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RESTORING THE POWER OF THE PURSE: 

LEGISLATIVE OPTIONS 

JOINT HEARING 

BEFORE THE

SUBCOMMITTEE ON 

GOVERNMENT OPERATIONS 

AND THE

SUBCOMMITTEE ON HEALTH CARE, BENEFITS, AND 

ADMINISTRATIVE RULES 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

DECEMBER 1, 2016 

Serial No. 114–127 

Printed for the use of the Committee on Oversight and Government Reform 

( 

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

http://www.house.gov/reform 


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(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

JASON CHAFFETZ, Utah, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

CYNTHIA M. LUMMIS, Wyoming 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

RON DESANTIS, Florida 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

MARK WALKER, North Carolina 

ROD BLUM, Iowa 

JODY B. HICE, Georgia 

STEVE RUSSELL, Oklahoma 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

WILL HURD, Texas 

GARY J. PALMER, Alabama 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

BRENDA L. LAWRENCE, Michigan 

TED LIEU, California 

BONNIE WATSON COLEMAN, New Jersey 

STACEY E. PLASKETT, Virgin Islands 

MARK DESAULNIER, California 

BRENDAN F. BOYLE, Pennsylvania 

PETER WELCH, Vermont 

MICHELLE LUJAN GRISHAM, New Mexico 

JENNIFER HEMINGWAY, Staff Director 

DAVID RAPALLO, Minority Staff Director 

COREY COOKE, Counsel 

KATY ROTHER, Counsel 

WILLIE MARX, Clerk 


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SUBCOMMITTEE ON GOVERNMENT OPERATIONS

MARK MEADOWS, North Carolina, Chairman 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan, Vice Chair 

TREY GOWDY, South Carolina 

THOMAS MASSIE, Kentucky 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

GERALD E. CONNOLLY, Virginia, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STACEY E. PLASKETT, Virgin Islands 

STEPHEN F. LYNCH, Massachusetts 

SUBCOMMITTEE ON HEALTH CARE, BENEFITS AND ADMINISTRATIVE RULES

JIM JORDAN, Ohio, Chairman 

TIM WALBERG, Michigan 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

CYNTHIA M. LUMMIS, Wyoming 

MARK MEADOWS, North Carolina 

RON DESANTIS, Florida 

MICK MULVANEY, South Carolina, Vice 

Chair 

MARK WALKER, North Carolina 

JODY B, HICE, Georgia 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

ELEANOR HOLMES NORTON, Distict of 

Columbia 

BONNIE WATSON COLEMAN, New Jersey 

MARK DESAULNIER, California 

BRENDAN F. BOYLE, Pennsylvania 

JIM COOPER, Tennessee 

MICHELLE LUJAN GRISHAM, New Mexico 

Vacancy 


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C O N T E N T S 

Page 

Hearing held on December 1, 2016 ........................................................................ 1 

WITNESSES 

Ms. Heather Krause, Acting Director, Strategic Issues, U.S. Government Accountability Office, Accompanied by Edda Emmanuelli Perez, Managing 

Associate General Counsel, U.S. Government Accountability Office 

Oral Statement ................................................................................................. 5 

Written Statement ............................................................................................ 8 

Mr. Kevin Kosar, Senior Fellow and Governance Project Director, R Street 

Institute 

Oral Statement ................................................................................................. 25 

Written Statement ............................................................................................ 27 

Mr. Hudson Hollister, Executive Director, Data Coalition 

Oral Statement ................................................................................................. 35 

Written Statement ............................................................................................ 37 

Mr. Stephen M. Kohn, Executive Director, National Whistleblower Center 

Oral Statement ................................................................................................. 61 

Written Statement ............................................................................................ 63 


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RESTORING THE POWER OF THE PURSE: 

LEGISLATIVE OPTIONS 

Thursday, December 1, 2016 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT OPERATIONS JOINT

WITH THE

SUBCOMMITTEE ON HEALTH CARE, BENEFITS, AND

ADMINISTRATIVE RULES, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, D.C. 

The subcommittees met, pursuant to call, at 2:06 p.m., in Room 

2154, Rayburn House Office Building, Hon. Mark Meadows [chairman of the Subcommittee on Government Operations presiding. 

Present from the Subcommittee on Government Operations: Representatives Meadows, Jordan, Walberg, Massie, Carter, 

Grothman, and Connolly. 

Present from the Subcommittee on Health Care, Benefits, and 

Administrative Rules: Representatives Jordan, Walberg, 

DesJarlais, Meadows, DeSantis, Walker, Hice, Carter, DeSaulnier, 

Boyle, and Lujan Grisham. 

Also Present: Representative Palmer. 

Mr. MEADOWS. The Subcommittee on Government Operations 

and the Subcommittee on Health Care, Benefits, and Administrative Rules will come to order. 

And, without objection, the chair is authorized to declare a recess 

at any time. 

Good afternoon. Thank you all for being here. 

And as we will call this to order, in recent years, an alarming 

trend has emerged, as we see the executive branch collecting various moneys for fees, fines, penalties, and settlements—the use of 

this money without providing Congress a clear accounting of how 

much money is being collected and what it’s being spent on. 

For example, according to the President’s fiscal year 2017 budget proposal, $231.8 billion in user fee charges go directly to an agency 

which subsequently spent the fund without congressional action, 

and an additional $302.2 billion in user fees will be spent according 

to the legislation that established the charge. These are enormous 

sums of money that have the possibility of being spent without any 

true congressional oversight. 

This week, Chairman Chaffetz released a report which looked at 

the issue of government-collected fines and penalties, similar to— 

the user fees, fines, and penalties are not an insignificant sum of 

money. The 34 agencies in the survey reported over $83 billion 

being collected between 2010 and 2015. 


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More startling than the sum of money collected was the complete 

lack of transparency, a failure of uniform accounting systems, and 

a slow agency response time. Some heavy-hitters, such as the Department of Treasury, were unable to provide the committee with 

a complete response regarding its various bureaus and offices, 

which is completely unacceptable. 

I still have no idea how much the Internal Revenue Service collected with its fines and penalty authority, which we all know 

would be significant. Something that is deeply troubling is that, 

given the massive discretion that the IRS has to level the penalties 

against American taxpayers, this sum could be enormous. 

Without a complete picture of the funds flowing into the government, Congress is limited in their ability to appropriate funds accurately and prevent waste, fraud, abuse, and mismanagement. The 

power of the purse is one of the most important responsibilities bestowed upon Congress in the Constitution, and we must ensure 

that this power is not obstructed by Federal agencies. 

Now, while I recognize that Congress has allowed certain agencies to utilize collected funds to operate, rather than go through the 

appropriations process, under President Obama this has taken on 

a more meaningful role, as the executive branch has utilized these 

collected funds or settlements to the funds as administrative—as 

priorities. 

So, in my opinion, this executive branch discretion has gone too 

far. We have lost the transparency needed to understand what is 

being collected and allocated. And, in light of these concerns, today’s hearing is meant to examine the use of the fees, the fines, 

the penalties, and settlements by Federal agencies to engage in activities that have not been specifically appropriated or authorized 

by Congress. 

We want to hear from our panel of witnesses about the appropriate legislative solutions to this concern and specifically hear 

feedback on the legislative options such as H.R. 5499, the Agency 

Accountability Act of 2016, which was proposed by my colleague, 

the gentleman from Alabama, Mr. Palmer. 

This is an important topic, that we need to know what the Federal Government is truly spending and what they are collecting, in 

order to reduce the deficit to get the Americans’ fiscal house in 

order. 

I want to thank our panel of witnesses for being here today. 

And I will recognize the gentleman from Virginia, my good 

friend, the ranking member of the Subcommittee on Government 

Operations, Mr. Connolly, for his opening statement. 

Mr. CONNOLLY. I thank my good friend from North Carolina. And 

I welcome our witnesses today. 

Today’s hearing will examine one of Congress’ most important 

constitutional powers. Article I, section 9 of the Constitution grants 

Congress the power of the purse—sole authority over the direction 

of public funds. The American people entrust Congress to wield 

that power in their best interests. 

Over the course of history, Congress has at times appropriately 

delegated these powers to certain government agencies, and it’s not 

done so carelessly or without parameters. When Congress has authorized agencies to collect fees, fines, penalties, or settlements, it’s 


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also placed limitations on those agencies and exercised oversight 

over their use of collected funds. 

Agency collection of fees is not a new concept. It was not invented by Barack Obama. The example of Customs comes to mind 

as one such authority that has existed since the beginning of the 

Republic. Agencies have retained import duty collections since the 

first United States Congress in 1789. 

The practice of agency retention of collections continued into the 

20th century with land grazing fees, an authority which has remained with the Bureau of Land Management for range improvement programs since the early 1900s when Teddy Roosevelt was in 

the Presidency. 

Today,similar dedicated collections of funds available without 

further congressional action can be found in programs supporting 

the Department of Justice’s Crime Victims Fund, the National 

Park Service fees, the Environmental Protection Agency Superfund 

settlements, the Tennessee Valley Authority collections, the Federal Protective Service fees, and the Federal Aviation Administration Franchise Fund customer fees, to name but a few. 

In all cases, Congress allows agencies to retain collections and 

self-sustain certain programs in order to make government more 

efficient. Today’s proposed legislative solution, H.R. 5499, the 

Agency Accountability Act, which has been referred to this committee, in my opinion, is the anthesis of efficiency. 

From my reading of the bill, it seems that it would require every 

single collection currently retained at agencies instead to be deposited into the general fund and obligated by the Committee on Appropriations. Every victim compensation award and every whistleblower reward would require the Committee on Appropriations to 

act. 

How many times in recent history has Congress failed to pass 

appropriations bills and instead passed an omnibus appropriations 

bill or a continuing resolution because Congress could not reach an 

agreement on critical government funding? We’re about to do it 

again within the next week. 

H.R. 5499 will have unintended consequences, many of which 

would be detrimental to the very good government mechanisms 

we’re committed to on this committee on a bipartisan basis. 

One essential good governance mechanism to which this legislation would render serious harm is the protection of whistleblowers, 

a cause championed by this committee. Much of government fraud 

detection relies upon whistleblowers. We’ll hear from an expert 

today on how whistleblower funds sustained via agency collections 

are crucial to protecting and incentivizing those willing to shed 

light on fraud, waste, and abuse in our government, a mission that 

goes to the very core of this committee’s mission. 

We will hear that whistleblowers are only willing to risk their careers and blow the whistle if there is some protection in the form 

of an award. That’s why Congress authorized agencies to issue 

those awards to whistleblowers—to guarantee that one of the incentives for whistleblowers to come forward is never in doubt and 

never tied up in uncertain appropriations processes. The effects of 

this bill would be to gut the guarantees to whistleblowers and the 


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services they provide. That alone is reason enough to question H.R. 

5499. 

I believe the sponsors of that bill intend to increase transparency. I don’t doubt their motivation. That’s a laudable goal. But 

H.R. 5499 is more than that; it’s a sweepingly broad and radical 

proposal that I believe would seriously impair the ability of government to function. 

Thank you, Mr. Chairman. 

Mr. MEADOWS. I thank the gentleman. 

The chair welcomes the participation of our colleague, the Representative Mr. Palmer from Alabama. He’s actually the sponsor of 

H.R. 5499, the Agency Accountability Act of 2016, which we look 

forward to discussing today. 

I ask unanimous consent that Mr. Palmer be allowed to fully 

participate in today’s hearing. 

And, without objection, so ordered. 

The chair now recognizes the ranking member of the Subcommittee on Health Care, Benefits, and Administrative Rules, Mr. 

Boyle, for his opening statement. 

Mr. BOYLE. Well, thank you, Mr. Chairman. 

And welcome to our witnesses. I look forward to hearing from 

you today. 

As my esteemed colleague Mr. Connolly has stated, the ability of 

agencies to retain collections is not new. Congress has authorized 

agencies since the Nation’s very beginning, and it has become a 

mechanism by which we ensure that the necessary work done by 

our Federal Government is financially self-sustained. 

Congress alone makes the decision to authorize certain programs 

to retain and spend funds. Congress has made that decision many 

times—everything from the National Park Service user fees to antitrust settlements at the DOJ, from whistleblower protections of 

pollution on ships to consumer protection funds at the newly created—I guess it’s not so newly created—CFPB. 

H.R. 5499, the Agency Accountability Act, was referred to this 

committee, and the chairman has called this hearing to consider 

the bill. This bill would put an end to that practice and prevent 

Congress from authorizing agencies to retain collections of user 

fees, fines, and settlements in the future. It is a solution in search 

of a problem. 

It is also radical. This bill states, and I quote, ‘‘Notwithstanding 

any other provision of law, an agency that receives a fee, fine, penalty, or proceeds from a settlement shall deposit such amount in 

the general fund of the Treasury.’’ Quote, ‘‘Notwithstanding any 

other provision of the law,’’ unquote, is as broad and sweeping a 

term as can be used in the law. In this case, it means ‘‘notwithstanding the history of our country.’’ 

H.R. 5499 would damage mechanisms Congress has created to 

promote good governance. As my colleague Mr. Connolly stated, 

whistleblowers are crucial to government accountability. The bravery of whistleblowers to do the right thing and shine the light on 

fraud, waste, and abuse helps our government in its important efforts to increase transparency. H.R. 5499 would have the effect of 

disincentivizing whistleblowers from coming forward with helpful 

information. 


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Make no mistake about it, this bill is reckless. It will cost taxpayers more money, because it will discourage whistleblowers from 

coming forward to expose fraud. If transparency is a goal of this 

bill, then I support that goal, but there are better paths forward 

that would do none of the harm this heavy-handed bill would 

cause. 

Now, with that, Mr. Chairman and to Ranking Member 

Connolly, I’m happy to yield the rest of my time. 

Mr. MEADOWS. I thank the gentleman for his remarks. 

I will hold the record open for 5 legislative days for any member 

who would like to submit a written statement. 

We’ll now recognize our panel of witnesses. 

I’m pleased to welcome Ms. Heather Krause, Acting Director of 

Strategic Issues at the U.S. Government Accountability Office. 

Welcome. 

Ms. Krause will be accompanied by Edda Emmanuelli Perez, 

Managing Associate General Counsel at the Office of General—U.S. 

Accountability Office. Her expertise on this issue will be important 

for the subject matter of this hearing, so she will be sworn in as 

well. 

Mr. Kevin Kosar, senior fellow and governance project director at 

R Street Institute. 

Welcome. 

Mr. Hudson Hollister, executive director of the Data Coalition. 

Welcome. It’s good to see you again. 

And Mr. Stephen M. Kohn, executive director of the National 

Whistleblower Center. 

Thank you for your work. 

Welcome to you all. 

And pursuant to committee rules, all witnesses will be sworn in 

before they testify. So if you would please rise and raise your right 

hand. 

Do you solemnly swear or affirm that the testimony you’re about 

to give will be the truth, the whole truth, and nothing but the 

truth? 

All right. Thank you. Please be seated. 

And let the record reflect that all witnesses answered in the affirmative. 

In order to allow enough time for discussion, we would appreciate it if you would limit your oral testimony to 5 minutes. However, your entire written statement will be made part of the record. 

Ms. Krause, you are now recognized for 5 minutes. 

WITNESS STATEMENTS 

STATEMENT OF HEATHER KRAUSE 

Ms. KRAUSE. Thank you, Mr. Chairman. 

Chairmen Meadows and Jordan, Ranking Members Connolly and 

Boyle, and members of the subcommittees, thank you for the opportunity to discuss our work on Federal fees, fines, penalties, and settlements. 

Congress exercises its constitutional power of the purse by appropriating funds and prescribing conditions for their use. As you 

know, Congress provides agencies with budget authority to make 


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financial obligations for specified purposes. Budget authority may 

be provided through appropriations acts or through other laws that 

constitute permanent appropriations. 

In addition to tax revenues, the Federal Government receives 

funds from a variety of sources, including fees, fines, penalties, and 

settlements. These collections involve billions of dollars annually 

and fund many programs, including those integral to our Nation’s 

security, the security of our financial systems, and the protection 

of natural resources. 

The design and structure of the statutory authorities for these 

collections varies widely. My statement today focuses on four types 

of statutory authorities that establish how agencies can use their 

fee, fine, and penalty collections and the varying degrees of agency 

flexibility and congressional control. 

These types of are: one, collections deposited to the Treasury as 

miscellaneous receipts; two, collections dedicated to a related program and available subject to a further appropriation; three, collections dedicated to a related program and available without further 

congressional action; and, four, collections available based on a 

combination of these authorities. 

First, Congress has specified that certain fees, fines, and penalties be deposited to the Treasury as miscellaneous receipts. These 

funds are not dedicated to the agency or program under which they 

are collected and are used for general support of Federal Government activities. For example, $2.7 billion in civil monetary penalties collected from financial institutions for certain enforcement 

actions were deposited to the Treasury as miscellaneous receipts 

from 2009 to 2015. 

Second, Congress has specified that some collections be dedicated 

to a related program but cannot be used by an agency without further appropriation. For example, cargo importers pay merchandise 

processing fees to Customs and Border Protection. These fees are 

deposited in the Customs user fee account and are only available 

to CBP through annual appropriations. 

Third, Congress has authorized some agencies to collect and use 

their fees, funds, and penalties without additional congressional action. This is considered permanent funding authority. Agencies 

with this authority have varying degrees of autonomy, depending 

on the extent to which the statute limits when, how much, and for 

what purpose funds may be used. 

For example, USDA’s Animal and Plant Health Inspection Service is authorized to set and collect user fees to cover the cost of Agriculture Quarantine Inspection services. These collections are 

available without fiscal year limitations and may be used for inspection-related purpose without further appropriation. 

Even if an agency has a permanent authority to use collections, 

Congress can still place limitations on the funds in any given year. 

For example, in recent fiscal years, annual appropriations acts limited the amount of fines and penalties from the Crime Victims 

Fund that could be used to fund victims assistance programs and 

other activities. 

Last, in some cases, Congress has provided agencies with a combination of different authorities. For example, each year, the Drug 

Enforcement Administration deposits the first $15 million in fees 


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that it collects from drug manufacturers and other registrants to 

the Treasury as miscellaneous receipts. Fees collected beyond that 

amount are available to the agency and used to recover the full 

cost of DEA’s Diversion Control program. 

These different design options involve different tradeoffs on agency flexibility versus congressional control. For example, Congress 

gains more oversight opportunities when it requires collections to 

be annually appropriated. Conversely, if Congress grants an agency 

authority to use collections without further congressional action, 

the agency may be able to respond more quickly to customers or 

changing conditions. 

This concludes my statement. My colleague Edda Emmanuelli 

Perez and I would look forward to answering any questions. 

[Prepared statement of Ms. Krause follows:] 


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For Release on Delivery 

Expected at 2:00 p.m. ET 

Thursday, December 1, 2016 

GA0-17-268T 

United States Government Accountability Office 

Testimony 

Before the Subcommittees on Government 

Operations and Health Care, Benefits, and 

Administrative Rules, Committee on 

Oversight and Government Reform, 

House of Representatives 

FEDERAL FEES, FINES, 

AND PENALTIES 

Observations on Agency 

Spending Authorities 

Statement of Heather Krause, Acting Director, Strategic 

Issues and 

Edda Emmanuelli Perez, Managing Associate General 

Counsel, Office of General Counsel 
9 


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FEDERAL FEES, FINES, AND PENAL TIES 

Observations on Agency Spending Authorities 

What GAO Found 

GAO's prior work has identified four key design decisions related to how fee, 

fine, and penalty collections are used that help Congress balance agency 

flexibility and congressional control. 

Key Design Decisions for Use of Collections 

Use of collections 

Source· GAO ! GA0-17-268T 

One of these key design decisions is the congressional action that triggers the 

use of collections. The table below outlines the range of structures that establish 

an agency's use of collections and examples of fees, fines, and penalties for 

each structure. 

Design Decision on Agency Use of Fees, Fines, and Penalties and Related Examples 

Design decision: Congressional 

action triggering use of collections 

Collections deposited to the Treasury 

as miscellaneous receipts 

Collections dedicated to the related 

program with availability subject to 

further appropriation 

Collections dedicated to the related 

program and available without further 

congressional action {i.e., a permanent 

a ro riation 

Collections available based on a combination of these authorities 

Source· GAO analySIS of applicable laws I GA0-17·268T 

Example of fee, fine, or penalty 

Civ!! monetary penalty payments from financial 

institutions received by certain financial 

re ulators 

Food and Drug Administration prescription 

drug user fees 

National Park Service fees 

Department of Justice Drug Enforcement 

Administration Diversion Control fees 

As GAO has previously reported, these designs involve different tradeoffs and 

implications. For example, requiring collections to be annually appropriated 

before an agency can use the collections increases opportunities for 

congressional oversight on a regular basis. Conversely, if Congress grants an 

agency authority to use collections without further congressional action, the 

agency may be able to respond more quickly to customers or changing 

conditions. Even when an agency has the permanent authority to use collections, 

the funds remain subject to congressional oversight at any point in time and 

Congress can place limitations on obligations for any given year. 

-------------United States Government Accountability Office 
10 


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Chairmen Meadows and Jordan, Ranking Members Connolly and 

Cartwright, and Members of the Subcommittees: 

We are pleased to be here today to discuss our prior work on federal 

fees, fines, penalties, and settlements. Congress exercises its 

constitutional power of the purse by appropriating funds and prescribing 

conditions governing their use. As you know, through appropriations, 

Congress provides agencies with budget authority to make financial 

obligations for specified purposes. An appropriations act is the most 

common means of providing appropriations; however, Congress may 

provide appropriations through other laws as well. 

The federal government receives funds from a variety of sources during 

the fiscal year, including tax revenues, federal fees, fines, penalties, and 

settlements. Collections from fees, fines, penalties, and settlements fund 

a wide variety of programs integral to our nation's security, to the security 

of our financial system, and to the protection of our natural resources and 

involve billions of dollars annually. For example, some user feesincluding U.S. Postal Service charges for stamps and other fees, 

Medicare premiums, and Tennessee Valley Authority proceeds from the 

sale of energy-exceed $1 billion in annual collections. Annual collections 

of fines and penalties fluctuate. For example, the federal government 

collected civil penalties paid in connection with the 201 0 Deepwater 

Horizon oil spill ranging from about $400 million in fiscal year 2013 to 

about $160 million in fiscal year 2016. 

