U.S. GOVERNMENT PRINTING OFFICE

66–197 cc WASHINGTON : 2000

S. Hrg. 106–691

LEGISLATIVE PROPOSALS AND ISSUES RELEVANT

TO THE OPERATIONS OF THE INSPECTORS

GENERAL

HEARING

BEFORE THE

COMMITTEE ON

GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

JULY 19, 2000

Printed for the use of the Committee on Governmental Affairs

(

For sale by the Superintendent of Documents, Congressional Sales Office

U.S. Government Printing Office, Washington, DC 20402

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS

FRED THOMPSON, Tennessee, Chairman

WILLIAM V. ROTH, Jr., Delaware

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

ARLEN SPECTER, Pennsylvania

JUDD GREGG, New Hampshire

JOSEPH I. LIEBERMAN, Connecticut

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

JOHN EDWARDS, North Carolina

HANNAH S. SISTARE, Staff Director and Counsel

WILLIAM M. OUTHIER, Investigative Counsel

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel

KENNETH R. BOLEY, Minority Counsel

DARLA D. CASSELL, Chief Clerk

(III)

C O N T E N T S

Opening statements: Page

Senator Thompson ............................................................................................ 1

Senator Collins ................................................................................................. 2

Senator Levin .................................................................................................... 22

WITNESSES

WEDNESDAY, JULY 19, 2000

Joshua Gotbaum, Executive Associate Director and Controller, Acting Deputy

Director for Management, U.S. Office of Management and Budget ................ 5

Gaston L. Gianni, Jr., Inspector General, Federal Deposit Insurance Corporation, and Vice Chair, President’s Council on Integrity and Efficiency; accompanied by Patrick E. McFarland, Inspector General, U.S. Office of Personnel Management, and Kenneth M. Mead, Inspector General, U.S. Department of Transportation ................................................................................. 7

Nicholas M. Gess, Associate Deputy Attorney General, U.S. Department of

Justice ................................................................................................................... 10

ALPHABETICAL LIST OF WITNESSES

Gess, Nicholas M.:

Testimony .......................................................................................................... 10

Prepared statement .......................................................................................... 46

Gianni, Gaston L. Jr.:

Testimony .......................................................................................................... 7

Prepared statement .......................................................................................... 34

Gotbaum, Joshua:

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

Prepared statement .......................................................................................... 29

APPENDIX

Questions for the record submitted by Senator Collins and responses from

Mr. McFarland ..................................................................................................... 27

Copy of S. 870 .......................................................................................................... 50

Letter to Senator Collins from Kenneth A. Konz, Focal Point for the DFE

OIGs, dated March 21, 2000 ............................................................................... 72

Letter to Senator Levin from Gaston L. Gianni, Jr., dated August 7, 2000 ....... 76

(1)

LEGISLATIVE PROPOSALS AND ISSUES

RELEVANT TO THE OPERATIONS OF THE

INSPECTORS GENERAL

WEDNESDAY, JULY 19, 2000

U.S. SENATE,

COMMITTEE ON GOVERNMENTAL AFFAIRS,

Washington, DC.

The Committee met, pursuant to notice, at 10:08 a.m., in room

SD–342, Dirksen Senate Office Building, Hon. Fred Thompson,

Chairman of the Committee, presiding.

Present: Senators Thompson, Collins, and Levin.

OPENING STATEMENT OF CHAIRMAN THOMPSON

Chairman THOMPSON. Let’s proceed. Thank you all for being here

this morning.

It is not the easiest morning on any of us to deal with any regular business, but our friend and colleague, Senator Coverdell,

would expect us to proceed.

This morning, the Governmental Affairs Committee is holding a

hearing on two legislative proposals relating to agencies’ Inspectors

General. The IGs are the front-line troops in combating fraud,

waste, and abuse, and improving the performance of Federal agencies.

A report released last week revealed that actions by the IGs re- sulted in the recovery of $4 billion in misspent funds last year and

identified another $8.2 billion in additional savings. The report also

revealed that IG investigations resulted in more than 13,000 successful prosecutions and 1,200 civil actions.

Inspectors General are also an important resource for congressional oversight. This Committee has come to rely on them more

and more. For example, IGs regularly update us on the top-ten

most serious management problems faced by their agencies. In fact,

we just reported a bill that makes these top-ten reports statutory.

Likewise, the IGs have been a great help to us in assessing their

agencies’ implementation of the Government Performance and Results Act.

Today, we will consider two legislative proposals designed to help

make the Inspectors General even more effective. One is S. 870, a

bill introduced by Senator Collins last year that would make a

number of amendments to the Inspectors General Act of 1978. The

other is the administration proposal to grant permanent law enforcement authority to some IGs.

2

Senator Collins’ bill would establish a 9-year term of office for

IGs, require periodic external management reviews of their operations, and change the current IGs’ semiannual reports to annual

reports. In addition, it would prohibit IGs from receiving cash

awards from their agencies, raise the pay level of presidentially appointed IGs, and consolidate some of the smaller IG offices.

The administration proposal would authorize the Attorney General to delegate to presidentially appointed IGs and their investigators permanent authority to carry firearms, to make arrests without warrant in appropriate circumstances, and to seek and execute

search warrants. They currently exercise these authorities under

temporary deputations from the U.S. Marshals Service.

The IGs would be required to establish an external review process to ensure adequate safeguards and management procedures

over the exercise of these authorities.

I look forward to exploring at today’s hearing how we can

strengthen and improve the IGs and their operations.

Senator Collins.

OPENING STATEMENT OF SENATOR COLLINS

Senator COLLINS. Thank you very much, Mr. Chairman. I join

the Chairman and, indeed, all of my colleagues in mourning Senator Coverdell today. He was an outstanding Senator, and it is very

difficult to go forward with our business. But I, too, know, as the

Chairman says, that that is exactly what he would want us to do.

He was so devoted to the Senate and so energetic. We will miss

him greatly.

Mr. Chairman, I do want to thank you for scheduling this important hearing today to examine a variety of legislative reforms and

issues regarding the Inspectors General, including legislation that

I have introduced. For more than 20 years, the Inspectors General

have been the watchdogs for Congress and the taxpayers in the ongoing fight against government waste, fraud, and abuse.

I have been very active on issues pertaining to the IGs for a

number of years and, most recently, in my position as Chairman

of the Permanent Subcommittee on Investigations. For example,

the Subcommittee has worked very closely with June Gibbs Brown,

the Inspector General for the Department of Health and Human

Services, in our ongoing investigation of Medicare fraud. Most recently, just a couple of weeks ago, Susan Gaffney, the Inspector

General for the Department of Housing and Urban Development,

testified before the Subcommittee about the efforts of her office to

halt the proliferation of the nationwide phenomenon of property

flipping, which is a kind of mortgage fraud. She brought to our attention the very lax controls by the Department in this regard.

Throughout all of my dealings with the Inspectors General, I

have been impressed with the professionalism and commitment to

public service that the hard-working members of the IG community

have repeatedly demonstrated. There can be very little debate

about the fact that the American people have been well served by

the IG community’s efforts over the past 22 years.

During this time, the IGs have put forward thousands of recommendations to Congress, which cumulatively have saved billions

of dollars. In fact, during just the first 10 years after the original

3

IG Act was signed into law, it was estimated that the Inspectors

General had identified a total of $100 billion in savings through

their audits of government programs and procedures.

Furthermore, as Federal law enforcement personnel, Inspectors

General have conducted countless investigations. Successful investigations have recovered billions of dollars for the Federal Government from unethical companies and individuals and have resulted

in numerous criminal prosecutions, debarments, exclusions, and

suspensions. Taken as a whole, therefore, the Inspectors General

have a very strong record of accomplishment, and the American

people have been the principal beneficiaries of their work.

The record of the IGs is not, however, without blemish. For example, the very successful overall record was tarnished by the activities of the Treasury Department’s Office of Inspector General.

After an extensive investigation, the Permanent Subcommittee on

Investigations found that the Treasury Department IG had actually violated Federal law in her award of two sole-source contracts

to people with whom she was acquainted. The Subcommittee concluded that the Treasury IG failed to meet the high ethical and

performance standards expected of an IG, and shortly after our

hearing, she did, in fact, resign.

I do want to emphasize, however, that problems like the ones

that we found in the Treasury IG’s office are the exception. They

are certainly not the rule.

We have not found a widespread pattern of abuse by the IGs,

and, indeed, just the opposite is the case. However, an Inspector

General is not just like any other government manager. Inspectors

General are the very officials in government responsible for combating waste, fraud, and abuse in Federal programs. As such, they

have to be held to the very highest of standards.

Again, I want to stress that my experience with the IGs, with

this one exception, has been a tremendous experience, and I think

they serve the public very well.

I have introduced legislation that would make a number of

changes in the IGs law. They were shaped by my experience with

the IGs as well as the one unfortunate experience with the Treasury IG, as well as extensive consultations with the IG community,

with GAO, with private sector organizations, and with the Department of Justice.

The key elements of my legislation are designed to enhance the

accountability and the independence of the IGs. For this reason,

the legislation includes a 9-year renewable term and a provision

against accepting cash awards or bonuses. To offset that prohibition, my bill includes a proposed pay increase for the IGs to prevent situations which occur now, where in some agencies the deputy actually makes more than the IG due to cash awards and bonuses.

