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89–447 PDF 2014

EXAMINING SOLUTIONS TO CLOSE THE $106 

BILLION IMPROPER PAYMENTS GAP 

HEARING 

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT OPERATIONS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JULY 9, 2014 

Serial No. 113–123 

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 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

DANNY K. DAVIS, Illinois 

PETER WELCH, Vermont 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

Vacancy 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

STEPHEN CASTOR, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON GOVERNMENT OPERATIONS

JOHN L. MICA, Florida, Chairman 

TIM WALBERG, Michigan 

MICHAEL R. TURNER, Ohio 

JUSTIN AMASH, Michigan 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

GERALD E. CONNOLLY, Virginia Ranking 

Minority Member 

JIM COOPER, Tennessee 

MARK POCAN, Wisconsin 

(III) 

C O N T E N T S 

Page 

Hearing held on July 9, 2014 ................................................................................. 1 

WITNESSES 

Mr. Beryl Davis, Director, Financial Management and Assurance, U.S. Government Accountability Office 

Oral Statement ................................................................................................. 10 

Written Statement ............................................................................................ 13 

Ms. Beth Cobert, Deputy Director for Management, U.S. Office of Management and Budget 

Oral Statement ................................................................................................. 33 

Written Statement ............................................................................................ 35 

Mr. Mark Easton, Deputy Chief Financial Officer, Office of the Under Secretary of Defense (Comptroller), U.S. Department of State 

Oral Statement ................................................................................................. 40 

Written Statement ............................................................................................ 42 

Shantanu Agrawal, M.D., Deputy Administrator and Director, Center for 

Program Integrity, Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services 

Oral Statement ................................................................................................. 48 

Written Statement ............................................................................................ 51 

The Hon. John Koskinen, Commissioner, U.S. Internal Revenue Service 

Oral Statement ................................................................................................. 58 

Written Statement ............................................................................................ 61 

APPENDIX 

Improper Payments Rate from 2008–2013 from OMB, Submitted by Mr. Mica 122 

Improper Payments Chart for 2013, Submitted by Mr. Mica .............................. 123 

Republican Guidance 8/2/13 Govt.Ops Hearing ‘‘Examining the Skyrocketing 

Problem of Identity Theft Related Tax Fraud at IRS’’ ...................................... 124 

Staff Report: Oversight of Conference Spending Saves Taxpayers Hundreds 

of Millions of Dollars ............................................................................................ 126 

(1) 

EXAMINING SOLUTIONS TO CLOSE THE $106 

BILLION IMPROPER PAYMENTS GAP 

Wednesday, July 9, 2014 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON GOVERNMENT OPERATIONS, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, D.C. 

The subcommittee met, pursuant to call, at 1:39 p.m., in Room 

2154, Rayburn House Office Building, Hon. John Mica [chairman 

of the subcommittee] presiding. 

Present: Representatives Mica, Meadows, Massie, Issa, and 

Connolly. 

Also Present: Representatives Jordan, DeSantis, and Clay. 

Staff Present: Ali Ahmad, Professional Staff Member; Melissa 

Beaumont, Assistant Clerk; Molly Boyl, Deputy General Counsel 

and Parliamentarian; David Brewer, Senior Counsel; Caitlin Carroll, Press Secretary; Katelyn E. Christ, Professional Staff Member; 

Drew Colliatie, Professional Staff Member; John Cuaderes, Deputy 

Staff Director; Adam P. Fromm, Director of Member Services and 

Committee Operations; Linda Good, Chief Clerk; Tyler Grimm, 

Senior Professional Staff Member; Jennifer Hemingway, Deputy 

Policy Director; Christopher Hixon, Chief Counsel for Oversight; 

Michael R. Kiko, Legislative Assistant; Mark D. Marin, Deputy 

Staff Director for Oversight; Jeffrey Post, Senior Professional Staff 

Member; Laura L. Rush, Deputy Chief Clerk; Jessica Seale, Digital 

Director; Andrew Shult, Deputy Digital Director; Katy Summerlin, 

Press Assistant; Peter Warren, Legislative Policy Director; Rebecca 

Watkins, Communications Director; Eric Cho, Detailee; Tamara Alexander, Minority Counsel; Meghan Berroya, Minority Deputy 

Chief Counsel; Jaron Bourke, Minority Director of Administration; 

Aryele Bradford, Minority Press Secretary; Portia Brown, Minority 

Counsel; Devon Hill, Minority Research Assistant; Jennifer Hoffman, Minority Communications Director; and Cecelia Thomas, Minority Counsel. 

Mr. MICA. Good afternoon. I’d like to welcome everyone to the 

Subcommittee on Government Operations, a subcommittee of the 

House Government Oversight and Reform Committee. Pleased to 

welcome Members. 

And the title of today’s hearing is ‘‘Examining Solutions to Close the $106 Billion Improper Payments Gap.’’ 

The order of business will be today that we’ll have opening statements by Members, and we have one panel of witnesses. We’ll recognize them, swear them in, and they will provide the committee 

2 

with their statements. And then we’ll go to questions after we’ve 

completed hearing from the witnesses assembled today. 

Again, I thank everyone for participating and attending. This is 

an important topic and actually part of the oversight committee’s 

mission, and that’s to accomplish two fundamental responsibilities. 

A lot of hardworking Americans send their taxpayer dollars here 

to Washington. They deserve to know how that money is spent. 

They need to make certain that our government operates efficiently, economically. And our responsibility in this committee and 

its predecessors back to their early 1800s is to protect those citizen 

rights and hold folks accountable in the Federal Government. 

So that’s the reason we’re here today. And the purpose of this 

hearing is one in a series of hearings that we’ve had on improper 

payments, and this is an update hearing. 

I’ll start by yielding to myself, and I have some opening comments. Then we’ll go to, as I said, the other Members. 

First of all, again, we’re going to discuss the very serious and, 

unfortunately, a very persistent problem of improper payments 

across the Federal Government. 

Now, listen to this. The amounts here are absolutely staggering. But just in fiscal year 2013, agencies reported over $100 billion in 

improper payments. I asked the staff to go back and see how consistent this has been, has it changed much. And, actually, it’s over 

$100 billion each of the last 5 years. That’s a staggering half-a-trillion dollars in improper payments at a time when we’re running 

trillions of dollars of deficit and that we’re scrambling to try to do 

the best we can to make, again, Federal fiscal ends meet. It’s an 

incredible amount of money that has been misappropriated and 

mispaid with improper payments. 

Let me take just a minute and review some of the staggering statistics. The sheer number award has to go to CMS, the Centers for 

Medicare and Medicaid Services, which paid out, again, a huge 

amount of money. I think about $60 billion of the $100 billion is 

just an—let’s put this little chart that we’ve got up here. 

This chart says it all, and the chart shows Medicare Advantage 

and Medicaid. You add them up, and you have about $60 billion 

total improper payments out of about $100 billion. So, in sheer dollars alone, one of the areas that concerns me and every American 

is health care and the staggering cost of health care. And here we 

have improper payments to the tune of over $60 billion in just 

those programs. 

Now, that sets the dollar record. However, one of my major concerns is the improper-payment error rate. And the chart here, the 

red shows the error rate. And soaring off the charts is the error 

rate for Earned Income Tax Credit, and that is overseen by IRS. 

So it’s about 25 percent error rate in the Earned Income Tax Credit 

area. That’s astounding. 

A quarter of these improper payments are done through, again, 

error. The error rate is less than in the health care. That’s the only 

thing, I guess, we could say good about, again, the huge amount 

of dollars going out from that area. 

So IRS—and we’ve asked them to join us today, talk about their 

progress, or lack of progress, where they are in trying to get this 

huge error rate under control. 

3 

There are many examples, and I’ll put some of them in the 

record. I won’t cover all of them today. But, for example, if you 

want to go back to health care, CMS has paid individuals who are 

incarcerated in correctional facilities, so individuals in prison, behind bars, who are generally not eligible for healthcare benefits, 

they paid some $33 million between 2009 and 2011 to people behind bars. That’s just the Medicare program. 

If we look at some of the other areas where money is going out 

the door, in my State, a mother of three with a sixth-grade education defrauded the Federal Government out of at least $3 million 

with an identity-theft tax fraud scheme. She was caught because 

she announced on her Facebook page that she was, ‘‘the queen of 

IRS tax fraud.’’ And I’ve also conducted hearings on the issue of 

identity theft and tax fraud that occurs through that scheme. 

Improper payments are one of the most important areas in our 

committee’s jurisdiction and one of which Congress has been very 

active. It’s not like Congress hasn’t acted on the issue of improper 

payments. 

Now, listen to this. Twelve years ago, we passed the Improper 

Payments Information Act, which requires agencies to do basic reporting to the White House Office of Management and Budget to 

address the so-called improper payments, which included overpayments, underpayments, payments to the wrong individuals, and 

payments where there’s no documentation. That’s 12 years ago. 

Four years ago, we passed the Improper Payments Elimination 

and Recovery Act, which requires agencies to produce plans to reduce the payment errors and attempt to recoup improper paid 

funds. 

Two years ago, we passed the Improper Payments Elimination 

and Recovery Improvement Act, which created a Do Not Pay initiative to prevent fraud and payments to deceased individuals and 

strengthen agencies’ abilities to recover improperly paid taxpayer 

dollars. 

In fiscal year 2013, the total estimated improper payments were 

over $105 billion, according to the GAO’s review of agency reports. 

So, today, we’re going to hear from GAO and OMB. Unfortunately, 

the picture hasn’t gotten much better, even with the passage of a 

number of laws that I cited. 

The Department of Defense, let’s talk about them for a second. 

While DOD does a report and they have found that a relatively 

small number of improper payments are made, it’s important to 

note that GAO’s total improper-payments figure does not include 

the Department of Defense. GAO has grave reservations even 

about DOD’s ability to track and accurately report its improper 

payments. 

Now, back to Medicare and Medicaid and CMS, which is responsible, also, for many high-error programs, including the program 

with the highest amount of improper payments, and that’s Medicare Fee-for-Service. In fiscal year 2013, roughly 10 percent, or $36 

billion, of payments were made by Medicare Fee-for-Service, and 

those were improper payments that were made. 

The IRS, again, administers the Earned Income Tax Credit. They 

do have one of the highest rates, as I said, about 25 percent, and 

the second-highest number of improper payments in total dollars— 

4 

again, a smaller number of dollars but a higher error rate. Their 

improper payments were $14.5 billion in last fiscal year. 

IRS also faces the grappling problem with increased identity 

theft, and I mentioned that before. And, again, the estimates we 

have from IRS indicate that that could run as high as $21 billion 

in fraudulent tax returns through 2017. 

Finally, I am pleased to see all of our witnesses, particularly 

pleased to see IRS Commissioner Koskinen. I had actually invited 

Debra Holland, the head of IRS Wage and Investment Division, to 

testify today. Mr. Koskinen, who heads IRS, has agreed to come at 

his own volition, and pleased to have him here. 

I may, in fact, call Debra Holland back; want to put her and the 

agency on notice. And while I’m glad he’s here, we’ll have an opportunity to question him, but I may, again, continue this hearing 

with her at a future date. And given the Commissioner’s broad responsibility, he does open himself to questions not only about this 

but a whole host of IRS issues that have been before this committee. 

So I look forward to hearing from IRS, CMS, GAO, OMB on how 

best we can tackle this problem that seems to be eliminating resolution and not getting better. In fact, the dollars are very concerning. 

So, with that opening comment, I’ll yield to the gentleman from 

Virginia, Mr. Connolly. 

Mr. CONNOLLY. I thank my friend. 

Before I start, if the chairman of the full committee has an opening statement, I would certainly defer to him. 

Mr. MICA. He does. And we can, with your permission—— 

Mr. CONNOLLY. I would defer to the chairman. 

Mr. MICA. He came in late. And we’re going to recognize Mr. 

Issa, the chairman of the full committee. 

Mr. ISSA. Well, thank you, Mr. Connolly. 

Commissioner, welcome. 

Ms. Davis, I want to signal you out for an excellent report, that 

I know these take time and they’re hard to put together. 

What I got out of your report, what I hope the Commissioner is 

prepared to talk about today, is an amount of money that the 

American people cannot begin to understand. More than 100 years 

of giving away a million dollars a day, somehow, you know, causes 

people—or more than 1,000 years of giving away a million dollars 

a day, it represents such a large amount of money that nobody can 

really understood what it would be like to just stack up those bills 

that long. 

But normally when we have these kinds of hearings, everyone 

comes in and everyone says, if you just gave us more money, we 

could fix that. Commissioner, consider it said that if we gave you 

lots more money in addition to the $11 billion budget, $1.8 billion 

for IT, and 90,000 employees, with more people, you could, in fact, 

reduce some of this. 

One of the challenges is, ultimately, that slide that Chairman 

Mica put up represents self-inflicted wounds in addition to fraud. 

There is no reason that earned income credit—basically, people 

with relatively small—have such a huge amount of fraud. That is 

a system failure. 

5 

CMS and Medicare, which sadly or happily fall under your purview, have, in fact, built a system that is rampant with fraud. 

And I’ll just briefly remind the committee of something that our 

committee was very proud of. During the spending of the stimulus, 

we had authorized the RAT Board and the oversight that went on. 

And what we discovered was that it wasn’t very expensive, a few 

million dollars, to set up a team that, in fact, was able to find, for 

example, doctors in Kansas who suddenly made new applications 

to have offices in Los Angeles and then proceeded to send large 

amounts of billing to Medicare. 

The system that they put in place looked through the data, saw 

it as a red flag. Discovering that it was an improbability that so 

many doctors would suddenly be in L.A., they did two things. They 

called the doctors’ offices, and before they got past the receptionist, 

they were very quickly put to the doctor, who was immediately 

available to say, ‘‘Heck, no, I don’t go to California, and I’m not 

there.’’ 

They did the second thing, which is they went to Google Earth 

and they looked at the building that was being applied for, and 

they quickly saw that it was a strip mall with no appropriate space 

for medical offices. They flagged it in realtime and very quickly 

were able to get to a fraud before large disbursements went out. 

That is proven technology that cost a fraction of what the portion 

of the budget that deals with fraud at the IRS spends. With the 

passage of the DATA Act, with the help of the ranking member, 

many of the procedures are in place and sit at Treasury today. 

These are leverageable technologies that are not about how much 

money; they’re about a willingness to employ them. Money may be 

needed to scale, but that money certainly would be easy to justify 

if, in fact, the tools were used. 

So what I’m hoping to hear today is not a request for more 

money, but it’s a statement, hopefully by both DOD and IRS, about 

how you can use modern technology to work smarter, not harder. 

If there are systems that need to be in place or changes, hopefully 

you’ll be proactive in suggesting them. 

But I think, Ms. Davis, you’ve done a few of these before, so this 

isn’t new work for you. Doing these reports year after year and seeing the numbers substantially similar—$100 billion, $100 billion, 

$100 billion, and pretty soon it’s heading toward a trillion—tells us 

that they have a system failure. 

And, Commissioner, I know you understand that it takes system 

changes to make large changes, tens or twenties of billions of dollars in changes. Simply plussing up the number of people to do the 

same work will get you, at best, an incremental increase and very 

hard to quantify as worth the taxpayers’ money. 

So, again, I’ve used my 5 minutes. I’ve used it to say that I’m 

hoping this hearing will very much be about the proactive system 

changes that the largest single areas of improper payments in our 

government are sitting before us today, the Department of Defense 

and the IRS, under their offices. 

So, Mr. Connolly, I want to thank you. 

This is an important hearing. This is one of those hearings that 

the committee does that is always the same no matter which party 

sits in the chair. 

6 

And I thank the chairman and yield back. 

Mr. MICA. I thank you, Chairman Issa. 

I now recognize Ranking Member Connolly. 

Mr. CONNOLLY. I thank you, both chairmen. 

And Chairman Issa makes a good point; this can’t be all about 

money. Money isn’t everything when it comes to resources for, you 

know, fulfilling our missions. 

On the other hand, money is not nothing. And this Congress has 

certainly take the precept that money isn’t everything to a very logical but harmful conclusion, especially when it comes to resources 

for the IRS. 

But I remember Ms. Davis, the head of GAO, testifying about the 

lack of resources at GAO and how there’s a return on investment. 

You know, when we invest in investigative and audit functions, the 

recovery rate is fairly high. Likewise, when we invest in collection 

rates and investigative resources for the IRS, there is a return on 

that investment, which I will return to in just a little bit. 

I think it’s important to keep both in mind. Money is not the solution to everything, but that isn’t the argument for stripping bare 

the resources so that we can’t really do or can’t perform our mission and our function. 

I want to thank Chairman Mica, especially, for holding the hearing. As Chairman Issa has said, actually, this subject has been, 

sort of, the purview of this committee for a long time. And we did 

some really, I thought, thoughtful and groundbreaking work under 

Todd Platts, who was a previous subcommittee chairman of this 

committee. Because this is something where it seems to me we can 

find bipartisan common ground. We’re not going to agree on everything, but I think, actually, we might agree certainly on the goals 

we want to set for ourselves. 

It’s important to know the Federal Government has reduced the 

reported government-wide improper-payment rate by 35 percent 

over the last 4 years, down from 5.42 percent in fiscal 2009 to 3.53 

percent in fiscal 2013. That tells me the Federal Government is 

taking this issue seriously, and I think this committee can take 

some credit for that. 

However, Federal agency improper-payment estimates still add 

up to at least $106 billion a year as of last year, which is, as the 

chairman said and the chairman of the subcommittee said, unacceptable by any standard. 

And when I think about the magnitude of that, when we talk 

about numbers involving sequestration over a 10-year period or 

debt-reduction plans or the big deal, this one item is over a trillion 

dollars in a 10-year time period and probably more. So the payoff 

for whittling it down is really important, and it’s something I’m 

glad the Federal Government is taking seriously, but we need to 

make more progress. 

Despite the imposing magnitude of the problem, I’m confident we 

can bring the figure under control, because, as the chairman 

showed in that chart, five programs account for $82.9 billion or 78 

percent of the amount we’re talking about. So it’s not something so 

scattered over thousands of agencies and divisions that it’s going 

to be hard to get our arms around it. 

7 

Actually, the chart the subcommittee chairman put up there really kind of gives us the scope of the problem, which means it is 

something manageable. While no silver bullet exists, a targeted approach, to me, on those concentrated areas, I think, could have 

high payoff. 

Further, having examined the issue in depth, I’m also convinced 

that when it comes to combating improper payments, we’d be wise 

to take heed of Ben Franklin, ‘‘An ounce of prevention is worth a 

pound of cure.’’ Antiquated pay-and-chase approaches that seek to 

recover improper overpayments after the fact are labor-intensive, 

time-consuming, and they’re going to have diminishing returns. 

And, finally, successfully bolstering the Federal Government’s 

ability to prevent improper payments requires two to tango, and 

Congress itself is not off the hook. As Deputy Director Cobert’s 

written testimony notes, there is compelling evidence that investments in administrative resources can significantly decrease the 

rate of improper payments. 

From the Social Security Administration saving taxpayers an es- timated $9 in avoided improper payments for every dollar spent on 

disability review, to the Health Care Fraud and Abuse Control Program recovering $8.10 for every dollar spent on healthcare fraud 

and abuse investigations over the past 3 years, it’s indisputable to 

me that investing taxpayer dollars wisely, maybe even modestly, 

into administrative resources can significantly reduce this deficit 

and yield to much better rules. 

And yet, when Members seek to offset amendments in appropriations acts, it’s invariably these same valuable administrative tools 

that are the first in line for the guillotine. 

As Commissioner Koskinen can attest, Congress’ pennywise and 

pound-foolish approach sometimes to management is not limited to 

improper payments. Consider the independent National Taxpayer 

Advocate 2013 annual report that said, for every dollar appropriated to the IRS in fiscal year 2013, the IRS collected an astounding $255 in legally owed taxes. In fact, the amount of tax money 

probably left on the table every year uncollected but properly owed 

far exceeds the dollar amount ascribed to improper payments. 

If the chief executive officer of a Fortune 500 company were told 

that each dollar he or she allocated to his or her company’s accounts receivable department could generate many multiples of dollars in return, it’s awfully difficult to see how a corporate board 

would allow that CEO to escape that investment. 

However, the revulsion sometimes expressed for the IRS here in 

Congress is so deeply engrained culturally that, since 2010, we’ve 

relinquished a golden opportunity to strengthen enforcement of our 

laws to catch tax cheats and reduce the deficit by a substantial 

amount of money. By my rough back-of-the-envelope calculation, 

we’re talking well over $3 trillion, potentially, on the table over a 

10-year period. That’s a very significant chunk of money. So I believe that investments make a difference. 