The design and structure-and corresponding agency flexibility and 

congressional control-of statutory authorities for fees, fines, penalties, 

and settlements can vary widely. In many cases, Congress has provided 

agencies with permanent authority to collect and obligate for specific 

purposes funds from sources such as fees, fines, and penalties without 

further congressional action. Such authorities are part of a broader 

category of budget authority provided in laws other than appropriations 

acts, which also includes contract and borrowing authorities, as well as 

spending on entitlement programs such as Social Security. These 

collections, known as "offsetting collections" are a form of appropriation 

and are subject to the fiscal laws governing appropriated funds. Although 

the laws authorizing permanent budget authority make them available for 

obligation without further legislative action, it is not uncommon for annual 

appropriation acts to include limitations on the obligations to be financed 

by these collections. Given the nation's fiscal condition, it is critical that 

every funding source and spending decision be carefully considered and 

applied to its best use. 

Page 1 GA0-17-268T 
11 


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Background 

Our testimony provides an overview of key design decisions and statutory 

authorities and controls related to the availability of funds collected from 

federal fees, fines, and penalties. In preparing this testimony, we relied on 

our September 2013 and May 2008 reports on the design of federal user 

fees and our February 2015 report on Department of Justice alternative 

funding sources, and drew examples from other work on specific fees, 

fines, and penalties that we issued between September 2005 and 

November 2016. 1 Detailed information about the scope and methodology 

used to conduct this work can be found in each of the issued products. 

We conducted the work on which this statement is based in accordance 

with generally accepted government auditing standards. Those standards 

require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on 

our audit objectives. 

The federal government receives amounts from numerous sources in 

addition to tax revenues, including user fees, fines, penalties, and 

intragovernmental fees. Whether these collections are dedicated to a 

particular purpose and available for agency use without further 

appropriation depends on the type of collection and its specific authority. 2 

User fees: User fees are fees assessed to users for goods or services 

provided by the federal government. They are an approach to 

financing federal programs or activities that, in general, are related to 

some voluntary transaction or request for government services above 

and beyond what is normally available to the public. User fees are a 

broad category of collections, whose boundaries are not clearly 

1

GAO, Federal User Fees: Fee Design Options and Implications for Managing Revenue 

Instability, GA0~13-820 (Washington, D.C .. Sept. 30, 2013), Federal User Fees: A Design 

Guide, GA0-08-386SP (Washington, D.C.: May 29, 2008), and Department of Justice: 

Altemative Sources of Funding Are a Key Source of Budgetary Resources and Could Be 

Better Managed, GA0-15-48 (Washington, D.C.: Feb. 19, 2015). A full list of our related 

work is included at the end of this statement. 

2

Un!ess otherwise authorized by statute, an official or agent of the Government receiving 

money for the Government from any source shall deposit the money in the Treasury 

without deduction for any charge or claim. 31 U.S. C.§ 3302(b) (also known as the 

miscellaneous receipts statute), 

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12 


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defined. 3 They encompass charges for goods and services provided 

to the public, such as fees to enter a national park, as well as 

regulatory user fees, such as fees charged by the Food and Drug 

Administration for prescription drug applications. Unless Congress 

has provided specific statutory authority for an agency to use (i.e., 

obligate and spend) fee collections, fees are deposited to the 

Treasury as miscellaneous receipts and are generally not available to 

the agency.' 

Fines, penalties, and settlement proceeds: Criminal fines and penalty 

payments are imposed by courts as punishment for criminal 

violations. Civil monetary penalties are not a result of criminal 

proceedings but are employed by courts and federal agencies to 

enforce federal laws and regulations. Settlement proceeds result from 

an agreement ending a dispute or lawsuit. As with user fees, unless 

Congress has provided specific statutory authority for an agency to 

use fines, penalties, and settlements, those collections are deposited 

as miscellaneous receipts and are generally not available to the 

agency. 

lntragovemmental fees are charged by one federal agency to another 

for goods and services such as renting space in a building or 

cybersecurity services. Unlike user fees, fines, and penalties, unless 

Congress has specified otherwise, agencies generally have authority 

to use intragovernmental fees without further appropriation. 5 

In 2013, we identified six key fee design decisions related to how fees are 

set, used, and reviewed that, in the aggregate, enable Congress to 

design fees that strike its desired balance between agency flexibility and 

congressional control. 6 Four of the six key design decisions relate to how 

legal distinction between a "fee" and a ~tax" can be compllcated and depends largely 

on the context of the particular assessment. Whether a particular assessment is statutorily 

referred to as a tax or a fee is never legally determinative. Instead, federal courts will 

examine the structure and the context of the assessment's application. 

4

Fees assessed under the authority of the Independent Offices Appropriation Act of 1952 

(codified at 31 U.S. C.§ 9701), rather than under a specific authorizing statute, must be 

deposited to the Treasury as miscellaneous receipts and are not available to the agency 

or program that co!!ected the fees, unless otherwise authorized by law. 

5

Forexample, the Economy Act, 31 U.S. C.§ 1535 and 1536, is a statutory exception to 

the miscellaneous receipts statute, authorizing a performing agency to credit 

reimbursements to the appropriation or fund charged in executing its performance. 

6GAO-13-820. 

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the fee collections are used and in 2015 we reported that they are 

applicable to fines and penalties (see figure 1).7 

Figure 1: Key Design Decisions for the Use of Federal Fees, Fines, and Penalties 

So!Jrw: GAO I GA0-17-268T 

Congress determines the availability of collections by defining the extent 

to which an agency may use (i.e., obligate and spend) them, including the 

availability of the funds, the period of time the collections are available for 

obligation, the purposes for which they may be used, and the amount of 

collections that are available to the agency. 

Availability. Congressional decisions about the use of a fee, fine, or 

penalty will determine how the funds will be considered within the 

context of all federal budgetary resources. Collections are classified 

into 3 major categories: offsetting collections, offsetting receipts, or 

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governmental receipts. Funds classified as offsetting collections can 

provide agencies with more flexibility because they are generally 

available for agency obligation without further legislative action. In 

contrast, offsetting receipts and governmental receipts offer greater 

congressional control because, generally, additional congressional 

action is needed before the collections are available for agency 

obligation. 

Time. When Congress provides that an agency's collections are 

available until they are expended, agencies have greater flexibility and 

can carry over unobligated amounts to future fiscal years. This 

enables agencies to align collections and costs over a longer time 

period and to better prepare for, and adjust to, fluctuations in 

collections and costs. Funds set aside or reserved can sustain 

operations in the event of a sharp downturn in collections or increase 

in costs. Carrying over unobligated balances from year to year, if an 

agency has multi- or no-year collections, is one way agencies can 

establish a reserve. 

Purpose. Congress sets limits on the activities or purposes for which 

an agency may use collections. Congress has granted some agencies 

broad authority to use some of their collections for any program 

purpose, but has limited the use of other collections to specific sets of 

activities. Narrower restrictions may benefit stakeholders and increase 

congressional control. On the other hand, statutes that too narrowly 

limit how collections can be used reduce both Congress's flexibility to 

make resource decisions and an agency's flexibility to reallocate 

resources. This can make it more difficult to pursue public policy goals 

or respond to changing program needs, such as when the activities 

intended to achieve the purposes of the related program change. 

Amount. Congress determines the specific level of budget authority 

provided for a program's activities by limiting the amount of collections 

that can be collected or used by the agency; however, these limits can 

also pose challenges for the agency. For example, when a fee-funded 

agency is not authorized to retain or use all of its fee collections and 

no other funding sources are provided, the agency may not have the 

funds available to produce the goods or services that it has promised 

or that it is required to provide by law. 

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Design Options 

Related to Agency's 

Access to and Use of 

Its Collections 

Collections Deposited to 

the Treasury as 

Miscellaneous Receipts 

Our design guides can help Congress consider the implications and 

tradeoffs of various design alternatives. One key design element is 

whether the funds will be (1) deposited to the Treasury as miscellaneous 

receipts for general support of federal government activities, (2) dedicated 

to the related program with availability subject to further appropriation, (3) 

dedicated to the related program and available without further 

congressional action, or (4) available based on a combination of these 

authorities. 

Some authorities to collect fees, fines and penalties specify that the funds 

will be deposited to the Treasury as miscellaneous receipts. These funds 

are not dedicated to the agency or program under which they were 

collected; they are used for the general support of federal government 

activities. For example, 

Penalties from financial institutions: Civil monetary penalty payments 

collected from financial institutions by certain financial regulators, 

including the Office of the Comptroller of the Currency and the 

Federal Deposit Insurance Corporation, are deposited to the Treasury 

as miscellaneous receipts. In March 2016, we reported that, from 

January 2009through December 2015, financial regulators and 

components within the Department of the Treasury deposited $2.7 

billion to the Treasury as miscellaneous receipts from enforcement 

actions assessed against financial institutions for violations related to 

anti-money laundering, anti-corruption, and U.S. sanctions programs 

requirements. 8 

Federal Communications Commission (FCC) Application Fees: The 

FCC regulates interstate and international communications by radio, 

television, wire, satellite, and cable, and telecommunications services 

for all people of the United States. FCC collects application fees from 

companies for activities such as license applications, renewals, or 

requests for modification. As we reported in September 2013, these 

fees are deposited to the Treasury as miscellaneous receipts 9 

8

GAO, Financial InstitutiOns: Fines, Penalties, and Forfeitures for Violations of Financial 

Crimes and Sanctions Requirements, GA0-16-297 (Washington, D.C.: Mar 22, 2016). 

9

GA0-13-820. 

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Dedicated Collections with 

Availability Subject to 

Further Appropriation 

Some fees, fines, and penalties cannot be used by an agency without 

being further appropriated to the agency. For example, 

Customs and Border Protection's (CBP) Merchandise Processing 

Fee: Importers of cargo pay a fee to offset the costs of "customs 

revenue functions" as defined in statute, and the automation of 

customs systems. CBP deposits merchandise processing fees as 

offsetting receipts to the Customs User Fee Account, with availability 

subject to appropriation. In July 2016, we reported that in fiscal year 

2014 merchandise processing fee collections totaled approximately 

$2.3 billion. 10 

Requiring an appropriation to make the funds available to an agency 

increases opportunities for congressional oversight on a regular basis. 

When the amount of collections exceeds the amount of the appropriation, 

however, unobligated collection balances that are not available to the 

agency may accumulate. For example, 

Security and Exchange Commission (SEC) Fees: When SEC collects 

more in Section 31 fees than its annual appropriation, the excess 

collections are not available for obligation without additional 

congressional action. 11 In September 2015, we reported that at the 

end of fiscal year 2014, the SEC had a $6.6 billion unavailable 

balance in its Salaries and Expenses account because the fee 

collections exceeded appropriations. 12 

Environmental Protection Agency (EPA) Motor Vehicle and Engine 

Compliance Program (MVECP) Fees: MVECP fee collections are 

deposited into EPA's Environmental Services Special Fund. 13 As we 

10GAO, DHS Management: Enhanced Oversight Could Better Ensure Programs 

Receiving Fees and Other Collections Use Funds Efficiently, GA0-16-443 (Washington, 

D.C.: Jul. 21, 2016). 

11Nationa! securities exchanges and the Financial Industry Regulatory Authority (FINRA) 

pay Section 31 transaction fees to SEC, generally based on the sales of securities (15 

U.S. C. § 78ee). 

121n 2015 we reported that, according to SEC officials, this large unavailable balance 

resulted from historical features of its Section 31 fee structure that are no longer in place. 

GAO, Federal User Fees: Key Considerations for Designing and Implementing Regulatory 

Fees, GA0-15-718 (Washington, D.C.: Sept. 16, 2015). 

13A Special Fund Receipt Account is a receipt account credited with collections that are 

earmarked by law but included in the federal funds group rather than classified as trust 

fund collections. These collections are presented in the President's budget as either 

governmental (budget) receipts or offsetting receipts. 

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reported in September 2015, according to officials, Congress had not 

appropriated money to EPA from this fund for MVECP purposes. 14 

EPA instead received annual appropriations which may be used for 

MVECP purposes. As a result, the unavailable balance of this fund 

steadily increased and totaled about $370 million at the end of fiscal 

year 2014. 

U.S. Anny Corps of Engineers Harbor Maintenance Fee: The 

authorizing legislation generally designates that the purpose for the 

fee collections is harbor maintenance activities but, as we reported in 

February 2008, fee collections have substantially exceeded spending 

on harbor maintenance." In July 2016, we reported that the Harbor 

Maintenance Trust Fund had a balance of over $8 billion at the end of 

fiscal year 2014. 16 

U.S. Patent and Trademark Office (USPTO) Fees: In September 

2013, we reported that in some years Congress chose not to make 

available to USPTO the full amount of its collections which, according 

to USPTO officials, contributed to USPTO's inability to hire sufficient 

examiners to keep up with USPTO's workload and invest in 

technology systems needed to modernize the USPT0. 17 According to 

USPTO officials, patent fee collections can only be used for patent 

processes, and trademark fee collections can only be used for 

trademark processes, as well as to cover each processes' 

proportionate share of the administrative costs of the agency. USPTO 

officials stated that patent and trademark customers are typically two 

distinct groups and this division helps to assure stakeholders that their 

fees are supporting the activities that affect them directly. 

Some programs include mechanisms to link the amount of collections 

with the amount of collections appropriated to the program, over time. For 

example, 

Food and Drug Administration (FDA) Prescription Drug User Fees: If 

FDA prescription drug user fee collections are higher than the amount 

of the collections appropriated for the fiscal year, FDA must adjust fee 

rates in a subsequent year to reduce its anticipated fee collections by 

15GAO, Federal User Fees: Substantive Reviews Needed to Align Port~Related Fees with 

the Programs They Support, GA0-08-321 (Washington, D.C .. Feb. 22, 2008) 

16GA0-16-443. 

17GA0-13-820. 

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Dedicated Collections 

Available without Further 

Congressional Action 

the excess amount. 18 In March 2012, we reported that in fiscal year 

2010, Prescription Drug User Fee Act user fees collected by FDAincluding application, establishment, and product fees-totaled more 

than $529 million, including over $172 million in application fees. 19 

Legislation authorizing a fee, fine, or penalty may give the agency 

authority to use collections without additional congressional action. We 

refer to the legal authorities that provide agencies with permanent 

authority to both collect and obligate funds from sources such as fees, 

fines, and penalties as "permanent funding authorities."20 Agencies with 

these permanent funding authorities have varying degrees of autonomy, 

depending in part on the extent to which the statute limits when, how 

much, and for what purpose funds may be obligated. Some examples 

include the following: 

National Park Service (NPS) Fees: NPS fees include recreation 

fees-primarily entrance and amenity fees-and commercial service 

fees paid by private companies that provide services, such as 

operating lodges and retail stores in park units. In December 2015, we 

reported that in fiscal year 2014 the NPS collected about $186 million 

in recreation fees and about $95 million in commercial service fees. 21 

U.S. Department of Agriculture Animal and Plant Health Inspection 

Service (APHIS) Agricultural Quarantine Inspection (AQI) Fees: The 

U.S.C. 379h(g)(4). 

19GAO, Prescription Drugs: FDA Has Met Most Performance Goals for Reviewing 

Applications, GA0-12-500 (Washington, D.C.: Mar. 30, 2012). 

2

0We will be issuing a report on permanent funding authorities later this month. As 

mentioned earlier, pennanent funding authorities are part of a broader category of budget 

authority provided in laws other than appropriations acts. We last published an inventory 

of budget accounts with spending authority and permanent appropriations in 1996. At that 

time, we reported that agencies identified 558 budget accounts as having spending 

authority and permanent appropriations. In our 1998 update to that inventory, we 

determined that 20 of the 558 budget accounts identified by agencies in the 1996 report 

did not possess spending authority and permanent appropriations. See GAO, Budget 

Issues: Inventory of Accounts with Spending Authority and Permanent Appropriations, 

1996, GAOIAIMD-96-79 (Washington, D.C.: May 31, 1996) and Budget Issues: Inventory 

of Accounts With Spending Authority and Permanent Appropriations, 1997, 

GAOIOGC-98-23 (Washington, D.C. Jan. 19, 1998). We are currently updating this 

inventory. 

21GAO, National Park Service: Revenues from Fees and Donations Increased, but Some 

Enhancements Are Needed to Continue This Trend, GA0-16-166 (Washington, D.C.: 

Dec. 15, 2015). 

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AQI program provides for inspections of imported agricultural goods, 

products, passenger baggage, and vehicles to prevent the 

introduction of harmful agricultural pests and diseases. APHIS is 

authorized to set and collect user fees sufficient to cover the cost of 

providing and administering AQI services in connection with the arrival 

of commercial vessels, trucks, railcars, and aircraft, and international 

passengers. 22 AQI fee collections are available without fiscal year 

limitation and may be used for any AQI-related purpose without 

further appropriation. In March 2013, we reported that in fiscal year 

2012, AQI fee collections totaled about $548 million23 

Environmental Protection Agency (EPA) Superfund Settlements: 

Under the Superfund program, EPA has the authority to clean up 

hazardous waste sites and then seek reimbursement from potentially 

responsible parties. EPA is authorized to retain and use funds 

received from certain types of settlements with these parties in 

interest-earning, site-specific special accounts within the Hazardous 

Substance Superfund Trust Fund. EPA generally uses these funds for 

future cleanup actions at the sites associated with a specific 

settlement or to reimburse appropriated funds that EPA had 

previously used for response activities at these sites. In January 2012, 

we reported that as of October 2010 EPA held nearly $1.8 billion in 

unobligated funds in 947 open special accounts for 769 Superfund 

sites." 

Tennessee Valley Authority Collections (TVA): The TVA, the nation's 

largest public power provider, has authority to use payments it 

receives from selling power to the public without further appropriation. 

In October 2011, we reported that TVA had annual revenues of about 

$11 billion. 25 

Presidio Trust Collections: The Presidio Trust, a congressionally 

chartered organization, manages The Presidio, an urban park in San 

22Section 2509(a) of the Food, Agriculture, Conservation, and Trade (FACT) Act of 1990, 

21 U.S.C. 136a. 

23GAO, Agricultural Quarantine Inspection Fees: Major Changes Needed to Align Fee 

Revenues with Program Costs, GA0-13-268 (Washington, D.C.: Mar. 1, 2013). 

24GAO, Supetfund: Status of EPA's Efforts to Improve Its Management and Oversight of 

Special Accounts, GA0-12-109 (Washington, D.C.: Jan. 18, 2012). 

25GAO, Tennessee Valley Authority: Full Consideration of Energy Efficiency and Better 

Capital Expenditures Planning Are Needed, GA0-12-107 (Washington, D.C.: Oct 31, 

2011). 

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Francisco, and sustains its operations in part by rental income from 

residential and commercial buildings on its grounds. 26 

Agencies can also be authorized to retain intragovernmental fees charged 

to other agencies in exchange for a good or service. Some agencies are 

fully supported by intragovernmental fees; for others, intragovernmental 

fees are one of their sources of funds. 

Federal Protective Service (FPS) Fees: The FPS is a fully fee-funded 

organization authorized to charge customer agencies fees for security 

services at federal facilities and to use those offsetting collections for 

all agency operations. In July 2016, we reported that, at the end of 

fiscal year 2014, FPS had an unobligated balance of approximately 

$193 million and that FPS had not established targets to determine 

the extent to which that balance was appropriate to fund its 

operations. 27 

Federal Aviation Administration (FM) Franchise Fund Customer 

Fees: FM's Administrative Services Franchise Fund provides goods 

and services-including training and specialized aircraft 

maintenance--to customer agencies on a fee-for-service basis28 

National Park Service Fees (NPS): NPS collections include 

intragovernmental fees, as well as user fees and appropriations. For 

28GAO, Congressionally Chartered Organizations: Key Principles for Leveraging 

Nonfederal Resources, GA0-13-549 (Washington, D.C.: June 7, 2013). Congress has 

chartered independent organizations which are authorized to receive and retain financial 

and nonfinancial resources from nonfederal partners to help meet their core mission and 

goals. Presidio Trust funds are deposited to a public enterprise fund account, a type of 

revolving fund that conducts cycles of businesslike operations-mainly with the public-in 

which proceeds from the sale of products or services are used to finance spending, 

usually without requirement for annual appropriations. See GAO, A Glossary of Terms 

Used in the Federal Budget Process (Supersedes AFMD-2.1.1), GA0-05-734SP 

(Washington, D.C.: Sept 1, 2005). 

27GA0-16-443. 

28FAA is authorized to retain an amount not to exceed 4 percent of the total annual 

income to the fund as a reserve; amounts in excess of the reserve limitation are to be 

transferred to the Treasury. See Pub. L. No. 104-205, title I, Sept 30, 1996, 110 Stat. 

2957 (now appears as 49 U.S.C. § 40113 note). Franchise funds are a type of 

intragovernmental revolving fund that provides common administrative services benefitting 

other federal entities. lntragovemmental Revolving Fund Accounts are appropriation 

accounts authorized to be credited with collections from other federal agencies' accounts 

that are earmarked to finance a continuing cycle of business-type operations. For our work 

on FAA's Administrative Services Franchise Fund, see GAO, Revolving Funds: Additional 

Pricing and Performance Information for FAA and Treasury Funds Could Enhance Agency 

Decisions on Shared Services, GA0~16-477 (Washington, D.C.: May 10, 2016). 

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example, in October 2016, we reported that NPS received funding 

from the Department of the Army to contract with the National 

Symphony Orchestra for holiday concerts on the U.S. Capitol 

Grounds." 

