warner, we are very pleased to have 

you here to present the nominee to the Committee. Please proceed. 

OPENING STATEMENT OF SENATOR WARNER 

Senator WARNER. Thank you, Madam Chairman. And to my good 

friend, Senator Lautenberg, I rather enjoyed relaxing and listening 

to your opening statement, both of you. It was very moving. As a 

matter of fact, there is very little left for me to say. I will ask unanimous consent if I might put my prepared statement in the record. 

Chairman COLLINS. Without objection. 

[The prepared statement of Senator Warner follows:]

PREPARED STATEMENT OF SENATOR WARNER 

Thank you, Madam Chairman for holding this hearing today. One of our greatest 

responsibilities as members of the U.S. Senate is to provide advice and consent regarding the President’s nominees for Executive Branch positions. Today I have the 

pleasure to introduce an accomplished public servant, David Norquist, to be the 

Chief Financial Officer of the Department of Homeland Security. 

David Norquist has spent his entire 16 year career in government service, starting as a program and budget analyst for the Department of the Army, later working 

on the House Appropriations Committee, and most recently serving as the Deputy 

Under Secretary of Defense for Budget and Appropriations. 

His experience in the budget and appropriations process coupled with his financial 

management work have served Mr. Norquist well and prepared him for the challenges ahead at the fast growing Department of Homeland Security. 

This Committee has worked very closely with the Department in its oversight role 

with specific reference to financial efficiency and accountability. Since the creation 

of DHS in 2003 we have seen great improvements in their overall financial accountability and the President’s nomination of David will help to build on that incremental success. His clear understanding of the relationship between the Executive 

and Legislative branches, and their roles, will serve this Nation well. 

In my pre-hearing meeting with Mr. Norquist he expressed his excitement with 

the opportunity ahead and shared with me the most important reasons why he is 

ready for the challenges before him—his family with him here today. At this point 

I would like to recognize them: Father—Warren Norquist. Wife—Stephanie, three 

children: Warren—5 years old; Elise—2 years old; and Vivian—6 months old. 

I am impressed by his willingness to serve his country in the best way that he 

could stretching all the way back to his days as an undergraduate at the University 

of Michigan where he was in the ROTC. 

The Armed Services Committee has, over the years, worked with David on the 

Department of Defense’s $400 plus billion annual budgets and in the Administration’s various supplemental appropriations requests. 

4

1The letter from the Office of Government Ethics appears in the Appendix on page 35. 

He is ready, willing, and able to get to work. I applaud his willingness to serve 

this President, the Secretary of the Department of Homeland Security, and the 

American people and urge the Committee to quickly report his nomination to the 

full Senate.

Senator WARNER. I think it is most appropriate, to follow on from 

Senator Lautenberg’s observation, that you introduce your family, 

sir. 

Mr. NORQUIST. I would be honored to. 

If I can introduce my family, I have with me my father, Warren 

Norquist, who is down from Massachusetts. Sitting next to him is 

my son, Warren Norquist as well. Sitting next to him is my wife 

Stephanie, and she is holding our baby, Vivian. Next to her, being 

held by a friend of ours, Michelle, is my middle one, Elise. 

And they keep me very busy. 

Chairman COLLINS. We are delighted that your family could be 

with you today. 

Senator WARNER. Thank you, Madam Chairman. 

Madam Chairman, I think the most important thing that I could 

say at this point in time, I have been discussing the nomination 

with the nominee, and that is that he has worked with the Armed 

Services Committee, of which you are a very distinguished and valued member, for over several years now on our budget of $400-plus 

billion. You have decided to drop down to a mere $40 billion; is 

that correct? 

Mr. NORQUIST. $42.7 billion, yes, sir. 

Senator WARNER. That is pretty good. You ought to take your little machine with you. I hope it will work on those numbers over 

there. 

But anyway, this man is eminently qualified, Madam Chairman, 

and we are fortunate to get him at Homeland Security because I 

happen to think that the Department, over which this distinguished Committee provides helpful guidance and oversight, is in 

need of a person with his qualifications. And I respectfully say to 

the Chairman and the Members of the Committee, he has them 

and we are fortunate. I think it is a loss at the Department of Defense that does concern me though. That will be my problem now. 

Good luck to you, young man. You are on your own. 

Chairman COLLINS. Thank you, Senator. 

Mr. Norquist has filed responses to a biographical and financial 

questionnaire, answered pre-hearing questions submitted by the 

Committee, and had his financial statements reviewed by the Office of Government Ethics. Without objection, this information will 

be made part of the hearing record, with the exception of the financial data, which are on file and available for public inspection in 

the Committee’s offices.1

Our Committee rules require that all witnesses at nomination 

hearings give their testimony under oath. Mr. Norquist, if you 

would please stand and raise your right hand so I can administer 

the oath. 

Do you swear that the testimony you are about to give to the 

Committee will be the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Mr. NORQUIST. I do. 

5

1The prepared statement of Mr. Norquist appears in the Appendix on page 27. 

Chairman COLLINS. Please be seated, and I would ask that you 

would proceed with your statement at this time. 

TESTIMONY OF DAVID L. NORQUIST,1 NOMINEE TO BE CHIEF 

FINANCIAL OFFICER, U.S. DEPARTMENT OF HOMELAND SECURITY 

Mr. NORQUIST. Thank you, Chairman Collins, Members of the 

Committee. 

It is an honor to appear before you today as President Bush’s 

nominee to be Chief Financial Officer of the Department of Homeland Security. 

I am humbled by the confidence that the President and Secretary 

Chertoff have shown in recommending me, and I thank this Committee for its consideration of my nomination. 

I would like to thank Senator Warner for his very kind introduction. 

On a personal note, I would like to thank my parents, Warren 

and Carol Norquist, for their unwavering support, strong values, 

and thoughtful guidance. 

I thank my wife, Stephanie, for her love, her dedication to our 

family, and her patience with the long hours and endless demands 

of my government service. 

Finally, I would like to thank my children, Warren, Elise, and 

Vivian, whose presence reminds me every day about the importance of building a better future for America. 

I began my career as a Federal civil servant, a GS–9 Program 

Budget Analyst working for the Department of the Army. Over the 

course of my 16 years of government service, I have worked financial management issues at virtually every level at which the Federal Government spends or oversees the expenditure of money, positions ranging from the professional staff of the House Appropriations Committee to Director of Resource Management at an Army 

field site overseas. 

Currently, I am the Deputy Under Secretary of Defense for 

Budget and Appropriations Affairs in the Office of the Undersecretary of Defense (Comptroller). 

The office for which I have been nominated has the dual mission 

of protecting this Nation’s security and protecting the taxpayers’ 

money. It is a profound responsibility, but these are things I believe in passionately. It is what I do for a living. It is why I enjoy 

my job. 

If confirmed, strengthening the internal controls needed to meet 

these challenges would be among my highest priorities. As Chief 

Financial Officer, I would constantly be mindful that the security 

of the American homeland depends on wise decisions in both the 

Legislative and Executive Branches of the Federal Government and 

on the effort of our State and local partners. 

Over the course of my career, I have also learned that on matters 

of national security, bipartisanship and cooperation are essential. 

I would look to bring that perspective and experience with me to 

the Department of Homeland Security. 

6

In closing, I would like to thank the Committee for its consideration of my nomination, and I look forward to answering your questions. 