And I’d also add one other thing, Mr. Chairman, that sometimes 

gets overlooked because we focus so much on the IRS, but one of 

the partners here for CMS and the IRS, when we look at Medicare 

and Medicaid fraud, is the U.S. Attorneys’ Office. Last year, for example, the Boston U.S. Attorney’s office, if I got my numbers right, 

8 

helped identify and recover $3.5 billion in Medicare fraud. That’s 

one U.S. Attorney office; there are 99. 

So working with the Department of Justice is also important. We 

need the U.S. attorney in every office across the United States to 

take this issue of fraud and waste seriously and make it a priority. 

Because when we have their support and their active machinery at 

work, Commissioner Koskinen has a very powerful ally in trying to 

undertake his mission. So I think that’s an important part of this, 

too, that we want to keep in mind. 

With that, Mr. Chairman, I look forward to the testimony of our 

friends at the panel, and I thank you so much for holding this 

hearing. 

Mr. MICA. Mr. Meadows? 

Mr. MEADOWS. Thank you, Mr. Chairman. And I’ll keep my remarks very brief. 

I’m looking forward to hearing from each one of you, but to give 

your staff, really, some prep time, what I would ask each of you 

is, you can satisfy the ranking member, Mr. Connolly, and myself 

if you can quantitatively give, if we invest more money, where it’s 

actually going to provide a return. 

Now, Mr. Koskinen, I’ve read your testimony, and I’ve got your 

return on investment. And as a business guy, that’s what I look for, 

is a return on investment. But I can tell you that I looked at the 

details, in terms of money spent, number of employees, with regards to the Earned Income Tax Credit, and I see no correlation 

between employees and money in terms of recoupment. 

And so I look forward to you answering in a quantitative—and 

that’s what I’m looking for, each one of you, really a matrix, if we 

invest another billions dollars, what will we see, in terms of reducing this number. 

Because it is systemic; it is not a new problem. And, honestly, 

as Mr. Connolly said, when we’re dealing with these kind of numbers, $106 billion, eventually it adds up to real money. 

And so I look forward to hearing from each one of you, and I’ll 

yield the balance of my time back to the chairman. 

Mr. MICA. Well, thank you. 

Mr. MICA. And thank you for yielding to me for just a second to 

just put a couple of things in the record. 

Now, first of all, this is one of the smallest subcommittees in 

Congress. We have a very limited, just 

over—— 

Mr. MEADOWS. Mr. Chairman, I would say most efficient. 

Mr. MICA. Yeah, but—well, it’s smallest in numbers, but let me 

just say that the savings from this subcommittee are substantial. 

I just, you know, I heard this about—this commentary that, just 

give us more money, that Chairman Issa talked about that. I asked 

them to pull the report that we did in January of this year on just 

conference spending. This is on IRS. And I just don’t tell these 

agencies to come in here and give them a hard time and not expect 

some results. 

But in conference spending alone, and through the work of our 

subcommittee, we reduced expenditures in IRS, from 2010 to 2012, 

87 percent in conference spending. They went from $37.6 million 

in fiscal year 2010 to $4.9 million after we hammered them, again, 

9 

about—I have no problem with people going to conferences. I represent one of the best conference areas in the world, Orlando, and 

some great deals. But the spending was out of control, and you can 

save money. 

So whether it’s improper payments, then—and I just pulled the 

improper payments. Now, something’s rotten in Denmark, and 

something sure as hell is rotten in Washington. If you go from 2008 

back to 2004, you’ve got totals of improper payments, $38 billion, 

up to 2008, $73. Most of them in the $30s, low $40s. And then you 

jump from 2009 to last year, $106, $116—these are billion dollars. 

I just was doing quick math when I finished that. Again, over half 

a trillion in 5 years, and a relatively small amount. 

So something has got to be done to get this under control, period. 

And we passed laws, and something is not happening. I cited at 

least four laws that we passed. So this hearing, or as many hearings as we have, we’re going to figure out a way to stem this. 

And the ranking member just said, over a 10-year period, trillions of dollars. You could balance the Federal budget just by some 

of this. 

Excuse me for getting a little bit intense about this, but this is 

serious, and we’re going to follow it through. 

Okay—— 

Mr. CONNOLLY. Mr. Chairman? 

Mr. MICA. Yes. 

Mr. CONNOLLY. Could I also just ask unanimous—— 

Mr. MICA. And, oh, I ask unanimous—— 

Mr. CONNOLLY. Yeah. 

Mr. MICA. —consent to put—that was what I started with—both 

this little chart—it’s not identified, but it’s the rate from 2013 to 

2009 and then 2004 to 2008 on improper payments. 

Without objection, so ordered. 

Mr. MICA. And the improper-payments 2013 chart in the record, 

without objection. 

Mr. CONNOLLY. And, Mr. Chairman, I’d just—to be fair to the 

IRS, I want to note, the four primary legislative requests are not 

for money. They’re actually for expanded authorities, and they list 

them here. And I would just ask that we enter that into the record. 

Mr. MICA. Yes. 

Mr. CONNOLLY. I want to be fair. I was talking about more resources, not the IRS. 

Mr. MICA. All right. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

Mr. MICA. Thank you. 

And, without objection, those items will also be noted in the 

record at this point. 

Okay. There being no further opening statements—and Members 

will have 7 days to submit opening statements for the record, Members that are not here. 

And we may be joined by some other members. There’s, I think, 

at least one classified, or possibly two, Member briefings going on 

simultaneously. 

So, without objection, so ordered. 

Now, I would like to first introduce our panel of witnesses. We 

have first, Ms. Beryl Davis is the Director for Financial ManageVerDate Aug 31 2005 09:33 Sep 09, 2014 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 C:\DOCS\89447.TXT APRIL
10 

ment and Assurance at the Government Accountability Office; Ms. 

Beth Cobert is Deputy Director for Management at the Office of 

Management and Budget; Mr. Mark Easton is Deputy Chief Financial Officer at the Department of State; Mr. Shantanu Agrawal is 

Deputy Administrator and Director of the Centers for Medicare and 

Medicaid Services’ Center for Program Integrity; and Mr. John 

Koskinen is the Commissioner of the Internal Revenue Service. 

Some of you have been here before; some of you have not. This 

is an investigative panel. We do swear in all of our witnesses. If 

you’ll stand, please. Raise your right hand. 

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

to give before this subcommittee of Congress is the whole truth and 

nothing but the truth? 

And all of the witnesses, the record will reflect, have answered 

in the affirmative. 

Have a seat. Again, you’re welcome. 

And, first, I will recognize—and, again, those who haven’t been 

here, we try to limit you not exactly, but we try to keep it close 

to 5 minutes. If you have written testimony, additional data, 

through the request of the chair, it will be included in the record. 

So, with that, let’s recognize and start off with Ms. Beryl Davis, 

Director of Financial Management and Assurance at the Government Accountability Office. 

Welcome, and you’re recognized. 

WITNESS STATEMENTS 

STATEMENT OF BERYL DAVIS 

Ms. DAVIS. Chairman Mica, Ranking Member Connolly, Chairman Issa, and Mr. Meadows, I am pleased to be here today to discuss the issue of improper payments in Federal programs. 

My testimony will focus on Federal agencies’ reported estimates 

of improper payments, remaining challenges in meeting requirements to estimate and report improper payments, and strategies 

for reducing improper payments. 

In fiscal year 2013, Federal agency estimated improper payments 

totaled nearly $106 billion. This estimate was attributable to 84 

programs spread among 18 agencies. The five programs with the 

highest dollar amounts accounted for almost $83 billion or 78 percent of the government-wide total. 

This same year, OMB reported a government-wide improper-payment error rate of 3.5 percent of total program outlays when including DOD’s Defense Finance and Accounting Service Commercial Pay program. However, in May 2013, GAO reported major deficiencies in DOD’s process for estimating improper payments for 

this program in fiscal year 2012. Consequently, the 2013 estimate 

may not be reliable. When excluding the DFAS Commercial Pay 

program, the reported government-wide error rate was 4 percent in 

2013, compared to a revised estimate of 4.3 percent the year before. 

In fiscal year 2013, Federal agencies reported improper-payment 

error rates for seven risk-susceptible programs that exceeded 10 

percent. These seven programs accounted for more than 50 percent 

of the government-wide estimate. 

11 

Federal agencies have continued to identify new programs as 

risk-susceptible and report improper-payment amounts. A net of 10 

additional programs were added by OMB in the 2013 governmentwide estimate when compared to the prior year. The most notable 

addition was the Department of Education’s Direct Loan Program, 

with an estimate of approximately $1.1 billion. 

Despite progress in reporting improper payments, in GAO’s fiscal 

year 2013 audit of the Financial Report of the United States Government, we reported the issue of improper payments as a material 

weakness in internal control because the Federal Government is 

unable to determine the full extent to which improper payments 

occur and reasonably assure that appropriate actions are taken to 

reduce them. 

We found that four Federal agencies have not yet reported estimates for four risk-susceptible programs. For example, HHS has 

cited statutory limitations for its State-administered Temporary 

Assistance for Needy Families program which kept it from requiring State assistance in developing an improper-payment estimate. 

In addition, two programs that did report estimates were not included in the government-wide total because their estimation methodologies were not approved by OMB. 

As GAO has previously reported, there are a number of strategies that can help agencies to reduce improper payments, including 

analyzing the root causes of improper payments and designing and 

implementing effective preventive and detective controls. 

Regarding root causes, identifying and analyzing the root causes 

of improper payments is key to developing corrective actions. While 

some agencies reported the causes of improper payments last year 

in three general categories, as required by OMB, more robust rootcause analysis may help to identify needed corrective actions and 

thus assist in developing and implementing effective preventive 

controls. 

Regarding preventive controls, strong preventive controls serve 

as the frontline defense against improper payments. This can increase public confidence and avoid the pay-and-chase aspects of recovering improper payments. 

Preventive controls involve a variety of activities, such as upfront 

validation of eligibility through data shared among agencies. One 

example of such data-sharing is agencies’ use of the Do Not Pay 

initiative. Other preventive controls include predictive analytic 

technologies to identify patterns of high risk for fraudulent activities, program design reviews and refinements, and training programs for providers, staff, and beneficiaries. 

Finally, regarding detective controls, agencies need effective detection techniques to quickly identify and recover improper payments that do occur. Detection techniques include data mining and 

recovery auditing. For example, in fiscal year 2013, the Medicare 

Fee-for-Service Recovery Audit Program reported recovering $3.7 

billion. 

Another area for further exploration is a broader use of incentives for States to implement effective preventive and detection 

controls in State-administered programs. Designed and implemented effectively, these strategies could help advance the Federal 

Government’s efforts to reduce improper payments. 

12 

Chairman Mica, Ranking Member Connolly, Chairman Issa, and 

Mr. Meadows, thank you very much for the opportunity to be here. 

This completes my prepared statement, and I’d be happy to answer 

any questions. 

Mr. MICA. Thank you. 

[Prepared statement of Ms. Davis follows:] 

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Mr. MICA. And we’ll have questions when we’ve heard from all 

the witnesses. 

We recognize now Ms. Beth Cobert, and she is the Deputy Director for Management at OMB. 

Welcome, and you’re recognized. 

STATEMENT OF BETH COBERT 

Ms. COBERT. Thank you. Thank you, Chairman Mica, Ranking 

Member Connolly, Mr. Meadows, for inviting me today to discuss 

the Federal Government’s efforts to stop improper payments. I appreciate the opportunity to update the subcommittee on this topic. 

When the President took office in 2009, improper-payment rates 

were on the rise, with the fiscal year 2009 rate coming in at 5.42 

percent, the highest figure to date. We are pleased to report that, 

since 2009, the administration, working together with Congress, 

has significantly reduced improper payments. 

As a result of this concerted effort, the government-wide improper-payment rate has dropped steadily for 4 consecutive years, 

from 5.42 percent in fiscal year 2009 to 3.53 percent in fiscal year 

2013. And, as noted, the fiscal year 2013 measure does include 

DOD commercial payments. 

Over the past year, we reduced improper-payment rates in major 

program areas, including Medicaid, Medicare Advantage Part C, 

unemployment insurance, the Supplemental Nutrition Assistance 

Program, Pell grants, and the Social Security Supplemental Security Income program and the Retirement, Survivors, and Disability 

Income program. Furthermore, agencies recovered more than $22 

billion in overpayments through payment recapture audits and 

other methods. 

In programs administered at the State and at the local level, the 

Federal Government has been working directly with States to ensure that appropriate corrective actions are put in place to reduce 

improper payments. 

In other instances, Federal agencies have implemented innovative techniques to ensure that benefit payments are accurate. For 

example, the Supplemental Security Income program has been integrating the Access to Financial Institutions, AFI, bank 

verification process. AFI electronically verifies bank account balances with financial institutions so SSI can ensure that beneficiaries do not exceed program asset thresholds. 

While we are pleased to see progress, we acknowledge that more 

work needs to be done. There are areas where we did not see 

progress in fiscal year 2013. For these and for all areas, we will 

continue to work closely with agencies to find the root causes of improper payments and address them. 

To build on our progress, we are working on a number of fronts. 

We are conducting a careful analysis of program-specific corrective 

actions to identify those with the highest return on investment or 

potential for substantially reducing improper payments. 

We are also focused on leveraging technology and sharing data 

to address improper payments, as exemplified by the Do Not Pay 

initiative. Do Not Pay uses data-matching and predictive analytics 

to prevent improper payments before they occur. 

34 

The budget includes proposals to build on congressional and administrative action to further reduce improper payments. The fiscal 

year 2015 budget includes a number of program integrity proposals 

aimed at improving government efficiency, which is a core focus of 

the overall President’s management agenda. 

For example, the budget strengthens Medicare, Medicaid, and 

the Children’s Health Insurance Program by providing tools and 

funding to fight fraud, waste, and abuse. It also supports the Internal Revenue Service efforts aimed at improving enforcement of current tax laws and reducing the tax gap. 

These proposals will provide additional savings for the government and taxpayers and will support government-wide efforts to 

improve the management and oversight of Federal resources. 

There is compelling evidence that investments in program integrity can significantly decrease the rate of improper payments and 

recoup many times their initial investments. As was noted earlier, 

for every dollar spent by the SSA on disability reviews, the government saves an estimated $9 in avoided benefit payments. 

To help bolster the value of the Do Not Pay system, the President’s fiscal year 2015 budget reproposes providing the Treasury 

Do Not Pay system access to the SSA full Death Master File, which 

includes the most timely information available on death information received from State sources. 

We look forward to continuing to work with Congress on other 

matters, including the Improper Payments Agency Cooperation Enhancement Act, IPACE, which includes many administration priorities on sharing data to prevent improper payments. 

I’d like to close by emphasizing that stopping improper payments 

remains a priority for this administration. We have taken an aggressive approach to attacking waste, fraud, and abuse within Federal agencies, and we will continue to seek out new and innovative 

tools to help us in this fight. While we are proud of the progress 

we have made, we know there is much more work to be done to 

improve the accuracy and integrity of Federal payments. 

I look forward to continuing to work with this subcommittee and 

other committees, as well as the GAO, the inspectors general community, and agencies, to make more strides in reducing improper 

payments. All of these stakeholders are our partners in this endeavor, and they all play a critical role in holding the Federal Government accountable for reducing improper payments. 

Thank you for inviting me to testify. I look forward to answering 

your questions. 

Mr. MICA. Thank you. 

[Prepared statement of Ms. Cobert follows:] 

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Mr. MICA. And I’ll now recognize Mr. Mark Easton. He’s the Deputy Chief Financial Officer at the Department of Defense. 

STATEMENT OF MARK EASTON 

Mr. EASTON. Thank you. 

Chairman Mica, Ranking Member Connolly, Congressman Meadows, thank you for the opportunity to discuss the actions the Department of Defense is taking to reduce improper payments and 

achieve full compliance with IPERIA. 

I submitted a statement for the record and will summarize it 

briefly. 

As the Deputy Chief Financial Officer of DOD, I am responsible 

for financial policy, systems compliance, internal controls governing 

the financial and accounting aspects of all business operations 

across the Department. I am proud to have served in the Department for over 40 years, both in uniform and as a civilian. 

I’m also very mindful of our stewardship responsibilities and am 

keenly aware that the Department of Defense financial management remains on the GAO’s high-risk list and that we are the only 

Federal agency without a positive financial audit opinion. I’m also 

convinced that this status will change over time, and remain committed to our broader improvements in financial management, including the improper payments. 

Most importantly, I should add that Secretary Hagel, Deputy 

Secretary Work, my new boss, and the Chief Financial Officer, 

Mike McCord, and other senior leaders throughout the Department 

are equally committed. 

In short, we feel we have a sound and active program in place 

to identify, report, eliminate, and, if need be, recover improper payments. We estimate that less than 1 percent of all of our payments 

meet the definition of ‘‘improper.’’ That is low compared to the government-wide rate of a little over 3–1/2 percent for fiscal year 2013. 

And, moreover, the nature of many of our improper payments allow 

us to resolve them quickly. 

Our record of minimal improper payments is particularly noteworthy considering the size and complexity of the Department’s 

business operations. Consider that, last year, the Defense Finance 

and Accounting Service, or DFAS, handled nearly 90 percent of our 

total payments and disbursed nearly $580 billion, including 162 

million pay transactions, 6 million travel payments, and nearly 10 

million commercial invoices. 

Of course, there is always room for improvement. We constantly 

strive to reduce improper-payment rates where we can cost-effectively do so. Our overall financial improvement and audit readiness 

effort, more commonly known as the FIAR Plan, will continue to 

provide increased confidence and credibility in the numbers we report. These efforts, plus our collaboration with OMB, GAO, and the 

Congress, help us to sustain this focus. 

In my larger statement, I described five broad categories of payments that we used as reporting elements. These are commercial 

payments to vendors, civilian and military payrolls, travel payments, retired annuitant pay, and the similar payments by other 

organizations outside DFAS. I described our approach to controlling 

improper payments for each of them and will be happy to provide 

41 

additional details this morning if you wish; otherwise, they are 

made a part of the record. 

I have also provided an update on recent audit results from GAO 

and the DOD Inspector General, who provides an annual compliance assessment. Each report helps to identify additional opportunities to strengthen financial management and improve on our improper-payment reduction program. 

Many of the issues and challenges highlighted in the reports are 

the same ones that affect our financial reporting and audit capabilities. We concur with those issues and recognize that, until 

solved, they will continue to limit the confidence that you have in 

our efforts to accurately report improper payments. 

We also appreciate their recognition of the progress we are making. 

Mr. Chairman, in conclusion, I’d emphasize that we have a fundamentally sound improper-payment program at DOD that minimizes improper payments to very small levels. Our more comprehensive efforts to improve financial information and meet financial reporting requirements and audit standards will also improve 

the efficiency of our improper-payment efforts as well as reinforce 

the completeness and credibility of our improper-payment rates report. I will further—it will further improve our attempts to minimize improper payments while also establishing an infrastructure 

that will greatly improve efficiency. 

Less than 2 weeks ago, Bob Hale, the DOD’s longest-serving 

CFO, left office for a well-deserved retirement, but, most importantly, he left a legacy that assigned a high priority to improving 

DOD financial management over the long term. Our current CFO, 

Under Secretary Mike McCord, is equally committed to improving 

the quality of our financial information and achieving auditability, 

and that includes full compliance with IPERIA. 

Elimination of improper payments is and will continue to be an 

important and visible part of financial management stewardship at 

DOD. 

That completes my statement, and I welcome your questions. 

Mr. MICA. Thank you. And, as I said, we’ll hold them. 

[Prepared statement of Mr. Easton follows:] 

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Mr. MICA. Now let me introduce and welcome Dr. Shantanu 

Agrawal, who’s the Deputy Administer and Director at the Centers 

for Medicare and Medicaid Services’ Center for Program Integrity. 

Welcome. You’re recognized, sir. 

STATEMENT OF SHANTANU AGRAWAL, M.D. 

Dr. AGRAWAL. Thank you. 

Chairman Mica, Ranking Member Connolly, Congressman Meadows, thank you for the invitation to discuss the Centers for Medicare and Medicaid Services’ efforts to reduce improper payments. 

CMS shares this subcommittee’s commitment to protecting the 

Medicare Trust Fund and ensuring taxpayer dollars are spent on 

claims that are accurately paid. 