Even when an agency has a permanent authority to use collections, 

collections remain subject to congressional oversight at any point in time 

and Congress can place limitations on obligations for any given year. For 

example, 

U.S. Citizenship and Immigration Services (USC/S) Fees: USCIS is 

authorized to charge fees for adjudication and naturalization services, 

including a premium-processing fee for employment-based pemioners 

and applicants. The House Report to the fiscal year 2008 Department 

of Homeland Security Appropriations Bill, H.R. 2638, directed USC IS 

to allocate all premium-processing fee collections to information 

technology and business-systems transformation. In January 2009, 

we reported that, consistent with this directive, USCIS's 2007 fee 

review stated that the agency intended to use all premium processing 

collections to fund infrastructure improvements to transform USCIS's 

paper-based data systems into a modern, digital processing 

resource. 30 In July 2016, we reported that USCIS estimated that the 

unobligated carryover balance for the premium processing fee could 

grow to $1.1 billion by fiscal year 2020, as fee collections are 

expected to exceed Transformation initiative funding requirements in 

fiscal years 2015 through 2020. 31 

Department of Justice's (DOJ) Crime Victims Fund (CVF) Fines and 

Penalties: Criminal fines and penalties collected from offenders, 

among other sources, are deposited in the CVF and can be used 

without further appropriation to fund victims' assistance programs and 

directly compensate crime victims. In February 2015, we reported that 

in fiscal years 2009 through 2013, annual appropriations acts limited 

the CVF amounts the DOJ's Office of Justice Programs may obligate 

for these purposes. 32 

29GAO, US. Capitol Grounds Concerts: Improvements Needed in Management Approval 

Controls over Certain Payments, GA0-17-44 (Washington, D.C.: Oct 25, 2016). 

30GAO, Federal User Fees: Additional Analyses and Timely Reviews Could Improve 

Immigration and Naturalization User Fee Design and USC!S Operations, GA0-09-180 

(Washington, D.C.: January 23, 2009). 

31GA0-16-443. 

32GA0-15-48. 

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a Combination of Different 

Authorities 

In some cases, Congress has provided agencies with permanent 

authority to use a portion of collections and designated other portions of 

the collections for another use or to be deposited to the Treasury as 

miscellaneous receipts. 

Bureau of Land Management (BLM) Grazing Fees: Since the early 

1900s, the federal government has required ranchers to pay a fee for 

grazing their livestock on millions of acres of federal land located 

primarily in western states. The relevant authorities designate a 

portion of the grazing fees collected by the BLM for range 

improvement, a portion to states, and a portion to be deposited to the 

Treasury as miscellaneous receipts. 33 For example, in September 

2005, we reported that in fiscal year 2004 the BLM collected about 

$11.8 million in grazing fees, half of which was deposited to a special 

fund receipt account in the Treasury for range rehabilitation, 

protection, and improvements. 34 Of the other half of the collections, 

about $2.2 million was distributed to states and counties and about 

$3.7 million was deposited to the Treasury as miscellaneous receipts. 

Department of Housing and Urban Development (HUD) Mutual 

Mortgage Insurance Fund Settlement: HUD's Mutual Mortgage 

Insurance Fund receives payments resulting from violations related to 

single-family programs. The primary purpose of the Mutual Mortgage 

Insurance Fund is to pay lenders in cases where borrowers default on 

their loan and the lender makes a claim for mortgage insurance 

benefits. In November 2016, we reported on a case involving False 

Claims Act violations and loans backed by HUD's Federal Housing 

Administration (FHA) in which a portion of the settlement was paid to 

the company that filed a complaint in regard to the False Claims Act 

33Under the Federal Land Policy and Management Act of 1976, 50 percent or $10 million, 

whichever is greater, of fees collected in a year for grazing on BLM lands managed under 

the Taylor Grazing Act and the Act of August 28, 1937, and on Forest Service land in the 

16 western states, are to be credited to a special fund receipt account in the Treasury for 

range rehabilitation, protection, and improvements. In addition, under the Taylor Grazing 

Act, the Act of August 28, 1937, and the Bankhead-Jones Farm Tenant Act, BLM also 

distributes a portion of grazing fee collections to states and the Treasury. 

34GAO, Livestock Grazing: Federal Expenditures and Receipts Vary, Depending on the 

Agency and the Purpose of the Fee Charged, GA0-05-869 (Washington, D.C. Sept. 30, 

2005). 

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on behalf of the government. 35 The other FHA-related settlement 

proceeds were divided among, and deposited to, the Mutual Mortgage 

Insurance Fund. the Treasury as miscellaneous receipts. and DOJ's 

Three Percent Fund. 

DOJ Drug Enforcement Administration (DEA) Diversion Control Fees: 

The first $15 million of fees collected each year from DEA registrants 

such as manufacturers. distributors, dispensers, importers, and 

exporters of controlled substances (such as narcotics and stimulants) 

and certain listed chemicals (such as ephedrine) is deposited to the 

Treasury as miscellaneous receipts. As we reported in February 2015, 

fees collected beyond $15 million are available to the agency and 

obligated to recover the full costs of DEA's diversion control 

program. 36 

DOJ Three Percent Fund Penalties: Most civil penalties resulting from 

DOJ litigation are eligible to be assessed up to a 3 percent fee 

disbursed to DOJ's Three Percent Fund-which is primarily used to 

offset DOJ expenses related to civil debt collection 37 The remainder 

of the civil penalty amount collected may be deposited to the Treasury 

as miscellaneous receipts or to another account. For example. in 

February 2015, we reported on a civil settlement involving fraud 

against the U.S. Postal Service. Of the $13 million that was awarded 

to the U.S. Postal Service. DOJ deposited $390,000 into the Three 

Percent Fund. 38 

Meadows and Jordan, Ranking Members Connolly and 

Cartwright, and Members of the Subcommittees, this concludes our 

35GAO, Financial Institutions: Penalty and Settlement Payments for Mortgage¥Related 

Violailons in Selected Cases, GA0-17-11R (Washington, D.C.: Nov. 10, 2016). In 

accordance wlth the qui tam provisions of the False Claims Act, a person or company that 

files suit for violations of the False Claims Act on behalf of the government is entitled to 

receive between 15 percent and 25 percent of the amount recovered by the government 

through the qui tam action. See 31 U.S.C § 3730(d). 

36GA0-15-48. 

37See Pub. L. No. 107-273, § 11013, 116 Stat. 1758, 1823 (2002) (codified at 28 U.S.C. § 

527 note). The Three Percent Fund is available for expenses related to processing and 

tracking civil and crimina! debt collection litigation. Thereafter, it is available for financial 

systems and debt collection-related personnel, administrative, and litigation expenses. 

Available amounts are determined by calculating 3 percent of eligible amounts collected. 

38GA0-15-48. 

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GAO Contact and 

Staff 

Acknowledgments 

prepared statement. We would be pleased to respond to any questions 

you may have at this time. 

If you or your staff members have any questions about this testimony, 

please contact Heather Krause, Acting Director, Strategic Issues at (202) 

512-6806 or krauseh@gao.gov or Edda Emmanuelli Perez, Managing 

Associate General Counsel, Office of General Counsel at (202) 512-2853 

or EmmanuelliPerezE@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this testimony. GAO staff who made key contributions to this testimony 

are Susan J. Irving, Director; Julia Matta, Assistant General Counsel for 

Appropriations Law; Susan E. Murphy, Assistant Director; Laurel Plume, 

Analyst-in-Charge; and Amanda Postiglione, Senior Attorney. Allison 

Abrams, Dawn Bidne, Elizabeth Erdmann, Chris Falcone, Valerie Kasindi, 

and Jeremy Manion also contributed. 

Page 15 GA0-17-268T 
25 

Mr. MEADOWS. Thank you, Ms. Krause. You said her name much 

better than I did, so I appreciate that. 

Mr. Kosar, you are recognized for 5 minutes. 

STATEMENT OF KEVIN KOSAR 

Mr. KOSAR. I thank the chairman and ranking member and the 

rest of the committee and its staff for having me here. My name 

is Kevin Kosar. I’m a senior fellow at R Street Institute, a think 

tank here in Washington, D.C. And previous to that, I spent 11 

years at the Congressional Research Service. 

In my current position, I co-direct the Legislative Branch Capacity Working Group, a nonpartisan gathering of scholars and congressional experts who aim, as we like to put it, to make Congress 

great again. We meet each month here on the Hill to discuss aspects of congressional capacity, produce research on it, and we do 

all this in the hopes that Congress will empower itself to carry out 

its constitutional duties and do what the public expects of it. 

So I’m obviously delighted to be here today, because the power 

of the purse is a fundamental legislative authority. It’s a power 

that aims to limit executive power, encourage agency accountability 

to elected officials, and to curb corruption. And it is a power, unfortunately, that Congress has delegated away, in many instances. 

I was asked to testify on the subject of Federal agencies and 

their self-funding activities, and it’s a large and obviously complex 

topic, to say the least. The President’s budget reports the government collected $516 billion from the public this past year in the 

form of fees, user charges, and the like, which is a significant portion of the government’s total revenues. 

Now, the principle that the collection expenditure of the funds 

should flow through Congress is longstanding. It is in our Constitution. All authority for collecting moneys from the public and expending it are explicated in Article I, which established the legislative branch. One will find no authorities over spending or collecting 

money in Article II. Instead, the President is to ensure that the executive branch take care that the law be faithfully executed. 

The principle of congressional control over spending is also expressed in Miscellaneous Receipts Act, first enacted in 1849. It 

obliged executive agents who collect funds from the public to 

promptly deposit the moneys in the Treasury, whereafter Congress 

may reappropriate the funds or not and also may direct to what the 

funds will be appropriated. 

While the principle is age-old and clear, congressional practice 

has frequently veered from it. As I note in my written testimony, 

the very first Congress passed a law that allowed customs officers 

and collectors in our young Nation’s ports to pay themselves from 

the moneys they collected on the ships that arrived at the ports. 

Over the past 200-plus years, Congress repeatedly has enacted 

exceptions to the principle that all funds should flow into the 

Treasury, and the rationales have been many and varied. Here are 

just a few of them: 

One rationale is that allowing the agency to expend some portion 

of its fees is logistically more sensible and that it creates incentives 

for higher productivity. Such was the case with the aforementioned 

1789 customs act. Customs officials were actually compensated 


KING-6430 with DISTILLER
26 

based on the number of ships they inspected, and it was at a rate 

that was written into the law. 

In the second instance, Congress’ rationale has been that an 

agency should be a self-funding commercial enterprise and its activities should not be borne by the taxpayers as a whole. And, 

therefore, if it’s to operate in a financially self-sustaining manner, 

it needs to have broad discretion over the spending of its receipts 

and immediate access to their use. We see this with the Postal 

Service. 

A third rationale one finds is a political one. And this one is 

much more complicated, in that we often will have a majority in 

Congress who wants to insulate agency spending from congressional influence by the minority because the minority may disagree 

with what the agency is going to do with the spending. 

The Consumer Financial Protection Bureau may well be an example of this line of thinking, wherein it is able to derive revenues 

through the Federal Reserve, but then it also has this fund, 

through which it can use these moneys for very, very broad purposes put in the statute. It is largely insulated, therefore, from appropriations. 

Now, assuredly, these aren’t all the reasons Congress has created 

exceptions to the principle but just a few. 

To anyone but experts in this room and appropriators, the government’s practices for collecting funds from the public are bewildering, but I think the basic takeaway is fairly obvious: The progressive delegating away of the power of the purse, by definition, 

diminishes legislative authority. By how much I am not sure, and 

I think that would be something that would be interesting to discuss. It seems a difficult thing to quantify. 

It is heartening, therefore, to see Congress discussing this topic 

and discussing H.R. 5499. And I’m hopeful that fruits of these discussions are that Congress can reclaim some of its powers of the 

purse. 

Thank you. 

[Prepared statement of Mr. Kosar follows:] 


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1050 17'h Street, N.W. 

Suite 1150 

Washington, DC 20036 

202.525.5717 

Nov. 29,2016 

Free Markets. Real Solutions. 

www.rstreet..org 

To: House Oversight and Government Reform, Subcommittee on Government Operations and 

Healthcare, Benefits, and Administrative Rules 

From: Kevin R. Kosar, Director of the Governance Project, R Street Institute 

Re: Written testimony concerning the agencies' expenditures of fees and H.R. 5499 for the 

hearing, "Restoring the Power of the Purse," Dec. 1, 2016 

I thank the subcommittee for inviting me to testifY on the subject of federal agencies and their 

self-funding activities. 

As the committee may know, I co-direct the Legislative Branch Capacity Working Group, a 

nonpartisan gathering of scholars and congressional staff that aims to "make Congress great 

again." 1 We meet each month here on the Hill to discuss aspects of congressional capacity, and 

commission and produce research on the subject.2 

This hearing strikes me as particularly important because it considers a fundamental and potent 

power of Congress: the power of the purse. The president's budget reports the government 

collected $516 billion from the public.3 

We also will discuss today an important piece oflegislation, H.R. 5499, the Agency 

Accountability Act of2016. This legislation aims to reassert congressional authority over a 

greater portion of federal spending by requiring agencies-with two exceptions-to turn over 

fees, fines, penalties and settlement proceeds to the U.S. Treasury, allowing Congress to choose 

whether to re-appropriate them.4 

1 The group is co-directed by Lee Drutman ofNew America. Details are at http://www.LegBranch.com. 2 E.g., "How to Strengthen Congress," National Affairs, fa112015. 

http://www.nationalaffairs.com/publications/detail;1Jow-to-strengthen-congrcss 

3 Office of Management and Budget, Budget of the United States Government, Fiscal Year 2017: 

Analytical Perspectives, p. 211. Table included on the final page of this testimony. 

https://www.whitehouse.gov/sites/default/files/omb/budget/fy2017/assets/ap 13 offsctting.pdf 4 H.R. 5499, 114'h Congress.ll,ltp!l;//www.congre_ss.gov/billll14th-congress/house-bill/5422 
28 


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2 I Kosar testimony on restoring the power of the purse 

Congress and the Power of the Purse 

The authority to raise revenues and to direct their expenditure was assigned to Congress by the 

Founders. 

Article I, section 8 and section 9, respectively, state: 

"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, 

to pay the Debts and provide for the common Defence and general Welfare of the United 

States; but all Duties, Imposts and Excises shall be uniform throughout the United 

States." 

"No Money shall be drawn from the Treasury, but in Consequence of Appropriations 

made by Law; and a regular Statement and Account of the Receipts and Expenditures of 

all public Money shall be published from time to time." 

Among Article II's explication of the powers of the president and the executive branch generally, 

one will find no constitutional provision permitting the raising of revenues. 

None of this was accidental. As the House of Representatives' Office of the Historian has noted, 

the Founders clearly wanted to 

"ensure that the executive would not spend money without congressional authorization 

... The framers were unanimous that Congress, as the representatives of the people, 

should be in control of public funds--not the President or executive branch agencies. 

This strongly-held belief was rooted in the framers' experiences with England, where the 

king had wide latitude over spending once the money had been raiscd."5 

The power of the purse, then, is a matter fundamental to the nature of our democratic re.public. 

Congress is the first branch. Thus, the Constitution empowers Congress alone to impose taxes, 

collect duties and imposts and to impose fees, as well as to direct if and how these funds will be 

spent by the executive branch. Individuals and businesses may be compelled by govermnent to 

pay only by consequence of a law. To ensure that law does not offend the public, the 

Constitution requires revenue-raising bills to originate in its most democratic body: the House of 

Representatives. 

5 "Power of the Purse," undated. http://bistory.house.gov/lnstitution!Origins-Development/Powcr-of-thcPurse/ 
29 


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Kosar testimony on restoring the power of the purse 13 

This principle of Congress as the keeper of the purse6 was embodied in the Miscellaneous 

Receipts Act,7 which was first enacted in 1849. The statute directs a federal employee in receipt 

of "public money" to "deposit the money without delay in the Treasury or with a depositary 

designated by the Secretary of the Treasury under law." The Government Accountability Office 

(GAO) explains: 

"The term 'miscellaneous receipts' does not refer to any single account in the Treasury. 

Rather, it refers to a number of receipt accounts under the heading 'General Fund.' ... 

Once money is deposited into a 'miscellaneous receipts' account, it takes an 

appropriation to get it out. " 8 

Law professor Andy Spalding provides an instructive example: 

"Say the [Department of Justice] settles a financial fraud case for $1 00 million. Someone 

over in the agency feels that some of this money should be spent on providing 

educational programs for the public on how to detect financial fraud. So he deposits $90 

million in the U.S. Treasury, and gives the remaining $10 million to a local community 

organization. Yes, this would violate the MRA. Why? Because once that money is placed 

in the federal government's hands, it's Congress' to spend. The statute makes this 

unmistakably clear: if the government 'receives' the money, it's to go to the Treasury and 

allocated as Congress sees fit. For an executive agency to receive money and then tum 

around and spend it would be to usurp Congress' power of the purse. It violates the 

separation of powers. It violates the MRA."9 

Practice vs. Principle 

The principle is indisputable: Congress must appropriate and direct the expenditure of public 

funds. Funds collected must go to the U.S Treasury, and Congress may re-appropriate them 

subsequently. Practice, however, has often been different. 

6 The District of Columbia Circuit Court has written the MRA "derives from and safeguards a principle 

fundamental to our constitutional structure, the separation-of-powers precept embedded in the 

Appropriations Clause." Scheduled Airlines Traffic Offices v. Department 

of Defense, 87 F.3d 1356, 1361 (D.C. Cir. !996).11!tpjl()p_e_!1il!tist.org1:7/f3dil356/schedulcd-ai!Jincstraffic-officcs-inc-v-department-of-dcfensc 

7 9 Stat. 398 (1849); 31 U.S.C. 3302(b). https://www.law.cornell.edu/uscode/text/31/3302# 8 -·-· ... -·-----------~---·· --·------·~· -·-·-.. --·-· 

Government Accountability Office, "Principles of Federal Appropriations Law," 3rd ed., vol. 2, pp. 6-

167-6-168. 

9 Andy Spalding, "The Much Misunderstood Miscellaneous Receipts Act (part!)," The FCPA B/og, Sept. 

2 9, 2014. http:/ !www. fcpablog.com/blog/20 1419/2 9 /the-much-rnisunderstood-misec!l~ill'OUs:r•~c~.::Afl: 

part-l.html 
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4 I Kosar testimony on restoring the power of the purse 

During the very first Congress, a law was enacted to raise revenues through customs duties and 

tonnage. 10 The federal "collectors, naval officials, and surveyors" who worked in the ports were 

paid out of fees they collected from vessels they examined. 11 In part, this arrangement was 

driven by the realities of the day: appropriating tax dollars upfront to pay for port operations and 

having all fees collected returned to the Treasury was burdensome and logistically difficult. 12 

The arrangement also aimed to incentivize work. Federally commissioned port employees were 

compensated on the basis of the quantity of work they completed. 13 

"That there shall be allowed and paid to the collectors, naval officers and surveyors, to be 

appointed pursuant to this act, the fees and percentage following, that is to say: To each 

collector, for every entrance of any ship or vessel of one hundred tons burthen or 

upwards, two dollars and a half; for every clearance of any ship or vessel of one hundred 

tons burthen and upwards, two dollars and a half; for every entrance of any ship or vessel 

under the burthen of one hundred tons, one dollar and a half ... " 

Over the ensuing two centuries, Congress enacted statutes ad hoc that authorized agencies to 

hold and expend revenues they collected in the forrn of fees, penalties and duties. For example, a 

1902 statute authorized the proceeds from the sale of public lands to be placed in a special 

Treasury fund, which could then be drawn upon by the secretary of the Interior to spend on 

irrigation projects of his choosing. 14 Congress also established various self-funding 

governmental entities and enterprises, such as government corporations. 15 Entities that were 

designed to be self-funding by selling goods and services, such as the U.S. Postal Service, were 

freed from many government operational rules. 16 Sometimes they were given broad discretion to 

10 An Act to regulate the collection of the duties imposed by law on the tonnage of ships or vessels, and 

on goods, wares and merchandises imported into the United States, July 31, 1789. 

ht!p://www.consritution.org/uslaw/sal/001 statutes at larg£J!!lf 11 On licit and illicit augmentations to agency appropriations, see Government Accountability Office, 

"Principles of Federal Appropriations Law," 3rd ed., vol. 2, pp. 6-166 et seq. 

bttlliL'YW\\CZ!l<>,,gQylsQeciaJ..v.llbsld0638£s.J2J24f 12 The young nation was broke, and it was not at all obvious how many ships would land each year. 13 In these days before income taxes, cnstoms fees comprised a substantial portion of federal revenues. 14 An Act Appropriating the receipts from the sale and disposal of public lands in certain States and 

Territories to the construction of irrigation works for the reclamation of arid lands, June 17, 1902. 

l:!!!R :1 lwww. constjg1 tiol}_,Qrg/.:!!.5;J.<L\YI'§_al!!l_~_2_;;_t;!tl)tes at las_g<;&Qi' 15 Ronald C. Moe, "Managing the Public's Business: Federal Government Corporations," U.S. Congress, 

U.S. Senate, Committee on Governmental Affairs, S. Prt. 104-18, April 1995. 

http://www.mindserpent.com/ American History/books/Businesslgovt bus.html 16 Government Accountability Office, "Government Corporations: Profiles of Existing Government 

Corporations," GAOIGGD-96-14, December 1995. https:l!}y-'Y':':'oS.l29·govifdsyslpkgLGAOREPORTSQ_Q_l)-96-14/pdf/GAOREPORTS-GGD-96-14.pdf A list of existing government corporations may be 

found in Kevin R. Kosar, "Federal Government Corporations: An Overview," Congressional Research 

Service, RL30365, Jan. 7, 2009. 

http://www.kevinrkosar.com/RL30365 Kosar Federal Government Corporations An Overview Ol-07-

09.pdf 
31 


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Kosar testimony on restoring the power of the purse Is 

spend their revenues, the rationale being that they needed to upgrade their operations regularly so 

as to ensure prompt and high-quality service for customers. 

As government grew and became more complex, so too did its policies for the collection of fees, 

settlements and the like. 

Congress made a conceptual and legal differentiation between the types of funds agencies 

collected, which carried ramifications for how said funds were treated in the budget and utilized 

by agencies. 

"Receipts ... are classified into the following major categories: (1) budget receipts and (2) 

offsetting collections ... Budget receipts are collections from the public that result from 

the exercise of the Government's sovereign or governmental powers, excluding receipts 

offset against outlays. These collections, also called governmental receipts, consist 

mainly of tax receipts (including social insurance taxes), receipts from court fines, certain 

licenses, and deposits of earnings by the Federal Reserve System. Refunds of receipts are 

treated as deductions from gross receipts. 