Chairman COLLINS. Thank you very much. 

We will start with an initial round of questions limited to 8 minutes each. But first, I will begin by asking you the three standard 

questions that we ask of all nominees. 

First, is there anything that you are aware of in your background 

which might present a conflict of interest with the duties of the office to which you have been nominated? 

Mr. NORQUIST. Not to my knowledge. 

Chairman COLLINS. Second, do you know of anything personal or 

otherwise that would in any way prevent you from fully and honorably discharging the responsibilities of the office? 

Mr. NORQUIST. No. 

Chairman COLLINS. And third, do you agree without reservation 

to respond to any reasonable summons to appear and testify before 

any duly constituted committee of Congress, if you are confirmed? 

Mr. NORQUIST. Yes. 

Chairman COLLINS. Thank you. You got those correct. 

Mr. Norquist, you served, as Senator Lautenberg mentioned in 

his opening remarks, as an official observer to the International 

Advisory and Monitoring Board for the Development Fund for Iraq 

for some 7 months. During your service as an observer, the IAMB 

asked that the Department of Defense provide audits of the restore 

Iraqi oil contracts between the Army Corps of Engineers and Kellogg, Brown and Root without redaction. 

Could you tell us, first, who was responsible for the decision on 

whether or not to release copies of the audits without redactions 

in response to the request from the Board? 

Mr. NORQUIST. The Corps of Engineers, as the contracting office, 

has the authority to decide what, if anything, is releasable from a 

DCAA audit. 

Chairman COLLINS. Did you play any role at all in that decision? 

Mr. NORQUIST. The role I played was to ask a lot of questions. 

My concern was that the Corps of Engineers concluded that the audits could not be released unredacted without the consent of the 

contractor, and the contractor had not consented. They were concerned about violations of what I believe is called the Trade Secrets 

Act. And so the approach they took was to have the contractor do 

the redactions. 

I was concerned about the need to provide as full an answer as 

possible to the IAMB. So I asked questions such as: Is there a way 

we can provide this unredacted without the contractor’s consent? 

Do we have to accept the contractor’s redactions? Or can you, as 

the Corps, do your own version of the redactions? I asked, if the 

IAMB members signed a nondisclosure agreement, could we, in 

fact, turn it over that way so they would have the unredacted audits? 

And finally, one area we were actually able to get some positive 

ground on was: Could they provide it to a third party? And the answer was if they were under contract to the U.S. Government, like 

an independent auditing firm, or an IG, we could. 

7

And so I proposed that we give the unredacted audits to them 

so that they could advise the IAMB, as a neutral party, as to the 

contents and the efficiency and effectiveness of a DCAA audit. 

Chairman COLLINS. What was your personal opinion as to whether or not the Board should have had access to unredacted audits? 

Mr. NORQUIST. I felt the Board should have as much information 

as the law would let us provide. The decision as to whether or not 

the law would permit redacted or unredacted audits I left to the 

General Counsel Office in the Corps of Engineers. They are the 

ones with the expertise in the law to make that determination. 

Chairman COLLINS. While at the Department of Defense, were 

you responsible for informing the Board of the management and expenditures of monies from the Development Fund for Iraq? 

Mr. NORQUIST. No, I was an observer. The Coalition Provisional 

Authority regularly briefed the Board on their management of the 

DFI. My function was to help provide transparency by observing 

the Board’s proceedings. 

Chairman COLLINS. As you may be aware, this Committee held 

extensive hearings into the response to Hurricane Katrina, including three hearings in which we examined how taxpayer dollars 

meant to help the victims recover from Hurricane Katrina were instead lost to egregious waste, fraud, and abuse, and poor management and decisionmaking. 

The Inspector General and the GAO both reported to us that the 

Department, and FEMA in particular, lacked basic management 

controls that would have prevented wasteful spending when it 

came to providing individual assistance and, of course, the debacle 

with the purchase of some $750 million worth of manufactured 

housing, much of which still sits in a field in Hope, Arkansas. 

What immediate steps do you believe should be taken in preparing for the 2006 hurricane season to better protect the taxpayer’s dollars? 

Mr. NORQUIST. I think at this stage, rather than focusing on 

doing an additional study, I would look at the reports that have 

been done to date. Inspector General Skinner did an examination 

of this issue. He looked both at the trailers as well as the Expedited Assistance Program and others. This Committee and others 

have looked into these issues, and there is an established series of 

recommendations from different organizations. 

So what I would do, should I be confirmed, would be to get together with the CFO and the procurement officers at FEMA and 

say where do you stand in implementing these recommendations? 

What controls have you added? Have they been tested? Do you 

have the means in place to be more confident about the way you 

would handle the next hurricane season when it arrives? 

Chairman COLLINS. I guess what is particularly troubling to me 

is that this Committee held hearings on FEMA’s management of 

assistance in the wake of the Florida hurricanes and found exactly 

the same kinds of ineffective or absent controls that allowed similar waste, although on a far greater scale, to happen with the hurricanes that affected the Gulf region. I would urge you to make this 

a priority. 

I think the American people are very generous, but they do not 

want to see their hard-earned money lost to waste and fraud and 

8

abuse. That is exactly what happened in the wake of both hurricanes. 

Mr. Norquist, the Department has had financial problems with 

several of its component agencies, most notably Immigration and 

Customs Enforcement. The component CFOs in those individual 

agencies do not have a direct reporting relationship to the Department CFO, something that I think needs to be rectified. 

Without that direct relationship, how are you going to ensure 

sound financial management and reporting throughout the Department? 

Mr. NORQUIST. I think there are a number of ways to approach 

it. First, there is a CFO Council, which provides a vehicle to meet 

regularly with the CFOs of the components. I would also look to 

strengthen the personal connection, meeting regularly with the individual CFOs. 

In addition, there are some authorities and some opportunities 

that the CFO at Homeland Security has which we do not actually 

have at the Department of Defense. The CFO at Homeland Security has a role to play in the selection of a component CFO, has 

a role to play in determining their performance standards and evaluating their success against their performance standards and evaluating their bonuses. So these provide some additional tools. 

So I think between the cooperation and the council that we 

should be able to be successful in building that relationship. 

Chairman COLLINS. Thank you. Senator Lieberman. 

OPENING STATEMENT OF SENATOR LIEBERMAN 

Senator LIEBERMAN. Thanks very much, Madam Chairman. 

Apologies to you, my colleagues, and Mr. Norquist. The plane 

landed at 2:45, but did not empty until 3:30 at National, coming 

from Hartford. So I apologize. 

I am going to enter my opening statement in the record and just 

paraphrase. 

Chairman COLLINS. Without objection. 

[The prepared statement of Senator Lieberman follows:]

PREPARED STATEMENT OF SENATOR LIEBERMAN 

Thank you, Madam Chairman, and welcome to this hearing, Mr. Norquist. 

I can’t stress enough how important this hearing is. The person stepping into the 

job of Chief Financial Officer of the Department of Homeland Security faces enormous challenges. 

The CFO will have to steer the 22 different agencies that makes up DHS to financial stability so that DHS will finally get a clean audit. 

Previous audits have detailed serious shortcomings and poor financial management that has resulted in agencies running out of money for critical missions or 

having to improve sudden hiring freezes. 

We cannot have these types of disruptions to the Department charged with securing our homeland. 