Each year, CMS estimates its Medicare Fee-for-Service improperpayment rate using the Comprehensive Error Rate Testing, or 

CERT, process. In fiscal year 2013, the Medicare Fee-for-Service 

improper-payment rate was 10.1 percent. 

It’s important to understand what improper payments are and 

what they are not. Like other large and complex Federal programs, 

Medicare, Medicaid, and CHIP are susceptible to payment, billing, 

and coding errors. Improper payments do not always represent an 

unnecessary loss of funds. They are not also necessarily fraudulent, 

nor are they necessarily payments for services that should not have 

been provided. Improper payments can also represent either overpayments or underpayments on billed claims. 

Medicare Fee-for-Service improper payments can result from a 

variety of circumstances, including: first, services with no documentation; second, services with insufficient documentation; third, 

incorrectly coded claims; fourth, services provided that were not 

medically necessary; and, five, any other errors, such as payments 

for noncovered services. 

The vast majority, over 60 percent, of Medicare Fee-for-Service 

improper payments are a result of insufficient documentation. For 

example, if an end-stage renal disease facility submitted a claim for 

1 month of dialysis services for a beneficiary but the submitted documentation did not include the physician’s order for dialysis and 

medications, as required by Medicare policy, the CERT program 

would score the claim as an improper payment. 

Another example would be, if a physician submitted a claim for 

an office visit with a Medicare beneficiary but the office visit note 

lacked enough identifying information about the beneficiary, the 

CERT program would score the claim as an improper payment. 

The factors contributing to improper payments are complex and 

vary from year to year. For example, the leading drivers of the improper-payment rate in fiscal year 2013 were hospital outpatient 

departments, skilled nursing facilities, and home health providers. 

A contributing factor to the Fee-for-Service error rate was the 

implementation of new home health policies requiring documentation of a face-to-face encounter prior to initiating home health services. This policy change will ultimately strengthen the integrity of 

the program. However, since it takes time for providers and suppliers to fully implement new policies, especially those with new 

documentation requirements, it’s not unusual to see increases in 

49 

error rates following implementation of otherwise-warranted program integrity policies. 

CMS is committed to paying claims in an accurate and timely 

manner and has a comprehensive strategy in place to address the 

improper-payment rate. 

First, CMS has put critical safeguards in place to make sure that 

only legitimate providers are enrolling in the Medicare program to 

make sure we do not allow bad actors to bill the program and generate improper payments. 

The Affordable Care Act required CMS to screen all existing 1.5 

million Medicare suppliers and providers under new risk-based procedures. Since March 25th, 2011, more than 930,000 providers and 

suppliers have been subject to the new screening requirements. We 

have deactivated over 350,000 providers and suppliers and revoked 

over 20,000 providers and suppliers, meaning they are no longer 

able to bill the Medicare program. 

CMS has demonstrated that provider enrollment actions result in 

cost avoidance. For example, by revoking just 48 providers identified by our advanced predictive analytics technology, CMS prevented $81 million in improper payments. 

Second, CMS has designed its claim-processing systems to detect 

anomalies in claims—for example, preventing payments for services such as a hysterectomy for a man or prostate exam for a 

woman. 

Medicare pays about $3.3 million Fee-for-Service claims each 

day. Due to the volume of claims processed by Medicare each day, 

CMS relies heavily on automated edits to identify inappropriate 

claims. The National Correct Coding Initiative stops claims like 

these that never should be paid in Medicare Part B and Medicaid. 

This program saved the Medicare program over $500 million in fiscal year 2013 alone. 

Third, CMS develops medical review strategies using the improper-payment data to ensure that we target the areas of highest 

risk and exposure. The review strategies range from issuing comparative billing reports that educate providers about their billing 

practices by showing the provider in comparison to his or her State 

and national peers, to targeted medical review of specific providers. 

Medical review resulted in $5.6 billion in savings for fiscal year 

2013. 

As required by law, CMS also uses other contractors to perform 

medical review on a primarily post-pay basis. These contractors 

have returned $3.7 billion in the same time period. 

Fourth, CMS is implementing prior authorization processes used 

by the private sector to prevent potential improper payments before 

they are made. To help address the high improper-payment rate for 

power mobility devices, CMS implemented the Medicare Prior Authorization of Power Mobility Device Demonstration in seven highrisk States and has announced plans to expand the demonstration 

to an additional 12 States. We are seeing real results from this 

demonstration. 

CMS is committed to paying claims in an accurate and timely 

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committee’s questions on how we can improve our commitment to 

ensuring the accuracy of payments made by CMS’s programs. 

Mr. MICA. Thank you. 

[Prepared statement of Dr. Agrawal follows:] 

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Mr. MICA. And we’ll hear from our last witness, Mr. John 

Koskinen, and he is the IRS Commissioner. 

Welcome back. And you’re recognized. 

STATEMENT OF THE HON. JOHN KOSKINEN 

Mr. KOSKINEN. Thank you, Chairman Mica, Ranking Member 

Connolly, and Congressman Meadows, for the opportunity to discuss the work being done by the IRS to reduce improper and erroneous payments in the programs we administer. 

These are important issues to the IRS to which I have personally 

devoted substantial time. The IRS views improper and erroneous 

payments as a very serious problem and one where we continue to 

devote a significant amount of time and resources. 

One of our major areas of focus is refund fraud, especially fraud 

caused by identity theft. I’m pleased to report that, in this area, 

over the last couple of years, the IRS has made important progress. 

In 2013, we suspended or rejected 5.7 million suspicious returns 

worth more than $17.8 billion. Through the end of May of this 

year, more than 3.7 million suspicious returns have been suspended or rejected. We have also opened more than 800 new investigations into identity theft and refund fraud schemes thus far this 

year, bringing the total number of active cases to more than 1,900. 

Despite the progress, we realize that more needs to be done. 

Fighting refund fraud caused by identity theft is an ongoing battle 

for the IRS, as we must remain vigilant given the propensity of 

identity thieves to develop new and more complicated schemes. 

And even with the progress we’ve made so far, I’ve recently 

asked our senior leadership team to reevaluate everything we’re 

doing in this area and to consider additional steps we could take 

related to refund fraud. For example, we are consolidating employees working on identity-theft victims assistance across the agency 

into a single office. We will also be limiting to three the number 

of refunds that can be electronically deposited into a single bank 

account or debit card. 

We’re also working to reduce improper payments by improving 

compliance with regard to refundable tax credits, particularly the 

Earned Income Tax Credit Program. Our programs that focus on 

EITC combine to protect approximately $4 billion annually, but we 

are concerned that the improper-payment rate for the EITC remains unacceptably high, along with the dollar volume of the payments that are made improperly. 

As noted, this program—this problem has existed in a steady 

state for several years, and when I began as Commissioner, I advised our senior team that we need to make improvements in these 

rates. 

We again have pulled together what I call everybody who knows 

anything about EITC in the agency into a working group that is 

assessing all of our past and current efforts in this area and exploring new possibilities for improving the EITC. I view this as one of 

the most important areas of our activities. 

One thing we’ve already done is disaggregate the problem and 

see where most of the noncompliance is. We found that EITC errors 

fall under three main categories. The first involves claims for dependent children that people are not entitled to claim. The second 

59 

is misreporting of income. And the third is improperly claiming the 

head of household or single filing status. 

Mr. KOSKINEN. We believe having made this more detailed background study about EITC enforcement problems will help us develop better compliance programs going forward. 

But, as Congressman Connolly noted, we have advised that we 

cannot do this alone. We need the help of Congress, which can 

greatly assist our efforts both on the EITC and on refund fraud by 

enacting several proposals in the administration’s fiscal 2015 budget. 

One would accelerate the due dates of third-party information returns, which would allow us to match these documents against income tax returns earlier in the filing process and allow us to more 

quickly spot errors and potential fraud. 

Another legislative proposal would provide the IRS with greater 

flexibility to address what are called correctable errors, which 

would allow us to automatically fix more areas on return—errors 

on returns prior to paying the refund than we can do now. 

Now, if we see an error, the only way we can correct it is through 

an audit. We do on the average of 500,000 audits a year, but we 

are not going to be able to audit our way out of this problem. 

The administration has also proposed expanding IRS access to 

information in the National Directory of New Hires to cover general tax administration purposes, which would include such things 

as data matching and verification of taxpayer claims during return 

processing. 

We would hope that Congress would enact these proposals to explicitly authorize us to regulate paid tax preparers as well. Given 

that more than half of returns for EITC refunds are done by paid 

preparers, this proposal would be an important addition to our efforts to improve compliance in the area. 

This is the first time we have pulled these legislative proposals 

together as a package. Some of them have been out for some time. 

But all of them would allow us to improve our ability to deal with 

EITC refund fraud. 

Even with those changes, which would be extremely helpful, a 

major challenge to our efforts to reduce improper payments remains our ongoing lack of resources. Without sufficient funding, 

our ability to proceed with any new initiatives in the area will be 

constrained. 

I agree with Congressman Meadows. I am a believer, after 20 

years in the private sector, in what do you get for what you pay. 

We have noted that, with the President’s proposed budget and increase in funding for the IRS of about $1.3 billion, we would 

produce back to you over $2 billion in enforcement revenues. 

Our estimate is that, with the legislative proposals and the resources, we would protect an additional $4 billion in EITC improper payments from going out and we would improve customer 

service levels, which we think this year are going to fall to 53 percent. 

With the budget resources, we would improve our taxpayer services to 80 percent. We stand behind those numbers and would be 

willing to be held accountable for them. 

60 

I also have a prepared statement that I am happy to submit for 

the record. 

We will continue to look forward to working with Congress to 

find a solution to the problems we face in the improper refund 

area. 

Thank you very much. 

[The statement of Mr. Koskinen follows:] 

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Mr. MICA. Thank you. 

And, without objection, your entire statement will be made part 

of the record. 

We will now turn to questions. And, actually, I will start first 

with the IRS Commissioner. 

Right now about 25 percent of the Earned Income Tax Credit requests that are put into IRS are improperly paid. It is 24-pointsomething percent. Is that correct? 

Mr. KOSKINEN. That is the number. Yes. 

Mr. MICA. Yeah. You outline some measures of spending some 

more money and, also, asking for some more authority. 

In the improper payments that we are talking about, we are not 

also including fraudulent returns. 

Mr. KOSKINEN. They are included. No. They—— 

Mr. MICA. They are? 

Mr. KOSKINEN. Part of the EITC problem are fraud, fraud by tax 

preparers, fraud by applicants. As I noted, one of the reasons we 

want to have authority to regulate tax preparers—— 

Mr. MICA. Okay. Let me be a little bit more specific, then. 

We didn’t include identity theft in that category. Right? 

Mr. KOSKINEN. No. Identity theft and the refund fraud generally 

are erroneous payments, but they are not categorized in the EITC 

improper payment category. But within the EITC area, the improper payments do include fraud as well as mistakes. 

Mr. MICA. Have you had any outside consultants look at what is 

going on? I mean, this is a staggering rate. Nearly a quarter of all 

of these returns receive an improper payment, for billions of dollars. 

Has there been someone that has looked at this and analyzed 

the—sort of the errors of your way or audited to come up with suggestions? Is this an internal set of recommendations? 

Mr. KOSKINEN. These are recommendations that are based on the 

experience we have had over the 8 to 10 years thus far, not very 

successfully dealing with this problem. 

Mr. MICA. But, again, I come from the private sector and, when 

you have got a—I couldn’t function. I would have to close down my 

business if I had a 20—close to 25 percent error rate on payments. 

Almost any business would go out of business. The difference 

here is you have an unlimited resource, and that is taxpayer dollars. 

But has there been anyone outside that has been retained to look 

at this problem, that you know of? And I know, John, you have 

only been there since the beginning of the year. 

Mr. KOSKINEN. No. We have had a series of audits by the Inspector General, reviews by GAO. We have not, to my knowledge,had 

anyone outside of the Agency actually look at this. But we have 

had, as I say, a lot of experience. 

The legislative proposals being pulled together results from, as I 

say, the working groups we have had over the last 6 months saying, ‘‘If you needed’’—‘‘If you are a blank slate, what would it take 

to actually begin to attack the problem?’’ 

Mr. MICA. Let me ask you another question. 

78 

Mr. Connolly and I have done a lot of work on IT. He has actually done a lot more. About half of this $84 billion they spend every 

year is wasted. 

Part of your detecting this fraud is also done through electronic 

means. Is that not correct? 

Mr. KOSKINEN. That is correct. 

Mr. MICA. Okay. 

Mr. KOSKINEN. We have filters and analyses that we make. 

Mr. MICA. Exactly. 

Well, something isn’t catching a huge number. 25 percent is just 

off the chart. And it is a pretty technical operation. 

Again, you are looking at electronic review of these returns and 

money going out and—like water over Niagara Falls. But there is 

something—some disconnect. 

Mr. KOSKINEN. Yes. And part of it is we identify—— 

Mr. MICA. Are you asking for more money for personnel or more 

money for technical equipment? And what—— 

Mr. KOSKINEN. As I say, we—— 

Mr. MICA. What is the mix? 

Mr. KOSKINEN. The mix is—the amount of money we need for 

EITC fraud is relatively modest. We do need continued support, but 

it is, you know, a couple hundred million dollars for the return review program that we have been trying to get—— 

Mr. MICA. But that is a tactic—that is a tactical improvement? 

Mr. KOSKINEN. Yes. 

Mr. MICA. Software—— 

Mr. KOSKINEN. Technical improvement would allow us to improve our thing. 

But what we really need—we already—— 

Mr. MICA. See, again, I think—again, I just don’t believe that 

this solution that you are bringing to us is really going to do it. 

Mr. KOSKINEN. Well, let me explain a little more, if I could. 

Mr. MICA. Yeah. 

Mr. KOSKINEN. The correctable error authority would allow us 

where we see an error in the refund, which is just legislative authority—— 

Mr. MICA. This is just legislative language. That costs nothing. 

We can pass that. 

Mr. KOSKINEN. I understand. No. No. That is what my point is. 

Mr. MICA. I don’t see a problem with those requests. 

Mr. KOSKINEN. Right. 

Mr. MICA. I am talking about personnel versus the technical 

equipment that it is—I mean, you can’t possibly do these returns 

and some guy, you know, with his spectacles looking at—— 

Mr. KOSKINEN. Exactly. Our view is exactly that, that there is 

no way for us to audit our—— 

Mr. MICA. And you are saying that is a couple-hundred-milliondollar solution versus a multi-billion-dollar solution. 

Mr. KOSKINEN. We already—— 

Mr. MICA. And I don’t—I don’t have a problem there. But, again, 

I don’t have the greatest faith, based on our most recent hearings, 

in your technical capability as far as computers and data and all 

of that and even retaining it. 

79 

A simple question: How long do you keep the records—the electronic records on this data? 

Mr. KOSKINEN. The electronic records for taxpayers are kept for 

years. We have some records for States that go back 50 years. 

Mr. MICA. Okay. And—well, again, we have had our issues with 

emails and other communications. Records can go back to 50 years. 

These you have pretty accurate information and it is entered electronically. 

Mr. KOSKINEN. Yes. We save each exam file. Every taxpayer 

record is saved separately. It is preserved. And those go back so 

that we can audit 3 to 6 years’ worth of returns. 

Mr. MICA. Uh-huh. 

Again, I am very skeptical about spending billions. I think it may 

take some money to upgrade software and the technical equipment 

that will, you know, help us reveal these fraudulent and, also, improper payments. 

But, again, I have no problem. I think Mr. Connolly and I would 

be glad to look at the other legislative remedies that we have. 

Mr. KOSKINEN. Those are the significant part—— 

Mr. MICA. I don’t want to take too much time. 

Quick question for DOD. DOD—most people don’t realize it, but 

I understand it is not till 2017 that you’ll even be capable of an 

audit. 

Mr. EASTON. We will—the statutory requirement is to be auditready by 2017. By the end of 2017, we intend to go into full financial statement audit—— 

Mr. MICA. So I would have every reason to believe that some of 

the improper payment data that you are bringing forward is not totally correct or valid. 

Mr. EASTON. We stand behind the numbers that we report. The 

fact that we don’t have a clean financial opinion—in the control environment that we have, we acknowledge why those numbers are 

not believable, people are skeptical. We have gone to great lengths 

to make sure that we have done as much as we can. 

Mr. MICA. And your improper payments wouldn’t include—we 

did a hearing here. I just about fell off the chair. The guy that got 

the contract in Amsterdam. He wasn’t an American. Remember 

that one? 

$800-million contract to supply fresh fruits and vegetables in— 

I think it was Afghanistan or one of the conflict areas. He milked 

that into almost a $5-billion improper payment. 

Is that included—that kind of thing included here? 

Mr. EASTON. We—it depends on the circumstances. But I understand—— 

Mr. MICA. But that is a specific one. You go back and look—— 

Mr. EASTON. Yes, sir. 

Mr. MICA. —at that one. That one knocked me off my chair when 

I heard that. 

And there were questions raised about even his eligibility as a 

proper vendor. I mean, it was just astounding how he milked the 

taxpayer with an improper or fraudulent payment. 

I would like a response from DOD on that one because I just 

don’t—again, all the information I have is your—your auditing capability is very limited. 

80 

The information you have, financially reporting to Congress is 

not what we can put our faith and trust in. And we still have a 

long way to go before we get the accurate information. 

With that, I yield to Mr. Connolly. 

Mr. CONNOLLY. Thank you, Mr. Chairman. Actually, let me pick 

up on where you just left off. 

Mr. Easton, if you can’t provide an unqualified audit until 2017— 

and we have reason—given the long history of the Pentagon that, 

you know, you have got the biggest budget and often, therefore, you 

have the biggest problems, but the idea that you stand by your 

numbers makes many of us queasy on both sides of the aisle, 

frankly. 

I hope you won’t stand too strongly behind your numbers because 

there is every reason to believe you are understating your improper 

payments, not deliberately, but given the fact that you really can’t 

provide an unqualified audit till 2017. 

Do you want to comment? 

Mr. EASTON. There is a—there is a lot of reasons that make a 

financial audit difficult in DOD, and I am convinced that we are 

doing a lot right. There is clearly exceptions. 

The control environment, I think, will continue to improve. Next 

year we will begin to conduct audits of our budgetary execution. 

When we have made changes—for example, GAO pointed out the 

statistical sampling for our commercial payments—and that has 

been raised before—we were using a sampling methodology that 

was not appropriate. We have made those adjustments. 

I think that GAO’s review in 2013 identified our statistical sampling has been accurate in other areas. And so we have reason to 

believe that the numbers are sound, but we certainly understand 

why the skepticism exists with the financial audit. 

Mr. CONNOLLY. Well, in 2012, that same GAO noted that two of 

your programs were excluded from OMB’s estimation of improper 

payments. 

Those two programs, the Defense Finance and Accounting Service commercial pay and the U.S. Army Corps of Engineers commercial pay, combined were worth $400 billion. 

Are they now included in the improper payments estimate? 

Mr. EASTON. Yes. They are included. They were included. I think 

that the decision GAO made is because of the statistical sampling 

anomalies that they found, which have been corrected, that they 

excluded them in their reporting calculation. 

Mr. CONNOLLY. Right. 

But if we just simply applied—this is going back to Mr. Mica’s 

point. 

If we simply applied, you know, the rough rounded percentage of 

improper payments of the total, 4 percent, and 400 billion was excluded for those reasons, perhaps we were understating improper 

payments if it averaged out by $16 billion. You take the point. 

Mr. EASTON. Understand. 

Mr. CONNOLLY. Okay. So I just—I worry a little bit that we may 

actually be understating, not deliberately—I am not one who’s conspiracy minded—but just because of the methodology and the lack 

of qualified data and sometimes excluding it for those reasons— 

81 

good reasons, but that means we are not actually getting the whole 

picture of improper payments. 

Dr. Agrawal, I mentioned in my opening statement about the 

role of U.S. attorneys. And my impression has been that, when it 

comes to Medi-—no. 

We understand Medicare fraud is a subset of improper payments. 

When we talk about improper payments, some of it is simple clerical error. 

Sometimes the data gets, you know, mixed up. ‘‘We thought you 

were 66 1/2 and eligible for full Medicare or Social Security and, 

whoops, you are actually only 65’’ or whatever it may be. So—but 

given a big country and big numbers, that adds up. 

