FOLLOW THE MONEY, PART I AND PART II

HEARINGS

BEFORE THE

SUBCOMMITTEE ON INVESTIGATIONS AND

OVERSIGHT

COMMITTEE ON SCIENCE AND

TECHNOLOGY

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

March 19, 2009

and

May 5, 2009

Serial No. 111–12

and

Serial No. 111–25

Printed for the use of the Committee on Science and Technology

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FOLLOW THE MONEY, PART I AND PART II

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FOLLOW THE MONEY, PART I AND PART II

HEARINGS

BEFORE THE

SUBCOMMITTEE ON INVESTIGATIONS AND

OVERSIGHT

COMMITTEE ON SCIENCE AND

TECHNOLOGY

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

March 19, 2009

and

May 5, 2009

Serial No. 111–12

and

Serial No. 111–25

Printed for the use of the Committee on Science and Technology

(

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

(II)

COMMITTEE ON SCIENCE AND TECHNOLOGY

HON. BART GORDON, Tennessee, Chairman

JERRY F. COSTELLO, Illinois

EDDIE BERNICE JOHNSON, Texas

LYNN C. WOOLSEY, California

DAVID WU, Oregon

BRIAN BAIRD, Washington

BRAD MILLER, North Carolina

DANIEL LIPINSKI, Illinois

GABRIELLE GIFFORDS, Arizona

DONNA F. EDWARDS, Maryland

MARCIA L. FUDGE, Ohio

BEN R. LUJA ́ N, New Mexico

PAUL D. TONKO, New York

PARKER GRIFFITH, Alabama

STEVEN R. ROTHMAN, New Jersey

JIM MATHESON, Utah

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

RUSS CARNAHAN, Missouri

BARON P. HILL, Indiana

HARRY E. MITCHELL, Arizona

CHARLES A. WILSON, Ohio

KATHLEEN DAHLKEMPER, Pennsylvania

ALAN GRAYSON, Florida

SUZANNE M. KOSMAS, Florida

GARY C. PETERS, Michigan

VACANCY

RALPH M. HALL, Texas

F. JAMES SENSENBRENNER JR.,

Wisconsin

LAMAR S. SMITH, Texas

DANA ROHRABACHER, California

ROSCOE G. BARTLETT, Maryland

VERNON J. EHLERS, Michigan

FRANK D. LUCAS, Oklahoma

JUDY BIGGERT, Illinois

W. TODD AKIN, Missouri

RANDY NEUGEBAUER, Texas

BOB INGLIS, South Carolina

MICHAEL T. MCCAUL, Texas

MARIO DIAZ-BALART, Florida

BRIAN P. BILBRAY, California

ADRIAN SMITH, Nebraska

PAUL C. BROUN, Georgia

PETE OLSON, Texas

SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT

HON. BRAD MILLER, North Carolina, Chairman

STEVEN R. ROTHMAN, New Jersey

LINCOLN DAVIS, Tennessee

CHARLES A. WILSON, Ohio

KATHY DAHLKEMPER, Pennsylvania

ALAN GRAYSON, Florida

BART GORDON, Tennessee

PAUL C. BROUN, Georgia

BRIAN P. BILBRAY, California

VACANCY

RALPH M. HALL, Texas

DAN PEARSON Subcommittee Staff Director

JAMES PAUL Democratic Professional Staff Member

TOM HAMMOND Republican Professional Staff Member

JANIE WISE Research Assistant

(III)

C O N T E N T S

Follow the Money, Part I: Accountability and

Transparency in Recovery Act Science Funding

March 19, 2009

Page

Witness List ............................................................................................................. 2

Hearing Charter ...................................................................................................... 3

Opening Statements

Prepared Statement by Representative Bart Gordon, Chairman, Committee

on Science and Technology, U.S. House of Representatives ............................. 12

Statement by Representative Brad Miller, Chairman, Subcommittee on Investigations and Oversight, Committee on Science and Technology, U.S. House

of Representatives ................................................................................................ 8

Written Statement ............................................................................................ 9

Statement by Representative Paul C. Broun, Ranking Minority Member, Subcommittee on Investigations and Oversight, Committee on Science and

Technology, U.S. House of Representatives ....................................................... 10

Written Statement ............................................................................................ 11

Panel I:

Dr. Cora Marrett, Acting Deputy Director, National Science Foundation

Oral Statement ................................................................................................. 13

Written Statement ............................................................................................ 14

Biography .......................................................................................................... 16

Mr. Ronald R. Spoehel, Chief Financial Officer, National Aeronautics and

Space Administration

Oral Statement ................................................................................................. 17

Written Statement ............................................................................................ 18

Biography .......................................................................................................... 20

Ms. Ellen Herbst, Senior Advisor for Recovery Implementation, U.S. Department of Commerce

Oral Statement ................................................................................................. 21

Written Statement ............................................................................................ 22

Biography .......................................................................................................... 26

Mr. Matthew Rogers, Senior Advisor, U.S. Department of Energy

Oral Statement ................................................................................................. 26

Written Statement ............................................................................................ 28

Biography .......................................................................................................... 31

Discussion ................................................................................................................. 31

Panel II:

Mr. Gregory H. Friedman, Inspector General, U.S. Department of Energy

Oral Statement ................................................................................................. 44

Written Statement ............................................................................................ 46

Biography .......................................................................................................... 49

Mr. Todd J. Zinser, Inspector General, U.S. Department of Commerce

Oral Statement ................................................................................................. 49

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

Page

IV

Mr. Todd J. Zinser, Inspector General, U.S. Department of Commerce—Continued

Biography .......................................................................................................... 60

Mr. Thomas C. Cross, Interim Inspector General, National Science Foundation

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

Written Statement ............................................................................................ 62

Biography .......................................................................................................... 65

Ms. Eileen Norcross, Senior Research Fellow, Mercatus Center, George Mason

University

Oral Statement ................................................................................................. 65

Written Statement ............................................................................................ 67

Biography .......................................................................................................... 111

Ms. Patricia Dalton, Managing Director, Natural Resources and Environment

Division, U.S. Government Accountability Office

Oral Statement ................................................................................................. 111

Written Statement ............................................................................................ 112

Biography .......................................................................................................... 117

Discussion ................................................................................................................. 117

Appendix 1: Answers to Post-Hearing Questions

Dr. Cora Marrett, Acting Deputy Director, National Science Foundation .......... 124

Mr. Ronald R. Spoehel, Chief Financial Officer, National Aeronautics and

Space Administration .......................................................................................... 131

Ms. Ellen Herbst, Senior Advisor for Recovery Implementation, U.S. Department of Commerce ............................................................................................... 135

Mr. Matthew Rogers, Senior Advisor, U.S. Department of Energy ..................... 144

Mr. Todd J. Zinser, Inspector General, U.S. Department of Commerce ............. 150

Mr. Thomas C. Cross, Interim Inspector General, National Science Foundation ........................................................................................................................ 155

Ms. Patricia Dalton, Managing Director, Natural Resources and Environment

Division, U.S. Government Accountability Office .............................................. 161

Appendix 2: Additional Material for the Record

NASA Plan for Improvement in the GAO High-Risk Area of Contract Management, January 31, 2008 ....................................................................................... 166

NASA Government Accountability Office (GAO) High-Risk Scorecard Status,

Contract Management, October 2008 ................................................................. 216

NASA High-Risk Corrective Action Plan, Executive Summary and Definition

of Success, September 26, 2008 .......................................................................... 218

Follow the Money, Part II: Government and Public

Resources for Recovery Act Oversight

May 5, 2009

Witness List ............................................................................................................. 222

Hearing Charter ...................................................................................................... 223

Opening Statements

Statement by Representative Brad Miller, Chairman, Subcommittee on Investigations and Oversight, Committee on Science and Technology, U.S. House

of Representatives ................................................................................................ 228

Written Statement ............................................................................................ 230

Statement by Representative Paul C. Broun, Ranking Minority Member, Subcommittee on Investigations and Oversight, Committee on Science and

Technology, U.S. House of Representatives ....................................................... 231

Page

V

Statement by Representative Paul C. Broun, Ranking Minority Member, Subcommittee on Investigations and Oversight, Committee on Science and

Technology, U.S. House of Representatives —Continued

Written Statement ............................................................................................ 232

Panel I:

Mr. Earl E. Devaney, Chairman, Recovery Accountability and Transparency

Board

Oral Statement ................................................................................................. 238

Written Statement ............................................................................................ 240

Biography .......................................................................................................... 242

Mr. Gene L. Dodaro, Acting Comptroller General, U.S. Government Accountability Office

Oral Statement ................................................................................................. 243

Written Statement ............................................................................................ 244

Biography .......................................................................................................... 260

Discussion

Information Transparency and Compatibility ................................................... 261

The Level of Detail in Tracking Contracts ......................................................... 262

Keeping Accurate Job Statistics ......................................................................... 263

Whistleblowers ..................................................................................................... 264

Indications of Success .......................................................................................... 264

Tracking Money at the Local Level .................................................................... 265

Preventing Misuse of Grant and Contract Funds ............................................. 265

Availability of Information .................................................................................. 266

Agency Compliance With Recovery Act Requirements ..................................... 269

Oversight at the State and Local Level ............................................................. 269

Results From the Online Dialogue ..................................................................... 270

Panel II:

Dr. Clarence G. Newsome, President, Shaw University

Oral Statement ................................................................................................. 272

Written Statement ............................................................................................ 274

Biography .......................................................................................................... 297

Dr. Gary D. Bass, Founder and Executive Director, OMB Watch

Oral Statement ................................................................................................. 297

Written Statement ............................................................................................ 299

Biography .......................................................................................................... 306

Dr. Jerry Ellig, Senior Research Fellow, Mercatus Center, George Mason

University

Oral Statement ................................................................................................. 307

Written Statement ............................................................................................ 308

Biography .......................................................................................................... 314

Ms. Danielle Brian, Executive Director, Project on Government Oversight

(POGO)

Oral Statement ................................................................................................. 314

Written Statement ............................................................................................ 317

Biography .......................................................................................................... 318

Mr. Eric Gillespie, Senior Vice President of Products, Technology, and Innovation and Chief Information Officer, Onvia, Inc.

Oral Statement ................................................................................................. 319

Written Statement ............................................................................................ 321

Biography .......................................................................................................... 329

Discussion

Achieving Detail in Data Tracking ..................................................................... 329

Monitoring Job Creation ...................................................................................... 330

Providing Equitable Funding Access .................................................................. 333

Closing .................................................................................................................. 334

Page

VI

Appendix: Answers to Post-Hearing Questions

Mr. Earl E. Devaney, Chairman, Recovery Accountability and Transparency

Board ..................................................................................................................... 338

Mr. Gene L. Dodaro, Acting Comptroller General, U.S. Government Accountability Office ......................................................................................................... 340

Dr. Gary D. Bass, Founder and Executive Director, OMB Watch ...................... 345

Dr. Jerry Ellig, Senior Research Fellow, Mercatus Center, George Mason

University ............................................................................................................. 347

Ms. Danielle Brian, Executive Director, Project on Government Oversight

(POGO) .................................................................................................................. 350

Mr. Eric Gillespie, Senior Vice President of Products, Technology, and Innovation and Chief Information Officer, Onvia, Inc. ................................................ 351

(1)

FOLLOW THE MONEY, PART I: ACCOUNTABILITY AND TRANSPARENCY IN RECOVERY ACT SCIENCE FUNDING

THURSDAY, MARCH 19, 2009

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT, COMMITTEE ON SCIENCE AND TECHNOLOGY, Washington, DC.

The Subcommittee met, pursuant to call, at 10:00 a.m., in Room

2318 of the Rayburn House Office Building, Hon. Brad Miller

[Chairman of the Subcommittee] presiding.

2

3

HEARING CHARTER

SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT

COMMITTEE ON SCIENCE AND TECHNOLOGY

U.S. HOUSE OF REPRESENTATIVES

Follow the Money, Part I: Accountability and

Transparency in Recovery Act Science Funding

THURSDAY, MARCH 19, 2009

10:00 A.M.–12:00 P.M.

2318 RAYBURN HOUSE OFFICE BUILDING

I. Summary

The Subcommittee will meet on March 19, 2009, to receive testimony relating to

the accountability and transparency provisions in the American Recovery and Reinvestment Act (H.R. 1; hereafter cited as the ‘‘Recovery Act’’). The Subcommittee will

take testimony on steps taken by agencies under the Committee’s jurisdiction to establish accountability for the funds they will receive under the Act.

Witnesses on the first panel have been designated as ‘‘senior accountability officers’’ by their agencies and are nominally in charge of planning for spending Recovery Act funds. The second panel is composed of Inspectors General (IGs) and the

Government Accountability Office (GAO). These witnesses will describe their roles

in overseeing appropriate distribution of these funds and highlight for the Subcommittee issues specific to our agencies that will deserve close oversight attention

while these funds are available.

II. Witness List

Panel I

• Dr. Cora Marrett, Deputy Director (Acting) and Senior Accountability Officer,

National Science Foundation

• Ronald R. Spoehel, Chief Financial Officer, National Aeronautics and Space Administration

• Ellen Herbst, Senior Official for Recovery Implementation, Department of Commerce

• Matthew Rogers, Senior Advisor to the Secretary, Department of Energy

Panel II

• Tim Cross, Inspector General (Acting), National Science Foundation

• Todd Zinser, Inspector General, Department of Commerce

• Gregory H. Friedman, Inspector General, Department of Energy

• Patricia Dalton, Managing Director, Natural Resources and Environment Division, Government Accountability Office

At the request of Mr. Broun, we have also invited testimony from Eileen Norcross, Senior Research Fellow at the Mercatus Center of George Mason University.

III. Funding Provisions

Funds made available under the Recovery Act are intended to accomplish certain

purposes, defined in Section 3(a):

1. To preserve and create jobs and promote economic recovery.

2. To assist those most impacted by the recession.

3. To provide investments needed to increase economic efficiency by spurring

technological advances in science and health.

4. To invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits.

4

5. To stabilize State and local government budgets, in order to minimize and

avoid reductions in essential services and counterproductive State and local

tax increases.

Further, the Act requires that, ‘‘The President and the heads of federal departments and agencies shall manage and expend the funds made available in this Act

so as to achieve the purposes specified in subsection (a), including commencing expenditures and activities as quickly as possible consistent with prudent management.’’ [Section 3(b)]

What follows is a short description of the Recovery Act funds allocated to the

major agencies under the jurisdiction of the Committee on Science and Technology:

Department of Energy (DOE) $15.9 billion

Of direct interest to the Committee is $1.6 billion provided for the Department’s

Office of Science, and $400 million made available for the Advanced Research

Projects Agency–Energy (established in the America COMPETES Act in the last

Congress).

The Department also received $2.5 billion for ‘‘applied research, development,

demonstration and deployment activities’’ in energy efficiency and renewable energy. The bill directed $800 million to biomass energy efforts, $400 million to geothermal energy projects and $50 million to standards and efficiency work for information and communication technologies. Further, $2 billion is provided for grants

in support of advanced battery manufacturing.

For fossil research and development, the Act provides $3.4 billion. Approximately

half ($2.32 billion) supports Round 3 of the Clean Coal Power Initiative and CO2

capture and storage research. Another $1 billion is available for general fossil energy research projects.

Finally, the Act establishes a new loan guarantee program ‘‘. . . for renewable

technologies and transmission technologies.’’ The Department will have $6 billion

for this purpose, and the conference report indicates it is expected this will leverage

ten times that amount in private funds to develop such technologies.

National Aeronautics and Space Administration (NASA) $1 billion

Each of the Agency’s appropriation accounts received funding in the Recovery Act:

• The Science account received $400 million to expedite development of the first

round of missions set out in the National Research Council’s 2007 Earth

science decadal survey, and to upgrade NASA’s supercomputers.

• Aeronautics has $150 million to focus on aviation safety, mitigation of environmental impacts from aviation and projects related to replacement of the

air traffic control system.

• $400 million is made available for Exploration, which will likely be used to

shrink the current hiatus between Shuttle retirement and initial operation of

new Constellation systems.

• The agency also obtained $50 million to assist in repairing facilities at the

Johnson Space Center damaged by Hurricane Ike last year.

National Science Foundation (NSF) $3 billion

The majority of funds available to NSF are provided in the Research and Related

Activities account, with $300 million targeted on the major research instrumentation program and $200 million set aside for academic facilities modernization. The

conference report requires that all of the research divisions share in at least some

of the other $2 billion in the account, after providing for ‘‘. . . advancements in

supercomputing technology.’’

Scholarship programs supported by the Foundation receive an additional $100

million, while $400 million is made available to programs funded by the Major Research Equipment appropriation.

National Institute of Standards and Technology (NIST) $580 million

The research program at NIST is bolstered by $220 million to support research,

to provide more competitive grants and purchase needed equipment for laboratories.

Remaining funding is split evenly between the agency’s own facility construction efforts and a competitive grant program for research science buildings.

Not included in the total above is an additional $20 million transferred from the

Department of Health and Human Services to support NIST’s efforts in developing

security and inter-operability standards for health information technology. A further

5

$10 million from the Department of Energy is intended to assist in bringing intelligence to the national electrical power grids.

National Oceanic and Atmospheric Administration (NOAA) $830 million

The Appropriations Committee directed NOAA to provide $230 million to reduce

its ‘‘backlog of research, restoration, navigation, conservation and management activities.’’ The remaining $600 million is split between work on facilities, ships and

equipment, weather forecasting and satellite development ($430 million), and $170

million targeted on climate activities such as modeling, data records and studies in

mitigation.

IV. Accountability Provisions

For the agencies, the Recovery Act imposes new requirements to accompany the

new funding available. For spending on infrastructure projects, the agencies are directed to obligate at least half of the funds available within 120 days of the bill’s

enactment (February 16, 2009). Grant funding is to be employed ‘‘in a manner that

maximizes job creation and economic benefit.’’ Contracts awarded as part of Recovery Act activities are to be fixed-price and awarded by the competitive process set

forth in the Federal Acquisition Regulation; contracts awarded by other means are

to be highlighted in a special section of the Recovery.gov website.

The Office of Management and Budget (OMB), on February 9, 2009, directed the

agencies ‘‘to name, no later than February 13, 2009, a senior official responsible for

coordinating recovery-related efforts across your agency.’’ Those officials represent

the agency witnesses here today. Weekly reports on agency activities relating to implementation of the Recovery Act were to be posted on the agency’s own website for

Recovery Act actions beginning March 3. According to the first weekly reports published by the agencies testifying at the hearing, there have been no expenditures

to date using Recovery Act funds. The formal plans for distributing Recovery Act

resources are due to OMB by May 1.

The Recovery Act does not relieve the agencies of their normal requirements for

assuring the proper use of funds, such as prohibitions against discrimination in the

Civil Rights Act and the reviews required by the National Environmental Policy Act.

OMB has told the agencies that they can expect their performance to be measured

against the following criteria:

1. Audits and investigation of Recovery Act funds occurring to identify wasteful

spending and minimize waste, fraud, and abuse;

2. Qualified personnel overseeing Recovery Act funds;

3. Opportunities to use competitive awards maximized;

4. Timely award of dollars;

5. Timely expenditure of dollars;

6. Timely completion of planned work;

7. Cost overruns minimized; and

8. Improper payments minimized.

However, because of the short window during which Recovery Act funds will be

available (appropriations under the Act will generally expire at the end of Fiscal

Year (FY) 2010 unless otherwise stated) and specific direction in the Act to expedite

disbursement, the agencies will have to execute their normal processes with alacrity, over and above the work needed to deal with regular activities.

At the same time, agency staff devoted to acquisition has been shrinking government-wide, from 67,085 in 1992 to 61,434 in FY 2007, according to the Federal Acquisition Institute (with half of those at the Department of Defense). The Professional Services Council, an organization of government contractors, warned last

month that ‘‘[w]ithout a government workforce sufficient to plan, deliver and manage the contracts and grants that dispense these huge funds, it will be like constructing an office building on a foundation of sand.’’ The state of these acquisition

staffs was a focus of OMB Director Peter Orszag at the first meeting with the Cabinet to discuss Recovery Act implementation. Agency witnesses should be questioned closely about steps they are taking to address their weaknesses in

this critical area.

It is the responsibility of the agency Inspectors General to monitor agency operations for waste, fraud and abuse, and they will have similar responsibilities for

funds made available by the Recovery Act. It is anticipated that their work will provide the bulk of the information related to accountability that will become available

on Recovery.gov (http://www.recovery.gov/, the central information website created

in the Recovery Act). The Inspectors General have a specific responsibility to receive

6

1The Subcommittee has made an affirmative decision to not invite the NASA Inspector General, Mr. Robert ‘‘Moose’’ Cobb. Both Chairman Gordon and Subcommittee Chairman Miller

have recommended his ouster for almost two years, most recently in a letter to the White House.

Based on investigative work by the Subcommittee and by the President’s Council on Integrity

and Efficiency (PCIE), Mr. Cobb has not lived up to the high standards of conduct and integrity

expected of an Inspector General. It was apparent from the PCIE investigation that Mr. Cobb

failed to understand how to properly employ auditors and did not respect the audit staff in his

organization. This may explain the finding in a recent report by GAO (done at the request of

Chairman Gordon and Chairman Miller) that the NASA IG audit operation demonstrated close

to the weakest performance of any IG office in the Federal Government. For every tax dollar

assigned to Mr. Cobb’s office, his audit operation discovers just thirty-six cents in potential savings. For an agency that puts 80 percent of its budget out the door in contracts and grants,

that is an inexplicably low number. The Department of Commerce IG and Department of Energy

IG were found to return $2.25 and $2.37, respectively. If anyone wishes more information on

these matters, please contact the Subcommittee staff.

reports from the public relating to items funded by the Act and to determine if those

reports demonstrate improper use of those funds. It will also be the IGs investigating allegations of retaliation against whistleblowers under the protections for

State, local and contractor employees providing information on misuse of Recovery

Act funds. The following table identifies the additional funding made available to

the IGs in the Act:

These funds remain available to the DOE IG until the end of FY 2012, and to

the other IGs until FY 2013. The Subcommittee has asked each of the witnesses

to describe how the extra resources will be employed.1

To coordinate the work of the IGs, Title XV of the Recovery Act establishes a new

entity named the Recovery Accountability and Transparency Board. The Board will

have the power to determine if contracts and grants issued with Recovery Act funding conform to law and regulation and if they are appropriately managed. The

Board will also evaluate the performance of the agency acquisition staffs. The Board

will report to Congress and the public regarding the use of Recovery Act funds at

least on a quarterly basis, and can issue immediate (‘‘flash’’) reports in cases requiring immediate attention. The Board will also maintain Recovery.gov. Given its position at the apex of the accountability structure, the Board will make recommendations for the prevention of waste fraud and abuse to the agencies, to which the agency must respond by report to Congress and the President within 30 days.

Membership for the Board is drawn from a subset of the departmental IGs, including two of our witnesses (Inspectors General Zinser and Friedman). President

Obama has appointed the Inspector General of the Department of the Interior, Earl

Devaney, to serve as the Board’s Chairman (Mr. Devaney has taken leave from Interior to fill this job and has made a promise to Chairman Miller to appear at a future

Subcommittee hearing). The Act specifically tasks the Board to consult and collaborate with the Inspectors General, the Government Accountability Office and State

auditors in the conduct of its affairs and in the preparation of the reviews and reports it will publish. The Board receives a budget of $84 million to fund its activities

until its termination date of September 30, 2013.

With regard to GAO’s contribution to Recovery Act oversight, the acting Comptroller General, Gene Dodaro, testified before the Senate Committee on Homeland

Security and Government Affairs on March 5, 2009. He described the steps he has

taken to begin cooperating with the IG community, State auditors and OMB as contemplated in the Act. Based on GAO’s prior work, he highlighted fraud prevention,

contract management and grant accountability as areas deserving special focus as

Recovery Act funds are expended. GAO received an additional $25 million in the Act

for salaries and expenses relating to their responsibilities under the Act.

While we have asked the IG and GAO witnesses to distill general oversight principles (like those just discussed) from their respective bodies of work, they also can

describe specific management challenges that relate to Recovery Act programs. Both

NASA and the Department of Energy have spent years on GAO’s high-risk list for

contract management. When either agency employs a contract to spend Recovery

Act money, how will the procurement process close the gaps GAO identifies? A recent report by the Department of Energy Inspector General indicates that the office

7

managing loan guarantees at the Department is overstretched with its existing

workload, and now faces an additional $6 billion provided for a new set of guarantees authorized by the Recovery Act. What will be done to reduce the overload?

Ms. Norcross will address the ability of nongovernmental organizations, academia,

and the private sector to complement existing oversight of the American Recovery

and Reinvestment Act. Additionally, she will also speak to what tools Congress can

provide to these organizations that will further enable transparency and oversight.

As co-founder of the website StimulusWatch.org, Ms. Norcross will also discuss the

role of technology in promoting accountability.

Mr. Devaney, in a Wall Street Journal article published March 9, 2009, noted that

his previous experience indicated that fraud in federal expenditures averaged

‘‘around seven percent of all big contracts.’’ While he stated that he believes strong

agency oversight can keep losses ‘‘well below’’ that level, it is unlikely that it will

end up reduced to zero. The efforts being made on accountability are themselves an

experiment. Depending on their success at minimizing improper expenditures, they

may become the standard for measuring federal spending distributions in the future.

8

Chairman MILLER. Good morning and welcome to our hearing,

‘‘Follow the Money: Accountability and Transparency in Recovery

Act Science Spending.’’ I understand Dr. Broun, the Ranking Republican of the Subcommittee, will be with us shortly. Mr. Bilbray

is serving in his stead for the moment.

This subcommittee’s hearings usually or frequently have as witnesses people that we think may have done wrong. None of our

witnesses today have done wrong, yet anyway, but we want to hear

from you on how you are going to do right.

Our purpose today is twofold: to learn how agencies in this committee’s legislative jurisdiction intend to distribute funds available

under the American Recovery and Reinvestment Act and then to examine what will be done to guarantee that those funds are not

awarded improperly or wasted.

Last Thursday President Obama told State officials seeking guidance on the use of Recovery Act funds that, ‘‘If we see money being

misspent, we are going to put a stop to it.’’ I assume he would give

the same warning to universities, to scientists, to businesses seeking funds from our agencies and today we will begin to find out

how that will be accomplished.

Congress and the President enacted the Recovery Act to respond

to extraordinary circumstances. It leaves the agencies to walk a

fine line. If you want to jump-start the economy by expanding employment, the money in this bill needs to get into the pipeline

quickly, but Congress did not relieve the agencies of their responsibility to adhere to federal contracting rules when distributing the

funds, which takes time and skilled personnel, first to award the

grant or contract and then to manage the contract in a way that

ensures a productive outcome.

The innovations in the Recovery Act are not in streamlining contracting techniques. Rather, the Act requires agencies to gather

more information regarding their awards and to make that information more available to the public than has ever been done before. The Act also sets up elaborate systems among the Inspectors

General and the Government Accountability Office, the GAO, to ensure that waste, fraud and abuse are at a minimum. It is probably

unrealistic to think that they will be eliminated entirely.

All of this—expanded spending, transparent competition and

awards tracking, and accountability after the award has been

made—must be carried out while dealing with the ordinary agency,

the IG and GAO business.

Our first panel has been asked to explain how they intend to balance these competing pressures and to accomplish the goals of the

Recovery Act. The witnesses on the panel represent the designated

accountability officers of the Department of Energy, NASA, NSF

and Department of Commerce. They are in the front line of conversations with OMB and program divisions in their agencies about

carrying out the Recovery Act.

Congress turns to IGs and the Government Accountability Office,

the GAO, for expertise and accountability. Our witnesses on the

second panel bring to bear their experience in detecting waste,

fraud and abuse, something that will be vital for managing the outflow of Recovery Act dollars. With the pressure to move the money,

we cannot depend solely on audits after the fact to avoid diversion

9

of those grants and contracts and I expect to hear that they are

closely cooperating with the agency management to build protections into project evaluation and procurements.

The late Senator from Illinois, Everett Dirksen, is credited with

the line, ‘‘A billion here, a billion there, pretty soon you are talking

about real money.’’ Today we are talking about 20 times that

amount of money.

When the stimulus funds run out next year, we want to know

where the money went, and if those funds succeeded in meeting the

goals that Congress set. This committee will particularly want to

know, did they provide investments needed to increase economic efficiency by spurring technological advances in science and health?

I expect to hear from our witnesses that this will not be an easy

task but one that you are prepared to tackle and get right. Since

this is just the first hearing on this subject, more to look forward

to, for this subcommittee, we anticipate monitoring progress along

these lines over the course of the 111th Congress.

I now recognize the Subcommittee’s Ranking Member, if he has

caught his breath, the gentleman from Georgia, Dr. Broun, for his

opening statement.

[The prepared statement of Chairman Miller follows:]

PREPARED STATEMENT OF CHAIRMAN BRAD MILLER

Good morning, and welcome to our hearing, ‘‘Follow the Money: Accountability

and Transparency in Recovery Act Science Spending.’’

Our purpose today is twofold—to learn how agencies in the Committee’s legislative jurisdiction intend to distribute funds available under the American Recovery

and Reinvestment Act, and then to examine what will be done to guarantee that

those funds are not awarded improperly or wasted.

Last Thursday, President Obama told State officials seeking guidance on the use

of Recovery Act funds that, ‘‘If we see money being misspent, we’re going to put a

stop to it.’’ I assume he would give the same warning to universities, scientists and

businesses seeking funds from our agencies, and today we will begin to find out how

this will be accomplished.

Congress and the President enacted the Recovery Act to respond to extraordinary

circumstances. It leaves the agencies to walk a fine line. If you want to jump-start

the economy by expanding employment, the money in this bill needs to get into the

spending pipeline quickly. Yet Congress did not relieve the agencies of their responsibility to adhere to federal contracting rules when distributing these funds, which

takes time and skilled personnel first to award the grant or contract and then to

manage in a way that ensures a productive outcome.

The innovations in the Recovery Act are not in stream-lining contracting techniques. Rather, the Act requires agencies to gather more information regarding

their awards and to make that information more available to the public, than has

ever been done before. The Act also sets up elaborate systems among the Inspectors

General and the Government Accountability Office to insure that waste, fraud and

abuse are at a minimum.

All of this—expanded spending, transparent competition and awards tracking,

and accountability after the award has been made—must be carried out while dealing with the ordinary agency, IG, and GAO business.

Our first panel has been asked to explain how they intend to balance these competing pressures and to accomplish the goals of the Recovery Act. The witnesses on

that panel represent the designated ‘‘accountability officers’’ for the Department of

Energy, NASA, NSF and the Department of Commerce. They are on the front line

of conversations with OMB and program divisions in their agencies, about carrying

out the Recovery Act.

Congress turns to Inspectors General and the Government Accountability Office

for expertise in accountability. Our witnesses on the second panel bring to bear

their experience in detecting waste, fraud and abuse, something that will be vital

for managing the outflow of Recovery Act dollars. With the pressure to move the

money, we cannot depend solely on audits after the fact to avoid diversion of these

10

grants and contracts. I expect to hear that they are closely cooperating with agency

management to build protections into project evaluation and procurements.

The late Senator from Illinois, Everett Dirksen, is credited with the line, ‘‘A billion here, a billion there; pretty soon you’re talking real money.’’ Today we’ll be talking about some 20 times that threshold for real money.

When the stimulus funds run out next year, we want to know where they went

and if these funds succeeded in meeting the goals Congress set forth. This committee will particularly want to know, did they ‘‘provide investments needed to increase economic efficiency by spurring technological advances in science and

health’’?

I expect to hear from our witnesses that this will not be an easy task, but one

they are prepared to tackle and get right. Since this is just the first hearing on this

subject for this subcommittee, we anticipate monitoring progress along these lines

over the course of the 111th Congress.

I now recognize the Subcommittee’s Ranking Member, the gentleman from Georgia, Dr. Broun, for his opening statement.

Mr. BROUN. I thank the Chairman and I beg his forgiveness and

the panel’s forgiveness for running late. Something very important

came up and delayed me a bit and I came running literally from

my office here, so I apologize and I hope you all will forgive me for

running late.

Thank you, Mr. Chairman. I want to thank you for holding this

hearing and commend you for addressing oversight at our science

agencies. This committee has an important responsibility to ensure

that funding from the American Recovery and Reinvestment Act is

spent appropriately, and I look forward to working with you, Chairman Gordon and Ranking Member Hall to make sure we do just

that.

Addressing oversight, accountability and transparency at agencies is an important task, but Congress should also be held to these

same principles. In attempting to live up to these standards, Democratic leadership has failed the American people. The stimulus bill

was bloated with earmarks and pushed through Congress without

a single oversight hearing. We will hear from witnesses shortly

about the importance of preventing waste, fraud and abuse ahead

of time rather than trying to detect it after the fact. They will

speak to the need to get policies and procedures for spending the

money established early in the process instead of playing ‘‘gotcha’’

after the money has been spent. This is important guidance that

we will insist the agencies follow, yet the irony of the situation is

that Congress never did this work itself.

Without a single hearing by any committee, the Democratic leadership has tripled our nation’s debt and forced us to borrow from

our children, grandchildren and foreign nations. We spent $787 billion in this bill. To put this into perspective, last year’s budget for

non-security discretionary spending was roughly $390 billion. That

is almost twice as much as last year’s budget and doesn’t even take

into account the omnibus or other bail-outs that we have passed on

top of that. Neither this committee nor any other had a role in developing appropriate oversight, accountability and transparency

measures necessary for such an enormous bill. We never held a

hearing or a single markup. Therefore, it is somewhat comical to

talk about stimulus accountability and transparency when there

wasn’t any behind this bill’s formulation.

Don’t get me wrong, making sure our science agencies are funded

at the appropriate authorization levels is important, but that is not

what we are talking about here. We are talking about not learning

11

from the lessons of post-Katrina disaster relief, Iraq reconstruction

and the Troubled Asset Relief Program, all instances where expediency trumped accountability and the taxpayer suffered. I was outraged just as the American people were to hear that AIG executives received taxpayer money as bonuses while their company

crumbled around them. If the stimulus bill had seen the light of

day, perhaps Democratic leadership would not have been able to

add a loophole for AIG executive bonuses. History has shown that

throwing as much money as we can out the window as fast as we

can has never ended well. Congress should have known this and

taken a more measured approach to aiding our economy, which

brings me to an important point. Obama Administration economic

advisor Larry Summers indicated numerous times that the stimulus bill would be ‘‘timely, targeted and temporary.’’ I have serious

concerns about the impact that a temporary surge of money will

have on our scientific enterprise. A temporary influx of funds without a long-term commitment will lead to a boom-and-bust scenario

similar to that experienced by NIH after its budget doubled earlier

this decade. As Science Magazine noted in a 2007 article, ‘‘Between

1998 and 2003, the budget of the National Institutes of Health rose

from $13 billion to more than $27 billion with a plan known as The

Doubling. Now that the tsunami of cash has receded, many life scientists, especially those in the early phase of their careers, have

found conditions no better and in some ways worse than before the

process began.’’

While the Obama Administration has clearly indicated that this

enormous influx of money will be ‘‘temporary,’’ our investment in

science should be steady and predictable, not volatile and fleeting.

Thank you, Mr. Chairman. I look forward to the witnesses’ testimony and look forward to working with you going forward, oversight in a truly nonpartisan endeavor. We have disagreements on

the underlying substance and process associated with the stimulus

bill but I hope now that the dust has settled, we can work together

in a productive manner to minimize waste, fraud, abuse and mismanagement at our science agencies.