'.'Offsetting collections are from other Government accounts or the public that arc of a 

business-type or market-oriented nature. They are classified into two major categories: 

( 1) offsetting collections credited to appropriations or fund accounts, and (2) offsetting 

receipts (i.e., amounts deposited in receipt accounts). Collections credited to 

appropriation or fund accounts normally can be used without appropriation action by 

Congress. These occur in two instances: (1) when authorized by law, amounts collected 

for materials or services are treated as reimbursements to appropriations and (2) in the 

three types of revolving funds (public enterprise, intra governmental, and trust); 

collections arc netted against spending, and outlays are reported as the net amount. 

Offsetting receipts in receipt accounts cannot be used without being appropriated. They 

are subdivided into two categories: (1) proprietary receipts - these collections are from 

the public and they are offset against outlays by agency and by function, and (2) intra 

govcrrm1cntal funds - these arc payments into receipt accounts from Governmental 

appropriation or fund accounts." 17 

What agencies could and could not do with fees became very confusing. GAO reported in ilic 

late 1990s: 

"The 27 fee-reliant agencies in our review varied in how their user fees were classified, 

what kind of account they were deposited into, the legislative controls on the amount or 

17 U.S. Treasury, "Final Monthly Statement Treasury Statement," October 2016, p. 35. 

https://www .fiscal. treasury. gov /fsreports/rpt/m th TreasStmt/m ts09!6. pdf 
32 


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6 I Kosar testimony on restoring the power of the purse 

use of these fees, and how they were treated under BEA. As a result, user fees for similar 

programs were often treated quite differently in the federal budget process. For example, 

some agricultural inspection fees were netted against their accounts' budget authority and 

outlays, which reduced spending counted against BEA discretionary spending limits. 

Other agricultural fees were appropriated as new budget authority and were counted as 

discretionary spending. While these fees offset spending, they do so at the department 

and subfunction levels. In this case, the offset can be used to provide room under the 

spending caps elsewhere and not necessarily for the program generating the fee." 18 

Annual appropriations acts, meanwhile, often include language limiting how agencies may use 

fees. The FY2016 Consolidated Appropriations Act carried various provisions on fees and 

collections, including these two: 

Department of Justice 

"For expenses necessary for the enforcement of antitrust and kindred laws, 

$164,977,000, to remain available until expended: Provided, That notwithstanding any 

other provision of law, fees collected for premerger notification filings under the HartScott Rodino Antitrust Improvements Act of 1976 (15 U.S. C. 18a), regardless of the year 

of collection (and estimated to be $124,000,000 in fiscal year 2016), shall be retained 

and used for necessmy expenses in this appropriation, and shall remain available until 

expended: Provided further, That the sum herein appropriated from the general fund 

shall be reduced as such offsetting collections are received during fiscal year 2016, so as 

to result in a final fiscal year 2016 appropriation from the general fund estimated at 

$40,977,000. "

19 

Nuclear Regulatory Commission 

"That revenues from licensing fees, inspection services, and other services and 

collections estimated at $8 7 2, 864,000 in fiscal year 2016 shall be retained and used for 

necessary salaries and expenses in this account, notwithstanding 31 U.S. C. 3302, and 

shall remain available until expended: Provided further, That the sum herein 

appropriated shall be reduced by the amount of revenues received during fiscal year 

2016 so as to result in a final fiscal year 2016 appropriation estimated at not more than 

$117,136,000. "

20 

18 Government Accountability Office, "Federal User Fees: Budgetary Treatment, 

Status, and Emerging Management Issues," GAO/AIMD-98-11, December 1997, p 12. 

http://www.gao.gov/assets/230/225030.pdf 

19 Consolidated Appropriations Act 2016, 129 Stat 2298, Dec. 18,2015. 

https:/ /www .congress_,g~lV/114/plaws/publll3/PLA W -1142.!!.12!lU...!ldf 2

° Consolidated Appropriations Act 2016, 129 Stat 2421, Dec. 18, 20l-5. 

h!tps://www.congress.gov/114/plaws/publl 13/PLAW-114publl13.pdf 
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Kosar testimony on restoring the power of the purse 17 

Conclusion: What Next? 

Clearly, in the 21st century, the budgetary and appropriations treatment of fees, fines, penalties 

and settlements often deviates from the simple principle outlined above. Indeed, the situation is 

sufficiently complex that it is difficult even to generalize as to how much discretion agencies 

have to spend these collections and receipts.21 

Congress should expand its authority to direct the usage of funds collected by agencies through 

the annual appropriations process. This would increase its power over the purse. 

As it proceeds, I would suggest that legislators should first get help mapping the scope of the 

problem. It simply is not clear how many agencies collect monies from the public and 

businesses, or what discretion they have over them. The president's budget has chapters on 

governmental receipts and offsetting collections and offsetting receipts, but it aggregates the 

funds received into broad categories.22 What is needed is more fine-grained data that is then 

mapped against statutory provisions (in authorizations and appropriations) that set the terms for 

use of the monies collected. Both GAO and the Congressional Research Service's executive and 

legislative budget-process experts could help in this endeavor. Once this sort of analysis is 

available, Congress could better consider how to ensure greater consistency across agencies. 

In closing, I reiterate that more annualized direction from Congress on how agency-collected 

monies may be spent is desirable. However, some agencies, particularly those that are selffunding, likely deserve greater discretion-so long as they have proven historically responsive to 

congressional oversight 23 

I thank the subcommittee for inviting me to testifY and would be happy to answer any questions, 

today or subsequently. 

21 And to make matters even more confounding, some of the funds collected should be categorized as 

governmental receipts but are treated as offsetting collections and receipts. Office of Management and 

Budget, Budget of the United States Government, Fiscal Year 201 7: Analytical Perspectives, p. 211. 22 Office of Management and Budget, Budget of the United States Government, Fiscal Year 2017: 

Analytical Perspectives, pp. !53 and 21 I. 

h!!m;.l6Y!VW. whitehouse.gov/sites/default/files/omb/bu~t/fy20 I 7 /assets/ap 13 offsetting. pdf 23 As an example, the National Academy of Public Administration reported this particular downside of 

excessive congressional direction. "The inherent nature of the appropriations process prevents some fees 

from reaching USPTO in unanticipated high-volume years because USPTO's budget is set months prior 

to the start of the fiscal year. Simulations using USPTO' s patent resource model, which the Academy 

Panel independently evaluated before using, show that if USPTO had been given access to these fees and 

applied all or most ofthem to patent staffing, it would have had the ability to consistently hire staff' and 

respond more quickly to filings. "U.S. Patent and Trademark Office: Transforming to Meet the 

Challenges of the 21st Century," August 2005, p. xx. http://www.napaw~sh.org/wpcontent!u.Pl_oads/2005/05 O(),pgf 
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8 I Kosar testimony on restoring the power of the purse 

Table 13-1. OFFSETTING COLLECTIONS AND OFFSETllNG RECEIPTS FI'IOM THE PUBUC flnbilf!Onsofdolla.-"S) 

Ollsetllng collo<ll..,. (""dited to expenditure a-~ 

User-: 

-~Sil!IJ'I:SllllllO""rUSPStoes(off·bu<lge!) 

AI! cthttfusercharges ............................... . 

S.tb!Olal.usercharges ...•. 

Ortler ctl!lacaxs creditectto ~ndilllrn ao::oltils: 

Otherco!loctions •.•....•.• ····-·············-·····-····. 

Subttltal, offsetting ~adions .,.,_ .. __ .,_ 

Offsetting: receipt& fdepcs:Jted ln receipt aecou.nts): 

l.Joor.cha~: 

MOO caw premt.Jms 

Spoc:tn:n auction. reloc:aZoo. and litenses 

0\JW:!'Continoota:! Shelf roms. !x:rn.lsoo, &'ld rQJa!tes 

All cthm" collec!i'oos deposited if!. roca1pt ao::aurns 

Subtotal, Olher oollectloos deposited m rocrum accourns ____ ., ___ ........................... _____ • 

Subt:>1al,off&Mijng ~ ··-·- ........ __ ......... " 

73.5 

5.5 

13.9 

43.2 

3.3 

68.7 

206.1 

5.5 

2.6 

17.6 

25.7 

zne 

34.2 

134.9 

T0121,offsetllngcolloclk>nsand-g meolptslromlllo publle ....................... ,.,,. ________ , ______ ,,, __ , 516~ 

Total, offSetting coll«1ions and off~ rreO:ii)1S.OOudif)g off~dgtrt 442.4 

ADDENDUM: 

343.0 

1i'3.0 

2011 2017 

1<.8 75.3 

6.0 5.7 

15.1 15.1 

40.9 41.5 

4.0 42 

652 71! 

205.0 214.6 

6.8 7.0 

2.1 2.1 

6.2 7.5 

17.7 172 

223.7 23tB 

72.1 78.1 

12.9 13.9 

2.8 32 

35.7 40.1 

123.5 136.3 

36.0 31.4 

6M S$.3 

16.0 16.7 

51.1 44.4 

163.1 16$.8 

265.6 302.2 

5102 534.0 

435.4 456.6 

329.5 350.9 

160.8 11l3.1 
35 

Mr. MEADOWS. Thank you, Mr. Kosar. 

Mr. Hollister, you’re recognized for 5 minutes. 

STATEMENT OF HUDSON HOLLISTER 

Mr. HOLLISTER. Chairman Meadows, Ranking Member Connolly, 

Chairman Jordan, Ranking Member Boyle, thank you for inviting 

me to testify today. 

In 1802, President Thomas Jefferson wrote to Albert Gallatin, 

the fourth Secretary of the Treasury, supporting Gallatin’s plan to, 

quote, ‘‘simplify our system of finance and bring it within the comprehension of every Member of Congress.’’ President Jefferson believed that Federal spending information had become so complex 

and so fragmented that only the experts could understand it. 

But Jefferson had a solution. By expressing Federal spending as, 

quote, ‘‘one consolidated mass’’ he wrote, ‘‘We might hope to see the 

finances of the Union as clear and intelligible as a merchant’s 

books so that every Member of Congress and every man of any 

mind in the Union should be able to comprehend them and consequently to control them.’’ 

Two hundred and fourteen years later, we face the same problem, and we need the same solution. The Federal Government is 

the largest and most complex organization in human history, but 

by expressing all Federal spending information as one consolidated 

data set, we can use commercially available software to make it, 

quote, ‘‘clear and intelligible’’ so that Congress and the people can 

comprehend it and control it. 

The Federal spending information is complex and fragmented. 

Hundreds of agencies separately report their receipts and their account balances to Treasury, their budget information to the White 

House OMB, and their contracting details to the GSA. But 2 years 

ago, this committee unanimously approved the Digital Accountability and Transparency Act, or DATA Act, which directs Treasury 

and OMB to create a single government-wide data structure for all 

Federal spending information. 

In May 2017, this May, when every agency begins to report 

standardized spending information using that structure, they will 

create a single electronic picture of all spending. In a few minutes, 

I’m going to show you what that picture should look like. 

I know this committee is particularly interested in nonappropriated receipts—fines, fees, penalties, settlements that agencies receive outside the appropriations process. So far, the DATA 

Act structure focuses on money going out, expenditures, not on 

money coming in, receipts. So that single picture, the single electronic picture, won’t be able to provide full detail on how fines, 

fees, penalties, and settlements are spent. 

However, this information already exists. It is already being reported to Treasury. It is maintained in the Central Accounting Reporting System at Treasury. And it could be reflected in the DATA 

Act structure. Congress can direct Treasury and OMB to expand 

the DATA Act to accommodate that information, and, in my view, 

Congress should. 

When I served as counsel to this committee, I worked on the first 

version of what became the DATA Act. I resigned from the staff in 

2012 in order to start the Data Coalition and helped then-ChairVerDate Nov 24 2008 09:39 May 08, 2017 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 H:\25006.TXT APRIL

KING-6430 with DISTILLER
36 

man Issa and Ranking Member Cummings to get the DATA Act 

passed. 

The Data Coalition is a trade association of nearly 40 companies 

whose commercially available software can inform decisions, illuminate fraud, and automate compliance—but only if we have consolidated and standardized data to work with. Starting in May 

2017, if all goes well, commercially available software will use that 

single data set to portray an electronic picture of Federal spending. 

And I want to ask if we could have slide 7 displayed for just a 

minute. This will be very familiar to Chairman Meadows, who has 

demonstrated this himself. 

The DATA Act should allow us to navigate from the entire government all the way to specific agencies, specific appropriations. 

This picture you see is interactive. If you click on one of the agencies or you click on one of the items there, you can go down all the 

way to individual items. You can navigate from the entire HHS to 

a particular contract. This level of interactivity will be possible 

across the entire executive branch. 

Now, the reliability of this picture is going to depend on how well 

agencies comply with the DATA Act starting in May 2017. They 

have to report high-quality data. 

As I mentioned, even after the DATA Act, there will be some limitations. The data structure that Treasury and OMB have created 

focuses on expenditures, not receipts. That means we won’t easily 

be able to differentiate between appropriated and nonappropriated 

funding sources. It is possible for Congress to amend the DATA Act 

to direct Treasury and OMB to expand the data structure so that 

it does include receipts. 

I asked our Data Coalition members to come up with a prototype 

visualization that shows what an expanded electronic picture of 

Federal spending might look like. And I would like to ask for slide 

14 to be displayed, please. 

Here we see a navigation that itemizes the Federal Government’s 

nonappropriated receipts, and it allows us to zoom in on a particular agency, programs within that agency. This information 

comes from the information Treasuryis already collecting and 

maintaining, but if this information’s incorporated into the DATA 

Act, this means we can see the connection between the receipts and 

the outlays. We can follow this all the way to the contracts and the 

expenditures. 

The coalition has prepared recommendations for the committee 

on how to amend the DATA Act to expand the data structure and 

ensure that receipts and payments are brought into the picture. 

By tracking all the complexity of Federal spending using a single 

government-wide data structure and by publishing all that information as one data set, we can realize President Jefferson’s vision 

of, quote, ‘‘one consolidated mass,’’ quote, ‘‘clear and intelligible.’’ 

This committee began that work by passing the DATA Act. By 

holding the executive branch accountable to follow the law and by 

expanding that law where necessary, the committee can finish it. 

Thank you. 

[Prepared statement of Mr. Hollister follows:] 


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Committee on Oversight and Government Reform 

Subcommittee on Government Operations 

Subcommittee on Health Care, Benefits and Administrative Rules 

United States House of Representatives 

December 1, 2016 

Testimony 

Hudson Hollister 

Executive Director, Data Coalition 

Using the DATA Act to Restore the Power of the Purse 

[Slide 1 ·Introductory Slide] 

Chairman Meadows, Ranking Member Connolly, Chairman Jordan, Ranking Member Norton: 

thank you for inviting me to testify. 

In April of 1802, President Thomas Jefferson wrote to Albert Gallatin,' the fourth Secretary of 

the Treasury, supporting Gallatin's plan to "simplify our system of finance, and bring it within the 

comprehension of every member of Congress." Jefferson believed that federal spending 

information had become so complex and so fragmented that only the experts could understand 

it. 

Jefferson's solution to this problem was a "simplification in the form of accounts in the treasury 

department, and in the organization of it's [sic] officers, so as to bring every thing to a single 

center." By expressing federal spending as "one consolidated mass," he wrote, "we might hope 

to see the finances of the Union as clear and intelligible as a merchant's books, so that every 

member of Congress, and every man of any mind in the Union, should be able to comprehend 

them, and consequently, to control them." 

Two hundred and fourteen years later, we face the same problem and we need the same 

solution. The federal government is the largest and the most complex organization in human 

history. But by expressing all federal spending as one consolidated data set, we can use 

1 http://founders.archives.govldocumentsiJeffersoniO 1-37-02-0 132#TSJ N-0 1-37-02-0 132-kw-000 1 
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commercially-available software to make it "clear and intelligible," so that Congress and the 

people can comprehend it, and control it. 

Federal spending information is complex and fragmented. Agencies must report their receipts 

and account balances to Treasury, their budget information to the White House Office of 

Management and Budget, and their contracting details to the General Services Administration. 

This information is handled by thousands of incompatible software systems. 

But two years ago this Committee unanimously approved, and President Obama signed, the 

reform necessary to express federal spending information as a single data set. The Digital 

Accountability and Transparency Act, or DATA Act, directs Treasury and OMB to create a 

single, government-wide data structure for all federal spending information. 

The most important deadline is five months away. In May of 2017 every federal agency must 

begin to report spending information using the same data format, creating a single electronic 

picture of all spending. In the next few minutes I am going to show you what that picture is going 

to look like. 

I know the Committee is particularly interested in fees, fines, penalties, and settlements that 

agencies receive outside the appropriations process. So far, the data structure that Treasury 

and OMB are using under the DATA Act focuses on expenditures, not on receipts, so our single 

electronic picture of all spending won't be able to provide full detail on how fees, fines, penalties, 

and settlements are spent. 

But Congress can direct Treasury and OMB to expand the data structure. And Congress should. 

When I served as counsel to this Committee, I worked on the first version of what became the 

DATA Act. I resigned from the staff in 2012 in order to start the Data Coalition and help 

then-Chairman Jssa and Ranking Member Cummings get the DATA Act passed. The Data 

Coalition is a trade association of nearly 40 companies whose commercially-available software 

can inform decisions, illuminate fraud, and automate compliance- but only if we have a single 

data set to work with. 

Earlier this year we established the Data Foundation, a nonprofit organization whose mission is 

to illuminate the benefits of open government data through research and education. For more 

on the DATA Act's history, goals, and potential, you can read the Data Foundation's first 

research paper, TheDA TA Act: Vision & Value, 2 co-published with MorganFranklin last July. 

[Slide 2 • Life Cycle of Federal Spending Information] 

2 http://www.datafoundation.org/data-act-vision-and-value-report/ 

2 
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Federal spending information is not just fragmented across agencies, systems, and reporting 

requirements. It is also separated into stages. Here is the full life cycle of federal spending 

information. 

Federal funds flow into receipt accounts. Some receipts are available for spending immediately. 

Other receipts are unavailable to be spent until Congress appropriates the funds. 

In 2006, the Federal Funding Accountability and Transparency Act, or FFATA, required the 

executive branch to begin publishing a summary of each federal grant and contract on the 

USASpending.gov website. The light gray arrow shows the information that is published under 

FFATA. 

The DATA Act- shown here with the dark gray arrow- requires the government to publish more 

of the life cycle and match appropriations to the grant and contract awards that are paid out of 

them. One of the most important expansions in transparency is not shown in this diagram: the 

DATA Act requires the publication of the direct spending that doesn't go out in the form of grants 

or contracts, like salaries and benefits. 

By requiring Treasury and OMB to set up a single government-wide data structure for 

appropriations, grants, and contracts, the DATA Act gives us a single electronic picture of all 

that information - or, to use President Jefferson's phrase, "one consolidated mass" that allows 

Congress and the public to "comprehend ... and consequently, to control" spending. 

The rest of my testimony has three parts. First, I will explain the information that is available to 

Congress and the public before the DATA Act comes into effect this May. Second, I will preview 

the single electronic picture of spending that will become available after agencies begin 

reporting appropriations, grants, and contracts using the standardized data structure. Third, I will 

show how even after the DATA Act, there will still be a need to expand the data structure to 

include more information for a more complete picture, and suggest how Congress might do that. 

[Slide 3- Federal Spending Information Before the DATA Act] 

Before the DATA Act, federal spending is mostly available as static documents, not as 

searchable data. 

[Slide 4 • Monthly Treasury Statement Example] 

The Monthly Treasury Statement of Receipts and Outlays, a document published every month 

by the Bureau of the Fiscal Service, is the most complete breakdown of federal funds received 

and spent by the government. 

The Monthly Treasury Statement summarizes all receipts, both those that are available to be 

spent immediately and those that cannot be spent until a Congressional appropriation. But 

3 
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because it is a static document, there is no way to access more detail or follow a particular 

category of receipts to see what happened to it. 

[Slide 5 - USASpending.gov] 

Under the Federal Funding Accountability and Transparency Act of 2006, federal agencies must 

report a summary of every grant and a summary of every contract, and that information is 

published on the USASpending.gov portal. It is fully searchable and interactive. 

However, because USASpending.gov is solely focused on grants and contracts, it does not give 

us the full picture of federal spending. It does not allow us to navigate back and forth between 

larger appropriations categories and specific grant and contract awards. 

[Slide 6- Federal Spending Information After the DATA Act] 

Under the DATA Act, Treasury and OMB have created a government wide data 

structure that connects expenditure accounts to grants and contracts for the first 

time. Once all the information is expressed using this data structure, starting in 

May 2017, we will have a single, authoritative data set that shows all 

expenditures, broken down by account, by grant, and by contract. 

Commercially available software will use this single data set to portray an electronic picture of 

federal spending. Several of our Data Coalition members are working on software that will 

provide agencies, and Congress, and the public with new ways to comprehend, and control 

spending. 

[Slides 7-12- Spending Visualizations] 

Here we see a navigation from an overall appropriation category all the way to a particular 

contract. This level of interactivity will be possible across the whole executive branch. 

This set of visualizations was created by Booz Allen Hamilton, but we expect other software 

companies will compete, once federal spending is publicly available as a single data set. 

The reliability of this electronic picture of federal spending will depend on how well agencies 

comply with the DATA Act, starting in May 2017. They must report complete, timely, accurate, 

high-quality data that matches the data structure Treasury and OMB have created. 

The DATA Act requires every inspector general to evaluate the data its agency reports. Last 

month, the inspectors general of most agencies published readiness reviews, and most came 

out positive, but some agencies are not ready. The Data Coalition has published a summary of 

4 
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the readiness reviews. 3 I understand this committee intends to conduct further oversight on 

agencies' DATA Act work. 

[Back to Slide 6 - Federal Spending Information After the DATA Act] 

Even after the DATA Act, some limitations will remain. First, the data structure that Treasury and 

OMB have created focuses on expenditures, not receipts. That means we won't easily be able 

to differentiate between appropriated and non-appropriated funding sources. 

Second, the data structure does not go all the way down to the checkbook level, with details for 

each payment. That means we won't yet be able to navigate all the way from the whole federal 

government to see the date and amount of every payment the government makes. Many states, 

led by Ohio, are providing this level of transparency already. In fact, Ohio allows the public to 

view every payment, see which accounts and budget categories the money came from, and see 

the name and contact information of the state official who was responsible for that payment. 