But in the case of Medicare, there is a subset of very substantial 

fraud. And I cited the Boston U.S. attorney’s Office, which I happen to know about, which I think was number 1 in the country last 

year in uncovering fraud to the tune of—and prosecuting and pursuing about $3–1/2 billion. 

Now, there are—I think there are 99 U.S. attorneys in the 

United States. Is it your sense that every one of those U.S. attorneys is taking this issue seriously and is making it one of their priorities? Because, if they are, our ability to whittle down this part 

of the improper payment could be considerable. 

Dr. AGRAWAL. Yeah. Thank you for the question. 

I couldn’t comment on every U.S. Attorney’s Office. But I can tell 

you that OIG and DOJ are extremely focused on healthcare fraud, 

and we work very closely with them on investigating issues as well 

as taking action, initially, administrative action on our end and 

then law enforcement action on their end. 

And I think, you know, for evidence of that, you just have to look 

at the HCFAC numbers that show an 8 to 1 ROI for all the HCFAC 

funding. That really is a combination of both the administrative actions that I mentioned and all the law enforcement work that is 

conducted as well. 

Mr. CONNOLLY. Okay. I would just plead with you, your office 

and those in the position to exhort, continue to put the pressure 

on the U.S. Attorneys. 

Because, I mean, it is easy for somebody—I mean, they have a 

lot of independent authority and they can set their own priorities. 

This needs to be one of them. 

And they are a powerful tool in helping us whittle down that 

number and, frankly, putting perpetrators where they belong who 

are defrauding the U.S. taxpayer. 

With that, Commissioner Koskinen, first of all, I want to clarify 

something because I think it was a little confusing. 

Refund fraud that you cited, a subset of improper payments or 

are you considering it a separate subject entirely? 

Mr. KOSKINEN. It is a separate subject. We track it. We treat it 

seriously. But it is not treated as an improper payment, per se. 

Mr. CONNOLLY. Okay. If I can just stay on that, even though it 

is not actually the subject, then, of this hearing, given what you 

just said. 

But this committee has also dealt with this issue of refund fraud, 

and I seem to recall a few years ago somebody from IRS talking 

82 

about the exponential growth in this category in just a brief 4-year 

period. 

And if I heard you correctly, we are not talking about you setting 

aside suspicious returns to the tune of millions a year. 

Mr. KOSKINEN. Yes. We stopped last year. Over $17 billion in 

suspicious refund claims. 

Mr. CONNOLLY. Is this a relatively recent phenomena? 

Mr. KOSKINEN. It exploded, really, in 2009 to 2012. Started in 

Florida, Georgia, and, oddly enough, the District of Columbia. But 

Florida was really the epicenter of it, and it was overwhelming law 

enforcement. It overwhelmed the IRS. 

More recently, in the last couple of years, we have made significant progress in dealing with it. 

Mr. CONNOLLY. Yeah. 

And, of course, if it happens—I have constituents this has happened to. 

And trying to recover the money they are legitimately owed, once 

the fraud occurs, is a very complicated process; is it not. 

Mr. KOSKINEN. It is. We have made progress there. It used to 

take almost a year to deal with an identity theft victim. We are 

now down to about 120 days to resolve their accounts. And our 

backlog is down to about 120,000. 

Mr. CONNOLLY. If the Chairman will indulge me, one last question? 

Mr. MICA. If I might. 

Mr. CONNOLLY. Yeah. 

Mr. MICA. If you would yield to me for a second. 

Mr. CONNOLLY. Of course. 

Mr. MICA. I just—we were talking about the hearing that we 

held August 2nd, 2013, identity theft tax fraud. And, actually, from 

fiscal year 2011 to 2012, IRS saw a 78 percent increase in identity 

theft cases. 

Now, listen to this. Taxpayer Advocate—I am sorry—Taxpayer 

Advocate Service, which provides assistance to victims, has seen a 

650 percent increase in cases from 2008 to 2012. We will put that 

in the record, as we cited that. 

Mr. CONNOLLY. I thank the chairman for his intervention. 

And, as he knows, the—our committee in another category of bipartisan identification of problems I hope we can do something 

about, this problem has been highlighted by this committee. 

And I appreciate Commissioner Koskinen’s comment because I 

can just tell you—and I know my colleagues, if you have had similar casework, it can—the impact of this can range from very inconvenient to devastating, depending on the size and magnitude of the 

refund we are talking about and the financial circumstances of the 

family involved. 

So a very important issue and, unfortunately, because of technology, just growing exponentially. Willie Horton once said, ‘‘I rob 

banks because that is where the money is.’’ Well, today’s version 

of that is—— 

Mr. MICA. IRS. 

Mr. CONNOLLY. —I go after refunds because—— 

Mr. KOSKINEN. Let me simply stress that, over the last 2 years, 

with the assistance of U.S. attorneys, interestingly enough, we 

83 

have begun to make serious inroads into this. We have, as I say, 

cut the backlog down of identify theft. 

Mr. CONNOLLY. Good. 

Mr. KOSKINEN. We are stopping more with technology. More filters are more effective. But we are basically—as somebody said, we 

have drivenmost of the amateurs out. We are dealing with organized crime here and around the world. 

Mr. CONNOLLY. Yeah. Well, it is a growing problem, and I am 

glad you highlighted it. Thank you. 

Mr. Chairman, I don’t wish to impose. I just had one more question. 

Mr. MICA. Go right ahead. I have got extra time. 

Mr. CONNOLLY. Okay. I thank my chairman. 

And my last question has to do with EITC. Mr. Koskinen, do you 

know the genesis of the Earned Income Tax Credit program. 

Mr. KOSKINEN. I—— 

Mr. CONNOLLY. That is to say, who thought it up. 

Mr. KOSKINEN. Well, it has been historically supported by—on a 

bipartisan basis, my understanding is that President Reagan, for 

instance, maintained that it was his favorite job creation program, 

poverty program. 

Mr. CONNOLLY. Yeah. 

Mr. KOSKINEN. It helps the working poor. It encourages people 

to work. 

Mr. CONNOLLY. That is exactly right. 

It was actually a conservative idea. It was not a liberal idea. And 

it was a good one because it is not only well-intentioned, but it is 

designed to end dependency and to get—but to help lift people out 

of poverty. 

But it is a complex program; is it not? 

Mr. KOSKINEN. Yes. Part of the problem is every time somebody 

tinkers with it, it gets more complex, in terms of which children 

count, where they live, who has responsibility for them. 

Mr. CONNOLLY. Who qualifies. 

Mr. KOSKINEN. Part of the error rate is it is very complicated for 

preparers and tax preparers—taxpayers to even figure out what 

they are entitled to. 

Mr. CONNOLLY. In fact—correct me if I am wrong—but my understanding is 57 percent of the returns—the EITC returns filed 

are actually prepared by tax return preparers. Is that correct? 

Mr. KOSKINEN. That is correct. 

Mr. CONNOLLY. Yeah. 

That tells you a lot about the complexity. I mean, that wouldn’t 

be happening if it were simple in determining eligibility. 

Mr. KOSKINEN. And most of those preparers do a good job. But 

there is a significant amount of error rate, and some of it intentional on the part of preparers—— 

Mr. CONNOLLY. Yeah. 

Mr. KOSKINEN. —some of whom take the refunds for themselves. 

Mr. CONNOLLY. If we are worried about improper payments and 

we hear that statistic, it requires a tax preparer in 57 percent of 

the cases—or at least it is preferred or required—you have to ask 

yourself, ‘‘Well, what could go wrong with that?’’ And, of course, the 

error rate is going to be high—— 

84 

Mr. KOSKINEN. Right. 

Mr. CONNOLLY. —even inadvertent. 

Mr. KOSKINEN. Correct. 

Mr. CONNOLLY. And I just wanted to stress that because this is 

a conservative idea that I think actually is—does work, but it is 

full of complexity that leads to an unintended consequence, which 

is improper payment. 

Mr. KOSKINEN. As I said, when I started, I looked at the history 

and advised people that it is an unacceptable rate of payment—improper payments, an unacceptable rate of dollars out the door, and 

we need to do whatever we can to make a dent in it. 

Mr. CONNOLLY. Thank you. 

And I thank you, Mr. Chairman. 

And I thank my colleagues for their indulgence. 

Mr. MICA. Thank you, Mr. Connolly. 

Mr. Koskinen, I can assure you that the late President Reagan 

will be doing back flips in his California tomb if he—if and when 

he learns today of a 25 percent—well, nearly 25 percent error rate 

in an IRS program which he championed, the Earned Income Tax 

Credit. 

With that, the gentleman from California, the—— 

Mr. ISSA. Thank you, Mr. Chairman. 

Mr. MICA. —Chairman of the full committee. 

Mr. Issa, I want you to check the tomb when you go out there. 

Mr. ISSA. Okay. 

Mr. Commissioner—— 

Mr. CONNOLLY. I want to second that motion, Mr. Chairman. 

Mr. MICA. That was a—I don’t know if you heard that. Were you 

here, also? 

Mr. ISSA. I think you better read that one again. Once we—— 

Mr. MICA. Reagan is doing back flips in his tomb to find out that 

the program that he championed, Earned Income Tax Credit, had 

a 25 percent error rate. 

And you weren’t here either to—— 

Mr. ISSA. Nixon isn’t that keen about what has happened with 

the EPA and OSHA either. So it happens. 

Mr. MICA. The Commissioner informed the committee today that 

taxpayers will be happy to know they keep your records for as 

much as 50 years. They do have a little problem with 27 months 

on the—— 

Mr. ISSA. That part I heard. And—— 

Mr. CONNOLLY. Although it is important to note Nixon had a lot 

more experience with the IRS than did President Reagan. 

Mr. MICA. Well, he’s probably doing some back flips, too, out 

there in his tomb. 

Mr. ISSA. I would now ask unanimous consent my time be restored. 

Mr. MICA. All right. 

Mr. ISSA. Mr. Commissioner—— 

Mr. MICA. I yield to the chairman. 

Mr. ISSA. Oh, we are having too much fun for the subject being 

so serious. 

I think I covered what I wanted to cover in the opening statement. 

85 

And I want to touch a few areas, Commissioner, since you are 

here and it is an appropriate time. 

The—we have had two large dumps from the IRS in the targeting of conservatives that have occurred in the last few days, one 

on the 3rd of July—I was in the air coming; so, I didn’t read them 

that day—and then more yesterday. 

Additionally, we have had a response from your office to my 15 

or so questions with lots of subparts, and I want to just run 

through a couple of quick questions. 

Your letter, although was partially responsive, didn’t respond to 

most of the specifics, including names of individuals and so on. 

Are you going to be responding further to my interrogatory questions we gave you at the last hearing? 

Mr. KOSKINEN. Yes. We will—we will respond to those as quickly 

as we can. As I said in my letter to you, the Congress has asked 

the IG to do an investigation of all of this. 

He’s asked us to give that a priority. So we are providing as 

much information to you as we can without interfering with that 

investigation. 

Mr. ISSA. Right. 

Mr. KOSKINEN. But as he winds that up, which I hope will be 

soon, we plan to respond to all of those interrogatories. 

Mr. ISSA. Well, oddly enough, both of us have been working for 

2 years. So concurrent working is part of it. 

And that brings to a specific the producing of the backup tapes 

and so on that, apparently, are at TIGTA. Backup tapes—and we 

have experts in the audience from MIT and Ohio State that will 

tell us that backup tapes can be duplicated. 

We would ask that you go to TIGTA and essentially make 

backup tapes and deliver them to us so that we can concurrently 

work on them. 

Things which are unique and can’t be moved, we would understand why they can only be in one place, but the others certainly 

we would expect. 

You know, for example, the BlackBerry could be difficult, but you 

can make a backup of a BlackBerry’s contents and it can be restored to a new BlackBerry. 

So if you would look into that, I would appreciate it. 

The—I am going to be brief. You know, it is 2 years into an investigation. You are the third commissioner since this thing got 

rolling, maybe fourth to a certain extent. 

And we find it interesting that, on the 3rd of July, in the documents that were provided to us, we only learned of something—and 

Mr. Jordan’s going to primarily ask some specific questions of 

you—but of the existence of a system called OCS. 

Are you familiar with that? 

Mr. KOSKINEN. OTS, I may be, but I don’t recognize the initials. 

Mr. ISSA. ‘‘OCS.’’ 

OCS is your internal communication. It is an IRS chat. Maybe 

some of the people behind you could raise their hands and say they 

know about how, in fact, you have a system that circumvents email 

and allows you to talk to each other, sort of like an in-house text. 

Are you familiar with it? 

86 

Mr. KOSKINEN. No. I have never used it. I didn’t know we had 

that. 

Mr. ISSA. Well, I am going to let Mr. Jordan go through the series of question. I really think it should—deliver a time. 

I am going to ask that the staff deliver the emails to you during 

the intervening questions because I don’t want you to be 

blindsided, but I want it to be very clear. 

Lois Lerner knew about that system. Lois Lerner asked and 

wanted to make sure that it wasn’t being tracked and traced. 

And, most importantly, you have had—your Agency has had a 

subpoena that would have covered the delivery—the preservation 

and delivery of information on this alternate email system and, to 

our knowledge, we have received no discovery from it. 

So it is a serious concern. I am going to ask, for efficiency, that 

they give you the documents. And then Mr. Jordan, after you have 

had a chance to look at them, will—and maybe let the people that 

are here with you be aware of them. 

Because it is critical to us that we are only finding out on the 

3rd of July, 2 years into an investigation, that, in fact, there is an 

entire other way to communicate, that Lois Lerner very carefully 

wanted to make sure, just after—just about the time that this 

whole thing erupted, she wanted to make sure that it wasn’t tracking and that it was a way to talk between her colleagues. 

Mr. KOSKINEN. As I say, I am not familiar with OCS. All I can 

say is I have been assured numerous times that there has been a 

search through every system in the IRS to make sure we provided 

you all the Lois Lerner emails we can find. 

Mr. ISSA. It is not email. You have another communication system, and it is one that is—the tracking is turned off even though 

the default for the tracking is turned on. 

It is a Microsoft system that you have within—within your communication, and we are obviously opening a new track of wanting 

to know more details about that. 

Mr. KOSKINEN. We would be delighted to provide that. 

Mr. ISSA. Okay. I will close quickly. Because, like I say, I want 

you to have full understanding. I want Mr. Jordan to actually cover 

the point by point. 

Since we last were together, Lois Lerner’s attorney has changed 

his position on Lois Lerner’s compliance and basically said that she 

printed out some, but not all, and that he was misunderstood in 

the case—in the case of printing out emails related to the Presidential Records Act. 

And, again, this investigation is not about the President—or 

the—I am sorry—about the Federal Records Act. It is about targeting of conservatives. 

To your knowledge, have you delivered the printed-out copies of 

Lois Lerner’s emails? And, if so, how do we tell the difference between the ones she printed out that you took from a file and ones 

you recovered from somewhere else? 

Mr. KOSKINEN. To the first question, I have asked that question 

myself some time ago as to whether there were hard copies. 

And I was told there were hard copies and they were all produced to you in the ordinary course of our production. I can’t tell 

87 

you whether all of her official records were printed out and are included in that or not. 

Your second question? I am sorry. 

Mr. ISSA. Well, the second question is, in fact, a favor. 

In order for us to not look through what seemed to be identical 

documents and we can’t tell which ones were printed out in hard 

copy and you took them and scanned them in to give us tips and 

which ones were, in fact, documents that you got from somewhere 

else, can you have your people give us either the Bates numbers 

or a duplicate copy of the files that were delivered that were specifically printed out by Lois Lerner in compliance with the Federal 

Records Act so that we can separate ones gotten from one source, 

which would have been Lois Lerner’s compliance, and the others? 

Because we have no way of knowing where you got which papers 

from. 

Mr. KOSKINEN. That is fine. I don’t either, but we would be 

happy to go back and determine that and send you up-to-date details so you will know which we were found—which were found as 

hard copies and which were found as emails. 

Mr. ISSA. That would be very appreciated. 

I thank the chairman, and I yield back. 

Mr. MICA. Mr. Clay. 

Mr. CLAY. Mr. Chairman, thank you. 

Commissioner Koskinen, thank you for being here today. 

Again, you just testified before this committee on June 23rd 

about Lois Lerner’s computer crash. After that hearing, Chairman 

Issa sent you a letter basically suggesting that you made false 

statements about whether Lois Lerner printed out her emails to 

comply with the Federal Records Act. 

He wrote:‘‘Ms. Lerner and the IRS are not being truthful about 

her lost emails, in violation of federal law. Although accusations of 

lying to Congress are common around here, they are very serious.’’ 

And so I want to give you a chance to respond. 

At a previous hearing, you testified: ‘‘My understanding is every 

employee is supposed to print records that are official records on 

hard copy and keep them.’’ 

And, in fact, the Internal Revenue manual, which sets forth the 

policies governing the Internal Revenue Service has a section entitled ‘‘Emails as Possible Federal Records.’’ 

That section states: ‘‘If you create or receive email messages during the course of your daily work, you are responsible for ensuring 

that you manage them properly. The department’s current email 

policy requires emails and attachments that meet the definition of 

a federal record be added to the organization’s files by printing 

them.’’ 

So according to the manual, IRS employees were required to 

print out emails that qualified as federal records. Is that right? 

Mr. KOSKINEN. That is correct. As I—go ahead. 

Mr. CLAY. Okay. In your testimony at our last hearing, you also 

said that Ms. Lerner: ‘‘printed hard-copy emails.’’ 

Has the IRS provided those printed hard-copy emails to Congress? 

Mr. KOSKINEN. Yes, we have. 

88 

Mr. CLAY. Oh. You have provided those. I am curious as to why 

we are still inquiring about them. 

Today, Ms. Lerner’s attorney issued a statement informing the 

committee that, during her tenure at the IRS, Ms. Lerner did print 

some emails. 

His statement continues, ‘‘The facts are that Ms. Lerner did not 

destroy any records subject to the Federal Records Act. She did not 

cause the computer assigned to her to fail, and she made every effort to recover the files on the computer.’’ 

And, Mr. Chairman, I ask that this statement be placed in the 

hearing record. 

Mr. MICA. Without objection, so ordered. 

Mr. CLAY. Thank you, Mr. Chairman. 

Mr. MICA. Let me just do a quick housekeeping. 

Mr. CLAY. Sure. 

Mr. MICA. I am sorry, Mr. Clay, because I failed to do this at the 

beginning. 

I ask unanimous consent that Mr. Clay, the gentleman from Missouri; Mr. Jordan, the gentleman from Ohio; Mr. DeSantis, the 

gentleman from Florida, who are not on the subcommittee, be— 

without objection, be allowed to participate fully in the subcommittee proceedings. Without objection, so ordered. 

I didn’t do that, and I apologize. And we have been joined by 

other members of the full committee and we want to give them full 

access. 

Thank you. 

Mr. CLAY. Thank you so much. 

Commissioner, at our last hearing, when you discussed Ms. 

Lerner’s computer crashing, you said this: ‘‘I don’t know whether 

anything that was lost was an official record or not.’’ Is that correct? 

Mr. KOSKINEN. That is correct. 

Mr. CLAY. But in Chairman Issa’s letter to you, he claimed that 

you testified to something different. He wrote that you testified 

that Ms. Lerner fully maintained her official records pursuant to 

the Federal Records Act. And I cannot seem to find that statement. 

Was that your testimony. 

Mr. KOSKINEN. No. As I said in my letter to the chairman in responding yesterday, I appreciated the opportunity to review the 

record. 

There is nothing in my statement that I would change. But if I 

can provide any clarification, I am happy to do that, but I have not 

suggested any changes in my testimony in the record. 

Mr. CLAY. Thank you for that response. 

And before I conclude, I want to emphasize an important fact. 

Lois Lerner’s hard drive crashed on June the 13th, 2011. 

16 days later, on June the 29th, was the first time she was first 

informed that the IRS employees in Cincinnati were using inappropriate search terms. And that is according to Inspector General 

Russell George. 

Is that correct, Mr. Commissioner? 

Mr. KOSKINEN. That is my understanding. 

Mr. CLAY. And, with that, Mr. Chairman, I yield back. And I 

thank you for your indulgence. 

89 

Mr. CONNOLLY. Mr. Chairman. Mr. Chairman. 

Mr. MICA. Yes. 

Mr. CONNOLLY. Just a unanimous consent request. 

I propose this line of questioning. I would ask unanimous consent 

that John Koskinen’s letter addressed to Chairman Issa dated July 

8th be entered into the record. 

Mr. MICA. Without objection, so ordered. 