To give the IGs more flexibility in allocating resources, my legislation would streamline their semiannual reporting requirement,

and, importantly, the bill also requires an external review of the

Inspector General’s operations by the General Accounting Office or

another neutral third party periodically. That would help Congress

make sure that someone is watching the watchdogs.

4

Finally, we will hear today testimony about the issue of granting

statutory law enforcement authority to the presidentially appointed

IGs. This is a very important issue, particularly in light of recent

developments. From my work with the IG community and also with

the IG office at DHHS, I know that increasingly IGs are called to

investigate dangerous situations. On the other hand, we want to

make sure that we strike the right balance in this area.

Again, Mr. Chairman, I thank you for convening this hearing

today. I hope the Committee will act to approve S. 870 and other

issues of concern to the IG community this year.

PREPARED STATEMENT OF SENATOR COLLINS

Mr. Chairman, I want to thank you for holding this important hearing today to

examine a variety of legislative reforms and issues regarding the Inspectors General. For more than 20 years, the Inspectors General have been the ‘‘watchdogs’’ for

Congress and the taxpayers in the ongoing fight against government waste, fraud,

and abuse.

I have been very active on issues pertaining to the Inspectors General for a number of years, most recently in my position as Chairman of the Permanent Subcommittee on Investigations. For example, the Subcommittee has worked very closely with June Gibbs Brown, the Inspector General for the Department of Health and

Human Services, in our ongoing investigation of Medicare fraud. Most recently,

Susan Gaffney, the Inspector General for the Department of Housing and Urban Development, testified before the Subcommittee about her efforts to halt the proliferation of the nationwide phenomenon of property flipping.

Throughout all of my dealings with the Inspectors General, I have been impressed

with the professionalism and commitment to public service that the hardworking

members of the IG community have repeatedly demonstrated. And there can be very

little debate about the fact that the American people have been very well-served by

the IG community’s efforts over the last 22 years.

During this time, Inspectors General have put forward thousands of recommendations to Congress, which cumulatively saved literally billions of dollars. In fact, during just the first 10 years after the original Inspector General Act was signed into

law, it was estimated that the Inspectors General identified a total of $100 billion

in total savings through their audits of government programs and procedures.

Furthermore, as Federal law enforcement personnel, Inspectors General have conducted countless investigations. Successful investigations have recovered billions of

dollars for the Federal Government from unethical companies and individuals, and

have also produced numerous criminal prosecutions, debarments, exclusions, and

suspensions. Taken as a whole, therefore, the Inspectors General have a very strong

record of accomplishment, and the American people have been the principal beneficiary of their work.

The record of the Inspectors General is not, however, without blemish. For example, this successful record was tarnished by the activities of the Treasury Department’s Office of Inspector General in 1997. After an extensive investigation, the Permanent Subcommittee on Investigations found that the Treasury Department Inspector General violated Federal laws in the sole-source award of two consulting

contracts, engaged in a pattern of careless management, paid for work unauthorized, and subjected two U.S. Secret Service agents to an unwarranted investigation

and negative publicity. The Subcommittee also found that the Treasury Inspector

General misled Congress about the nature of this investigation and that official documents were destroyed. The Subcommittee concluded that the Treasury Inspector

General failed to meet the high ethical and performance standards expected of an

Inspector General. The Inspector General resigned shortly after our hearings were

completed.

Let me stress that, in my view, problems like the ones in the Treasury Inspector

General’s office are not widespread in the Inspector General community. However,

an Inspector General is not like any other government manager. Inspectors General

are the officials in government responsible for combating waste, fraud, and abuse

in Federal programs. And as such, Inspectors General should be held to a higher

standard. To do their job effectively, Inspectors General must be above reproach,

must set an example for other government managers to follow, and must not create

situations where there is even the appearance of impropriety. Credibility and effecVerDate 11-MAY-2000 15:12 Oct 17, 2000 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6621 66197.TXT SAFFAIRS PsN: SAFFAIRS
5

1The prepared statement of Mr. Gotbaum appears in the Appendix on page 29.

tiveness are lost when the office charged with combating waste and abuse engages

in the kind of activity that the Inspector General is responsible for deterring.

It was with some of these principles in mind that in 1998, I sponsored legislation,

S. 2167, that proposed a series of changes and reforms to the Inspector General Act

of 1978. Last year, I introduced similar IG reform legislation, S. 870, which is one

of the issues pending before the Committee this morning.

The key elements of my legislation are designed to enhance the accountability and

the independence of the Inspectors General, such as the renewable 9-year term of

office and a prohibition against accepting cash awards or bonuses. To offset the prohibition against accepting bonuses, my bill includes a proposed pay raise. To give

Inspectors General more flexibility in allocating resources, my legislation streamlines their semiannual reporting requirement by requiring only annual reports to

Congress. And, to increase accountability of the Inspectors General, the bill requires

external review of OIG operations by the General Accounting Office or another neutral third party.

Finally, as I noted in 1998 when I introduced S. 2167, legislation to grant statutory law enforcement authority to presidentially appointed Inspectors General deserves careful consideration. The question of how best to provide Federal law enforcement professionals with the tools they need and deserve is important, and I

look forward to hearing from our witnesses about this issue today.

In closing, again, Mr. Chairman, thank you for convening this hearing and I look

forward to working with you on S. 870 and other issues of concern to the Inspectors

General community.

Chairman THOMPSON. Thank you very much. Thank you for your

longstanding leadership in this area.

Our panel today consists of Joshua Gotbaum, the Executive Associate Director and Controller at the Office of Management and

Budget; Nicholas Gess, Associate Deputy Attorney General at the

Department of Justice; Gaston Gianni, the Inspector General for

the FDIC and the Vice Chair of the President’s Council on Integrity

and Efficiency. Mr. Gianni is accompanied by Kenneth Mead, who

is the IG for the Department of Transportation, and Patrick

McFarland, the IG for the Office of Personnel Management.

Mr. Gotbaum, do you have an opening statement?

TESTIMONY OF JOSHUA GOTBAUM,1 EXECUTIVE ASSOCIATE

DIRECTOR AND CONTROLLER, ACTING DEPUTY DIRECTOR

FOR MANAGEMENT, U.S. OFFICE OF MANAGEMENT AND

BUDGET

Mr. GOTBAUM. Yes, Mr. Chairman, I do. I will be brief. I made

the main points in the written statement, which, with your permission, I would ask be included in the record.

Chairman THOMPSON. It will be made part of the record.

Mr. GOTBAUM. First of all, Mr. Chairman and Senator Collins, I

want to just say thank you. Like you, we appreciate and consider

extremely important the activities of the IGs. We consider it extremely important that periodically those activities be reviewed, by

the IGs, by the rest of the administration, and by the Congress, to

see what we are doing that works and what we need to make it

work better. And that is the spirit in which we take your consideration of our proposal regarding law enforcement authority and Senator Collins’ bill, S. 870.

If I may speak first on the issue of our law enforcement proposal.

To be honest, Mr. Chairman, after you very graciously confirmed

me as controller, this is an issue which I then came to understand.

This is an issue which has been around for a very long time.

6

I want to start by saying what this is not. This is not an issue

of whether or not IGs should work in law enforcement. They do

and they have for 22 years, ever since you created them. Senator

Collins was gracious enough to mention June Gibbs Brown and the

work at HHS in terms of Medicare fraud. There are other equally

impressive activities: Child support enforcement, food stamps, work

at the border on border control that involves money laundering and

drug enforcement, etc. So the issue here is not whether the IGs

should work in law enforcement. They do. We are not proposing

any expansion of their activities in law enforcement. Nor is the

issue whether or not this law enforcement activity should be under

the supervision of the Attorney General, the supreme law enforcement officer of the land. It should be. It is. It has been. Under our

proposal it would continue to be.

We think the issue instead is whether or not the process by

which the Attorney General exercises oversight can, in fact, be

streamlined. We view this as a good government, nonpartisan

issue.

Historically, IGs who work on law enforcement issues get deputized on a case-by-case basis. They went to the Marshals Service

and said: Can Mr. X or Ms. X working on the following case get

authority? And the Marshals Service would review it and grant it.

That became sufficiently cumbersome so that several years ago

the Department of Justice, the Deputy Attorney General said,

‘‘Why don’t we do this on a year-by-year basis?’’ And so what the

Department of Justice does now is they give blanket authority on

a year-by-year basis to individual IG agencies.

What we would like to do now, and what we have proposed, is

to take the next step and to turn the presumption the other way.

If those agencies that have received this blanket authority by the

Department of Justice, let them have that authority now on a permanent basis; but, one, let us keep it under the supervision of the

Attorney General, who can revoke it; and, two, let us supervise and

make sure that we have an ongoing professional peer review process of how the IGs use this authority.

So, Mr. Chairman, Senator Collins, we view this as a good government measure, a measure which respects the professionalism of

the IGs, reduces what is, frankly, an administrative burden on the

Department of Justice, and lets the IGs continue to do the work

that we all recognize and think is extremely important.