[Slide 13 - Federal Spending Information if the DATA Act is Amended] 

Congress should amend the DATA Act to direct Treasury and OMB to expand their data 

structure. Here is what the life cycle of federal spending information would look like if the DATA 

Act covered both receipts at the beginning and payments at the end, as shown by the green 

arrow. 

I asked our Data Coalition members to come up with a prototype visualization that shows what 

this expanded electronic picture of federal spending might look like. 

[Slides 14-17 - Receipts Visualizations] 

Here we see a navigation that itemizes the federal government's receipts between those that 

are unavailable, and require Congressional appropriation to be spent, and those that are 

available for spending immediately. 

If the data structure is expanded as we are recommending, we will also be able to navigate all 

the way down to the payment level, just as is possible today in Ohio and other states. 

[Slide 18- Conclusion: Expand the Data Structure; Eliminate Duplicative Systems; End 

the DUNS Monopoly] 

We have prepared recommendations for the Committee on how to amend the DATA Act to 

expand the data structure and ensure that receipts and payments are brought into the picture. 

Our legislative recommendations for the DATA Act are based on the Center for Open Data 

3 http:llwww.datacoalition.org/blog/. 

5 
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Enterprise's Transition Report,' which explains how the next Presidential administration can 

work with Congress to use open data to deliver transparency, accountability, and efficiency 

across all government operations. 

In addition to expanding the data structure to provide a more complete electronic picture of 

federal spending, we believe Congress should clarify how the DATA Act should streamline the 

federal government's reporting processes. Beginning in May 2017, agencies will be reporting 

their spending information spending twice- first the old-fashioned way, as static documents and 

through disconnected databases, using legacy systems like the Federal Procurement Data 

System (FPDS), and a second time as searchable, standardized data under the DATA Act. 

Congress should eliminate this duplication as soon as possible. The DATA Act process, based 

on data instead of on documents, must become the only way that agencies report spending. 

Our legislative recommendations provide a foundation to accomplish this. 

Finally, Congress must address the biggest obstacle to the public's access to spending 

information. The federal government uses an identification code called the DUNS Number to 

identify every grantee and contractor across all of its systems. The DUNS Number is 

proprietary. It is owned by Dun & Bradstreet, Inc., which is itself a contractor. Nobody can 

download federal grant or contract data without purchasing a license from Dun & Bradstreet. 

Taxpayers paid for this information to be compiled, and yet they cannot download or analyze it 

without paying again, every time. 

Congress should end Dun & Bradstreet's monopoly by directing the government to adopt a 

nonproprietary, freely reusable identification code for grantees and contractors. Our legislative 

recommendations would phase out the DUNS Number and replace it with an identification code 

that everyone can freely download, such as the globally-adopted Legal Entity Identifier (LEI). 

President Jefferson's 1802 letter to Secretary Gallatin complained that the government's 

financial position had taken on "the most artificial and mysterious form," "until the whole system 

was involved in impenetrable fog" and beyond the comprehension of Congress and the public. 

To anyone but a Treasury expert, the distinction between appropriated and non-appropriated 

receipts is indeed artificial and mysterious, and it allows the government to operate beyond 

Congress' comprehension and beyond public accountability. 

But by tracking all the complexity of federal spending using a single, government-wide data 

structure, and by publishing all that information as one data set, we can realize Jefferson's 

vision of "one consolidated mass," "clear and intelligible." This Committee began this work by 

passing the DATA Act. By holding the executive branch accountable to follow the law, and by 

expanding the law where necessary, this Committee can finish it. Thank you. 

4 http://opendataenterprise.org/transition-report.html 

6 

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Using the DATA Act to Restore 

the Power of the Purse 

Hudson Hollister, Executive Director 
44 


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Federal Spending Information Before the DATA Act 

There is no platform that shows the whole picture of federal spending, from receipt a

the way to outlay. 

Receipt of appropriated fundsMonthly Treasury Statement of 

Receipts and Outlays provides a 

summary but there is no way to drill 

down. 

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Monthly Treasury Statement 

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USASpending.gov 

HOME ABOUT WHERE IS THE MONEY GOING REFERENCES DOWNlOAD CENTER COMTACTUS 

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information on how their tax dollars are spent Learn More ... 

OVERVIEW OF AWARDS- FY 2017 

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Insert offset folio 37 here 25006.037KING-6430 with DISTILLER

Federal Spending Information After the DATA Act 

As agencies begin to report standardized data in May 2017, they will create a 

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non-appropriated funds will be mixed 

with other budgetary resources. 

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Insert offset folio 44 here 25006.044KING-6430 with DISTILLER

Federal Spending Information with Amended DATA Act 

If the DATAAct's data structure is expanded to include receipt accounts, the 

electronic picture can show the full life cycle of federal spending. 

Receipt of appropriated fundsAn expanded data structure could 

provide a dynamic view of 

appropriated funds. 

Receipt of non-appropriated 

funds- If receipt accounts were 

part of the data structure, we could 

track the receipt of nonappropriated funds to the same 

degree of detail as appropriated. 

Grants and contracts- Grants 

and contracts could be matched to 

the receipts from which they are 

funded. 

Legends: 

360 Spend Life Cycle 

Amended DATA Act 

FFATA (USAspending

Apportionme

Allotment 

(Allocatio

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All Federal Receipts 

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Top Offiee(s} Top Program{s) Top Aettvltie(s) 

Insert offset folio 46 here 25006.046KING-6430 with DISTILLER

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All 

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Insert offset folio 48 here 25006.048KING-6430 with DISTILLER

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Legislative Recommendations: 

Expand the Data Structure. 

Eliminate Duplicative Systems. 

End the DUNS Monopoly. 
61 

Mr. MEADOWS. Thank you, Mr. Hollister. And thank you for illuminating what we may be able to do in terms of giving greater 

transparency. We look forward to seeing the progress as we—I 

know the ranking member and I have been very in tune in a bipartisan way of following your work. 

Mr. Kohn, you are now recognized for 5 minutes. 

STATEMENT OF STEPHEN M. KOHN 

Mr. KOHN. Thank you. Thank you, Chairmen, Ranking Members, 

members of the committee—— 

Mr. MEADOWS. If you can pull that a little closer to you. Yeah. 

Mr. KOHN. Thank you Chairman, ranking members, members of 

the committee, for this opportunity to share with you the benefit 

of my 32 years of representing whistleblowers and how H.R. 5499 

may impact on those cases. 

This committee has a long and distinguished bipartisan record of 

supporting whistleblowers, and I am confident that you will ensure 

that nothing will inadvertently harm the existing statutory structure that works extremely well, is transparent, and saves the taxpayers billions of dollars. 

To understand how this process works, we need to look at the 

current laws and why whistleblowing is so effective. 

The Founding Fathers were true visionaries. They understood 

the importance of using citizens as a bulwark for ensuring accountability. On July 30, 1778, the Continental Congress passed perhaps 

the world’s first whistleblower law, encouraging every American 

and declaring it their duty to report crimes and misdemeanors to 

appropriate authorities. 

The very first Congress, starting in 1789, passed 18 whistleblower reward laws. They didn’t call them whistleblowers then; 

they called them informants. Eighteen. And that structure of those 

laws has been passed on, and the modern whistleblower laws that 

are most effective are modeled on what the Founding Fathers did. 

And let’s see why it works. Slide 1, or my chart 1 in my testimony, shows how fraud is actually detected in real life. As in my 

testimony, these are statistically verifiable numbers. And you’ll see 

to the far right, the tip, or the whistleblower, is the number-one 

source of all fraud. Without a program to encourage fraud detection 

by tipsters or whistleblowers, crime will pay. 

Slide 2, which is, again, statistically verifiable, shows the real 

life of what happens at the job. And it shows that only 2 percent 

of the witnesses to fraud and misconduct actually report that fraud 

outside their agency—2 percent. And that’s to anyone, not going to 

the proper law enforcement authority. 

If you want to have an effective accountability system, you need 

to figure out how to make that 2 percent real and effective. And 

guess what? The model used by the Founding Fathers works. 

And if we can go to the next slide, which is chart 5 in my testimony. 

When Chuck Grassley passed the False Claims Act in 1986 and 

reinstated these models used by the Founding Fathers, which permits a reward to the whistleblower paid immediately from the collected proceeds, not through an appropriations process—they get 

the reward based on the fruits of their original information, the 


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62 

sacrifice they go through, the risks they take—look what happened. 

These are the Department of Justice figures to the penny. The ability to detect fraud skyrocketed. The ability to hold fraudsters accountable skyrocketed. Look how it went from a handful of millions 

before you activated the whistleblower to billions and billions every 

year. 

The final chart shows that—the next slide shows that, today, 70 

percent of all fraud detection coming in is coming from the whistleblower. 

The legislation being proposed does not take the reality of whistleblowing into consideration, but I know this committee will act 

and make sure it is protected. 

I also want to state that there is an appropriate oversight for 

these funds, and whistleblowers are dependent upon them. And I 

look forward to working with the committee to have better oversight. 

Thank you. 

[Prepared statement of Mr. Kohn follows:] 


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UNITED STATES HOUSE OF REPRESENATIVES 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

SUBCOMMITTEE ON GOVERNMENT OPERATIONS AND THE 

SUBCOMMITTEE ON HEALTH CARE, BENEFITS AND ADMINISTRATIVE RULES 

"Restoring the Power of the Purse: Legislative Options" 

Testimony of Stephen M. Kohn 

Executive Director 

National Whistleblower Center 

www.whistleblowers.org 

email: contact@whistleblowers.org 

December 1, 2016 

Chairman Meadows, Chairman Jordan, Ranking Member Connelly and Members of the Subcommittees: 

Thank you for this opportunity to testif'y regarding H.R. 5499 and issues concerning federal spending outside the appropriation process. 

The Committee on Oversight and Government Reform has a long bi-partisan record of 

supporting whistleblowers. 1 I am confident that as H.R. 5499 works its way through the legislative process, your subcommittees will ensure that whistleblowers are not inadvertently harmed 

by this legislation. 

1 For example, Chairman Jordan eloquently explained the "importance ofwhistleblowers to good 

government" in his Opening Statement during a joint oversight hearing: "These brave individuals shed light on waste, fraud and abuse, often at great personal or professional risk and make 

what we do in Congress a whole lot easier. We should always be grateful for the sacrifice these 

individuals make and proud of their contributions to the Nation. Perhaps the most important 

tools that whistleblowers have are the qui tam provisions of the False Claims Act. Senator GrassIcy, who we will hear from shortly, was instrumental in amending the False Claims Act in 1986 

to ensure whistleblowers are protected. This year, of the $4.9 billion of False Claims Act recoveries, $3.3 billion came from whistleblower suits, a record amount." Joint Hearing before the 

Subcommittee on Economic Growth, Job Creation and Regulatory Affairs of the Committee on 

Oversight and Government Reform, and the Subcommittee on the Constitution and Civil Justice 

of the Committee on the Judiciary, House of Representatives (May 7, 20 13) (Serial No. 113-23) 

(Committee on Oversight and Government Reform) (Serial No. 113--6) (Committee on Judiciary) (emphasis added). 
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In its current form, H.R. 5499 could have a devastating impact on critical whistleblower 

laws, including the False Claims Act and other qui tam whistleblower laws.2 The proposed 

changes to the appropriations process contained in H.R. 5499 do not take into consideration reward provisions contained in the False Claims Act and similar laws. H.R. 5499 would interfere 

with the well-established process for compensating whistlcblowers who risk their careers, jobs 

and reputations to serve the public interest. 

Before addressing the specifics ofH.R. 5499, it is imperative to understand why the False 

Claims Act and its progeny have been so effective in protecting the taxpayers from fraud. 

WHO REPORTS FRAUD? 

The foundation of any effective anti-fraud/anti-corruption program is predicated on detection. Without the ability to detect and document frauds, crime pays. In the wake of the 

ENRON and WORLDCOM fiascos, respected trade associations and corporate-sponsored 

groups studied the science offraud detection. Here is what they found: 

First, as set forth in Chart 1,3 the heart of any successful fraud detection program is encouraging employee "tips." Tips or whistleblower information is unquestionably the single most 

important source of information on frauds. 

Without a program to encourage tips, fraud detection will be crippled. 

2 As noted in footnote 2, the qui tam provisions of the False Claims Act have played an invaluable role in incentivizing whistleblowers to report frauds. They permit whistleblowers to obtain a 

portion of the sanctions obtained directly from the criminal or fraudster. Whistleblowers are 

compensated for the risk they take and only obtain compensation when their "original information" is truthful, accurate and results in an actual conviction, settlement or plea agreement. 

Instead of using taxpayer monies to compensate the whistleblower, the whistleblower's original 

infommtion results in additional revenue to the United States, paid entirely by fraudsters. In addition to the False Claims Act, Congress has enacted other qui tam styled whistleblower laws, including provisions that incentivize reporting tax, securities and commodities frauds, illegal international wildlife trafficking, pollution on the high seas and, most recently, the Motor Vehicle 

Safety Whistleblower Act passed under the leadership of Senator John Thune in 2015. 

3 Chart I is from the 2016 Annual Report of the Association of Certified Fraud Examiners 

(ACFE), a trade association with nearly 80,000 members. Their annual report, "Report to the 

Nations" is compiled from a valid statistical survey of its members, and is conducted annually. 

The numbers reported in 2016 arc consistent with its reports since 2010, and before. 

2 
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Fraud Detection Methods in Companies with 100 

or More Employees 

50% 

45% 

40% 

35% 

:(l 30% VI 

u "' 

0 

gJ, 25% 

E "' 

Ill 

~ 

~ 20% 

15% 

10% 

5% 

0% 

43.50% 

18.60% 

1.90% 

Notified •by Management Internal Audit All Other Tip 

law Review Reporting 

Enforcement Methods 

Reporting Method 

Source: Association of Certified Fraud Examiners, "Report to the Nations on Occupational 

Fraud and Abuse," (2016). 

3 
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Chart 2 is based on the findings of the Ethics Resource Center and represents the reporting behavior of employees who witness misconduct at work.4 It demonstrates that strong plurality of employees never discloses the misconduct they witness. Only 2% report "outside" their 

organizations, which would include reports to non-law enforcement agencies. The number of 

employees who actually report misconduct to appropriate law enforcement agencies is miniscule. 

Employee Reporting Behavior 

DEmpfoyee's Supervisor or Someone Else In the Company 

ORe ports to No one 

lllsomeone Outside the company 

Source: Ethics Resource center, "Blowing the Whistle on Workplace Misconduct," 2010c. 

4 The Ethics Resource Center is the oldest corporate ethics organization in the United States. 

Chart 2 is based on the statistics from their report, Inside the Mind of a Whistleblower: A Supplemental Report, Ethics Resource Center, (2012) available at 

http://www. whistleblowers.org/storage/docsllnside _the_ mind_ of_ a_ whistleblower.pdf. That 

report, was sponsored by Google, Boeing, the Deloitte Foundation, Walmart, Northrop Grumman, Altria, The Defense Industry Initiative, and Lockheed Martin. 

4 
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Although employee tips are the most important source of fraud detection, the overwhelming majority of potential whistleblowers do not report their allegations to law enforcement. 

Charts 3 and 4 further highlight the need to create programs that encourage reporting 

frauds and misconduct. Chart 3 demonstrates the day-to-day pressures placed on auditors to ignore material findings or alter their reports in a material manner. Over half of North American 

chief auditors working for companies with over 100 employees reported these improper pressures or demands. 5 

North American Chief Auditing 

Executives Instructed to Omit or 

Modify an Audit Finding 

• Directed to Omit or 

Modify 

D Not Directed to Omit 

or Modify 

Source: IIA Research Institute, "Political Pressure Intense on 

Internal Audit," {Mar. 10, 2015). 

5 
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Chart 4 represents where the requests to alter or falsity material audit findings originated. 

Sources of Direct Requests to the Chief AuditExecutive 

to Surpass or Significantly Modify a Valid Internal Audit 

Finding on a Regular Basis* 

40 .--------------------------------------------

35 

30 

25 

20 

15 

10 

5 

0 

1-. ~,<-rq 

0 

~"""' d' 

& (:'<l; ~-.,G "'' 

'?><It 0 

o-1i- ~'?>~ '?>;;;: 

v ~" 1-. 

o;s "'"' r:;-0 ~,c,<l; .-§ 

~~<l; 0 ;f 

<-"" 'Vo<S' d- ·'?>~ ~0 ~ &-'"' <v+<l; >:-" <.:_-$:' o'~> <.P<S' ~-s 

·~ ~0 .~ <() 

(f' <.'~>' (f' .~ o't d 

~ "'"'QJ 

Source: llA Research Foundation, Global Internal Audit Practitioner 

• Total percentage Is greater than 100 because more than one person can make a 

request. 

A breakthrough study, originally published by the University of Chicago's Booth School 

of Business, was authored by three leading economists. 6 They studied, "in depth all reported 

6 See Alexander Dyck, Adair Morse & Luigi Zingales, Who Blows the Whistle on Corporate 

Fraud? University of Chicago Booth School of Business (2006), available at 

http ://faculty. chicagobooth.edulluigi .zingales/papers/researchlwhistle. pdf. 

6 
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fraud cases in large U.S. companies between 1996 and 2004" in order to determine the most effective mechanisms for detecting corporate fraud. They determined that whistleblowers were the 

key to fraud detection. Like the ACFE study, the Booth School study also found that "employees 

clearly have the best access to information. Few, if any, fraud can be committed without the 

knowledge and often the support of several of them. Some might be accomplices, enjoying some 

of the benefits of the fraud, but most are not." 

They also found that retaliation was prevalent in the workplace: "Not only is the honest 

behavior not rewarded by the market, but it is penalized." Thus, "given these costs, however, 

the surprising part is not that most employees do not talk; it is that some talk at alL" 

The Booth School economists then reviewed the positive impact the False Claims Act qui 

tam whistleblower reward provisions had on employee behavior, and recommend that these 

types of laws be expanded: "The idea of extending the qui tam statue to corporate frauds (i.e. 

providing a financial award to those who bring forward information about a corporate fraud) is 

very much in the Hayekian spirit of sharpening the incentives of those who are endowed with 

information." 

The False Claims Act qui tam provisions (the only major whistleblower reward law inplace during the study) was the key to developing these indispensable sources. 

Their findings speak for themselves: 

"A strong monetary incentive to blow the whistle does motivate people with information to come forward " 

"Having . .. monetary rewards has a significant impact on the probability a 

stakeholder becomes a •vhistleblower. " 

"[T]here is no evidence that having stronger monetary incentives to blow the 

whistle leads to more.frivolous suits. " 

"Monetary incentives seem to work well, without the negative side effects often 

attributed to them." 

DOES WHISTLEBLOWING WORK? 

Chart 5 quantifies the recoveries obtained by the U.S. taxpayers over the 30-year history 

of the modernized False Claims Act. 7 It quantifies how important the reward laws are to addressing the problems identified in Charts 1-49

• 

7 Charts 5 and 6 are based on the fraud recovery statistics annually reported by the U.S. 

Department of Justice. See Fraud Statistics - Overview, U.S. Department of Justice (2015) 

available at https://www.justicc.gov/opa/file/796866/download. 

7 
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Sanctions Obtained by the United States 

from Whistleblower Disclosures (FCA) 

$10,000,000,000 

$9,000,000,000 4---------------------t--

$8,000,000,000 4--------------------J--

-+-sanctions Recovered from 

Wh!stleblower Disclosures 

Under the False Claims Act.,. 

$7,000,000,000 +---------------------!'------

$6,000,000,000 +----------------+----

$5,000,000,000 +------------------+----

$2,000,000,000 +----------+---------------

$1,000,000,000 

Chart 6 demonstrates that incentivizing whistleblowers is extremely successful in generating high quality tips that result in successful prosecutions. Because the government must pay a 

reward when the whistleblower's information leads to a successful enforcement action, civil 

fraud cases prosecuted by the Justice Department are categorized. Chart 6 reflects that fact that 

over the 30-year history of the False Claims Act whistleblowers disclosures account for over 

70% of the fraud recoveries from corrupt government contractors. These numbers will further 

increase over time. 

8 
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Total U.S. Civil Recovery: From 

Whistleblowers and Government 

Investigation 

October 1, 1987 - Sept. 30, 2015 

69% 

$33,230,410,007 

0 Whistle blowers 

• Government 

Civil Division, U.S. Department of Justice, "Fraud Statistics- Overview," (Oct. 1, 1987- Sept. 30, 2015). 

9 
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Charts 5 and 6 objectively demonstrate that whistleblower reward laws work. Every government official with responsibility for overseeing the False Claims Act, or similar reward laws, 

have praised these programs as having "profound" impact,8 and recognize that the laws are "the 

most powerful tool the American people have to protect the government from fraud."9 Whistleblower reward programs are the most effective mechanism for encouraging citizens to report 

criminal activities. 10 

CURRENT WHISTLEBLOWER REWARDS ARE MODELED ON LAWS 

ENACTED BY THE FOUNDING FATHERS 

At the heart of all of the whistleblower reward programs is a simple mechanism in which 

the whistleblowcr obtains a portion of the "collected proceeds." This payment is not part of any 

formal appropriations process. Instead, the relevant executive agencies authorize the payment of 

the reward if the whistleblower's information conforms to the requirements that Congress established when it enacted the relevant whistleblower law. The proceeds can come from the Treasury Department or a specialized fund established to pay rewards, but there is no requirement under any whistleblower law for Congress to pass a special appropriation. Such a requirement is 

not necessary, is not constitutionally required, and is inconsistent with both the U.S. Constitution 

and the specific practices endorsed by the Founding Fathers of the United States. 

ln a landmark decision authored by U.S. Supreme Court Justice Antonin Scalia (and endorsed by all nine members of the Court), the whistleblower reward provisions of the False 

Claims Act were upheld after a vigorous assault on a whistlcblower's "standing" to pursue a 

claim under the law's qui tam provisions. Justice Scalia carefully reviewed the history behind 

whist!eblower reward laws and explained that there was a "long tradition of qui tam actions in 

8 The "impact" of the reward laws "has been nothing short of profound .... Some of these [False 

Claims Act cases] may have saved lives. All of them saved money," Attorney General Eric 

Holder, U.S. Department of Justice, "Attomey General Eric Holder Speaks at the 25th 

Anniversary of the False Claims Act Amendments of 1986" (Jan. 31, 2012). 