And the CFO must work closely with the Chief Procurement Officer of the Department to bring an end to the embarrassing waste we have seen in many large DHS 

contracts. 

The CFO will also need to decide what to do with the financial modernization 

project called EMERGE2—or Electronically Managing Enterprise Resources for Government Effectiveness and Efficiency. 

The system was originally designed as a total transformation of DHS’ financial 

systems, but has been downscaled in the President’s FY07 budget request. 

Given the importance of this job, in 2004, Congress changed the law to make the 

position of Chief Financial Officer subject to Senate confirmation. 

9

Serving as Chief Financial Officer will require a commitment not only to sound 

financial management, but also to openness and transparency. 

If you are confirmed, Mr. Norquist, we would expect you to cooperate closely with 

the Inspector General and GAO, and to provide information promptly to Congress. 

In that spirit, I intend to ask you about your involvement in a troubling incident 

that relates to these important principles. 

While working at the Department of Defense, you led a team of government officials that decided not to disclose to a United Nations oversight board that KBR—

a subsidiary of Halliburton—was suspected of overcharging Iraq millions on dollars. 

In December 2003, the Defense Contract Audit Agency (DCAA) announced that 

its draft audit had found overcharges by KBR of as much as $61 million for importing Kuwaiti fuel into Iraq, DCAA also said that significant additional overcharges 

were likely in the months to come. 

The contract was largely paid for from the Development Fund for Iraq, also 

known as DFI, which was established by UN Secretary Council Resolution 1483. 

The money in this fund belongs to the Iraqi people. It came from Iraqi oil sales, 

assets that had been frozen in bank accounts outside the United States, and $8 billion in funds transferred from the UN Oil-for-Food program. 

The UN gave control of the DFI to the Coalition Provisional Authority. The UN 

also established the International Advisory and Monitoring Board for Iraq to monitor our government’s administration of DFI. 

Resolution 1483 required that the Iraqi funds be ‘‘used in a transparent and equitable manner’’ and for the benefit of the Iraqi people. 

Beginning in April 2004 and continuing through September, the UN oversight 

board made repeated requests for the DCAA audits of the KBR contracts. 

During that period, you were the U.S. Department of Defense’s observer and liaison to the Board. 

Accordingly, as you’ve told the Committee’s staff investigators, you headed up the 

process that considered whether the audits would be given to the UN Board. 

In October 2004, you provided the oversight board redacted copies of the DCAA 

audits that struck every reference to every overcharge in every audit—463 

redactions in all. 

Had they not been redacted, the DCAA audits would have shown that more than 

$177 million in overcharges and more than $17 million in unsupported costs were 

funded with Iraqi money. 

These redactions were made at KBR’s request. The Department of Defense did not 

dispute a single one. 

It would have been proper to redact information of a strictly proprietary nature. 

But when KBR handed over the redacted audits to the Department of Defense, 

it stated that it had struck information other than propriety information. 

KBR explained that it had also redacted statements that the company believed 

were incorrect or misleading and that could damage KBR’s ability to win and negotiate new work. 

It is also very troubling that a contractor implicated in an overcharging scandal 

would be given the final say on what information to provide to the UN oversight 

board. After all, the UN board was the legal entity responsible for oversight of 

misspent Iraqi funds. 

Mr. Norquist, I would like to hear more about your role in this incident. 

I think this episode is relevant to today’s hearing because DHS needs a CFO who 

puts taxpayers first; who is committed to sound financial management and transparency, and who is willing to confront agencies that may be shirking their legal 

responsibilities. 

In preparing for the hearing Committee staff reviewed many documents that had 

been produced by the Department of Defense, as well as others that are publicly 

available. I ask that a selection of the documents be entered into the hearing record 

so that I can ask the nominee about them. 

I would also note that the Department of Defense refused to provide us with many 

hundreds of pages of responsive documents, but did let Committee staff review the 

documents at the Pentagon. In my questions I may refer to documents that our staff 

reviewed but we do not have. 

Thank you, Madam Chairman.

Senator LIEBERMAN. First, welcome to you and your family, who 

I presume are the people behind you. And I would like to say that 

this position of Chief Financial Officer of DHS is one that faces 

very significant challenges. 

10

The CFO is going to have to steer the 22 different agencies that 

make up DHS to the higher ground of financial stability so that 

DHS will get what it has not gotten yet, which is a clean audit. 

As you know, previous audits have detailed serious shortcomings 

and poor financial management that has resulted in agencies running out of money for critical missions or having to impose sudden 

hiring freezes. Now that is something we cannot afford, those kinds 

of disruptions, in this Department, which is charged with securing 

our homeland. 

The CFO must also work closely with the Chief Procurement Officer of the Department to bring an end to the embarrassing waste 

we have seen in some of the large DHS contracts. And you will also 

need to decide what to do with the financial modernization program called EMERGE2 or Electronically Managing Enterprises Resources for Government Effectiveness and Efficiency. 

I want to go to this question that I know has been raised already 

by others, which is that during the time you worked at the Department of Defense, you led a team of government officials that ultimately decided not to disclose to a UN Oversight Board that KBR, 

a subsidiary of Halliburton, was suspected of overcharging Iraq 

millions of dollars. This was Iraqi money collected and funneled 

through the UN, which we were spending at the outset for the benefit of the Iraqi people. 

As you know, the Defense Contract Audit Agency, in December 

2003, in its draft audit, found overcharges by KBR of as much as 

$61 million for importing Kuwaiti fuel into Iraq. So they were overcharging for that. And additional significant overcharges that were 

likely to come in the months after. 

I would just jump ahead to say that in October 2004 you provided the Oversight Board redacted copies of the DCAA audits that 

struck every reference to overcharge in every audit, 463 redactions 

in all, which is what KBR had asked. Had they not been redacted, 

the DCAA audits would have shown more than $177 million in 

overcharges and more than $17 million in unsupported costs were 

funded with Iraqi money. 

Just continuing to pick out here, when KBR handed over the redacted audits to the Department of Defense, it stated that it had 

struck information other than proprietary information. 

That is correct, to your knowledge, is it not? 

Mr. NORQUIST. That is my understanding, yes. 

Senator LIEBERMAN. KBR explained that it had also redacted 

statements that the company believed were incorrect and misleading and that could damage KBR’s ability to win and negotiate 

new work. 

I must say, to me it is really unacceptable that a contractor implicated in an overcharging scandal would be given the final say on 

what information to provide the UN Oversight Board. After all, 

that board was the legal entity responsible for oversight of 

misspent Iraqi funds. 

I want to say what is probably obvious, but I want to say it for 

the record. Nobody says that you are involved in any of this wrongdoing yourself, at all. 

I think the appropriate question for the Committee, as we consider you for this position, and you bring an impressive backVerDate 0ct 09 2002 09:28 Sep 06, 2006 Jkt 028243 PO 00000 Frm 00014 Fmt 6633 Sfmt 6601 C:\DOCS\28243.TXT SAFFAIRS PsN: PAT
11

ground, personal skills, and background in government agencies, is 

the way you handled this. 

And let me pose it as directly as I can because I have heard at 

least one person looking over this record say to me that though you 

made some efforts to unredact, which I think was the right thing 

to do, ultimately you may have been caught between two bureaucracies and a private interest here and simply resolved it in what 

might be called the most manageable way. 