We hope that you would consider this proposal expeditiously because the Department of Justice, as I think Mr. Gess will testify,

was hoping that we might reduce the administrative burden on

them by arranging such a procedure. So I hope you will consider

this legislation and hope you consider this expeditiously this year.

Turning to the broader question, Mr. Chairman, I think it is important that we commend and thank Senator Collins for her work.

It is extremely important that we review the activities of the IGs

because although we support them, but there is no institution that

shouldn’t be reviewed, that you shouldn’t ask questions about. And

so we view S. 870 as a very good start to that review.

There are provisions in it we support. We agree with Senator

Collins and the IG community agrees that there ought to be limitations on bonuses by agency heads. It is simply undermining the noVerDate 11-MAY-2000 15:12 Oct 17, 2000 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6601 66197.TXT SAFFAIRS PsN: SAFFAIRS
7

1The prepared statement of Mr. Gianni appears in the Appendix on page 34.

tion of independence to do that. And we agree that there ought to

be some recognition that limiting bonuses has an effect on IG compensation.

We have concerns about the 9-year fixed term. We just don’t

think that that is something which is necessary to guarantee IG

independence, and we think that, paradoxically, it might have the

effect of making it harder to recruit quality people if you create an

expectation that you have got to be in the job for 9 years. And so

we hope that we can have an ongoing discussion.

The last point I hope to make about this is that since this kind

of legislation doesn’t come along very often, we hope that the Committee would, also take the opportunity to address some issues that

the bill does not address. We have found working with the IGs that

there is not clarity with regard to the role of the IG vis-a-vis the

agency head in terms of involvement in agency management.

When I was Assistant Secretary of Defense, the then-IG of the

Department of Defense, Eleanor Hill, came to me and said, we can

be helpful to you because we know a lot about program management, and you are trying to improve the management of the Department of Defense, and we can work together. And I said to her

then a question which I know every agency head asks, which is:

Fine, I accept that. If I work with you and don’t follow everything

that you recommend, what then?

And so what we have found is that different IGs have different

answers to that question. Some IGs take the view that their independence requires them to step back from agency management,

from making suggestions about improving agency management,

from involvement in the agency, because that is how they are independent. Other IGs say no, that is my job.

And so one thing we would hope is that before the Committee

turns out a final bill, you would consider this issue and address

whether or not it makes sense to provide greater guidance to IGs

as to what their ongoing role ought to be with the agency head.

My time is limited, I understand, and there are going to be plenty of folks to have this opportunity, but I just wanted to say in closing: One, thanks; second, if it is not possible to have the more sustained debate on S. 870 that we think it deserves, we hope the

Committee could find a vehicle this session to enact the proposed

streamlining of the law enforcement authority into law.

With that, thank you very much.

Chairman THOMPSON. Thank you very much.

Mr. Gianni, did you have an opening statement?

TESTIMONY OF GASTON L. GIANNI, JR.,1 INSPECTOR GENERAL, FEDERAL DEPOSIT INSURANCE CORPORATION, AND

VICE CHAIR, PRESIDENT’S COUNCIL ON INTEGRITY AND EFFICIENCY; ACCOMPANIED BY PATRICK E. MCFARLAND, INSPECTOR GENERAL, U.S. OFFICE OF PERSONNEL MANAGEMENT, AND KENNETH M. MEAD, INSPECTOR GENERAL, U.S.

DEPARTMENT OF TRANSPORTATION

Mr. GIANNI. Yes, Mr. Chairman, thank you.

8

Mr. Chairman, first of all, before I start, I just want to let you

know that we share your loss of the Senator, the fine Senator from

the State of Georgia. And I know it is difficult to proceed under

those circumstances, but we certainly appreciate your leadership

and the Committee’s and Senator Collins’ leadership in bringing

these hearings today.

I am pleased to be here to discuss legislative proposals and

issues relevant to the operations of the IG community. Kenneth

Mead, to my left, is the Chairman of the PCIE’s Legislative Committee, and Patrick McFarland, to the far left, is a Chair of our Investigations Committee, and that is why I have asked them to accompany me today.

My testimony represents the views of the IGs and not necessarily

the administration, and I would ask that my full testimony be submitted for the record.

Chairman THOMPSON. It will be made part of the record.

Mr. GIANNI. First of all, we would like to thank the Governmental Affairs Committee for its longstanding, bipartisan support.

Over the years, we have worked with this Committee on a wide

range of government management issues and stand ready to assist

the Committee in carrying out its legislative and oversight functions. Of particular note is our ongoing financial statement work

under the Chief Financial Officers Act and our continuing work to

review agency compliance with the implementation of the Results

Act. Moreover, we were pleased to work closely with you on the

Government Information Security Act to enhance the Federal Government’s ability to combat computer hacking and intrusions.

Certainly, you have referred to our accomplishments over the

years, and we are quite proud of those accomplishments and stand

ready to continue our service to the Federal Government.

Today, we are here to discuss, among other issues, legislation

that is critical to the IG community’s ability to perform its mission.

The Department of Justice’s proposal to amend the IG Act to

authorize criminal investigators in the offices of 23 presidentially

appointed IGs to exercise law enforcement powers is extremely important to the IG community. This proposal would do three things:

First, it would grant no new authorities, but would simply recognize in statute authorities that are already being exercised administratively.

Second, it would ensure consistency of law enforcement powers

among the IGs.

And, finally, it would enhance accountability and would offer

greater oversight of the law enforcement authority by the Department of Justice.

We have learned that the Department of Justice does not intend

to renew the OIG blanket deputation authority after January 31,

2001. If blanket deputation were not renewed and statutory law

enforcement was not enacted, literally thousands of open investigations of fraud against government programs, in the areas of health

care, Federal procurement, telecommunications, Federal construction, bribery of public officials, crimes in subsidizing housing, corruption of highway construction programs, child support enforcement, and a host of others, would be jeopardized. These types of

investigations would simply cease. Moreover, if we were forced to

9

1The letter to Senator Collins from Kenneth A. Konz, Focal Point for the DFE OIGs, dated

March 21, 2000, submitted by Mr. Gianni appears in the Appendix on page 72.

return to a process in which we sought deputation in each individual case, it would be burdensome both to the Department and

to the IG community. On behalf of the entire OIG community, I

urge the Committee to endorse this proposal and seek its passage

in this Congress.

Second, I will turn to Senator Collins’ bill, which is under consideration by this Committee. In introducing this legislation, Senator

Collins referred to the IGs as ‘‘an already invaluable program’’ and

noted our performance and many accomplishments over the years.

She also challenged her colleagues and the IG community as a

whole to build on its strengths and remedy its weaknesses. I fully

subscribe to this strategy and look forward to working with her and

her staff to respond to this challenge.

While there is a general consensus within the IG community in

support of the underlying principles embodied in this proposed legislation, I must note that consensus is different from unanimity.

Our community consists of nearly 60 individuals, each with their

own background and experience, interacting with agencies performing a wide variety of missions. On most matters, there is distinct minority viewpoints with suggestions that are worthy of consideration.

Generally there is support for all of the provisions put forth in

the bill with some advice or suggestions for making some change.

We recently provided your staff with the results of an updated

survey on the revised bill; our specific comments are included in

my written statement. I would like to include for the record a letter

sent to Senator Collins from my colleagues in the ECIE regarding

their concerns related to the consolidation provision.1 We would

welcome the opportunity to work further with your Committee and

Senator Collins’ staff to share proposed technical changes that

could improve our ability to better perform our mission.

I’d like to turn next to the other suggested areas that we would

like the Committee to consider. One area needing attention involves the scope of the IGs’ authority. Contrary to the plain language of the statute, some courts have narrowly construed the IG

Act’s grant of authority to allow investigations of regulated entities

only when they are direct recipients of Federal funds, such as contractors or grantees. Under this view, IGs may not investigate

criminal conduct of regulated entities, even if the subject has engaged in criminal conduct knowingly or intentionally to deceive

their agency. Fortunately, the Congress saw fit to clarify this matter as it related to the DOT IG under the Motor Carrier Safety Act.

We are asking the Committee to revisit a provision that they

passed several years ago and enact language that would extend

that interpretation to the whole community.

The other area that we raise for consideration is the Paperwork

Reduction Act and how it is being implemented. We are working

with OMB to try to work out some procedural matters to make it

more efficient, but still, there is a difference in the interpretation

as far as the authority of the IGs and the independence of the IGs

and how the Paperwork Reduction Act plays out. We would like to

10

1The prepared statement of Mr. Gess appears in the Appendix on page 46.

work with the Committee to make some improvements in that

area.

We are also suggesting that the Committee may want to encapsulate into legislation the PCIE and the ECIE concept, somewhat

like the current codification of the CFO Council and the CIO Council. We think that codifying the two councils would provide more

accountability, more efficiency, and more opportunities to work

closer with the Congress.

Last, we appreciate your continued support on a bipartisan basis

to advance legislation to provide authorization for the IG Criminal

Investigator Academy and the Forensic Laboratory. We would like

to work with you to expand any further legislation to authorize

funding for our IG Auditor Training Institute.