I yield back.

[The prepared statement of Mr. Broun follows:]

PREPARED STATEMENT OF REPRESENTATIVE PAUL C. BROUN

Thank you Mr. Chairman. I want to thank you for holding this hearing, and commend you for addressing oversight at our science agencies.

This committee has an important responsibility to ensure that funding from the

American Recovery and Reinvestment Act is spent appropriately, and I look forward

to working with you, Chairman Gordon, and Ranking Member Hall to make sure

we do just that.

Addressing oversight, accountability, and transparency at agencies is an important task, but Congress should also be held to these same principles. In attempting

to live up to these standards, Democratic Leadership has failed the American people.

The stimulus bill was bloated with earmarks and pushed through Congress without a single oversight hearing.

We will hear from witnesses shortly about the importance of preventing waste,

fraud, and abuse ahead of time rather than trying to detect it after-the-fact.

They will speak to the need to get policies and procedures for spending money

established early in the process, instead of playing ‘‘gotcha’’ after the money has

been spent.

This is important guidance that we will insist the agencies follow, yet the irony

of the situation is that Congress never did this work itself.

12

Without a single hearing by any committee, the Democratic Leadership has tripled our nation’s debt and forced us to borrow from our children, grandchildren, and

foreign nations. We spent $787 billion in this bill. To put this into perspective, last

year’s budget for-non-security discretionary spending was roughly $390 billion.

That’s almost twice as much as last year’s budget, and doesn’t even take into account the Omnibus or other bail-outs that we passed on top of that.

Neither this committee, nor any other, had a role in developing appropriate oversight, accountability, and transparency measures necessary for such an enormous

bill. We never held a hearing, or a single markup. Therefore, it is somewhat comical

to talk about stimulus accountability and transparency when there wasn’t any behind this bill’s formulation.

Don’t get me wrong, making sure our science agencies are funded at the appropriate authorization levels is important, but that’s not what we are talking about

here.

We are talking about not learning from the lessons of post-Katrina disaster relief,

Iraq Reconstruction, and the Troubled Asset Relief Program—all instances where

expediency trumped accountability and the taxpayer suffered. I was outraged, just

as the American people were, to hear that AIG executives received taxpayer money

as bonuses while their company crumbled around them. If the Stimulus bill had

seen the light of day, perhaps Democratic leadership would not have been able to

add a loophole for AIG executive bonuses.

History has shown that throwing as much money as we can out the window as

fast as we can has never ended well. The Congress should have known this and

taken a more measured approach to aiding our economy.

Which brings me to an important point. Obama Administration Economic Advisor

Larry Summers indicated numerous times that the stimulus bill would be ‘‘timely,

targeted, and temporary.’’ I have serious concerns about the impact that a temporary surge of money will have on our scientific enterprise. A temporary influx of

funds without a long-term commitment will lead to a boom-and-bust scenario similar to that experienced by NIH after its budget doubled earlier this decade.

As Science Magazine noted in a 2007 article, ‘‘Between 1998 and 2003, the budget

of the National Institutes of Health rose from $13 billion to more than $27 billion

in a plan known as ‘‘the doubling.’’ Now that the tsunami of cash has receded, many

life scientists—especially those in the early phase of their careers—have found conditions no better, and in some ways worse, than before the process began.’’

While the Obama Administration has clearly indicated that this enormous influx

of money will be ‘‘temporary,’’ our investment in science should be steady and predictable, not volatile and fleeting.

Thank you Mr. Chairman. I look forward to the witnesses’ testimony and working

with you going forward. Oversight it truly a nonpartisan endeavor. We may have

disagreements on the underlying substance and process associated with the Stimulus bill, but I hope that now that the dust has settled, we can work together in

a productive manner to minimize waste, fraud, abuse, and mismanagement at our

science agencies.

I yield back.

Chairman MILLER. Thank you, Dr. Broun.

I ask unanimous consent, I am not sure I need to, but I ask

unanimous consent that any additional opening statements submitted by Members will be included in the record, and without objection that is so ordered.

[The prepared statement of Chairman Gordon follows:]

PREPARED STATEMENT OF CHAIRMAN BART GORDON

Good morning, Mr. Chairman. I am pleased to see your subcommittee devoting

attention to how our agencies are preparing to spend recovery money.

In the Recovery Act, Congress placed extra requirements on agencies to insure

that taxpayer money was carefully managed and accounted for.

The Congress expects that money will be put into circulation quickly to meet the

employment goals of the Act, but it is just as important that the money is awarded

fairly and for purposes that serve real public needs.

I look forward to hearing how the agencies are getting ready to ramp up awards.

The Recovery Act also provided extra funding for the Inspectors General and the

Government Accountability Office so that they could expand their operations and

monitor the coming surge in government spending. I look forward to the testimony

13

of our IGs and GAO regarding their efforts to provide an extra level of oversight

and accountability inside the agencies.

Finally, the Obama Administration has brought a renewed commitment to transparency in all aspects of government. In our democracy, the greatest accountability

measure you can embrace is to let the public know what you are doing and how

you are doing it.

I am very pleased that an unprecedented level of information will be made available to the public through Recovery.gov, however I am interested in learning how

agencies intend to provide that information, where there will be challenges in providing accurate information, and whether the right policies are in place to guide the

agencies in their reporting requirements.

This will not be the last hearing on the Recovery Act held by this committee, but

I think it is an excellent start.

Thank you, Mr. Chairman and I yield back.

Panel I

Chairman MILLER. It is now my pleasure to introduce our witnesses at this time. Dr. Cora Marrett is the Senior Accountability

Officer and Acting Deputy Director at the National Science Foundation. Mr. Ronald Spoehel is the Chief Financial Officer of the National Aeronautics and Space Administration. Ms. Ellen Herbst is

the Senior Officer of Recovery and Implementation with the U.S.

Department of Commerce, and Mr. Matthew Rogers is the Senior

Advisor to Secretary Chu at the U.S. Department of Energy.

As our witnesses should know, you will each have five minutes

for your spoken testimony. Your written testimony will be included

in the record for the hearing. When you all have completed your

oral testimony, we will have questions. Each Member will have five

minutes to question the panel. It is the practice of the Committee

to receive testimony under oath. Since I said earlier none of you

have done wrong yet, I don’t think you have to worry about anything but we do take testimony under oath. Do any of you have any

objection to swearing an oath, to take an oath? You also have a

right to be represented by counsel. We are trying to make you at

as ease as we can by asking you these questions. Do any of you

have counsel here? Okay. Now if you would now please stand and

raise your right hand. Do you swear to tell the truth and nothing

but the truth? The record will reflect that all the witnesses took

the oath.

We will now begin with Dr. Cora Marrett. Dr. Marrett, you may

begin.

STATEMENT OF DR. CORA MARRETT, ACTING DEPUTY

DIRECTOR, NATIONAL SCIENCE FOUNDATION

Dr. MARRETT. Thank you for inviting me on behalf of the National Science Foundation. I am Cora Marrett, Acting Deputy Director and Senior Accountability Officer for Recovery Act activities

at NSF.

NSF is honored to have a role in stimulating the American economy. The $3 billion entrusted to us will sustain and advance major

research initiatives, enhance support for science, technology, engineering and mathematics education, and help renew America’s research infrastructure. The immediate impact will be felt by investigators, postdoctoral fellows, graduate and undergraduate students

and teachers throughout the Nation. We now support nearly

14

200,000 of these individuals every year. We expect to add approximately 50,000 in Fiscal Year 2009 with Recovery funds. Over the

long run, our investments should help the Nation meet the increasing demands for new knowledge and innovative technologies.

We are confident that NSF can maintain the highest standards

of competitive merit review, distribute the funds in a timely manner and meet all of the requirements for accountability and transparency. We have formal policies and procedures for implementing

the guidance and a plan for allocating the funds.

Moreover, we have proposals and procedures; we have proposals

in place that merit the funding and procedures for handling expeditiously the other proposals we will receive. For all of these reasons,

NSF is confident that we can make the first awards within the

next few weeks.

Of the $3 billion allotted to NSF, $2.5 billion is for Research and

Related Activities, $400 million for Major Research Equipment and

Facilities Construction and $100 million for Education and Human

Resources. Now, not only is NSF prepared to distribute the funds,

but so are the science and engineering research and education communities poised to expend the funds quickly and effectively.

We recognize the importance of building and maintaining the

confidence of Congress and the American people. We maintain an

unwavering commitment to our merit review processes, processes

considered by many to be the gold standard for achieving excellence, accountability and transparency in grant making. NSF will

not compromise the fairness and competitiveness that mark our

processes and we can make this commitment, given the caliber of

our staff and of our management practices, both refined over many

decades.

Now, we have more than a plan for the Recovery Act funds, we

have a structure in place. As the Senior Accountability Officer, I

oversee a steering committee drawn from across the Agency. Several members of the committee themselves direct ‘‘tiger teams,’’

teams with responsibilities aligned with the requirements of the

Recovery Act. We are working closely with the National Science

Board, our governing body, and our Office of the Inspector General.

These connections will help us meet the enhanced monitoring and

reporting requirements of the Act. Personally, I take seriously my

responsibility to deliver information in a timely way and to ensure

the quality of that information.

In conclusion then, the high expectations for NSF derive from the

discoveries and the innovations that the agency has helped generate over the past six decades. The landmark legislation then enables us to strengthen our contributions and in so doing move forward the Nation and the American people.

Mr. Chairman, this concludes my remarks. I will certainly answer any questions should you have them.

[The prepared statement of Dr. Marrett follows:]

PREPARED STATEMENT OF CORA MARRETT

Chairman Miller, Ranking Member Broun, and distinguished Members of the

Subcommittee, thank you for inviting me to speak on the National Science Foundation’s participation in the America Recovery and Reinvestment Act. I am Dr. Cora

Marrett, Acting Deputy Director and Senior Accountability Officer for Recovery Act

Activities for NSF.

15

The Foundation is grateful and honored that our role in stimulating the American economy has been recognized. The $3 billion Recovery Act investment in NSF programs will sustain and advance major research initiatives, enhance support for

science, technology, engineering and mathematics education, and help renew America’s research infrastructure:

The immediate impact of this investment will be felt by investigators, post-doctoral fellows, graduate and undergraduate students, and teachers throughout the

Nation. NSF funding now helps to support nearly 200,000 of these individuals every

year. We expect to add approximately 50,000 in FY 2009 with Recovery Act funds.

Over the longer-term, a vibrant research and education enterprise will help meet

increasing demands for the new knowledge and innovative technologies that contribute to sustainable economic prosperity and quality of life.

As you know, the Recovery Act mandates an unprecedented level of transparency

and accountability. NSF is confident that the agency can maintain the highest

standards of competitive merit review, distribute Recovery Act funds in a timely

manner, and meet all requirements for accountability and transparency.

1. How soon will you begin to allocate funds for your agency programs

funded through the Recovery Act?

The Foundation has developed formal policies and procedures for implementing

the Recovery Act and a plan and framework for allocating funds. Moreover, we have

proposals in place that merit the funding and we have and procedures for handling

expeditiously other proposals we will receive. For these reasons, NSF is confident

that we can begin to make the first awards within the next few weeks. As you know, NSF Recovery Act funds total $3 billion. $2.5 billion is available for Research and Related Activities, and includes $300 million for Major Research

Instrumentation (MRI) and $200 million for Academic Research Instrumentation

(ARI). The remaining $2 billion supports new research grants and critical infrastructure needs; with an emphasis on deferred maintenance and enhancements for

existing research facilities. In addition, the Recovery Act stipulates $400 million for Major Research Equip- ment and Facilities Construction, and $100 million for Education and Human Resources. The $100 million includes $25 million for the Math and Science Partnerships Program and $60 million for the Noyce Teacher Scholarship Program, and $15

million for a Science Masters program authorized in the America COMPETES Act.

Not only will NSF distribute these funds expeditiously, we expect that the science

and engineering communities are poised to immediately expend funds that will advance discovery and innovation, and enhance the economy. The highly rated proposals we have been unable to support provide ample evidence of this. Colleges and

universities have urgent needs to retain talented faculty, graduate students and

post-doctoral fellows. They. are also prepared to use Recovery Act funds to refurbish

laboratories and upgrade information systems technology.

2. There will be increased pressure to bypass standard procedures in order

to accelerate the delivery of Recovery funds through grants and contracts. How will you ensure the expedited awards maintain a selection

and management process that is fair, competitive, and advances the

President’s long-term policy agenda?

In awarding Recovery Act funds, the Foundation recognizes the importance of

building and maintaining the confidence and trust of Congress and the American

people. NSF maintains a steadfast commitment to established merit review processes, considered by many to be the ‘‘gold standard’’ for achieving excellence, accountability, transparency and effectiveness in grant-making activities.

The NSF merit review process, relies on a pool of over 50,000 volunteer reviewers,

selected from a pool of national and international experts, to evaluate the proposals

we receive. Proposals are weighed against two established criteria: intellectual merit

and broader impacts of the proposed research. The second criterion considers the

impact that the research can have beyond the advancement of new knowledge, for

example in teaching, training and learning.

NSF will not, and need not bypass these established procedures in order to move

funds rapidly. We have proposals already reviewed through the merit process this

fiscal year that we could not fund with our regular budget. The budgets for these

highly rated proposals total at least $2 billion. Reviews underway or to be completed

shortly will generate additional proposals appropriate for Recovery Act funding.

NSF will not compromise the fairness and competitiveness that marks the review

process.

The Foundation’s first priority is to fund highly-rated proposals that would otherwise be declined for lack of funds. These investments clearly reflect the AdministraVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00025 Fmt 6633 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
16

tion’s commitment to advance science and innovation to build a sustainable economic future. NSF places a high priority on using Recovery Act funds to support

proposals from first time principal investigators and for high risk and transformative research. Both of these goals are also priorities for the Administration.

3. How will you ensure the agency staff responsible for contracts and grant

management have the knowledge and skills necessary to properly award

and manage contracts and grants funded by Recovery Act resources?

The Recovery Act clearly requires NSF to employ highly qualified staff to execute

the critical responsibilities of grant and contract management. As you know, awarding and managing grants and contracts is the bread-and-butter business of the

Foundation. In addition to well established merit review processes, NSF has a cadre

of highly experienced grants management staff. Effective management processes, refined over many decades, are already in place to ensure that Recovery Act funds

are awarded in a timely-manner while maintaining the integrity of award management processes.

4. What structures do you plan to establish to ensure compliance with directions from the Office of Management and Budget? How will these

structures ensure the timely delivery of information on Recovery Act

projects to the public web portal, Recovery.gov, as directed by the Act and

President Obama?

NSF has more than a plan; we have a structure in place. The Senior Accountability Officer, my role, oversees a Recovery Act Steering Committee drawn from

across the agency. Many members of the Steering Committee themselves direct

‘‘tiger-teams’’ with specific responsibilities aligned with the requirements of the Recovery Act.

NSF management continues to work closely with the National Science Board, our

governing body, and the Office of the Inspector General to develop appropriate procedures to meet the enhanced monitoring and reporting requirements of the Recovery Act. The responsibility for the timely delivery of information to the Recovery.gov

web portal rests with the Chief Accountability Officer. A single office compiles the

information that currently is required on a weekly basis.

In conclusion, the high expectations accompanying the Recovery Act are a direct

reflection of the discoveries and innovations that NSF and its partners in the research and education community have brought to the Nation over the past six decades. This landmark legislation provides the means to move forward and to greatly

strengthen these contributions to the Nation and the American people.

Mr. Chairman, this concludes my remarks. I would be pleased to answer any

questions.

BIOGRAPHY FOR CORA MARRETT

Dr. Cora Marrett was appointed Acting Deputy Director of the National Science

Foundation, effective January 18, 2009.

She had been the Assistant Director for Education and Human Resources (EHR),

a position she held from February 2007 until becoming Acting Deputy Director. She

led NSF’s mission to achieve excellence in U.S. science, technology, engineering and

mathematics (STEM) education at all levels and in both formal and informal settings. Earlier, from 1992–1996, Dr. Marrett was NSF’s Assistant Director for Social,

Behavioral and Economic Sciences (SBE).

Prior to returning to NSF in 2007, Dr. Marrett served as the University of Wisconsin’s Senior Vice President for Academic Affairs for six years. Before that, she

served as Senior Vice Chancellor for Academic Affairs and Provost at the University

of Massachusetts–Amherst for four years.

Dr. Marrett holds a B.A. degree from Virginia Union University, and M.A. and

Ph.D. degrees from UW–Madison, all in sociology. She received an honorary doctorate from Wake Forest University in 1996, and was elected a fellow of the American Academy of Arts and Sciences in 1998 and the American Association for the

Advancement of Science in 1996.

Chairman MILLER. Thank you, Dr. Marrett.

Mr. Spoehel for five minutes.

17

STATEMENT OF MR. RONALD R. SPOEHEL, CHIEF FINANCIAL

OFFICER, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

Mr. SPOEHEL. Chairman Miller, Ranking Member Broun and distinguished Members of the Subcommittee, thank you for the opportunity to appear today to discuss steps being taken at NASA to implement the Recovery Act.

The Recovery Act entrusts NASA with the stewardship of just over $1 billion of Recovery Act funds, with almost 95 percent or

$950 million designated for expenditure on science, aeronautics and

exploration activities, and $50 million for cross-agency support activities prioritized for hurricane damage repair, along with $2 million for the NASA Office of Inspector General.

While NASA is working aggressively to fulfill the Act’s mandate

of commencing Recovery Act activities and expenditures as quickly

as possible, the Agency is also committed to managing Recovery

Act funding under the heightened level of transparency and accountability demanded by the Congress and the Administration.

We want the American people to rest assured that they will know

where and how each of their Recovery Act dollars is being spent

at NASA.

NASA’s planning, execution, reporting and oversight for Recovery

Act activities began early, even before the Act was signed by the

President. NASA is still in the early stages of implementing Recovery Act specific processes and activities, and while OMB guidance

continues to evolve, it is my view that the Recovery Act requirements can be successfully implemented at NASA within a framework that substantially relies on existing Agency processes and

structures. NASA already has well-established and effective procedures in place for budget planning and execution and for procurement, as well as for internal controls and external reporting, and

the Agency intends to leverage those existing capabilities to accomplish rapid, timely Recovery Act planning and budget execution

and procurements, while fully meeting all the requirements of the

Act, related OMB guidance, and relevant laws and regulations. The

Agency’s planning process for Recovery Act activities and the associated allocation of funds is well underway, consistent with Recovery Act direction provided by Congress and OMB guidance, and

also consistent with NASA goals and priorities as established by

the President and Congress.

NASA senior management recognizes that meeting the commitments of the President and Congress will require sustained focus

and accountability from all, particularly in the awarding, managing

and overseeing the contracts and grants funded by the Recovery

Act. NASA’s annual procurement obligations have exceeded $15 billion on average over the last four years and the $1 billion of Recovery Act funds, most of which will go to contract awards, is just over

six percent of that amount. For the Recovery Act funding, the

Agency intends to use its well-established processes and procedures

for effectively and efficiently awarding—or planning, awarding and

managing contract and grant awards in a fair and equitable manner. Oversight of the procurement process is maintained through

several means beginning with a strong internal communication

network within NASA’s procurement community, monthly reviews

18

of major procurements, periodic on-site intensive reviews of individual procurements, further supplemented by oversight and internal control reviews conducted regularly by the Agency. NASA recognizes that these processes can only be effective if it maintains a

skilled and knowledgeable cadre of acquisition professionals, and

the Agency has established a rigorous procurement training program as well as a contracting certification program.

In closing, NASA is committed to the effective, efficient and responsible use of the resources entrusted to the Agency, and to the

implementation of a robust and comprehensive program that meets

the requirements of the Recovery Act and other relevance guidance

and laws with the level of transparency and accountability demanded.

I would be happy to respond to any questions you or the Members of the Committee may have. Thank you, Mr. Chairman.

[The prepared statement of Mr. Spoehel follows:]

PREPARED STATEMENT OF RONALD R. SPOEHEL

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity

to appear today to discuss the steps being taken at NASA to implement the American Recovery and Reinvestment Act of 2009 (P.L. 111–5), commonly referred to as

the Recovery Act. My testimony will outline NASA’s progress to date and the actions

the Agency is taking to provide for the special accountability and transparency

called for by the Act. The Recovery Act entrusts NASA with the stewardship of just over $1.0 billion in Recovery Act funds. Almost 95 percent of these funds, or $950 million, are designated for expenditure on Science, Aeronautics and Exploration activities. Specifically, $400 million has been appropriated for Science, $150 million for Aeronautics,

and $400 million for Exploration. Of the remaining funds, $50 million is for CrossAgency Support, with the highest priority being given to restoring NASA-owned facilities damaged from hurricanes last year, and $2 million is for the NASA Office

of Inspector General.

While NASA is aggressively working to fulfill the Act’s mandate of commencing

Recovery Act activities and expenditures as quickly as possible, the Agency is also

committed to managing Recovery Act funding under the heightened level of transparency and accountability demanded by Congress and the Administration. We

want the American people to rest assured they will know where and how each of

their Recovery Act dollars at NASA is being invested.

Reinforcing the Structures for Compliance with the Recovery Act and Initial Implementing Guidance for the Recovery Act

In my role as the senior agency Recovery Act official for the Agency, as designated

by NASA’s Acting Administrator, I am coordinating NASA efforts in planning, execution, reporting and oversight related to the spending of the Recovery Act funds

appropriated for the Agency. These efforts began even before the Recovery Act was

signed by the President on February 17, and NASA has proactively considered the

implications of the guidance from the Office of Management and Budget (OMB),

even while still in draft form. Although the OMB guidance continues to evolve and

NASA is still in the early stages of implementing its Recovery Act-specific processes

and activities, it is my view that the Recovery Act can be successfully implemented

at NASA within a framework that substantially relies on existing Agency processes

and structures.

For example, NASA has well-established procedures for budget planning and execution. The teams involved in that process include staff from offices across Headquarters. These same teams already have the processes and internal controls in

place, with slight modification, for the rapid planning and budget execution encouraged by the Recovery Act. In the month since the Recovery Act was signed into law,

NASA already coordinated with Treasury to establish unique Treasury Fund Symbols covering all of its Recovery Act funding, identified how it will implement separate accounting of Recovery Act funds in its financial systems with new Work

Breakdown Structure codes, and developed and reviewed with the Administration

the Agency’s initial spending plans for use of Recovery Act funds for restoration of

hurricane-damaged facilities, together with required apportionments from OMB and

19

warrants from Treasury. Planning also is well underway for the Science, Aeronautics and Exploration Recovery Act activities, and those should be complete in advance of the 60 day deadline for the Agency spending plan specified in the Conference Report accompanying the Recovery Act. In all of this activity, NASA is able

to leverage its existing teams and processes to accomplish timely Recovery Act planning and budget execution.

NASA also will leverage its existing processes for internal controls and external

reporting as the Agency implements the reporting and oversight requirements of the

Recovery Act and the OMB guidance. Based on the information currently available

on requirements, it is anticipated that NASA’s processes or systems will require

only minor modification for compliance with the final requirements. We do know,

for example, that new reports will be required from NASA and other government

contractors, and the Agency is in discussions with OMB about the need for new government-wide contract clauses to capture these requirements. Until such clauses

and OMB’s final requirements are approved, NASA will not know the full implications for how reporting and oversight is to be handled. However, our experience

with other requirements, like developing and publicly posting weekly reports on Recovery Act activities, is that these have been readily implemented by the functional

teams assigned. Overall, what we have seen so far leads us to believe that our functional teams involved in Recovery Act implementation are more than capable of developing and overseeing the timely implementation of the new reports and processes

required.

NASA senior management recognizes that meeting the commitments of the President and the Congress will require sustained focus and accountability from all, particularly in the awarding, managing, and overseeing the contracts and grants receiving Recovery Act funds. Close coordination of the functional teams at NASA, with

almost daily meetings at present, is intended to ensure that the Agency Recovery

Act activities achieve both the quick implementation and the full accountability and

transparency called for by the Recovery Act.

Timeline for Funding of Agency Activities

The NASA planning process for Recovery Act activities and the associated allocation of funds is well underway, consistent with the direction provided by Congress

and OMB guidance. Initial plans for the $50 million in Cross-Agency Support appropriations for hurricane repair have been approved by OMB. Funding has been prepared for obligation under contract following submission of the spending plan called

for in the Conference Report accompanying the Recovery Act and completion of the

open procurement process. Each of the NASA Mission Directorates—the organizations responsible for Agency mission programs and projects—which received appropriations under the Recovery Act are developing program plans for Agency review.

Once these plans are finalized within NASA, as anticipated in the next few weeks,

they will be provided to OMB for Administration review and, subsequently, submitted as part of the Agency spending plan as directed in the Conference Report

accompanying the Recovery Act. Following that submission, the Agency will distribute the funds to the allocated projects, begin the procurement processes to award

new contracts and tasks on existing contracts, and then obligate these funds.

Ensuring Fair and Competitive Awards, and Knowledgeable Procurement

and Grants Management Staff

NASA has well-established processes and procedures for effectively and efficiently

planning, awarding and managing a substantial volume of contract and grant

awards. Over the last four years, the average amount of NASA’s annual procurement obligations was over $15 billion. As such, the $1.0 billion of Recovery Act

funds, most of which will go to contract awards, represents just over six percent of

NASA’s annual amount of contract and grant obligations. While some changes to

Agency processes will be needed to meet special Recovery Act requirements, the increase in total procurement activity represents only a modest increase over current

annual levels.

Consequently, NASA intends to continue utilizing its standard proven procedures

for Recovery Act funding, in substantially the same way as for regular appropriations, in order to ensure that Agency and Government financial controls and accountability standards are maintained. These procedures begin with the project

planning and approval process, which in this case includes identifying specific

project activities that meet approved Recovery Act plans, and are consistent with

NASA goals and priorities as established by the President and the Congress.

NASA’s financial system provides controls over the distribution of these funds, so

only approved Recovery Act projects will receive funds—in NASA this occurs

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through the centralized financial system via approved Work Breakdown Structure

codes.

The Agency acquisition process complies with the Federal Acquisition Regulation

(FAR) and the NASA FAR Supplement, both of which provide the regulatory guidance on the announcement, solicitation, evaluation, and award processes to ensure

that each procurement is conducted in a fair and equitable manner. In addition, in

2007, NASA developed and published a set of NASA Procurement Tenets, which

outline a framework for conducting procurements that meet the Agency’s requirements with the best business approach for the Agency. These tenets are consistent

with, and in substance reflect, many of the essential elements of the President’s

Memorandum on Government Contracting issued on March 4, 2009. For example,

NASA’s third tenet requires the Agency’s programs and projects to maximize and

optimize competition when acquiring supplies and services. This requires early and

ongoing communication with all personnel involved in the procurement process, and

the NASA Office of Procurement will be a part of the review process for specific implementation plans in order to ensure compliance with procurements regulations,

NASA Procurement Tenets, the OMB Guidance related to the Recovery Act, and the

Recovery Act.

Further, oversight of the procurement process is maintained through several

means. A strong communication network exists between the Office of Procurement

at NASA Headquarters and the procurement staff at each NASA Center. For example, regular teleconferences are held with the procurement officers across the Agency, enabling the rapid dissemination of policy and the honing in on issues as they

arise in the field. In addition, the Assistant Administrator for Procurements holds

monthly reviews of major procurements, providing a regular opportunity to review

each Center’s activities in greater detail. Further, procurement surveys are conducted on-site at each Center on a periodic basis. These surveys encompass intensive reviews of individual procurements, permitting a validation that the proper

process has been followed in compliance with applicable laws and regulations. And,

those are further supplemented by oversight and internal control reviews conducted

regularly by the Agency.

NASA recognizes that these processes can only be effective if it maintains a

skilled and knowledgeable cadre of acquisition professionals. To this end, NASA has

established and maintains a rigorous procurement training program that provides

its contracting workforce with the competencies and skills necessary to perform well

in the increasingly complex and ever changing acquisition environment. In addition,

NASA’s contracting certification program requires fulfillment of education requirements, training, experience, and continuous learning points. Prior to receiving a new

warrant, a contracting professional must be certified at the appropriate certification

level. NASA also concentrates on continuously improving specific skills of the procurement workforce, such as cost and pricing skills, to ensure that the Agency receives the overall best value in the award of contracts and grants.

In addition to established training, detailed information regarding the award and

administration of contracts and grants, specifically designed for the Recovery Act

funding, is currently being developed and planned for dissemination by the Office

of Procurement to the NASA procurement community via the Agency’s Center Procurement Officers. This information will be used to supplement the established policies and procedures at each NASA Center for the review and approval of processes

leading to the award of contracts and grants, and the subsequent administration of

those contractual vehicles. Stringent oversight will be implemented both at each

Center and at Headquarters to ensure that the Recovery Act milestones and requirements are met.

Conclusion

In closing, NASA is committed to a robust and comprehensive program that meets

the requirements of the Recovery Act and other relevant guidance and laws. The

effective, efficient, and responsible use of the resources that have been provided to

NASA is good stewardship. NASA is committed to carrying out this stewardship to

achieve the objective of the Administration and Congress to expedite Recovery Act

project spending within increased standards for transparency and accountability.

I would be happy to respond to any questions you or the other Members of the

Subcommittee may have.

BIOGRAPHY FOR RONALD R. SPOEHEL

Ronald R. Spoehel has served as the Presidentially-appointed Senate-confirmed

Chief Financial Officer of the National Aeronautics and Space Administration since

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September 2007. As Chief Financial Officer, he oversees all financial management

activities relating to the programs and operations of the Agency. He serves on the

U.S. Chief Financial Officers Council coordinating agency financial management activities with other federal agencies and participating with other agency Chief Financial Officers in supporting implementation of Presidential objectives.

Mr. Spoehel has held various financial and general management positions

throughout his career, including serving as Executive Vice President, Chief Financial Officer and Director of ICx Technologies, an advanced technologies security solutions company; Executive Vice President, Chief Financial Officer and Director of

ManTech International Corporation, a NASDAQ-listed government technology solutions company; Chairman and founder of Alpine Partners, a private investment advisory firm; Chief Executive Officer and Director of Optinel Systems, an optical communications equipment company; Vice President-Corporate Development of Harris

Corporation, a NYSE-listed Fortune 500 global communications equipment and defense electronics company; Senior Vice President of ICF Kaiser International, a

NYSE-listed company with global operations; Vice President, Investment Banking

of Lehman Brothers; Vice President of Bank of America; and, program financial

management with Hughes Aircraft Company.

Mr. Spoehel is an honors graduate of the University of Pennsylvania, where he

received his Bachelor of Science degree in economics and MBA from the Wharton

School and his Master of Science degree in engineering from the Moore School of

Electrical Engineering. He serves on the U.S. Air Force Audit Committee and he

has served on the Board of Directors of the Professional Services Council and the

Advisory Council for the Wharton and Engineering Schools at the University of

Pennsylvania. Mr. Spoehel has also served on the Boards of private companies both

in the U.S. and in Europe.

Chairman MILLER. Thank you, Mr. Spoehel.

Ms. Herbst for five minutes.

STATEMENT OF MS. ELLEN HERBST, SENIOR ADVISOR FOR

RECOVERY IMPLEMENTATION, U.S. DEPARTMENT OF COMMERCE

Ms. HERBST. Chairman Miller, Ranking Member Broun and distinguished Members of the Subcommittee, my name is Ellen

Herbst. I am the Senior Advisor for Recovery Implementation at

the Department of Commerce, and I appreciate this opportunity to

discuss how the Department of Commerce will implement the

American Recovery and Reinvestment Act.

Under the Recovery Act, the Commerce Department is receiving

$7.9 billion. Commerce agencies receiving funding include the Economic Development Administration, the National Institute of

Standards and Technology, the National Oceanic and Atmospheric

Administration, the Bureau of the Census and the National Telecommunications and Information Administration, and funding is

also included for the Office of Inspector General to conduct audits

and oversight. At the Commerce Department, Recovery Act funds

will be used to invest in business development, innovative research,

construction projects, expanding broadband services and other programs that will create jobs and build a foundation for recovery.

The Subcommittee asks that my focus be on a number of important questions related to the Commerce Department’s plan to ensure accountability and transparency. The Department has established a clear path forward for meeting our responsibilities under

the Act. We are committed to allocating funding in an expeditious,

open and transparent manner that ensures accountability. To this

end, we are working closely with the senior management in each

of the five agencies receiving Recovery Act funds. Additionally, we

are working with Commerce’s Office of Budget and the Administration’s Office of Management and Budget and we are on track to

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transmit to Congress spending plans for agency programs funded

in H.R. 1 within the timeframe required. These plans will be posted to Commerce’s recovery website.

The Department is also committed to ensuring that all grants

and contracts are awarded in a fair and timely manner. The Department has engaged its grants and acquisition counsels to thoroughly review requirements of the Act, establish standardizing reporting of grants and acquisitions awarded, ensure consistency in

the wide dissemination of information to be made publicly available, and ensure the correct and complete recording of award information. Standard processes and procedures are to be followed in

the awards of grants and contracts. At the same time, we are doing

what we can to streamline and improve the underlying processes.

Another key element of the Department’s strategy involves staff

competence. We have made significant progress in ensuring our acquisition core meets government-wide certification requirements

and they will be working with other senior-level professionals and

management to plan and execute the appropriate mechanisms for

successful implementation of the Recovery Act. In all cases, our Office of Acquisition Management will be assisting the grants and acquisitions communities to ensure both timeliness and that the

highest standards of accountability and transparency are met.

The Department is also making sure we have the structure and

personnel in place to ensure our compliance with OMB guidance.

The Department appointed me as the senior staff person to coordinate, integrate and manage our implementation of the Recovery

Act. We too have formed a steering committee and have formed

several work teams with representatives from all Department offices and bureaus receiving funds to plan and implement the Act

across the Department. We are also receiving proactive advice and

education from our Office of Inspector General.

Mr. Chairman, I will conclude with this: President Obama has

called the American Recovery and Reinvestment Act the most

sweeping economic recovery package in our history. At the Commerce Department, we are committed to working with the Congress, the President and the American people to meet the highest

standards of transparency and accountability in allocating this

vital Recovery Act funding.

Thank you, and I would be happy to answer any questions you

may have.

[The prepared statement of Ms. Herbst follows:]

PREPARED STATEMENT OF ELLEN HERBST

Good morning, Mr. Chairman, Ranking Member Broun, and Members of the Subcommittee. My name is Ellen Herbst. I am the Senior Advisor for Recovery Implementation at the Department of Commerce. Thank you for the opportunity to appear before you today to discuss the Department of Commerce plans for the American Recovery and Reinvestment Act of 2009.

The American Recovery and Reinvestment Act of 2009 (‘‘the Recovery Act’’

‘‘ARRA’’) was signed into law by President Barack Obama on February 17, 2009.

It is an unprecedented effort to jump-start our economy, create or save millions of

jobs, and put a down payment on addressing long-neglected challenges so our country can thrive in the 21st century. The Recovery Act is an extraordinary response

to promote economic recovery and growth, and includes measures to modernize our

nation’s infrastructure, enhance energy independence, expand educational opportunities, preserve and improve affordable health care, provide tax relief, and protect

those in greatest need.