9 Assistant Attorney General, U.S. Department of Justice, "Remarks at American Bar 

Association's lOth National Institute on the Civil False Claims Act and Qui Tam Enforcement," 

(June 5, 2014) ( Whistleblowcr reward laws are "the most powerful tool the American people 

have to protect the government from fraud"). 

10 See, Remarks at the Securities Enforcement Forum, Securities and Exchange Commission 

Chairman (Oct. 9, 2014) (The "whistleblower program ... has rapidly become a tremendously 

effective force-multiplier, generating high quality tips, and in some cases virtual blueprints laying out an entire enterprise, directing us to the heart of the alleged fraud"); "Information of this 

nature is otherwise difficult, if not virtually impossible to obtain [without help from the whistleblower]" (U.S. Department of Justice, USA v. Consultores De Navegacion S.A, 1:08-cr-10274, 

(Sept., 22, 2009) (US District Court, Massachusetts) (filing in support of whistleblower reward 

application). 

10 
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England and the American Colonies."11 He pointed to numerous laws passed by the First Congress of the United States in 1789-90, in which many of the drafters of the U.S. Constitution participated as members of Congress approving informant reward laws, paid directly 6y federal officials, with no appropriation from Congress. Justice Scalia held: 

Qui tam actions appear to have been as prevalent in America as in England, at 

least in the period immediately before and after the framing of the Constitution ... 

Moreover, immediately after the framing [of the Constitution], the First Congress 

enacted a considerable number of informer statutes. Like their English counterparts, some of them provided both a bounty and an express cause of action; others 

provided a bow1ty only. 

In upholding the constitutionality of the False Claims Act Justice Scalia explained that 

the payment to these whistleblowers (or informants) was not effectuated by an appropriation, but 

instead constituted an "assignment" of interests, a well-known procedure in the common law in 

which the rights of one party are transferred, in whole or in part, to another party in exchange for 

valuable consideration. Justice Scalia held that "the False Claims Act can reasonably be regarded 

as effecting a partial assignment of the Goverrunent's damage claim." 

As far back as the First Congress, in which numerous drafters of the U.S. Constitution 

were prominent members, including Elbridge Gerry, Rufus King, Robert Morris and James Madison, it was clear that paying an informant's reward was not dependent upon an appropriations 

process. Indeed, the First Congress passed 18 such laws, none of which were dependent upon 

the Congressional appropriations process. See Addendum. As the U.S. Supreme Court has noted, the actions of the First Congress can provide "contemporaneous and weighty evidence" of 

the Constitution's "true meaning."12 Many of the major revenue laws enacted by the First Congress, in order to generate the revenues for which Congress could eventually appropriate, contained whistleblower reward laws, including the laws establishing the Treasury Department, the 

United States Bank, and regulating the collection of duties on the tonnage of ships and merchandise.13 

For example, the fifth law passed by the First Congress (relating to the collection of customs duties), had a special section concerning the distribution of "penalties, fines and forfeitures 

recovered" from those who violated the law. The collected proceeds from these sanctions was 

divided as follows: one-half was sent to the U.S. Treasury and one-half was equally divided between the "collector, naval officer and the surveyor by virtue ofthis act." However, if any "person" gave "information" that resulted in the United States obtaining the collected proceeds, that 

person would receive one-half of the total amount not remitted to the Treasury Department. In 

11 Vermont Agency of Natural Res. v. U.S. ex rel. Stevens, 529 U.S. 765 (2000). 

12 Wisconsin v. Pelican Ins. Co., 127 U.S. 265 (1888)(because "many "of the "members" of the 

"first Congress" had "taken part in framing that instrument," that Congress' actions are "contemporaneous and weighty evidence" of the Constitution's "true meaning"). 13 See First Congress. Sess. I. Ch. 5 (July 31, 1789)(collecting duties); Ch. 11 (Sept. I, 

1789)(regulating coastal trade); Ch. 12 (Sept. 2, 1789)(establishing Treasury Department); Sess. 

II, Ch. 35 (Aug. 4, 1790)(collection of duties). 

11 
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other words, the whistleblower would obtain 25% of the monies collected as a result of his or her 

finishing the information. 

The First Congress provided as follows: 

That all penalties, fines and fm:feitures, recovered by virtue of this act (and not 

otherwise appropriated), shall, after deducting all proper costs and charges, be 

disposed of as follows: One moiety shall be for the use of the United States, and 

paid into the treaswy thereof; the other moiety shall be divided into three equal 

parts, and paid to the collector, naval officer and surveyor of the district wherein 

the same shall have been incurred . . . provided nevertheless, That in all cases 

where such penalties, fines and foifeitures shall be recovered in pursuance of information given to such collector, by any person, other than the said naval officer 

and surveyor, the one ha{f of such moiety shall be given to the informer, and the 

remainder shall be disposed of between the collector, naval officer and surveyor, 

in manner and form as above limited and expressed. 14 

In consideration of the risk and effort undertaken by the whistleblower/informant to provide high quality information to the government, the First Congress assigned to these persons a 

future interest in a portion of the proceeds actually collected by the government based on his or 

her sacrifices/contribution. These monies were not part of an official appropriation by Congress, 

but were assigned by a statute approved by Congress for direct payment to the whistleblower. 

The payment of the 25% informant share would be made by members of the executive branch of 

government, before (or simultaneous to) these officials transmitting to the United States Treasury 

its 50% portion of the sanctions. 

Because the whistleblower's right to the collection of a reward arises from an assignment 

of interests, not from a formal appropriation, any interference with such a lawful assignment 

would itself raise a host oflegal and constitutional issues. 

TRANSPARENCY 

The modem whistleblower reward process is extremely transparent, with numerous 

checks and balances. For example, the False Claims Act has strict limits on a whistleblower's 

ability to dismiss a case or settle a case, and the court has authority to approve settlements 

(which include specific provisions setting forth an amount of any reward) over a whistleblower's 

objection, if such settlements are determined to be "fair, adequate and reasonable. " 15 In practice, 

False Claims Act settlements are done in public, the Department of Justice places on the public 

record the terms of each settlement, including the amount of money assigned to the whistleblower. These settlement agreements are all publicly disclosed before a court dismisses an action. In 

the 30 plus years of the False Claims Act, this witness is unaware of Congress taking issue with 

the validity of a reward paid to a whistleblower under that Act. 

14 First Congress, Ch. 5, Section 38 (July 31, 1789)(emphasis in original). 

15 31 U.S.C. § 3730((c)(2)(A) and (B). 

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The False Claims Act, and similar laws, create a safe, effective, and highly successful 

method for employees to disclose fraud in government programs to the appropriate authorities. 

The method for compensating whistleblowers for their original information, whether the rewards 

are paid for from specialized funds, by court order, or directly from the federal treasury, are irrelevant. Once it is adjudicated that the whistleblower provided the service directed by Congress, 

and once monies are obtained as fmes and penalties from the wrongdoer, the entitlement for 

payment is effectuated. The whistleblower has a right to collect on the portion of the sanction 

assigned to him or her by law. Interference with this lawful payment, mandated by the government's partial assignment of interest, would undermine the whistleblower laws, cripple effective 

anti-fraud programs, destroy the whistleblower's confidence in the reward system and violate the 

whistleblower's constitutionally protected property interest in the partial assignment. 

CONCLUSION 

Thank you again for this opportunity to testifY. The Founding Fathers were true visionaries. They understood the importance of using the citizens as a bulwark for the enforcement of 

laws and ensuring accountability. On July 30, 1778 the Continental Congress passed America's 

first whistleblower, stating that it was the "duty of all persons" to give "the earliest information" 

to "proper authority of any misconduct, frauds or misdemeanors."16 After the formation of our 

current government, the First Congress reinforced the message it sent on July 30, 1778, and enacted 18 separate whistleblower reward laws, covering many important laws. I am certain that it 

was not the intent of the authors of H.R. 5499 to interfere with the whistleblower reward programs. The National Whistleblower Center stands ready to assist this Committee in ensuring that 

no government whistleblowcr reward program is harmed by the passage ofH.R. 5499. 

Respectfully submitted, 

Is/ 

Stephen M. Kohn 

Executive Director 

National Whistleblower Center 

3238 P Street, N.W. 

Washington, D.C. 20007 

(202) 342-1903 

Email: contact@whistlcblowers.org 

Web page: www.whistleblowers.org 

16 Kohn, "The Whistleblower's Handbook: A Step-by-Step Guide to Doing What's Right and 

Protecting Yourself," (Lyons Press, 2011)(setting forth the complete history behind Congress' 

enactment of the July 301

h resolution, found at Journal of the Continental Congress. XI, p. 732). 

Also see, Senate Resolution 522 (1141

h Congress, 2nd Session), setting forth July 30, 2016 as National Whistleblower Appreciation Day, in honor of contributions made by whistleblowers and 

the foresight of the Founding Fathers. 

13 
76 

Mr. MEADOWS. Thank you, Mr. Kohn. I can assure you that whistleblowers are a vital part of what we do, from an oversight standpoint. There is not a month that goes by that I don’t get a call on 

my private cell phone from some whistleblower somewhere suggesting that we look at something. 

And so, with that, let me make sure I understand. So if we were 

to exempt out the whistleblower provision in this and make sure 

that it’s not included in Mr. Palmer’s piece of legislation, you 

wouldn’t have an issue with this legislation. Is that correct? 

Mr. KOHN. Well, I’m only here—I’m only really an expert on the 

whistleblower part. 

Mr. MEADOWS. So if we exempted it, you wouldn’t have an issue. 

Is that correct? 

Mr. KOHN. Exactly. As National Whistleblower Center, that’s our 

concern. 

Mr. MEADOWS. Okay. Well, I think we look forward to hearing 

from others on that, but I believe that a friendly amendment that 

would protect our whistleblowers would be in order. And I know 

I’ve talked to the gentleman from Alabama about that very subject, 

and he seems very willing to accommodate. 

The chair recognizes the gentleman from Michigan, the vice chair 

of the Subcommittee on Government Operations, Mr. Walberg. 

Mr. WALBERG. Thank you, Mr. Chairman. 

And thank you to the panel for being here today. 

In my other life, other committee work, chairing the Subcommittee on Workforce Protections, we look at regulatory issues 

and the high cost of regulations that go on. So this discussion today 

focuses very clearly on additional costs resulting from regulation. 

Mr. Kosar, last year, I believe it was, you authored an article on 

increasing Federal regulations and how Congress should reassert 

their authority in the regulatory process. 

I recently introduced a series of regulatory reform measures 

which focus specifically on harmful labor regulations. When you see 

the costs last year, approaching almost $2 trillion of regulatory 

costs to business alone—that’s it—not including collections and everything that goes on, it’s an important thing to consider. 

One of the measures that I introduced, H.R. 6325, the Workforce 

Regulatory Review Act, creates an independent regulatory review 

commission tasked with removing a third of all the regulatory obligations created by Department of Labor alone. 

So let me ask you, Mr. Kosar, do you have any thoughts on proposals to establish commissions tasked with reviewing and eliminating regulations? 

Mr. KOSAR. Thank you for the question. I have not reviewed your 

piece of legislation, regrettably, but I will say, as a general proposition, yeah, I favor commissions to take a look at these things. 

I mean, when you consider the size of the corpus of regulations, 

no human being could fully appreciate or understand what’s in 

there. And it just seems self-evident that there is some value in 

having a group dedicated to looking at it and going through and 

saying, this is anachronistic, or, guess what, this regulation didn’t 

actually work out and we should consider getting rid of it. 

Mr. WALBERG. Any other ideas beyond a commission like that 

that you might have that could more effectively monitor the output 


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of new regulations and the costs that are inherent in those regulations? 

Mr. KOSAR. Well, I think two leading proposals, the ones that 

have certainly gotten a lot of discussion, are some mechanism similar to a REINS Act, wherein, you know, you would look at a whole 

ball of these things and figure out which ones are problematic or 

undesirable for whatever reason and then have a fast-track-type 

authority to run them through. That’s a commission version or the 

REINS Act, which has the tripwire where a regulation of a certain 

size, with a certain quantity of cost, cannot actually take effect 

until Congress affirmatively acts upon it. So that would be another 

way to go. And then regulatory budgeting. 

Mr. WALBERG. Yeah. Certainly familiar with that and supportive 

of it. 

Your written testimony mentions that the complexities for collection of fees and settlements had increased as government has 

grown. Could you elaborate further on this point? 

Mr. KOSAR. You know, that line is self-evident but is one of those 

things that came out as I have this past week stuck my nose back 

in the President’s fiscal year 2017 budget. It’s unbelievably complex. 

And there’s a basic principal-agent relationship between legislative branch and executive branch. As the persons who authorize 

the taking of money from the public, the legislators want to keep 

an eye to make sure that the money is being well-spent. When that 

amount grows to $4 trillion or some such number, it’s really hard 

to keep track of all those dollars, especially if you’re not doing the 

appropriating. 

Mr. WALBERG. So your method of simplifying the complexities of 

collecting fees and settlements specifically is what? 

Mr. KOSAR. Well—— 

Mr. WALBERG. Review that for us. 

Mr. KOSAR. The first thing that I find vexing is the separation, 

the kind of conceptual separation, that’s been around since at least 

1967 between government receipts and then the offsetting receipts 

and collections, and how is an offsetting collection different from an 

offsetting receipt. And, in fact, Congress has often written into statute exceptions to these rules, so something that should be a receipt 

is instead a collection or something like that. 

Maybe in an effort to be too precise, we got too complex. You 

know, if you have smart people in this town who are looking at the 

Federal budget and having a hard time understanding it, I don’t 

quite know how the rest of the country can understand it. 

So I know some folks who are working at a Brookings budget 

group, and one of the ideas that’s being frequently brought up is 

we need to simplify budget concepts, we need to rethink, because 

we’re relying on stuff that was ginned up a long time ago. 

Mr. WALBERG. Thank you. 

Mr. Chairman, I yield back. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes Mr. Connolly for his questions. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

Mr. Kosar, I want to make sure I understood your testimony. Is 

it your testimony that Congress has been too whimsical or careless 


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over the years in devolving these powers to agencies and ought to 

re-arrogate them back to itself through the appropriations process? 

Mr. KOSAR. I would suggest that the various incidents where the 

authority has been delegated away should be reviewed. Do the rationales that originally propelled the delegation still make sense, or 

have they become anachronistic, or has it just not worked out? 

Mr. CONNOLLY. Fair enough. 

It is not your contention, however, that you or R Street Institute 

have looked at in depth the other impacts, the negative impacts, 

on agencies that currently engage in that practice legally through 

the delegation of authority by the Congress. For example, you 

haven’t looked at the potential impact of doing that in the Department of Justice’s Crime Victims Fund. 

Mr. KOSAR. Oh, no. No, we have not done an assessment, and we 

certainly—— 

Mr. CONNOLLY. Right. 

Mr. KOSAR. —haven’t looked at each program and tried to—— 

Mr. CONNOLLY. Or what it might do to the Superfund clean-up 

process. 

Mr. KOSAR. Correct. 

Mr. CONNOLLY. Or Tennessee Valley Authority collections and 

what it uses those for. 

Mr. KOSAR. Uh-huh. 

Mr. CONNOLLY. Right? 

Mr. KOSAR. You’re right. 

Mr. CONNOLLY. And likewise the Federal Protective Service program through the use of its fees. 

Mr. KOSAR. Correct. 

Mr. CONNOLLY. Or the Federal Aviation Administration Franchise Fund customer fees. 

Mr. KOSAR. No, sir, we haven’t looked into those. 

Mr. CONNOLLY. Right. Okay. I just want to make sure. It’s one 

thing to say: Yeah, we looked at it, maybe some of these authorities 

are too broad. But that’s not the same as testifying: I’ve looked in 

depth at the impact and it’s negligible, or it’s tolerable. We don’t 

know, sitting here. 

So we can—not that you are, because you’ve just clarified your 

testimony. But one needs to be careful, in terms of impacts. And 

my view is, before we do any of this, we have to understand what 

the impacts would be. Because over well over 200 years of history, 

this has a lot of entanglements and commitments, and the disruption could be profound to the operations of government, which is 

my contention. That doesn’t mean don’t do some of it. It might not 

even mean don’t do all of it. But we’ve got to know a lot more than 

we know right now. 

Ms. Krause, I want to make sure I understand what you’re testifying to. GAO looked at this why? 

Ms. KRAUSE. This is really based on—we have a body of work 

that’s looked at fees, fines, and penalties, often individual ones. But 

we also have a body of fee work that’s looked at design principles 

to consider when you’re establishing fees. It also applies to fines 

and penalties. So things to consider in structuring these, especially 

related to congressional control. 


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As I mentioned in my oral statement, one of those decisions is 

related to what triggers the use—the congressional trigger of use 

of funds, so whether it requires further appropriation after it has 

been collected or whether an agency is allowed to use it 

through—— 

Mr. CONNOLLY. But it’s not your testimony this practice should 

end. 

Ms. KRAUSE. We don’t take a position, no. 

Mr. CONNOLLY. And nor do you contend in this study, like my 

questioning of Mr. Kosar, that you’ve looked in depth at the potential impacts of curtailing or conditioning or revoking these authorities that we’ve delegated. 

Ms. KRAUSE. No. 

Mr. CONNOLLY. No. 

Ms. KRAUSE. We have not. 

Mr. CONNOLLY. Thank you. 

And, Mr. Kohn, your testimony is that if we had a carve-out for 

whistleblowers you’d be fine? 

Mr. KOHN. Well, as I say, I don’t have a position on the entire 

bill—— 

Mr. CONNOLLY. Right. 

Mr. KOHN. —but it absolutely needs a carve-out for whistleblowers. 

Mr. CONNOLLY. Right. But I’m bigger than whistleblowers, 

though I share your concern, as you heard my opening statement. 

I think that’s an unintended consequence, but my concern is there 

could be lots of other unintended consequences, and we haven’t 

looked at them. 

So to act with haste on a bill that I think is well-intentioned and 

that makes a good point about the kind of willy-nilly delegation of 

authority that has crept up over the years—that is worthy of examination, and I share my friend from Alabama’s commitment to 

doing that. I think this bill raises a very important subject we 

ought to reexamine. 

But revoking those authorities or putting them on ice, whether 

it’s whistleblower or any of the other fees I listed—there are plenty 

of others we could talk about—I think would be very disruptive. 

And I just want to be clear. You’re not saying, give me a carveout and you’ve got my acquiescence and all the rest? You’re only 

addressing your own issue, which is whistleblowers. And your testimony is limited to the fact that this would have an unintended but 

devastating impact on whistleblowers and contravene the intent of 

the Whistleblower Protection Act. That’s your testimony. Is that 

correct? 

Mr. KOHN. Yes, that’s correct. 

Mr. CONNOLLY. I thank you. 

Thank you, Mr. Chairman. 

Mr. MEADOWS. The chair recognizes the chairman of the full 

committee on Health Care and Administrative Rules, Mr. Jordan, 

the gentleman from Ohio, for a series of questions. 

Mr. JORDAN. Thank you, Mr. Chairman. Thank you for having 

this hearing. 

And, Mr. Palmer, thank you for bringing a good piece of legislation forward. 


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Thank you to our witnesses. 

And, Mr. Kohn, I agree with you. There’s nothing wrong with an 

amendment that would carve out the whistleblowers, much like 

Mr. Palmer’s legislation already exempts the Patent Office and the 

Postal Service. But I want to try to get a handle on the overall picture here. 

So, as I understand it, there are three major categories—there’s 

fees, there’s fines and penalties, and then there’s settlements— 

money that the people’s representatives don’t get a direct say on 

what happens with that money when it comes to the Federal Government. 

So, Director Krause, what is the total number—let’s just go in 

that order. Fees. What is the amount of fees collected in fiscal year 

2017 by the Federal Government and all the various agencies? 

Ms. KRAUSE. Unfortunately, that number is unknown. When we 

have looked at issues particularly related to fees, government-wide 

sources don’t necessarily track back to the specific legal authorities 

related to the—— 

Mr. JORDAN. Here’s what the President said. The White House 

said it was $534 billion. Are you familiar with that number? 

Ms. KRAUSE. I am not familiar with that number. 

Mr. JORDAN. This is from their budget. For 2017, the table shows 

that total offsetting collections and offsetting receipts from the public are estimated to be $534 billion. 

Do you accept that number? 

Ms. KRAUSE. I would have to take a look at it closer to understand it. 

Mr. JORDAN. Is the White House right or wrong? 

Ms. KRAUSE. I don’t—unfortunately, I don’t—— 

Mr. JORDAN. Is it in the ballpark? 

Ms. KRAUSE. Like I said, when we have—so we have work ongoing—— 

Mr. JORDAN. For the sake of argument, let’s accept what the 

White House said. It’s their budget. They are the head of the executive branch. They’re saying it’s—that’s a lot of money. 

Do you know how much we spend in discretionary spending each 

year? Or last year, do you know how much we spent in discretionary last year? 

Ms. KRAUSE. I don’t know that number off—— 

Mr. JORDAN. One-point-two trillion. So we have a number that’s 

collected in just fees, just one-third of the three areas, that’s almost 

half of what we spend annually in discretionary spending. That’s 

a pretty big number. That $534 billion is approaching what we 

spend on national defense each year. 

And, again, the people’s representatives in the United States 

Congress don’t have a direct say on how that money is spent once 

it’s collected, right? 

Let’s move on to fines and penalties. Do you know how much we 

collect annually in fines and penalties? 

Ms. KRAUSE. I do not know that based on the data sources that 

are available. 

Mr. JORDAN. Yeah, that’s stuff we need to know. But the study 

the committee did over a 5-year period determined that number 


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was $83 billion over a 5-year period. So, again, we’re talking billions of dollars. 

Now, what’s interesting in what the committee found out is 

Treasury couldn’t give us any numbers. Specifically, Treasury and 

the IRS couldn’t give us the numbers. This is the IRS. They collect 

a few fines and penalties, my guess is, some amount. So then you 

have this $83 billion figure that excludes the Internal Revenue 

Service and any numbers coming from Treasury. 

And then, finally, you have the third category, settlements. 

Which now we know ‘‘settlements’’ is a nice way of saying, for some 

people—particularly when you think about the Justice Department—‘‘settlements’’ is another word for a shakedown. Certain 

companies have reached a settlement with the Justice Department, 

and then they tell this particular company: It’s not just about penalizing you or compensating the real victims. We want you to give 

money to some nonprofit that we deem as appropriate, and we’re 

going to call it a donation. Interesting use of the word ‘‘donation.’’ 