Mr. Chairman, this concludes my prepared statement. We again

appreciate the opportunity to share with you this information and

hope it will be useful to the Committee as it considers ways for improving the operations of the IG community. We are grateful for

the Committee’s past support of the IG community. We look forward to working together to maximize government’s efficiency and

effectiveness.

We realize that this is a short legislative session, but the issues

we cited, especially statutory law enforcement authority, are ones

we hope the Congress may be able to consider before adjournment.

Thank you in advance for your efforts, and we would be happy

to respond to any questions.

Chairman THOMPSON. Thank you very much.

Do any of you other gentlemen have comments? Mr. Gess, do you

have an opening statement?

TESTIMONY OF NICHOLAS M. GESS,1 ASSOCIATE DEPUTY

ATTORNEY GENERAL, U.S. DEPARTMENT OF JUSTICE

Mr. GESS. Thank you. Mr. Chairman, Senator Collins, good

morning. Let me join in expressing my deepest sympathies to you.

I can only imagine how hard it must be this morning after the loss

of a colleague.

Let me start by simply asking that my prepared statement be

made a part of the record.

Chairman THOMPSON. It will be made a part of the record.

Mr. GESS. Thank you, Mr. Chairman. I do not intend to offer

anything from that prepared statement because I think it speaks

for itself. I do, however, want to address three very quick matters

that I think may assist the Committee in its business.

First, is the issue of timing on the part of the Department of Justice. I want to assure the Committee that approximately 1 year ago

we advised the IG community that we needed to move forward and

that effective January 31, 2001, we would no longer offer blanket

deputations. We fully recognize the practical reality of the fact that

it is now the end of July, that there are 16 days left in this legislative session. I want to assure the Committee—because we think it

would be grossly inappropriate for a co-equal branch of government

to push at that level—that we will work with the IG community

and the Committee on timing issues. We will not jeopardize the

11

lives of agents or investigations. I can assure the Committee of

that.

Second, there are two particular parts of the proposed legislation

that deserve very brief comment. The first is that under our proposal there would be limited occasions where the Attorney General

could confer law enforcement authority for acts taken by an Inspector General outside of the Inspector General Act. And while that

is potentially controversial, I want to assure the Committee—I

want to give you two very brief examples.

Chairman THOMPSON. Would you state that again?

Mr. GESS. We have proposed that, as a general matter, IGs

would have law enforcement authority when they are conducting

their business under the Inspector General Act. We have also proposed that there would be limited occasions when an Inspector

General could undertake law enforcement activities at the request

of the Attorney General, and, obviously with the concurrence of the

Inspector General, when that act falls outside the IG Act.

The two very brief examples I can give you of where this has occurred are child support, in which we recognized that we needed

to do something—in fact, there was a resolution of the Senate that

passed 99–0, frankly condemning the Justice Department’s inaction

several years ago. The Attorney General took that to heart, immediately, quite frankly.

In order to get the investigative resources we needed, she asked

the Inspector General of HHS to help out. The IG agreed. However,

his investigative authority for child support cases is not included

in the IG Act. We would not want to lose that authority in the future.

Second, the Health Care Portability Act, which was passed by a

bipartisan majority, a substantial majority of Congress, confers certain law enforcement authority on the Inspector General of HHS.

As a matter of drafting, that authority falls under the Health Care

Portability Act, not the IG Act. We would not want to face a situation where an Inspector General had to choose statutory authorities for a prosecution by which one gave him law enforcement authority.

Let me conclude by simply saying that we do not suggest that

law enforcement authority be expanded for Inspectors General. We

simply suggest that the first and primary responsibility for supervising that law enforcement authority ought to be in the chain of

command of the agent who has that authority. In this case, it

should be the Inspector General of an agency.

We fully intend and our proposal provides for Attorney General

regulatory authority to assure that there are proper hiring, training, and conduct standards and that there is the possibility of sanctions should a problem occur.

With that, I would simply suggest that I am here to answer the

Committee’s questions, and I appreciate the opportunity to appear.

Chairman THOMPSON. All right. Mr. Mead or Mr. McFarland, you

didn’t have any opening comments?

Mr. MCFARLAND. I have no prepared testimony.

Mr. MEAD. No, Mr. Chairman.

Chairman THOMPSON. Well, thank you very much. I hope the fact

that we are having this hearing today, in light of the increasingly

12

cramped schedule that we have of Senate business and all the

other things that we are involved in, it attests to how important

we feel this issue is, and the fact that we need to move the ball

down the field as much as we can before recess and during this session. This is something Senator Collins has been urging for a long

time, and it is primarily due to her leadership that this issue is

among the things that this Committee wants to seriously consider

in the near future.

Mr. Gotbaum, thank you for your comments. You reminded me

of several things that I think are important, and that is, the nature

of the Inspectors General and their job, how important they are to

us. They have been extremely important to Congress. But they

have an inherently difficult job. They have a tightrope to walk.

They have not a built-in conflict of interest as such, but certainly

a built-in conflict, even those who are presidentially appointed.

They are trying to help the agencies on the one hand, and some

of them, most of them have worked well in that regard in trying

to assist. I think that is the way the IGs look at themselves, as

somebody there not to wreak havoc but to try to assist to do a better job, give ideas and suggestions and so forth. You have seen it

from both sides now.

At the same time, they are the cop also, and how do you balance

that? Well, it is hard to write that down on a piece of paper in a

memo. It has to do with sound judgment.

We have run into a couple of situations with regard to HUD,

with regard to TVA, one presidentially appointed, one not presidentially appointed that I think should be, and we have legislation

to that effect for TVA, where I think the Inspectors General were

abused in those cases. They were not cooperated with. And we had

this great conflict between the appointing authority in one case or

the head of HUD in the other and the IGs. And we were never able

to resolve those problems.

So it gets back initially to your office, really. Frankly, I don’t

think your predecessor was able to effectively resolve some of these

issues. I know that your position as Chairman of PCIE is not a

statutory one. It is under executive order. And one of the things I

think we ought to look at is whether or not it ought to be statutory,

because I think somebody within the administration ought to have

the authority to resolve these issues and to balance the legitimate

position of these agency heads who say, after all, we were elected

and we ought to be able to carry out our policies, whether you

agree with them or not, we will have another election in 4 years,

versus the IGs who are seeing things done that are clearly not

within the purview under any normal objective reading of the situation.

And when you have that, there ought to be something short of

a congressional hearing or a lawsuit or something to really work

that out and resolve that, and I am not sure where that is going

to lie, except in your office.

You have been very cooperative with us, and I think you understand what I am saying. And I know that, as I say, you have limited authority. But I would urge you to stay in the middle of all

that and not let these situations get out of hand. Be fair and just

apply some common-sense standards.

13

Obviously, you are part of the administration. I guess you have

a bit of a conflict yourself. But that is, I think, your responsibility,

and if more authority is needed there, perhaps we need to look at

that.

With regard to the statutory criminal law enforcement authority—and I want to make sure that I understand it correctly—that

what you are suggesting here basically is that we put in statutory

form what is already in practice; that is, every 2 years, the Marshals Service deputizes all these people, and there are hundreds of

them. It sounds to me like it has gotten to be more of a pro forma

thing. Obviously, they don’t have a chance to do a lot of reviewing.

I don’t know if there is any background checks or additional checks

or anything of that nature. You are already there. We are already

into these areas. Every one of these offices has an investigative

side, and statutorily it sounds like here and there we have given

these IGs additional authority that other IGs in other departments

don’t have.

It has become kind of a mill, and what you are suggesting here

is that we—first of all, I guess you would take the Marshals Service out of it, and we would——

Mr. GOTBAUM. And the Attorney General.

Chairman THOMPSON. And we would statutorily institutionalize

that. Now, is that an oversimplification or is that basically what we

are talking about?

Mr. GOTBAUM. I think with one addition, Mr. Chairman. You are

right that this is, in a lot of respects, a proposal that we are making to ratify a practice that already goes on. But the distinction I

would make is that in the law enforcement proposal, we have proposed something which we don’t do now, which is a peer review

process, an automatic, periodic, peer review process. That is not

something we do right now. And what we propose in this is that

the IG community would, through the PCIE, develop some sort of

peer review process, and that proposed procedure would be itself

reviewed by the Attorney General. That process would provide an

ongoing basis for review. We think this provides, in effect, a better

form of oversight than the one that the Justice Department has

been able to provide currently, given their resources.

So you are right, this is in a lot of respects enabling us to

streamline what we are already doing, but we do think that it recognizes the professionalism of the IGs and puts in place some additional safeguards as well.

Chairman THOMPSON. And the Attorney General, as I recall,

would have the authority to withdraw this authority if circumstances arose justifying it?

Mr. GOTBAUM. Yes.

Chairman THOMPSON. You are familiar, of course, with the Commission on the Advancement of Federal Law Enforcement, the

Webster report, that basically has a different view. They are concerned about the growth and role of the functions of the Inspector

General, and, actually, they propose consolidating some offices, and

perhaps limiting them to the audit side of things and giving the investigative functions to someone else.

In fact, it seems like they are going in the opposite direction of

what you are suggesting or where we have been going. They talk

14

about the proliferation of law enforcement agencies, and they talk

about an inherent conflict between the program review evaluation

role of the IGs and their law enforcement role.