Mr. CONNOLLY. I also would request that the statement by William W. Taylor issued today, clarifying Ms. Lerner’s printing out of 

emails, brief statement, be entered into the record. 

Mr. MICA. Without objection, so ordered. 

Mr. CONNOLLY. I thank the Chairman. 

Mr. MICA. Thank you. 

Let me recognize Mr. Meadows, the gentleman from North Carolina. 

Mr. MEADOWS. Thank you, Mr. Chairman. 

Ms. Cobert, I am going to come to you first because you were saying that we have made great progress. I think you were saying you 

had a lower percentage in this administration. You have been able 

to cut this—improper payments way down. Is that correct? 

Ms. COBERT. We have. Yes. 

Mr. MEADOWS. You went from 5.42 percent down to 3.53. Is that 

your testimony? 

Ms. COBERT. That is correct. 

Mr. MEADOWS. All right. I am a little troubled because it gives— 

if we talk percentages, it sounds a whole lot better than reality. 

And so I guess my question is: In terms of real dollars, I am 

showing that we have really made no significant change, that, in 

2009, your percentage was—it was $106 billion in improper payments. Would you agree with that? 

Ms. COBERT. I believe that is correct. 

Mr. MEADOWS. Okay. So the only reason the percentage came 

down is because we are spending more. So 106, as it relates to a 

higher number that we are spending, but we are still sending out 

$106 billion in terms of improper payments. Is that correct? 

Ms. COBERT. The figure last year was $106 billion in improper 

payments. $97 billion of that was the overpayment portion. Yes. 

Mr. MEADOWS. Okay. And so—and that is exactly the number 

that it was in 2009, is that correct, in terms of total number? 

Ms. COBERT. I believe that is correct. 

Mr. MEADOWS. All right. So your testimony to say that we are 

making good progress and all of us should be excited doesn’t really 

do anything to go to what Mr. Connolly said about $106 billion 

being real money? 

Ms. COBERT. We believe $106—we take the responsibility to reduce both the percentage and the absolute dollars of improper payments very seriously. 

Mr. MEADOWS. Okay. 

Ms. COBERT. We believe that we need to continue to work on this 

issue. We are doing that accurately. We want to be—— 

Mr. MEADOWS. But to say we are making progress when we still 

are wasting $106 billion, don’t you think that that is an inaccurate 

narrative? 

90 

Ms. COBERT. We have made progress in reducing the percentage. 

We think that is important. And we think we need to continue to 

focus on both of these issues. 

Mr. MEADOWS. All right. So I am a numbers guy. So let’s go back 

to 2008. 

What was the total in improper payments then? 

Ms. COBERT. I don’t have the exact figure in front of me. 

Mr. MEADOWS. Well, I do. And that is why I asked the question. It is $73 billion. And so we—we had an increase of some $26-, $27 

billion. 

In a very short period of time between 2008 and 2009, what— 

what caused that, in terms of improper payments? 

Ms. COBERT. So as you look at the improper payments, one of the 

ways we look at it is look at it program by program. 

Some programs, as we have discussed, have higher rates than 

others. Unemployment insurance, for example, has a higher rate 

than DOD commercial payments. 

So some of that is due to the change in mix. That still means we 

have to keep looking at each one of those program elements and 

say, ‘‘What can we do to bring the level down and the percentage 

down?’’ 

Mr. MEADOWS. All right. So, in terms of level, in terms of real 

numbers, most of these across—if you look at all the payments, 

most of them haven’t really gone down other than unemployment 

insurance. 

It had a decrease—a significant decrease of improper payments of about $6 billion. Some have suggested it is just because we have 

made it more inclusive in terms of being able to get those benefits. 

But how—how can we celebrate this in terms of improper payments when we are really not making any progress in terms of 

payments going to different people? 

Ms. COBERT. What we are trying to do when we go through each 

of these programs is to continue to say, as you said, how can we 

take specific actions to reduce improper payments from all different 

sources, to understand what is driving those, and to look at the underlying root causes in conjunction with the GAO, in conjunction 

with the IG. As—— 

Mr. MEADOWS. So do we give out bonuses based on people making progress on this? 

Ms. COBERT. We do hold senior account-—senior officials in agencies—there is a senior accountable official for each program identified as the person responsible for making progress on improper 

payments. 

Mr. MEADOWS. So those officials in those agencies where we 

didn’t make progress shouldn’t have gotten bonuses. Would you 

agree with that? 

Ms. COBERT. I believe that people need to be held accountable for 

program performance. 

Mr. MEADOWS. That is not the question I asked. 

So should they have gotten a bonus if they didn’t perform, if this 

was one of the matrix of performance? 

Ms. COBERT. The performance—their bonuses are based on the 

specifics of their performance plan. 

Mr. MEADOWS. Right. 

91 

And so, if they went the wrong way, do you think they should 

have gotten bonuses? Your opinion. Nobody else’s. Just your opinion. Should they have gotten a bonus? 

Ms. COBERT. I think they all are accountable. 

Mr. MEADOWS. ‘‘Yes’’ or ‘‘no.’’ 

Ms. COBERT. That is why they are there. 

Mr. MEADOWS. Just a ‘‘yes’’ or ‘‘no.’’ 

Ms. COBERT. You know, there is a—— 

Mr. MEADOWS. Well, obviously, you think they should. All right. 

So let me—let me go on a little bit further. 

Mr. Koskinen, what is your target this year for EITC in terms 

of where you believe that we should be percentage-wise? What is 

your target? 

Mr. KOSKINEN. The target—pardon me. 

Our target this year is to make an improvement. If you look 

at—— 

Mr. MEADOWS. What is your number target? 

Mr. KOSKINEN. Right now, on the basis of what we are doing, unless we can change the way we are doing it—my concern is, for the 

last 6 to 8 years, it has been at an unacceptable level. 

And one of the reasons we are asking for legislative support to 

change the way we deal with it is that, if—as I told our executives, 

if we keep doing the same thing the same way, we should expect 

the same—— 

Mr. MEADOWS. So you don’t have a number? 

Mr. KOSKINEN. So I do not have a better number. 

Mr. MEADOWS. All right. So let me ask you this question. 

If the Chair will indulge me, and I will close with this. 

You have a law on the books passed in 2002, amended in 2010, 

that says that you are required to have a target and you are required to publish it. 

And the Inspector General’s report says that you haven’t done it 

for the last 3 years and, obviously, still today you are not doing it. 

So if you are not willing to follow the law in terms of what is 

already passed, how will a new law help you accomplish that? 

Mr. KOSKINEN. Well, as I said earlier to your target, I expect, if 

we don’t have additional resources in terms of the legislative support, that our target will be—we are going to be right where we 

are and where we have been. 

Mr. MEADOWS. But that is not what the law says. 

Mr. KOSKINEN. Well, like I said, let’s have a target. I will say 

that our target then has to assume—— 

Mr. MEADOWS. So when can we expect you to publish it? Because 

that is what the law says. So is there any justification for not following the law, Mr. Koskinen? 

Mr. KOSKINEN. None at all. We will publish our target. You are 

exactly right. There is no reason not to—not to do that. 

Mr. MEADOWS. All right. I will yield back. 

Mr. CONNOLLY. Would my friend yield? 

Mr. MEADOWS. I am out of time, but I would be glad to yield if 

the chairman will—— 

Mr. CONNOLLY. If we could operate under the Darrell Issa rules, 

you get a lot of time. Could you yield? 

Mr. MEADOWS. I would be glad to yield to the—— 

92 

Mr. CONNOLLY. I meant that in a loving way. 

I just—I wonder if my friend would ask the same question of Ms. 

Davis from GAO that he put to Ms. Cobert because I think he was 

making a very good point. 

We have reason to believe we are understating the actual 

amount of improper payments. I just wonder if we could just give 

GAO an opportunity, if my friend would ask that question, since 

it is his time allotment. 

Mr. MEADOWS. Consider it asked, Ms. Davis. 

Ms. DAVIS. Thank you. 

As I also mentioned in my testimony, the GAO, when it looked 

at the consolidated financial statements of the United States Government, identified improper payments as material weakness in internal controls due to the fact that we at this point in time cannot 

estimate the full extent of improper payments first and then assure 

that there are actions—reasonable actions that are being taken to 

reduce them. 

I will make a point that, while the goal is, of course, to reduce 

improper payments and we did put forward some strategies to do 

that, there are instances, of course, where an addition to the improper payment figure is a good thing. 

To be specific, this past year a net of 10 programs were added 

to the improper payment government-wide estimate. It was actually, I believe, about 12 programs that were added, and then 6 

came off, and there were 4 that were split. 

But, in total, there was a net increase of improper—a net increase of 10 programs that were added to the estimate of improper 

payment. 

So to the extent—the first point, as I made earlier about having—knowing the extent of improper payments, that is a positive 

thing. 

Mr. MICA. Thank you. 

Gentleman from Kentucky, Mr. Massie. 

Mr. MASSIE. Thank you, Mr. Chairman. 

Mr. Koskinen, I have a—I think, a simple question about the 

tape backups at the IRS. 

I think you testified earlier that the tape backups are recycled 

every 6 months—— 

Mr. KOSKINEN. They are—— 

Mr. MASSIE. —at the time. 

Mr. KOSKINEN. They are kept for 6 months and then the tapes 

are put back into being recycled. 

Mr. MASSIE. So the tapes are reused? 

Mr. KOSKINEN. They are reused. Yes. They are reused until they 

don’t work. 

Mr. MASSIE. So how long of a period is that? How many times 

can you reuse the tapes? And how long do they last? 

Mr. KOSKINEN. I don’t know. 

Mr. MASSIE. Does the IRS still recycle tapes, overwrite them 

every 6 months, as a policy? 

Mr. KOSKINEN. No. Ever since the start of the investigation and 

the release of the IG’s report, all backup tapes have been saved. 

So we have the 6 months up to May of 2013 and everything since 

then. 

93 

Mr. MASSIE. Here’s what confuses me, because I had a chance to 

talk to an expert in tape backups. 

These tapes hydrolyze after about 6 years. In fact, they are not 

guaranteed. And the manufacturer doesn’t advise you to recycle 

them. 

In fact, their admirable qualities are their storage density, transportability, and low cost, but not the length of time that you can 

keep data on them. 

So this expert was surprised that you are at the IRS recycling 

what is something that is so cheap that it is actually cheaper to 

use new material instead of recycling. 

Can you confirm that these tapes were recycled and not destroyed? 

Mr. KOSKINEN. I can’t tell you that off the top of my head, but 

I would be happy to be checked. 

I have been told sometime ago when I first started being involved 

with this that the tapes were used and recycled and they are recycled until they are no longer useable and then they are disposed 

of. 

But with regard—— 

Mr. MASSIE. But when they are no longer useable, they fail, and 

the purpose is to prevent failures. That is what confuses me. 

Mr. KOSKINEN. I will be happy to get you information about that. 

Mr. MASSIE. So it is your understanding that these tapes were 

recycled for reasons of economy. 

Mr. KOSKINEN. That is my understanding. 

Mr. MASSIE. Not to cover—to make sure that there were never 

more than 6 months of data. 

Mr. KOSKINEN. I never had any indication of that. 

Mr. MASSIE. All right. Thank you very much. 

I am going to yield the balance of my time to the gentleman from 

Ohio. 

Mr. JORDAN. I thank the gentleman. 

Commissioner Koskinen, 3 weeks ago in front of the Ways and 

Means Committee you testified—we have actually got it on the 

screen here—‘‘Lois Lerner was not trying to destroy email. In fact, 

she was working very hard to restore her emails.’’ 

Do you stand by that statement? 

Mr. KOSKINEN. As far as I know, yes. 

Mr. JORDAN. Okay. Then, I want to—I want to show you a few 

emails that you have had a chance to review now. We got these on 

July 3rd, 4 o’clock. And I want to show you three emails out of 

15,000 that you dumped on us on July 3rd. 

Let’s go first to this one. This is to—Lois Lerner to Maria Hooke. 

‘‘I had a question today about OCS’’—what the chairman was asking you about earlier—‘‘I was cautioning folks about email and how 

we have had several occasions where Congress has asked for 

emails and there has been an electronic search for responsive 

emails. So we need to be cautious about what we say in emails because Congress might get ahold of them and the American people 

might actually find out what the IRS is doing.’’ 

But then she quotes, ‘‘Someone asked if OCS conversations were 

also searchable.’’ 

94 

Now, your response to the chairman was you don’t know anything about OCS. Is that—that true? You have no idea what this 

system is? 

Mr. KOSKINEN. Correct. 

Mr. JORDAN. It is our understanding, after our staff did some 

background work, that this is an intra-office instant messaging 

chat-type system that you have in place at the Internal Revenue 

Service. 

And this was followed up by a response from Ms. Hope—or 

Hooke—excuse me. So, remember, Ms. Lerner says, ‘‘I had a question about OCS.’’ 

And then Ms. Hooke responds—Ms. Hooke responds back, ‘‘OCS 

messages are not set to automatically save as the standard.’’ 

You follow me, Mr. Koskinen? 

Mr. KOSKINEN. Right along with you. 

Mr. JORDAN. I appreciate it. 

And then, of course, the response from Ms. Lerner is, ‘‘Perfect.’’ 

So now I want to show you one more timeline. I have one more 

slide, and it is actually the timeline from the Inspector General. 

March 28, 2013, discussion draft report was issued to the IRS. 

And so here is what I see. Now, maybe—maybe you see something 

different, but this is what I see, and my guess is the American people see this. 

At our last hearing, we learned that, on June 3rd, 2011, Chairman Camp sent a letter to the Internal Revenue Service saying, 

‘‘Hey, we are concerned about what we think may be targeting of 

conservative groups.’’ 

10 days later, June 13th, 2011, a bunch of computers mysteriously crash, including Lois Lerner’s computer. 

Now we jump forward. March 28th, 2013, the Inspector General 

gives the Internal Revenue Service the discussion draft report, his 

audit. 

And you all learn—well, you weren’t there at the time, but the 

IRS learns, and specifically Ms. Lerner learns, that you have been 

caught with your hands in the cookie jar and that, in fact, targeting was going on and now the Inspector General knows it. 

And so 12 days later we get this email exchange that we just 

went through where Ms. Lerner says, ‘‘Wow, I know I have gotten 

rid of the emails’’—when the computer crashed 2 years earlier— 

‘‘but I better double-check on this intra-office instant messaging capability we have here at the Internal Revenue Service.’’ And she 

says, ‘‘Perfect’’ when she learns that it is not traceable, not trackable, not stored. 

And so my question to you—I mean, we know Ms. Lerner is not 

being square with the American people. Remember, it was just 31 

days after this email exchange right here. 

31 days later she went to a Bar Association speech here in town 

and told the whole world Washington had nothing to with it. 

Even though she’s trying to make sure her tracks are covered, 

she told the whole world Washington didn’t have anything to do 

with it, it is a couple rogue agents, a couple of line agents in Cincinnati. So we know she can’t be trusted. 

95 

But what I want to know is: Why did it take us this long to get 

these emails? We have been after these for 6 months and you dump 

them on us on July 3rd. 

Mr. KOSKINEN. First of all—— 

Mr. JORDAN. Have you ever seen this—have you ever seen this 

stuff before? 

Mr. KOSKINEN. No. And I don’t see anything in here where Lois 

Lerner says, ‘‘Wow, I got rid of my earlier emails and now I have 

got to check on them.’’ 

Mr. JORDAN. I am not saying that. I am focusing on the pattern. 

Mr. KOSKINEN. I am sorry—— 

Mr. JORDAN. I am focusing on the pattern. 

Mr. KOSKINEN. I am sorry. You said, for the record, that Lois 

Lerner had written—— 

Mr. JORDAN. No, I didn’t. 

I said Dave Camp sent her a letter. 10 days later her computer 

mysteriously crashes and seven other important people at the IRS. 

And then I am saying here’s the pattern again. 

She learns that there is—oh, the Inspector General is going to 

issue a report that says the IRS was, in fact, targeting conservative 

groups and now, 12 days after that, she says, ‘‘We better make sure 

this OCS system doesn’t track anything, is not traceable, and Congress and, more importantly, the American people can’t get access 

to what we were talking about.’’ 

Mr. KOSKINEN. I understand you might—— 

Mr. MICA. Let me just interrupt a second. 

Mr. Massie’s time has expired. I am recognizing Mr. Jordan—— 

Mr. JORDAN. Thank you, Mr. Chairman. 

Mr. MICA. —for his 5 minutes at this point. 

Mr. JORDAN. Thank you, Mr. Chairman. 

Mr. KOSKINEN. I don’t see anything in here about Congress— 

using the OCS system or not helping Congress. It says, ‘‘The recommendation is to treat the conversation as if it is been saved 

somewhere because it is possible’’—— 

Mr. JORDAN. Okay. Okay. 

Mr. KOSKINEN. —‘‘that somebody else did it.’’ 

Mr. JORDAN. All right. Fair enough. 

Let’s look at the first sentence in each email. 

Lois Lerner says to Ms. Hooke, ‘‘I had a question today about 

OCS.’’ 

First sentence Ms. Hooke says, ‘‘OCS messages are not set to 

automatically save as the standard.’’ 

Lois Lerner’s response, ‘‘Perfect.’’ 

That is what I see. 

Mr. KOSKINEN. Well—— 

Mr. JORDAN. Now, here’s the point. 

Mr. CONNOLLY. Would my friend yield? 

Mr. JORDAN. When I am—I will be happy to yield here in a second. 

Mr. CONNOLLY. I thank you. 

Mr. JORDAN. Have you made these emails—have you given these 

emails to the FBI? 

Mr. KOSKINEN. We provide all of the emails we provide to all the 

investigators. So I am assuming this went to all six investigators. 

96 

Mr. JORDAN. Well, now, just a couple of weeks ago, when I asked 

you did you tell the FBI that you—when you knew that you had 

lost Lois Lerner’s emails, you said you did not. 

But now you are saying you have sent this—this information to 

the FBI? 

Mr. KOSKINEN. We send all of the—for the tax-writing committees—and the FBI has 6103 for that—we have sent 960,000 documents, and we have sent those to everybody doing an investigation, 

including the Justice Department. 

Mr. JORDAN. Have you or anyone at the IRS sat down with the 

FBI and talked to them about the lost emails of Lois Lerner and/ 

or this email chain that we just discussed? 

Mr. KOSKINEN. I have no understand—not to my understanding. 

Mr. JORDAN. You have not. You personally have not. 

Mr. KOSKINEN. I have personally not. 

Mr. JORDAN. The FBI has not talked to you about the lost emails 

of Lois Lerner? 

Mr. KOSKINEN. They have not. 

Mr. JORDAN. Has anyone at the Justice Department talked with 

you or anyone at the Internal Revenue Service about Lois Lerner’s 

lost emails? 

Mr. KOSKINEN. I don’t know. 

Mr. JORDAN. So the FBI has not talked to you. And you don’t 

know if they talked to anyone in your Agency about—— 

Mr. KOSKINEN. I have no idea whether the Justice Department 

has talked to anybody at the Agency. They have not talked to me. 

Mr. JORDAN. The Justice Department—so, for the record, the FBI 

and Justice Department have not talked to you about the lost Lois 

Lerner emails? 

Mr. KOSKINEN. That is correct. 

Mr. JORDAN. And they have not talked to you about this email 

exchange right here? 

Mr. KOSKINEN. That is correct. 

Mr. JORDAN. Okay. 

Mr. CONNOLLY. Would my friend yield? 

Mr. JORDAN. In just a second. 

Let me go to one other thing—one other thing we noticed on this 

email exchange between Ms. Lerner and Ms. Hooke. 

It is—it is copied to Nanette Downing. Do you know who Nanette 

Downing is? 

Mr. KOSKINEN. I do not. 

Mr. JORDAN. Do not? Well, we do. She’s the head of the exams 

division at the Internal Revenue Service. 

Any idea why the person who’s head of the exams division is getting copied on email that says, ‘‘We want to make sure that intraoffice communications aren’t tracked?’’ 

I mean, particularly in light of the fact we also just learned in 

the past few weeks that Ms. Lerner was hoping Mr. Grassley, Senator Grassley, was going to be referred for an exam, any idea why 

Nanette Downing is listed on this email exchange, Commissioner? 

Mr. KOSKINEN. I have no idea why. 

Mr. JORDAN. No idea? 

Mr. KOSKINEN. None. 

97 

Mr. JORDAN. Okay. Has the FBI talked to Nanette Downing? Do 

you know that? 