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The U.S. Department of Commerce will receive $7.9 billion to create and save jobs

for American workers as part of the historic economic stimulus bill recently signed

by President Obama. As he stated, ‘‘The American Recovery and Reinvestment Act

is the most sweeping economic recovery package in our history . . .. We have begun

the essential work of keeping the American Dream alive in our time.’’ The President

has noted that the Recovery Act will create or save 3.3 million jobs over the next

two years.

ARRA investments in Commerce agencies, which will be allocated in an open,

transparent and timely manner, include funding for business development, innovative research, construction projects, expanding broadband services and other programs that will create jobs in a broad range of occupations and industries.

Economic Development Administration

The Recovery Act includes $150 million for the Economic Development Administration to provide grants to economically distressed areas across the Nation to generate private sector jobs. Priority consideration will be given to those areas that

have experienced sudden and severe economic dislocation and job loss due to corporate restructuring. Funds will be disbursed through the agency’s traditional

grant-making process and will support efforts to create higher-skill, higher-wage

jobs by promoting innovation and entrepreneurship and connecting regional economies with the worldwide marketplace.

National Oceanic and Atmospheric Administration

The Recovery Act funding for the National Oceanic and Atmospheric Administra- tion (NOAA) is $830 million including:

• $230 million slated for habitat restoration, navigation projects and vessel

maintenance

• $430 million for construction and repair of NOAA facilities, ships and equipment, improvements for weather forecasting and satellite development; and

• $170 million to be used for climate modeling activities, including supercomputing procurement, and research into climate change.

Bureau of the Census

To ensure a successful 2010 Decennial Census, the Recovery Act includes $1 billion to hire new personnel for partnership and outreach efforts to minority communities and hard-to-reach populations, increase targeted media purchases, and ensure

proper management of other operational and programmatic risks.

National Institute of Standards and Technology

Through the Recovery Act, the National Institute of Standards and Technology (NIST) is provided a total of $610 million, including:

• $220 million for NIST laboratory research, measurements, and other services

supporting economic growth and U.S. innovation through funding of such

items as competitive grants, research fellowships, and advanced measurement

equipment and supplies;

• $360 million to address NIST’s backlog of maintenance and renovation

projects and for construction of new facilities and laboratories, including $180

million for a competitive construction grant program for funding research

science buildings outside of NIST;

• $20 million in funds transferred from the Department of Health and Human

Services for standards-related research that supports the security and interoperability of electronic medical records to reduce health care costs and improve the quality of care; and

• $10 million in funds are provided, through the Department of Energy, for

NIST to help develop a comprehensive framework for a nationwide, fully

inter-operable smart grid for the U.S. electric power system.

National Telecommunications and Information Administration

The Recovery Act provides critical funding for programs at the National Telecommunications and Information Administration (NTIA) including:

• $4.7 billion to establish a Broadband Technology Opportunities Program

(STOP) for awards to eligible entities to develop and expand broadband services to rural and under-served areas and improve access to broadband by public safety agencies:

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• Of these funds, not less than $250 million will be available for innovative

programs that encourage sustainable adoption of broadband services;

• At least $200 million will be available to upgrade technology and capacity

at public computing centers, including community colleges and public libraries;

• Up to $350 million of the BTOP funding is designated for the development and maintenance of statewide broadband inventory maps; and

• $10 million will be a transfer to the Office of Inspector General for the

purposes of BTOP audits and oversight; and

• $650 million for the DTV Converter Box Coupon Program to allow NTIA to

issue coupons to all households currently on the waiting list, to start mailing

coupons via first class mail and to ensure vulnerable populations are prepared for the transition from analog-to-digital television transmission.

Office of Inspector General

The Recovery Act includes $6 million for the Office of Inspector General (OIG) to

conduct audits and oversight of the programs and activities funded by the ARRA

in addition to the $10 million provided to the OIG for oversight of the Broadband

Technology Opportunities Program. With such a large infusion of cash expected to

be obligated within a short time frame, this oversight will be important in evaluating the effectiveness of these programs and detecting and preventing waste, fraud

and abuse.

The Subcommittee, in its letter of invitation, asked that my testimony focus on

a number of important questions related to the Commerce Department’s plan to ensure accountability and transparency in the process of implementing the ARRA.

Mr. Chairman, the Department of Commerce has established a clear path forward

for meeting our responsibilities under the ARRA. First, the Department is working

with the senior management in each bureau that received ARRA funding, as well

as the Department’s Office of Budget and the Office of Management and Budget

(OMB), to complete approved spending plans for the agency programs funded

through the Recovery Act. We expect to complete these plans and transmit them to

Congress within the time frame required in the legislation. Once those spending

plans are approved, they will be posted to the Department’s Recovery website.

The Department is committed to ensuring that all ARRA grants and contracts are

awarded in a fair, impartial and timely manner. We are working to streamline and

improve existing procedures without compromising transparency and accountability.

The Department has worked closely with OMB to develop and promulgate standard processes and language to be included in grant and acquisition awards that address the recipient reporting requirements of ARRA and follow the specific guidance

in the legislation (e.g., Buy American Act; Davis Bacon Act). As well, the Department has engaged its Grants and Acquisition Councils to thoroughly review requirements of the Act, to establish standardized reporting of grants/acquisitions awarded

utilizing ARRA funds, to ensure consistency in wide dissemination of information

to be made publicly available through Grants.gov, FedBizOps.gov, Recovery.gov and

agency and bureau Recovery Act web pages, and to ensure the correct and complete

recording of award information through existing processes to USASpending.gov.

Recognizing the urgency of getting the funding made available by ARRA into the

community, streamlined processes have been or are being established for acquisitions. For example, those programs/acquisitions less than S75 million anal not designated as a ‘‘major investment’’ will undergo an Office of Acquisition Management

(OAM) review via a paper process in lieu of monthly Investment Review Board

meetings. The process for reviewing those programs/acquisitions greater than $75

million or those designated as a ‘‘major investment’’ is currently under refinement.

These management reviews will ensure that, to the maximum extent possible, acquisitions will be made on a fully competitive basis and on a fixed price basis.

Where other than full and open competition is necessary or appropriate, or where

other than a fixed price type contract will be utilized, the justification will be reviewed for sufficiency, compliance with Federal Acquisition Regulations, and for full

consideration of all options available.

A reporting process has been established to provide DOC management with an

on-going flow of information regarding planned acquisitions and grants and the

progress of those awards through the process. To a large degree, existing processes

will be utilized, but with a focus on streamlining the process wherever possible. The

ability to expedite will rely heavily on the thoroughness and quality of the up-front

work done by the acquiring/granting office. OAM will oversee that work to ensure

25

speed of process does not diminish the quality of the decisions made or sacrifice

quality of the process and award in favor of expediency.

In order to meet that challenge, OAM has drafted a Risk Management and Oversight Plan. This Plan has been developed based on the provisions of ARRA, DOC

OIG’s Initial Oversight Plan, the guidance provided in ‘‘A Guide to Grant Oversight

and Best Practices for Combating Grant Fraud’’ by the National Procurement Fraud

Task Force, the Statement of the Acting Comptroller General of the United States,

‘‘GAO’s Role in Helping to Ensure Accountability and Transparency’’ and historical

GAO and OIG reports regarding the acquisition and/or financial assistance functional areas.

Another key element of the Department’s strategy involves staff competence. The

Department has been hard at work making sure that those with responsibility for

carrying out the necessary work to well implement the ARRA have the knowledge

and skills necessary,to properly award and manage contracts. The Department has

been making significant progress in ensuring that its acquisition corps (including

Program/Project Managers, Contracting Officer Technical Representatives, Contracting Officers and Contract Specialists) meet government-wide certification requirements. Depending on the complexity of Recovery Act-funded acquisitions, Bureau Procurement Officials will be assigning those acquisitions to individuals within

the existing cadre of staff with the requisite knowledge, skills, expertise and experience necessary to properly award and administer acquisitions. These individuals

will be supplemented or assisted by others (other senior level acquisition professionals, the DOC Office of General Counsel, the Office of Acquisition Management)

to strategize, plan and execute the appropriate contract mechanisms for successful

implementation of the Recovery Act.

We recognize that acquisition resources within DOC and across the Government

will be challenged by the requirements of the Recovery Act. Therefore, the Department will take advantage of all hiring flexibilities and options available and will,

where appropriate, transfer acquisitions to other federal agencies for execution

where their resources and expertise surpass the resources available within DOC, or

will utilize contractor support for the acquisition function. As staff is committed to

the execution of the Recovery Act programs, new hires, transfers to other agencies

for acquisition purposes and contractor support will be utilized to fulfill the other

day-to-day acquisitions necessary outside of the Recovery Act.

In the Grants area, DOC has been developing for the past two years a formal online Grants training and certification program. The first module developed, Price

Evaluation, is of key importance to the successful evaluation of applications and the

successful oversight of grant expenditures to mitigate fraud, waste anal abuse in the

execution of a grant. The DOC Grants community has been relatively stable and,

thus, will rely on seasoned, trained and experienced Grants Specialists and Federal

Program Officers to execute programs under the ARRA. All grants specialists partner with the Financial Assistance Law Division of the DOC Office of General Counsel, which provides a fresh ‘‘set of eyes’’ to the process and its execution.

In all cases, the Office of Acquisition Management (OAM) will be assisting the

grants and acquisition communities to address developing issues and to provide

guidance and assistance in compliance with the provisions of this legislation and the

governing regulations. As well, OAM will, as detailed above, be instituting a rigorous oversight and reporting program associated with ARRA-funded grants and

contracts, which will provide DOC management insight into resource challenges and

allow for input into the process.

Mr. Chairman, the Department is hard at work making sure that we have the

structures and personnel in place to ensure DOC compliance with OMB guidance

and statutory requirements. The Department appointed me as the senior staff person to coordinate, integrate and manage our implementation of the Recovery Act.

We have formed several cross-bureau, cross-function work teams to plan and implement the Recovery Act across the Department. Our Departmental Work Team structure is as follows:

• Senior Advisor and Program Management staff are responsible for overall coordination and management at the Department level of ARRA implementation, including timely delivery of information on Recovery Act projects.

• ARRA Working Group structure—provides senior oversight and management

to all subgroups. This Working Group consists of

Æ Recovery Implementation Steering Committee with subject matter expertise composed of senior managers from all Department-level Offices (Acquisition and Grants, General Counsel, Financial Management, Budget,

Human Resources, Legislative and Intergovernmental Affairs, Public Affairs, Management and Organization, Policy and Strategic Planning and

26

the Chief Information Officer) as well as a senior manager from the Office of Inspector General, who provide proactive advice and education.

Members of the Steering Committee are responsible for providing guidance in their area of responsibility as well as coordinating communication

and activities. They, in turn, work with the functional offices within each

bureau to support specific activities.

Æ Recovery Implementation Bureau Points of Contact (POC)—a single senior manager from each of the bureaus receiving funding (Census, EDA,

NIST, NOAA and NTIA) as well as a representative from the Office of

Inspector General. These bureau POCs are responsible for coordinating

and managing bureau efforts with Departmental efforts. Each bureau has

its own internal team working on bureau-specific activities and oversight,

and the bureau POC is the communication and management liaison to

the Department.

Æ Leaders of each of the work group sub-teams. There are multiple subteams working on specific issues including:

• Transparency to the public

• Detailed data reporting and systems

• Grant and contract recipient reporting.

Mr. Chairman, thank you for the opportunity to testify before the Subcommittee

today. Congress, the President and the American people have trusted us with this

unprecedented effort to invest in our economy, create or save millions of jobs and

build a foundation for recovery. We do not take this challenge lightly and are committed to the high standards both you in Congress and the President have charged

us to uphold.

The Department of Commerce is committed to implementing the provisions of the

ARRA in a transparent manner that ensures accountability. We look forward to

working with you, the other Members of this subcommittee, and the entire Congress, to ensure we do this right on behalf of the American people. I would be happy

to answer any questions you may have.

BIOGRAPHY FOR ELLEN HERBST

Ellen Herbst joined the Federal Government as Director, National Technical Information Service (NTIS), effective July 11, 2005. As an agency of the U.S. Department of Commerce, NTIS serves our nation as the largest central resource for government-funded scientific, technical, engineering, and business related information

available today.

Ellen has spent 25 years in private industry with extensive involvement with

growing businesses in the security, processing and imaging systems markets. She

has held senior management positions at Spectra Systems Corporation, a supplier

of security materials, and Giesecke & Devrient America, a supplier of banknotes,

security documents and currency automation systems. Ms. Herbst has also held various key management positions at E.I. DuPont De Nemours and Company where

she served as Business Manager for their Digital Systems and Equipment Service

Divisions. In addition to these qualifications Ellen has extensive experience in financial and strategic planning and integration of acquisitions.

She received her B.S., in Economics and Accounting in 1979 from the University

of Delaware and her M.B.A., in 1995 from the Wharton School of Business, University of Pennsylvania.

Chairman MILLER. Thank you, Ms. Herbst.

Mr. Rogers for five minutes.

STATEMENT OF MR. MATTHEW ROGERS, SENIOR ADVISOR,

U.S. DEPARTMENT OF ENERGY

Mr. ROGERS. Chairman Miller, Ranking Member Broun and

Members of the Subcommittee, thank you for the opportunity to be

here today to discuss the U.S. Department of Energy’s actions to

assure accountability and transparency in Recovery Act funding including our efforts to promote science and technology.

Today’s severe economic conditions demand rapid action. Effective implementation of the American Recovery Act and ReinvestVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00036 Fmt 6633 Sfmt 6601 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
27

ment Act of 2009 is an urgent priority of the Administration, for

Secretary Chu and for the Department of Energy. Congress has

given the Department a great opportunity and a great responsibility to administer $32.7 billion in Recovery Act grant and contract authority, $6 billion in credit subsidy costs that will support

tens of billions in new loan guarantees and $6.5 billion in borrowing authority. Secretary Chu is personally committed to providing the direction, resources and oversight needed to assure the

timely but accountable distribution of this funding to support

short-term needs and protect taxpayers while investing for the long

term in a new economy powered by clean, reliable, affordable and

secure energy.

When Secretary Chu asked me to serve as his Senior Advisor for

Recovery Act Implementation, he emphasized that we must deliver

on four objectives: get projects underway quickly, invest in projects

with lasting value, exercise an unprecedented degree of transparency and oversight, and deliver a tangible down payment on the

Nation’s energy and environmental future. We began the public

part of this process last week with the Vice President’s announcement of the first $8.1 billion for weatherization and State energy

grant programs and we will soon have additional funding announcements. These Recovery Act funds will create jobs and lay the

groundwork for a less carbon intensive, less oil dependent and

cleaner energy economy. All of our efforts are geared toward meeting President Obama’s pledge to act boldly and urgently to put

Americans back to work by reinvesting in a new clean energy economy. At the time, we recognize that the Recovery Act programs

will, and should, receive heightened public scrutiny and so we are

putting in place the leadership and control procedures necessary to

track performance and account for expenditures.

The Department of Energy is committed to carrying out the economic recovery plan with the highest level of speed, discipline,

transparency and accountability. Under our Chief Financial Officer

Steve Isakowitz’s leadership, the Department has taken significant

steps to improve oversight and strengthen internal controls to ensure the funds are spent effectively. Every morning the Recovery

Act leadership principals from every program and every major

function get together to ensure clear alignment on priorities, to report progress and to resolve any outstanding issues that could impede success. We have developed strong oversight strategies for Recovery Act implementation including: building up-front risk assessments, building specific risk management plans, upgrading process

controls, establishing personal risk assurance accountabilities and

expanding outreach, training and coordination between headquarters and field offices.

As soon as the Recovery Act was passed, we conducted Department-wide risk assessments to identify existing or potential

vulnerabilities within our programs that could hinder our efforts to

deliver on the Recovery Act. From these identified risks, senior

management officials have begun developing risk mitigation plans

to increase internal controls and reduce opportunities for fraud,

waste and abuse of recovery funds. For example, some programs

have determined to use a phased approach to their distribution of

funds. This will allow them to better maintain accountability by

28

measuring performance against clear project milestones and disbursing new funds on the basis of successful performance. Several

programs have also significantly expanded fraud training for their

program managers and senior officials. In high-risk programs such

as the Office of Environmental Management, I have met personally

or via phone and video conference with all of the site managers,

major contractors, State regulators and major unions to make clear

the expectations up front for accountability, delivery, oversight and

transparency.

As part of our planning and monitoring efforts, the Chief Financial Officer’s Office of Program Analysis and Evaluation and the

Office of Internal Review have taken steps to address internal controls, guidance, document standards, external reporting requirements, outcome validation and early issue identification.

The Department has also taken several steps to ensure that all

procurement vehicles incorporate a selection process that is fair

and advances the President’s long-term policy agenda to ensure

that all solicitations, contracts and financial assistance awards

comply with OMB’s Recovery Act requirements. We have issued

standard language for all these procurement instruments.

Mr. Chairman and Members of the Subcommittee, at the Department of Energy we are committed to creating jobs by developing

new, innovative ways to provide clean, reliable and secure energy.

Congress has vested the Department with significant responsibility

under the Recovery Act. We have begun and will continue to institute a culture of transparency, accountability, integrity and efficiency as we capitalize on our advances in science and technology

to better manage the Nation’s energy resources and contribute to

a competitive, growing and environmentally sustainable U.S. economy.

Mr. Chairman, thank you for the opportunity to appear before

you today. This concludes my testimony and I am happy to answer

questions.

[The prepared statement of Mr. Rogers follows:]

PREPARED STATEMENT OF MATTHEW ROGERS

Chairman Miller, Ranking Member Broun, and Members of the Subcommittee,

thank you for the opportunity to be here today to discuss the U.S. Department of

Energy’s actions to ensure accountability and transparency in Recovery Act funding,

including our efforts to promote science and technology.

Today’s severe economic conditions demand rapid action. Effective implementation

of the American Recovery and Reinvestment Act of 2009 is an urgent priority for the

Administration, for Secretary Chu, and for the Department of Energy. Congress has

given the Department a great opportunity and a great responsibility to administer

$32.7 billion in Recovery Act grant and contract authority, $6 billion in credit subsidy costs that will support tens of billions in new loan guarantees and $6.5 billion

in borrowing authority. Secretary Chu has said repeatedly that getting this money

into the economy quickly, carefully, and transparently is a top priority for him. To

this end he has personally committed to providing the direction, resources, and oversight needed to assure the timely but accountable distribution of this funding to

support short-term needs and protect taxpayers while investing for the long-term in

a new economy powered by clean, reliable, affordable, and secure energy.

When Secretary Chu asked me to serve as his Senior Advisor for Recovery Act

Implementation, he emphasized that we must deliver on four clear objectives:

• Get projects under way quickly,

• Invest in projects with lasting value,

• Exercise an unprecedented degree of transparency and oversight, and

29

• Deliver a tangible down payment on the Nation’s energy and environmental

future.

We began the public part of this process last week with the Vice President’s an- nouncement of $8.1 billion for Weatherization and State Energy programs, and we

will soon have additional funding announcements. These Recovery Act funds will

create jobs and lay the groundwork for a less carbon-intensive, less oil-dependent,

and cleaner energy economy. All of our efforts are geared toward meeting President

Obama’s pledge to act boldly and urgently to put Americans back to work by reinvesting in a new clean energy economy. At the same time, we recognize that Recovery Act programs will, and should, receive heightened public scrutiny, and so we are

putting in place the leadership and control procedures necessary to track performance and account for expenditures.

Department of Energy and GAO’s High-Risk List

In this context, it is critical that the Department have in place the most rigorous

control and oversight processes to manage and account for the Recovery Act funds—

the more so given the Department’s past challenges and difficulties in providing

adequate management and oversight of its major projects. Since 1990, contract and

program management concerns have kept the Department of Energy on the Government Accountability Office’s (GAO) High-Risk List. In recent years, however, the

Department’s Office of Management has made substantial progress and has implemented numerous corrective actions. For example, the Department has developed an

action plan to address the major Department risk factors and significantly improve

not only the Department’s performance in contract and project management, but its

overall culture of spending. The plan includes steps to improve risk management,

strengthen cost estimation, increase oversight, optimize staff, improve acquisition

planning and strategies, and better incorporate project management requirements.

The plan also reflects the Department’s commitment to improved performance and

increased accountability through well-defined metrics and reporting.

As a result of these and other efforts, GAO, in its January 2009 High-Risk Update, noted that the Department has met three of the five criteria necessary for removal from its High-Risk List. Specifically, the Department has demonstrated

strong leadership, developed a corrective action plan, and made progress in implementing effective solutions. Still remaining to be addressed, however, are issues relating to human capital and contract management, and these have caused the Department to remain on GAO’s High-Risk List. To address the human resource challenges, the Department is implementing actions based on other federal agencies’

best practices. We have also taken steps to establish a more structured, disciplined

approach to contract and project management, with an emphasis on improved oversight.

In its update, GAO recognized that the Department’s Office of Science has demonstrated continuous, strong performance in meeting original cost and schedule targets. As a result, GAO refined the Department’s high-risk area primarily to the National Nuclear Security Administration and the Office of Environmental Management. And, accordingly, the Department will be following the project management

requirements of DOE Order 413.3A and paying special attention to the performance

and oversight of those Environmental Management projects receiving significant

funding from the Recovery Act.

Recovery Act Transparency and Accountability

The Department of Energy is committed to carrying out the economic Recovery

plan with the highest level of speed, discipline, transparency, and accountability.

Under our CFO Steve Isakowitz’ leadership, the Department has taken significant

steps to improve oversight and strengthen internal controls to ensure that funds are

spent effectively. Every morning, the Recovery Act leadership principals from every

program and every major function, including representatives from the Offices of the

Chief Financial Officer, General Counsel, Procurement and Human Capital, get together to ensure clear alignment on priorities, to report progress, and to resolve any

outstanding issues that could impede success. We have developed strong oversight

strategies for Recovery Act implementation, including up-front risk assessments and

building specific risk management plans, upgrading process controls, establishing

personal risk assurance accountabilities, and expanding outreach, training, and coordination between Headquarters and field offices.

As soon as the Recovery Act was passed, we conducted Department-wide risk assessments to identify existing or potential vulnerabilities within our programs that

may hinder our efforts to deliver on the Recovery Act. From these identified risks,

senior management officials have begun developing risk mitigation plans to increase

30

internal controls and reduce opportunities for fraud, waste, and abuse of Recovery

funds. For example, some programs have determined to use a phased approach in

their distribution of funds. This will allow them to maintain better accountability

by measuring performance against clear project milestones and disbursing new

funds on the basis of successful performance. Several programs have also significantly expanded fraud training for their program managers and senior officials. In

high-risk programs such as the Office of Environmental Management, I have met

personally or via phone and video conference with all of the site managers, major

contractors, State regulators, and major unions to make clear the expectations up

front for accountability, delivery, oversight, and transparency.

As part of our planning and monitoring efforts, the Chief Financial Officer’s Office

of Program Analysis and Evaluation and the Office of Internal Review have taken

steps to address internal controls guidance, documentation standards, external reporting requirements, outcome validation, and early issues identification. On an ongoing basis, we participate on government-wide teams led by OMB to develop implementation guidance and requirements. Based on the initial OMB guidance and subsequent meetings, we have already issued Recovery Act implementation guidance to

aid programs in developing specific performance plans that detail the status of

projects, performance metrics, major project milestones, and risk management. In

addition, the CFO’s office led a two day ‘‘all-hands’’ field CFO education session for

financial control officers to make sure everyone understands his or her responsibilities with respect to oversight and accountability under the Recovery Act.

Within the CFO’s office, we are also aligning our financial systems to accept Recovery Act data, perform analysis, and track the execution of Recovery Act plans so

that senior management can monitor progress. Separate Treasury account symbols

have been established to comply with requirements for tracking and reporting Recovery Act funding separately from existing Department funding. Project codes are

being established in our accounting system as Recovery projects are approved by the

Secretary. These efforts will all allow the Department to better monitor and assess

the progress of Recovery Act projects and will also facilitate the Department’s reporting to Recovery.gov, which in turn will assure the accountability and transparency for the American people which the President has promised.

The Department has taken several steps to ensure that all procurement vehicles

incorporate a selection process that is fair and advances the President’s long-term

policy agenda. To ensure that all solicitations, contracts, and financial assistance

awards comply with OMB’s Recovery Act requirements, we have issued standard

language for all these procurement instruments. We are also directing our contracting professionals to pay special attention to the content quality of specific

areas, including clear scope definition, adequate documentation to support decisions,

compliance with transparency requirements, and small business considerations.

In our efforts to ensure accountability, we have required each Headquarters program element, field office managers, and Field Chief Financial Officers to sign an

‘‘Acknowledgement of Management Accountability of Internal Controls.’’ This document will serve as a commitment from management to maintain a strong internal

control environment. The signed acknowledgements are required prior to any distribution of Recovery funds. The Department will require an additional assurance

letter at the end of the fiscal year to support financial statement reporting. These

policies and procedures will help ensure that we achieve the outcomes envisioned

by the President and the accountability expected by our fellow Americans.

Loan Guarantee Program

Title XVII of the Energy Policy Act of 2005 and the 2007 Energy and Water Appropriations Act authorized the Department of Energy to provide loan guarantees for

advanced technology projects that avoid, reduce, or sequester anthropogenic greenhouse gas emissions or air pollutants. The GAO and Office of Inspector General

have both identified issues with management, accountability and transparency in

this program. I am pleased to report to you this morning that the Loan Guarantee

Program has made substantial progress over this past year, and Secretary Chu has

directed us to accelerate the process significantly and deliver the first loans in a

matter of months, while maintaining appropriate oversight and due diligence to protect taxpayers’ interests. We are taking steps to reduce the cycle time from application to loan guarantee so that good projects are funded, with all due speed and due

diligence. We have also taken steps to improve the Program’s transparency and to

attract quality projects that will result in environmental benefits, create jobs, and

contribute to long-term economic growth and competitiveness. The Loan Guarantee

Program is expanding its efforts to recruit and hire highly qualified personnel to

complete the necessary project evaluation, environmental compliance, due diligence,

credit underwriting, monitoring, and oversight activities. The Department is comVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00040 Fmt 6633 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
31

mitted to managing the Loan Guarantee Program carefully to maintain the integrity

and objectives of the program and to ensure that the taxpayers’ interests are protected.

Conclusion

Mr. Chairman and Members of the Subcommittee, at the Department of Energy

we are committed to creating jobs by developing new, innovative ways to provide

clean, reliable, and secure energy. Congress has vested the Department with significant responsibility under the Recovery Act. We have begun and will continue to institute a culture of transparency, accountability, integrity, and efficiency as we capitalize on our advances in science and technology to better manage the Nation’s energy resources and contribute to a competitive, growing, and environmentally sustainable U.S. economy.

Mr. Chairman, thank you for the opportunity to appear before you today. This

concludes my testimony and I am happy to answer questions. Thank you.

BIOGRAPHY FOR MATTHEW ROGERS

Matt Rogers is the Senior Advisor to the Secretary of Energy for the Recovery Act.

Previously, he was a Senior Partner in McKinsey & Company’s San Francisco Office. Over time with McKinsey he led their, America’s Petroleum Practice and their

North American Electric Power and Natural Gas practice, and helped establish their

Clean Technology practice. Matt spent more than 20 years consulting with leading

oil companies and utilities globally.

Matt played a leading role in developing McKinsey’s perspectives on global energy

supply/demand and greenhouse gas abatement economics. He served the Obama

Presidential Transition Team in a special effort to develop opportunities to reduce

the cost and increase renewables content in federal energy procurement.

Matt graduated magna cum laude from Princeton University. After graduation he

joined Credit Suisse First Boston as an energy investment banking analyst. He

earned an M.B.A. from Yale University’s School of Management.

Matt is married to the Honorable Yvonne Gonzalez Rogers, who serves as a California Superior Court Judge on the Alameda County bench. They have three children—ages 13, 10, and 7.

DISCUSSION

Chairman MILLER. Thank you, Mr. Rogers.

We will now begin our first round of questions, and the Chairman recognizes himself for five minutes.

The idea of a stimulus package, of stimulus spending, is that it

does not just help the immediate recipients but it ripples through

the economy; that whoever directly receives federal funds buys

meat, the butcher buys bread, the baker buys candlesticks, the candlestick-maker buys something else, and we obviously need that

since we have been losing 600,000 jobs a month and we need it as

quickly as we can to spend money quickly and spend money well,

carefully. How quickly do you think you can get the money out the

door so the recipients can start buying meat and bread and candlesticks? Dr. Marrett, an approximate date when the money will

start going out?

Dr. MARRETT. I indicated in my testimony that we are talking

about a matter of weeks. That should be two or three weeks at the

most that we will begin to move the money out of the door.

Chairman MILLER. Mr. Spoehel.

Mr. SPOEHEL. The timing in NASA’s case will depend on the

length of the procurement cycles. The award of contracts that we

have for the initial hurricane repair, for example, will likely take

a month so I would say it is probably at least two months before

the actual work under any of those contracts would be undertaken

32

and that is again assuming that all the approvals and requisite reviews by OMB and Congress have been achieved.

Chairman MILLER. Ms. Herbst.

Ms. HERBST. The answer is dependent on the different bureaus

but, for instance, in NTIA we have DTV coupon money flowing

again already. Approximately two-thirds of our monies we believe

will go out as competitive grants and contracts so we are in that

process now of announcing grants and so forth.

Chairman MILLER. Mr. Rogers.

Mr. ROGERS. In the Department of Energy, the first funds should

be going out in the next couple of weeks. The weatherization activities, we need to get a short form application from the states binding them under the Recovery Act terms and then we are turning

around and obligating the first 10 percent of the funds immediately

to the states in response to that. Likewise, as soon as the obligations for the next departments come through, we will be getting

those monies out the door quickly as well.

Chairman MILLER. Ms. Herbst, I understand that NIST had construction competition last year. You got 100 applications. You only

had the funding for three. But I assume the others are still on the

shelf. Were some of those also strong projects that would be logical,

worthy recipients of funding?

Ms. HERBST. The NIST spend plan is just about approved and we

recognize the flexibility given to award from both 2008 competition

and 2009, so we are preserving that flexibility in our planning to

move forward in that fashion.

Chairman MILLER. So you will be able to fund some of those

projects without re-bidding them because you already evaluated, all

the work has been done?

Ms. HERBST. Well, we have been given the—the Act stipulated

that we could do it that way and we are certainly looking at that

in our planning.

Chairman MILLER. What would be the difference in timing if you

took the plans already evaluated on the shelf versus re-bidding,

going back through all the rigmarole—I am sorry—all the oversight.

Ms. HERBST. If I could, can I get back to you with that so I can

give you a very specific answer on that?

Chairman MILLER. Okay.

Ms. HERBST. Thank you.

Dr. Marrett, I hear from the universities, the research universities in my district that the researchers love working with

FastLane; they hate working with grants.gov. This all comes at an

awkward time. Is there anything you can do to have this subject

to FastLane so it can remain up and running and let the bugs in

grants.gov be worked out later?

Dr. MARRETT. Well, we certainly will be processing our own. We

will continue to use FastLane. We do work with a number of other

agencies with reference to FastLane and have been in discussion

recently. There will be some limits, of course, to how much we will

be able to absorb from everywhere across the Federal Government,

but we are in conversation about how to have our own processes

and what would be available, how to make that as widely available

as possible.

33

Chairman MILLER. Dr. Marrett, I also hear from researchers in

my district that although the grants usually ask who will be doing

this work, how many graduate assistants will you be using or

whatever else, it is not typically—their work is not typically judged

by how many jobs it creates, and they are a little puzzled by how

all that is going to work and how they are supposed to report back

on job creation from grants. What kind of guidance will they get

from OMB—or are you getting from OMB—to tell the research

agencies what to tell universities on job creation data, how to keep

it, what to look for?

Dr. MARRETT. The guidance is emerging from OMB and we are

in conversation with all of the agencies, but in addition, our grantees have always reported what they are doing, how many people

they are anticipating and in their subsequent reports how many

people they have in fact employed. So some of this will not be new

for gathering the information. What I said about the numbers of

students, post-docs, undergraduate and graduate students,

postdoctoral students, for the programs that we have in the education world, I talk about teachers, we have for some time been

monitoring these numbers that we are talking about. We will have

additional procedures where this will have to be reported as a part

of the activities for any grant that is given.

Chairman MILLER. I guess this is for all the panelists. Is there

going to be a consistent policy across all agencies on how that data

is going to be collected? What will be required? Just flip a coin.

Ms. HERBST. All the agencies who receive funding are working

with and through OMB, who is coordinating the guidance on jobs

creation, counting methodology, tracking methodology and reporting methodology.

Mr. ROGERS. And we are working trying to—the Office of Science

within the Department of Energy is trying to work quite closely

with the National Science Foundation to make sure that the processes are similar across the various agencies because what you

don’t want to have is to have different researchers think one money

group is different from another money group, either because the reporting is different or the application is different, so we are trying

to get consistency between and among the agencies on that basis.

Chairman MILLER. My time has expired, not gloriously but some.

Dr. Broun. I recognize Dr. Broun for five minutes of questioning.

Mr. BROUN. Thank you, Mr. Chairman.

The first question would be to Mr. Rogers. Mr. Rogers, the Secretary was here—appeared before this whole committee—and during the questioning, I asked the Secretary if he realized that there

was not a consensus, not a consensus, I repeat, not a consensus on

human-induced global warming, and he disagreed with me on that.

He talked about that if a scientist came forward and refuted the

consensus, that that individual would be counted a hero. Well,

there are thousands of such scientists around this country, around

this world that refute that there is any human-induced, if any at

the most a very minuscule effect on human-induced global warming. I am very concerned about the granting process and accountability that you guys are going to be doing when the Secretary displays such blatant scientific blindness. There are many scientists

all over this country, all over the world, that will very readily say

34

that human-induced global warming is not factual and so if you

guys go forward in the granting process taking the attitude that

this is absolutely the consensus, this is absolutely the fact and

don’t do any grants, don’t do anything to look at the other side,

first thing, it is not scientifically—there is no scientific integrity

there, and I see a tremendous lack of that in the attitude of the

Secretary.

As you go forward with this granting process, I hope and pray

that you will take into consideration that there are other views

than the Secretary’s and will look at granting some of this money

to other people. Would you please reassure me, because I have no

assurance today that that is going to happen? I see what is happening with this Administration and with your Secretary and I

hope it stops there, but within your agency there is tremendous scientific blindness about other ideas. Can you please tell me how you

are going to assure me, as a Member of Congress, and the American people who are watching you this moment how we are going

to make sure that science prevails and not political policy that is

being driven by other things than scientific methods? Before you

answer that question, I want to tell you, I am a physician. I believe

in scientific theory. I believe totally in scientific integrity and I do

not see that with your Secretary.

Mr. ROGERS. One of the things that is helpful about the Recovery

Act is, it actually specifies the blocks of that spending quite clearly,

and my task is very straightforward in that regard. We need to

move those funds out against those projects with a high degree of

transparency and accountability. What is good about it is, if you

take a look at the funds we have, for example, for grant programs,

of the $32.7 billion that we have for grants and contracts, approximately $13 billion of that is dedicated towards energy efficiency. I

would argue and we would argue that those are among the highest

return investment opportunities that the American public has and

that these—we are working closely with the Council of Economic

Advisors to show what the return on the American taxpayer’s investment is in energy efficiency programs. These are programs that

should put dollars back in the pockets of hardworking Americans

and demonstrate a good investment in energy efficiency is a highreturn one for the overall U.S. economy. So in those kind of topics,

I don’t think the issue is about global warming or not, it is just a

good investment for the American people to make.