Any of you who would like to comment on that?

Mr. GOTBAUM. Mr. Chairman, may I? There are times in life

when being at OMB puts you on the hot seat because your life is

always a set of conflicting issues. From my perspective, from

OMB’s perspective, we disagree quite fundamentally with the Webster report. And I think it would be worthwhile getting the Department of Justice’s view as well.

It is very easy to say as a theoretical matter law enforcement

ought to be in one place and to try to parse out this very complex

thing that IGs do into law enforcement and program management,

etc.

But I think this Committee recognizes—it is very clear that Senator Collins recognizes and that the IG community recognizes and

the administration recognizes that it is not that simple. The fact

is that we tried to appoint good people, tried to improve the professionalism and the quality, and have succeeded, in our view, in creating in the IGs a function of government that is really very helpful. It helps you and it helps us.

That doesn’t mean that other parts of the government won’t

grumble from time to time, as they will: You know, I should be

doing that. And we at OMB get that all the time, and that is the

reason why I think it is important to say to this Committee that

I am not an IG. I am not speaking on behalf of the IGs. I am

speaking on behalf of the administration. We don’t think and we

wouldn’t propose centralizing all law enforcement authority within

the Justice Department.

We do think it is important in our proposal that the Justice Department be recognized as the preeminent law enforcement authority, so that when they say go one way and somebody wants to go

another way, we go the way the Justice Department says.

So with respect to Mr. Webster, who is obviously an important

and distinguished American, we don’t agree with his notion. We

think what we have got is something that is worth strengthening.

Chairman THOMPSON. Mr. Gess, what do you say about that?

Mr. GESS. Mr. Chairman, we deeply appreciate the work of

Judge Webster and, in fact, are in the process of implementing

some of his recommendations or the Commission’s recommendations respecting training and coordination in training because we

think it is important.

However, on this particular issue, we frankly disagree. We think

that these are issues that were dealt with roughly 20 years ago

when the IG authority was expanded and has expanded over the

years. We don’t think that it is necessary, given the way that we

do our law enforcement business, which is establishing partnerships at the local level between the U.S. Attorney, with the Federal, State, and local law enforcement agencies, to centralize everybody in one place. And we don’t think that it would be good practice, but, more importantly, practical at this point 20 years down

the road.

15

Chairman THOMPSON. Let me ask you one more final question in

this round. It has to do with, I guess, a broader view of law enforcement.

I was somewhat surprised at the breadth of the investigative

work that IGs do. You mentioned child support and all the other.

Some of it is statutory and pertains to particular departments.

You say that this proposal does not expand the jurisdiction of the

IGs, and I am seeing—I think of myself as a graduate of the U.S.

Attorney’s Office, and I am wondering how all this works. You have

all these Inspectors General doing all these things. You have the

FBI doing a lot of the same things, it sounds to me like. And I am

wondering how that is coordinated.

As I understand it now, there comes a point where the IGs, if

they reach a certain level in their investigation, are supposed to report to Justice or to the FBI, are they not?

Mr. GESS. That is correct, Senator.

Chairman THOMPSON. And that would not change.

Mr. GESS. Absolutely not.

Chairman THOMPSON. It looks to me like quite a coordinating

job. I am not sure what to do about it or if there is anything that

should be done about it. But if I was the FBI, I would be mindful

of that and make sure that there is a firm understanding.

Are there any interoffice procedures or understandings as to how

those lines are drawn? I don’t think there is anything statutory.

Mr. GESS. Mr. Chairman, there is nothing statutory, but, for instance, the Inspector General for HHS and the FBI, who would

share health care fraud investigative responsibilities, have a written memorandum of understanding.

I can also speak to this issue based on my prior hat as an Assistant U.S. Attorney in Portland, Maine, where, in fact, there are few

investigative resources. Anything major means bringing everybody

under the sun to the table and begging for help.

I can assure you, Mr. Chairman, that it is a challenge. It is hard

to do. But the reality is that I don’t think particularly in smaller

States we could get the job done if we didn’t basically have everybody at the table contributing a little bit. And I know that it

sounds hard from a management perspective, but the reality is it

seems to work around the country because everybody at that table

really is committed to doing good law enforcement.

Chairman THOMPSON. Let me finish with one note of concern

with our little love fest we have got going on here today. We

reached out to the FBI to get their views about this, and before we

got very far, it was closed off. And I don’t know why, but I suspect

that the Justice Department wanted to speak with one voice on

this issue. And I understand that, but you need to understand that

before I do anything, I am going to hear the best candid assessment from the FBI’s vantage point, because we have got everybody

singing from the same sheet of music here today, but there may be

some other viewpoints and some things that I haven’t thought of

or maybe others haven’t thought of. So I would not be too careful

about trying to hold this thing—I mean, too adamant in trying to

hold this thing close, because we are not going to do anything until

we make sure we understand the ramifications of this from a law

enforcement standpoint.

16

Mr. GESS. Mr. Chairman, I can assure you that that would be,

among other things, I think, bad law enforcement practice. Our

sole goal here with the FBI is that we be at the table. We would

not try to restrict what anybody would say. To be quite frank, I

think that would be folly.

Chairman THOMPSON. Well, you have a right to set policy. I

mean, I understand that.

Mr. GESS. Absolutely.

Chairman THOMPSON. You are the Justice Department. But we

have a right to get the views of the major players involved.

Mr. GESS. And we don’t question that, Mr. Chairman, I can assure you.

Mr. MEAD. Mr. Chairman, I would like to make a point about the

relationship of the IGs to the FBI, and I would like to use the Department of Transportation as an example because I can speak to

that one more credibly.

I think things work well with the FBI. I have enormous respect

for that institution. I think part of the reason they work so well

is because of the U.S. Attorneys and the Justice Department. Before a case gets too far down the road on the investigative side, you

have got to get buy-in from the U.S. Attorney, which operates, as

a matter of fact, as a very important internal control, a check and

balance.

In some instances, we investigate cases that are highly specialized. They are not really ‘‘high profile.’’ You may not read about

them in the paper. They may involve something where a motor carrier, a trucker, has been lying to the Department about the hours

that they are driving, for example, or whether they are carrying

hazardous materials. These are areas where you need a great deal

of specialization. In those cases, we work with the U.S. Attorney,

and largely at the U.S. Attorney’s direction, and the FBI may not

even get involved.

On the other hand, not too long ago we were involved with a

highway transit construction fraud case, very high profile, involving a couple of organized crime families. There, we teamed with the

FBI but still operated largely under the direction of the U.S. Attorney.

As to your question earlier about whether there is some sort of

conflict here because you have program review responsibilities and

you also have criminal investigative responsibilities, in fact——

Chairman THOMPSON. What Webster actually suggested he

thought of that report?

Mr. MEAD. Yes. In fact, the auditors do not get involved in the

investigations, and the investigators do not get involved in the

audit. But, in fact, the criminal investigators do develop expertise

in a particular program area. For example, in airline safety, it

takes a great deal of specialization to understand how those maintenance logs have to be filled out and when you have ‘‘pencil whipping.’’

So it is important that you have that reservoir of expertise in the

various agencies of government. Thank you.

Chairman THOMPSON. Well, I appreciate that, and I think most

U.S. Attorneys want all the help that they can get from whatever

source they can get. And I don’t think the FBI is too jealous about

17

some of these things, but I understand also that there could be

some territorial concerns there, and you may be concerned that the

FBI might come in and say, no encroachment on our territory.

But we can figure that out. I mean, we know how that works,

and we just need everything on the table.

Mr. GOTBAUM. Mr. Chairman, can I just make two points on

this?

Chairman THOMPSON. You are going to have to let me quit.

Mr. GOTBAUM. I will be fast, I promise. One is, again, the side

effect of being in OMB and trying to develop an administration position, is that we see this. You are, of course, right that you should

hear the FBI’s view. All we would ask is that since the person who

best explained to me why, notwithstanding the FBI’s view, he

thought the administration proposal was right was Nick Gess. I

would hope that you would also hear the Justice Department’s response to those concerns.

Chairman THOMPSON. He is here. He is getting his shot.

Mr. GOTBAUM. OK.

Chairman THOMPSON. Senator Collins.

Senator COLLINS. Thank you very much, Mr. Chairman. I want

to follow up on exactly some of the issues that you were raising

with regard to the statutory law enforcement authority.

Mr. Gess, I first want to welcome you from Maine. I know you

are on detail here from the U.S. Attorney’s Office, and I think it

was a clever move of the Justice Department to send you here

today, because some of the questions that I was going to ask I now

have to discard. [Laughter.]

I will pass them right over to my colleagues.

Nevertheless, I must say that I find the Department’s position on

granting statutory law enforcement authority, to put it kindly, to

have evolved. And I want to take you back and try to understand

exactly what the Department’s position currently is and how it has

changed.

In 1998, when I introduced the first version of Inspectors General reform legislation, I put in statutory law enforcement authority. The Justice Department objected to my doing so, and thus,

when I redrafted the bill with the new Congress and introduced it

in 1999, I left that provision out, even though the IGs were virtually unanimous in urging me to include it and gave me several

very compelling examples of the delays and the paperwork involved

in the process.