Mr. KOSKINEN. I do not know. 

Mr. JORDAN. All right. 

Mr. CONNOLLY. Would my friend yield? 

Mr. JORDAN. I would be happy to yield. 

Mr. CONNOLLY. I thank my friend. 

I just want to point out, keeping that graphic up on the screen, 

we have got to be real careful about not taking this out of context. 

Lois Lerner’s answer, ‘‘Perfect’’ is not to this lower box in red. It 

is to the last paragraph that says, ‘‘My general recommendation’’— 

this is from Maria Hooke—‘‘is to treat the conversation as if it 

could be’’—or ‘‘is being saved somewhere, as it is possible for either 

party of the conversation to review the information.’’ 

Mr. JORDAN. You—after she said, ‘‘I have already cautioned people about what they say in emails’’ after her computer’s crashed, 

after—after she’s nervous about the OCS system and ‘‘what we are 

going to say because it might be traceable and trackable,’’ you expect us and, more importantly, the American people to believe that, 

‘‘Oh, yeah. Perfect. Now we know we need to save these.’’ 

That is the most ridiculous interpretation. There is no one with 

any common sense who would reach that interpretation that my 

colleague reached. No one would reach that—but if you want to 

stick to it, God bless you. 

Mr. CONNOLLY. Well, I would just say to my friend—— 

Mr. JORDAN. Notice the first line—this is what I said to the Commissioner. 

Mr. CONNOLLY. I would just say to my—— 

Mr. JORDAN. I had a question today about OCS. Suddenly here 

is—here’s how it plays out. 

Mr. CONNOLLY. I would—— 

Mr. JORDAN. It is my time. It is my time, Mr. Chairman. 

So suddenly Lois Lerner learns—— 

Mr. CONNOLLY. Mr. Chairman, as a matter of personal privilege—— 

Mr. JORDAN. No. No. Wait. 

Mr. CONNOLLY. —I would caution our colleague—— 

Mr. JORDAN. I will yield back. I will yield back. 

Mr. CONNOLLY. —that he not characterize another member as ridiculous. What is—— 

Mr. JORDAN. I didn’t characterize you as ridiculous. I said it is 

a ridiculous interpretation. 

So notice the first sentence, ‘‘I had a question about OCS.’’ Here 

is what happened. March 28th, the IRS gets a heads-up the Inspector General caught them. Because we asked the Inspector General 

to do the audit, he caught them targeting conservative groups. 

And now Lois Lerner says, ‘‘You know what? I better doublecheck and make sure this intra-office instant messaging’’—that 

that can’t be traced, that can’t be tracked. 

And all I want to know is why the Commissioner took 6 months 

to get us this information. 

We have been asking for this stuff forever and it is—Mr. Commissioner, is there anything—here’s a good question. 

98 

This one email where Lois Lerner says, ‘‘Perfect,’’ is there any 

6103 violation in that email? Why in the heck did it take us 6 

months to get this email chain? 

There is not one chance there is any 6103 information contained 

in these three emails, and, yet, that is what you hide behind, ‘‘Oh, 

we have got to check it off for 6103.’’ 

There is no way. We could have had this 6 months ago, when we 

first issued the subpoena when you took over. And we don’t. And 

we are supposed to believe—— 

Mr. KOSKINEN. We are working—— 

Mr. JORDAN. We are supposed to believe she’s saying, ‘‘Oh, perfect. We have’’—— 

Mr. KOSKINEN. We are working our way through and have completed the production for tax-writing committee—— 

Mr. JORDAN. Yeah. So you give us—— 

Mr. KOSKINEN. Sixty-three times—— 

Mr. JORDAN. July 3rd, 4 o’clock, the day before a holiday, is when 

you give us 15,000. We see them. 

Mr. KOSKINEN. Right. And you’re going to get more, because 

the—— 

Mr. JORDAN. Well, let’s hope we—— 

Mr. KOSKINEN. This committee has got 40,000. You’ve got 23,000 

more to go—27,000 more to go. And I’m sure in those 27,000 there 

will be some other interesting email you’ll have to read, and it 

won’t be because we didn’t give it to you in February. We’re giving 

them to you as fast as we can. 

And it’s a significant volume of evidence. As I say, it’s almost a 

million pages of documents that have gone to the tax-writing committee. 

Mr. JORDAN. All I’m saying is there’s no 6103 problem with these 

three, and we should’ve had them a long time ago. But because, 

whoa—Lois Lerner is talking about, ‘‘Be careful what you say in 

emails. Make sure this OCS system is not traceable.’’ 

Mr. KOSKINEN. Remember—— 

Mr. JORDAN. Six months, we get them on July 3rd at 4:00 p.m. 

With 15,000 other documents. 

Mr. KOSKINEN. If I could note for the record, our first request by 

the investigators was to go through the custodians with search 

terms that had to do with the determination process, not with the 

email process. Therefore, when we went through, we pulled them 

by subject matter, and the first email—— 

Mr. JORDAN. That is simply not true. We asked clear back last 

summer for everything. I asked Mr. Werfel in a committee hearing 

just like this, ‘‘I want every single piece of correspondence Lois 

Lerner sent to anybody. We want all of them.’’ So this has been 

over a year that we’ve been asking for this. 

Mr. KOSKINEN. Right. And the prioritization was we would 

produce to you all the emails that had a subject matter having anything to do with the determination issue, which was the IG report. 

Mr. JORDAN. Mr. Chairman? 

Mr. KOSKINEN. Those are the first emails we produced. Then we 

went back and searched to find all the other Lois Lerner emails, 

and they’re coming forward. And you’re going to get more. The tax 

writers have all 67,000. You’ll get another 24,000 or 27,000. And 

99 

I’m sure some of those will be interesting to people, but it’s not because we delayed them, it’s because that’s the process we’ve had to 

produce them. 

Mr. MICA. I thank the gentleman. 

And I think we have another Member waiting, Mr. DeSantis, the 

gentleman from Florida. 

Mr. DESANTIS. Thank you, Mr. Chairman. 

I’ll yield some time to the gentleman from Ohio. 

Mr. JORDAN. I thank you. 

Here’s the takeaway: Nine days after the IRS knows they’re in 

trouble, Lois Lerner is trying to cover her tracks. That’s why we’ve 

got the mail exchange here. She already knows her emails are gone 

because the computer crashed back in 2011, 10 days after Dave 

Camp asked about it. So 9 days after the IRS knows they’re in 

trouble, she’s trying to cover her tracks. 

Thirty-one days after this email happens, she goes to a Bar Association speech and blames some good public servants in Cincinnati, 

says that’s where the problem is, lies to the American people. And 

we don’t get that information after we’ve been asking for it for a 

year. 

And this guy tells us he hasn’t even talked to the FBI. What 

kind of investigation is going on when the FBI won’t even talk to 

the head of the agency that has this kind of stuff going on with 

their email exchange and won’t talk to the agency that lost key evidence in an investigation that’s about people’s First Amendment 

rights being targeted? 

And we get these flippant answers from the Commissioner. 

Mr. KOSKINEN. I—— 

Mr. JORDAN. That’s what just bothers—— 

Mr. KOSKINEN. I wouldn’t—— 

Mr. JORDAN. —that’s what bothers every single American, Mr. 

Chairman. 

Mr. KOSKINEN. I wouldn’t say there—— 

Mr. JORDAN. With that, I would yield to my—— 

Mr. KOSKINEN. I wouldn’t say there—— 

Mr. JORDAN. —I’d yield to my colleague. 

Mr. DESANTIS. Well, I thank the gentleman from Ohio. 

And—— 

Mr. CONNOLLY. Mr. Chairman, I must say—— 

Mr. DESANTIS. —these emails—— 

Mr. CONNOLLY. —I object to this badgering of a witness. At least 

the witness is entitled to respond after having his comments characterized. 

And this is not the standard of the subcommittee you and I’ve 

set, Mr. Chairman. 

Mr. MICA. Well—— 

Mr. CONNOLLY. Characterizing Members of Congress and abusing and badgering witnesses, that is not the standard this subcommittee has set. 

Mr. JORDAN. Mr. Chairman, I did not mischaracterize—— 

Mr. MICA. Okay. 

Mr. JORDAN. —my colleague. 

Mr. MICA. Okay. 

100 

Mr. JORDAN. I characterized his interpretation as one that I don’t 

think very many Americans are going to reach. I did not disparage 

my colleague. I have a great deal of respect for my colleague. 

Mr. MICA. I would rule that, again, I don’t think he disparaged 

the witness, but I think he spoke to, again—— 

Mr. KOSKINEN. I would just—— 

Mr. MICA. —a situation. 

And we do want all the Members to be respectful of the witnesses. He is not under a subpoena, and he came here voluntarily. 

And, again, there are differences of opinion as to what occurred, 

and our job is to get to the facts. 

Mr. KOSKINEN. Right. And—— 

Mr. CONNOLLY. I thank the chairman. 

Mr. KOSKINEN. —I appreciate that, but I would just—— 

Mr. MICA. Did you want to respond, Mr. Koskinen? 

Mr. KOSKINEN. Yes, I would appreciate that. Thank you very 

much. 

My only response was to disagree with the characterization that 

my responses have been flippant. I’ve tried to be responsive in any 

way that I can, both in my previous hearings and now. I understand these are important matters, and any information we can 

provide we will. But—— 

Mr. JORDAN. How is it responsive when you wait 2 months to tell 

the United States Congress that you lost Lois Lerner’s emails? How 

is that responsive? That’s what the American people want to know, 

Mr. Commissioner. 

Mr. KOSKINEN. Yes. And—— 

Mr. JORDAN. And you did not tell the FBI you lost Lois Lerner’s 

emails. How is that responsive? Tell me that. 

Mr. KOSKINEN. Well, I can—— 

Mr. JORDAN. You waited till you knew in April, and you didn’t 

tell us. 

Mr. KOSKINEN. As I have testified to in two previous long hearings, when we knew in April that there had been—— 

Mr. JORDAN. You knew in April, and you told us in June. 

Mr. KOSKINEN. And told you in June, and the reason was because—— 

Mr. JORDAN. Why’d you wait 2 months? 

Mr. KOSKINEN. Can I answer this question? 

Mr. MICA. Yes, you can. And go ahead. 

Mr. KOSKINEN. Can I—thank you. 

As I testified in two previous hearings, when I learned about the 

situation in April and we began to collect the information on how 

many other emails could we reproduce, my judgment was at the 

time that we should produce and discover exactly what the full context of the situation was and report it. 

Mr. DESANTIS. Were you advised of that, Mr. Commissioner, advised to keep quiet? 

Mr. KOSKINEN. I was absolutely not. Nobody—— 

Mr. DESANTIS. Okay. Can we play your clip of your testimony in 

front of this committee last—— 

[Video shown.] 

Mr. DESANTIS. Okay. So you said you were advised, and now 

you’re saying you were not advised. 

101 

Mr. KOSKINEN. Sorry. It’s a good question. I was advised by the 

people in the organization working on the production of documents. 

And I was advised—— 

Mr. DESANTIS. So you were advised. 

Mr. KOSKINEN. You asked me if I was advised not to say anything. I was not advised by anyone not to say anything. I was advised—in that clip, I noted I was at advised by our people doing 

the research—— 

Mr. DESANTIS. Okay, but that’s—— 

Mr. KOSKINEN. —that there was a problem. 

Mr. DESANTIS. —what we’re saying. Because, to us, that’s a distinction without a difference, because we’re looking for the truth. 

And your organization has not provided us with the truth in a 

timely fashion. 

What I’m seeing with Lois Lerner’s emails is really a culture of 

obstruction at the IRS. I mean, for her to be worried right on the 

heels of this draft IG report that Congress may search her instant 

messages, ooh, perfect that, you know, the settings aren’t like that, 

that is very, very troubling. Because she wants to be able to conduct her operations according to her ideology without oversight 

from the American people on behalf of the Congress. So that is 

very, very troubling to me. 

And, you know, she’s copying Nanette Downing, who is the head 

of the Exams department, which is very much troubling. 

So what you’ve told us—last hearing, you said the hard drive 

crashed; well, these things happen. The odds of that happening innocently right on the heels of Dave Camp’s letter are astronomical 

based on the hard-drive failure rate you gave us, based on the fact 

that it was those 10 days right after Camp, and based on the fact 

that it was totally unrecoverable. They recovered data from the 

Challenger explosion from 9/11. So somehow Lois Lerner’s emails 

was totally unrecoverable. 

So that is a coincidence of absolutely inexplicable proportions. 

And I think that’s why the American people, 75 percent, do not believe the explanation that the IRS has provided. 

Let me ask you this: Why are we just now hearing about this 

OCS system? We’ve supposedly had the FBI investigating this for 

a year. No one at the IRS ever told the FBI that there were communications using this system? 

Mr. KOSKINEN. I didn’t—— 

Mr. DESANTIS. Why didn’t anyone at the IRS ever tell the Congress—— 

Mr. KOSKINEN. I never—— 

Mr. DESANTIS.—that there were these? The subpoenas are written very broadly, and they would absolutely have included this, not 

simply the email. So what is the reason for withholding that from 

Congress? 

Mr. KOSKINEN. You asked a lot of questions. If I could answer 

them. 

I have no information as to whether anybody told the FBI or not 

or who was interviewed by the FBI about the OCS system. So I 

have no basis of saying one way or the other. So I don’t think it’s 

fair to say nobody told them. We don’t know whether anybody told 

them. 

102 

Secondly, we’ve produced the information to you, and you now 

have—the tax writers have all 67,000 Lois Lerner emails. You will 

soon have—— 

Mr. DESANTIS. With OCS, you’ve produced that? 

Mr. KOSKINEN. And OCS, as they noted, at this point—the first 

I’ve heard about it; I’ll look at this—says the OCS system, whatever it is, by itself does not get retained. But, as it’s noted, you 

should assume—Lois Lerner is advised, you should assume that it’s 

retained because it’s easy to turn it into an email. 

And I would also note, I have no—I’m not here to defend Lois 

Lerner. I’ve never met her. But in terms of getting rid of emails, 

it should be noted there were 43,000 Lois Lerner emails from April 

2011 until May of 2013 that have been produced. So, in terms of 

getting rid of emails, there were 43,000 that she didn’t get rid of 

after the hard-drive crash. 

Mr. DESANTIS. Well, but that number is meaningless if there are 

critical emails that have not been produced, that have: ‘‘been destroyed.’’ That means the American people aren’t being given the 

whole truth. 

And I yield back. 

Mr. MICA. Okay. Well, we’ve finished one round. I have some additional questions; then I’ll yield to other Members. 

Well, we’ve gotten into a whole array of subjects. We started with 

a 25 percent error-rate payments, which is, I guess, the highest in 

government for Earned Income Tax Credits under IRS, and we’ve 

come around to some of the issues relating to the IRS probe. 

I just read this Wall Street Journal article. I’d heard about it just 

a few minutes ago. It raises some questions with me. I guess the 

FBI began investigating, or at least told Congress June 11th, over 

a year ago, that they were conducting an IRS investigation. 

Has this been going on over a year? Is that correct? 

Mr. KOSKINEN. That’s my understanding. 

Mr. MICA. Yeah. And you came the end of last year, John; is 

that—— 

Mr. KOSKINEN. I started on December 23rd. 

Mr. MICA. Yeah. Okay. And it said in January the Justice Department assigned the IRS probe to an Obama donor, Barbara 

Bosserman, an attorney in the Civil Rights Division. So, since January, basically since the time you took over IRS, she took over the 

investigation. 

So you have not had any conversation with Ms. Bosserman? 

Mr. KOSKINEN. I’ve had no conversation with anybody at Justice 

about this investigation. 

Mr. MICA. Or FBI? 

Mr. KOSKINEN. Or the FBI. I’ve had, actually, no conversations 

with any of the staff investigators or—— 

Mr. MICA. You see, I mean, this raises a lot of questions. Maybe 

some of them you don’t know the answer to. But it’s startling that 

a supposed investigation that’s been going on for over a year, you’re 

the new IRS Commissioner sent in to clean up the mess, and, in 

fact, you have not spoken to them. 

Mr. KOSKINEN. Well—— 

103 

Mr. MICA. Is there any of your—have any of your folks that have 

been involved in this—can you name someone who has talked to 

the FBI? 

Mr. KOSKINEN. I can’t, but if the FBI—— 

Mr. MICA. Can you provide us with information as to who—I 

mean, there must be some record of some contact. This investigation supposedly has been going on since June 11th. Congress notified over a year ago. You came in. They haven’t talked to you. 

Mr. KOSKINEN. But they wouldn’t talk to me because this investigation goes from 2009 to 2013 and I wasn’t there. 

Mr. MICA. Well, I know, but, again—and you don’t know who 

they’ve talked to. But can you provide us with who they talked to 

when? 

We’re trying to figure out who knew what when, to quote the late 

Howard Baker, and some of the pieces to the puzzle don’t fit. 

Again, it raises a lot of questions. 

Mr. KOSKINEN. To the extent I’m able, I’m happy to see if we can 

provide you that information. 

I do know, from having spent a lot of time with inspectors general my last time around in the government in the 1990s, that investigators sometimes are very hesitant to have their witness list 

known, the people that they’ve actually talked to who they’re investigating. But to the extent that that information is available, I’m 

sure we can provide it to you. 

Mr. MICA. Okay. It, again, raises some very serious questions. 

Back to the payments, we’ll look at your legislative suggestions, 

Mr. Connolly and I. Maybe we can address those. 

Tell me, physically, where do they process the Earned Income 

Tax Credit returns? Is that done around the country? At—— 

Mr. KOSKINEN. Yes. 

Mr. MICA. —one location? 

Mr. KOSKINEN. No. Basically, we have processing plants all 

around the country, so it depends where you are. 

Mr. MICA. Yeah. 

Mr. KOSKINEN. And they are—they come in just like regular returns. 

Mr. MICA. And, again, John, you’ve been around a long time. I 

just come from a business background. If I was losing 25 percent 

in improper payments, I would have someone come in and give me 

an analysis. There are a lot of good firms around you have the ability to contract. I think—and asking for billions just doesn’t cut it. 

I think you’ve got a technical and a software, electronic evaluation 

issue. And it’s astounding, the amount of money that’s involved 

here and—— 

Mr. KOSKINEN. Yes. 

Mr. MICA. —again, the percentage of errors. But I think we need 

to get someone in there immediately, if not sooner, and see if that 

can’t be corrected. 

Mr. KOSKINEN. It would be helpful. As I say, we’ve had several 

GAO reviews, several inspector general reviews over time, independently making recommendations. 

Mr. MICA. And Mr. Connolly and I have discussed, we held one 

hearing in August on identity-theft-related tax fraud issues. We 

haven’t gotten into a lot of that. We put some things in the record, 

104 

but that doesn’t seem to be clearing up the way it should. And 

that’s a multi—— 

Mr. KOSKINEN. That one I think we’re making more progress on. 

Mr. MICA. Well, again, the information we had last August—and 

that’s why we’ll hold another hearing. 

Mr. KOSKINEN. I’d be happy to come back and talk with you in 

more detail about that. 

Mr. MICA. And we will definitely have that. 

Mr. KOSKINEN. As I’ve told our people, I think we have a good 

story on identity theft and refund fraud. And I have been unhappy 

and I don’t think we have a good story thus far on EITC improper 

payments. I think it’s—— 

Mr. MICA. Well—— 

Mr. KOSKINEN. —been there too long at too high a level. And we 

need to actually—so I’ve asked people to go back to the drawing 

board and rethink everything we do in that area. 

Mr. MICA. Well, I just came back from a week in the district, and 

I can tell you, Mr. IRS Commissioner, that there is a canyon of disbelief and a lack of credibility the size of the Grand Canyon when 

it comes to the general public and the IRS operations right now. 

It’s huge. And people are not buying, again, some of the information that’s been put out there. 

Let me yield to Mr. Connolly. 

Mr. CONNOLLY. Thank you, Mr. Chairman. I’m glad we’re returning to the subject matter of the hearing. 

Ms. Davis, I’m not sure I understood your answer to my question 

through Mr. Meadows. 

The suspicion up here is that probably the number we’re using right now, $106 billion a year in improper payments, understates 

the extent of the problem. Given the fact that DOD does not yet 

have an unqualified audit, by definition, their numbers could be 

squishy—hopefully they’re not, but they could be; given the fact 

that Mr. Koskinen does not include refund fraud as an improper 

payment, even though, in the case of Dr. Agrawal, Medicaid fraud 

is a subset of improper payments. 