In terms of the scientific question, what I think we are driving

towards, and as we get the grant programs defined for the Office

of Fossil Energy or the Office of Electricity, is what we are trying

to do is create a series of experiments at scale against a broad

range of technologies that address the particular topics that were

brought up in the Recovery Act, and by examining a diverse range

of technologies, what we then do is give the market the opportunity

to decide what mix of capital costs, operating costs and efficiency

is the most appropriate one to be adopted by industry, and so I

think it creates quite a good dynamic where you do the good

science across a broad range and then effectively leave it up to the

market to adopt—to decide on adoption rates and adoption standards. So those are the approaches that we are taking. We should

35

approach this with each of the different programs as they come out

and explore whether in fact we are meeting that test.

Mr. BROUN. Well, thank you, sir. My time is expired and I thank

the Chairman, but you still don’t reassure me, sir.

Chairman MILLER. Thank you, Dr. Broun.

Ms. Dahlkemper for five minutes.

Ms. DAHLKEMPER. Thank you, Mr. Chairman.

Thank you all for being here. I appreciate the opportunity to ask

you a few questions. I am a new Member from Pennsylvania, and

it is great to be on this type of a committee because people in my

district expect when I vote for something as important as this Recovery Act that we know where the money goes and we have transparency. Obviously there is a lot of anger about money that has

been given out, so this is very, very important to me and to my constituents. I want to ask on a scale of one to ten, how prepared do

you believe you are currently to really be the stewards of this

money, and my goal is that you are at a ten eventually if you are

not there and how do you plan to get there if you are not?

Dr. MARRETT. I am glad you let us know what the scale was on.

I was getting ready to put us down near one thinking that was at

the top. But if 10 is where we are aiming for, it would depend on

which parts. We certainly, as indicated, have the commitment, we

have plans. There are still some matters that we are working on

to ensure that everything is going to be in place and so I would not

want to say that we have reached 10 as of today. I will guarantee

we will be at 10 before that time period I had given you of when

the grants, when the funds will go out of the door. So that is what

we are aiming towards, and I think we are quite well on the way

to being exactly at the point you are talking about.

Ms. DAHLKEMPER. Thank you.

Mr. Spoehel.

Mr. SPOEHEL. I think the processes and structures that NASA

has in place would allow the Agency to meet the requirements as

they are known under the Recovery Act. There are guidances, as

was mentioned before, that are evolving so it is hard to know until

that solidifies exactly what readiness state we are in, but I believe

we are ready.

Ms. DAHLKEMPER. Ms. Herbst.

Ms. HERBST. For the Department of Commerce, I would echo that

we are following the guidance closely. We have plans in place. We

have created a risk inventory and are looking at risk mitigation

plans. The area that we are working on right now is staffing up

particularly in the contracts and grants professional area. We have

identified the resources we need and we are working expeditiously

to obtain those resources.

Mr. ROGERS. I think as Dr. Marrett was arguing, different programs are different places in this process. Our commitment to you

is that we are going to have the program to a high level of preparedness before the funds go out. What we did were two things.

First is, we established this risk assessment for each of the programs and then are having each of the programs develop risk mitigation plans against the major risk areas that they have. Until

those risk plans are in place and until we have walked through a

series of quite disciplined milestones, none of the money can be obVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00045 Fmt 6633 Sfmt 6601 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
36

ligated, or no checks can go out, and so that is the combination between my office and the CFO’s office to make sure that each of

them has to certify readiness before the first check clears, and

again, each of the programs are at different places but all will be

ready before the money moves.

Ms. DAHLKEMPER. I have another question that I would like to

kind of address to the entire panel. Different areas of this country

are having greater economic issues than other areas. Where I am

from, the northwest part of Pennsylvania, we had a depressed

economy before the rest of the Nation was really suffering as they

are right now. When you are looking at the monies and granting

this money out, are you taking into consideration at all what areas

of the country have the greatest needs for jobs, for job creation, for

economic development?

Dr. MARRETT. As I indicated, we have proposals in place and proposals will be coming in, and we certainly—for National Science

Foundation, we have to rely on what comes to us. But one of the

things that we did quite recently was to map across the country

where the current proposals that could be considered under the Recovery Act, where those are located, to try to make sure that when

we talk about trying to have ‘‘broader impacts,’’ we mean ‘‘broader

impacts’’ making sure that we are addressing the needs as those

might vary across the country. So we are paying close attention to

the quality of the work that is coming to us and the fact that that

work is, in fact, represented across all parts of the Nation.

Ms. DAHLKEMPER. Would anyone else like to address that?

Mr. ROGERS. Within the Department of Energy, every dollar

under the Recovery Act is associated with a job amount, a state

and an impact, and then a set of milestones that that project has

to achieve in order to reach those jobs and that impact, and so

what is nice now is that we are going to be able to report out by

state, which you can see with the existing formula grants, and then

by Congressional district to be able to show the American people

where those funds are going so that you can see that those dollars

are in fact going to work in your neighborhoods. The good thing

again about the Department of Energy’s formula grant activities is

both for the State levels and then as we come out with the energy

efficiency activities for the local levels, we are going to be addressing every state in the country and we are going to be addressing

1,700 municipalities with direct funds and then as with Dr.

Marrett, there is a whole set of them that are coming in then from

the marketplace but the ability to go back and track jobs by Congressional district is a really important one so that you can see

where those monies are being spent.

Ms. DAHLKEMPER. Ms. Herbst, did you want to comment at all?

Ms. HERBST. I would echo Mr. Rogers in terms of in addition to

the criteria around specific program outcomes that are grant making, the process already has, the jobs creation criteria is being

added and we will track where those jobs are. Additionally, in

Commerce we have the Economic Development Administration and

specifically have been directed to look at regions that have experienced economic dislocation and job loss as part of the grant-making

criteria.

Ms. DAHLKEMPER. Okay. Thank you.

37

Chairman MILLER. Thank you, Ms. Dahlkemper. For information

for Members of the Committee, when I exceed the time, I will generally use that as a rule of thumb of how indulgent I will be for

other Members, so both Dr. Broun and Ms. Dahlkemper exceeded

their time but not by as much as I exceeded my time.

Mr. Bilbray for roughly five minutes.

Mr. BILBRAY. Thank you, Mr. Chairman.

In the spirit of full disclosure, Mr. Chairman, I serve as the

Ranking Member for the Government Oversight Committee on Procurement and Government Oversight so this is sort of a two-fer for

me. But I want to clarify that I think that what has happened this

week with AIG is exactly why somebody like myself, who has been

in government oversight since 1976—it is kind of scary to think I

got elected to city council before Jimmy Carter was elected. That

is how long I have been in the game. In fact, that was the days

when I had a mustache and long hair. But the one thing I saw

when the bail-out under Bush was being proposed was, it was wide

open for this kind of abuse. Now, the discussion of this bill was the

fact that we had a bill dropped at 10 minutes ’til midnight and we

were asked to start an intelligent debate at 9:00 the next morning,

and I just think that we have to recognize the huge potential for

abuse because of the lack of oversight in the creation, and that

means now the huge responsibility we have to really look at oversight in the implementation. So we have got to make up for that,

and you think that people are upset right now about AIG, they are

darn well going to be upset about this if we don’t try to correct it,

and the one thing I have tried to do working with my Democratic

colleagues on oversight is to use the opportunity, that this is a new

Administration with a whole new structure and help this new Administration avoid the pitfalls of the previous Administration. So

rather than play gotcha the way that oversight usually does, we

need to be proactive and point out the mistakes of the Bush and

the Clinton Administrations so that the Obama Administration

doesn’t fall into the same problem. So just so you know where I am

coming from and where we are working over on that committee

and there is a lot of information that I receive there that I will

apply here.

Mr. Rogers, we talk about—we can argue the merits of what my

scientists at Scripps say and where we are going and different scientists are saying whatever, but there are some scientific facts that

we have ignored in the past. A good example is your choice of the

term ‘‘green’’ or ‘‘renewable,’’ and let me tell you, let me tell you,

when you have Duke University that just came out with a report

that said it would be better never to plant the crop than to grow

corn for ethanol, better for the soil, better for the environment,

across the board. I certainly hope that when we are reviewing applications that we remember that. When you have the Air Resources Board of California, which I had the privilege of serving on

for six years, the premiere clean air people—you would admit that

they are cutting-edge when it comes to admissions issues. When

the ARB, the Air Resources board of California, which there is a

slew of states that do nothing but follow their guidelines, actually

adopt their guidelines, and let us face it, most people don’t like following California anywhere except to Hollywood, when they say

38

that ethanol is no better for the environment than regular gasoline,

in other words, the word is getting out from the scientists that the

only thing green about burning ethanol is how much money the industry is making off of the consumer. Are you going to be able to

reflect as you look at this that when you talk about a gallon, you

don’t talk about a gallon for gallon like what we get with ethanol

where you lose 30 percent, but mile for mile, BTU to BTU, the outcome and the efficiency, not what people are telling you about what

is clean and what gives you the mileage, are you able to be able

to reflect that?

Mr. ROGERS. In the program evaluation, for example, of some of

the auto loan programs, there is a simple one we have. The Argonne National Lab has done a very nice set of technical analysis

that reflects a multitude of real-world functions in terms of the operations in that evaluation. So how do people really drive cars as

a simple model as well as, you know, issues like the ones that you

raised, and I think that is where the—what the Department can

bring to this debate again is good scientific evaluation that incorporates all the different factors in a consistent fashion as we go

through program evaluation.

Mr. BILBRAY. Okay, because E85, to give credit to E85 and not

give a credit to natural gas compressed gas, even to have E85 in

the same category is really ignoring good science, and I know politics the way it is and I know where the President is from and all

his buddies, but the fact is, this is one of those things I am going

to be pounding on because just as much as we need to stand up

for good science about climate change is where the answer is.

Now, we are going to be using non-profits a lot on this and one

of the things we have run into, and Ms. Herbst, we brought into

this issue, everybody is talking about the previous Administration’s

contracts with for-profit organizations in Iraq. The new big scandal

is going to be what the Bush Administration did with so-called nonprofits and the lack of accountability for those contracts in Afghanistan.

Mr. Rogers, are we going to maintain a level of oversight on nonprofits? Because when we do energy retrofits, you know that is

very, very cost-effective, but traditionally non-profits have jumped

into that but the oversight and the accountability of non-profits

have never, ever been up to the standards that we have held with

for-profits. Are we ready to change that and hold them to the same

standard just because they are so-called community based? Are

they going to be required to hold the same standards that we do

for profits?

Mr. ROGERS. So one of the most important improvements in oversight that we are implementing as part of the Recovery Act is a

change in the way that we look at the weatherization program.

Historically, the money flows through the states and we would look

at the State level to figure out how the state is actually costing or

spending those funds and we would do that every other year with

the states. Under the current model, what we are doing is moving

to a much more direct oversight model where first the States have

to issue plans and milestones. They only get funding with respect

to meeting their milestone objectives. Secondly, we are going to be

auditing not just the funds flow but actually the outcomes from the

39

way the states are spending the funds. So the states now have to

report within five business days of the close of every month who

receives the checks from the states, which non-profits receive that,

and instead of us going in and just saying can you show us that

a nonprofit did how many houses, we actually now have the ability

to go in and look at which houses actually got done and go to the

house and figure out was it done, to what standard, did they do

it—how much money did they spend, what kind of returns did they

get for that investment, which is something that we haven’t had either the resources or the authority to do in the past.

Mr. BILBRAY. Ms. Herbst, following up on this just to get down

to it is one of the critical components of distributing these funds

was the census of what is the population base, and we are talking

about—let me just follow up with this one, please. This is a very

important issue in California, and that is, the scientific accurate

data that we need for our census is going to be under your department. We have talk of the use of ACORN, one of those non-profits

that are under investigation. In California, the criminal investigation is as long as my arm, and to talk about a non-profit that is

under investigation, that is under that kind of cloud really lends

itself to the kind of outrage that we said that private sector, you

know, being investigated the same way. Are we going to be contracting with non-profits that have that cloud, and if we are,

doesn’t that send a whole message that the entire census if we use

those groups may be suspect down the road when it is a critical

time to be able to try to use that data?

Chairman MILLER. I am sorry. Ms. Herbst, Mr. Bilbray has now

exceeded his time by substantially more than I exceeded my time,

so if you could make your answer just a sentence or two and you

can respond further in writing if you like.

Ms. HERBST. Thank you, because I would like to respond in detail as a follow-up. We are committed to the importance and the

accuracy of the census. The Census Partnership Program Plan,

which is part of the Communication Plan, is under review regularly

and the spending on that is under review and we intend to continue that. We also intend to have the same oversight regardless

of whether it is a profit or nonprofit. All of our processes around

acquisitions and grants do not distinguish between those two.

Thank you.

Chairman MILLER. Thank you. I will now recognize myself for a

second round of questioning. I understand with votes coming, it

probably will not be the case that Members other than Mr. Broun

and I will be able to have a second round.

Dr. Marrett, your agency is getting a $3 billion increase over two

years. You are now a $6 billion agency, so that is a pretty stiff increase. We have—our staff has heard that many of your employees,

most of your employees are working hard already and most are in

fact working well beyond an eight-hour day. How is your staff

going to manage that really very significant increase in work to

make sure that the money is managed properly?

Dr. MARRETT. Our staff acknowledges, we have to acknowledge

that there are pressures on the Foundation given that the staffing

levels have not been increasing. Against that backdrop though,

there is a great deal of enthusiasm on the part of all the staff. The

40

level of commitment is amazing. In addition, the workload is not

going to be even across the Foundation and so some will have more

than others and thus we are looking at how to even out a lot more

the workload issues. So we are working on that. The other matter

has to do with something that I think is affecting all of us. The Office of Personnel Management is also looking at strategies that

might be put into place that will help with the staffing issues that

we are all confronting at this time, so we are paying a lot of attention to what kinds of flexibilities we have internally, what kinds of

strategies might be possible through the experiences elsewhere and

certainly working to make sure that we do not place great stresses

on what is still a very enthusiastic staff.

Chairman MILLER. Thank you, Dr. Marrett.

Mr. Spoehel, my concerns about NASA are different. You make

the point correctly that the increase for NASA is not really that

much more than your current budget and that you can simply supervise this funding in the way that you supervise your existing

funding. I think it is a $1 billion increase in a $17 billion budget.

The problem is your existing management. NASA has consistently

remained on GAO’s list of the agency that is at highest risk for

mismanagement in contract administration, at risk for waste, fraud

and abuse. This committee is now looking at various acquisition

contracts by NASA, generally how NASA administers contracts and

decides what to contract. We are not entirely reassured by the assertion that you will just manage this the way you are managing

everything else. What changes does NASA—you are kind of a juncture where you can make changes. You will shortly have a new director. We devoutly hope you will have a new IG. What changes do

you contemplate making in NASA’s management of contracts now?

Mr. SPOEHEL. Over a year ago, in response to the continued portrayal of NASA on the high-risk list, NASA undertook a comprehensive corrective action plan, and based on the progress under

that, as may have been noted, GAO improved—recognized the improvement that NASA had made under the high-risk series. NASA

continues to undertake additional actions under that and I would

be glad to provide the Committee with a copy of that if that is

something you would like to go into in more detail [see Appendix

2: Additional Material for the Record.]

Chairman MILLER. Okay. Ms. Herbst, the NPOESS satellite has

been one of this committee’s, the Subcommittee’s and the broader

Committee’s concerns for the last several years and we have heard

again and again, the project has been mismanaged and the mismanagement has cost taxpayers considerably, and that we are at

some risk by not having the system in place to collect climate

change data and weather prediction data to improve our weather

prediction capability. Have you developed a plan to use some of the

Recovery Act funds to address the many problems with the

NPOESS system?

Ms. HERBST. NOAA is very focused on program execution, particularly in this program, and is planning on using Recovery Act

funds towards that program to reduce technical and schedule risk,

and again, their spend plans are working their way through the approval process in the Department. We expect to have them out

41

shortly. And that will include the plan around the NPOESS satellite.

Chairman MILLER. My time has expired by just a little bit.

Dr. Broun.

Mr. BROUN. Thank you, Mr. Chairman. I am always going to give

you leeway because I may need it at sometimes myself.

Chairman MILLER. And I have the gavel.

Mr. BROUN. And you have the gavel. Correct. I am sure you will

remind me of that over and over again.

I want to start with Ms. Herbst but I would like all of you to answer this question. I want to associate myself with the concerns

and remarks that my colleague, Mr. Bilbray, said. Ms. Herbst,

would you please reassure me, this committee and the American

people that you all will not be granting any of these funds to profits or non-profits, either one, to any group that is under criminal

investigation for whatever reason and that you will take diligent

efforts to make sure that that happens? I think it is atrocious, totally unacceptable the way that the original TARP funds were handled by the Bush Administration, and I think it is extremely important for this Administration to make sure that those funds are expended in a better way, and one way to do that is to assure us as

a committee and assure the American people that groups such as

ACORN, which is under investigation in numerous states, it is not

just one little enclave of these folks, it is a systemic problem with

ACORN, but would you please reassure us that you will take very

diligent efforts to ensure that the taxpayers’ dollars are not going

to be given to groups that are under criminal investigation, particularly those that are under investigation for fraud, and then I

would like all the rest of you to answer that if we still have time

within my five minutes.

Ms. HERBST. The Department of Commerce has identified the

contracts and grants area in total across all of our bureaus as a key

area of risk to mitigate and manage and we have spent additional

time with our senior people developing risk management and oversight plans, providing additional guidance. We also plan from a

personnel standpoint to put our senior experienced contracts and

grants people on Recovery Act contracts and grants. Because of the

additional oversight, the additional reporting and accountability requirements, we feel we need to put our most experienced people on

those. We intend to then bring in other resources to handle

through our normal processes and oversight the existing underlying grants and contracts activity. We have also taken a specific

look at our investment review board procedures and processes,

which are used at the department level to review high-level, highrisk, high-dollar types of contracts, grants and programs, and we

are putting special emphasis on Recovery Act grants and contracts

for the review board. We will be very diligent in reviewing those

grants and contract awards and will use all of the oversight and

management processes that we have to ensure that.

Mr. BROUN. I am about to run out of time. I would like for the

other three of you to please answer that in writing. We are going

to present, I think, questions in writing, so if you all would please

answer that question.

42

But back to Ms. Herbst before my time runs out, would you assure me that you are not going to give grants to ACORN to do census?

Ms. HERBST. I would like to be able to get back to you. I would

like to go back to the Department and give you an answer in very

great detail on that if I may.

Mr. BROUN. Well, if you don’t have that answer, certainly I will

be glad to give you that latitude, but I highly encourage, just for

the sake of integrity of the census which is extremely important to

every single American, and most of them don’t realize how important that is, but this organization is under criminal investigation,

criminal investigation, in numerous states across this country. And

I highly recommend that the agency absolutely not even begin to

consider granting ACORN any money whatsoever to be involved in

the census, and I encourage all of your agencies to take diligent efforts to make sure that no contracts are given to anybody, profit

or non-profit, that is under criminal investigation because it is

going to lay a cloud on this Administration, on this Congress, on

everything that is done, so I encourage you all to do so. There is

a database that you all can search. It is not updated enough. That

is a whole other issue. But I encourage you to do that. With that,

I will yield back.

Chairman MILLER. Thank you, Ms. Herbst. I actually hold the

435th seat in Congress, so I thought the Census Bureau did an outstanding job last time. The Members from Utah, not so much.

It turns out we do have time for another round of questioning,

Ms. Dahlkemper, if you have another round of questioning. If not,

it probably makes sense for us to stand at ease and go to vote and

have the next panel. Do you have a second round?

Ms. DAHLKEMPER. I just have one question that should be fairly

easy, hopefully, to answer. But it is about other agencies where desired or needed. Have you been getting the necessary support and

if not, you know, can we do anything to help you with that because

I find that agencies often don’t cooperate as we really would hope

that they would here in the Federal Government.

Dr. MARRETT. Well, speaking on behalf of NSF, there has been

quite a bit of interaction across the agencies. You have heard some

of that among us today, but there are other agencies that we are

working with, especially both to learn about what are potential effective practices to ensure that there are commonalities. I can’t

think of, then, any particular problems that I would say we have

encountered in working with the other agencies.

Mr. ROGERS. Indeed, from an Energy Department standpoint, the

level of collaboration among departments has been at a very, very

high level. We have joint ventures now with HUD and with HHS

on community grant activities, with Interior and Agriculture on a

whole set of siting issues, with Labor and Education on job training

issues so that we are actually getting the most for the taxpayers’

funds, that we are either not leaving big gaps or showing up in duplicative ways. And the level of commitment to collaboration in a

positive way from the American taxpayer has been extraordinary

since the passage of the Recovery Act.

Ms. DAHLKEMPER. That is great to hear. Thank you very much.

43

Chairman MILLER. Thank you. Mr. Bilbray, it looks like you will

have time for a couple minutes as well.

Mr. BILBRAY. Thank you, Mr. Chairman. Mr. Rogers, we had a

great ability to talk directly to the Energy Secretary. The Energy

Secretary made it very clear that he understands that the answer

for clean fuel is a petroleum-like product with the BTU’s, clean environment, and that alcohol ethanol is not the answer. Is your department ready to draw the line and make sure you are not using

taxpayers’ funds to subsidize technology that produces a fuel that

is not recognized by the best experts as a clean fuel, i.e., ethanol?

Mr. ROGERS. The funding within the Recovery Act focused on renewables is still going through the consideration process, and we

are still working with the Office of Management and Budget to be

able to talk exactly about how that breaks down. We should have

a very clear set of guidance out on that in the next several weeks

where we can address that issue specifically.

Mr. BILBRAY. Mr. Rogers, were you around in the ’90s when the

Federal Government mandated the inclusion of MTBE, a.k.a. methanol in our gasoline stream in non-attainment areas?

Mr. ROGERS. I have been around the Federal Government for 30

days, so I was not here in the 1990’s.

Mr. BILBRAY. Well, let me just remind you. The fact is, the Federal Government has gone down roads before thinking it is an environmental option, not taking the time to talk to the scientists and

creating not only a huge waste of taxpayers’ money but huge environmental damage. Santa Monica now still has polluted wells from

a federally mandated additive that was supposedly—and I just

want to say again. I don’t care if it is even cellulosic. The Secretary

made it quite clear in his hearing that he is looking for an option

that produces a fuel that is not 30 percent less efficient than traditional fossil fuels and does not create more pollution per mile. And

watch the way they work their numbers. They will say per gallon,

and they will say tailpipe emissions. They won’t talk total emissions. And if I sound really hard-nosed about this, it is that we

have had to live with the environmental damage of a misguided

federal strategy, and if you want to see a scandal like AIG, in a

few months we could have—all this new science coming out on ethanol and your department subsidizing it, and I don’t think you

want to be in that position, sir. So I hope that you look at these

things, apples to oranges, mile for mile, gallon for gallon, and emissions at a truly environmental item. Can we do that?

Mr. ROGERS. The Secretary’s guidance on this topic is quite clear,

and you know, what is good about working for the Secretary is he

sinks his teeth into a set of topics and gets into the science in great

detail, and then that translates quite quickly into the structure of

both the direct options that we have as well as of the grant-making

that we undertake. As we work through this process, he is directly

involved in that activity.

Mr. BILBRAY. Well, I think what I am excited about is I have got

a Californian who knows the frustration of us in California watching Washington do things in the name of the environment that has

been absolutely disastrous, and now we finally got somebody at the

right place who can sort of try to wake up this town that there are

environmental opportunities out there and there are some really

44

lost leaders. And I am still very excited about somebody trying to

show me how we are going to make coal clean from the mining to

the transporting to the use, and I will still stand up and say clean

coal is about as logical as safe cigarettes. In a few years people are

going to understand that, but this one I really do not want us to

waste this money. I don’t want the outrage with this Administration that we have seen with the last Administration, and we can

avoid this if we just are willing to take the time to make sure we

got our facts straight first.

And I don’t care if it is the technology we choose or the people

we choose to implement these funds. We darn well better be careful

because Congress was not careful. We did not take the time, and

you have got to make sure you take the time and do it right because we didn’t do it right. Thank you very much, Mr. Chairman.

Chairman MILLER. Thank you. I think we have now completed

with this panel. It does appear we might have time to get started

on the second panel, at least perhaps to do the introductions. So

if we could fairly quickly change places, but we will shortly be

called for votes.

Panel II

I would like to introduce our second panel. Mr. Gregory Friedman is the Inspector General for the United States Department of

Energy. Mr. Todd Zinser is the Inspector General for the U.S. Department of Commerce. Mr. Tim Cross is the Interim Inspector

General at the National Science Foundation. Ms. Eileen Norcross

is a Senior Research Fellow at the Mercatus Center, a think tank

at George Mason University, and Ms. Patricia Dalton is the Managing Director of the Natural Resources and Environment Division

at the U.S. Government Accountability Office.

As you know, from having been here for the previous witnesses,

you each have five minutes for your oral testimony. Your written

testimony is as long as you would like for it to be within reasonable

limits, and that will be submitted for the record. After your oral

testimony, we will have rounds of questioning, perhaps just one, in

which each Member will have five minutes to question the panel.

It is the practice of the Subcommittee to receive testimony under

oath. Do any of you have any objection to swearing an oath, to taking an oath? Okay. You also have the right to be represented by

counsel. Do any of you have counsel here? If you would now all

please stand and raise your right hand, do you swear to tell the

truth and nothing but the truth? Let the record reflect that each

of the witnesses swore the oath.

Mr. Friedman, I think we have time to take your testimony.

STATEMENT OF MR. GREGORY H. FRIEDMAN, INSPECTOR

GENERAL, U.S. DEPARTMENT OF ENERGY

Mr. FRIEDMAN. Mr. Chairman and Members of the Subcommittee, I appreciate the opportunity to testify today on accountability and transparency issue related to the American Recovery

and Reinvestment Act of 2009. As you know, the Department of Energy will receive approximately $40 billion for various science, energy, and environmental programs and initiatives. Furthermore,

45

based on the Recovery Act and previously approved programs, the

Department has been authorized to make or guarantee loans totaling up to $127 billion for innovative technologies as well as auto

industry advancements.

The Recovery Act will undoubtedly have a significant impact on

the operations and the activities of the Department and, in turn,

on the Office of Inspector General. The passage of this legislation

makes this a transformative time for the Department of Energy,

particularly in the areas of scientific discovery and innovation.

My staff and I are committed to evaluating the actions of the Department to ensure that Recovery Act funds are used both efficiently and effectively. Utilizing a risk-based oversight strategy, my

office will: First, evaluate the internal control structure for the

most significant programs receiving Recovery Act funds. Second,

through transaction testing, evaluate the effectiveness of the Department’s distribution of funds to key external recipients. Third,

evaluate the Department metrics to gauge program success.

Fourth, provide fraud awareness briefings throughout the Department complex and coordinate with federal, State, and local prosecutors and law-enforcement agencies, and fifth, enhance our program

to process and report on whistleblower retaliation complaints. In

addition, the Act creates the Recovery Accountability and Transparency Board. As Inspector General for the Department of Energy,

I will participate actively as a member of this Board.

This strategy takes into account management challenges that we

have reported on over time as well as issues that we expect as a

result of new initiatives related to the Recovery Act. These include

concerns about the following: The Department’s ability to administer or manage its large portfolio of contracts and related financial

instruments; the Department’s loan guarantee program, specifically

related to having adequate staffing to manage the programs and

the inherent vulnerabilities and operational risks associated with

massive increases in funding and mission responsibilities, all in a

relatively short timeframe. We will treat these concerns as priorities as we move forward.

While continuing to focus attention on our customary responsibilities, in recent weeks my office has accelerated efforts to provide

proactive oversight of Recovery Act funds and programs. In addition to developing our oversight strategy, my office will shortly

issue two reports to the Department regarding the Department’s

implementation of the Act. First we will provide the Department

with a report on lessons learned based on prior Office of Inspector

General work. This report will provide the Department, we hope,

with a resource to establish a framework to manage the unprecedented amount of funding under the legislation. Secondly, we will

provide a report on staffing concerns relating to the Department’s

acquisition workforce and their impact on the implementation of

the Recovery Act. Using our risk-based approach, my office has also

initiated a review of the Office of Energy Efficiency and Renewable

Energy. This office will be one of the first to put money on the

street as a result of the Recovery Act. Furthermore, to mitigate potential fraud risks, my office has launched a proactive effort to

communicate with federal and State prosecutors on strategy for

pursuing allegations of fraud, and we have also delivered over 15

46

fraud awareness briefings to various Department elements. Finally,

in order to make the most effective use of available oversight resources, my office is currently involved in discussions with several

State auditors to establish collaborative efforts, most notably in the

area of weatherization, to follow the expenditure of Recovery Act

funds to project completion. We have also commenced outreach efforts with the Government Accountability Office to discuss interaction and communications as it relates to the Recovery Act.

We appreciate the significance of the Department of Energy’s

participation in the Recovery Act and the potential short- and longterm implications for the U.S. economy. We are mindful as well of

the special responsibilities of the Office of Inspector General to help

ensure transparency and accountability, all in the interest of the

American taxpayers. We will work diligently to meet these challenges. We look forward to keeping this Subcommittee and others

in Congress apprised of the results of our work.

Mr. Chairman, this concludes my statement, and I would be

pleased to answer any questions that the Subcommittee may have.

[The prepared statement of Mr. Friedman follows:]

PREPARED STATEMENT OF GREGORY H. FRIEDMAN

Mr. Chairman and Members of the Subcommittee:

I appreciate the opportunity to testify today on accountability and transparency

issues related to the American Recovery and Reinvestment Act of 2009 (Recovery

Act). My testimony focuses on the efforts of my office to provide effective oversight

of Recovery Act funds at the Department of Energy, which will receive approximately $40 billion for various science, energy, and environmental programs and initiatives. Furthermore, based on the Recovery Act and previously approved programs, the Department has been authorized to make or guarantee loans totaling up

to $127 billion for innovative technologies as well as auto industry advancements.

The Recovery Act will undoubtedly have a significant impact on the operations

and activities of the Department and, in turn, the Office of Inspector General.

Under the Recovery Act, the Federal Government hopes to stimulate the economy

in the shortest timeframe possible, while fostering an unprecedented level of accountability, oversight, and transparency. The passage of this legislation makes this

a transformative time for the Department of Energy, particularly in the area of scientific discovery and innovation.

Consistent with the objectives outlined in the Recovery Act, my office has developed a strategy to provide the most effective oversight possible given our available

resources. Before discussing the specifics of the oversight strategy, I would like to

outline a few fundamental principles that I believe must guide the Department’s

management of Recovery Act funds.

• Prevention and Detection: In terms of oversight, it is important to note that

simply detecting problems after the fact is not satisfactory. As the Department works to establish safeguards and internal controls for managing Recovery Act funds, the prevention of fraud, waste, and abuse must be a top priority.

• Expediency and Accountability: A principle feature of the Recovery Act involves the allocation of funds with all possible speed as a means of stimulating the economy. While expeditious action is an important goal, the Department must be mindful of the fact that accountability must be maintained

over funds.

• Management Responsibility: Responsible program managers and contracting

officials must exercise effective program management as a primary tool to ensure Recovery Act success. Inspector General oversight activities supplement,

rather than supplant, program execution.

47

Office of Inspector General Oversight Strategy

My staff and I are committed to evaluating the actions the Department takes to

ensure that Recovery Act funds are used both efficiently and effectively. Our riskbased strategy for achieving these goals includes the following steps:

• Evaluate the internal control structure for the most significant programs receiving Recovery Act funds: To ensure effective oversight, my office will review

the internal control structure and management of Department programs, beginning with those receiving in excess of $500 million in funding under the

Recovery Act. To provide immediate feedback on areas needing improvement,

‘‘real time’’ reviews will be initiated as controls are established, and policies

and procedures are developed.

• Evaluate the effectiveness of the Department’s distribution of funds to key external recipients: The vast majority of funds provided to the Department will

be distributed under various procurement instruments to contractors, State

and local governments, educational institutions, and non-profit organizations.

After reviewing the Department’s internal control structure, my office will

evaluate the controls established by the primary recipients over the use of

funds.

• Examine the use of funds through transaction testing, utilizing a risk-based

approach: My office will conduct transaction testing at the recipient or enduser level to fully explore the effectiveness and efficiency of Recovery Act

projects.

• Evaluate Department metrics to gauge program success: We will evaluate established goals and metrics to ensure that they address Recovery Act objectives. We will also test specific performance and economic information, including reported performance in the critical area of job creation, to determine

whether objectives are being met.

• Provide fraud awareness briefings throughout the Department complex: On a

regular basis, the Office of Inspector General will provide fraud awareness

briefings to groups of federal employees, contractor officials, and fund recipients. These briefings aid significantly in preventing fraud, waste and abuse

by heightening managers’ awareness of fraud indicators and familiarizing officials with our operations.

• Enhance existing relationships with federal, State, and local prosecutors and

law enforcement agencies: These relationships are critical to establishing effective networks for identifying areas that are most vulnerable to fraud,

waste, and abuse as well as bringing to justice those who would defraud the

government.

• Expand Hotline capabilities: The Office of Inspector General maintains a Hotline to facilitate the reporting of allegations of fraud, waste, abuse, or mismanagement in Department of Energy programs or operations. On an annual

basis, the Hotline receives approximately 1,300 complaints. We anticipate receiving an additional 500 Hotline complaints each year that pertain to Recovery Act funds. In the coming months, we will expand our Hotline capabilities,

as necessary, to accommodate these complaints.

• Enhance our program to process and report on whistleblower retaliation complaints, to respond to new requirements under the Recovery Act: The Office of

Inspector General will direct additional resources to review retaliation complaints relating to Recovery Act programs.

• Participate actively as a member of the Recovery Accountability and Transparency Board: As outlined in the Recovery Act, I will serve with nine other

Inspectors General on the Recovery Accountability and Transparency Board.

This work will complement my regular duties as Department of Energy Inspector General. I look forward to working closely with my colleagues to help

ensure that Recovery Act funds are spent efficiently and effectively throughout government.

Areas Requiring Special Attention

The strategy outlined above takes into account management challenges that we

have reported on over time as well as new issues that we expect as a result of the

sudden influx of substantial additional Department funding.

For example, for over a decade, the Office of Inspector General has identified ‘‘contract administration’’ as one of the most significant management challenges facing

the Department. We have issued numerous reports on a wide variety of contract administration and project management deficiencies. Given the Department’s almost

48

total reliance on contractors to carry out its mission, a commitment to effective contract administration will be of vital importance as the unprecedented flow of funds

begins under the Recovery Act.

The Office of Inspector General has also reported on the maturity of the internal

control structure of the Department’s loan guarantee program, questioning whether

it was adequately staffed to support its goals and objectives. For example, prior to

the signing of the Recovery Act, we reported that staffing levels were not adequate

to, among other things, monitor disbursed loans and complete credit underwriting

for applicants. We noted that the Department has stated its intention to augment

the staffing levels. We think this is a positive step that should be pursued aggressively as the process of reviewing and approving loan guarantee applications proceeds.

As implementation of the Recovery Act continues, all parties should recognize that

the potential risk of fraud increases dramatically when large blocks of funds are

quickly disbursed. Our experience in the investigative arena has demonstrated that

even during periods of normal operation, the Department is vulnerable to the misuse of funds, submission of false or fictitious data, employee conflicts of interest, and

other related wrongdoing.