In other words, I want to confront you with this question, which 

is: Should your handling of this very difficult but important situation lead us to conclude that you would not be as strong a decision 

maker—including making decisions that make people unhappy—as 

I think will be necessary in this Chief Financial Officer position? 

Mr. NORQUIST. Sir, I made a number of recommendations that 

made people unhappy in the process, but it was out of a desire to 

provide as much information as possible. There was, for example, 

initially only going to be redacted executive summaries. And I 

made the point that if we are going to do this, you ought to deliver 

the full audit. 

There was some concerns about how much would be missing 

from those. And I said fine, but we owe the IAMS as much information as we can give them. And if you feel, as the Corps, that it 

needs to be redacted, that is your jurisdiction and your authority. 

But I was quite willing and stood very strongly in favor of pushing this everywhere I believed I could, except when I ran up 

against the advice of lawyers. When our General Counsel at OSD 

concurred with the advice of the Army’s General Counsel that there 

was not a way to provide these audits unredacted, that was the 

point at which I was not in a position where I could take an alternative position. 

So the Corps had to make the call. Their lawyers gave them advice that I bounced off our lawyers to ensure that there was not 

a different reading of the law, that we could not find a way around 

this. 

And the answer was pretty consistent. The people with an expertise agreed you could not do it unredacted because of the way the 

Trade Secrets Act was written. 

But nevertheless, I continued to push. Is there a way we can find 

another precedent or something that will let us go forward? Can 

the Corps do the redacting instead of the company? Can we do nondisclosure agreements? I consistently pushed to get people to think 

of alternative ways of solving this problem so that we did not default into the ‘‘this is the easiest way forward’’ approach. 

Now in the end it was a hard way forward, and it was an awkward situation to be in. But I wanted to ensure that they had properly evaluated the alternatives and had not simply fallen in on the 

easiest answer. 

Senator LIEBERMAN. I am sure my colleagues will have other 

questions about this. And I would just say finally, in preparing for 

the hearing, Committee staff reviewed many documents that had 

been produced by the Department of Defense, as well as others, 

that are publicly available. 

12

1The Exhibits submitted by Senator Lieberman appear in the Appendix on page 95. 

Madam Chairman, I would like to ask that a selection of those 

documents be entered into the hearing record at this point.1

Chairman COLLINS. Without objection. 

Senator LIEBERMAN. Thank you. Thanks, Mr. Norquist. 

Chairman COLLINS. Senator Lautenberg. 

Senator LAUTENBERG. Thanks very much, Madam Chairman. 

It is obvious, Mr. Norquist, that all of us are concerned about the 

redaction and the redaction process. 

In the beginning, did you express your view of what the Trade 

Secrets law might say? Because as we look at this first chart, and 

we have others which we will not bother the Committee with right 

now, but when you look at it, it is awfully hard to understand what 

the trade secrets are that were being redacted. When they say KBR 

proposed, and now it is common knowledge, $252 million rounded 

for unleaded gas, and other numbers, in the schedule. 

I wonder how in the world can it be suggested that is a trade 

secret? I mean the taxpayers pay for it. It is not a practice that you 

find in very many places in our business world. And certainly in 

government, when we are much more obliged to operate with transparency. 

The other things, to go on, the highlights there, ‘‘our audit found 

purchase orders and procurement files related to the Kuwait supplier did not contain data to support the reasonableness of the negotiated purchase orders.’’

Trade secret? And it goes on like that. It is very disappointing 

to see that government acted in response to what looks like a dictate by Halliburton or KBR to define these as trade secrets and 

have it hidden from the public view. 

Does that strike you that way? And I am going to give you credit, 

Mr. Norquist, because as I read some of the history here, it was 

obvious that you disagreed or at least voiced an objection to this 

redaction. But then I think it took almost 6 months, am I correct, 

in order to provide the unredacted documents? 

Mr. NORQUIST. Let me just clarify. Although they were requested 

in April, the audits were not actually completed until the last days 

of August to the middle part of October. So at the point the audits 

were available for review until they were delivered, there was only 

a matter of a few weeks of going both through the review and the 

redaction process and the back and forth with the Corps of Engineers. Up until that point, the DCAA audits were only in draft 

stage, and we were not in a position to move forward. 

But to get to your first question that you asked me, about my 

reaction to seeing the redactions, I did, in fact, raise the very same 

types of concerns you did. I did not necessarily see this particular 

page. But I said, I am a layman, I do not have an expertise in this 

area, but I do not see why this would be—and I used the euphemism—‘‘proprietary’’ data. I do not know if that is actually cited in 

the Trade Secrets Act as a criteria. 

But it did not strike me as proprietary data. And that is why I 

encouraged the Corps to go back and take a look at this information and to make their own independent judgment as to what 

13

should or should not be redacted, as opposed to simply following 

what the company had sent forward. 

Senator LAUTENBERG. Senator Lieberman discussed with you in 

detail something that relates to the question I am going to ask you. 

The fact that one department decided that the government, we 

were entitled to refunds of some $61 million in overcharges. And 

that was agreed upon. 

But then there was a decision not to accept or not to demand 

these refunds. How did that come about? 

Mr. NORQUIST. Sir, I cannot speak to how that came about. I 

think what you are talking about is the difference between what 

DCAA recommended and the actions the Corps of Engineers chose 

to take. 

I was not part of the process of managing this contract. My involvement was as an observer with the request for the audits. And 

so I do not know the story behind how the Corps reacted to the recommendations from DCAA as to what——

Senator LAUTENBERG. Of the independent audit? 

Mr. NORQUIST. I am referring to the DCAA audit. If there is a 

different one, then I am not familiar with it. 

Senator LAUTENBERG. One is the first stage of an audit process. 

And then on, would you say it was on appeal that the refunds were 

ordered not to be collected? 

Mr. NORQUIST. Let me walk through, to the extent I understand 

it, the mechanics of this. And I apologize that I am not an expert 

in this area. 

But the Corps of Engineers negotiates and sets up the contract 

with the company. They ask the Defense Contract Audit Agency, 

particularly in a contract like this, to review the pricing and the 

procedures that the company followed to determine that they were 

only charging a fair and reasonable price. 

The auditors then identify what I think they call questioned 

costs, meaning either they disagreed with it or they simply did not 

see enough documentation to support it. And it provides the basis 

for the contracting officer to negotiate, to either insist upon being 

provided that documentation or to make decisions as to whether or 

not to pay. 

It is not a decision of the government. The audit is an advisory 

document given to the contracting officer. So again, how the contracting officer uses it, whether they were right to accept or reject 

those, I cannot speak for the contracting officer on that. 

Senator LAUTENBERG. It borders on the outrageous that an audit 

agency, after its review, has its recommendation overturned by another department. An audit, as I see it, an audit is an audit. That 

is a check on what is going on. The tactics here are hard to understand. 

The Defense Contract Audit Agencies have shown that Halliburton has billed more than $1.4 billion in unsupported or questioned costs. Has the Department of Defense paid Halliburton for 

these costs? 

Mr. NORQUIST. Sir, I cannot speak to that. I think the number 

you said might have been the total contract, but I am not certain. 

Senator LAUTENBERG. The total contract was larger. 

14

Mr. NORQUIST. I am not familiar with the underlying contract or 

the dollar amounts involved there. 

Senator LAUTENBERG. I would have thought that these had become somewhat under your purview, Mr. Norquist. 