Then, in March of this year, I received a letter from Deputy Attorney General Holder urging me to sponsor statutory law enforcement authority for the IGs. Then the latest development, which I

learned of from an IG just yesterday, is that the Department of

Justice has decided that the current deputation process is unduly

burdensome for the U.S. Marshals Service and, in fact, has reached

such a crisis point that DOJ apparently has threatened to revoke

the deputation authority for the IGs effective next year.

So I think given these events, you can understand why I am a

little bit concerned and perplexed as to what the Department’s position is and why it seems to have evolved or changed dramatically.

Mr. GESS. Senator, I think that your words are perhaps kind,

very kind in their view. I think the simplest answer to this is that

18

the IG community did a very good job of coming to us approximately 18 months ago, and then over the next 6 months spending

a significant amount of time with Eric Holder walking through proposals that might work. There then ensued what I would term

‘‘high level’’—including both the Attorney General, the Deputy, the

other senior staff at the Department—consideration and our decision ultimately that the IG community was right.

At the time that we struck this—I don’t want to call it a ‘‘deal,’’

but effectively this law enforcement comity approach, we also made

the decision approximately a year ago that statutory law enforcement authority needed to replace these blanket deputations.

Our selection of the January 2001 date contemplated an entire

legislative session moving through. As I said in my opening statement, while we very, very much would hope that there would be

rapid action here, we have no intention of using that date as a

hammer in any way, shape, or form. It was simply seen to be a reasonable date when we set it a year ago.

Senator COLLINS. But if, in fact, legislation granting the statutory authority does not make it all the way through into law, you

will not revoke the authority? I mean, the threat is out there, and

that is very disturbing.

Mr. GESS. It was part of—I mean, to be frank, it was—as this

approach was agreed to around Eric Holder’s conference table with

representatives of the IG community, we actually had initially

thought that it would be at the end of this legislative session, but

for a variety of administrative reasons pushed it off.

What I can assure the Committee of, and you personally, Senator, is no agent will be endangered, no case will be endangered.

We will explore with the IG community and the Committee ways

in which, if we have to, we can make this more effective and efficient given the fact that we have a system now in which the Marshals Service has two to three employees, frankly, doing administrative paperwork processing, not law enforcement review. And

that is our concern.

But we certainly have no intention of—I mean, we are the lead

law enforcement agency. We would never do anything to hurt law

enforcement.

Senator COLLINS. Mr. McFarland, would you like to add something?

Mr. MCFARLAND. Yes, Senator. I would like to just respond. My

recollection is quite different than Mr. Gess’ recollection. I for one,

and the other IGs that I have talked to, did not hear that stated

at that meeting. If we had, we would have been in turmoil ever

since. We have only been in turmoil for a few days.

My concern is that if, in fact, we acknowledge that the blanket

deputation is working—and I certainly do—it is working. It is cumbersome to the Marshals, I am sure. But everybody has administrative problems, every office. And if somehow that is revoked, then

probably the alternative is to go back to case-by-case deputation,

and that is a horrible scenario.

Using the Department of Labor IG’s office as an example, the

DOL processing costs per case was $500. And you know the

amount of work that comes out of that Labor IG office. It is staggering. And the different processes that it had to go through to get

19

to that point was just so time-consuming and costly that I hope

that, first of all, legislation is passed, and, of course, that is why

we are here; but, second of all, I would hope that it wouldn’t be

just a working-it-out-later-type situation with the Department of

Justice.

This is a critical thing, and it is critical because—well, just take

HHS as an example. The day that happens that we lose something

in our deputation, 2,400 of their cases cease and desist. They just

come to a stop. Not one of us is going to send an agent out in

harm’s way under any circumstances.

So it is a dilemma, and I hope it can be resolved.

Senator COLLINS. Thank you.

Mr. GIANNI. Senator, if I might?

Senator COLLINS. Mr. Gianni.

Mr. GIANNI. Two points. First of all, I think as you said, it is an

evolving process. It has evolved and it has grown. And the reason

it has evolved and grown to this point is that the Inspectors General have taken their responsibilities seriously and have carried

them out dutifully. We all have entered into an agreement with the

Attorney General, so we each have entered into a responsible

agreement and made some commitments.

Second, I think the important issue is—and why we in the community would like to see our law enforcement authority in statute—that it could very easily change from one administration to

another administration. And all of the work that we have invested

in showing this administration how we are able to perform and

why it makes good sense may not be accepted with another set of

leaders, no matter what party they might be coming from. And so

that is why we are pushing for it. We think it makes sense. We

have proven that we are able to accept these responsibilities and

carry them out in a way that coordinates with the other law enforcement communities, and at the same time are willing to undergo additional oversight—which I might say that many of us do at

the present time.

Senator COLLINS. I want to ask Mr. Mead a question about the

training that the IG staff undergoes in order to make sure that

they understand the proper use. For example, it is my understanding—well, why don’t you tell us what kind of training the IGs

who do receive the deputations undergo?

Mr. MEAD. Well, they have to go to FLETC.

Senator COLLINS. Which is?

Mr. MEAD. Which is the investigative academy that is also used

by other law enforcement agencies, and they get the standard portfolio of training. We are very proud of them. In fact, that is a tradition for the current deputization, and I assume that would be carried over to the statutory provisions being proposed here today.

Senator COLLINS. I think that is an important point because

some of the people who have been opposed to granting the statutory authority are wrongly assuming that the IG agents are not

trained, that they are just handed a gun, a badge, et cetera. And

I want to get on the record exactly the point that you have just

made.

Mr. MEAD. And I have made it a point also to attend recurrent

specialized training of our agents done under the supervision of

20

senior managers, where they would go through the various exercises that a law enforcement agent can be expected to face, such

as presenting Miranda warnings and all that, as well as how to use

a weapon.

I don’t know if my colleagues here would like to amplify on that.

Mr. MCFARLAND. Yes, I would, Senator Collins. The Department

of Treasury Federal Law Enforcement Training Center that Ken

was talking about is in Glynnco, Georgia, and it is a 10-week

course, and it services 70 agencies of government. It is big and it

is effective. And it is something that every one of us in the community is very proud of, proud of being able to go to that school.

After that, then our agents in the IG world go to the IG Academy, which is also at the same location, for 4 weeks—not necessarily right after but within a period of time. So we have our own

academy.

And in recent months, that academy is what I would consider

now a model academy because we had the good fortune of being

able to join with the Treasury Tax Administration Academy that

was already in existence, along with our own academy, and we

have got a dynamic force down there, a dynamic curriculum. And

it stands alone.

Senator COLLINS. Thank you. My time is fast running out, so I

want to just touch on two other points very quickly. Mr. Gotbaum,

I was disappointed this morning to hear you repeat the administration’s opposition to a 9-year renewable term for the IGs. This provision is intended to help improve recruitment of IGs and also to give

them some sense of security and to avoid a situation that happened, frankly, in the Reagan Administration where the IGs were

fired, which I thought was inappropriate. Thus, we chose a 9-year

term to try to overlap administrations, although I am certainly

flexible on the number of years. It is more the concept that I was

trying to advocate for.

I am puzzled by the administration’s opposition because the

President signed into law a 5-year term of office for the Inspector

General for Tax Administration and a 7-year term of office for the

Inspector General for the U.S. Postal Service. So, clearly, the administration has found terms of offices for Inspectors General acceptable in some situations. I don’t understand why the administration thinks that the Postal Service Inspector General should

have a term, the Inspector General for Tax Administration should

have a term, but that other presidentially appointed IGs should not

have terms.

Mr. GOTBAUM. Senator Collins, this is an important question.

When you are a Presidential appointee subject to the appointment

of the President, at the end of an administration you become extremely conscious of when you are working for government beyond

the current administration. I view all of the things that we are

talking about today as not having any consequence for the current

administration. And so when I talk about them, we really are taking views that we think are of service to the next administration,

of whatever party. And I want to be very clear about that because

our support for law enforcement authority, for example, whether

you legislate this or not, is not going to change our ability in the

21

1The questions for the record submitted by Senator Collins and responses from Mr. McFarland appears in the Appendix on page 27.

next 6 months. What it will do is it will enable IGs in the next administration.

Getting to the specific proposal about fixed terms, I think I

should say that we don’t feel that a long term is necessary to preserve the independence of the IGs. I can’t speak for the beginning

of the Reagan Administration, but since then we think the history

has been pretty clear that IGs have been independent under the

current structure and——

Senator COLLINS. Is there anything to stop a new President from

firing all of the IGs?

Mr. GOTBAUM. Only the fact that that President would have to

explain to the entire world why he should or would do it.

Senator COLLINS. It has been done before.

Chairman THOMPSON. How about all the U.S. Attorneys?

Mr. GOTBAUM. Right. But if I may, Senator Collins, the other

issue is that if you start making this a job that when you take it

you have to commit for almost a decade, you are going to affect the

kind of people that you can get to take that job.