Finally, given the magnitude of the Recovery Act, successfully infusing funds into

existing Department programs will be a significant challenge. For example, the Office of Electricity Delivery and Energy Reliability, which will continue to lead efforts

to modernize the electric grid, had a budget of approximately $138 million in Fiscal

Year 2008. Under the Recovery Act, this Office will receive $4.5 billion, the bulk

of which will be used for electricity delivery and energy reliability activities. Such

an expansive increase in funding in a short timeframe carries with it certain

vulnerabilities and operational risks.

These are just a few examples of areas relating to Recovery Act programs and operations that we believe will require special attention by Department management.

Utilizing the risk-based oversight approach previously outlined, in conjunction with

experience gleaned in part from existing management challenges, we will continue

our efforts in these, as well as other, critical areas to aid the Department in the

successful implementation of the Recovery Act.

Accomplishments to Date

While continuing to focus attention on our customary responsibilities, in recent

weeks my office has accelerated efforts to provide proactive oversight of Recovery

Act funds and programs. To date, my office has:

• Developed a comprehensive oversight strategy, as outlined above.

• Completed and will shortly issue a ‘‘lessons learned’’ report based on concerns

identified in prior work. The report will provide the Department with a resource as it works to establish a framework to manage the unprecedented

amount of funding under the Recovery Act.

• Initiated a review of the Office of Energy Efficiency and Renewable Energy’s

implementation of the Recovery Act.

• Launched a proactive effort to communicate with federal and State prosecutors on strategies for pursuing allegations of fraud.

• Completed and will shortly issue a report on staffing concerns relating to the

Department’s acquisition workforce and its impact on implementation of the

Recovery Act.

• Delivered several fraud awareness briefings to various Departmental elements, including the Office of the Chief Financial Officer, the Office of Energy

Efficiency and Renewable Energy, the Office of Science, the Office of Environmental Management, and the Bonneville Power Administration. We have numerous other briefings scheduled in the near future.

• Initiated discussions with the State Auditors in several states to establish collaborative efforts, most notably in the area of weatherization, to follow the expenditure of Recovery Act funds to project completion.

• Commenced outreach efforts with the Government Accountability Office to

discuss interaction and communication as it relates to the Recovery Act.

• Applied additional resources for receiving and reviewing whistleblower retaliation complaints associated with Recovery Act programs, as outlined in the

legislation.

49

Conclusion

We appreciate the significance of the Department of Energy’s participation in the

Recovery Act and the potential short and long term implications for the U.S. economy. We are mindful, as well, of the special responsibilities of the Office of Inspector

General to help ensure transparency and accountability, all in the interest of the

American taxpayers. We have already initiated efforts in this arena and will continue to work diligently to meet these challenges. We look forward to keeping this

Subcommittee and others in Congress apprised of the results of our work.

Mr. Chairman, this concludes my statement, and I would be pleased to answer

any questions that the Subcommittee may have.

BIOGRAPHY FOR GREGORY H. FRIEDMAN

Gregory H. Friedman was nominated by the President and confirmed by the U.S.

Senate as Inspector General of the U.S. Department of Energy in 1998. Mr. Friedman started his federal career in 1968 and has been with the Department of Energy, Office of Inspector General, since 1982. As Inspector General, he is responsible

for a nationwide, independent program of audits, inspections, and law enforcement

efforts related to the Department of Energy’s programs and operations. In addition

to his responsibilities as Inspector General, Mr. Friedman now serves as a member

of the newly created Recovery Act Accountability and Transparency Board.

Mr. Friedman received a Bachelor’s degree in Business Administration from Temple University and a Master’s degree in Business Administration from Fairleigh

Dickinson University. In 1979–1980, Mr. Friedman was selected as a Princeton Fellow in Public Affairs and spent a year in residence at Princeton University’s Woodrow Wilson School for Public and International Studies.

In 2002, Mr. Friedman was named by the Comptroller General of the United

States to serve as a member of the Advisory Council on Government Auditing

Standards. In addition, he led the development of the ‘‘Federal Audit Manual,’’ for

the first time providing universal guidelines for conducting federal financial audits.

From 2005 to 2008, Mr. Friedman served as Vice Chairman of the President’s

Council on Integrity and Efficiency. Mr. Friedman has been a guest lecturer on the

topics of audit, integrity, government oversight and management. In addition, Mr.

Friedman is a member of several professional organizations, and has served in leadership positions in the Association of Government Accountants and the Institute of

Internal Auditors. Mr. Friedman has also been active in a number of community

and philanthropic organizations.

During his federal career, Mr. Friedman has received numerous awards, including

the Department of Energy’s Meritorious Service Award, the Meritorious Presidential

Rank Award, and the Presidential Rank Award for Distinguished Executive.

Chairman MILLER. Thank you, Mr. Friedman. Dr. Broun and I

need to go and vote now. We have three votes. We should be back

within half an hour, and when we return, Mr. Zinser, you will be

first up. So we are now at ease.

[Recess.]

Chairman MILLER. Okay. We are back. Mr. Zinser for five minutes.

STATEMENT OF MR. TODD J. ZINSER, INSPECTOR GENERAL,

U.S. DEPARTMENT OF COMMERCE

Mr. ZINSER. Good afternoon, Mr. Chairman, Ranking Member

Broun. Thank you for inviting us to testify today on the oversight

of the science program and initiatives at the Department of Commerce that will be funded through the American Recovery and Reinvestment Act. The Recovery Act requires unprecedented accountability and transparency on the part of government agencies receiving stimulus funds and establishes a strong oversight role for Offices of Inspector General. The Department of Commerce received

approximately $7.9 billion in stimulus funding; $1.4 billion of this

amount is for science activities at the National Oceanic and AtmosVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00059 Fmt 6633 Sfmt 6601 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
50

pheric Administration and the National Institute of Standards and

Technology.

The Department has assigned some of its very best people to lead

its Recovery Act efforts, and we have found that all those involved

are committed to meeting the challenges ahead. Nonetheless,

spending stimulus funds effectively poses significant risks and

challenges for the Department of Commerce. At the outset, we see

six areas of risk facing the Department in spending Recovery Act

funds.

First, spending these funds expeditiously with little time to staff

up and gear operations to accommodate the additional activities

significantly increases the risks for fraud and waste in stimulusfunded initiatives as well as in the Department’s traditionally

funded operations.

Second, the executive branch, including the Department of Commerce, is still in transition. Key leadership positions remain unfilled. This puts at risk the leadership vision and the decision-making important in executing a cohesive Recovery Act plan.

Third, the Act’s emphasis on grant and contract spending puts

additional pressure on already overburdened management and administrative operations, particularly the Department’s grants management and acquisition workforce.

Fourth, construction grants and contracts, which NOAA and

NIST are expressly required to fund, are inherently risky and difficult to manage effectively. In addition, the construction grant program to be administered by NIST is a relatively new program.

Five is specific requirements related to competitive contracts

such as maximizing the use of fixed price contracts and the Act’s

Buy American requirements will require extra vigilance.

And finally the Act’s strict oversight requirements and reporting

deadlines will require a greater level of centralized management of

the bureaus than the Department has historically exercised. This

is a significant challenge for the Department because it has been

expected to exercise a greater centralized management role without

sufficient funding to do so in the past and without funding to do

so in the Recovery Act.

Mr. Chairman, my written statement includes examples of audits

and investigations of grants and contracts where we have found

problems. My written statement also includes examples of important actions the Department is taking to strengthen its administration of grants and contracts. And you heard from Ellen Herbst on

your first panel this morning about steps the Department is taking

specifically for the Recovery Act.

The Office of Inspector General has established a Recovery Act

task force. We are also participating in the Department’s steering

committee in an advisory capacity to reinforce the recommendations we have made in our past audit work. We are scheduling

fraud awareness briefings by our investigative staff and technical

assistance briefings by our audit staff. We have hired a risk management expert to lead our task force and have organized along

eight subject matter areas: transparency and accountability,

grants, program acquisition and construction, scientific and technical research, the broadband technology program, census, digital

TV, and fraud awareness.

51

Our early work with the Department and its bureaus is aimed

at the prevention of fraud, waste and abuse and reinforcing the notion that the program offices themselves have the most critical role

in providing oversight of the projects and contracts they fund. With

additional oversight funding we have received, we will not be able

to audit every contract and grant. We will need to target our resources to those projects and grants that present the greatest risk.

We would like to commend the Subcommittee for holding this

hearing early in the process and focusing attention on the importance of oversight in the science programs funded by the Recovery

Act. We would welcome the opportunity to assist the Subcommittee

with your oversight work however we can. That concludes my

statement, Mr. Chairman. I would be pleased to answer any questions you may have.

[The prepared statement of Mr. Zinser follows:]

PREPARED STATEMENT OF TODD J. ZINSER

Mr. Chairman, Ranking Member, and Members of the Subcommittee:

Thank you for inviting us to testify today on accountability and transparency in

the science programs and initiatives that will be funded through the American Recovery and Reinvestment Act of 2009. The Recovery Act requires unprecedented accountability and transparency on the part of government agencies receiving stimulus funds, both for their spending decisions and the impact of funded activities—

particularly as they contribute to the Administration’s goals of creating jobs and

strengthening the economy.

To ensure this accountability and transparency, the Act establishes a strong oversight role for Offices of Inspector General in monitoring their agency’s use of stimulus funds and coordinating their collective Recovery Act oversight throughout the

IG community. We have new responsibilities for investigating whistleblower complaints from employees of contractors, grantees, and State or local government entities receiving stimulus funding. And we have a new oversight entity in the Recovery

Accountability and Transparency Board, created by the Act. As 1 of the 10 inspectors general appointed to serve on the Board, I believe Congress—in establishing the

Board—created an important mechanism for building on the collective strength of

the IG community to ‘‘follow the money’’—ensuring that agencies distribute stimulus

funds effectively and exercise the oversight necessary to ensure that those funds are

used in accordance with the intent of the legislation.

My testimony today will respond to the Subcommittee’s questions regarding

science funding the Department has received under the Recovery Act; risks the Department faces in spending its stimulus funds, based on our prior audit and investigation work; and our planned approach for oversight. Specifically, I will address

three areas:

1. The Commerce programs and operations that received funding.

2. The challenges and risks facing the Department in using Recovery Act funds

effectively to meet the objectives of the Act.

3. The Office of Inspector General’s initial work plans for conducting effective

oversight of the Department’s stimulus-funded programs.

COMMERCE’S RECOVERY ACT FUNDING IS CONCENTRATED IN FIVE

BUREAUS

The Department of Commerce received $7.946 billion in stimulus funding—$1.440

billion of this amount is for science programs and activities at two Commerce bureaus—the National Oceanic and Atmospheric Administration and the National Institute of Standards and Technology (Table 1).

52

The Office of Inspector General received a total of $16 million in stimulus funding to conduct oversight: $6 million for general oversight over the next four years and

$10 million for oversight of the National Telecommunications and Information Administration’s $4.7 billion initiative to expand access to broadband services.

Bureau Spending Will Focus on Science, Technology, Decennial Census, and Business Development Initiatives Aimed at Job Creation

NOAA will direct its stimulus dollars toward activities intended to promote and

enhance its broad marine and environmental stewardship mandates.

• $430 million will be used for construction and repair of NOAA facilities, ships,

and equipment; improvements in weather forecasting; and development of

satellites;

• $230 million for habitat restoration, navigation projects, and vessel maintenance; and

• $170 million for climate modeling activities, including procurement of supercomputers and research into climate change.

NIST will use its Recovery Act funds to expand its technical research capacity.

It will use

• $360 million to construct research facilities, including $180 million in competitive grants for the construction of research science buildings; and

• $220 million for scientific and technical research, equipment, and services.

NIST will receive an additional $20 million from the Department of Health and

Human Services to accelerate efforts to develop and deploy electronic health records

and a nationwide health care information technology testing infrastructure, and $10

million from the Department of Energy to help develop a comprehensive framework

for a nationwide, fully inter-operable ‘‘smart grid’’ for the U.S. electric power system.

The remaining Commerce agencies that received stimulus funds will similarly apply

them to activities aimed at enhancing their missions and supporting a variety of national priorities and needs.

NTIA received $4.7 billion to develop and expand broadband services in areas

that have no service or are under-served and to improve broadband access among

public safety agencies. NTIA received an additional $650 million for the Digital-to-Analog Converter Box

Program, established under the Digital Television Transition and Public Safety Act

of 2005. NTIA will use these funds to eliminate the backlog of coupon requests and

ensure that consumers who are currently on the waiting list for coupons receive

them promptly.

The Census Bureau will use its $1 billion to staff and conduct certain 2010 decennial census operations, focusing on partnership and media efforts designed to increase participation among minority communities and hard-to-reach populations,

and to enhance management of other 2010 operations and programs.

EDA’s stimulus funds will support grant programs in its traditional lines of business—public works projects, revolving loan funds, business development and technical assistance—in economically distressed areas throughout the Nation, with priority given to areas that have experienced significant job loss due to corporate restructuring.

53

A detailed breakdown of the Recovery Act funding received by the Department is

provided in Appendix A.

THE DEPARTMENT FACES SIGNIFICANT CHALLENGES AND RISKS IN

SPENDING RECOVERY ACT FUNDS EFFECTIVELY

The Department has assigned some of its very best people to lead its Recovery

Act efforts and we have found that all those involved are committed to meeting the

challenges ahead. Nonetheless, spending stimulus funds effectively and in a manner

that meets the economic objectives of the Recovery Act poses significant risks for

the Department of Commerce and will put significant strain on a number of already

stretched resources and vulnerable operations.

The Department’s $7.9 billion in stimulus funding, in effect, doubles Commerce

resources over FY 2008 levels. The Department’s enacted budget was $7.7 billion

last year. Its FY 2009 budget, apart from Recovery Act funding, is $9.2 billion. Although a substantial proportion of the Recovery Act funding received by the Department will continue to be expended in fiscal year 2010 and, to a lesser degree, in

fiscal years 2011 through 2013, the clear intent of the Act is to award funds as expeditiously as possible. NOAA’s stimulus funding effectively increases its FY 2009 resources by nearly 20 percent and NIST’s Recovery Act funding increases its available resources by a potential 74 percent.

As the agencies carry out their plans, there will be significant challenges and

risks along the way. At the outset, we see six areas of risk facing the Department

and its bureaus.

1. Spending Recovery Act funding quickly and with little time to staff up and

gear operations to accommodate the new and expanded programs, grants,

and contracts it will support significantly increases the risks for fraud and

waste in both stimulus-funded activities and the Department’s traditionallyfunded operations. This applies across the government—not just the Department of Commerce.

2. The Executive Branch, including the Department of Commerce, is still in

transition. Key leadership positions remain unfilled. While the career staff

is capable of managing their programs, this puts at risk the leadership vision

and decision-making important in formulating and executing a cohesive Recovery Act plan.

3. The Recovery Act’s emphasis on grants and contract spending puts additional pressure on weak management and administrative operations that we

have identified in our audit work over the years, particularly with regard to

• the Department’s decentralized grants management structure, which consists of three separate management systems operated by three different

bureaus—each managing a subset of Commerce grant activity according

to policies established at the Department level; and

• the Department’s shortage of qualified contracting specialists, technical

specialists, and subject matter experts—particularly in light of the anticipated shift from cost-type contracts, which are predominantly used today,

to fixed-price contracts, which require different knowledge and skill sets.

4. Construction grants and contracts funded by the Recovery Act are inherently

risky and historically difficult to manage effectively. In addition, the construction grant program to be administered by NIST is a relatively new program for the agency.

5. There are specific requirements related to competitive contracts including

maximizing the use of fixed-price contracts and Buy American requirements

that will necessitate extra vigilance.

6. The Act’s strict oversight requirements and reporting deadlines will require

a greater level of centralized management of Commerce bureaus than the

Department has historically exercised.

I would like to focus my discussion on the Act’s emphasis on grants and contract

spending at Commerce, particularly as it impacts science activities; to highlight

some examples from our audits and investigations of potential problems; and to

briefly discuss the special challenges facing NOAA and NIST in managing stimulusfunded construction projects.

54

THE RECOVERY ACT’S EMPHASIS ON GRANTS AND CONTRACT SPENDING PUTS NEW PRESSURE ON THE DEPARTMENT TO SHORE

UP WEAKNESSES IN GRANTS AND PROCUREMENT MANAGEMENT AND OVERSIGHT

We estimate that approximately two-thirds of Commerce’s $7.9 billion in stimulus

funding will be dedicated to grants and contracting: in addition to the $215 million

NIST will spend for science, research, and construction grants and contracts, NOAA

will use the bulk of its $830 million for grants and contracts in a variety of mission

activities, including $170 million for grants in coastal and marine habitat restoration. NTIA will operate a $4.7 billion grants program for improved broadband access. EDA’s $150 million in stimulus funds is exclusively for economic development

grants.

Effective grants and acquisition management has been a long-standing challenge

for the Federal Government because these programs are susceptible to fraud, waste,

and abuse if not adequately monitored. Acquisition management and shortages in

skilled contracting staff are among the top management challenges we reported as

facing the Department of Commerce this past November.

The Department Needs to Implement Strategies for Ensuring Sound Management of

Recovery Act Grants

We recently concluded an audit of Department-wide grants oversight and will release our report shortly. This audit identified a number of weaknesses in grants

oversight at the Department. More effective oversight by the Department and its

bureaus is critical in order to avoid many of the problems we have identified in our

grant audits and investigations over the years: fraud, inadequately documented or

unallowable costs charged to the grant, financial accounting irregularities, conflicts

of interest, improper procurement procedures, noncompliance with grant terms and

conditions, and failure to complete funded projects. We have questioned millions of

dollars in federal costs and identified millions more to be put to better use.

• Our investigation of a NOAA grantee found the recipient had spent more

than one-half of the $109,000 award on personal items and travel expenses.

• An investigation of an EDA grant to establish a revolving loan fund led to

the conviction of four individuals for fraud, conspiracy, and money laundering

after converting nearly $800,000 in grant funds to personal use.

• Another EDA RLF case involved grantees using award proceeds to make more

than $900,000 in unauthorized loans and payments to benefit themselves and

the companies they operated and controlled.

• We questioned $4.5 million in costs claimed by a grantee who repeatedly

failed to comply with federal annual audit requirements set forth in the

award. The Commerce oversight agency had continued to disburse funds even

though the grantee was not filing its required financial audit reports.

In operating grant programs funded by the Recovery Act, a major challenge for

the Department will be minimizing or eliminating the problems we have identified

in our prior work and maximizing oversight strengths within the ambitious spending goals of the stimulus program. Recommendations we have made in our prior

grant audits bear repeating as the Department prepares to implement these programs. The Department must ensure that grant administrators:

• Are sufficiently trained in pre-award screening techniques to identify highrisk proposals and grantees.

• Maintain documented analysis of a recipient’s grants management and financial capabilities, and past performance in the award file.

• Fully document award activity, using information technology tools developed

specifically for this purpose.

• Assign high-risk designations or special award conditions to grantees if preaward screening or ongoing oversight determines that such a designation is

warranted.

• Are fully versed in grant policies and kept informed of any changes to them.

• Ensure single audits are conducted for grantees receiving awards of more

than $500,000, and review the resulting audit reports. The Single Audit Act

requires these grantees to obtain this annual audit, prepared by an independent auditor, to ensure recipients have appropriate internal controls for

safeguarding federal funds and are using funds in accordance with grant

terms and conditions.

55

Part of the challenge of sound grants management lies in the Department’s decentralized management structure: overall policy and procedures are set by the Department’s Office of Acquisition Management, but day-to-day grants management is

housed in three bureaus—NOAA, NIST, and EDA. Each has its own management

system. NOAA and NIST manage the grant activities of other bureaus as well as

their own (Figure 1). All grant programs will eventually migrate to NOAA’s Grants

Online system, but this consolidation is not scheduled to occur until 2011.

The strengths we have noted in the grants management operations are not across

the board but apply generally to the individual bureaus. For example, NIST compares financial status reports against grantee withdrawals to verify the accuracy of

the grantee’s financial reporting, which is a strong internal control practice. NOAA

uses the web-based Grants Online system as a management tracking tool for its

grants activity. EDA has consolidated program and grants management functions

at the regional office level, giving regional oversight staff the advantage of monitoring both program and administrative requirements in tandem.

We are taking a number of proactive steps to help the Department bolster its

grants management and curtail the potential for fraud with respect to Recovery Act

funding. We are instituting a strong fraud awareness training program and conducting briefings on best practices for competitive grant awards, with a focus on

identifying and monitoring high-risk grantees. As part of these briefings, we will

provide technical advice on incorporating internal controls and risk analysis into the

grants management process.

Recovery Act Spending on Contracts and Procurements Will Require Improvements

in Contract Formulation, Administration, and the Department’s Acquisition

Management Workforce

Acquisition and contract management has been a consistent watch list item for

inspectors general, as related government spending has ballooned in recent years

without a commensurate growth in the acquisition workforce or the higher-level

skills needed to properly oversee complex procurements. Cost overruns, fraud, and

a lack of oversight and accountability are common findings in IG audits and GAO

reviews government-wide.

The accelerated spending called for under the Recovery Act will undoubtedly further tax an already overwhelmed acquisition workforce at Commerce and exacerbate

contract management weaknesses. Our November 2008 report, Top Management

Challenges Facing the Department of Commerce, described an acquisition infrastructure that does not have coherent policies to guide systems acquisition or effective

56

oversight mechanisms. Hiring and retaining a skilled acquisition workforce has been

difficult at the Department, as it has been for all federal agencies. The Department

has a limited number of contracting specialists to meet its multi-billion-dollar workload. It has no reliable count of its program and project managers or contracting

officer representatives—critical positions in the contracting oversight chain.

Our audits have found repeated instances in which

• the Department’s lack of sufficient skilled contracting and project management professionals has resulted in poorly defined requirements for

deliverables and inadequate contract management;

• contracts contained poorly structured incentive fees and performance metrics

that were not well aligned with the goals of the contract; and

• communications between contracting officers and program personnel, including contracting officer representatives, were extremely ineffective.

As a result of these weaknesses, contracts have experienced significant cost and

schedule overruns and performance shortfalls, contractors have been paid high fees

for poor quality work, and the Department has at times failed to address important

contract requirements—such as implementation of adequate IT security controls to

protect sensitive government information.

Our recent audit of the Census Bureau’s Field Data Collection Automation contract found that poorly defined requirements were a significant contributor to the

problems encountered in developing the hand-held computers for automating key

operations and the resulting $3 billion increase in estimated costs for conducting the

2010 census. Our audits of the Census contract and a satellite acquisition at NOAA

found that contractors were receiving high award fees for projects that were experiencing serious performance shortfalls and large cost overruns.

Acquisition staff may be further challenged by the Administration’s preference for

using fixed-price contracts over ‘‘cost type’’ contracts, which have greatly increased

in popularity in recent years. The President’s policy memorandum on government

contracting, issued on March 4, establishes a clear preference for fixed-price contracts without prohibiting cost-type contracts. The memorandum leaves contracting

officers with the authority to use cost types when appropriate, but only after careful

analysis leads to the exclusion of fixed-price options.

Fixed-price contracts are most effective when the cost of performing the contract

is predictable. This requires, among other things, clear and well-defined requirements. The risk associated with fixed-price contracts is that when requirements are

not well-defined or new development is called for, the actual cost of performing the

contract will far exceed the contract price. As a result, the contractor will inevitably

seek price adjustments thereby driving up the cost to the government. Cost-type

contracts, on the other hand, are more appropriate for projects involving significant

development and innovation, and where the requirements are less conducive to detailed specifications. The shift to a policy preference for fixed-price contracts will demand an acquisition workforce with the skills to conduct a rigorous analysis of the

appropriate contract type.

The Department has taken several steps to address some of its contract and procurement weaknesses.

• It is working to complete revisions to its major systems acquisition procedures.

• It combined the Commerce IT Review Board and the Acquisition Review

Board into a single Investment Review Board, which has scheduled reviews

for programs that will receive Recovery Act funding.

• It has improved its certification program for contracting officer representatives, in response to our recommendation.

And notably, the Office of Acquisition Management recently issued Implementation of the American Recovery and Reinvestment Act—a quick guide for the acquisition workforce—and created a Risk Management and Oversight Plan, currently in

draft, to highlight contracting and grant risks and help agency program leaders and

acquisition staff prepare mitigation plans.

These are important improvements that the Department can use to ensure that

contracts funded by the Act are properly structured and administered, promote contractor responsibility and accountability, produce good business deals for the Department, and create new jobs for the American people.

57

NOAA and NIST Face Unique Challenges in Managing Construction Procurements

and Grants

I would like to briefly address the additional challenges to effective oversight and

administration that NOAA and NIST face in using their stimulus funds for grants

and contracts to build science facilities.

The overarching goal of any federally funded construction project is to complete

the project on time, within budget, and free from fraud. This will require first and

foremost that agencies scrub proposals and cost estimates up-front before committing federal funds. Construction projects, including those funded by the Department

of Commerce, are also at risk of anti-competitive practices, substandard workmanship, defective materials, nonperformance, and corruption. Our audits and investigations of public works projects, for example, have identified significant instances of

nonperformance, misuse of federal funds, and bribery of a local official.

• Our audit of a $6.7 million project to develop a technology park disclosed the

grantee failed to carry out numerous responsibilities and did not provide the

necessary engineering supervision. More than a year after the grant had expired, the park remained without water and other infrastructure and had no

prospects for use.

• Our audit of a $6.44 million grant for construction of a 40,000 square-foot

business incubator resulted in termination of the project after we found the

grantee was on the brink of insolvency and had used grant funds to stay

afloat.

• An audit of a $900,000 grant awarded for infrastructure improvements to a

proposed industrial park questioned all claimed costs and recommended termination of the project. Violations included failure to ensure full and open

competition in procuring materials and services, and allowing conflicts of interest.

• A subcontractor on a construction grant for a public works project was convicted of bribing a local official to obtain minority business certificates for use

in obtaining contracts.

Full and open competition is fundamental to ensuring that the government obtains the best value. However, in some areas obtaining competitive bids can be difficult when the number of companies and suppliers qualified to bid on these projects

is limited. Increased demand for contractors and suppliers creates a risk of bid-rigging and other anti-competitive practices. In such schemes, contractors ostensibly in

competition may secretly collude, agreeing to share future projects so as to keep

prices high.

These are just some of the potential problems NOAA and NIST grants and procurement specialists must be attuned to. Negotiating fair terms for construction

projects and managing the work requires a distinctly different skill set from that

needed to oversee research projects—the ability to evaluate architectural and engineering proposals, work schedules and labor rates, and assess whether proposed and

actual materials costs are reasonable, to name a few. NOAA and NIST, as well as

the other Commerce agencies, must carry out risk assessment as a fundamental

part of its stewardship of Recovery Act funds. Such risk assessments must determine the agencies capacity to apply the necessary skills and expertise to these

projects.

THE RECOVERY ACT IS REDEFINING ‘‘BUSINESS AS USUAL’’ IN GOVERNMENT OPERATIONS AND EXPANDING THE SCOPE OF IG

OVERSIGHT

We have taken several important steps to implement an appropriate oversight

framework that will allow us to track the various stimulus activities Commerce undertakes and its compliance with the Office of Management and Budget’s accountability and transparency requirements. On March 2, we issued our Initial Oversight

Plan for the American Recovery and Reinvestment Act of 2009, which laid out four

key elements of that framework:

• Dedicated Recovery Act staffing.

• Targeted risk-based audit and investigative planning, and expedited reporting.

• Participation in Department steering committee and working groups.

• Fraud awareness training and timely responses to citizen complaints.

I would like to briefly discuss these elements and our progress in implementing

them.

58

Dedicated Recovery Act Staffing. We are organizing and staffing OIG to provide

oversight of stimulus spending while continuing to oversee departmental programs

and operations consistent with our ongoing priority areas.

As a first step, we established within our Office of Audit and Evaluation a Recovery Act Task Force charged with coordinating our oversight of the funding received

by the five Commerce bureaus. We have hired an audit expert in the area of risk

management and internal controls to head the task force and assigned seasoned

OIG staff as team leaders with responsibility for specific program and operational

areas—one of those areas is science and research, with three additional teams—

grants, procurements, and fraud prevention, also directly supporting science oversight.

Targeted Risk-Based Audit and Investigative Planning, and Expedited Reporting. The task force is developing a comprehensive audit and investigative oversight plan to guide our work and to track departmental and bureau compliance with

legislative requirements and OMB guidelines for accountability and transparency.

The bureaus are currently developing their detailed Recovery Program Plans, due

to OMB by May 1, 2009, and making decisions on program design, internal controls,

performance measurement, and reporting requirements, all of which will be critical

in establishing accountability and transparency for their use of stimulus funds. We

are working closely with the Department and bureaus to provide advice and recommendations on internal controls and best practices as they prepare these plans.

We have prepared a draft Recovery Act Short-Term Oversight Plan which we will

give to Department and bureau officials shortly. This plan describes the outreach,

advisory, and monitoring activities we will undertake during the initial 120 days of

our oversight efforts.

We have also developed short-turnaround ‘‘flash’’ reports to provide quick, timely

feedback to Congress, the Department, and the public regarding Commerce stimulus

activities, with the goal of identifying potential and emerging program and financial

risks and making recommendations to promptly address them.

Participation in Department steering committee and working groups. The

Department has established a Recovery Act Implementation Team consisting of senior Commerce officials and headed by the Recovery Act Steering Committee. Our

principal assistant inspector general for audit and evaluation participates on the

Steering Committee in an advisory capacity so that we can share best practices and

make recommendations up-front regarding internal controls and risk management

for stimulus activities. Our task force is also providing technical assistance and advice to the working groups established by the steering committee and the bureaus.

Fraud awareness training and timely responses to citizen complaints. Our

Office of Investigations has developed a Recovery Act fraud awareness briefing for

the Department’s grant and procurement specialists, program officials, financial

management staffs, grantees, and State and local oversight entities. The training

focuses on Commerce programs that will use stimulus funding and Commerce-specific risks. We have also reconfigured our online hotline system to uniquely identify

incoming Recovery Act complaints for expedited processing.

The Department of Justice is concurrently rolling out a national fraud awareness

training program for the Recovery Act, and we have invited them be co-presenters

at our briefings. The audiences for these training programs are those on the front

line and therefore in the best position to prevent and deter fraud, waste and abuse

and alert the inspector general about questionable or unusual activities.

A key piece of the training describes the Recovery Act’s expanded whistleblower

protections for non-federal employees of firms receiving stimulus-funded grants or

contracts, should they disclose information regarding the use of those funds that indicates:

• gross mismanagement or waste;

• substantial and specific danger to public health or safety;

• abuse of authority related to the implementation or use of covered funds; or

• violation of law, rule, or regulation.

Under the Act, employers are prohibited from discharging, demoting, or otherwise

discriminating against employees for making such disclosures, and OIGs must investigate these complaints within 180 days, unless the complaint is deemed frivolous, does not relate to covered funds, or is already under consideration by another

judicial or administrative body. Our reconfigured hotline system will help expedite

these investigations to meet our legislative deadline.

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SUMMARY OF OIG ACTIONS WITH REGARD TO RECOVERY ACT

SCIENCE FUNDING

In closing, I would like to summarize the Subcommittee’s questions and our answers with regard to science stimulus funding at Commerce:

1. How do we plan to monitor this funding to ensure it is spent promptly, in

accordance with the Recovery Act’s objectives, and in compliance with the

law?

• We continue to emphasize and reinforce that the program offices have a

critical role in providing oversight of the projects and contracts they fund.

• We are participating on the Department’s Recovery Act Steering Committee and working groups to share best practices and make recommendations regarding internal controls and risk management.

• We have created a Recovery Act Task Force consisting of multi-disciplinary teams of auditors and evaluators who will focus on the following

program areas and activities:

— Grants

— Procurements, Acquisition, and Construction

— Scientific and Technical Research

— Broadband Technologies Opportunities Program

— Digital Television

— Fraud Awareness and Prevention

— Transparency and Accountability

The task force is developing a long-term oversight plan, will implement a

short-term oversight plan to monitor the Department’s initial Recovery Act

activities, and has established expedited reporting products to promptly communicate our concerns and recommended solutions.

• We have developed Recovery Act fraud awareness training and reconfigured our hotline system to identify and expedite our responses to related

citizen complaints.

2. Based on our prior work, are there particular areas of Recovery Act funding

that deserve special attention to ensure funds are put to best use?

Our prior work has identified a number of weaknesses in the Department’s

oversight of grants and contracts. These activities bear very close watch.

Given the particular susceptibility to fraud and misuse of funds associated

with construction projects, NOAA and NIST stimulus-funded construction activities also require close scrutiny.

3. To conduct effective oversight, what professional skill areas do we need to

increase and how quickly do we plan to fill these positions?

Conducting effective oversight of Recovery Act funds will require increased

staffing, including some specialized expertise. The funding provided to our office will permit us to hire a mix of permanent, temporary, and term employees, and contract staff to do this most effectively. We will also need to use

all the flexibilities and authorities that the Office of Personnel Management

will allow. A key flexibility, for example, would be to have the authority to

rehire experienced retirees without affecting their retirement annuities.

In addition to the risk management expert we have hired to head our task

force, we plan to increase professional staffing in all the critical skill areas

required for stimulus oversight-grant, contract, and performance audits and

evaluations. We are pursuing options for increasing staff expertise in science

and technology-related work, including satellite engineers, an expert in climate research supercomputer techniques, and specialists in fisheries habitat

restoration to help monitor NOAA stimulus spending; and scientists and engineers to oversee NIST research into ‘‘smart grid’’ energy technology and interoperable digital health records management systems.

Mr. Chairman and Members of the Subcommittee, this concludes my statement.

I would be happy to answer questions at this time.

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BIOGRAPHY FOR TODD J. ZINSER

On December 26, 2007, Todd J. Zinser was sworn in as the fifth Inspector General

of the U.S. Department of Commerce. As Inspector General, Mr. Zinser leads a team

of auditors, evaluators, investigators, attorneys, and administrative staff responsible

for promoting economy and efficiency and detecting and preventing fraud, waste,

and abuse in the vast array of business, scientific, economic, and environmental programs administered by the Department and its 13 bureaus.

Mr. Zinser’s appointment as Inspector General by President Bush follows his 24

years as a career civil servant. He began as an investigator for the U.S. Department

of Labor in 1983. Mr. Zinser joined the Department of Transportation in 1991, serving as special agent in charge of OIG’s New York regional Office of Investigations,

Deputy Assistant Inspector General for Investigations, and Assistant Inspector General for Investigations. He was named Deputy Inspector General in 2001, with responsibility for day-to-day OIG operations and management of more than 400 auditors, investigators, and evaluators monitoring the activities funded by Transportation’s roughly $60 billion budget.

Mr. Zinser has received numerous awards for superior performance and leadership throughout his career, including the Secretary of Transportation’s 9–11 Medal

61

and two Gold Medals—the first for his work with the Department’s Hurricane

Katrina Task Force (2006); the second for his involvement in Transportation’s response to the collapse of the I–35W bridge in Minneapolis (2007). Also in 2007, he

was awarded the Transportation IG’s Bronze Medal for superior achievement as

Deputy Inspector General.