So, when you add all these together, could you even hazard a 

guess, how much money in fees, fines and penalties, and settlements the Federal Government collects in 1 year? 

Ms. KRAUSE. As I mentioned, when we’ve looked at this, there 

isn’t a government-wide source that would allow us to give a reliable total on the amount. 

Mr. JORDAN. So who can give us that number? 

I mean, this is what Mr. Palmer’s legislation gets to the heart 

of. We can’t even get someone in the Federal Government to tell 

us what that total number—we know fees, based on what the 

White House told us, is roughly equivalent to what we spend on 

national defense each year. It’s roughly equivalent to half of all discretionary spending we did in 2017. We know it’s a big number just 

in the fees category alone. But we’d like to know what it is, fees, 

fines and penalties, and settlements, what that number totals up 

to. 

So who can give us that number? 

Ms. KRAUSE. That is something—we have ongoing work looking 

at what we call backdoor spending authority, and it is to do an inventory of the accounts that are out there, the budget accounts that 

are out there, for funding that supports outside of the—— 

Mr. JORDAN. Does anyone else on the panel know? 

I mean, I would think Office of Management and Budget should 

be able to give us that number. I would think someone at the 

Treasury Department, the department in charge of the Nation’s 

money and how we—I would think someone there could give us 

that number. 

Why can’t we get that number in an important hearing on an important piece of legislation that Mr. Palmer has brought forward? 

Mr. Hollister, it looks like you want to offer a—— 

Mr. HOLLISTER. I sure do. Mr. Jordan, my understanding is that 

the Treasury Department’s fiscal service has that information, it’s 

maintained by the Central Accounting Repository Service, and 

that, on the other hand—— 

Mr. JORDAN. Well, Mr. Hollister, why won’t they give that information to this nice lady over here, Director Krause, so that she 


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could come here today and give it to Mr. Meadows in this committee? 

Mr. HOLLISTER. If I understand right, there are some organizational problems that exist between Treasury’s leg. affairs office and 

their fiscal service. 

Mr. JORDAN. What does mean? 

Mr. HOLLISTER. That means that sometimes the fiscal service 

and the leg. affairs office don’t get along. 

Mr. JORDAN. Does that mean they’re just not going to—well, you 

know, Mr. Meadows is a nice guy, but we’re not going to give him 

the information? Is that what they’re saying? 

Mr. HOLLISTER. Well, what it does mean is that the information 

that’s in the President’s budget that you cited and the information 

that’s in the monthly Treasury statement that comes out every 

month that has at least a line item for miscellaneous receipts, 

that’s coming from somewhere. It’s coming from the system that 

Treasury maintains. 

Mr. JORDAN. Yeah. Well, we’d like that information so that we 

can actually get moving on Mr. Palmer’s legislation with the appropriate amendments, like Mr. Kohn has offered. But this is exactly 

why the gentleman from Alabama is on the right track with an important piece of legislation. 

With that, I yield back, Mr. Chairman. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes Mr. Boyle for 5 minutes. 

Mr. BOYLE. Thank you, Mr. Chair. 

And I wanted to narrow in specifically on this whistleblower portion of it, because beyond just the two pieces of legislation that 

we’re talking about today, I think it’s actually important for reasons far beyond that and for all the members who are here to better understand this. 

Because just in—I was interested in reading all of your testimony, particularly the charts, but the exponential growth has been 

staggering in the amount of money collected—we’re talking about 

from the early 1990s, roughly 1990–1991, until today. So, over 25 

years, by my back-of-the-envelope math, a nine times increase in 

the amount of revenue. 

I’m curious what specific rewards or programs within the umbrella of whistleblowing would you say has been most effective in 

cutting out waste, fraud, and abuse and, of course, generating revenue? 

Mr. KOHN. Thank you. 

And that growth is triggered by empowering the insiders, who 

are critical for fraud. Fraud is designed to be hidden. 

Mr. BOYLE. Right. 

Mr. KOHN. You need the insider. 

The False Claims Act is really the model, because it has been 

around for 30 years and you can test it. And the Department of 

Justice, unlike, apparently, in other programs, to the penny figures 

out how much the whistleblowers are bringing in and how much 

the government is finding on its own. Because they have to—if the 

whistleblower brings it in, they have to give the reward. 

Mr. BOYLE. Right. 


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Mr. KOHN. So these numbers are literally to the cent. And it’s 

just incredible, the growth. 

Other programs that are more modern, they don’t have the track 

record, but the SEC is reporting incredible findings. The Chair is 

talking about blueprints and unbelievably high-quality information. 

Why? Think about it. If your reward is based on the truthfulness 

of your information, the accuracy of your information, and the quality of your information, you’re going to be weeding out, you’re going 

to get the best sources, it’s going to help the government, it’s going 

to get the big fish. SEC is seeing that, although they’re still relatively new. 

In offshore illegal accounts, illegal Swiss banking, one whistle- blower, Bradley Birkenfeld, literally broke the bank—$780 million 

fine to UBS. They had 18,000 illegal U.S. accounts. And that triggered a voluntary program of 50,000 Americans, millionaires and 

billionaires, coming back and paying fines. I totaled it up to about 

$13 billion—triggered by a whistleblower because the people didn’t 

want to get caught. 

If you empower the insider, the positive results are truly remarkable. 

Mr. BOYLE. Another way of thinking about this is essentially 

we’ve created a market where the insider now can bring this information forward, and there’s essentially a market for this information that previously did not exist at all. 

I’m—you wanted to add to that? 

Mr. KOHN. Absolutely true. The University of Chicago, their 

school of economics—you know, these are no liberals—you know, 

these guys looked at it and concluded that without rewards there’s 

no incentive. And, in fact, they couldn’t even understand why anyone would blow the whistle. 

But with those rewards—and they’ve studied every major fraud 

case in a period of time; it was an incredible study—they said they 

worked, they worked remarkably well, they’re not frivolous, and 

they recommended expanding the use of that process. 

You’re talking about, to just put it bluntly, the goose that lays 

the golden egg. And I’m just saying, don’t kill it. 

Mr. BOYLE. So let’s take the next step then. If it were killed, either purposely or inadvertently, through this or any other legislation, what specifically would be the ramifications? 

Mr. KOHN. I will tell you, I will have a $500 hammer I can sell 

you. It’s as simple as that. 

When you look at the state of Federal procurement before Senator Grassley fixed it, if you look at that state, it was so bad. Yet 

I have the opportunity to talk to people within business, and they 

tell me the impact, far from just the recoveries—the increasing 

compliance programs; the fear of detection making people do the 

right thing; and guess what, making honesty pay, making the markets more fair, where people who are cheating can get caught so 

the honest businesses aren’t at a disadvantage. 

The benefits are literally overwhelming. Every regulating agency 

that has looked at this has turned around and said, whoa, this is 

great. 

Mr. BOYLE. I thank you. 

Mr. Chairman, I see my time has expired, so thank you. 


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Mr. KOHN. Thank you. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes the gentleman from Florida, Mr. DeSantis, 

for 5 minutes. 

Mr. DESANTIS. Thank you, Mr. Chairman. 

Mr. Kosar, what is the reason why the Founding Fathers put the 

power of the purse with the Congress? 

Mr. KOSAR. Well, they had had plenty of experience of abuse at 

the hands of the crown. And I think there was just more philosophical agreement that, if money was to be taken, it should only 

be taken by elected officials who are, therefore, accountable and 

could be taken out of office if they take more than they should. 

Mr. DESANTIS. So you have an executive—and they believed in 

separation of powers. So you have an executive branch. If the executive branch is acting in a way that’s contrary to either the interests or the rights of the public, then those elected representatives 

in the legislature would be able to remedy that by simply refusing 

to provide funds going forward, correct? 

Mr. KOSAR. The wealth and property of individuals would be better protected under a scheme by which only those who are able to 

be recalled through election or put out of office are able to extract 

it, yes. 

Mr. DESANTIS. And I think the problem with what we’ve pointed 

out here—and I commend the chairman for doing this—is, when 

you have the agencies that are effectively on autopilot with fees 

and whatnot—and we saw this with the dispute about illegal immigration, when the President, even though he had said 20 times, you 

know, you can’t do this, was then effectively issuing legal status 

unilaterally to certain people who were in the country illegally. The 

Congress said, wait a minute, you can’t do that. But it turned out— 

we said, we’re not going to fund it. Well, it turned out we didn’t 

even need to take an affirmative act to fund it. They already had 

the fees through the USCIS, and it was just on and on they went 

without any need for congressional appropriation or authorization. 

And the problem with that is that that takes the default—the default should always be, if we just simply decide not to act, then the 

offending conduct stops. It should require Congress to take an affirmative act to appropriate funds for a given activity. 

And the way we’ve gone, we’re insulating the Congress—well, 

we’re insulating the agencies from accountability from the Congress, but, more importantly, from the American people, because 

they don’t have a direct way to hold the agencies accountable. 

And I think that what frustrates me is that it’s not like Congress 

had this power taken from us. Congress has given away the power 

and has offered to do this over the years. 

Mr. DESANTIS. So let me ask you this. Well, this could be for 

anyone that wants to jump in. In terms of transparency, some 

agencies are not transparent at all, some are very transparent. 

What agency would you say is the most transparent? Examples? 

Mr. HOLLISTER. Mr. DeSantis, I would point to—we were doing 

a lot of work on the overall spending and the transparency of expenditures as is going to be required beginning this May under the 

DATA Act, and I would point to the Small Business Administration, for instance. They have been able to take all of their spending 


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information, they’ve been able to conform it to the new data structure, and they’re now able to navigate seamlessly from their appropriation all the way down to each grant they issue and put all of 

that in a map in one click. 

Mr. DESANTIS. Anyone else? Go ahead. 

Mr. KOHN. Sure. Under the False Claims Act, those settlements 

are all made public, they’re subject to court approval. Every dime 

given to the whistleblower is accounted for in a public document. 

It’s been around for 30 years, and I don’t know of any time that 

a Member of Congress or even the public has said the way the 

whistleblower was awarded was somehow bad, except for a whistleblower claiming they should have gotten more, but—so there is 

transparency in the False Claims Act. 

Mr. DESANTIS. Let me ask about examples of Congress relieving 

agencies from the appropriation process, as I mentioned. When did 

this start? Ms. Krause, is that—I think you had mentioned it. 

Ms. KRAUSE. Sorry. I was looking back to my colleague. 

Ms. PEREZ. Actually, there—excuse me. There have actually been 

examples going back—— 

Mr. MEADOWS. We’ll get you a chair. Okay. 

Ms. PEREZ. Oh, thank you. Sorry about that. 

There have been examples going back to, as was mentioned earlier, the Customs officials early on in the republic. There have also 

been a number of authorities just in this past 100 years where 

agencies are collecting fees, and Congress has either provided limitations on how they can use them or made them available without 

further appropriation. 

Mr. DESANTIS. And that process has become more conspicuous 

over the last hundred years? Is that fair to say? 

Ms. PEREZ. Yes, that would be fair to say. 

Mr. DESANTIS. Okay. Well, look, I think that my friend from Alabama has a good bill. I think at some point, if we want to be anything more than a debating society, we’re going to have to start 

reclawing some of this authority. You know what? It requires Congress to do more work. You actually have to legislate more, you’ve 

got to make more decisions. Some people don’t like going on the 

record as much, but that’s just the reality. And it’s easier to kind 

of say that just let everything run on autopilot. And I think some 

of the fees, it’s not all bad the way it’s done. Sometimes it is within 

law, but other times it’s simply government on autopilot, and that 

is not, I think, what the Constitution envisions, and I think it’s up 

to us to start to claw this back. 

So I yield back. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes the gentleman from Georgia, Mr. Hice, for 

5 minutes. 

Mr. HICE. Thank you, Mr. Chairman. 

Ms. Krause, I just want to make sure. You stated that the GAO 

does not know how much is collected through the fees and fines 

and all that sort of thing. Is that correct? 

Ms. KRAUSE. There are data out there about individual ones. It 

has not been aggregated into a total. It’s a very involved, complex 

process in terms of understanding the underlying specific legal authorities associated with those funds. 


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Mr. HICE. Well, in the first place, it seems like that would be information that not only you should have, but you would want to 

have. But secondly, this bill would correct that problem as well, if 

we’re able to move forward on it. 

And, Mr. Hollister, right along the same line, I want to just—for 

clarification, I want to make sure that you stated, you testified a 

while ago that the Treasury can provide an accurate number for 

the fees, fines, and settlements. Is that correct? 

Mr. HOLLISTER. Mr. Hice, yes. My understanding is the Treasury 

can. The information that the Treasury receives from agencies is 

often in the form of summaries. So Treasury might give you 

amounts, but Treasury might not be able to walk that back all the 

way to the specific complexities of the legal authority under which 

each bunch was collected. Treasury, however, could give us, from 

the central accounting reporting system, could give us aggregations. And my testimony was that Congress could direct Treasury 

to include that in the overall spending structure. 

Mr. HICE. Okay. Mr. Chairman, I think it’d be wise for us to request that number from the Treasury just to have an idea of what 

we’re dealing with here. 

Mr. Kosar, let me ask you, regarding the fines and fees, penalties, settlements, all this sort of stuff, do you have any idea how 

much that has increased over recent years? 

Mr. KOSAR. No, I do not. 

Mr. HICE. Who would have that information for us? Does anyone 

chart the increase of fees, fines, and settlements? 

Mr. KOSAR. I would think OMB would have a number to use, and 

then presumably we could get some better data from Treasury. 

Mr. HICE. I would also like for us to get that information, if we 

can. 

And let’s just, for the sake of being in here, is it fair, do you 

think, to make the assumption that fees and penalties, fines, have 

increased over the years? Is that a fair assumption? 

Mr. KOSAR. I would say so. And I would say so probably as a proportion of the budget it has increased. 

Mr. HICE. Right. I would say so as well, because we’re now 

watching some agencies actually live off of those things. And so 

with the assumption that is more than likely accurate that the 

fines, penalties, fees have increased, how does that, number one, 

enable these agencies to operate independently? But also, how does 

that impact Congress’s role? 

Mr. HOLLISTER. Well, Mr. Hice, it reminds me of Thomas Jefferson’s letter to the Treasury secretary complaining that the spending, even at that time in 1802, the Federal Government’s operations had gone beyond the comprehension of Congress. The complexity at that point had already grown to the point where Congress couldn’t comprehend it. 

And in this case we see—because Congress has over the last 200 

years delegated authority in very complex ways to agencies, we 

have a great deal of difficulty in getting that comprehension. I 

think we could help—we could start to regain it by consistently 

tracking that information and asking for that information to be put 

into the whole picture, integrated into the whole picture. 


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Mr. HICE. Well, I would absolutely agree. And it seems to me, 

with the complexity that you mention, the more complex this whole 

scenario is, the more difficult it is to have oversight over it. And 

it gets out of hand rapidly, it seems. And that—you know, this 

whole thing—and I’ll just pick up on what Mr. DeSantis said. You 

know, this ultimately comes down to a constitutional issue. And 

fair enough, Congress over the decades has yielded some authority 

to these agencies, but we are on the verge of a genuine constitutional crisis now where those who are representatives are not having oversight and accountability, because those who are unelected 

in very powerful agencies are now able to operate independent 

from Congress and do multiple things, and they’re not even elected 

by the people. And all of this creates a potential enormous constitutional crisis. Would you agree with that? Mr. Kosar? 

Mr. KOSAR. I would say it creates basic questions of legitimacy 

and concerns along that line. And it also leads, I think, to the perspective that, you know, where does the real power lie, which 

branch? Eyes more and more turn to the executive branch. I mean, 

each time in an authorization, say, you allow an agency to collect 

fees for a particular purpose and spend it for a particular purpose, 

okay, you’re directing the congressional spending, but because it’s 

put into an authorization statute, if that agency misuses the money 

or has too much of it, well, you’re going to have to pass another 

law to get that back. And as we know in this environment, passing 

legislation is very difficult. So the more that that is kind of toggled 

in one direction, the more toggles you’ve got to pull back if things 

don’t work out right. 

Mr. HICE. Well, I thank the panelists. 

And I thank my colleague from Alabama for this bill, Mr. Chairman. I appreciate your indulgence. I yield back. 

Mr. MEADOWS. The gentleman from Tennessee, Mr. DesJarlais, 

is recognized for 5 minutes. 

Mr. DESJARLAIS. I thank you, Mr. Chairman. And thank you, Mr. 

Palmer, for bringing forth this legislation. 

Ms. Krause, if you would, your 2015 report illustrates the DOJ 

sidestepping Congress and providing deposits from Federal fines 

and penalties to be immediately used to fund agency programs, correct? 

Ms. KRAUSE. Yes. That’s our report. 

Mr. DESJARLAIS. Do you feel Mr. Palmer’s legislation adequately 

addresses this issue? 

Ms. KRAUSE. The recommendations that we made in that report 

dealt a lot with the obligated balances, so the balances the agency 

holds that—to manage the programs and the fees that come in. I’m 

not familiar—or I wouldn’t know how that applies in the bill context. 

Mr. DESJARLAIS. Okay. So we already know the DOJ has taken 

advantage of using their fines to fund initiatives within their agencies. Do you know what percent of their budget that represents? 

Ms. KRAUSE. I believe in that report we talked about it being 15 

percent of the budget in 2013. 

Mr. DESJARLAIS. Do you have a list of other government agencies 

that have also circumvented Congress and used fines, fees, and 

penalties without congressional authorization? 


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Ms. KRAUSE. We have individual reports that we’ve—we have in 

terms of those that have authority where they’ve been granted authority to use funds without further appropriations. We don’t have 

a comprehensive list. We have examples of that—— 

Mr. DESJARLAIS. Can you name a couple? 

Ms. KRAUSE. What—— 

Mr. DESJARLAIS. Can you name a couple? 

Ms. KRAUSE. Yeah. Sure. Some of those that include, I think we 

mentioned the National Park Service, the recreation fees, that the 

National Park Service is allowed to use those for repair and maintenance. You also have the USDA agriculture quarantine fees. 

Those are examples of fees that they do not require any further appropriation beyond their current authority. 

Mr. DESJARLAIS. Is MHS one? 

Ms. KRAUSE. MHS being? 

Mr. DESJARLAIS. Mining. 

Mr. MEADOWS. Mining Health and Safety. 

Ms. KRAUSE. I believe that is, yes. 

Mr. DESJARLAIS. Who determines the amount of the fine that’s 

levied? 

Ms. PEREZ. So that depends on the statutory authority. In some 

instances, Congress will set the percentage or the amount of the 

fee. In other situations, Congress has by statute designated that 

the agency will follow a particular process for determining a fee. 

And so agencies use a variety of factors for that. 

Mr. DESJARLAIS. Okay. Mr. Jordan had mentioned the term 

‘‘shakedown’’ in the process of these fines being levied and then 

sometimes negotiated. Who’s authorized to negotiate, let’s say, a 

fine that’s levied of $1 million and scares the heck out of businesses, and really there’s never any intention of collecting $1 million, but that gets their attention? Who negotiates the actual fee 

or fine that’s paid? 

Ms. PEREZ. That also will depend on the statutory authority of 

the agency that is either imposing a fine or following the process 

to assess a fine. So in those situations, you know, depending on 

that statute, the agency will be able to, you know, make decisions 

about how much of a fine they need to seek. 

Mr. DESJARLAIS. Do you think that’s fair and effective, to purposely mislead or levy a fine in instances to companies that obviously can’t afford to pay that? I’ve seen it happen in nursing 

homes, I’ve seen it happen in mines, it happens in the Department 

of Justice. That’s a problem America has with overregulation in the 

Federal Government, is they feel like they’re simply at their mercy. 

And I think the process of coming in and determining a fine—the 

EPA does this all the time, that you have people that clearcut some 

timber and it happens to go beyond an acre, and they come in with 

a huge fine that they know they can’t pay. And then when they negotiate it down to something still unreasonable, they are somehow 

expected to feel good about it. Do you think that’s a fair process? 

Ms. PEREZ. We actually haven’t done the work to be able to determine of any specific case where that happens. 

Mr. DESJARLAIS. Well, can you tell me if any of these fines and 

fees are used within the agency? We know they’re used to fund 

some of their own initiatives. Do the employees that go out and 


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levy these fines that start the shakedown, if you will, do they ever 

get bonused by the very fines that they levy? 

Ms. PEREZ. We’re not aware of those situations. 

Mr. DESJARLAIS. Can you say that there’s not? Because this was 

a question I posed in a previous hearing and we didn’t get an answer, even though there was evidence that this was occurring. So 

you’ve never heard of that? 

Ms. PEREZ. We’re not—I’m not aware of any particular situation, 

sir. 

Mr. DESJARLAIS. Okay. So even though the DOJ has used this 

to fund their own initiatives, you don’t have any evidence that the 

people who work for the DOJ benefit from these fines? 

Ms. PEREZ. No. We don’t—we don’t have any particular cases in 

mind. We have received a request for a legal opinion from Chairman Chaffetz of the committee to look at some supplemental agreements that are made with respect to the EPA, and so that’s a 

project we’re working on. 

Mr. DESJARLAIS. Okay. But, again, you can’t tell me specifically 

who comes up with the amount of the fine and who’s able to negotiate the actual settlement? 

Ms. PEREZ. No, not in a general sense. Again, that would depend 

on the very specific statute and program and how that would be 

authorized. 

Mr. DESJARLAIS. Do you feel that’s something that needs to be 

addressed? Or Ms. Krause? 

Ms. PEREZ. I mean, certainly GAO is always—you know, we’re 

definitely in favor of, you know, looking into, you know, particular 

programs and the authorities and how agencies use them. 

Mr. DESJARLAIS. Okay. I thank you for your time. 

Yield back. 

Mr. MEADOWS. I thank the gentleman. 

Let me verify one thing. You said it’s according to statute. A lot 

of these fines are not dictated by statute, I mean, in terms of what 

they are to fine. Is that correct? 

Ms. PEREZ. Right. And that’s why what we were saying is that 

depending on how the statute authorizes the agency to either impose a fine or assess a fine, then we would need to look at a specific 

situation to see what authority the agency had in that case. 