Now, the fact is that this President has signed and other Presidents have signed legislation that provides for fixed terms for some

IGs and other folks. But I want to be clear: I am expressing the

administration’s preference or view. Our preference is that we not

constrain IGs in this way. This is not a statement about IGs. This

is a statement on behalf of the Executive Branch, on behalf of the

next administration, which isn’t here yet to take this argument:

There ought to be some ability in the Executive Branch to pick the

people who work particularly in things that, involve agency management. And that is the reason why we have resisted the notion,

and we hope that you would reconsider.

Senator COLLINS. Mr. Mead, I want to give you a chance to respond to that, and then I am going to yield because I know that

I have used a considerable amount of time. I have many other

questions, but I am going to submit them for the record.1

Mr. MEAD. This is a very central issue, and I want to respond

directly and explicitly to the question on removal because it is of

concern to the Inspectors General.

There is considerable support for some sort of term limit. I think

the reason there is considerable support for some sort of term limit

is because of the removal issue. The law does require the President, when removing an Inspector General, to communicate to Congress and explain the reasons therefor. It is quite different, materially so, from a ‘‘for cause’’ removal. Now, the President could communicate with the Congress and say ‘‘I think I want a new team.’’

That statement would satisfy the law. But you do not want an Inspector General in the last year of an administration or in the beginning of a new administration to be pulling any punches.

The law requires very clearly that Inspectors General report to

the Congress and to the Secretary and keep them currently and

fully informed. And I believe that the Congress would do a service

to the Inspectors General if they did address this removal issue.

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I think I am trying to fairly reflect the views of this community,

which is not always unanimous, but I think if there is any one

issue besides law enforcement that there is some consensus, it is

this one.

Mr. GIANNI. And we might be able to take care of that by just

putting in a for-cause provision in the act rather than just a notification provision in the act. The cause is poor performance, and that

is the reason for removal. And that might solve the problem.

Senator COLLINS. Thank you, Mr. Chairman.,

Chairman THOMPSON. Senator Levin.

OPENING STATEMENT OF SENATOR LEVIN

Senator LEVIN. Thank you, Mr. Chairman.

First, let me thank you for scheduling this hearing. It is a hearing on kind of a dry and complex subject, and it is particularly difficult, obviously, today when our thoughts are elsewhere. We have

lost an esteemed colleague who was a very important part of this

family, a very kind and a gentle and a good man. And all of us in

this room are thinking about that, I am sure, more than this. But,

nonetheless, our work must go on, and that is what Senator Coverdell would want us to be doing, I am sure.

I also want to thank Senator Collins for taking on this subject.

It is important that we have this kind of review. These issues are

complex. They don’t attract a great deal of media attention so that

we just have to be doing our work free of that, which is a big plus,

frankly, but, nonetheless, sometimes not as attractive or glamorous

as some of the other things in which we might be involved. This

is sort of the grunge work.

But this subject, the Inspector General Act, is really one of the

true feathers in the cap of this Committee over the last 25 years.

The Inspectors General Act has really saved billions of dollars. We

have gone after waste and abuse, and our Chairman has been one

of the leaders in that. Again, I want to thank him and Senator Collins for their leadership in taking on this review.

I just have a few questions in the areas which have been discussed. First, on the 9-year term, we have a 5-year term for the

head of the Office of Government Ethics, as I understand it, and

there are two IGs that have terms, I believe one is 7 years and one

is 9 years. And so in two of those three cases, at least, the term

of office is less than the 9 years proposed here, for the IGs. That

is a significant grant of a term of office for a large number of Executive Branch appointees.

So what is the logic in a 9-year term, instead of, for instance, a

5-year term, as we give to the Director of the Office of Government

Ethics? And, second, what does it really add when the IGs still

serve at the pleasure of the President? Because I assume we are

not eliminating that language in this proposal. They still would

serve at the pleasure of the President, but have a 9-year term. It

seems to me there is an inconsistency in that.

But two questions: Why a 9-year term, when we have a 5-year

term for the OGE Director and a 5-year term for one of those other

Inspectors General who have a specific term? And, second, since

this bill would maintain serving at the pleasure of the President,

what does this really add? Mr. Gianni?

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Mr. GIANNI. Senator, from the standpoint of the IG community,

I don’t think that we are wed to any specific number of years. The

idea is to set up a situation that goes beyond one term of an administration. The expertise and knowledge of an agency should increase the longer an IG is in position. This should result in better

service to the agency and the Congress. In my opinion, a longer period of time rather than a shorter period would be better for the

government.

As far as the differences between other types of—well, my two

colleagues, one from the Postal Service and one from the Tax Administration, I must admit I wasn’t aware of the term for my colleague at the Tax Administration. But, again, it is probably something we would want to look into to make sure that there is some

degree of consistency if we move in that direction.

Mr. MEAD. And, in fairness, Senator Collins, when constructing

her legislation, asked the views of the Inspectors General, and they

ranged the gamut. And I did not envy the position she was in.

What she was trying to do—not to speak for her, but my understanding—was to give the position some security, to inject almost

an expectation that you do not remove an IG at the end of a particular administration regardless of the party that is in power.

There was also consideration given to the Comptroller General’s

term, which, of course, is 15 years, and everybody thought, my

God, that is a long time. And I think the idea was to span at least

one full administration, 8 years. But, again, there is no magic in

that number.

I personally think you do want Inspectors General to commit to

stay for a good period of time. Now, whether that is 5 years or 7

years or 9 years, I do not know. I think a core underlying issue is

that you should not have Inspectors General leaving at the end of

an administration.

Senator LEVIN. Well, there is no commitment on the part of the

Inspectors General in this proposal.

Mr. MEAD. No, sir.

Senator LEVIN. The commitment is—to the extent there is a commitment, and there still is a removal without cause.

Mr. MEAD. Yes.

Senator LEVIN. So they are still serving at the pleasure of the

President.

Mr. MEAD. The provision does not technically change the requirements for removal. That is correct.

Senator LEVIN. Has there been an unusually large turnover in

Inspectors General since they were all removed in 1981.

Senator LEVIN. Since then, has there been a particularly large

turnover?

Mr. GIANNI. Since I came into the community 4 years ago, I believe we had, at one point in time, seven vacancies, which would

indicate that seven of my colleagues had decided to leave for one

reason or another. I don’t view that as a large number. There

seems to be some continuity, and certainly both the Bush Administration and the Clinton Administration on two occasions have chosen not to remove the IG and basically listened to the advice that

it was getting from this particular Committee.

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1Letter to Senator Levin from Mr. Gianni, dated August 7, 2000, appears in the Appendix

on page 76.

Senator LEVIN. What is the average length of service of the IGs

since 1980?

Mr. GIANNI. Senator, I do not have that. We certainly could get

it and provide it for the record.1

Senator LEVIN. I think it might be an interesting statistic.

On the consolidation issue, do we have any example of an IG

serving a free-standing agency, but also serving another agency, or

a department?

Mr. GIANNI. I am not aware of one. There might be, but I am just

not aware if that is the case. At the State Department, I believe

that there was an attempt—the Congress was trying to achieve

some consolidation, and I believe at the State Department there

might have been a consolidation of one of the——

Senator LEVIN. Wasn’t that within the State Department?

Mr. GIANNI. Consolidation within the State Department.

Senator LEVIN. No, I am not referring to that. I think the Agency

for International Development had an IG that was within the State

Department.

Mr. GIANNI. Right.

Senator LEVIN. I am talking about a free-standing entity.

Mr. GIANNI. I am not aware of any.

Senator LEVIN. OK. On the law enforcement issue, I was very

happy to hear about the training that is provided. Is there some

kind of a certificate that is granted at the end of that training? Do

you have to pass a course? Is it that specific?

Mr. MCFARLAND. Yes, Senator, absolutely.

Senator LEVIN. OK. What is it called when you pass that course,

both the Treasury academy and yours?

Mr. MCFARLAND. Well, I don’t know what it is called, but there

is a certificate given at both FLETC and the academy to acknowledge successful completion.

Senator LEVIN. That is all I have, again, unless others wanted

to comment on any of those questions that I asked. I should have

offered you, Mr. Gotbaum, or anybody else the opportunity to comment.

Mr. GOTBAUM. Senator Levin, on the consolidation issue, part of

the reason why we view S. 870 as an important start for conversation is that it raises the sort of issues that you raised on consolidation. It is not that we don’t believe that smaller IG offices shouldn’t

find ways to work with each other or develop some sort of crossservicing. We think that is something which makes sense. But the

bill in its current form directs particular consolidations—and we

thought that was a case of a good intention that deserved some discussion before we went further.

Senator LEVIN. What are the criteria, Mr. Gianni, that are used

in establishing these particular consolidations or proposing these?

What are the criteria that were used? Or since you support it, what

criteria do you think we should use?

Mr. GIANNI. Well, I think I communicated that, in general, there

was some agreement, but there was also some disagreement. I believe the jury is still out.

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I believe what was put forth were some areas where efficiencies

could be acquired because many of my ECIE colleagues are not in

large Inspector General offices compared to those IGs from departments and larger agencies. But at the same point in time, there is

a trade-off. There is the other side of the picture. When you consolidate this responsibility into a larger agency, there is the question

of whether oversight of the smaller agency would receive resources

to show some degree of monitoring. Loss of expertise and knowledge of that specific agency could also occur.