Mr. Zinser holds a Bachelor’s degree in Political Science from Northern Kentucky

University and a Master’s degree in Political Science from Miami University, Oxford, Ohio. He has also completed the Senior Managers in Government Program at

Harvard’s John F. Kennedy School of Government.

Chairman MILLER. Thank you, Mr. Zinser. Mr. Cross for five

minutes.

STATEMENT OF MR. THOMAS C. CROSS, INTERIM INSPECTOR

GENERAL, NATIONAL SCIENCE FOUNDATION

Mr. CROSS. Good afternoon, Chairman Miller, good afternoon,

Ranking Member Broun, and Members of the Subcommittee.

Thank you for the opportunity to testify today about how the NSF

Office of Inspector General will perform its oversight responsibilities under the Recovery Act.

I would like to discuss three subjects with you today. First, the

OIG’s plan for monitoring NSF’s recovery spending; second, important challenges facing NSF with regard to the Recovery Act; and

finally, how my office will be addressing our current staffing needs.

We will pursue a strategy aimed not only at safeguarding Recovery Act funds against waste, fraud, and abuse, but also at helping

assess whether those funds produce the results sought in the Act.

We will develop an implementation plan for our Recovery Act oversight that includes preparing a thorough risk analysis, reviewing

past OIG audit and investigative findings that may be relevant,

contracting for audits and other reviews of the agency’s financial

accounting systems, conducting focused reviews of the agency’s actions to implement its spending and risk management plans, and

initiating detailed audits and proactive investigation reviews to

identify and evaluate issues flagged in our risk assessments.

We have also launched an outreach effort aimed at both agency

program managers and the public about OIG’s role under the Recovery Act, and this also helps us gather information and insights

that are useful in determining the issues on which we need to

focus.

Given our independent oversight role, we cannot participate in

agency decision-making, but our input at this juncture may help

NSF avoid problems down the road. Like other IG offices, we prepare a list each year of what we consider the most significant challenges facing agency management, and there are several challenges

that have particular relevance to the administration of the Recovery Act. Previous reviews have identified major research equipment

and facilities construction expenditures and NSF’s monitoring of

previously made awards as high-risk activities. Actions that NSF

has taken in recent years in response to past OIG recommendations have mitigated some of the problems that we identified. However, we still consider both as high-risk areas for purposes of the

Recovery Act because of the large amounts of money at stake and

the fact that a number of our recommendations remain

unimplemented.

62

We understand NSF intends to use Recovery Act funds largely

to support proposals that have already been submitted. It will be

a challenge for NSF to implement the new requirements on awards

that are based on earlier proposals which most likely did not envision or address the purposes or additional reporting requirements

of the Act.

Another management challenge that raises concern is the adequacy of the NSF’s workforce, as you heard earlier this morning.

The administration of the Recovery Act funds represent a significant increase in NSF’s workload over at least the next year-anda-half, and we are concerned that the work involved in distributing

and monitoring the results of the Recovery Act funding will severely strain NSF’s grant/processing operations, its staff, and its

information systems across the agency.

Further, a fundamental responsibility of my office is the promotion of research integrity. We devote significant investigative resources to both preventing and investigating research misconduct,

and we are concerned that the large inflow of research dollars into

an already highly competitive arena can only increase the opportunities for abuse.

Finally, we will also be watchful of award recipients whose financial systems may have difficulty handling a sizable influx of funds.

We have identified a number of specific grant characteristics as

fraud indicators that, based on our experience, may reflect a higher

potential for abuse, and we are sharing these indicators with NSF

along with practical guidance on combating fraud.

I was also asked by the Subcommittee to comment on our own

staffing resources. Because the funding we received in the Act is

temporary, we probably will not be able to use stimulus funding to

hire additional permanent employees. Instead, we are looking into

options for the temporary hiring of auditors and investigators, and

we expect to use the bulk of our Recovery Act funding to retain

contractors to conduct audits and provide forensic support for investigations.

We expect that the additional workload generated by the stimulus funds will be significant and extend beyond the funding period. We are considering some adjustments to our work methods,

such as developing reviews that are shorter and more focused than

traditional audits tend to be in order to provide more timely results. Our challenge will be to continue to provide the robust audits

and investigations necessary to address fraud, waste, and abuse

issues occurring in NSF’s programs and activities, while also giving

top priority to the special oversight requirements of the Recovery

Act, and we look forward to meeting that challenge.

Chairman Miller, that concludes my testimony, and I would be

happy to answer any questions.

[The prepared statement of Mr. Cross follows:]

PREPARED STATEMENT OF THOMAS C. CROSS

Good morning Chairman Miller, Ranking Member Broun, and Members of the

Subcommittee. Thank you for the opportunity to testify today about how the National Science Foundation (NSF) Office of Inspector General (OIG) intends to perform its oversight responsibilities under the Recovery Act for the $3 billion in Recovery Act funds allocated to NSF. Discussions regarding how best to ensure the accountability of Recovery Act funds have been ongoing within the IG community, beVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00072 Fmt 6633 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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tween our office and NSF, and within our own office for several weeks. Like the

hearing today, these discussions are helping us to better prepare for the many challenges ahead.

To introduce myself, my name is Tim Cross and I was appointed Interim Inspector General last January after serving as the NSF Deputy Inspector General for the

past eight years. Our office is unusual among the Designated Federal Entity OIGs

in that we report to the National Science Board, a policy and oversight body, rather

than to agency management. Over the years, this arms-length relationship from

management has allowed OIG the freedom to pursue a vigorous audit agenda and

provide the Congress and the Foundation with fully independent analyses and recommendations. NSF’s mission to support education and basic research has also required that my office develop a strong investigative effort to ensure research integrity and to address instances of misconduct in research.

I would like to discuss three subjects with you today. First will be the OIG’s plan

for monitoring NSF’s recovery spending. Second, I will describe some of the important challenges facing NSF with regard to the Recovery Act. Finally, I will discuss

how my office will be addressing our current staffing needs.

Planning. Ensuring compliance with the many requirements of the Act poses a challenge for all the IG offices involved, and we have appointed a special team within

our office to coordinate our planning of Recovery Act activities. The NSF OIG will

pursue a strategy aimed not only at safeguarding Recovery Act funds against waste,

fraud and abuse, but also at helping assess whether those funds produce the results

sought in the Act. NSF has submitted its Recovery Act plan to OMB for approval,

and once the agency provides this plan to our office, we will develop an implementation plan for our Recovery Act oversight that includes:

• Preparing a risk assessment based on the agency’s spending plan and its own

risk management plan;

• Assessing past OIG audit and investigative findings that are relevant to

NSF’s management of Recovery Act funds;

• Contracting for audits and other reviews of the capacity of the agency’s financial accounting systems to track separately and report accurately on Recovery

Act funds;

• Conducting focused reviews of the agency’s actions to implement its spending

and risk management plans at the earliest possible point, when corrective actions will be most beneficial; and

• Initiating detailed audits and proactive investigation reviews to identify and

evaluate issues flagged in our risk assessments.

We have also launched an outreach effort aimed at educating both agency program managers anal the public about OIG’s role under the Recovery Act. This effort

also helps us gather information and insights that are useful in determining the

issues on which we need to focus. OIG staff members are attending NSF planning

sessions at all levels to improve our understanding of agency activities and to make

our concerns known at an early stage. Given our independent oversight role, we cannot participate in agency decision-making, but our input at this juncture may help

NSF avoid problems down the road. We have also been meeting with the IGs in

other agencies that received Recovery Act funding to brainstorm approaches to oversight. As you know, the Act requires that OIGs examine issues raised by the public

about the funds and post the results of their inquiries on the OIG websites, with

a link to the Recovery Accountability and Transparency Board’s website. Our office

will ensure that Recovery Act-related investigations, audits, reviews, and information received from the public are handled in a manner that is both expeditious and

thorough. We are also developing new procedures to address the Act’s broad requirements for investigating whistleblower allegations. In general, we are able to respond

to a question or tip from the public within hours of an e-mail or hotline call, and

we will be giving Recovery Act inquiries priority attention.

Challenges. Like other IG offices, we prepare a list each year of what we consider

the most significant challenges facing agency management. With regard to funding

areas that deserve special consideration, there are several challenges that have particular relevance to the administration of the Recovery Act. Previous NSF OIG reviews have ,identified Major Research Equipment and Facilities Construction

(MREFC) expenditures and NSF’s monitoring of previously-made awards as highrisk activities. Actions that NSF has taken in recent years in response to past OIG

recommendations have mitigated some of the problems that we identified. However,

we still consider both as high-risk areas for purposes of the Recovery Act because

of the large amounts of money at stake and the fact that a number of our recVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00073 Fmt 6633 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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ommendations remain unimplemented. We will watch both areas closely to ensure

that Recovery Act funds are spent promptly and prudently, and that:

• The agency keeps track of the awards and their associated funding;

• The award outputs and outcomes are clearly identified and consistent with

the intended economic stimulus goals of the Recovery Act; and

• Sub-awardees can accurately account for and report their spending activities

to the prime awardee.

In addition, we understand that NSF intends to use Recovery Act funds largely

to support proposals that have already been submitted. It will be a challenge for

NSF to implement the new requirements on awards that are based on earlier proposals, which , most likely did not envision or address the economic stimulus purposes or additional reporting requirements of the Act.

Another management challenge that raises concern is the adequacy of NSF’s

workforce. Despite an increase in workload driven by an increasing number of research proposals received over the past ten years, agency staffing levels have remained relatively flat. Consequently, the NSF workforce has at times struggled to

keep pace with the incoming workflow. The administration of Recovery Act funds

represents a significant increase in NSF’s workload over at least the next year-anda-half, with no provision for funding additional staff or overhead. The agency is hoping that the infusion of new funds will allow the rate of approved proposals to increase from the current 20 percent to as much as 30 percent in the short-term, and

we anticipate a concomitant increase in workload throughout the life of the two- to

five-year standard awards. We are concerned that the work involved in distributing

and monitoring the results of Recovery Act funding will severely strain NSF’s grantprocessing operations, staff, and information systems across the agency. Absent an

increase in staffing resources, the additional workload will make compliance with

the Act’s transparency and accountability requirements considerably more difficult.

This is an issue that we are discussing with NSF staff, as they seek ways to manage

the workload strain.

Further, a fundamental responsibility of my office is the promotion of research integrity, and we are encouraged by recent presidential statements about its importance to the advancement of science and technology in this country. In concert with

NSF’s mission to support basic research, we devote significant investigative resources to both preventing and investigating research misconduct, which includes

plagiarism in proposals or reports, falsifying research data, and fabricating data. We

are concerned that the large inflow of research dollars into an already highly competitive arena, where issues of questionable research practices and inadequate

training in the responsible conduct of research remain unresolved, can only increase

the opportunities for abuse.

Finally, we will also be watchful of award recipients whose financial systems may

have difficulty handling a sizable influx of funds. Institutions already under financial strain, for example, may be tempted to use the new funds for purposes other

than those designated in the awards. We have identified a number of specific grant

characteristics as ‘‘fraud indicators’’ that, based on our experience, may reflect a

higher potential for abuse. These include indications of questionable cost-sharing

claims by institutions receiving NSF awards, abuse of funds intended only for student support under a grant, duplicate submissions of proposals, and the diversion

of grant funds to unrelated purposes. In addition to participating in NSF’s planning

and implementation teams, our investigators are sharing these indicators with NSF,

along with practical guidance on combating fraud Through these efforts, we have

developed a rigorous approach within our office for handling cases of grant fraud,

while also keeping the agency well-informed on how to identify the warning signs

and reduce or prevent its occurrence.

Staffing. I was also asked by the Subcommittee to comment on our own staffing resources, specifically whether we planned to add staff and what professional skills

might be needed to perform our Recovery Act oversight responsibilities. The expected increase in workload over the next five years creates a critical need for additional audit and investigations capability. Because the funding we received in the

Act is temporary, we probably will not be able to use stimulus funding to hire additional permanent employees.

Instead, we are looking into options for the temporary hiring of auditors and investigators, and we expect to use the bulk of our Recovery Act funding to retain contractors to conduct audits and provide forensic support to investigations. We also

plan to contract with IT auditors to conduct technical reviews of specific NSF systems. However, with so many government organizations—IG offices and federal

agencies alike—seeking contractor support as a result of the Act’s requirements, we

65

are concerned that it will be difficult to procure the professional assistance we need.

In our FY 2010 budget request, we are seeking approval to add auditors and investigators, some of whom could conceivably be hired before the start of FY 2010 with

Recovery Act funds. With an appropriation to back up such hires, we would not risk

running out of staff funding when the Recovery Act money is gone. In any case, it

seems clear that we will also be diverting some of our existing staff from audits and

investigations they would normally handle to instead perform work that is necessary to ensure proper oversight of NSF’s management of its stimulus funds.

Due to the intense public interest and enhanced accountability requirements associated with the Recovery Act, and because our work inherently focuses primarily on

assessing completed projects and expenditures, we expect that the additional workload generated by the stimulus funds in the form of audits, investigations, outreach,

and administration will be significant and extend beyond the funding period. We are

considering some adjustments to our work methods, such as developing reviews that

are shorter and more focused than traditional audits tend to be, in order to provide

more timely results. We have to be mindful, however, that cutting corners poses intrinsic risks, and we must avoid any actions that could compromise the quality,

credibility, or usefulness of our work. Our challenge will be to continue to provide

the robust audits and investigations necessary to address fraud, waste, and abuse

issues occurring in NSF’s programs and activities, while also giving top priority to

the special oversight requirements of the Recovery Act. We look forward to meeting

that challenge.

Chairman Miller, this concludes my testimony. I again want to thank you for the

opportunity to share my views. I will be happy to answer any questions.

BIOGRAPHY FOR THOMAS C. CROSS

Tim Cross has served as the Interim Inspector General at the National Science

Foundation (NSF) since January 2009. For the previous eight years, he was the

Deputy Inspector General, managing Office of Inspector General operations and special projects.

Previously, Mr. Cross was the Assistant Inspector General for Inspection and

Evaluation at the Small Business Administration (SBA) from 1991 to 2000. He

headed a division that assessed the performance of SBA programs and conducted

analyses of related policy and management issues.

From 1986 to 1991, Mr. Cross served as Chief of the Program Coordination Division in a crisis management office at the Department of State. In this capacity, he

was responsible for coordinating interagency activities with the intelligence community, evaluating crisis management functions, and maintaining a crisis data base.

From 1983 to 1986, Mr. Cross was Director of the Office of Policy and Management Analysis in the Criminal Division at the Department of Justice. He managed

a staff that performed evaluations of law enforcement programs, intelligence analyses, planning for new Departmental initiatives, and policy analyses. He held various positions in the same office from 1979 to 1983, including Organized Crime Specialist and Associate Director. From 1978 to 1979, he was a drug enforcement program analyst in the Management Division at the Department of Justice.

Prior to his federal employment, Mr. Cross held positions with the Massachusetts

State government, including Coordinator of Staff Education for the Department of

Correction and Director of Community Services in a maximum-security State prison.

Mr. Cross earned a B.A. with honors in social sciences from Harvard University

(1970), a Master’s degree in criminology from the University of California, Berkeley

(1972), and an M.B.A. from Stanford University (1977).

Chairman MILLER. Thank you, Mr. Cross. Ms. Norcross for five

minutes.

STATEMENT OF MS. EILEEN NORCROSS, SENIOR RESEARCH

FELLOW, MERCATUS CENTER, GEORGE MASON UNIVERSITY

Ms. NORCROSS. Mr. Chairman and Members of the Subcommittee, thank you for inviting me to testify today on how citizens and non-governmental entities can help monitor stimulus

spending. I am a Senior Research Fellow at the Mercatus Center,

a university-based research center that works with scholars, policy

experts, and government officials to connect academic learning with

real-world practice. Part of that research focuses on using techVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00075 Fmt 6633 Sfmt 6601 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
66

nology to improve government transparency, including accessibility

and usability of data for agencies, Congress, and citizens.

First, I would like to submit to the record a paper by my colleague, Jerry Brito on crowd sourcing, one of the tools I will discuss

today.

The Committee knows how vital accountability is to the perform- ance of the nearly $800 billion committed in the American Recovery

and Reinvestment Act. We are entering unsettling economic territory regardless of any potential short-term stimulus effect. We face

a budget deficit of $1.75 trillion in 2009. That is 12.3 percent of

GDP, the highest deficit as a share of the economy since World

War II.

Another effect of the recession and stimulus actions is the massive uncertainty it has created. Transparency is important for

many reasons, including restoring credibility and certainty with the

public. Following the money as it flows from agencies to states, localities, contractors, and grantees is a monumental, if not impossible, task for a centralized entity, no matter how many auditors

and analysts government commits to the job. The Administration

noted why in its memo on transparency and open government:

knowledge is widely dispersed in society. Those in government

charged with stimulus accountability are being asked to manage an

unprecedented deluge of data. Funds are to be spent quickly while

ensuring prudent management.

Fortunately, that work can be augmented at a low cost. The public, technically skilled and knowledgeable parties in the on-line

transparency community can help fill that gap, but only if government provides the data. The data must be deep, structured, and

standardized. With data made publicly accessible, there are literally no limits to how individuals can extract patterns, trends,

using Internet tools and applications. One such tool is crowd

sourcing.

Crowd sourcing allows a large group of people to make small, individual contributions to a project. Wikipedia, the on-line encyclopedia, is the most familiar example. Wikipedia is built on wikis, a

kind of on-line collaborative notebook built by volunteers who add,

edit, and enhance reference articles on any topic conceivable. The

result is a dynamic resource more extensive and deep than what

a limited number of editors could produce in a traditional organization. The Internet allows people to gather and analyze data in

novel ways, to take apart impenetrable masses of data quickly to

find patterns. This technique can be used to follow stimulus money.

In fact, it is being used right now at StimulusWatch.org, a website

I co-founded with Jerry Brito and two software developers, Kevin

Dwyer and Peter Snyder.

The premise of StimulusWatch is simple. Using the U.S. Conference of Mayors’ on-line wish list for projects cities would like to

fund with stimulus money, in a manner of weeks the developers

created a key word searchable database, allowing users to search

projects, comment, and vote, and importantly contribute wikis or

factual information on projects. In effect, StimulusWatch transformed a static, on-line list into a virtual town hall.

Since the launch in January, the response has been tremendous.

In the first month we had two million unique visitors and many

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journalists using the site. Projects deemed low priority rose to the

top within hours. A few weeks after the site’s launch, a local paper

in Natchez, Mississippi, clarified that a nature trail listed at $600

million was only supposed to cost $3.1. An error had been made,

but it had been caught because so many eyes were scanning the

data.

Other projects in transit and light rail quickly emerged as high

priority, stimulating debate by local citizens. Many project descriptions were enhanced with factual information beyond what cities

provided, in some cases clarifying what were initially viewed as

wasteful projects.

StimulusWatch demonstrates how crowd sourcing can help monitor projects that are actually funded with stimulus dollars. But

first, the public needs raw, project-level data. Though Recovery.gov

has promised accountability to citizens through reporting, the provisions of the Act are not encouraging.

ARRA’s reporting requirements are shallow and incomplete. Only

prime, non-federal recipients and sub-awards made by prime recipients must be reported. The trail stops very high in the funding

chain. Some recipients need not report. In many cases, that means

reporting stops at the level of a city. The granular project level detail necessary for analysis and tracking may not be available.

Secondly, ARRA doesn’t stipulate how data should be provided.

There is no guarantee of complete data sets or structured formats

such as XML. Why is this important? An example: it may be possible to account for stimulus spending in a narrative form and posted online. We may be left with millions of individual narratives,

but it would be impossible to read them all and make sense of

them. Putting this data in a structured format that can be used by

developers can permit any number of possibilities for monitoring

and measuring the stimulus impact and performance, meshing the

data with interactive maps, economic or industry statistics in Congressional districts. But short of project-level data provided in a

structured format, the task at hand is not only an impossibility but

a wasted opportunity that will leave more questions about the efficacy of the stimulus unanswered and even greater uncertainty

among the public.

Thank you, and I look forward to your questions.

[The prepared statement of Ms. Norcross follows:]

PREPARED STATEMENT OF EILEEN NORCROSS

Mr. Chairman and Members of the Committee:

Thank you for inviting me to testify on ‘‘Follow the Money: Accountability and

Transparency in Recovery Act Science Funding.’’ My research at Mercatus has included considering ways to improve the access, clarity, and usability of government

data so agencies, Congress, and researchers and citizens can make better use of that

data, while helping ensure greater accountability for government spending.

The Committee knows how vital transparency and accountability is to the

progress and performance of the nearly $800 billion in funds committed as part of

the American Recovery and Reinvestment Act (ARRA).

Following the stimulus money—as it branches out from agencies to State and

local budgets, contractors, subcontractors, individual projects and transactions—is a

monumental and, frankly, impossible task for a centralized entity, no matter how

many auditors and analysts the government commits to the job. Simply put: information about how funding is ultimately spent is dispersed, and knowledge about

how funds are used is local. A central entity cannot possibly marshal or even be

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1 Jerry Brito, Hack, Mash & Peer: Crowdsourcing Government Transparency, 9 Columbia

Science and Technology Law Review 119 (2008), available at http://www.stlr.org/html/

volume9/brito.pdf

alert to all of the possible transactions and dedications of stimulus dollars, or comprehensively assess how projects are performing.

Those in government charged with this important task are being asked to manage

an unprecedented deluge of data that accompanies a funding commitment of this

size. There is the added pressure and paradox of spending funds quickly, while ensuring prudent management. As the Professional Services Council stated, ‘‘without

a government workforce sufficient to plan, deliver, and manage the contracts and

grants that dispense these huge funds, it will be like constructing an office building

on a foundation of sand.’’

Fortunately that workforce can be augmented. The public—individuals with local

knowledge—aided by technology, can fill in the gap. To help government with the

stimulus-monitoring effort, there are low-cost innovative solutions that embrace the

best principles of government accountability, 21st century Internet technology, citizen, and community involvement. I would like to highlight one such approach

today—crowdsourcing.

Crowdsourcing or ‘‘peer production’’ allows a large group of people to make small

individual contributions to a project or product that would traditionally have been

produced by a single individual or organization.1

The most familiar example of crowdsourcing is Wikipedia—the online communityoriented encyclopedia. A wiki is a kind of online collaborative notebook. Wikipedia

is a reference built by volunteers who add, expand, enrich and edit reference articles

on any topic conceivable.

The result is a vast, ever-evolving, but easy-to-use resource that is more extensive

than what a limited number of editors could produce. Importantly, Wikipedia is dynamic, continually updated and monitored by users for content and accuracy.

This kind of informational dynamism, which permits ongoing content and data enrichment and improvement, has only become possible with Internet technology. By

reducing the transaction costs between individuals, the Internet and continual software developments allow people to gather and analyze data in novel and creative

ways—to take apart seemingly impenetrable masses of data and extract patterns

and new meaning.

But it is only possible if government provides data according to a few basic principles, advanced by my colleague Jerry Brito.

Data must be structured, open, and searchable. In other words, it must be provided in useful formats, standard, web-friendly, machine-readable formats that can

be aggregated, parsed, and sorted. A loose analogy is to think of this as data in a

spreadsheet—with rows and columns that allow users to sort according to criteria

and uncover trends and patterns.

This is in contrast to disclosing spending in reporting narrative. The information

might all be there, but it doesn’t allow a computer to analyze it. However, putting

information in XML (Extensible Markup Language) would allow a user to search,

for instance, all projects over $500,000 for a contractor in a particular state, or congressional district.

Providing data in this form allows users to innovate, building tools to analyze and

improve upon the data, merging maps, economic statistics, industry information

thereby enhancing reporting. This informs citizens, and also aids the government

in the effort to gauge how federal funds are performing.

I will now turn to a concrete example of how this is working in practice.

What crowdsourcing can do for stimulus accountability

One of the great benefits of crowdsourcing is that it is low-cost and fast. The

human capital is already in place—made up of volunteer programmers and good

government activists in the online transparency community.

1) StimulusWatch.org

In early December I came across the online U.S. Conference of Mayors Ready-toGo wish list of projects cities submitted detailing how they would like to spend potential stimulus funds.

The list had several virtues. Importantly it provided granular details of how federal funds might be spent on the local level. It was possible to sort by city, and federal funding type. Each project listed included valuable details: project dollar

amounts, potential jobs created, and in most cases, brief project descriptions.

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2 ‘‘City did not ask for $600M for project’’ by Mary Hood, Natchez Democrat, February 7, 2009,

http://www.natchezdemocrat.com/news/2009/feb/07/city-did-not-ask-600m-project/

However, there was a limited amount of information I could extract by myself not

having local knowledge of all of the communities nor unlimited time. The data was

meaningfully displayed, but the format was relatively rigid and did not allow for

keyword searching.

I asked my colleague Jerry Brito if the list might be a good opportunity for

crowdsourcing—to invite people with local knowledge to improve the content while

also proving localities with feedback on the relative merit of individual projects.

Jerry, with the help of two volunteer software developers, Kevin Dwyer and Peter

Snyder, screen-scraped the data from the Mayor’s site and within a few weeks created StimulusWatch.org. The site uses the data reported by participating cities to

the U.S. Conference of Mayors, while improving upon its usability by allowing visitors to vote and comment on individual projects and search projects by keyword.

One of the most important features of the site is that it allows individuals—citizens and city officials alike—to contribute wikis, or factual information, on individual projects, in many cases enhancing and clarifying the project descriptions initially provided by individual cities. In effect, StimulusWatch.org helped transform

a static report into a kind of online national Town Hall.

We observed some interesting trends. First, the response was tremendous. In the

first month we had two million unique visitors, and many journalists using the site.

Users were actively commenting on projects and adding information.

Projects deemed low-priority—dog parks, for example, rose to the top within hours

of the site’s launch. An official in Natchez, Mississippi clarified in the local paper

a few weeks after the site’s launch that a nature trail project listed on the site as

costing $600 million, was only supposed to cost $3.1 million—an error had been

made, and it had been caught, because so many eyes were able to quickly parse the

data.2

Other projects, in particular in transit and light rail, quickly emerged as highpriority, stimulating active and ongoing debate by local citizens. Many project descriptions were enhanced by people contributing factual information, in some cases,

clarifying what were initially regarded as wasteful projects.

The result of StimulusWatch.org to date has been more than encouraging, it has

functioned as a demonstration project—showing how the public can contribute and

help the government keeps its commitment to accountability by ferreting out potential waste, while also becoming civically engaged, providing feedback to officials on

how dollars are ultimately used to benefit the community.

2) Crowdsourcing and Stimulus Accountability

The online community is eager to help government in the task of monitoring stimulus funding. Recovery.gov has made a commitment to provide information to the

public.

In order to meet the government’s goals of transparency and accountability, certain details must be provided to the public. Specifically,

a) Project-level details on how funds were spent.

Individual should be able to drill down from contractor, to subcontractor, to

the level of individual transaction, up to a cap of $25,000.

b) Absent government provision of a database, raw data should be made available.

The government does not have to build such a database to track spending,

it only needs to require that grantees (states, localities, and grantees) provide raw data according to the principles mentioned-structured, open, and

searchable, and then make that data available to the public. This will allow

users to access, search, and analyze data for patterns and trends.

But before this is possible, the disclosure and transparency requirements in the

American Recovery and Reinvestment Act must be strengthened. ARRA does not require data be provided in structured machine-readable formats. Guidance issued by

the Office of Management and Budget does not remedy other outstanding issues.

The Recovery Accountability and Transparency Board must address four issues in

how it requires and will publish data: detail in disclosure, standardization of information, aggregation and centralized access.

a) Detail and Depth in Disclosure

According to OMB’s guidance,

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3Office of Management and Budget, Initial Implementation Guidance for the American Recovery and Reinvestment Act of 2009, Feb. 18, 2009, pages 14–15, available at http://

www.whitehouse.gov/omb/asset/aspex?Assetl=703 4 ARRA §1512 (c ) requires stimulus fund recipients report to awarding agencies how they

have spent funds, there is no requirement in the Act that reports be made available to the public.5The Coalition for an Accountable Recovery, at http://www.ombwatch.org/car

‘‘Reporting requirements only apply to the prime non-federal recipients of federal funding, and the sub-awards, (i.e., sub-grants, subcontracts, etc.) made by

these prime recipients. They do not require each subsequent sub-recipient to

also report. For instance, a grant could be given from the Federal Government

to State A, which then gives a sub-grant to City B (within State A), which hires

a contractor to construct a bridge, which then hires a subcontractor to supply

the concrete. In this case, State A is the prime recipient and would be required

to report the sub-grant to City B. However, City B does not have specific reporting obligations, nor does the contractor or subcontractor for the purposes of reporting on the Recovery.gov website.’’ 3

This, in effect, hobbles the accountability commitment of the Administration. The

trail stops very high in the funding chain, making the ultimate destination of funds

a mystery.

It is not sufficient to know HUD made a grant to New York, which then made

a grant to New York City. We should know to whom the grant was ultimately made.

This level of detail allows citizens with local knowledge to uncover if funds are being

used in accordance with the law, revealing fraud and misuse.

Every dollar in the funding chain should be accounted for. Further, the reporting

requirements do not stipulate how data should be provided. There is no guarantee

that the complete data set of recipient reports will be provided, or that they will

be provided in a useful format.4

b) Standardization

It is currently unclear how data will be provided. To continue the spreadsheet

metaphor, we don’t know what the columns and rows look like. The Act requires

initial recipients to base their reporting on the Federal Funding and Transparency

Act. Thus, we expect reports will contain, award grantee names, amounts, program

source, description, city, and state. But we do not know what data elements will actually be published, or the format in which we can expect it.

It would be helpful to know what Recovery.gov intends to provide, and in what

form. That way, software developers can begin work on applications. Ideally data

should be in XML format.

c) Aggregation

When information is standardized (the what, who, when and where of data), then

it is possible to aggregate it.

d) Centralized Access

Funding will be widely distributed, thus information will come from many

sources. For the information to be useful, it must be searchable from central locations. Recovery.gov should function as a web search engine that houses every single

reporting data set. That does not preclude individual agencies publishing spending

data on their websites. An analogy is to think of reports as books, indexed in a card

catalog. As long as we know where the book is housed, it is possible to find it. Recovery.gov doesn’t have to have all of the data sets, just the key for finding them.

Conclusion

With the passage of ARRA, the Administration and Congress made a commitment

to citizens that the government would ensure transparency and accountability for

how stimulus funds were spent. That task is only possible with the involvement of

citizens—interested, technically skilled, and knowledgeable parties from across the

political spectrum who want to participate in and collaborate with their government.5 That community needs to know what data will be provided, and how to build

the tools needed to make this effort work.

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6President Barack Obama, Memorandum for the Heads of Executive Departments and Agencies on Transparency and Open Government, Jan. 21, 2009, available at http://

www.whitehouse.gov/the¥press¥office/TransparencyandOpenGovernment/

The President’s Memorandum on Transparency and Open Government cites three

themes: transparency, participation, and collaboration.6 The memo makes two important points developed in this testimony:

‘‘Knowledge is widely dispersed in society, and public officials benefit from having access to that dispersed knowledge.’’

‘‘Executive departments and agencies should use innovative tools, methods, and

systems to cooperate among themselves across all levels of Government, and

with non-profit organizations, businesses, and individuals in the private sector.’’

These are the operating principles upon which Recovery.gov should build its transparency and accountability effort. Linking citizens with detailed, structured, and

standardized data will make it possible.

Thank you.

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BIOGRAPHY FOR EILEEN NORCROSS

Eileen Norcross is a Senior Research Fellow with the Social Change Project at the

Mercatus Center at George Mason University. Previously, she was a Senior Research Fellow with the Government Accountability Project from January 2003 to

July 2008.

Her research areas include the U.S. Budget, the use of performance budgeting in

the Federal Government, tax and fiscal policy, and community and economic development.

Before joining Mercatus, Ms. Norcross was the 2001–2002 Warren Brookes Fellow

in Journalism at the Competitive Enterprise Institute in Washington, D.C. While

there, she focused on trade, regulatory, and tax policies affecting the European

Union and the United States.

Before coming to Washington, Ms. Norcross worked for KPMG as a consultant

with their transfer pricing division and as a research analyst with Thompson Financial Securities Data where she researched mergers and acquisitions for domestic and

international transactions.

A native of New Jersey, Ms. Norcross earned her Master’s in Economics from Rutgers University in 1996. A member of Phi Beta Kappa, she graduated summa cum

laude from Rutgers University in 1993 with a Bachelor of Arts degree in Economics

and U.S. History.

Chairman MILLER. Thank you, Ms. Norcross. Ms. Dalton, five

minutes.

STATEMENT OF MS. PATRICIA DALTON, MANAGING DIRECTOR, NATURAL RESOURCES AND ENVIRONMENT DIVISION,

U.S. GOVERNMENT ACCOUNTABILITY OFFICE

Ms. DALTON. Thank you, Mr. Chairman, Mr. Broun. I am pleased

to be here today to discuss GAO’s plans for carrying out our oversight roles related to the science funding under the Recovery Act.

Today I want to discuss those responsibilities and plans that we

have under way to oversee these funds as well as the risks and

particular funding areas in R&D that deserve special attention to

ensure that the funds are best used.

The Recovery Act provides over $21 billion in additional spending

at Energy, Commerce, NSF, and NASA for research and development-related activities. These range from fundamental research to

demonstration projects to purchases of equipment, to the building

of new facilities.

The accountability community will play an important role in reviewing the use of Recovery Act funds. In addition to GAO, the

community includes the IGs, the State auditors, local government

auditors, and the Recovery Accountability and Transparency Board.

Because of the scope of this work, we at GAO have reached out

to the broader accountability community to coordinate our respective roles, planned approaches, and timelines. Through a coordinated approach, we feel that we can maximize our overall effectiveness.

The Recovery Act directs GAO specifically to provide bi-monthly

reviews and reporting on selected states and localities’ use of funds.

We have already begun the first review, which will examine 16

states, the District of Columbia, and selected localities. These

states represent 65 percent of the U.S. population and approximately two-thirds of the money going through the State governments under the Recovery Act program. Our first report will be

issued in about a month.

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1Pub. L. No. 111–5 (Feb. 17, 2009).

Over the next few years we will be able to provide an ongoing

longitudinal analysis of the use of Recovery Act funds at the State

and local level. We will look at other states as necessary.

At the federal level, in consultation with the Congress and in coordination with the IGs, we will also be targeting at-risk programs

for review. We will also incorporate reviews of stimulus funding in

our ongoing reviews-based programs.

In recent years, the accountability community has produced a

wide variety of best practice and related guides in areas such as

grant and contract management that can assist agencies in ensuring they have the needed internal controls in place from the outset.

Up-front safeguards are critical to the successful program implementation. It is important to have the controls built in at the beginning so that we can hopefully prevent downstream problems.

We at GAO are currently assessing programs for key risk factors.

They include whether it is a new program under the Recovery Act,

a significantly expanded program, there is a new delivery mechanism, or a program has known problems. A number of programs receiving science funding have one or more of these risk factors. For

example, $6 billion is being provided for loan guarantees at the Department of Energy. That is a significant expansion of a new program that has had some start-up problems. At NASA, when we examine projects with life cycle costs exceeding $250 million, 10 out

of 13 projects have very serious implementation problems in terms

of cost and budget and cost and schedule growth.

In summary, to make the most effective and efficient use of resources, we will work together with the IGs to leverage our

strengths and avoid duplication of effort wherever possible. We

have moved quickly to begin our oversight work with our initial assessment of State funding currently under way as well as our program risk assessment.