Mr. NORQUIST. No, the contracting involvement was the Corps of 

Engineers. I was involved in this because I was an observer at the 

IAMB, and specifically on the issue of the request for the copy of 

the DCAA audits, not the actual resolution of those comments. 

Senator LAUTENBERG. Were you the senior financial person in 

the Department of Defense? 

Mr. NORQUIST. No, I was one of the Deputy Under Secretaries, 

and contracting is an acquisition authority, not a financial management authority. 

Senator LAUTENBERG. Madam Chairman, I am out of time here. 

I would like to talk further to Mr. Norquist. 

Chairman COLLINS. Senator Levin. 

OPENING STATEMENT OF SENATOR LEVIN 

Senator LEVIN. Thank you very much, Madam Chairman. 

Let me pursue this redaction because I am mystified, first of all, 

that we allow a company being audited to do the redacting. What 

is the precedent for that? 

Mr. NORQUIST. I do not know. I asked if there was a way we 

could do it instead, but the advice was, from the Corps of Engineers lawyers, that to change the contractor’s redactions—and 

again, let me cite their words because this is not an area where I 

have an expertise—they said, the Corps counsel noted that there 

were significant legal risks to include potential individual criminal 

violations associated with changing the redactions provided by 

KBR. So that was the advice of the Corps lawyers. That is what 

they said was the proper way forward. And since they are the ones 

who make the call on this one, I did not have much——

Senator LEVIN. Potential criminal liability to whom? 

Mr. NORQUIST. To the individual who releases the document, to 

the actual individual who couriers it to the recipient is my understanding. 

Senator LEVIN. That would be to you? 

Mr. NORQUIST. Actually, I made sure the Corps of Engineers 

couriered the document. 

Senator LEVIN. To the UN? 

Mr. NORQUIST. To the UN. 

Senator LEVIN. And the UN objected to this, did they not? 

Mr. NORQUIST. No, they did not. When they received it, I provided a letter to the chairman to explain that the audits had just 

been completed, to walk through what was in it, to note that the 

contractor had done the redactions, and what the law was that created the obstacle. They were pleased to have received them. They 

understood that we were operating within limitations set by U.S. 

law. 

But I also put forward at that time an alternative option of providing the unredacted audits to a third party because I wanted to 

show the good faith effort, that they would not have to take my 

word for it, or the Corps word for it. We could give it to a third 

15

party. That third party could read it over and tell them DCAA audits are good, sound audits, or whatever the words——

Senator LEVIN. Where did that proposal go? 

Mr. NORQUIST. They originally went—again——

Senator LEVIN. Who were you proposing that to? 

Mr. NORQUIST. I proposed it to the IAMB, and I said would you 

like us to do this? We are prepared to do this if you chose to. 

I stopped working with the IAMB on October 11. We handed over 

this responsibility to other offices. But let me give a summary of 

what I understand happened. 

They first went to the option of seeking an outside auditing firm 

to look it over. That ran into some obstacles. So I think they provided it to the Special Inspector General for Iraq, who reviewed the 

documents. But here I am outside my expertise. 

Senator LEVIN. The redacted documents? 

Mr. NORQUIST. No, they were provided the unredacted in order 

to be able to provide an opinion or a view to the IAMB. I wanted 

somebody else to be able to see the full document and be able to 

give their advice to the IAMB. 

Senator LEVIN. And a UN Council saw the unredacted documents? 

Mr. NORQUIST. No, the requirement to avoid the Trade Secrets 

Act is they have to have a relationship with the U.S. Government. 

Senator LEVIN. Who was it specifically that saw the unredacted 

document? 

Mr. NORQUIST. It is my understanding, again I am not certain on 

this, that it was the Special Inspector General for Iraq. 

But if you like, I will take that for record so I can be certain 

about who was the recipient and provided the report. 

Senator LEVIN. If you would. 

And that person was satisfied that it was properly redacted? 

Mr. NORQUIST. I do not know how they set it up, what they were 

asked to do. They were asked to be available to support the IAMB 

by reviewing it. But the terms of the agreement, I am not familiar 

with. 

That would have happened well after I had stopped working on 

this. 

Senator LEVIN. If you could supply that for the record, it would 

be useful. 

You say that the IAMB, the UN International Advisory and Monitoring Board for Iraq, was satisfied with the redaction, they did 

not object to it. 

The press release that they issued on April 29 said the following, 

‘‘that these reports indicate overcharges and questionable amounts 

billed under the sole source contracts of an amount in excess of 

$200 million. The IAMB notes with regret’’—that does not sound 

like they were satisfied with it. It says they, ‘‘note with regret that 

these findings have been redacted in earlier DCAA reports submitted by the U.S. Government to the IAMB.’’

Mr. NORQUIST. At the time we provided it to them and gave them 

the information to show what the extent of the DCAA audit was, 

how thorough the DCAA audit was, what they covered, that went 

a long way toward addressing some of their issues. 

16

The fact that they would have liked to have seen more, I would 

completely understand. And the fact that the redactions created a 

challenge and that was a regret of theirs, I would understand as 

well. 

Senator LEVIN. It sounds a little different from saying that they 

were satisfied. 

Mr. NORQUIST. They did not express any concern at the time we 

sent it to them. This is an issue that came up later on. 

Senator LEVIN. When did you send it to them? 

Mr. NORQUIST. We delivered it to the chairman, I think, before 

the full IAMB meeting and then provided copies to the rest of the 

members on October 11, 2004. 

Senator LEVIN. You are familiar with that April 29, 2005, press 

release? 

Mr. NORQUIST. I actually only became familiar with it afterwards 

when the questions started coming up and somebody raised it to 

my attention. 

Senator LEVIN. If you thought that the redaction was improper, 

and you did, why did you not appeal that higher up above the lawyers? 

Mr. NORQUIST. I raised it to the OSD lawyers. The Corps of Engineers lawyers had said it could not be released. 

Senator LEVIN. Why did you not go above their head. Lawyers 

are not the final determiners. 

Mr. NORQUIST. If I have a set of lawyers that advise that an action is illegal, and I confirm it with another, to then go up and say 

you should engage in an action that your lawyers will tell you is 

illegal, is not a very productive way forward. If I had had dissent, 

if I had found——

Senator LEVIN. You think the client should be consulted? The clients are not the lawyers. The lawyers do not have the final say. 

It is the client. And you yourself, in your own good conscience, and 

I think you were right, saw this as pure common sense, as Senator 

Lautenberg went over these. These comments are not trade secrets 

under any stretch of the imagination. 

The Trade Secrets Act cannot possibly protect this kind of redaction. ‘‘The cost and pricing data and the information other than 

cost or pricing data submitted by the offerer are not adequate.’’ 

That is not a trade secret. 

‘‘We consider KBR’s estimating system to be inadequate.’’ That 

is not a trade secret. That is not proprietary. 

‘‘In addition, KBR was unable to demonstrate their proposal was 

based on actual cost.’’ This goes to the heart of overcharging. This 

is not trade secret stuff. This is fundamental. 

KBR cannot demonstrate here the costs behind their charges. 

There is no trade secret. You were familiar with that. And just because the lawyers say that there is some reason that should be redacted is not the end of the matter. Clients are the ones who make 

decisions, unless you are the client. Are you the client? 