So there are pros and cons. I think, as I looked at the agencies

that were identified, it appears that they might have been trying

to match up those agencies with like-minded larger departments or

agencies.

Senator LEVIN. Like-minded being similar types of functions?

Mr. GIANNI. Yes, similar types of functions.

Senator LEVIN. And if you applied those same criteria to all of

the IGs, would others fall in that same category?

Mr. GIANNI. I think certainly so. One could conduct an exercise

of saying ‘‘do we want to have some sort of a reorganization and

consolidation and mergers,’’ and certainly that process could take

place. Now, whether that is going to result in the end of having the

degree of oversight both for the agency and for providing the information that the Congress needs to carry out its oversight, that is

an open question.

Senator LEVIN. Thank you.

Mr. MEAD. We did a survey of the Inspectors General, and found

that this is probably the most controversial component of the entire

proposal. I think it was a strongly held view that it is important

to have a presence at the smaller entities. But when there are

problems, you need the critical mass. And at many of these agencies, there are just two or three people there, which is not enough

to undertake a comprehensive investigation or audit.

On your question about the criteria, I think it was by

functionality. Just as an example, FLRA, the Federal Labor Relations Authority, would have gone to OPM, the Pension Benefit

Guaranty Corporation into the Department of Labor, the Federal

Maritime Commission to us at DOT.

You are quite right that if you were to apply that criteria government-wide, you could identify other opportunities for consolidations. But there is a lot of disagreement over this particular proposal.

Mr. GIANNI. Senator, if I might, just a point of clarification.

On the training for our agents at the academy, this is the same

academy that members from the ATF and the Secret Service attend, and we receive the same certificates as they do. There is a

grading of their performance during that training.

Chairman THOMPSON. Gentlemen, thank you very much. This

has been very, very helpful.

It seems to me, just a point of overview, that basically what we

are considering here falls into two categories: One has to do with

the IG’s relationship to the outside world, those who do business

with the Department and third parties, and what that ought to be

in coordinating that within Justice; and the other has to do with

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the internal part of it with regard to its own department head, and

the difficulty in getting that right.

What we are doing, it seems to me, over a period of years—and

being in the last year of an administration I think helps us to be

a little more objective about it, hopefully—is balancing the need for

an administration to carry out its own policies versus the need for

someone inside there to keep close tabs on what they are doing, not

only from the standpoint of waste, fraud, and abuse but some other

gray areas, perhaps, and to report to Congress.

I think it is like the other balance-of-power considerations that

we have. Sometimes they go this way and sometimes they go that

way.

My own feeling is that the Executive Branch has gotten so big

and so complex, and the Legislative Branch has gotten so preoccupied with the budget process and everything else, and has so

little time to do oversight, that the balance is a little out of whack

in favor of the executive power and that we need more right now

than we have at some times in the past, maybe, to have a little

more independence from the IGs than we have had, because Congress needs all the help that it can get. And maybe even the head

of an administration—obviously, they don’t know what all is going

on. They need to help themselves to monitor what is going on in

all of these agencies and departments that we continue to create.

So I think that is what we are talking about here when we are

talking about the term and how long it should be. We are talking

about the extent of independence that we need. And I think we

need to move in the direction of a bit more independence than we

have had. All the cases that we have had up here recently have not

been cases of the IGs just going in and looking to create havoc

without just cause. The cases have been where the IGs are trying

to do a decent job, and the heads of departments have tried to

squelch them, quite frankly.

So I think we are moving in the right direction. Thanks again

to Senator Collins and Senator Levin today, and perhaps we can

move on this.

Senator Collins, do you have any other comments?

Senator COLLINS. No, Mr. Chairman. I just want to thank you so

much for holding this hearing. I am grateful to the IGs for the

work that they do, and I think a lot of the issues are very complex,

and we need to strike the right balance. But I hope we will be able

to proceed this year, and I thank you for your leadership.

Chairman THOMPSON. Thank you very much.

The record will remain open for 1 week for the submission of

other material.

We are adjourned.

[Whereupon, at 11:39 a.m., the Committee was adjourned.]

(27)

A P P E N D I X

QUESTIONS FOR THE RECORD SUBMITTED BY SENATOR COLLINS AND

RESPONSES FROM MR. MCFARLAND

The following questions submitted by Senator Collins are directed to Mr. McFarland in his capacity as Inspector General for the Office of Personnel Management:

Mr. MCFARLAND. Madam Chairman, thank you for the opportunity to comment

on the questions for the record concerning S. 870, Inspector General Act Amendments of 1999. Though I testified before your Committee as the Chairman of the

PCIE Investigations Committee, I am answering your questions as the Inspector

General of the Office of Personnel Management. First, let me go on record as supporting the overall bill. Below are my responses to each question you have asked:

Question 1. In 1997, the Permanent Subcommittee on Investigations thoroughly

examined the practices of the Treasury Department’s Inspector General, Valarie

Lau. The Subcommittee found that Ms. Lau had actually awarded two sole-source

contracts to acquaintances of hers in violation of standard contracting regulations.

Other serious management problems were also identified during the course of the

Subcommittee’s investigation.

As a result of that incident, I have proposed in S. 870, The Inspector General Act

Amendments of 1999, that an external review be conducted every 3 years of the operations of the Offices of Inspector General, so that there will be a clear answer to

the question, ‘‘Who is watching the watchdogs?’’ Do you agree that an external review of the Offices of Inspector General is appropriate?

Answer. I wholeheartedly support the concept of external reviews of the

entire operations of the Office of the Inspector General (OIG). As I am sure

you are aware, the OIGs are subjected to an external peer review of the

audit functions every 3 years. In addition, as part of the proposed law enforcement authority provisions you are now considering, we are planning

periodic reviews of investigative functions with results reported to the Attorney General. An external review encompassing the remainder of the OIG

would attest to our creditability to all interested parties. As the watchdogs

of the government, we need to be able to defend our operations at all times.

Question 2. S. 870 also proposes a provision prohibiting Inspectors General from

accepting cash awards and bonuses to eliminate the appearance of any impropriety

resulting from acceptance of a bonus from an agency head that the Inspector General is required to audit and investigate. Do you support this prohibition?

Answer. I have always opposed bonuses for inspectors general (IG). I believe they make it difficult for IGs to function in the independent nature

expected by the American public and Congress. Additionally, acceptance of

a bonus award would indeed create a conflict of interest. Your provision is

strongly supported by the entire IG community.

Question 3. Although I am generally very reluctant to propose pay raises for any

Federal officials, in S. 870, I have included a provision that would compensate the

presidentially appointed Inspectors General who would be affected by the bill’s ban

on accepting cash awards or bonuses. I am aware that it is possible for deputy Inspectors General to earn a higher salary than an Inspector General. To correct this

disparity, S. 870 proposes a salary increase from Executive Level IV ($122,400) to

Executive Level III ($130,200). Do you support this provision?

Answer. I concur with the proposed change in salary levels for IGs. Logically, the inspector general should be the highest paid staff person in the

OIG. In addition, this section of the bill would provide incentives for retention and recruitment of qualified IGs.

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Question 4. The Inspectors General are currently required to report their activities to Congress on a semi-annual basis. I have learned from discussions with the

Inspectors General that the production of semi-annual reports is very resource-intensive. Thus, I have proposed reducing this requirement to an annual report so

that Inspectors General may reallocate the volume of resources presently devoted

to report production to audits, investigations, and any other activities the Inspectors

General deem necessary. What is your position on streamlining the reporting requirement in this manor?

Answer. I support the proposed streamlining of reporting. The semi-annual

report is a time consuming and demanding process. By creating an annual

report, we are ensuring reporting on a timely basis while reducing the

workload demands in the OIGs. If more frequent reporting is necessary, the

bill permits congressional committees or GAO to require it. Most importantly, an IG is mandated to keep the agency and Congress fully informed

and, therefore, additional reports may be issued at any time.

Question 5. To enhance their independence from agency heads, I have proposed,

in S. 870, a term of office for the presidentially appointed Inspectors General. Do

you think that a term of office would be helpful to send a signal to agency heads

that the Office of Inspector General is not a political post, and that there is a strong

measure of independence expected by law?

Answer. By making appointment terms that exceed the maximum of 8

years of a presidential administration, I believe the bill provides a message

to management that IGs are not political, and, therefore, are independent

from the political considerations of an administration.

Question 6. In S. 870, I have suggested consolidating smaller Offices of Inspector

General into larger offices that perform similar programmatic reviews. One of the

bases for this provision is that offices with the equivalent of one, two, or even three

employees cannot fulfill the intent of the Inspector General Act. I would like to hear

your thoughts on the objective of making the Offices of Inspector General more efficient and true to their mission through consolidation.

Answer. I concur with the concept of consolidation for the OIGs that employ

a limited number of staff. When such a consolidation does in fact take

place, it will be incumbent on the accepting larger OIG to make sure that

the mission of the smaller agency remains a paramount concern and is not

relegated to a lesser status of importance.

I feel that S. 870 addresses many of the issues the IG community has faced in

the last 10 years. Please feel free to contact me if there are any questions.

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