Thank you, Mr. Chairman.

[The prepared statement of Ms. Dalton follows:]

PREPARED STATEMENT OF PATRICIA DALTON

GAO’s Role in Helping to Ensure

Accountability and Transparency

for Science Funding

Chairman Miller, Ranking Member Broun, and Members of the Subcommittee:

I am pleased to be here today to discuss our plans for carrying out our oversight

roles related to science funding provided by the American Recovery and Reinvestment Act of 2009 (Recovery Act).1 I will also provide an overview of prior GAO work

that identifies several programs that deserve special attention from agency managers and from the Inspectors General (IG) at the Department of Energy, the Department of Commerce, the National Science Foundation (NSF), and the National

Aeronautics and Space Administration (NASA) to ensure that additional science

funds these agencies will receive under the Recovery Act are put to the best uses.

The Congress and the Administration have fashioned a significant response to what

is generally reported to be the Nation’s most serious economic crisis since the Great

Depression. The Recovery Act’s combined spending and tax provisions are estimated

to cost $787 billion, including more than $21 billion in additional spending at Energy, Commerce, NSF, and NASA for research and development (R&D) related acVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00122 Fmt 6633 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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2See GAO, American Recovery and Reinvestment Act: GAO’s Role in Helping to Ensure Accountability and Transparency, GAO–09–453T (Washington, D.C.: March 5, 2009).

tivities, including supporting fundamental research, demonstrating and deploying of

advanced energy technologies, purchasing scientific instrumentation and equipment,

and constructing or modernizing research facilities. (See Appendix I.)

The accountability community will play an important role in reviewing the use

of Recovery Act funds. In addition to GAO, the community includes the IGs, State

auditors, local government auditors, and the Recovery Accountability and Transparency Board. The Recovery Act has identified the following specific responsibilities

for GAO, the IGs, and the Recovery Accountability and Transparency Board:

• GAO is charged with reviewing the use of funds by selected states and localities and commenting on funding recipients’ estimates of the number of jobs

created and retained as a result of the funding. We also have several other

reporting responsibilities.2

• IGs across government are expected to audit the efforts of federal agencies’

operations and programs related to the Recovery Act, both individually within

their particular entities and collectively, as many of them are members of the

Recovery Accountability and Transparency Board.

• The Recovery Accountability and Transparency Board is intended to help prevent waste, fraud, and abuse by reviewing contracts and grants to ensure

they meet applicable standards, follow competition requirements, and are

overseen by sufficient numbers of trained acquisition and grants personnel.

The Board has a range of authorities and is charged with reporting to the

President and the Congress any potential problems requiring immediate attention in addition to reporting quarterly and annually.

My statement today discusses (1) our responsibilities under the Recovery Act to

provide bimonthly reviews of selected States’ and localities’ use of funds; (2) particular R&D funding areas that deserve special attention to ensure that funds are

best used; and (3) our plans for carrying out our responsibilities under the Recovery

Act.

Our Responsibilities Under the Recovery Act and Our Plans to Evaluate AtRisk Programs

The Recovery Act directs GAO to provide bimonthly reviews and reporting on selected States’ and localities’ use of funds. We have initiated work on the first review,

which will examine 16 states, the District of Columbia, and selected localities. Specifically, we axe examining how these states and localities are using the Act’s funds

and whether they are, among other things, (1) preserving and creating jobs and promoting economic recovery; (2) assisting those most impacted by the recession; (3) investing in transportation, environmental protection, and other infrastructure that

will provide long-term economic benefits; and (4) stabilizing State and local government budgets in order to minimize and avoid reductions in essential services and

counterproductive State and local tax increases. We will track the following 16

states, and the District of Columbia, over the next few years to provide an ongoing

longitudinal analysis of the use of funds under the Recovery Act: Arizona, California, Colorado, Florida, Georgia, Iowa, Illinois, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Pennsylvania, and Texas.

These states contain about 65 percent of the U.S. population and are estimated to

receive about two-thirds of the intergovernmental grants funds available through

the Recovery Act.

Because of the scope of this work, we have reached out to the broader accountability community to coordinate our respective roles, planned approaches, and

timelines. Soon after the Act was passed, the acting Comptroller General reached

out to the IG community and, with Ms. Phyllis Fong, the Chairman of the Council

of Inspectors General on Integrity and Efficiency, hosted an initial coordination

meeting on February 25, 2009, with the Inspectors General or their representatives

from 17 agencies. It was a very productive discussion in which we outlined coordination approaches going forward. The acting Comptroller General also talked with Mr.

Earl Devaney soon after the President appointed him as Chairman of the Board on

February 23, 2009, to ensure effective coordination of our respective efforts.

In consultation with the Congress in exercising our general statutory authority to

evaluate the results of government programs and activities, we will target at-risk

programs for review. We will also incorporate reviews of stimulus funding whenever

we are examining base programs. There are many implementation challenges to ensuring adequate accountability and efficient and effective implementation of the ReVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00123 Fmt 6633 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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covery Act. Experience tells us that the risk for fraud, waste, and abuse grows when

billions of dollars are going out quickly, eligibility requirements are being established or changed, new programs are being created, or a mix of these characteristics.

This suggests the need for a risk-based approach to target for attention on specific

programs and funding structures early based on known strengths, vulnerabilities,

and weaknesses, such as a track record of improper payments or contracting problems. We currently are assessing all of the programs receiving Recovery Act funds

for key risk factors, including new programs, significant growth, new delivery mechanisms, and known problems. In recent years, the accountability community has

produced a wide variety of best practice and related guides that can assist agencies

in ensuring they have the needed internal controls in place from the outset. These

best practices and related guides cover such areas as fraud prevention, contract

management, and grants accountability.

R&D Funding Areas that Deserve Special Attention

Our prior work has identified several areas that deserve special attention from

management and the IG’s office to ensure that funds are put to best use. The following examples highlight problems associated with (1) a new program—Energy’s

innovative technology loan guarantee program—which does not have established

management and internal control activities, (2) an existing program that cannot

readily determine whether private entities would fund a project without the federal

funds, (3) an existing program that awards a large amount of matching funds to

demonstrate or deploy advanced technologies but cannot ensure that industrial partners will complete the project, axed (4) an existing program with a history of cost

overruns and schedule slippage for its major projects.

• The Recovery Act made $6 billion available to Energy to support $60 billion

in new loan guarantees under its innovative technology loan guarantee program. However, our July 2008 report entitled Department of Energy: New

Loan Guarantee Program Should Complete Activities Necessary for Effective

and Accountable Program Management (GAO–08–750) found that DOE was

not well positioned to manage the loan guarantee program effectively and

maintain accountability because it had not completed a number of key management and internal control activities. To improve the implementation of the

loan guarantee program and to help mitigate risk to the Federal Government

and American taxpayers, we recommended that DOE take several steps, including (1) completing detailed internal loan selection policies and procedures

that lay out roles and responsibilities and criteria and requirements for conducting and documenting analyses and decision making, (2) amending application guidance to include more specificity on the content of independent engineering reports and on the development of project cost estimates to provide

the level of detail needed to better assess overall project feasibility, and (3)

further developing and defining performance measures and metrics to monitor

and evaluate program efficiency, effectiveness, and outcomes. We are currently engaged in an ongoing engagement to determine the current state of

the loan guarantee program and what progress DOE has made since our last

report.

• The Recovery Act made $3.5 billion available to Energy to fund R&D on renewable energy and fossil energy. However our December 2008 report entitled

Research and Development: DOE Could Enhance the Project Selection Process

for Government Oil and Natural Gas Research (GAO–09–186) found that DOE

does not formally assess whether industry would undertake oil and gas R&D

without federal funding. To better ensure that DOE selects oil and gas R&D

projects that industry is unlikely to pursue, we recommended that DOE’s

project selection process include a formal assessment of the likelihood that

the R&D would not have occurred without federal funding. Our review of

similar federal programs has found that agencies may be unable to ensure

that their funding is not duplicating existing or planned research that would

be conducted in the same period in the absence of federal financial assistance.

In addition, our work has questioned a R&D program’s ability to obligate a

large influx of appropriations because the review, selection, and approval of

individual project proposals from the private sector can be lengthy and requires substantially more scientific peer review panels to assess the technical

merits of each proposal and staff with expertise in making grant awards.

• The Recovery Act made $2.32 billion available to Energy to jointly fund private sector projects demonstrating clean coal and carbon capture and sequestration technologies. However, our June 2001 testimony entitled Fossil Fuel

R&D: Lessons Learned in the Clean Coal Technology Program (GAO–01–

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854T) and a series of prior reports on the program found that many demonstration projects had experienced delays, cost overruns, bankruptcies, and

performance problems. We identified several lessons learned for improving

DOE’s selection and oversight processes. As a result of the projects’ problems,

the Congress since 1995 has rescinded or reprogrammed almost $900 million

of the funds appropriated for the Clean Coal Technology Program. More recently, our February 2009 report entitled Clean Coal: DOE’s Decision to Restructure FutureGen Should Be Based on a Comprehensive Analysis of Costs,

Benefits, and Risks (GAO–09–248) found that DOE did not base its decision

to restructure FutureGen on a comprehensive analysis of factors, such as the

associated costs, benefits, and risks. We recommended that, before implementing significant changes to FutureGen or before obligating additional

funds for such purposes, DOE prepare a comprehensive analysis that compares the relative costs, benefits, and risks of a range of options that includes

(1) the original FutureGen program, (2) incremental changes to the original

program, and (3) the restructured FutureGen program.

• The Recovery Act provided a total of $1 billion to NASA, including $400 million for exploration. However, our March 2009 report entitled NASA: Assessments of Selected Large-Scale Projects (GAO–09–306SP) noted that NASA

plans to invest billions of dollars in the coming years in science and exploration space flight initiatives. Our examination of NASA projects with life

cycle costs exceeding $250 million found that 10 of 13 that had entered the

implementation phase had experienced significant cost and/or schedule

growth—on average, development costs had increased by 13 percent and

launch had been delayed by 11 months. NASA has acted to adopt practices

that would better ensure that programs proceed based on a sound business

case that addresses technology maturity, design stability, complexity of heritage technology, contractor performance and development partner performance. In particular, NASA has undertaken an array of initiatives aimed at

improving program management, cost estimating, and contractor oversight.

However, until these practices become integrated into NASA’s culture, it is

unclear monies will be well-spent and the achievement of NASA’s mission will

be maximized.

Our Plans for Carrying Out Our Oversight Responsibilities

To make the most effective and efficient use of our resources, we plan to fulfill

our Recovery Act responsibilities related to science funding by working together

with the IGs to leverage our strengths and avoid duplication of effort wherever possible. In consultation with the Congress, we will also target at-risk programs that

receive Recovery Act science funding for review under our general audit authorities,

and we will expand our work on base programs to examine any related stimulus

funding.

In summary, GAO welcomes the responsibility that the Congress has placed on

us to assist it in the oversight, accountability, and transparency of the Recovery Act.

We will continue to coordinate closely with the rest of the accountability community.

We also are committed to completing our Recovery Act work on the timetable envisioned by the Act and will keep the Congress fully informed as our plans evolve.

Mr. Chairman, Representative Broun, and Members of the Subcommittee this

concludes my statement. I would be pleased to respond to any questions you may

have.

Staff Acknowledgments

Key contributors to this testimony were Richard Cheston (Assistant Director),

Karen Keegan, and Stuart Ryba.

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BIOGRAPHY FOR PATRICIA DALTON

Patricia Dalton became Managing Director of the Government Accountability Office’s Natural Resources and Environment Team in June 2008. The Natural Resources and Environment Team is responsible for GAO’s work in agriculture and

food safety, energy, the environment, federal land stewardship, U.S. and international nuclear security, and water resources and science and technology. Before

assuming her current responsibilities, Ms. Dalton was Managing Director of GAO’s

Physical Infrastructure Team, where she directed work in transportation, telecommunications, federal property, and the Postal Service. She was also a Director

in GAO’s Strategic Issues Team, where she was responsible for GAO’s work related

to government management issues, particularly performance management and the

Government Performance and Results Act, and organization structure and design.

She also was responsible for work related to the decennial census and the Census

Bureau, intergovernmental relations, and tools of government. Before joining GAO

in 2001, Ms. Dalton was the Deputy Inspector General for the U.S. Department of

Labor for seven years. She received her appointment to the Senior Executive Service

in 1993 from the U.S. Department of Army, where she served as Director of Audit

Policy, Planning and Resources, Army Audit Agency. Ms. Dalton is a Certified Public Accountant. She holds an MBA from the University of Massachusetts, and a BA

from the College of the Holy Cross.

DISCUSSION

Chairman MILLER. We will now have questions. I would anticipate one round. Do you have more than that?

Mr. BROUN. No, that is fine. I know you have a hearing that you

need to go to, and that is fine.

Chairman MILLER. Mr. Friedman and Mr. Zinser, the statute

provides that the two of you sit on the Recovery Accountability and

Transparency Board. The Board will meet for the first time on

March 27. What will you take to the Board, what concerns, what

recommendations?

Mr. FRIEDMAN. There are 10 IGs on the Board, as you know, and

I think—I of course am not the Chairman of the Board. Mr. Earl

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Devaney—who is the sitting IG, I guess, at the Department of the

Interior but is temporarily in this capacity—will be chairing it. So

I don’t precisely know what the agenda will be for that date. My

expectation is, number one, that we have a responsibility under the

statute to operate Recovery.gov, and that will probably consume a

good deal of our time at that meeting.

Secondly I anticipate that we will be talking about the progress

that we have made in proactively providing oversight at our respective agencies and determining if there are cross-cutting issues that

could be applied throughout the IG community and certainly

throughout the accountability community in a broader context.

So those are the three—and probably findings to date, you know,

specific to our agencies but which may have application again

across the board. So I anticipate that will be the primary focus of

the meeting, but I am not setting the agenda so I don’t know for

sure.

Chairman MILLER. Mr. Zinser, any concerns?

Mr. ZINSER. Yes, sir. I think there will be a lot of issues surrounding technical problems with Recovery.gov and reporting requirements on the agencies and how they are going to fulfill those

reporting requirements. I also think that a cross-cutting issue, both

for the oversight groups as well as the agencies themselves, and it

was discussed here several times this morning, is workforce issues,

about how we staff both the oversight agencies and the agencies

that are spending these monies. Do we have the right people in the

workforce to do it?

Chairman MILLER. Okay. Mr. Cross, if I could bring you in, too,

and ask the question of the three IGs. I know that most of the witnesses and perhaps all the witnesses touched on whether agency

contract and grant management resources are sufficient or really

ready to manage the extra workload. Do you believe they are sufficient? Are they ready for what is coming at them? And if not, what

needs to be done?

Mr. CROSS. I think at NSF they are making strides in that direction. They didn’t get any additional funding for workforce ameliorations. The workload is going to be there with essentially the same

staff. Given that fact, you have to look for ways to make that productivity more efficient, and they are doing that in terms of beefing

up their IT, doing some cross-training, bringing in more support

staff, that kind of thing, also looking at all the different possibilities with OPM for bringing people in on a temporary basis. So I

think that’s the thrust. They still have some new territory to tread

in terms of the reports and the information they need to generate

in terms of figuring out how to do undeclines as they call them,

where you’re taking formerly declined proposals and revisiting

those for future funding. There are some new games in play here

that people need to figure out, and I know they have got a lot of

staff and managers looking at those issues and we will be watching

to see how they work them.

Chairman MILLER. Mr. Zinser, Mr. Friedman?

Mr. ZINSER. I think at the Department of Commerce, it is mixed.

I think some agencies are prepared for contracting but perhaps not

grants and vice-versa. I know for example that a broadband technology program is going to require an increase in grants manageVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00128 Fmt 6633 Sfmt 6601 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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ment personnel, and the agency or the Department has three different agencies that administer grants and I don’t think they have

settled on what agency is going to administer the grants under the

broadband program. That is just one example, but whoever does is

going to have to increase that workforce substantially.

Mr. FRIEDMAN. It is a superb question, Mr. Chairman, and obviously it is one of the biggest problems that we feel the Department

of Energy faces. As you may be aware, the Department of Energy

perhaps is the most contractor-dependent agency in the civilian

sector. Virtually everything is done by contract, grant, cooperative

agreement, a whole series of contractual and financial instruments.

And actually, we wrote to the Deputy Secretary expressing our concern in 2007, and we have just updated that. We will be issuing

a report on that in the not-too-distant future. They have made

some progress, but given the influx of huge amounts of fresh dollars that are going to be flowing into the procurement system

broadly defined, it is one of the most significant challenges that the

Department faces and one that we have reported on regularly.

Chairman MILLER. Ms. Dalton, do you have any thoughts on

that?

Ms. DALTON. Well, I would agree with the Inspector Generals

that it is kind of a mixed bag. Some agencies and programs have

more experience in terms of grants and contract management, but

I think across the board we are going to have a capacity issue because there has been so much money that is going into these programs, and the agencies are going to have to be looking at what

is the best way to implement the programs, where can I get the

resources and the expertise, and in training the people that they

do have to manage these programs and the grants and the contracts and following best practices in terms of setting clear expectations for each of the grants and contracts and monitoring them.

Mr. FRIEDMAN. Can I add one thing, Mr. Chairman, to my answer?

Chairman MILLER. Sure.

Mr. FRIEDMAN. First of all, in the interest of being fair and balanced, which I want to be, the Department’s procurement officials

are aggressively trying to retain and recruit. For example, their retirement eligibility rate is quite high, so they are making aggressive efforts to try to retain and recruit the skilled workforce that

they need to handle the influx of additional cash. So I want to be

fair to them as well. They are making Herculean efforts to try to

meet their responsibilities.

Chairman MILLER. My time is expired. Dr. Broun.

Mr. BROUN. Thank you, Mr. Chairman. I assume you all were

here in my previous line of questions with the first panel. I wasn’t

convinced by the answers that I got, and I see you guys as street

cops; and I see what you need to do is operate as street cops, and

I know a street cop, when something is out of place, out of character, they start scratching and digging and looking into things.

And they also look into the people who they know have already

committed crimes or accused of committing crimes, and we already

know that there are entities out there such as ACORN who are an

organization under investigation in I think it is like 17 or 18 states

for criminal activity. I am extremely concerned about the census

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and the possibility of the Department of Commerce contracting

with entities like ACORN. And I just would like a yes or no answer. Can you all assure me that you will utilize available data—

and I understand maybe it is the GAO that has a list of entities

who are under criminal investigations. Will you all let the agencies

know that you are going to look very strongly to make sure that

criminal entities, or criminally accused entities, are not given contracts to carry out projects that—so that the American people can

be absolutely sure that there is not any of this shifty, shady groups

that are doing the people’s business? Please, start with Mr. Friedman.

Mr. FRIEDMAN. Well, Dr. Broun, I am not sure I can give you the

satisfactory answer that you perhaps desire. We face these sorts of

challenges every day because we have 200 to 300 potential criminal

investigations ongoing at any given time dealing with the Department of Energy or Department of Energy-related entities. So it is

a problem we face.

What I can tell you is the following. When you have a criminal

investigation, and we understand that a contract or a grant has to

be awarded to that entity—assuming that it will not compromise

the investigation, assuming we will not compromise grand jury information, assuming that we appropriately coordinate with the Department of Justice, we will inform the Department’s program

managers of the ongoing investigation, and ultimately they will

have to make the decision as to whether they will proceed with the

contract of the procurement or not. Now, I know nothing about the

ACORN investigation other than what I have seen in the media,

so I am not familiar with that. I will tell you as well that, and I

know this is obvious, that the mere fact that there is a criminal

investigation, and I am not defending anyone here, should not necessarily lead anyone to conclude that ultimately there will be a

charge resulting from the investigation.

So it is a very tricky, difficult area, but I have tried to explain

the steps that we go through to make sure that management, who

ultimately awards the contracts, is aware that there is an investigation, and they will have to make the ultimate judgment on

that.

Mr. BROUN. Mr. Zinser.

Mr. ZINSER. Sir, I think you are going to find that ACORN is

working with the census bureau on their partnership efforts. I

don’t know——

Mr. BROUN. That is what——

Mr. ZINSER.—that they are getting any money, sir, but I think

that they are working with the census. But I think what you have

to do is identify those ACORN groups that are under investigation

and see whether they are actually working with the census, and

then if the census has some criteria that they can use in terms of

the groups that they are associating with, you know, they have to

make those decisions. But we would certainly be willing to help you

get answers from the Department or the census bureau about

where that is occurring.

Mr. BROUN. Well, I would appreciate that, and I am extremely

concerned about this because of the integrity and the importance

of the census. Just in the sake of time, I will just let Mr. Cross anVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00130 Fmt 6633 Sfmt 6601 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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swer that and Ms. Dalton, too, in writing. And Ms. Norcross, if you

would have any ideas about that, I would appreciate your thoughts.

But Ms. Norcross, in your testimony you have mentioned a number of recommendations for Recovery.gov. How early will these recommendations need to be adopted before more reporting starts to

flow into the website?

Ms. NORCROSS. The sooner the better. There is no time to waste.

People right now are waiting to know how data is going to be displayed so they can start building websites and monitoring data. In

anticipation, even if the Administration just lets people know how

they intend to display the data, that would be a help.

Mr. BROUN. Thank you so much. Mr. Chairman, my time is expired so I will yield back.

Chairman MILLER. Thank you. Mr. Zinser, as to the 2010 census,

if you just do what you did in 2000, I will be perfectly happy. If

it ain’t broke——

Mr. BROUN. Chairman, would you yield a moment?

Chairman MILLER. Yes, Dr. Broun.

Mr. BROUN. I would like to do the same thing. I certainly don’t

want to use statistical sampling in the census. People need to be

counted. Real people need to be counted, and that is my concern.

I just don’t want any election stolen. As a scientist, I want to see

real data and I would like to see right over wrong, and statistical

sampling to me is a way of interjecting a tremendous amount of potential for fraud and abuse. So, thank you.

Chairman MILLER. I do not want to defend the position of wrong

over right. I was not speaking to the methodology. I am not sure

it is necessary that you actually touch each nose to do a nose count.

But that ends our testimony today. Thank you very much. Under

the rules of the Committee, the record will remain open for two

weeks for additional statements from the Members and for any follow-up questions or answers, and I think at least one or two of the

witnesses mentioned that they would provide further answers in

writing. And with that, the witnesses are excused, the hearing is

now adjourned.

[Whereupon, at 12:50 p.m., the Subcommittee was adjourned.]

(123)

Appendix 1:

ANSWERS TO POST-HEARING QUESTIONS

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ANSWERS TO POST-HEARING QUESTIONS

Responses by Cora Marrett, Acting Deputy Director, National Science Foundation

Questions submitted by Chairman Brad Miller

Q1. You heard the concerns expressed by the Subcommittee and by the Inspector

General that the Foundation’s grants management staff was working at full capacity even before the enactment of the Recovery Act. You testified that by revisiting existing proposals already reviewed, the Foundation can expedite the

award of funds with the available staff. However, there remains the requirement

to monitor the performance of these additional grants, which is likely to be a

nontrivial increase in workload. Are you still confident no increase is needed in

the Foundation’s capacity for this function?

A1. NSF recognizes and is honored by the responsibilities brought by the Recovery

Act. As I noted in my testimony, there will be major challenges associated with the

increased workload, as the agency will be processing roughly 50 percent more

awards than expected in FY 2009. Given that the Recovery Act did not increase

funding for administrative activities, NSF staff and management will be monitoring

the workload and reprioritizing and redeploying resources as appropriate.

Q2. Should the Foundation’s assumption about grant management staff prove incorrect, what plan is in place to detect and address the deficiencies?

A2. The NSF Chief Financial Officer is on NSF’s Recovery Act Steering Committee

and will provide regular updates on grants management workload. Should any

issues arise, the Steering Committee will address how best to enhance and/or redeploy resources. Now that the FY 2009 omnibus appropriation has been enacted, NSF

has an additional 25 FTE that may be deployed and we have submitted a request

to OPM for a dual compensation waiver far re-employed annuitants. This, in combination with continual evaluation of necessary resources by managers, will help to

prepare NSF to manage federal funding. Continued and thoughtful reinforcement of

NSF staff is needed to ensure appropriate monitoring, administration, oversight, accountability, and stewardship of the federal funds.

Q3. The Subcommittee is concerned that a too rigid adherence to a specific level of

point scores assigned by reviewers may lead to sub-optimal award distributions

as measured by intellectual promise. What level of discretion will program officers have in identifying grant applications already received by the Foundation

that were worthy of funding but, due to insufficient funds, were not previously

funded?

A3. A hallmark of NSF’s merit review process is the discretion that resides with

program officers. The NSF program officer reviews proposals and analyzes the input

received from the external reviewers. Reviewer ratings are provided only as assistance to the program officer. In addition to the external reviews, program officers

consider several factors in developing a portfolio of funded projects.

For example, these factors might include different approaches to significant research and education questions; potential (with perhaps high risk) for transformational advances in a field; capacity building in a new and promising research

area; or achievement of special program objectives. In addition; decisions on a given

proposal are made considering both other current proposals and previously funded

projects. After scientific, technical and programmatic review and consideration of

appropriate factors, the program officer makes an award/decline recommendation to

the division director.

In order to accommodate situations where programs had proposals that were worthy of funding but they were not able to support them due to insufficient funds, the

Foundation has developed functionality for reversal of a previous declination decision. The reversal of the decision must be based on both the high quality of the reviews received on the initial submission and the lack of available funding at the

time the original decision was made.

Q4. How is the Foundation coordinating distribution of Recovery Act resources with

the Foundation’s regular appropriations to maximize the value of both in achieving the Act’s goals and the President’s priorities?

A4. The Foundation is considering all available FY 2003 funds, both those from the

Recovery Act and those provided through the omnibus appropriation, as it develops

its FY 2009 award portfolio.

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NSF will utilize the majority of the Recovery Act funds to support highly-rated

proposals that would otherwise be declined due to lack of available funding. NSF

has many proposals already in hand that meet this criterion. NSF will prioritize

funding of new principal investigators and high-risk, high-return research with Recovery Act funding. This is in keeping with the goals of the legislation—to increase

economic efficiency by spurring technological advances in science and health and to

jump-start the economy. Support will also be provided for critical infrastructure

needs, with an emphasis on deferred maintenance and enhancements for existing

research facilities. NSF expects that the science and engineering communities are

poised to immediately expend funds that will advance discovery and innovation, and

enhance the economy.

Along with the funds provided in the Recovery Act, NSF will utilize funds provided through its regular FY 2009 appropriation to advance the frontiers of science

and engineering, including support for addressing urgent national priorities, such

as energy, environment, and climate change.

Questions submitted by Representative Paul C. Broun

Q1. One of the selling points of the stimulus bill was that action was needed immediately. How long will it take you to spend all of the money directed to your

agencies?

A1. NSF plans to obligate the majority of its Recovery Act funding by the end of FY 2009 and will carefully monitor the expenditure of funds. Of the $3.002 billion

provided to NSF, over two-thirds will be used to fund highly-rated proposals that

have already been received but would otherwise be declined due to lack of available

funding. NSF will ensure that Recovery Act funds are awarded in a timely manner

while maintaining its commitment to its established merit review process.

NSF expects that some or all of the funds for the following programs may need

to be carried forward into FY 2010:

• The Science Master’s Program in the Education and Human Resources Account. NSF is currently developing plans to establish this program.

• The Academic Research Infrastructure (ARI) program in the Research and

Related Activities Account. There will be multiple categories for ARI proposals, dependent on the size of the proposal budget. NSF expects to make

the majority of ARI awards (those that are less than or equal to $2 million)

in January 2010. The remaining awards are expected to be made no later

than April 2010.

• The Major Research Instrumentation (MRI) program. NSF intends to utilize

approximately $100 million of the $300 million provided in the Recovery Act

for MRI to support MRI proposals already in hand. These awards will be

made during FY 2009. The remaining $200 million will be used for a new

MRI solicitation to be issued in spring 2009. NSF expects to make most of

these MRI awards by the end of the 2009 calendar year.

NSF expects to obligate funds for the three projects that will be supported

through the Major Research Equipment and Facilities Construction (MREFC) account—Ocean Observatories Initiative (OOI), Alaska Region Research Vessel

(ARRV), and Advanced Technology Solar Telescope (ATST)—either late in FY 2009

or early in FY 2010 so that construction can begin expeditiously.

In addition, it may be necessary to carry forward into FY 2010 a small amount

of funding within the Research and Related Activities (R&RA) account. Proposals

that have been reviewed but not awarded by September 30, 2009 and awards to organizations that have not previously received NSF funding are examples of instances that might require the carry forward of Recovery Act funds.

Funds provided to the NSF Office of Inspector General (OIG) are expected to be

carried forward into FY 2010.

All NSF awards made with Recovery Act funds will be ‘‘standard’’ grants, which

means that the awardee receives all funds at the time of award rather than receiving funds over multiple years. The average award duration for NSF research grants

is approximately three years. Therefore, NSF expects that the majority of Recovery

Act funds will be spent by awardees within the next three years. Research grant

awardees typically spend the majority of funding in the second year of their award.

Q2. Current OMB guidance only requires that money be tracked to two layers down.

For example, a state and a city would have to report data, but not the contractor

or the subcontractor. Do you intend to require additional reporting beyond OMB

guidance?

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A2. At this time, NSF does not intend to require institutions that receive Recovery

Act funding to report beyond the requirements established by OMB. The OMB guidance clearly states that ‘‘the prime recipient is responsible for reporting on their use

of funds as well as any sub-awards they make.’’ Further. ‘‘in limited circumstances,

recovery will go from a federal agency to a state, and then to a local government

or other local organization. In these cases, the current reporting model will not

track funds to subsequent recipients beyond these local governments or other organization.’’

NSF agrees and requires that prime recipients report on their use of funds as well

as any sub-awards they make. Per our General Grant Conditions (GC–1), we state

‘‘The grantee remains responsible for maintaining the necessary documentation on

all sub-awards and making it available to NSF upon request. The grantee shall include sub-award activities in the annual and final project reports that are submitted

to NSF.’’

NSF already requires extensive technical and financial reporting for all assistance

awards. These reports provide NSF program officers and administrative offices with

information on the progress of supported projects and the way these funds are used.

Awardee institutions are required to submit annual project reports as well as a final

project report. Quarterly financial reports on the status of funds received from NSF

are also required through submission of a Federal Financial Report (FFR).

It should be noted that NSF awards very limited funding to State and local governments. Most NSF awards are made to research institutions.

Q3. Do you believe two layers of accountability are enough?

A3. As described above, this particular concern is not of great impact to most NSFfunded organizations. In addition, NSF believes that it has adequate and appropriate policies and procedures in place to ensure awardees are held accountable for

all funds awarded, inclusive of Recovery Act funding. Our general Grant Condition

provisions hold all parties expending funds originating from the Federal Government responsible for expending funds in compliance with applicable federal and

agency-specific requirements.

Q4. Please list the top three risks at your agency associated with stimulus funding.

A4.

1. Risk of Non-compliance with Recovery Act Requirements: The most significant

risk to the Foundation emanates from the fact that, although the Recovery Act appropriation represents an increase to the NSF budget of almost 50 percent, no additional administrative funding for staff or other resources was provided. Our regularly-appropriated resources will be used to ensure compliance with the Recovery

Act mandates, in addition to our normal management and administrative activities.

The Act requires the agency to provide additional information that was not considered when setting the agency’s administrative FY 2009 budget. Some examples

include:

• Weekly Status Updates on Recovery Act Funding

• Monthly Financial Reports

• Award Transaction Data Feeds

• Agency Recovery Plan

• Recovery Program Plans

2. Risk of Systematic Flaws and/or Breakdowns: Additionally, there are risks inherent in implementing any new program responsibly, on an expedited time line. The

Recovery Act requires additional reporting, on data not currently collected in recipient and agency systems. The tracking and reporting requirements have required

both agencies and recipients to modify accounting and award systems in short order.

Due to the expeditious nature of the Act, the time spent testing these modifications

has been limited.

3. Risk of Administrators Not Hawing Sufficient Knowledge: There will be continuing education needed across multiple sectors in the recipient and federal awarding communities. Again, due to the expeditious nature of the Act, both agency and

recipient administrators may encounter limitations as they try to keep up-to-date

on Recovery Act guidance, which is currently in Interim Final status. Recovery Act

recipient reporting data elements are not yet final.

Q5. What contracts at your agency are ‘‘mission critical’’? That is, if the specific contract were to experience cast-overruns, schedule decays, or performance problems

would it affect the mission of the agency?

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A5. With regard to Recovery Act funds, the National Science Foundation will not

award any contracts that are mission critical.

Q6. The DOE IG identified contract administration as ‘‘one of the mast significant

management challenges facing the Department’’ Please discuss the current status

of your agency’s ability to issue contracts and manage grants.

A6. Currently, NSF is well positioned to award and administer its current portfolio

inclusive of the additional Recovery Act funding. NSF employs highly qualified and

experienced staff to execute the critical responsibilities of grant and contract management. These professionals include grant and contract specialists, cost analysts,

policy analysts, financial staff, and program officers who are vital to monitoring and

administering the performance of awards to ensure appropriate monitoring, administration, oversight, accountability, and stewardship of federal funds. Although staffing resources are certainly a concern considering the increased workload, at this

particular juncture, we are confident that the existing staffing level is sufficient to

adequately award and manage the dollars within our agency’s budget.

Q7. Do you have adequate resources?

A7. NSF is aware of the need for continuous evaluation of resources required to successfully manage the increased responsibilities associated with the Recovery Act. To

this end, NSF has put a Recovery Act steering committee in place to face the expected challenges by using all available resources as well as employing appropriate

management oversight and flexibility to meet unforeseen challenges. The NSF CFO

is on the Recovery Act steering committee and will provide regular updates on the

awards management workload. NSF was allocated an additional 25 FTE in the FY

2009 omnibus appropriation, and a request for waiver of reemployed annuitants has

been prepared for submission to OPM. Should any resource issues arise, the steering committee will address how best to enhance and/or redeploy resources to ensure

that the NSF award portfolio receives adequate resources.

Q8. Are your employees adequately trained?

A8. NSF makes every effort to ensure that all employees are adequately trained.

We believe that the combination of experience and training of our current employees

along with our outstanding record of recruiting and retaining qualified professional

and administrative staff serves us well as we implement the requirements of the

Recovery Act.

Q9. Do you have adequate staff levels?

A9. NSF’s current staffing levels are adequate at this time. NSF is committed to

fulfilling its responsibilities under the Recovery Act and it is our intention to move

forward expeditiously with all award and administrative activities using staff resources that are currently available.

Q10. What can Congress do to help?

A10. NSF appreciates Congress’ strong support in recent years far the agency’s stewardship responsibilities. Enactment of the full FY 2310 Request of $318 million

for Agency Operations and Award Management—currently pending before Congress—will be vital to NSF fulfilling its responsibilities under the Recovery Act.

Q11. Understanding that coordination is sometimes necessary, IGs should not be

used as an agency’s internal auditor. What in-house auditing and program

evaluation capabilities do your agencies have?

A11. The NSF IG reports directly to the National Science Board (NSB), as opposed

to the head of the agency, the Director of NSF. This organizational structure is intended to maintain the IG’s independence in performing both internal and external

audits and reviews. Audit guidelines preclude auditors from making decisions an behalf of management.