Mr. NORQUIST. Sir, the Corps of Engineers was the one to make 

the decision, and their lawyers were the ones who gave them advice. I went above that to the OSD lawyers to see if there was any 

dissent, to see if there would be a disagreement by going up to the 

17

lawyers for the Department. But the OSD lawyers had the same 

opinion as the Corps of Engineers lawyers. 

Senator LEVIN. Did you ever think of going to the people to 

whom those lawyers are responsible, the client for those lawyers, 

and say, you know, your lawyers are saying this, but I have got to 

tell you there is no common sense way, there is no way you can 

read these and say there is a trade secret here. 

I mean this is a cover-up of overcharging. Not by you. By the 

way, I think Senator Lieberman is absolutely right. We all ought 

to make that clear. This is not anything you did improperly in 

terms of any cover-up. 

But this redaction was a cover-up, and it was tolerated by lawyers for reasons that we have trouble understanding. I have trouble 

understanding. Senator Lautenberg does, too. There may be others. 

It seems to me that at a minimum your obligation would have 

been to go to the clients for those lawyers, the people to whom they 

are accountable, to say this is what your lawyers are telling me, 

but it does not make sense. 

I am wondering whether that thought crossed your mind? And 

that is my last question. 

Mr. NORQUIST. Sir, if there had been disagreement among the 

advisors—again, I have no expertise. I am told the Trade Secrets 

Act is very broadly written. I have no way of knowing and judging 

whether or not they were being reasonable or unreasonable in asserting that these things are protected by that. 

But if I had gotten dissent, if I had one office of lawyers saying 

it was perfectly acceptable to release it and one saying not, then 

I would have had a very sound basis upon which to go and say the 

Corps of Engineers are holding this up but the OSD lawyers think 

they are wrong. 

But there was not. There was not a dissent. Those people with 

an expertise in this area had a very similar opinion. 

Senator LEVIN. Thank you. And if you could provide for the 

record then the names of the lawyers that you spoke with, it would 

be helpful so we can ask them. Because we have had an investigation into the UN, improper UN kickbacks. And here we have a situation where materials provided to the UN, which are redacted, do 

not allow them to do their job, and there is no action being taken 

here. It may not be your responsibility. You may be right. But 

someone is responsible here for covering up clearly charges which 

could not be justified. 

Thank you. Thank you, Madam Chairman. 

Chairman COLLINS. Senator Dayton. 

OPENING STATEMENT OF SENATOR DAYTON 

Senator DAYTON. Thank you, Madam Chairman. 

Mr. Norquist, I am wondering if you discussed this job and its 

time demands with Warren, Elise, and Vivian? 

Mr. NORQUIST. I have sir, and it is with some trepidation that 

we have signed up for the hours that this involves. This will be a 

tough job. 

Senator DAYTON. As the parent of a 25-year-old and a 22-yearold, I encourage you to make sure they come first. 

Mr. NORQUIST. Does it get easier? 

18

1The March 1, 2006, letter to Secretary Chertoff re: City of Roseau, from Senator Dayton appears in the Appendix on page 143. 

Senator DAYTON. Yes, they will not want to have anything to do 

with you all too soon. I mean that facetiously and also seriously. 

The Congress has appropriated $62 billion, most of it going 

through the Department of Homeland Security, for the Hurricane 

Katrina cleanup. And the Senate just last week, in its supplemental, appropriated another $27 billion. That is $89 billion then. 

I do not know what is a reasonable timeline, but I would like to 

ask you within say a month, if possible, 2 months at the outside, 

after you have been confirmed for this position, to provide this 

Committee with your best accounting on how that money has been 

spent, at least where it has been distributed. It may not be possible 

to get to the level of the contractors, subcontractors and the like. 

But at least so we have an accounting. 

And I, at a Committee meeting last week, encouraged my colleague from Minnesota, Chairman of the Permanent Subcommittee 

on Investigations, to conduct a similar oversight. 

Because I think it is imperative, particularly if, and I expect 

when, we will have another request for additional funds for Mississippi and Louisiana, that we understand at least as fully as possible to that current date how that money has been distributed. 

Mr. NORQUIST. Should I be confirmed, I would be happy to do the 

best I can to do that. 

Senator DAYTON. Thank you. 

I hope this will be concluded before you are confirmed, but I have 

had the greatest difficulty, to my frustration, getting information 

from Secretary Chertoff from FEMA’s handling in the aftermath of 

a flood that devastated Roseau, Minnesota, in June 2002. FEMA 

has been more of an obstructionist, I regret to say, than an ally in 

the effort to rebuild that city and some of its key projects to both 

repair what occurred and also to prevent future flooding. 

The city began, in March 2003, that is over 3 years ago, a request for $617,000 that 21⁄2 years later was denied by FEMA’s Region V. 

The incongruity of, on the one hand, $62 billion being passed 

through with almost no feedback on how it is being spent, and the 

21⁄2 year effort that a small city in Northwestern Minnesota that 

is struggling, that is trying to do its best to rebuild from a flood 

that wiped out its downtown just as completely as Hurricane 

Katrina’s flooding wiped out parts of New Orleans. And yet here, 

21⁄2 years later, they are denied what is—from everything I can determine—a very responsible and certainly a very modest amount of 

money to engage in some rebuilding projects. 

They have then appealed that decision and now, 5 months later, 

have not gotten a decision from FEMA as to the final disposition 

of that appeal. 

I handed a letter when Secretary Chertoff was before this Committee on March 1 regarding this matter. Madam Chairman, I 

would ask unanimous consent that a copy of that letter be submitted for the record in this proceeding. 

Chairman COLLINS. Without objection.1

Senator DAYTON. Thank you. 

19

I did not hear anything back from him, not even the acknowledgment of receipt of the letter, which I know he did receive because 

I handed it to him. 

I happened to meet him just outside the Capitol 21⁄2 weeks ago, 

and I brought this matter to his attention again. And one or two 

of his accompanying aides wrote down the details, Roseau, Minnesota, and the like. I still have not heard back anything from him 

or from anybody at FEMA. The city of Roseau has not heard back. 

I am incredulous that, regardless of the disposition, and that is 

a determination for the proper FEMA officials to make, but that I, 

in my responsibilities as a U.S. Senator representing the city of 

Roseau, cannot get from the Secretary or from anybody underneath 

him a response to first a letter and then 21⁄2 weeks ago a further 

direct inquiry about the status of the review and the project. 

So again, you have nothing to do with this. You do not have any 

responsibility for it. But in your new position, when you assume it, 

I would ask for your assistance getting somebody in that vast bureaucracy to respond. 

Mr. NORQUIST. I would be happy to assist you, Senator, should 

I be confirmed. 

Senator DAYTON. All I can say is if that is indicative, and unfortunately from some of my constituents’ other experiences with 

FEMA, and particularly it is Region V, if that is indicative of the 

lack of responsiveness to elected representatives of the people, and 

more importantly to the people themselves, I seriously wish you 

the very best in this undertaking because it badly needs people 

who are going to be responsible for the expenditures of dollars and 

the reporting of those dollars and feel some sense of responsibility 

to the people whose tax dollars are paying their salaries and providing the mission that they are supposed to honor and carry out. 

So I wish you well. Thank you, Madam Chairman. This concludes my questions. Thank you. 

Chairman COLLINS. Thank you. We will now have a second 

round of questions for those who wish to participate, limited to 4 

minutes each. 