So please elaborate. Because we kind of have the impression 

we’re understating the number, and I couldn’t quite understand 

your answer, which seemed to be, no, it’s pretty accurate. Did I 

misread you? 

Ms. DAVIS. We have stated in our audit of the financial statements, the consolidated financial statements in the last fiscal year 

that there’s material weaknesses in internal control governmentwide because of the inability, at this point in time, to actually get 

a handle of the number, to actually determine the full extent of improper payments and, of course, to ensure that appropriate actions 

are taken to reduce them. 

You know, there are so many facets in this. As you are aware, 

this coming year, in 2014, the definition of ‘‘significant improper 

payments’’ is actually going to change. The rate is going down from 

2.5 percent to 1.5 percent, and $10 million and/or still, you know, 

the ‘‘million’’ as being the criteria. We think that there is a possibility, certainly, of additional programs being added as the requirements for addressing and assessing and identifying improper payments change. 

105 

There are so many facets. As I mentioned just a few minutes ago, 

the fact that additional programs are being recognized and are 

coming onto the government-wide estimate, that’s positive, in the 

respect that now additional estimates are being, you know, shown, 

identified. And, therefore, one would assume programs can take appropriate action, now that they have identified these additional, 

you know, internal control issues related to improper payments and 

take actions to reduce them. 

So, you know, the bottom line is that we are—the Federal Government in total is unable to really identify the amount, and, as 

time progresses, we will see changes in that amount. 

It is important to note, I will say, that, you know—and this has 

been mentioned before, but improper payments includes errors or 

insufficient documentation of errors. So it doesn’t necessarily mean 

that money has been inappropriately spent. 

Mr. CONNOLLY. That’s right. 

Ms. DAVIS. And, also, the total includes underpayments as well 

as overpayments. 

It’s a very complicated issue. It’s not simple. 

Mr. CONNOLLY. Of course. 

Ms. DAVIS. We’d like to see the numbers go down. We’d absolutely like to see the rate go down. That’s a very positive aspect 

of the program. 

Mr. CONNOLLY. Is it GAO’s view that some infusion of targeted 

strategic resources could make a big difference? 

Ms. DAVIS. You know, that’s a difficult question to answer, but 

let me—let me say that there are certain areas where—and I think 

that, you know, as the subcommittee has noted, there are certain 

areas that really need more attention. The healthcare areas, as was 

mentioned, you know, looking at the two Medicare programs, the 

Medicaid—and, actually, if you add the prescription drug program, 

which is around $2.8 billion, close to $3 billion, you’re talking about 

$64 billion in improper payments, you know, compared to the government-wide total of $106 billion. So you’re talking about over 60 

percent of the government-wide total, you know, is attributable to 

this area. 

So, to the extent that we can focus on areas—as, you know, 

learned through this discussion here today at the subcommittee, 

EITC has a very high rate. And what is of concern, too, is the fact 

that this rate has actually increased. It was a little under 23 percent last year; it’s now 24 percent. 

But, also, one of the big healthcare programs, Medicare Fee-forService, that rate has gone up. It’s now 10.1 percent. It used to be, 

I think, 8.5 percent the year before. So you’re looking at, you know, 

issues related to programs increasing their rates, you know, which 

is something that needs to be addressed. 

Mr. CONNOLLY. Well, but my question was not whether it needs 

to be addressed. We agree on that. I’m actually asking you to go 

out on a limb. Would targeted resources make a difference, in 

GAO’s opinion? Or have you even looked at that? ‘‘We can solve 

this problem without a dime extra’’; is that your position? 

Ms. DAVIS. I don’t think we’ve done any work that could specifically address your question, and—— 

Mr. CONNOLLY. Well—— 

106 

Ms. DAVIS. —I would be hesitant for that reason to answer it 

specifically with a ‘‘yes’’ or ‘‘no.’’ 

But, as you can see, because there are areas of concern, you 

know, there needs to be attention. Now, whether that can be accomplished with existing resources or additional resources are 

needed, I would turn to the agencies to address specifically those 

questions. 

Mr. CONNOLLY. Well, I would just respectfully say to you, Ms. 

Davis, that once in a while Congress actually looks to GAO to give 

recommendations, not just analysis of problems. 

And your own agency has been before this committee and testified as to the efficacy of additional resources for it. So if we are to 

assume that some more resources for some more investigators and 

auditors at GAO can really save us money, can help uncover problems that, you know, could make us more efficient and less wasteful, it might follow that these other agencies could benefit from 

that, too. 

Not to say money is the answer, but, as I said in my opening 

statement, you can’t take the position that money is never the answer. I mean, sometimes targeted investments can really have big 

payoffs. And that’s my point, and I look to the GAO someday to actually comment upon that in a meaningful way. 

Thank you. 

Mr. MICA. I thank the gentleman. 

Mr. Meadows? 

Mr. MEADOWS. Thank you, Mr. Chairman. 

Let me follow up a little bit on that, in terms of numbers, Mr. 

Koskinen, because I looked at the numbers. And I want to give you 

the resources to do the job that you need to do to get this 30 percent, 25 percent, whatever it is, under control. 

Mr. KOSKINEN. Right. 

Mr. MEADOWS. I’m not convinced—and what I guess I need you 

to respond to—I’m not convinced that people or dollars make a difference. 

And the reason I say that is that, in fiscal year 2010, when your 

budget was higher and your employees were higher, the improper 

payments were also higher. Can you explain how that would happen? 

Mr. KOSKINEN. Actually, you probably have the numbers. When 

I looked at them, over the last 6 to 8 years, what concerned me was 

the numbers have been more or less flat. So they’ve been the same, 

as you say, whether we had more people or not. 

And that’s why, when I asked people to go back to square one 

and meet with me several times to figure out what is it that we 

need to do, the focus came on the legislative issues, that we need 

more authority to be able to stop refunds earlier, that we see that, 

otherwise, to make those corrections, we have to go out and do an 

audit, but each one is small enough that, as you say—my judgment 

and ours is that we can’t audit our way out of this. We can’t be 

tracking down each one. We’ve got to be able to, when we see the 

error against our other databases, be able to correct it right then, 

rather than send it out and then have to do an audit and track people down. 

107 

So I do think the legislative changes—I think the taxpayer regulation will help. As noted, 57 percent of the returns are by tax preparers—— 

Mr. MEADOWS. Okay. And I knew you were going to go through 

there, and so let me ask you—and I’m sorry to interrupt you. 

Mr. KOSKINEN. No, that’s okay. 

Mr. MEADOWS. I’m trying not to be rude. I know you get interrupted a lot. 

So let me just, since you’re going there, how is regulating preparers that want to abide by the law going to fix the fraud and 

those who—really, 30 percent, some of it is error, but we’ve had 

testimony from your predecessor that would indicate sometimes we 

had a thousand payments going to one particular address, and you 

know that’s accurate. 

And so how would additional regulators on preparers, who are 

well-intentioned, maybe make an error, actually substantially reduce this? Because I read your testimony, and that one was like 

nails on a chalkboard to me. 

Mr. KOSKINEN. It’s a good question. The regulation is relatively 

straightforward. It requires basically passing a minimum competency test and taking continuing education. So for preparers—— 

Mr. MEADOWS. Yeah, but that just—I mean, listen, I was in the 

real estate business, and you know what? 

Mr. KOSKINEN. If you pass the basic course, you’ll be in there. 

And what it’ll do—— 

Mr. MEADOWS. But this is not about basics. 

Mr. KOSKINEN. But what it will do, is our judgment, is we 

won’t—the fraudsters, the people who are actually out keeping the 

refunds—— 

Mr. MEADOWS. But that’s what this is really about, is fraudsters. 

Mr. KOSKINEN. But it will allow—so the question is, if you’re a 

taxpayer, how will you be able to distinguish—if you’re in a moderate-income community, an immigrant community, or any community, what this will allow, you would get a certificate that said 

you’ve registered with the IRS, you’ve taken the courses, you’ve 

tried to become informed. And I suspect the fraudsters aren’t going 

to do that. 

And so what it will do is it will allow taxpayers to be able to 

have a more—— 

Mr. MEADOWS. So like a Good Housekeeping Seal of Approval. 

Mr. KOSKINEN. A Good Housekeeping Seal of Approval. 

Mr. MEADOWS. Okay. All right. 

Let me go on. I’m limited on time, but I’ll listen to further discussion on that. 

Dr. Agrawal, I know that in a May 20th hearing you were asked 

for some information from Mr. Chaffetz and Mr. Lankford, and you 

were given a time to respond by June 19th. And that was almost 

3 weeks ago, and we’ve received nothing with regards to that response. 

Can we expect a response to their questions with regards to the 

Medicare mismanagement by the end of the week? Are you working 

on that? 

Dr. AGRAWAL. We are working on it. And I’ll check immediately 

after this to make sure that you get a response as soon as possible. 

108 

Mr. MICA. So what kind of timeframe do you need? 

Dr. AGRAWAL. I think a week or 2 would be great. 

Mr. MICA. Okay. So in 2 weeks, no later than 2 weeks, we can 

have your response? 

Dr. AGRAWAL. Sure. 

Mr. MEADOWS. All right. Thank you. 

I want to also go back, in my last remaining time, Mr. Koskinen, 

since it’s been illuminated that we have this record problems with 

this new system that we just found out about, that’s not news to 

your staffers, is it, that they would have an internal communication that is not email? 

That is probably not even news to you. You may not have known 

the name, but you’ve certainly seen people communicating in your 

agency via a messaging system that is not email; isn’t that correct? 

Mr. KOSKINEN. No, I’ve actually never seen that. 

Mr. MEADOWS. You’ve never seen that? 

Mr. KOSKINEN. No, I have not seen that in operation. 

Mr. MEADOWS. You’ve never seen anybody communicating in 

your agency—— 

Mr. KOSKINEN. I’ve never gotten anything that was—— 

Mr. MEADOWS. Okay. Well, you’ve got a couple of staffers. 

Have you guys seen that, behind—I mean, have they seen it? 

Mr. KOSKINEN. I don’t know. 

Mr. MEADOWS. Yeah. 

Mr. KOSKINEN. They said they have. They’ve been doing it for a 

while. 

Mr. MEADOWS. It’s like instant messaging. I mean, I know 

that—— 

Mr. KOSKINEN. I don’t do instant messaging either, so I’m probably out of touch. 

Mr. MEADOWS. Yeah, me either. But let me tell you my concern, 

is the OMB—and we’ve got Ms. Cobert here today—gave guidance 

in 2012 to have a senior official, a special person within each agency to make sure that we have compliance with regards to records. 

Who’s your senior person within the IRS or Treasury that you 

would’ve appointed according to that guidance? 

Mr. KOSKINEN. There’s a man, whose last name I don’t know, 

who is in charge of the records. We have 2,000 information resource counselors—— 

Mr. MEADOWS. That’s not what I—it says that you’re to designate 

a senior agency official. So who is that? 

Mr. KOSKINEN. I don’t know his name, but there is one. Actually, 

he just wrote a letter to NARA. Maybe I have a copy of the letter. 

Hold on. 

No, I don’t. But we just—— 

Mr. MEADOWS. But when you found out, the last hearing, that 

you didn’t comply with the laws, the Federal records, did you go 

back to that person and say, you know what, you messed up? 

Mr. KOSKINEN. No, what I—actually, even before then, I’ve gone 

back and said, we have to have a better—— 

Mr. MEADOWS. So you’ve talked to him; you just don’t know his 

name or her name. 

Mr. KOSKINEN. I did not talk to him personally. But I do know 

that, actually, ironically, I did go back and ask for more informaVerDate Aug 31 2005 09:33 Sep 09, 2014 Jkt 000000 PO 00000 Frm 00112 Fmt 6633 Sfmt 6633 C:\DOCS\89447.TXT APRIL
109 

tion. And it turned out, when NARA did a review in 2011, we got 

a score of 93, and when they did a review of our record management system in 2012, we got a score of 99. So I think it—— 

Mr. MEADOWS. So did it include those instant messages in that 

scoring? 

Mr. KOSKINEN. I have no idea. 

Mr. MEADOWS. Can we find out? 

Mr. KOSKINEN. I’m sure we can. 

Mr. MEADOWS. Okay. 

And I’ll close with this, Mr. Chairman. 

We have been denied access, the Oversight Committee, to your 

senior official in terms of technology, the people that are providing 

all these documents. I can’t imagine why, if you had nothing to 

hide, we would be denied access to those types of people. 

Can I have your commitment here today that you’re willing to 

make them available for us to ask questions, both the majority and 

the minority? 

Mr. KOSKINEN. Yes. As I’ve said, we’ve told the IG we’re not 

going to interfere with his—— 

Mr. MEADOWS. But that wouldn’t interfere. Would you be willing 

to commit to the committee today that we can have access to those 

individuals to ask them questions? Yes or no? 

Mr. KOSKINEN. Yes. We’ve already—actually, you’ve already had 

a briefing from—— 

Mr. MEADOWS. So we can call them, you will identify them 

today—— 

Mr. KOSKINEN. No—— 

Mr. MEADOWS. —and let us go ahead and start interviewing. 

Mr. KOSKINEN. No. I should make it clear, and I thought I had 

made it clear, that we’ve agreed to the IG’s request that we not do 

anything to interfere with his investigation—— 

Mr. MEADOWS. Well, that’s not what the IG—the IG didn’t say 

that. 

Mr. KOSKINEN. IG has asked us—— 

Mr. MEADOWS. The IG asked you to cooperate. He didn’t say—— 

Mr. KOSKINEN. No, that’s—— 

Mr. MEADOWS. —to not provide information or cooperate with us, 

did he? 

Mr. KOSKINEN. The IG asked us—— 

Mr. MEADOWS. I mean, we have information that would indicate 

he didn’t say that. 

Mr. KOSKINEN. What the IG asked us was to give priority to his 

investigation and not do anything that would interfere with it, including talking to anyone that he was going to be talking to. 

So we have not pursued—we have told him, as soon as he finishes his investigation, we will provide—and you can have discussions with anybody you would like. We will do that. 

Mr. MEADOWS. I’ll—— 

Mr. KOSKINEN. We’re committed to that. 

Mr. MEADOWS. I’ll yield back. I thank the patience of the chair. 

Mr. MICA. Okay. 

Mr. Clay, the gentleman from Missouri, is recognized. 

Mr. CLAY. All right. It’s Mr. Clay of Missouri, Mr. Chairman. You 

remember. You’re thinking of Bill Gray, but—— 

110 

Mr. MICA. I apologize. I did that—— 

Mr. CLAY. You served with Bill Gray, I understand. 

Mr. MICA. —twice today, and I know you very well. 

Mr. CLAY. I know. 

Mr. MICA. I had us in a different place. Thank you. 

Mr. MEADOWS. He is looking at the ranking member’s hair as he 

looks by you. 

Mr. MICA. That’s the second time. 

Mr. CLAY. It always helps to have levity in here. 

Mr. Easton, according to a 2012 GAO report, two DOD programs 

were excluded from OMB’s estimation of government-wide improper-payments amount. These two programs, the Defense Finance and Accounting Service Commercial Pay and U.S. Army 

Corps of Engineers Commercial Pay, spent nearly $400 billion in 

2011. 

The reason for the exclusion was that those programs were still 

developing their estimating methodologies. In other words, they 

didn’t know how bad their improper-payment problem was. 

Mr. Easton, have they figured that out yet? 

Mr. EASTON. They did. And, in fact, we did report both of the 

numbers for the Commercial Pay program and for the Army Corps 

of Engineers. The decision was apparently made to exclude the 

numbers that we reported because of questions about the statistical 

sampling estimation methodology. And there was one in place in 

both of those programs. 

Since then, at the recommendation of the GAO, we’ve gone back 

and in both cases implemented an adequate—and we would welcome GAO to come back and validate that—program for both of 

those. 

Mr. CLAY. Okay. So are these programs’ expenditures able to be 

included in the next OMB government-wide estimation? 

Mr. EASTON. Yes, sir. 

Mr. CLAY. Yeah. Okay. 

And I do understand that the DOD’s estimating processes for 

these programs is different from methodologies it uses for other 

programs. Why is that the case? 

Mr. EASTON. In the case of the Commercial Pay program—that 

was the specific program that was identified by GAO—there was 

some concern about the variability of the payments. We can make 

very, very small payments to very, very large payments. 

And we were using, when we initiated the methodology, more of 

a simple statistical sampling methodology. And my understanding 

is that they recommended, and we implemented, a stratified sampling methodology. So that was the distinction. 

Mr. CLAY. Okay. 

And, Ms. Cobert, could you comment on the estimation methodologies used for these two programs? 

Ms. COBERT. We, in our oversight role, have worked with DOD 

and incorporated the feedback from GAO and believe that the sampling methodology, improved sampling methodology that Mr. Easton described is now a sound one. That’s why we’ve included those 

numbers in this past year. 

Mr. CLAY. Okay. Thank you. 

111 

On another subject, my colleagues on the other side of the aisle 

have spent a significant amount of time today focusing on whether 

or not Lois Lerner has tried to hide information from Congress. 

They have suggested that Ms. Lerner has done so by intentionally 

crashing her hard drive and by using an intra-office chat system 

at the IRS called ‘‘OSC’’ to avoid leaving records on email. 

I have just a few follow-up questions relating to this topic. One, 

Mr. Commissioner, does the IRS have a policy to withhold information from emails in order to obstruct congressional information? 

Mr. KOSKINEN. No. 

Mr. CLAY. Is the IRS policy to comply fully with all congressional 

document requests and subpoenas? 

Mr. KOSKINEN. It is. 

Mr. CLAY. Has the IRS been complying fully with all congressional document requests and subpoenas that it has received to 

date? 

Mr. KOSKINEN. We are. It takes longer than people expect and 

longer than we would like. We’ve spent about $18 million doing it. 

But we are doing our very best to be totally compliant. 

Mr. CLAY. And about how many documents have you supplied to 

Congress to date since you got there? 

Mr. KOSKINEN. Tax-writing committees overall have just a little 

less than a million documents. Since I’ve been here, we’ve probably 

provided 300,000 or 400,000 of those. 

Mr. CLAY. Do you think we’re going to read all of that, Mr. 

Chairman? 

Are you aware of any IRS employee intentionally withholding information in order to obstruct any congressional information? 

Mr. KOSKINEN. I am not. 

Mr. CLAY. And I thank you very much for—— 

Mr. CONNOLLY. Would my friend yield? 

Mr. CLAY. If the chairman would let me. 

Mr. MICA. You have plenty of time. Go ahead. 

Mr. CLAY. Yes, I yield. 

Mr. CONNOLLY. I thank the chair, and I thank my friend. 

Is it my friend’s understanding, my friend from Missouri, that— 

with respect to the issue of did somebody deliberately crash their 

hard drive, maybe the inference to be drawn from that might be, 

well, it’s otherwise a rare event in the IRS that a hard drive crashes. 

And is it my friend’s understanding that at our previous full 

committee hearing the statistic was 3,000 hard drives in the IRS 

alone have crashed so far this year, with almost half the year still 

to go? 

Mr. CLAY. That is the testimony—— 

Mr. KOSKINEN. I think it’s actually 2,000. 

Mr. CONNOLLY. I thought we heard 3,000 in the testimony, but 

all right, 2,000. That means we’re kind of on track to get somewhere shy of 4,000; is that correct? Hardly an unusual event. 

And was it further my friend’s understanding from the testimony 

received that one of the reasons for that is that a lot of the computers at IRS have not been updated according to industry standards, they’re kind of old by technology standards? 

112 

Mr. CLAY. And my friend from Virginia, and we know why that 

is: Because in the past 4 years there have been dramatic cuts to 

the IRS budget, mostly initiated by this House and the appropriators who are responsible for that budget. 

Mr. CONNOLLY. Right. 

And let me finally ask my friend, much has been made of the fact 

that apparently staffers of the IRS resorted to Gmail and Gchat 

and they actually used those private vehicles for official business; 

is that correct? 

Mr. CLAY. Yes. 

Mr. CONNOLLY. Can you imagine if we applied the same standard here on Capitol Hill to our staff and ourselves? Perhaps it’d be 

embarrassing information, but not necessarily—in fact, almost certainly not sinister. Would that be a fair characterization, my friend 

from Missouri? 

Mr. CLAY. That would be fair, but I’m glad we have a firewall. 

Mr. CONNOLLY. I thank my friend. 

And I thank the chairman. 

Mr. CLAY. You’re welcome. 