Mr. MEADOWS. So it just depends on that agency’s statute? 

Ms. PEREZ. Yes, that’s correct, sir. 

Mr. MEADOWS. Do you not see that there would be a problem 

with lack of equality there? 

Ms. PEREZ. You know, certainly that would be something to look 

into in terms of how an agency carries out those functions, carries 

out their statutory authorities. We just don’t have any examples to 

be able to give you a specific example of one where there might be 

such a problem. 

Mr. MEADOWS. I’m going to yield to the ranking member for just 

a—very brief, and then we’ll come to Mr. Grothman. 

Mr. CONNOLLY. Two quick observations. I come from local government. It is the practice of local government throughout the 

United States to levy fines, for example, on restaurants or food 

handling establishments when they find nonhygienic conditions: 

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en. Maybe some people want to call that a shakedown. I can tell 

you where I live, my public thinks that’s a measure of public safety 

and protection to make sure that food is sanitary and healthy—— 

Mr. JORDAN. Mr. Chairman? 

Mr. CONNOLLY. —not disease prone. 

Mr. MEADOWS. The gentleman from Ohio. I can see where this 

is going. 

Mr. JORDAN. We—— 

Mr. MEADOWS. Go ahead. 

Mr. JORDAN. Yeah. If it’s going to the—if the fine is going to the 

local government, but what—that’s not what’s happening at DOJ. 

There is a settlement and then DOJ tells the party who has supposedly done something wrong, you need to give the money to this 

nonprofit organization, which just so happens to have political 

leanings of—well, may have political leanings. That’s the problem. 

And they call it a donation. When you’re forced to do it, it’s not 

really a donation. I think it’s a shakedown, the term I used before. 

Mr. MEADOWS. All right. We’re going to go to the gentleman from 

Wisconsin, Mr. Grothman, for 5 minutes. 

Mr. GROTHMAN. Okay. This is a question for any one of you. Next 

year’s budget—obviously, it’d be nice if we had more detail here. 

It kind of surprises me the amount of funds that are going around 

that we don’t even know the amount that’s being spent. Can you 

make suggestions how—and I guess it would be Donald Trump’s 

first budget—how in his submission to Congress, we can begin to 

see more clearly how funds are collected and spent or requirements 

we should put on that budget request? 

Mr. HOLLISTER. Yes, sir. I’d recommend that Congress insist that 

the budget be expressed not just as a document, but also electronically, that it conform to the electronic structure that this committee 

has spent a great deal of time and effort mandating under the 

DATA Act of 2014 so that the budget can be electronically compared to the records from the previous year. 

Mr. GROTHMAN. Okay. Mr. Kosar, in your testimony, you mentioned that the government collected $516 billion from the public 

last year, right? 

Mr. KOSAR. Correct. 

Mr. GROTHMAN. To what degree do these—may be outside the 

normal collections is included in that amount? 

Mr. KOSAR. I honestly don’t know, because I find the categories 

that are used so confounding. And what we find in the President’s 

budget is aggregate numbers in many cases. You’ll have a line 

specifying a particular agency if it has a particularly large number, 

but then, you know, smaller amounts collected by agencies for 

other activities get rolled into one big ball. And so I would say it 

would be very nice if we had a better breakout and it was connected to the set of authorities. 

Mr. GROTHMAN. Do you think we should do something statutorily 

to mandate a more clear delineation of where the funds are coming 

from? 

Mr. KOSAR. I would favor that. 

Mr. GROTHMAN. Okay. That’s good. 

Mr. HOLLISTER. Mr. Grothman, if I may, I would also add that 

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mately spent is crucial. That’s one thing that we’re missing today. 

We don’t have any kind of system—even though Treasury has a 

system back behind there that does track what agencies are doing, 

we don’t have a system that shows—that connects those receipts 

from nonappropriated sources to their ultimate expenditure. We 

know that that is technologically possible. We believe Congress 

should mandate that. 

Mr. GROTHMAN. Well, I hope it’s technologically possible. In other 

words, when they have money coming in, even though some of that 

money is dedicated to a given purpose, that’s not necessarily apparent from their budget? 

Mr. HOLLISTER. It won’t be apparent from the system the way 

the system’s structured today. 

Mr. GROTHMAN. You know, it never ceases to amaze me how 

screwed up the Federal Government is. I tell everybody back home, 

I was a state legislator for 20 years, Washington is so much more 

screwed up than Madison, Wisconsin, you can’t believe it, and one 

of them is how little information we get. 

We’ll ask all of you again, are there agencies with funding 

streams outside the appropriation process? And I guess this kind 

of goes to you. Which agencies in particular do you think could give 

us more transparent budgets? 

Mr. HOLLISTER. Well, anecdotally, sir, we do know that some of 

the agencies that have independent research facilities, Defense Department in particular, but Energy Department certainly, there are 

often difficulties in comparing the budgets of those independent but 

federally funded research centers with wrapping them up and rolling them up to the overall budget of the agency. 

Mr. GROTHMAN. Okay. Well, I’ll see if we can do something. 

One other comment. One of the Congressmen asked, I think 

maybe rhetorically, why they gave the power of the purse to Congress. And I guess I’ll say the reason you want things in two different places is I think our forefathers were antithetical to the government growing at all. I mean, that’s why, you know, the senators 

were supposed to be appointed by the—you know, why there were 

so many checks and balances. I think that’s obviously why. It 

should be very, very difficult for the government to spend any 

money or hire any new people, and the more things are spread out, 

the more difficult that will be. 

But we’ll yield my remaining minute—— 

Mr. JORDAN. Will the gentleman yield? 

Mr. GROTHMAN. —to Congressman Jordan. 

Mr. JORDAN. I appreciate it. 

I would just—I’m just struck because no one seems to be able to 

give us an amount. We had a colleague ask, has it been increasing, 

the fees, the fines, the penalties, the settlements? Has that number 

been going up? We don’t—the answer is, from our panel, we don’t 

know. When asked the total amount in fees, fines, penalties, and 

settlements, the answer is, we don’t know. 

Maybe the best way to get the information is to pass Mr. Palmer’s legislation. Right? Because then we would know, because they 

got to all send it to the general fund, and we’ll know what the 

amount—and with the appropriate amendments, Mr. Kohn, but we 

pass this bill, now we’ll now. Right? Because now it’ll be—that’s 


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the whole—that makes the point why Mr. Palmer’s legislation is so 

darn good, because we’ll know and then we’ll know year to year if 

that number’s going up or down. 

This is why this is such a common sense thing and so constitutional. And as Mr. Hollister said, States are doing this, they’re 

transparent. In Ohio, we know what’s happening with fees and 

fines and penalties and settlements. It’s just the Federal Government we don’t know. All the more reason to pass the legislation, 

then we’ll know. 

I yield back. 

Mr. MEADOWS. I thank the gentleman. 

The gentleman’s time from Wisconsin has expired. 

The gentleman from Alabama is recognized for 5 minutes. 

Mr. PALMER. Thank you, Mr. Chairman. And I want to thank all 

my colleagues for attending this hearing, and for the witnesses. 

And, Mr. Kohn, I want you to rest assured. I’ve read your testimony, and I actually called my chief of staff and told him that we 

needed to make sure that whistleblowers are compensated and that 

that’s protected. So you can rest assured that we’ll take care of that 

with a friendly amendment. 

I would like to ask Ms. Krause this question: Article I, section 

9, clause 7, says, ‘‘No money shall be drawn from the Treasury, but 

in consequence of appropriations made by law; and a regular statement and account of the receipts and expenditures of all public 

money shall be published from time to time.’’ 

Are fees collected by the Federal Government public money? 

That’s not a hard question. 

Ms. KRAUSE. No. I was going to turn it to my counsel. 

Mr. PALMER. Okay. 

Ms. PEREZ. Yes, sir. The fees that are collected by agencies under 

the authority of Congress are considered to be appropriated funds. 

Mr. PALMER. No. The question is are they public money? 

Ms. PEREZ. Yes, sir. They’re considered to be public. 

Mr. PALMER. Okay. They belong to the public, not to any individual, not to any agency director. They belong to the public. Is 

that correct? 

Ms. PEREZ. Right. Appropriated funds—— 

Mr. PALMER. How about fines? 

Ms. PEREZ. —is synonymous to public money, yes. 

Mr. PALMER. Fines? That would—would you answer in the affirmative on fines, that’s public money? 

Ms. PEREZ. Yes. Unless Congress—— 

Mr. PALMER. How about settlements? 

Ms. PEREZ. Unless Congress has specifically designated that they 

not be considered public or appropriated, they would be considered 

appropriated, yes. 

Mr. PALMER. Okay. And, I mean, settlements, revenues from the 

sale of government assets. That would be considered public money, 

wouldn’t it? 

Ms. PEREZ. Any time Congress has designated sources of funding 

and said that—— 

Mr. PALMER. Okay. 

Ms. PEREZ. —agencies can use them, those are considered—— 

Mr. PALMER. All right. 


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Ms. PEREZ. —public money, yes, sir. 

Mr. PALMER. Thank you. 

I just want to make the point that H.R. 5499 is not a radical proposal. It is consistent with the Constitution. It’s a constitutional 

proposal. And as my colleagues on both sides of the aisle have acknowledged, it’s the duty of Congress to direct spending and not 

the agencies. And H.R. 5499 is not only consistent with that principle and that constitutional requirement, it advances it. It advances that responsibility. 

All my bill does is—all H.R. 5499 says is that all fines, fees, settlements, all unappropriated revenues shall go to the Treasury 

identified with the agency where they originated subject to being 

appropriated by Congress. It doesn’t in any way diminish the fact 

that an agency might have access to those fees, but what it does 

is it puts the responsibility back where it belongs. It restores oversight to Congress over the agencies, but more fundamentally, it restores accountability of Congress back to the people. And that’s one 

of the main things that we’ve avoided over the years by delegating 

spending to agencies, whether it’s through spending fees, fines, settlements. But we also are required by the Constitution to give a 

statement and account of all receipts and expenditures of all public 

money. 

And with all due respect to my—to the GAO and my colleagues, 

my friends there, and I have—I really like what the GAO does, you 

can’t answer that question. You’ve been asked repeatedly and you 

can’t give an answer to that. 

So I’m just—what H.R. 5499 does is it would require Congress 

to review the unappropriated spending, it would give us the accurate number of how much we’re actually collecting. And it may be 

that some agencies would be authorized or reauthorized on spending some of these fees. I don’t dispute the use that some of these 

fees are necessary, but the use of the funds should also be proper. 

And if Congress is not appropriating and not exercising oversight, 

whether or not it’s necessary, it’s not proper. 

So I just think on too many occasions, you know, agencies have 

circumvented the will of Congress and Congress has shielded itself 

from being held accountable by the public by allowing this to continue. And I think H.R. 5499 would hold the agencies accountable, 

but more fundamentally, it would make Congress accountable to 

the people. 

And I just think that the fact that we fail to pass appropriations 

bills does not diminish the fact that Congress is not exercising the 

oversight and the appropriation authority required by the Constitution, and that’s what we’re trying to reestablish here. Congress 

needs to be held accountable for the way the agencies operate. We 

need to exercise due diligence in our oversight. And if Congress can 

give the authority, it can take it away. But I believe H.R. 5499 is 

a reasonable step toward restoring constitutional oversight of our 

agencies and Congress being held accountable by the people. 

And I appreciate again your indulgence, Mr. Chairman, and for 

the committee holding this hearing, and I appreciate the witnesses’ 

testimony. I yield back. 

Mr. MEADOWS. I thank the gentleman, and thank the gentleman 

for his interest in this important topic. 


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The chair’s going to recognize himself for a few questions, and 

then we’ll be prepared to close with closing statements. 

So, Mr. Hollister, let me come back to you, because I think in 

your testimony, you indicated that the Department of Treasury actually has monthly statements where the total fines, fees, and settlements, I guess, as it relates to—it may not be able to be tracked 

back to the genesis of where it started, but there is a total number. 

Is that correct? 

Mr. HOLLISTER. That’s correct, sir. There is a total number and 

there are detailed tables. The trouble is it’s a static document. 

Mr. MEADOWS. It’s a what? 

Mr. HOLLISTER. It’s a static document. You can’t—— 

Mr. MEADOWS. Okay. A static document. And we know that your 

fine group is not static, right? One of the reasons why I get so excited about what you’re doing is it adds a level of transparency 

where we’ll be able to drill down and really start to look at it in 

a real meaningful way. Would you agree with that? 

Mr. HOLLISTER. It ought to be interactive, sir. 

Mr. MEADOWS. So as we look at that, can you explain any reason 

why Treasury would not be able to give this committee, in response 

to a request that we made, the total amount of fines and penalties 

that they’ve collected? What would be a reasonable rationale for 

them not being able to give this to this committee? 

Mr. HOLLISTER. My best suggestion, sir, would be that the Treasury Department tried to minimize the scope of the request, as leg 

affairs offices have been known to do—I’ve worked for the committee, I know how that works—and interpreted the request as a 

request for just the Treasury Department’s own receipt of fines, 

fees, and settlements, which involves all sorts of—— 

Mr. MEADOWS. So what you’re saying is we have a failure to communicate? 

Mr. HOLLISTER. Yes, sir. 

Mr. MEADOWS. So if we have a failure to communicate, I think 

it would be prudent for us to make sure that as a staff—and 

they’ve already indicated they’re going to reach out to Treasury to 

get this number, because as my colleague, the gentleman from 

Ohio, Mr. Jordan, mentioned, we’re talking—it’s starting to add up 

to real money here. We’re talking about $600 billion. Is that correct? Based on the testimony from the White House budget and the 

$83 billion that we got in a report, $600 billion. Would you 

agree—— 

How about this, Ms. Krause. Would you agree that $600 billion 

is a large sum? 

Ms. KRAUSE. That is a large sum. 

Mr. MEADOWS. All right. And being that the President-elect, Donald Trump, wants to spend $1 trillion on infrastructure, that gets 

us half the way there with fees, fines, and settlement, doesn’t it? 

You don’t have to answer that. I’ll just leave it at that. 

But—and so as we go here, I guess I use the humorous example 

in one area that’s not so humorous to me. So let me come back to 

GAO. MHS was mentioned earlier. And the reason why I drilled 

down on statute and what we can do with fines, fees, is because 

there is no guideline for MHS in terms of the fines that they may 


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give and the scope of that. It depends on the individual inspector 

on what he would give. 

And what I was troubled with is—and I didn’t know this because 

I was just a new Member of Congress going out to find out what 

was happening out there. And as I’ve recently found out, that actually there was an empty Coke can on a desk at a mining group, 

that they got a fine of well over $500 for having a Coke can sitting 

on their worktable. That happens in my office probably on a regular basis. So if MHS had come in and fined me, I would have had 

this unbelievable fine. And then I went up on the—— 

Mr. CONNOLLY. Wait a minute. Can we get the address of your 

office? 

Mr. MEADOWS. Yeah. Well, I’m sure it’s in Rayburn, because 

you’ve got plenty of seniority. 

And so as we look at this, here’s my concern. If we leave it up 

to a nonspecified, arbitrary fine and fee schedule, it’s one thing to 

say, okay, a fee covers the cost of this particular thing and this is 

where we collect it and it goes, that’s one issue. But the other is, 

the gentleman from Ohio pointed out, on the settlement and the 

fines, that’s a number that could go up or down based on no particular criteria. Would you agree with that? How many of the agencies have a defined, if you do X, it’s going—the fine is Y? 

Ms. PEREZ. I don’t know the absolute number. 

Mr. MEADOWS. Does the EPA have that? 

Ms. PEREZ. I don’t know specifically. 

Mr. MEADOWS. I know the answer, but, I mean, do they have, if 

you violate a particular rule, that it always—the fine is always a 

set amount? In your experience, would you say that there is—that 

you could make an analysis that is linear in terms of their fee and 

fine structure? 

Ms. PEREZ. I don’t know that we could, sir. 

Mr. MEADOWS. Okay. So here’s what I would ask of each one of 

you. We would ask each of you to report to this committee, if you 

can, three recommendations on what you would like to see. And if 

you would get back to this committee. And that might even include 

looking at the particular piece of legislation and problems that you 

may have with that legislation that may not fulfill the intended 

consequence. 

Mr. Kohn, I’m sure you can weigh in on that. There’s a couple 

of others that the ranking member and I have talked about. But 

three recommendations that we have. 

Here is the other question that I would ask for you, is to prepare 

at least two questions that we can ask OMB, the IRS, and Department of Treasury when we have the follow-up hearing for them to 

be able to hopefully illuminate on some of these unanswered questions. Because you would think if any group would have a proper 

accounting of what’s coming in and what’s going out and where it’s 

coming from, it would be OMB, Treasury, and the IRS. Would you 

all agree with that? 

Mr. HOLLISTER. Yes, sir. 

Mr. MEADOWS. Most of you are nodding your head yes, and so 

let the record reflect that all witnesses answered in the affirmative. 

And so as we go with that, I just want to thank you. I’m going 

to recognize the gentleman from Virginia for his closing statement. 


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Mr. CONNOLLY. I thank the chair. And it’s an intriguing hearing. 

And I thank our colleague from Alabama for really bringing before 

us, I think, a very legitimate issue, worthy of much further examination. 

I guess I’d make three points. One is, we talked about the Constitution and the role of Congress and the power of the purse. 

There has been no court ruling, that I’m aware of, in the history 

of the Republic that has challenged or questioned the constitutionality of Congress’s right to delegate those authorities. So the 

fees and settlements and penalties in question so far apparently 

pass constitutional muster. So that’s not the issue. The issue is, 

has it gone too far? Is it de facto creating a situation where we’re 

not doing our job? And if so, what’s the remedy? 

What we have not examined here today, which you’ve heard me 

pursue, is, okay, what are the downsides? What are the consequences? If you cut off the TVA’s ability to collect fees, what does 

it do to the mission of the TVA and the people it serves? And is 

that minor, is it trivial, is it easily correctable, or is it something 

much more serious and significant that we have to contemplate, we 

have to take responsibility for? 

And, finally, I think we’re putting a lot of faith in our own appropriations process. The fact of the matter is Congress is derelict in 

its duty, not so much by delegation of these fees and collections, 

but in our inability, frankly, to pass a normal appropriations process. And that’s a bipartisan dereliction of duty. I worked in the 

Congress in the Reagan administration, and I can remember Ronald Reagan putting a big stack of papers, which was the omnibus 

funding bill that year, and talk about how shameful it was. That 

was over 30 years ago, and we do more of it and that stack of paper 

would be even bigger today. 

To assume that we’re going to take on more responsibility by 

proving every whistleblower payment or every settlement agreement or every fee to be charged, to me is maybe something that 

constitutes a noble goal, but it is not something that’s practical in 

this Congress or any future Congress, given our past record of performance in that regard. 

So I think there’s a lot we have to think through before we act 

on this bill, but I do thank our colleague from Alabama for whetting our appetite and forcing us to deal with this subject, and I look 

forward to further investigation. And, Mr. Chairman, thank you for 

this hearing. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes the gentleman from Ohio for his closing 

statement. 

Mr. JORDAN. I thank the chairman. 

I just wanted to respond briefly to the ranking member, our good 

friend from Virginia. He talked about no court case has said Congress cannot delegate, that’s accurate, but there was a court case 

in 1976, United States versus McCollum, which said the Supreme 

Court has repeatedly affirmed, quote, ‘‘The established rule is that 

the expenditure of public funds is proper only when authorized by 

Congress, not that public funds may be expended unless prohibited 

by Congress.’’ 


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So it’s not a passive, it’s an active role that Congress is supposed 

to play in this effort. 

Never forget what happens here. We have three categories: Fees, 

fines and penalties, and settlements. No one could tell us what the 

total amount is. But we do know that the fees, according to the 

White House, just that alone is $534 billion, roughly half of what 

we spent in discretionary spending last year. We know fines and 

penalties is $83 billion over 5 years, and that excludes Treasury 

and the IRS. So we know that’s a substantial number. And we 

know settlements just at DOJ is in the millions and millions of dollars, what they’ve required companies to pay, and not only pay to 

the DOJ but to pay to some favorite nonprofits that the DOJ recommends that they give a, quote, donation to. 

So that’s why what the chairman said just a few minutes ago is 

so important, that we get OMB in here, that we get Treasury in 

here, someone from the IRS, who can answer our questions. That’s 

plain and simple. 

And it, again, underscores, as I said earlier, why Mr. Palmer’s 

legislation—maybe it needs some amendments, I haven’t seen 

many bills that come in front of Congress that don’t need some 

changing—but why it’s so important and so valuable. 

Maybe we also need the inspector general, Mr. Chairman, the inspector general from Justice Department to come in here and explain to us how this settlement game works when DOJ shakes 

down some companies. I’d like to know that too. 

So this is an important subject. I want to commend the chairman 

for having this hearing, and I particularly want to commend the 

gentleman from Alabama for bringing this legislation. This is something we need to pursue. We need to make sure this bill gets done, 

gets passed, becomes law, because, like I said, if no one else will 

give us the number, when we pass the bill, we’ll get the number, 

and that will help the taxpayers. 

So with that, I yield back, Mr. Chairman. 

Mr. MEADOWS. I thank the gentleman. 

I want to mention, the ranking member and I just had a conversation, and so we will be sending a bipartisan letter to request 

that information of Treasury. And so hopefully we’ll get a little bit 

more specificity on that particular item. 

And I want to close by saying this: One, thank you all for your 

interest in transparency, for your interest in this particular subject. 

Mr. Kohn, thank you for your support of whistleblowers, specifically. It is a critical nature. Your graphs were very illuminating, 

and certainly we don’t want to go backwards there. And I can tell 

you that I for one am committed to make sure we don’t go backwards on that issue. I believe Mr. Palmer agrees with me on that 

particular item as well. 


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For my friends at GAO, the follow-up hearing that we will be 

having, I would ask that you just be prepared, because you’re going 

to be part of that, because the fourth leg of that chair needs to be 

GAO and what we have and have not been able to acquire. And so 

as we look at that, I just want to thank all of you for your interest. 

And if there is no further business before the subcommittees, 

they stand adjourned. 

[Whereupon, at 3:46 p.m., the subcommittees were adjourned.] 

Æ 


KING-6430 with DISTILLER