Mr. Norquist, in 2003 the GAO designated the Department of 

Homeland Security on its High Risk list of government operations, 

and it has subsequently reaffirmed that designation. An area of 

specific concern identified by the GAO is the weak financial management of the Department. 

In forming the Department, the Department had to combine 

some 19 financial management systems. I think that now there are 

eight. 

What are your plans for specifically identifying the financial 

weaknesses that the GAO has pointed out as the justification for 

putting DHS on the High Risk list? 

Mr. NORQUIST. Senator, there have been a number of reviews of 

the Department of Homeland Security’s financial practices. You 

have the GAO reviews, you have the independent audit of the financial statements that identified, I believe it was, 10 material 

weaknesses. There have been some other reviews, as well. 

I think the important task before us, and the task I would take 

on should I be confirmed, is to get to the root cause of those weaknesses, identify the corrective action, who is going to take the acVerDate 0ct 09 2002 09:28 Sep 06, 2006 Jkt 028243 PO 00000 Frm 00023 Fmt 6633 Sfmt 6601 C:\DOCS\28243.TXT SAFFAIRS PsN: PAT
20

tion and by when, and begin the somewhat difficult task of advancing the corrections across the board. You have got corrective action 

you have to take in a number of areas. 

So I think the important thing is to identify them, lay out the 

corrective action process, and then the challenge is maintaining the 

discipline to stay on top of that issue while other crises are happening that are distracting the organization, to keep that focus on 

fixing the basic underlying financial process. 

Chairman COLLINS. In your response to the Committee’s written 

questionnaire, you indicated that you had experience, including involvement in or direct oversight of financial management transformation. I assume this is at the Department of Defense; is that 

correct? Or were you referring to other efforts? 

Mr. NORQUIST. Actually, my experience with financial management transformation began when I was with the House Appropriations Committee. One of the accounts I had oversight of included 

the Department’s Financial Management Modernization Program. 

Chairman COLLINS. The Department of Defense? 

Mr. NORQUIST. The Department of Defense’s. And so there were 

a number of challenges they had, one of which, for example, was 

their CFO had difficulty enforcing compliance with the intended architecture. And so we worked with the committee, and the Congress adopted language to strengthen their hand in forcing systems 

under development to comply with the architecture. 

We also were concerned about systems that were built and were 

what in the Defense Department they called joint systems, that 

were supposed to bring the services together. But somewhere 

around year two of the program a service backs out, then another 

service backs out, and eventually you have a software solution that 

only works for one. 

So we worked very closely with them on trying to help prevent 

these types of challenges. 

I was originally hired by the Department of Defense to address 

those issues as my original position. But in the course of a reorganization, my duties shifted, but I continued to work alongside people who had that initiative. 

Chairman COLLINS. One final question. 

I mentioned earlier what I think is an anomaly of having the 

CFOs of the component agencies of DHS not report to the overall 

Department CFO. Is that a change that you think we should make 

in the law? 

Mr. NORQUIST. I am not shy. If I were confirmed and found that 

was an insurmountable obstacle, I would certainly come back and 

alert you to that challenge. 

But in the Department of Defense, the Assistant Secretary of the 

Army for Financial Management reports to the Secretary of the 

Army. So it is similar to the structure I am used to working in. 

Whether it proves to be sufficient and effective in this environment, 

I would just have to get there, should I be confirmed, and see how 

it goes. 

Chairman COLLINS. Thank you. Senator Lieberman. 

Senator LIEBERMAN. Thanks, Madam Chairman. 

I think you know, Mr. Norquist, because you are here, that in 

2004, Congress expressed its concern about the importance of this 

21

job by making the position of CFO subject to Senate confirmation. 

I think there is a message there, and it goes back to the questions 

raised about the redacted materials, which is how important this 

position is to the public. 

To me that means a commitment, if you take this position and 

are confirmed, to openness and transparency, that we would expect 

you to cooperate closely with the Inspector General and GAO and 

to provide information promptly to Congress when requested. 

Are you comfortable saying that you would do so, if confirmed? 

Mr. NORQUIST. Absolutely. 

Senator LIEBERMAN. Let me ask you a question about a different 

part of that enactment of 2004. 

The DHS Financial Accountability Act imposes a requirement 

that the Department conduct audit opinions of the internal financial controls starting in fiscal year 2006, the one we are in now. 

These audits will be an important tool in putting DHS on the path 

to financial stability because they will help DHS uncover inherent 

weaknesses that we have referred to in one way or another here 

this morning in its business practices. 

As you may know, the former DHS CFO testified before a House 

Subcommittee that the fiscal year 2006 audit of internal controls—

and here I quote from the former CFO—‘‘Will be taxing on a thin 

financial management cadre that is still coping with the challenging organizational structure of DHS and fixing the weaknesses 

already identified in the financial audit.’’ 

I am of the opinion, though, that despite the difficulties that the 

audit poses, it is really important that the Department proceed 

with this audit of internal controls. I wanted to ask you where you 

come down on that question? 

Mr. NORQUIST. My first inclination is always to comply with the 

guidance that the Congress has provided. If the Congress would 

like this done in 2006, then we need to work to provide it in 2006. 

If there is some overwhelming compelling reason why that is not 

practical, then we owe it to the Congress to get back to you and 

explain to you what the trade-offs are, what the challenges are. But 

my going-in position would be to go with the direction you have 

provided in the Congress. 

Senator LIEBERMAN. I think you have got the right priorities. 

And I urge you, if you are confirmed for this position, to focus on 

that early on in your tenure. If you feel you cannot comply with 

the law, I would ask you to let this Committee know as quickly as 

possible. 

Let me ask this question about your credentials for the job. As 

I mentioned earlier, you have had a series of impressive positions 

throughout your career. In these you have handled a broad range 

of budget appropriations and financial matters. I think those experiences will serve you well should you be confirmed for the CFO position. 

You have had less experience in accounting and management responsibilities, the kind that will face you as CFO if you are confirmed. I wonder what steps you will take to better prepare yourself for these central tasks of the position of CFO? 

Mr. NORQUIST. In financial management, people come up 

through different paths. And as you pointed out, I came up as a 

22

program budget analyst. But during my time in financial management I have, for example, when I was Director of Resource Management at a field site in England, over seen the finance and accounting office. They reported to me. 

When I served as Acting Principal Deputy, the Deputy Chief Financial Officer in the accounting office reported to me. So I am familiar with the work they do, the important things they do. I have 

worked very closely with them. 

So I would look to draw on the strength of the people in the field 

who are CPAs. But I am also familiar with what we should expect 

them to be able to do in terms of providing guidance and proper 

internal controls for organizations. 

Senator LIEBERMAN. OK, my time is up. 

There is not time today, but I am going to submit for the record 

a number of detailed questions about the KBR material redacted 

and ask you to answer them for the record. 

From what I know now, I would draw two conclusions that I 

hope you have drawn from this experience that you had in this 

matter. The first is that your personal instinct on this was the 

right one, and therefore I hope you follow that kind of personal instinct. 

The second is lawyers are not always right. It is not so bad sometimes to say thanks, Mr. Attorney, but that does not seem right to 

me. 

Thank you. 

Chairman COLLINS. Senator Lieberman, I think that Senator 

Lautenberg and I would agree that lawyers are not always right. 

Senator LIEBERMAN. It was a declaration against my own interests. 

Senator LAUTENBERG. I would be inclined to review the Chairman’s educational background. 