And I yield back. 

Mr. MICA. I thank the gentlemen for their little colloquy there. 

I’ll go back and tell my folks that they can—I tried to explain to 

them that they keep their records for 50 years but they can’t keep 

emails for 27 months. I talked about the credibility of—Mr. Jordan? 

Mr. JORDAN. I thank the chairman. 

I’ll just pick up where Mr. Clay was. It seems to me that the IRS 

had three duties here and they’ve breached all three. 

First, they have a duty to preserve documents. We know they 

didn’t do that. They didn’t do that right. They had some 6-month 

tape that recycled, et cetera. 

They had a duty to produce the documents that we actually subpoenaed. They can’t do that because they lost them; they didn’t 

preserve them. 

And then they had a duty to disclose once they knew that they 

didn’t preserve and couldn’t produce. And they didn’t do that in a 

timely fashion. 

So they had three duties. They breached all three. 

And Mr. Meadows, I think, asked an important question. We 

want certain people to come in front of this committee and elaborate on the fact that they’ve breached these three duties they had 

to the American taxpayers, the American citizenry. And they’re 

saying they can’t because the Inspector General told them they 

couldn’t do it. 

So my question to you, Commissioner, is, how is cooperating with 

Congress’ investigation going to impede any Inspector General investigation? 

Mr. KOSKINEN. My understanding, the concern of the Inspector 

General is that he is actually talking to everybody who knows anything about the email situation and the crash of the hard drive. He 

has asked us not to talk to any of those people, asked us to give 

priority to his investigation—— 

Mr. JORDAN. And you know what? We’d be happy to work around 

his schedule. If the Inspector General wants to interview one of the 

113 

witnesses we want to interview and he wants to interview them at 

10:00, we’ll say, you know what, we’ll do it at 12:00. 

Mr. KOSKINEN. The Inspector—— 

Mr. JORDAN. You want to do it at 1:00, we’ll do it at 3:00. 

Mr. KOSKINEN. My—— 

Mr. JORDAN. We’ll do it the next day. We’re happy to work. 

What we want from you is a commitment for these people. The 

committee sent you a letter 3 weeks ago. Thomas Kane, Acting 

Deputy Associate Chief Counsel for Procurement and Administration, will you commit to letting Mr. Kane come and talk to this 

committee and the American people? 

Mr. KOSKINEN. I’ve said that when the Inspector General is 

done—— 

Mr. JORDAN. No, no, no, no. I mean soon. We want this to happen this month. We’re not—we want—— 

Mr. KOSKINEN. I didn’t ask—— 

Mr. JORDAN. This has been a year investigation, Mr. Commissioner. We want it to happen. You wait 2 months to tell us you lost 

to the emails. We want to get to the truth as quickly as possible. 

We’ve got key witnesses: Thomas Kane; Lillie Wilburn, Field Director, Information Technology Division. Will you commit to letting 

her come talk to us this month? 

Mr. KOSKINEN. I am sure she’s one of the people the Inspector 

General is going to talk to. I have told and talked with the Inspector General. As soon as he’s done talking to a witness, we’re happy 

to have them come—— 

Mr. JORDAN. What does that—what is the big deal? 

Mr. KOSKINEN. The big deal—— 

Mr. JORDAN. If the Inspector General wants to talk to him Monday, we’ll talk to him Tuesday. If he wants to talk to him on Tuesday, we’ll talk to him on Monday. 

Mr. KOSKINEN. Because the big deal is everybody, at least—— 

Mr. JORDAN. How about John McDougal, Senior Trial Counsel, 

Office of IRS Chief Counsel? Will you commit to letting us talk to 

him? 

Mr. KOSKINEN. My answer is the same. As soon as the Inspector 

General completes his investigation—— 

Mr. JORDAN. How convenient. How long is that going to take? 

Two months? 

Mr. KOSKINEN. I didn’t ask—— 

Mr. JORDAN. Three months? One year like the first audit took? 

Mr. KOSKINEN. The Congress asked the Inspector General to do 

this investigation. The Inspector General is committed to doing it 

quickly. Everyone has been interested in an independent review, 

which the Inspector General—— 

Mr. JORDAN. We’re all fine with that, but there is no reason we 

can’t run our investigation at the same time he’s running his. 

Mr. KOSKINEN. The Inspector General has advised us he doesn’t 

think that he can get an independent review of all of this if other 

investigations are going on. 

Mr. JORDAN. Let me switch subjects here. I’m actually going to 

try to stay in my—I appreciate the chair’s leniency on the time earlier. 

114 

Let me ask you this. To your knowledge, have any of these instant messages, any OSC messages been turned over to Congress 

in the last year? 

Mr. KOSKINEN. I assume any of them that is noted in the process 

there that were preserved as emails have all been turned over. 

Mr. JORDAN. Have any that weren’t preserved as emails been 

turned over to Congress? Do you know? 

Mr. KOSKINEN. All I know about the system is what I see in the 

emails. And, apparently, if you don’t save them, they don’t exist. 

Mr. JORDAN. That’s a question we need to find out. Well, I mean, 

who knows? You’re telling us there’s still thousands of emails you 

have to get to us. So even if they’ve been turned into emails, they 

may not have been turned over to us. 

I’m asking, do you know if any of the OCS messages, whether in 

instant messaging form that are somehow preserved or put into 

emails, have they been turned over to us? And your response is you 

don’t know. 

Mr. KOSKINEN. I don’t know. And we’ll be happy to let you 

know—— 

Mr. JORDAN. And we’d like that information soon. Not based on 

when the Inspector General tells you you can give to us, but soon. 

Mr. KOSKINEN. That information we’ll give you soon. 

Mr. JORDAN. Yeah, like tomorrow if you can get it. You’ve got the 

guys back behind you who use it. Go find some folks at the IRS 

who understand how quickly this works, and get that to us. 

Mr. Chairman, a whole new system—a whole new system that 

this committee didn’t know about, the American people didn’t know 

about, we find out just a couple days ago exists, and we don’t know 

whether we’ve got any of that information. That’s the key point. 

And the fact that they also are saying we can’t talk to witnesses 

is just unbelievable. But hopefully we can make that happen this 

month, as well. 

With that, I’d yield back, Mr. Chairman. 

Mr. MICA. Let’s see. Mr. DeSantis? 

Mr. DESANTIS. Thank you, Mr. Chairman. 

Mr. Commissioner, when you see the email with Lois Lerner 

when she writes that, ‘‘We need to be cautious about what we say 

in emails’’ because Congress has asked for those emails, what is 

your response to that? Does that bother you in any way? 

Mr. KOSKINEN. I don’t know the background in which she wrote 

that, so my sense is that she was not cautious. She said, I was cautioning about them, and then we had several occasions where they 

asked for them, and we need to be cautious because they’re actually going to be searchable. And so I’m—— 

Mr. DESANTIS. Yeah. Right. 

So, you know, we have a duty on behalf of the American people 

to exercise oversight over the executive branch. And she does not 

want to be subject to that oversight. So I think a lot of Americans 

would look at that, I think they’d be concerned that she would try 

to conduct her business in a way that was not on the up and up. 

And so I’d just—as the Commissioner, you weren’t here at this 

time; this doesn’t reflect on you, what she wrote. But I do want to 

know now, is this something that you would be comfortable with, 

115 

if this is how high officials underneath your command behave 

themselves? 

Mr. KOSKINEN. All I would note, as I say—you make a good 

point. I’m not here to defend Lois Lerner, I have never met her, 

she doesn’t work at the IRS anymore. 

All I would note is that she composed 43,000 emails, all of which 

at some point you will get very soon. All of them have already 

been—— 

Mr. DESANTIS. I’m asking you, what does this make you feel? Are 

you comfortable that high Federal officials are talking about this, 

are conducting themselves in this way? Is that good or not? 

Mr. KOSKINEN. My view is that records should be kept, email 

conversations should be preserved. We need a better email retrievable system and a better system of record. That’s the view I have. 

Mr. DESANTIS. So you don’t think the people who work for you 

at the IRS should change the way they conduct their business for 

the purpose of evading congressional oversight? Are you on the 

record as saying you agree with that statement? 

Mr. KOSKINEN. I am on the record of saying nobody in this organization, any Federal organization, should do anything to evade 

oversight. I’m a big—I spent 4 years working in the Senate. The 

Senator I worked with—— 

Mr. DESANTIS. No, I understand. 

Mr. KOSKINEN. —was part of the Oversight Committee, so I’m a 

big believer in oversight. 

Mr. DESANTIS. Can I—I just want to clear up a couple inconsistencies in your testimony. 

I had showed you your comment about being advised. You initially said you weren’t advised. Then I referred back to it. Then I 

think you’ve clarified that to say you were not necessarily advised 

by somebody in the administration; it was that the document producers advised you that it would be better to turn it all over at 

once. 

So is that how you reconcile those statements? 

Mr. KOSKINEN. No. I’m sorry. No, no, no. I was not advised by 

anyone. It was my decision that the best way to proceed, once we 

knew there was a difficulty, was to find out the full context so we 

could make a complete report. I was not advised by anyone to do 

that inside the IRS or outside. 

I think the question being—— 

Mr. DESANTIS. So you just misspoke in your testimony last—— 

Mr. KOSKINEN. Pardon? 

Mr. DESANTIS. So you misspoke in the video clip we played when 

you said you were advised? 

Mr. KOSKINEN. No, I—I’d be happy to see the clip again. My 

point was that was on a different issue. 

My point has been all along it was my decision—and I remember 

clearly, I think, testifying to that—it was my decision that we 

should get to the bottom of the situation, collect all the emails we 

could find, and give the Congress a full report of what the situation 

was. And that’s what we did. We published that report and gave 

it to you. 

116 

Mr. DESANTIS. I think we can replay it at the appropriate time, 

but Chairman Issa was asking you about this specific issue about 

why you did not turn it over to Congress for 2 months. 

Let me ask you this. 

Mr. KOSKINEN. I’m sorry. My—— 

Mr. DESANTIS. If the person—— 

Mr. KOSKINEN. My recollection of that is, I was—what I was saying was I was advised about the difficulty. I was not advised about 

delaying—— 

Mr. DESANTIS. In fairness, that clip, you did not say it was the 

difficulty; you just said you were advised and that’s why you didn’t 

do it. But we can deal with that some other—let me ask you this. 

If the person who’s currently in Lois Lerner’s position wrote that 

email saying that, look, Congress looks for these things, we need 

to be careful what we say over email, let’s maybe use this other 

system, would that be something that you would be comfortable 

with, if that individual who is in charge of this division right now 

were conducting themselves in that fashion? 

Mr. KOSKINEN. My advice to anyone working for the IRS now is 

that they should not do anything that would look—appear to be, let 

alone be purposeful, to avoid oversight by the Congress. 

Mr. DESANTIS. Do you think that you, as the IRS Commissioner, 

if you come before Congress and you testify and you either make 

factual statements that later appear not to be the entire truth or 

maybe you just misspoke, do you believe that you, as a high Federal official, as a civil officer of the United States, have a duty of 

candor to us to come back and correct the record? 

Mr. KOSKINEN. I do. I don’t know of any misstatements I’ve 

made, but I would agree totally with you, if there is an inconsistency or misstatement, I should come back. 

As I said, I appreciated the chairman’s letter to me giving me a 

chance to reconsider, and I reconsidered and thought that my 

statement was fine as stated. 

But I don’t know of any problems. But I do think, in all candor, 

if someone has found an issue, I’m happy to come back and explain 

it or discuss it further. As I told the chairman, I would stand by 

and I do stand by my testimony. But if I can provide clarification, 

I’m happy to do that. 

Mr. DESANTIS. I yield back. Thank you. 

Mr. MEADOWS. Would the gentleman yield—— 

Mr. DESANTIS. Yeah. 

Mr. MEADOWS. —for just one quick question? 

Mr. DESANTIS. I yield to the gentleman from North Carolina. 

Mr. MEADOWS. You know, you keep using one term. You say, I’ve 

never met Ms. Lerner, you know, I don’t know her. Have you communicated, either directly or indirectly, with her or with her attorneys, directly or indirectly? 

Mr. KOSKINEN. I’ve not directly or otherwise communicated with 

her. I met her attorney on a tennis court. He played on the court 

next to me in the middle of the wintertime. I’ve never talked to 

him about the case. I’ve never communicated with Ms. Lerner. I 

wouldn’t know how to communicate with Ms. Lerner. 

Mr. MEADOWS. Okay. Thank you. 

I yield back. 

117 

Mr. MICA. We have—Chairman Issa has returned. 

Did you seek time? 

Mr. ISSA. Thank you. 

Mr. MICA. You’re recognized. 

Mr. ISSA. Just briefly—and I apologize that I had to go to the 

other committee—in light of this OCS development, do you have an 

opinion, Commissioner, on how long before we’d be able to get an 

understanding of the capabilities of how much of it is preserved on 

tapes since you began preserving? 

In other words, if you have 6 months of backup, I would presume 

that this communication system would have 6 months, the last 6 

months’ worth of the use of these communications, but perhaps not 

further. 

Are you aware of any of that since you became aware of this document? 

Mr. KOSKINEN. I’m not aware of any of it. All I’m aware is we’ve 

produced every document we have of Lois Lerner’s emails, however 

they were generated. 

Mr. ISSA. But OCS is not an email system. It is a communication 

system that has capability of tracking. That’s what the email tells 

us. 

Mr. KOSKINEN. Right. I am happy to get you and the committee 

full information about how the system runs, what its backup is, 

what might exist wherever it might exist. And we’ll get that to you 

promptly. 

Mr. ISSA. Additionally, we asked for the names and an opportunity to interview the individuals who supposedly were not able 

to recover the data on Lois Lerner’s disk. The reason that that’s 

critical is that expert after expert after expert has said to us in 

very clear terms that there’s no such thing as a drive that there’s 

no data recoverable on. 

And I might mention that one of them had recovered the last 17 

seconds from the Challenger’s disaster after the tape had been 

under water for a year. The fact is, these drives are recoverable. 

So it is critical that as you look at prioritizing the fairly simple 

act in our interrogatories of giving us the names of the individuals 

and making them available so we can go through that process. 

It’s not our greatest desire to go down that road. Our greatest 

desire, obviously, is to get to the bottom and the top of who Lois 

Lerner worked with as she was targeting and deliberately treating 

conservative groups because of their values in a different way, an 

unfair way, to the way other entities were treated. 

That has been a decision made by this committee, well-staffed. 

And, ultimately, as you know, the Ways and Means Committee has 

referred criminal prosecution against Lois Lerner. So that is the 

primary target. And what we’re looking for primarily, of course, is 

to find out who worked with Lois Lerner in her operation to target 

conservative groups. 

That’s our big feature, but, along the way, we certainly want to 

know about the disk drive because it now has become a pretty unbelievable statement, that it was completely unrecoverable. It may 

have been unrecoverable through the techniques that they were 

using, but in your testimony you talked about extraordinary—— 

Mr. KOSKINEN. Right. 

118 

Mr. ISSA. —efforts. 

This email that Mr. Jordan went through with you shows that 

she was very concerned with not being tracked. And that’s inconsistent with a disk drive that we now understand was on a notebook computer, one that went in and out. And if I read the statements that we received on the computer she was using at the time, 

that was a computer she took home. So the so-called blue screen 

she discovered was probably a blue screen that she came to work 

with. It was a device that had these records on them and went in 

and out of, you know, your possession. 

So I guess the question is, can we have those names in a timely 

fashion? It certainly doesn’t seem like a difficult or time-consuming 

act to give us the names of the people in the interrogatories. 

Mr. KOSKINEN. Exactly. And as I’ve said, the Congress has asked 

the IG to do an investigation. The IG has asked us to give it a priority and not to do anything that would interfere with their investigation of this very issue, which they hope to conclude promptly. 

As I’ve said—and I’ve talked to the IG about it—as soon as they 

are through talking with a witness they’re not going to have to talk 

to again, they will let us know, and we’ll be happy to have that witness able to talk, and we’ll provide you that information. As soon 

as the IG is done, we’re happy to provide you any information you 

need and discussions you need. 

Mr. ISSA. And, Commissioner, I want to be cooperative, and I 

know you want to be cooperative. Names of people is a different 

process from scheduling when we would work with them. And we 

certainly would coordinate with the IG to make sure that, if you 

will, that we deconflict any schedule of when we would talk to the 

same witnesses. But I think it is important that we have an understanding of the window, how many people we’re going to be deposing. 

And, you know, if you prefer, we can work directly with TIGTA. 

But, in the past, we’ve normally made the request to you and to 

Treasury, rather than working with the IG on the specifics. Like 

I say, we’ll work either way. 

Mr. KOSKINEN. Fine. We can each have our discussions with 

TIGTA. 

Our discussion with TIGTA has been thus far that they didn’t 

want us talking to anyone, they didn’t want anybody else talking 

to them until they were through. Because, as they explained to me, 

they talk to a person, they talk to somebody else, then they want 

to come back and talk to the first person again, and if that person 

has been out talking to others, it begins to muddy the waters. 

And so we’ve said they can have—the field is open, they can have 

anything they need, any documents they need. We’ve made sure 

they’ve always had documents because they’re doing an investigation anyway, but we’ve made sure they have all the documents 

you’ve had. We’ve told them they can talk to anybody they like 

anytime and that we will stay totally out of the way. And that’s 

what we’re trying to do. 

Mr. ISSA. So I just want to understand one more time. Your position is that it would be counter to the investigation being done by 

TIGTA if we were to interview or even know the names of any of 

119 

the individuals related to the disk and the other activities we’re 

both investigating. Is that correct? 

Mr. KOSKINEN. That’s correct. That’s my understanding. 

Mr. ISSA. Okay. We will talk to the IG, obviously, directly. I 

think that would be appropriate—— 

Mr. KOSKINEN. That’s fine. 

Mr. ISSA. —that we hear it firsthand. 

Mr. Chairman, Ranking Member, I’ll take this opportunity to 

mention one interesting thing. I’m often asked by the press, when 

are we going to release all of our work product? When are we going 

to let witnesses basically see what other witnesses have seen? 

I think the Commissioner, on behalf of the IG, has made the 

clear point that it is often selected information, limited information 

that’s made available, but, clearly, you don’t make all of the information available until you conclude your investigation. 

And I note that because that has been the history of our committee, that most information remains unavailable to the public 

even though both sides have it. 

So I respect the need to make sure the IG does have what he 

needs, and we’ll work to make sure that we find some common 

middle ground. And I appreciate your willingness to take care of 

the other questions on the interrogatory. 

Thank you, Mr. Chairman, Mr. Ranking Member. I yield back. 

Mr. CONNOLLY. Mr. Chairman? 

Mr. MICA. Mr. Connolly. 

Mr. CONNOLLY. Just a brief comment on the chairman’s—I really 

appreciate the chairman’s line of inquiry here because we don’t 

want to put the Commissioner in an impossible position, where 

we’re putting a set of interrogatories to him and the TIGTA has 

sort of put them off-bounds pending the investigation. 

So I welcome the chairman’s desire to get further clarification 

from TIGTA so that we’re not putting the Commissioner in an impossible position and we’re not unwittingly treading on ground that 

needs to be protected. 

So I thank the chairman for that clarification. 

Mr. MICA. Well, I thank, first of all, the Members for their participation. 

Actually, Mr. Connolly, we’ve done, I think, 23 hearings. We 

should count this as two. 

Mr. CONNOLLY. You know, Mr. Chairman, I want to say this to 

you and Chairman Issa. 

Mr. MICA. We’ve covered a lot of territory. 

Mr. CONNOLLY. I belong to two committees that apparently practice the belief, passionate belief, that no human problem cannot be 

significantly improved with another hearing. 

Mr. MICA. All right. 

Well, again, an interesting, hopefully productive hearing. And we 

covered a great deal of information. 

Most importantly, back to the original purpose, is the half-a-trillion dollars in improper payments, a whole host of other issues 

about fraudulent activity, gaming the taxpayers, that need to be resolved. And we will hold hearings, as many as we need, as I said 

before. 

120 

And we did divert a bit to some of the current IRS issues, but 

I appreciate everyone coming and participating. I thank our witnesses. 

We’ll leave the record open for a period of 10 days. You may have 

additional questions submitted from the committee to you, and we 

ask you be respondent and let us include that material as part of 

the record. 

Mr. MICA. There being no further business before this Subcommittee on Government Operations, this hearing is adjourned. 

[Whereupon, at 4:38 p.m., the subcommittee was adjourned.] 

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