Chairman COLLINS. Senator Lautenberg. 

Senator LAUTENBERG. I come from the business side of the ledger. I ran a fairly sizable company before I came to the Senate. The 

audit was kind of the Bible in terms of how the company did in 

its past year when it reported its financial statements. 

You sounded, very frankly, more obedient to the rule than I 

think you might have to be, to the rules and the structure, than 

you might have to be as the chief financial officer now of DHS. Not 

unlike the Defense Department, this critical agency to the manner 

in which we conduct ourselves, would it have been appropriate, 

could it have been appropriate for you to go to the IG and say look, 

this is not right, to defend your view more aggressively? 

I hear what you said, and I know you are apparently very careful 

to stand by the rules. But is there a point in time when you say 

the rule is not correct? I mean, the notion that the company could 

tell you what to redact, what to take out of the public notice, I 

think is outrageous. I ran a public company. 

Would the IG have been an appropriate party to go to in terms 

of doubt? 

Mr. NORQUIST. I do not know that the IG would have issued a 

legal opinion. I would go to the IG if I thought there was improper 

activity by someone, but I had no reason to suspect that. I want 

to be very clear about this, however much I was unhappy with the 

23

answers I was getting from the Corps of Engineers, I had no reason 

to believe they were doing other than their professional jobs as lawyers of the Department or as contracting officers. 

So if I had felt that there was an improper activity, I would have 

indeed gone to an IG. But they were doing their job, they were 

making their opinions. I just did not like the answer. 

Senator LAUTENBERG. But in terms of making certain that—you 

had a very lofty position in terms of the Department of Defense. 

Would it not have been appropriate for you to say this does not 

seem right? You expressed your reservations about it. But at some 

point, I hope that when you are confirmed for this job that you will 

be aggressive in terms of asking the questions that go beyond—the 

numbers tell you something about the policy, it tells you a lot about 

it. 

I think you are going to have to be fairly forceful if you are going 

to manage a department like that. 

The Chairman raised a question I thought was really important, 

that is do the separate auditors, separate financial executives in 

the different branches report in to a central agency? Some place 

there is going to have to be an audit. An audit is the confirmation 

of what is correct. 

I think it might do you well to look at the structure, as well as 

just being sure that the money is coming in and the money is going 

out, etc. 

I want to ask you one last question. You were in charge of looking for grants to help with the reconstruction in Iraq to go to a 

donor body; is that correct? 

Mr. NORQUIST. Correct. 

Senator LAUTENBERG. Who made up the donor body? 

Mr. NORQUIST. We had an outreach effort to raise international 

donations for Iraq reconstruction. The U.S. Government team consisted of under secretaries from State, Treasury, and Defense. The 

international community effort was led by the IMF, the World 

Bank, and the UN. And so the international donations that were 

made were made to trust funds managed by those international 

agencies. 

Senator LAUTENBERG. Am I correct in noting that you were 

searching for $50 billion and the commitments we got were only 

$13 billion? Is that accurate? 

Mr. NORQUIST. I believe it was the World Bank and the UN, if 

I have that correctly, that went into Iraq and did a needs assessment to determine what it would take to reconstruct Iraq. I believe 

their initial assessment was that over many years it would take 

about $50 billion. And that would include funds from the Iraqis, 

what they were going to spend on their own reconstruction, international donations, and, of course, the U.S. Congress made a very 

sizable appropriation to support that reconstruction effort. 

Senator LAUTENBERG. We would be defined as a donor? 

Mr. NORQUIST. We were a donor country under the system. 

Senator LAUTENBERG. So were we——

Mr. NORQUIST. We are by far the largest. The Japanese, I believe 

their pledge was on the order of about $5 billion. They were another large donor. 

24

Senator LAUTENBERG. But the total raised, the total committed 

was $5 billion, as I understand it? 

Mr. NORQUIST. The total raised from all the parties against the $50 billion dollar multiyear target——

Senator LAUTENBERG. It was $13 billion. 

Mr. NORQUIST. It was $13 billion from the international community in addition to about $18 billion or so from the United States. 

But again, let me point out, that is significantly larger than a 

normal donor conference. I believe it is actually, according to the 

State Department, I was told it was the single largest donor conference result. 

But for many countries it was a one-year pledge, for some countries a multi-year. 

So it was not everything that Iraq would need to get reconstructed, but it was a very significant first step. I would frankly 

say, given the situation, being able to bring the international community together to be part of an effort to rebuild Iraq was a very 

important political step forward for the world. And I greatly appreciate all the countries that participated in that. 

Senator LAUTENBERG. Have those bills been paid? Do you know? 

Have those pledges been paid? 

Mr. NORQUIST. I do not know all of them. I know that they have 

been coming in. When I was there, we were working with the Japanese who were delivering things. So I am familiar with some of 

them, but not the overall. 

Senator LAUTENBERG. Thanks, very much, Madam Chairman. 

Thank you, Mr. Norquist. 

Chairman COLLINS. Thank you, Mr. Norquist. I want to thank 

you for appearing before the Committee today. 

I want to second my colleagues in saying that I am impressed, 

with three such young children, that you are willing to take on a 

job that is going to involve a tremendous commitment on your part. 

I think that speaks very well as far as your commitment to public 

service. And you obviously have a very supportive family for them 

to allow you to do that. 

Without objection, the record will be kept open until 6 p.m. on 

Tuesday, May 9, for the submission of any additional written questions or statements for the record. 

I do want to point out that Senator Akaka, who has been very 

active in the area of financial management, does have questions 

that he will be submitting for the record. Mr. Norquist, I encourage 

you to complete your responses to those questions as soon as possible. Senator Akaka also has a prepared statement he submitted 

for the record. 

[The prepared statement of Senator Akaka follows:]

PREPARED STATEMENT OF SENATOR AKAKA 

Thank you very much Madam Chairman. I, too, welcome Mr. Norquist as we consider his nomination to be the Chief Financial Officer (CFO) for the Department of 

Homeland Security (DHS). 

As one of the three sponsors of legislation that brought DHS under the Chief Financial Officers Act, thus making the DHS Chief Financial Officer a Senate-confirmed position, I understand the tremendous challenges facing the CFO at this 

time. For a relatively new Federal agency, which has very high expectations from 

Congress, a primary challenge is integrating all financial management activities in 

the Department. 

25

Moreover, as the Ranking Member of the Armed Services Readiness Subcommittee, I have worked with my colleagues to ensure that the Department of Defense develops a financial management architecture to integrate its systems and 

business processes. Unfortunately, we were forced to mandate—by statute—timetables for implementation at DOD. Hopefully we won’t have to take the same action 

for DHS. 

I look toward Mr. Norquist, if confirmed, to be a steadfast leader who will work 

to overcome the internal stovepipes and barriers to integrating Department operations. It is my expectation that he will promote efficiency and transparency of the 

Department’s financial management efforts. 

As CFO, Mr. Norquist will also be expected to take the necessary actions to investigate and eliminate any waste and abuse of taxpayer money, even in the face of 

political pressure. He must be accountable to the taxpayers. I trust that should he 

be confirmed, he will be steadfast and persistent in fulfilling the duties of this office. 

Thank you.

Senator COLLINS. Thank you for being here today. This hearing 

is now adjourned. 

[Whereupon, at 4:43 p.m., the Committee was adjourned.] 

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