NSF has clearly established these distinct roles and responsibilities in its structure and NSF’s appropriation clearly sets forth distinct funding for the IG audit

function (not to be commingled with NSF administrative funding for audits and

other evaluations).

That being said, NSF realizes that sound financial management enables the

Foundation to pursue critical investments in science and engineering research and

education that ultimately ensure the Nation’s security, prosperity, and well being.

Over the past eight years NSF has, with the encouragement of the IG, continuously

refined and enhanced its post-award oversight process. To that point; NSF senior

management, and notably through the leadership of the Chief Financial Officer, has

made post-award administration one of the agency’s highest priorities. We are conVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00137 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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fident that, through the strategic analysis of need and the application of extensive

staff and contracting resources, the Foundation is now postured with one of the

most comprehensive programs of awardee monitoring and business assistance programs in the Federal Government.

Through a combined set of activities, on-site visits, desk review, and/or transactional testing, we are ensuring that the entire high risk award universe receives

past award review. We believe that the extraordinary measures NSF has taken to

conceive and implement the Award Monitoring and Business Assistance program

are having a positive impact on those institutions visited, desk reviewed and tested

and are mitigating the risk of potential misuse of funds. We have been very careful

in designing this program that we complement, rather than supplant, the auditing

responsibilities of the Office of the Inspector General (OIG). Should we, in the

course of the Foundation’s post-award oversight activities find matters that require

OIG audit or investigative scrutiny, we will refer them to the OIG.

Q12. Have your agencies ever tasked IG to conduct work on your behalf?

A12. Annually, the Office of the Inspector General solicits from the Director of the

NSF, recommendations for external audits to be performed of our recipient institutions. These are considered by the OIG, along with the results of their independent

assessment of the NSF awardee and award portfolio. The OIG makes its determination as to what institutions will be audited. As described above, the OIG is independent from agency management.

Q13. How has the Internet portal www.grants.gov operated recently?

A13. Overall questions on the operations of the Grants.gov portal are best directed

to the managing partner, the Department of Health and Human Services, as they

have program management responsibilities, on behalf of the Federal Government,

for this initiative. As such, they would collect, maintain, and analyze performance

data for Grants.gov.

Consistent with OMB Guidance, NSF has been posting all of our funding opportunities, and associated application packages, to Grants.gov. Analysis of submission

data consistently demonstrates that applicants for NSF awards, in large numbers

and percentages, continue to use NSF’s own system, FastLane, as the default solution when submitting research proposals to the Foundation. Less than three percent

of NSF’s total proposals are submitted through Grants.gov.

Q14. What is the Federal Government doing to ensure its operation and effectiveness?

A14. The Office of Management and Budget established the Grants Executive

Board (GEB), comprised of the major grants making agencies, as an advisory body

to the Grants.gov initiative and to the HHS managed Grants.gov program management office. Among the GEB responsibilities are:

• The review and approval of the annual funding algorithm that supports the

Grants.gov operational budget

• Ensuring the timely execution of memoranda of understanding, and associated funding transfers that support the Grants.gov operational cost

• Review and approval of the HHS-prepared Grants.gov business case

• Ensuring that respective agencies comply in all of the OMB issued guidance

concerning Grants.gov participation and support

• Provision of policy and operation input, review of documents, and additional

staff support to Grants.gov tactical matters

• Consistent communications to respective applicant/awardee communities concerning Grants.gov

• Advice to OMB on the initiative’s direction.

Q15. What impact would the crashing of this site have on the ability to issue grants?

A15. The impact is agency-specific. There will be no impact of Grants.gov issues on

NSF’s ability to issue grants. The Foundation’s FastLane system well pre-dates

Grants.gov ‘‘Find’’ and ‘‘Apply,’’ so we have not been subject to such restrictions.

NSF is able to accept directly its full complement of proposals, both regular submissions and those additional proposals anticipated through the Recovery Act. We will

use our legacy FastLane capabilities for proposal submission and acceptance.

In 2006, NSF was also selected by OMB to provide grants management services

beyond the Grants.gov ‘‘Find’’ and ‘‘Apply’’ services for the broad research community, using modernized FastLane services in partnership with other research agencies. This ‘‘next generation ‘FastLane’ ’’ system, called Research.gov, provides a menu

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of service offerings for 2,200 research institutions in partnership with NASA and

Department of Defense science agencies. In light of the recent issues with

Grants.gov, we are currently exploring the feasibility of including a new Research.gov ‘‘Application Preparation and Submission’’ service as an alternative to

Grants.gov for the research community (only) and for research agencies that may

be interested in using the service to support their research constituents.

Q16. I am concerned that the ‘‘Buy American’’ provisions in the Stimulus legislation

could add significant costs to and restrict agency flexibility in spending for

science-related construction and facilities. How will this provision be implemented with respect to construction of scientific buildings, facilities, and major

research equipment and how will you work to ensure the restrictions do not result in cost overruns and delays?

NOTE: the language specifically states: SEC. 1605. USE OF AMERICAN

IRON, STEEL, AND MANUFACTURED GOODS. (a) None of the funds appropriated or otherwise made available by this Act may be used for a project

for the construction, alteration, maintenance, or repair of a public building or

public work unless all of the iron, steel, and manufactured goods used in the

project are produced in the United States.

A16. NSF is working with the Office of Management and Budget and the Office of

the U.S. Trade Representative to develop an NSF-specific implementation strategy

in response to the Section 1605 of the Act and will provide it to the Committee as

soon as possible.

Q17. BACKGROUND: The stimulus package provides $200 million for the Academic

Research Facilities Modernization Program, which is a grant-making program

to allow eligible research entities to repair, renovate, or replace obsolete laboratories and research facilities. This statute was enacted over 20 years ago and

has not even been used by NSF since the mid-nineties. My question is threefold:

Q17a. Why has this program not recently been put to use?

A17a. The decision to halt the Academic Research Infrastructure (ARI) program in

the latter 1990s (a) rested on the premise that investing in the modernization of

individual institution’s research facilities was of a lower priority than supporting

shared-use, large-scale facilities which are accessed by the broader the scientific and

engineering research community and (b) was consistent with the National Performance Review’s recommendation that facilities modernization might reasonably be accommodated by institutions, states, and the private sector.

Q17b. Given that NSF has not utilized the program in many years, is it even feasible

that you have mechanisms in place to formulate guidelines and appropriately

award grants within the timeframe provided in the stimulus package? If so,

how do you plan to accomplish this?

A17b. Mechanisms and Guidelines. NSF’s Office of Integrative Activities (OIA) will

oversee the ARI program and coordinate Foundation-wide efforts. The process is

analogous to the current Major Research Instrumentation program. OIA staffing has

been augmented to meet the added responsibility of managing ARI; (a senior program director has been seconded to OIA to manage the program and additional staff

support is being secured). An internal office team and a cross-Foundation working

group, including program officers with experience with infrastructure programs,

have been established to implement the program. The guidelines for the 2009 ARI

program have been updated to reflect the requirements for conducting 21st century

research as well as to conform to current, federal construction-related policies.

Timeline. NSF will fund all ARI awards within the allowable stimulus package

timeframe (i.e., no later than September 30, 2010).

Q18. It is my understanding that these funds will not to used for any new construction—only repair and renovation. Can you please confirm this?

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A18. The NSF 2009 ARI program will not fund any new construction. It may accept

a proposal for the reconstruction of a research facility. Consistent with previous ARI

solicitations, the 2009 ARI will support projects to repair, renovate, or in exceptional

cases, replace existing research facilities. If an institution were to demonstrate that

it was more cost-effective to raze and then rebuild a research facility or research

training facility, rather than to try to repair or renovate the existing structure, then

the program would accept a proposal for replacement.

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ANSWERS TO POST-HEARING QUESTIONS

Responses by Ronald R. Spoehel, Chief Financial Officer, National Aeronautics and

Space Administration

Questions submitted by Chairman Brad Miller

Q1. The Recovery Act directs that the funding available in the Science account be

provided for supercomputing capability and to bring forward the planning activities for the first of the Earth Science Decadal Survey missions at NASA. How

do you anticipate breaking down the funding to fulfill that direction?

A1. The NASA spending plan for use of Recovery Act funding, including the Science

program plan, has been submitted to the Committees on Appropriations. NASA has

posted its Recovery Act Program Plans on both the Agency’s website and on the government-wide website and will update the information as may be appropriate following consultation with the Committees on the spending plan.

Q2. In developing the plan for using Recovery Act resources, is an effort being made

to contribute to meeting the longer-term missions of the Agency? For example,

can the Recovery Act funds be used for technology development to support the

Europa mission NASA hopes to conduct with the European Space Agency in the

next decade?

A2. Every effort is being made to use Recovery funds to further the Agency’s programmatic goals, as well as stimulate economic activity. With respect to specific

spending plans, the NASA spending plan for use of Recovery Act funding, including

the Science program plan, has been submitted to the Committees on Appropriations.

Q3. The Recovery Act states that funds are to be awarded primarily using competitive procedures and with a preference for fixed-price contracts. NASA, however,

regularly employs cost-type and incentive contracts in its business. How do you

expect to meet the law’s direction when issuing contracts using Recovery Act

funds?

A3. Consistent with the Federal Acquisition Regulation (FAR), it is NASA’s policy

to utilize fixed price contracts when requirements are relatively certain which permits costs to be estimated with sufficient accuracy for pricing. When issuing contacts with Recovery Act funds, NASA will utilize competitive procedures and fixedprice contracts to the maximum extent practicable. We also anticipate using Recovery Act funds on contracts that are non-competitive and other than firm fixed-price,

as NASA mission requirements often contain uncertainties that do not permit costs

to be estimated with sufficient accuracy to use a fixed-price contract. In those cases,

NASA will comply with all requirements of the Recovery Act, including those which

require the publication of the rationale for using other than a competitive and fixedprice contract as part of the award notice.

Q4. In his March 20th memorandum, the President established a process for communications with outside sources relating to Recovery Act activities. What steps has

the agency taken to implement the internal controls needed to assure compliance

with the President’s direction?

A4. NASA has taken a variety of steps to effectively and efficiently implement the

Recovery Act, including almost daily tag up meetings with key officials involved in

Recovery Act activities. NASA has distributed the President’s Memorandum and the

Office of Management and Budget Interim Guidance on Communications with Registered Lobbyists About Recovery Act Funds within the Agency and provided appropriate guidance as to their requirements. In addition, NASA is currently preparing

further guidance tailored for even broader dissemination in the near future.

Questions submitted by Representative Paul C. Broun

Q1. One of the selling points of the stimulus bill was that action was needed immediately. How long will it take you to spend all of the money directed to your

agencies?

A1. NASA’s Program Plans have been developed, have been finalized with OMB, include publicly information available on expenditure estimates, and were filed with

OMB on May 15th.

Q2. Current OMB guidance only requires that money be tracked to two layers down.

For example, a state and a city would have to report data, but not the contractor

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or the subcontractor. Do you intend to require additional reporting beyond OMB

guidance?

A2. Federal Acquisition Regulation (FAR) interim rules relating to required recipient reporting have been developed and approved. NASA will comply with these rules

and use our standard reporting procedures for contracts and grants. These procedures should be sufficient with some modifications, as necessary, to capture the required two layers for contract and grant reporting. For NASA activities, two levels

of reporting would typically include the prime contractor and subcontractor.

Q3. Do you believe two layers of accountability are enough?

A3. Yes.

Q4. Please list the top three risks at your agency associated with stimulus funding.

A4. Almost all NASA Recovery funds were appropriated for ongoing operations, so

programmatic risks are relatively small. The challenges to the agency associated

with Recovery funding relate to the special requirements for procurement and resource management processes and control of these funds, the tension in the Act between speed of implementation and process control, and the many reporting requirements—some of which are still being defined.

Q5. What contracts at your agency are ‘‘mission critical’’? That is, if the specific contract were to experience cost-overruns, schedule delays, or performance problems

would it affect the mission of the agency?

A5. Any individual contract is critical to its specific program, such that overruns,

delays or performance problems would likely affect that program’s commitments,

and potentially other activities within the program’s portfolio. No single contract is

large enough that it could put the mission of the Agency at risk.

Q6. The Department of Energy’s Inspector General identified contract administration

as ‘‘one of the most significant management challenges facing the Department.’’

Please discuss the current status of your agency’s ability to issue contracts and

manage grants.

a. Do you have adequate resources?

b. Are your employees adequately trained?

c. Do have adequate staff levels?

d. What can Congress do to help?

A6. NASA believes that it has a well-trained, experienced workforce, capable of diligently administering the Recovery Act contracts. The NASA employees’ management and technical expertise will help ensure that the money is spent as intended

and that the process is transparent with full accountability to the American public.

While our current staff is adequate for the job of awarding Recovery Act contracts

and grants, with an anticipated increase in contract support activities, including reporting and oversight, we will be continuously assessing our posture and make reassignments and changes in resource allocation and staff assignments as needed.

NASA has an aggressive training program for acquisition personnel. In addition

to core classes which serve as a mandatory framework to bring developmental training to contracting professionals, NASA provides its workforce with supplemental

training on topics that will improve our administration of Recovery Act contracts.

Recent examples include special training on cost and pricing techniques, and fraud

awareness.

Congress’ continued support for hiring flexibilities will permit agencies to hire

qualified procurement personnel in an expedited fashion.

Q7. Understanding that coordination is sometimes necessary, IGs should not be used

as an agency’s in-house auditor. What in-house auditing and program evaluation capabilities do your agencies have?

A7. NASA has robust capabilities for in-house auditing and program evaluation.

The NASA Office of Internal Controls and Management Systems (OICMS) serves as

the in-house auditor for NASA Headquarters. With contractor support, OICMS performs in-house audits of Headquarters organizations on a three-year cycle. OICMS

reviews of actions related to the use of Recovery Act funds will be conducted on a

regular basis. The NASA Office of the Chief Financial Officer also has a Quality Assurance Division that, among its activities, provides and oversees internal controls

and OMB A–123 Appendix A audits; Improper Payment Information Act and, as

needed, associated recovery audits; and financial statement audit planning and coordination. NASA Centers have in-house audit staffs to perform audits of key procVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00142 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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esses and controls at the Centers. They, too, will review Recovery Act implementation and operation at NASA on a regular basis. Additionally, NASA’s Office of Program Assessment and Evaluation (PA&E) serves as an independent assessment organization that provides objective, transparent, and multidisciplinary analysis on all

aspects of NASA programs and institutions. PA&E is responsible for evaluating

NASA programs, projects and institutions for cost effectiveness, quality, and performance in achieving strategic objectives. OICMS also performs quality assurance

reviews over NASA’s compliance with FMFIA and the guidance contained in OMB

A–123 as it pertains to performing self assessments of controls in place to mitigate

key risks faced by the Agency.

Beyond its in-house audit capabilities, NASA uses multiple methods, processes,

and entities for monitoring and evaluating its performance. These same processes

and procedures will be used for activities funded under the Recovery Act. NASA’s

programs are assessed for relevance, quality, and performance. A relevance review

assures alignment with national priorities; alignment with the NASA Strategic

Plan; impact on related fields of research or technology; and alignment with ‘‘customer’’ (users of NASA data, research results, etc.) needs. Determining quality is

generally prospective and assures ‘‘best value’’ for an investment, using peer review

processes. Performance reviews evaluate whether a program is on track to meet its

baseline performance commitments (cost, schedule, science/technical deliverable).

Reviews are conducted internal and external to the Agency. External evaluations

are performed by entities such as the NASA Advisory Council (NAC) and the National Research Council to assess NASA’s program content and direction. Additional

independent reviews are commissioned by the NASA Administrator or responsible

mission organization to review programs for relevance and quality, as well as performance. Reviews are rigorous and methodical and focused on the program’s methods, results, and findings by others in the field with requisite expertise, and independence.

Responsibility for program and project management and their control mechanisms

(NASA Procedural Requirements (NPR) 7120 series)*, institutional management

(NPR 8500 series)*, and financial management (NPR 9010 and 9120 series)*, occurs

at all management levels of the Agency. NASA’s management monitors different aspects of program or institutional performance, at the highest Agency levels, and

uses a rigorous structure of program and management reviews for Agency-level decisions. To continue through each phase of development, programs must demonstrate,

on an on-going basis and at key life cycle junctures, an ability to manage in a manner that produces identifiable results, and must document performance against previously defined commitments including multi-year outputs, annual performance

goals, milestones and other metrics, as appropriate.

NASA internally monitors performance through monthly and quarterly reviews,

at each management level. At the senior management level, program reviews, accompanied by an independent (internal) assessment, occur across all mission areas

(aeronautics, science, space operations and exploration systems), with an in-depth

review each quarter rotating among the mission organizations. Senior management

also reviews institutional data (finance, human capital, acquisition, infrastructure),

and aggregated Agency measures and metrics, e.g., safety, cross-cutting technical

and non-technical issues. The data reviewed, and the accompanying analysis, allows

the Agency to focus on, and proactively address, issues that could lead to not achieving desired performance goals.

* The NASA Online Directives Information System Library ensures access by

NASA employees and contractors to the most current documentation.

Q8. Have your agencies ever tasked IG to conduct work on your behalf?

A8. NASA does not task the IG to conduct in-house audits on management’s behalf.

Q9. How has the Internet portal www.grants.gov operated recently?

A9. Over the past year, both NASA internal users and external grant proposers

have experienced technical issues and difficulties associated with the ‘‘Apply’’

functionality within the Grants.gov application.

Q10. What is the Federal Government doing to ensure its operation and effectiveness?

A10. NASA fully supports the overall purpose and intent of Grants.gov and continues to contribute funding to support the maintenance and operations of the Internet portal. On March 19, 2009, NASA received approval from OMB exempting the

Agency from use of the ‘‘Apply’’ functionality within Grants.gov and authorizing the

Agency to exclusively use NASA’s proposal data system, NASA Solicitation and ProVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00143 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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posal Integrated Review and Evaluation System (NSPIRES), (http://

nspires.nasaprs.com) for the receipt of all grant proposals. This measure was taken

to help relieve the stress on the Grants.gov Internet portal based on projected increased demands resulting from the American Recovery and Reinvestment Act of

2009.

Q11. What impact would the crashing of this site have on the ability to issue grants?

A11. In the event the Grants.gov Internet portal were to crash, NASA would be able

to temporarily provide a backup posting process using existing Agency resources.

This may create some public confusion until NASA could educate the public regarding the temporary posting URL. In addition, any existing announcement of opportunities on Grants.gov would be lost and would require re-posting on NASA’s

NSPIRES Internet portal. Otherwise, the Agency’s ability to receive, evaluate, process, and issue grants would experience little disruption.

Q12. I am concerned that the ‘‘Buy American’’ provisions in the Stimulus legislation

could add significant costs to and restrict agency flexibility in spending for

science-related construction and facilities. How will this provision be implemented with respect to construction of scientific buildings, facilities, and major

research equipment and how will you work to ensure the restrictions do not result in cost overruns and delays?

NOTE: the language specifically states: SEC. 1605. USE OF AMERICAN

IRON, STEEL, AND MANUFACTURED GOODS. (a) None of the funds appropriated or otherwise made available by this Act may be used for a project

for the construction, alteration, maintenance, or repair of a public building or

public work unless all of the iron, steel, and manufactured goods used in the

project are produced in the United States.

A12. The Federal Acquisition Regulation (FAR) Council has made changes to the

Federal Acquisition Regulation which implements the ‘Buy American’ provisions of

the Recovery Act, and NASA will comply with the regulations in issuing and administering construction contracts with Recovery Act Funds. NASA will include clauses

in accordance with the regulations in all appropriate contracts which will require

that contractors provide domestic iron, steel, and manufactured goods in performing

the contract.

NASA will mitigate the impact the restrictions may have on cost overruns or

delays by utilizing, as appropriate, the exceptions in the Federal Acquisition Regulation which permit waiver of the ‘Buy American’ requirement when the product is

unavailable domestically, only available at an unreasonable cost, or when domestic

item use is inconsistent with the public interest. Established approval protocols will

be followed to ensure that waiver decisions are supported and well-documented, and

that they are consistent with the intent of the Recovery Act.

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ANSWERS TO POST-HEARING QUESTIONS

Responses by Ellen Herbst, Senior Advisor for Recovery Implementation, U.S. Department of Commerce

Questions submitted by Chairman Brad Miller

Q1. NIST receives funding from the Recovery Act to prepare standards for two areas

where the Administration intends to make significant investments—health information technologies and monitoring and control technology for the electrical

grid. How is NIST cooperating with both the Department of Health and Human

Services and the Department of Energy to complete development of the standards

so that they inform the expenditure in these areas?

A1. In the area of health information technology (IT), the National Institute of

Standards and Technology (NIST) interacts regularly with the Department of

Health and Human Services’ Office of the National Coordinator for Health Information Technology (ONC). The Recovery Act funding will accelerate efforts to develop

and deploy electronic health records and a nationwide health care information infrastructure. Specifically, NIST’s efforts will target two critical areas: standards harmonization and the development of a technology testing and evaluation infrastructure. This builds on the formal collaboration NIST has had with ONC since 2005,

through which NIST provides expertise in IT standards, testing for conformance to

standards, pilot implementation of standards-based technologies, security, and certification processes.

In the area of monitoring and control technology for the electric grid (Smart Grid),

NIST is working closely with the Office of Electricity Delivery and Energy Reliability in coordinating the development of Smart Grid standards. NIST participates

in the Department of Energy (DOE) Interagency Smart Grid Task Force and has

organized six expert working groups addressing standards issues under the umbrella of the DOE-sponsored GridWise Architecture Council. NIST is also working

with DOE in developing an interagency agreement defining how the $10 million of

Recovery Act funding directed to NIST will be used to establish a Smart Grid Interoperability Standards Panel by the end of 2009 to provide ongoing coordination and

oversight of the implementation of the Smart Grid standards roadmap now under

development.

Q2. Your testimony described changes in the agency’s acquisition management process, stating that projects less than $75 million will now receive only ‘‘paper reviews’’ instead of discussion at the Department Investment Review Board.

Projects over $75 million or declared ‘‘major investments’’ are to be handled by

a process that is ‘‘currently under refinement.’’ In the tug-of-war between speed

of award and oversight, this sounds very much like oversight letting go of the

rope. Please explain why these changes don’t represent backsliding from the accountability requirements of the Recovery Act?

A2. The Department of Commerce has a two-prong oversight approach to Departmental acquisitions. For those programs with a life cycle cost exceeding $75 million,

the program and associated acquisitions must be reviewed by the Investment Review Board (IRB) to address management and oversight of the program and planned

acquisition strategies for acquisitions planned to be processed in support of the program. The Deputy Secretary has the authority to designate other programs that do

not meet the life cycle cost threshold for IRB review as well. All Recovery Act programs, regardless of whether the program will be executed internally, through acquisitions or through grants, or some combination thereof, have been designated as

‘‘major investments.’’ Thus, a more stringent review process is in place for all Recovery Act acquisitions.

The IRB focuses on all aspects of the program (management, risk, security, systems architecture, acquisition strategies, etc.). Prior to the meeting of the IRB, the

Office of Acquisition Management (OAM) conducts a comprehensive review of the

acquisition plan, the proposed statement of work, other specific portions of the proposed solicitation/contract (schedule of items/services to be provided, deliverables,

award/incentive fee/term plans, evaluation criteria, proposal instructions) to ensure,

generally, all Federal Acquisition Regulations and Commerce Acquisition Regulations and policies are being adhered to, and specifically, to ensure compliance with

all provisions of the Recovery Act as it relates to acquisitions. Prior to review by

the IRB, the Office of General Counsel (OGC) and the Office of Small and Disadvantaged Business Utilization (OSDBU) must concur with the proposed strategy.

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For acquisitions that do not meet the threshold or specific designation as a major

investment, OAM has eliminated a formal, once-a-month meeting to review acquisition plans and strategies. The same process of reviewing acquisition plans, statements of work, evaluation criteria and other associated documents still occurs. The

concurrence of the OGC and OSDBU is still required.

These Department-level procedures are in addition to the individual bureau’s internal review processes and are separate from the Acquisition Management Reviews

(AMR) that are being instituted with this new review policy. Those reviews will

focus on the work products (contracts, supporting files) for compliance with law, regulation and policy and for completeness. All Recovery Act acquisitions will undergo

a post-award AMR to focus on decision documentation and effective oversight and

management of the contract once the award has been made.

Q3. How are NIST and NOAA coordinating distribution of Recovery Act resources

and their regular appropriations to maximize the value of both in achieving the

Act’s goals and the President’s priorities?

A3. Both the National Oceanic and Atmospheric Administration (NOAA) and NIST

have placed a high priority on coordinating reviews and internal clearances required

to move forward with the obligation of funds under the Recovery Act. In determining the allocation of Recovery Act funding, NIST and NOAA management took

into careful consideration the resources that were being provided by the FY 2009

Omnibus appropriation as they made decisions in allocating resources in the Recovery Act. Investment decisions for Recovery Act funds have focused on activities promoting near-term recovery by creating and preserving jobs. The funding will also

provide longer-term sustained economic growth by supporting important science and

research activities in critical national priority areas.

NIST’s Recovery Act funding supports the procurement of state-of-the-art scientific equipment that will greatly benefit NIST’s measurement research. Additionally, Recovery Act funding for fellowships, Postdoctoral researchers and research

contracts will augment NIST’s ability to conduct its mission, while meeting the

goals of the Recovery Act. The FY 2009 Omnibus appropriation provides additional

resources for Scientific and Technical Research and Services (STRS) that invest in

longer term research programs that support NIST’s mission to promote U.S. innovation and industrial competitiveness by advancing measurement science, standards

and technology in ways that enhance economic security and improve our quality of

life. NIST management coordinated the use of funds from the Recovery Act and FY

2009 Omnibus appropriation for construction to best meet NIST’s facilities construction and renovation needs. Furthermore, the Recovery Act funding targeted at construction provided a timely and expedient mechanism to achieve the goals laid out

in the Recovery Act of providing economic stimulus, creating jobs, and introducing

funds to the national economy.

NOAA is also emphasizing coordinated distribution of these funds to maximize

their value in achieving the President’s priorities. For those facility construction investments funded with resources jointly under the Recovery Act and the FY 2009

Omnibus appropriation, NOAA is ensuring close coordination of the investment

planning efforts to effectively achieve the intended results of the Recovery Act and

regular appropriations, both in terms of job creations and stabilization, and in terms

of facility construction, replacement and repair necessary to maintain and improve

NOAA mission performance.

Q4. In his March 20th memorandum, the President established a process for communications with outside sources relating to Recovery Act activities. What steps has

the Department taken to implement the internal controls needed to assure compliance with the President’s direction?

A4. The Department of Commerce has communicated the President’s memo widely

throughout the Department. We have issued interim detailed guidance for reporting

contacts with registered lobbyists. We have discussed rigorous compliance requirements with our leadership and will continue to emphasize these requirements to all

employees affected by this requirement. We are preparing training which will be

available to all employees through our online training system to support compliance.

Questions submitted by Representative Paul C. Broun

Q1. One of the selling points of the stimulus bill was that action was needed immediately. How long will it take you to spend all of the money directed to your

agencies?

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A1. We are confident we will meet the legislative requirement to obligate all programmatic Recovery Act funds by September 30, 2010. The Department of Commerce did not receive block or formula grant funds. The $7.9 billion in Recovery Act

funding for DOC will be expended through competitive grants and acquisitions as

well as support for the Decennial Census. We anticipate obligating funds throughout

the balance of FY09 and throughout FY10 with the exception of the Office of the

Inspector General (OIG). The OIG funding is authorized through 2013.

Q2. Current OMB guidance only requires that money be tracked to two layers down.

For example, a state and a city would have to report data, but not the contractor

or the subcontractor.

Do you intend to require additional reporting beyond OMB guidance?

A2. At this time, we do not have plans to require additional reporting beyond the

OMB guidance.

Q3. Do you believe two layers of accountability are enough?

A3. Yes, we believe two layers of reporting are sufficient.

Q4. Please list the top risks at your agency associated with stimulus funding.

A4. In the Department’s planning and risk management activities and utilizing

OMB guidance on risk identification, three areas have been identified as top risks

associated with stimulus funding.

1) Administering the Broadband Technology Opportunities Program (BTOP).

STOP received the largest share of the DOC ARRA funds ($4.7 billion of the

total $7.9 billion that DOC received). Based on the amount of funding as a

percentage of total funding, and because BTOP is a brand new program,

DOC has focused particular management oversight on this program.

2) Administering the increased volume of funding and transactions associated

with Recovery Act funding. The $7.9 billion of Recovery Act funding represents approximately one annual appropriation for the entire Department

of Commerce. The volume of funds, transactions and activities require increased risk management activities to adequately oversee their administration.

3) Staffing requirements, particularly for contract and grants professionals.

DOC is actively working with the Office of Personnel Management to use all

hiring flexibilities and options available, including direct hire authority; rehired annuitant waivers and job fairs. Additionally, DOC will, where appropriate, utilize existing resources through detail assignments to meet Recovery Act staffing needs.

Q5. What contracts at your agency are ‘‘mission critical?’’ That is, if the specific contract were to experience cost-overruns, schedule delays, or performance problems

would it affect the mission of the agency?

A5. NIST: The only contracts that could be considered ‘‘mission critical’’ would be

the contracts associated with the Building 1 Extension construction project in Boulder, CO. NIST has put in management safeguards for this as well as all NIST construction projects to mitigate the potential of cost overruns or scheduling delays.

Census: All Decennial contracts are considered critical to the Census Bureau’s

mission. Accordingly, these contracts are continuously monitored to identify problems early and mitigate the risk of cost-overruns, schedule delays and/or performance problems. When issues arise in these areas the Census Bureau takes immediate action to minimize the impact to our Decennial Programs.

NOAA: All contracts that are entered into by NOAA are in direct support of our

missions and functions. They are the result of a process that has distilled all NOAA

requirements into our highest mission priorities for contract funding. We work very

hard to make sure that contract challenges do not affect direct mission accomplishment by having appropriate work around actions to provide direct support should

there be delays, overruns, or performance issues. Due to their inherent complexity,

NOAA’s satellite programs are our highest risk contract activities, with the greatest

potential impact to our weather prediction and climate research and services missions. However, ARRA funding for NOAA’s satellite program will be used to mitigate both cost and schedule risk for the National Polar-orbiting Operational Environmental Satellite System (NPOESS) program.

NTIA: The National Telecommunications and Information Administration (NTIA)

has contracted with IBM to provide administrative services for the TV Converter

Box Coupon Program, which received Recovery Act funds to continue to educate the

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public about the transition and issue converter box coupons to households wishing

to keep using their analog sets after all broadcasters stop analog broadcasting on

June 12, 2009. IBM performs critical program functions with respect to coupon distribution and redemption. NTIA provides extensive oversight of this performancebased contract to ensure that the contractor performs within budget and according

to service levels and milestones agreed upon in the contract.

Q6. The DOE IG identified contract administration as ‘‘one of the most significant

management challenges facing the Department.’’ Please discuss the current status of your agency’s ability to issue contracts and manage grants.

a. Do you have adequate resources?

b. Are your employees adequately trained?

c. Do have adequate staff levels?

d. What can Congress do to help?

A6. The Department, and its subordinate bureaus, have identified additional staff

resources needed and are taking full advantage of all hiring flexibilities to recruit

and/or acquire the needed resources. This includes participation in hiring fairs, rehiring annuitants, contracting for appropriate support and re-assigning appropriate

staff to handle Recovery Act acquisitions and grants.

DOC has a cadre of experienced, well-trained acquisition and grants specialists

for executing this work. Recruiting efforts are focused on acquiring well-trained and

experienced individuals to meet the increased workload. Where appropriate, more

skilled and/or experienced staff or hires will focus on Recovery Act acquisitions/

grants and those with less training or experience will handle the more routine acquisitions/grants.

The Department will continue to work to ensure proper management and oversight of its contracting. We look forward to working with Congress on this issue.

Q7. Understanding that coordination is sometimes necessary, IGs should not be used

as an agency’s internal auditor.

What in-house auditing and program evaluation capabilities do your agencies

have?

A7. The Department of Commerce coordinates its in-house auditing and program

evaluation capabilities with its external auditors.

The Department of Commerce has a Senior Management Council (SMC) that provides leadership and oversight for internal control assessments under OMB Circular

A–123, Management’s Responsibility for Internal Control. The SMC is co-chaired by

the Deputy Chief Financial Officer and the Director, Office of Management and Organization, and is composed of all bureau Chief Financial Officers, the Chief Information Officer, and the heads of Human Resources, Acquisition Management, Budget and Administrative Services offices. The Department also has a Senior Assessment Team (SAT) which is responsible for conducting day-to-day A–123 activities,

including review, documentation, and testing of internal controls. The SAT is composed of representatives from bureaus and offices that have a material impact on

the Department’s financial reporting. To the greatest extent possible, the SAT will

be leveraged to assess the additional risk posed for financial reporting requirements

by the receipt and administration of Recovery Act funds and will be used to test

Recovery Act transactions.

Q8. Have your agencies ever tasked IG to conduct work on your behalf?

A8. We have not asked the IG to do something for us that would ordinarily be considered a bureau or Department administrative function. We have of course referred

matters to the OIG that fall within the OIG purview of ‘‘waste, fraud and abuse.’’

Q9. How has the Internet portal www.grants.gov operated recently?

A9. NOAA had the first competitive grant program under the Recovery Act with a

closing date of April 6, 2009. So far, applicants report that they are able to submit

applications through the Grants.gov portal. We are continuing to monitor and will

report through the Grants Executive Board issues that are being brought to our attention. We have encouraged applicants to use Grants.gov but to allow themselves

sufficient time to submit a paper application if needed.

Q10. What is the Federal Government doing to ensure its operation and effectiveness?

A10. The Grants Executive Board, in partnership with General Services Administration and Department of Health and Human Services is actively working to reVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00148 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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solve the capacity problems that exists with Grants.gov with a goal of ‘‘right sizing’’

the capacity to handle not just routine grant applications but also Recovery Act

grant applications.

Q11. What impact would the crashing of this site have on the ability to issue grants?

A11. We believe this contingency to be remote. Grants.gov has successfully handled

the first round of grant applications for NOAA where over 600 applications were received with few problems.

However, if there were no electronic means to receive applications, DOC would

need to revert to paper-based processes, which are more time-consuming and laborintensive than electronic processes. While paper applications can be ‘‘input’’ into

Grants Online, it is a time-consuming process that is subject to human error.

Q12. I am concerned that the ‘‘Buy American’’ provisions in the Stimulus legislation

could add significant costs to and restrict agency flexibility in spending for

science-related construction and facilities.

How will this provision be implemented with respect to construction of scientific buildings, facilities, and major research equipment and how will you

work to ensure the restrictions do not result in cost overruns and delays?

NOTE: the language specifically states: SEC. 1605. USE OF AMERICAN

IRON, STEEL, AND MANUFACTURED GOODS. (a) None of the funds appropriated or otherwise made available. by this Act may be used for a project

for the construction, alteration, maintenance, or repair of a public building or

public work unless all of the iron, steel, and manufactured goods used in the

project are produced in the United States.

A12. This provision will be implemented by incorporating the provisions of Federal

Acquisition Regulation (FAR) Sub-part 25.6 and including FAR Clauses 52.225–21,

22, 23 or 24 in all contract solicitations and contracts. We will work to ensure the

restrictions do not result in cost overruns and delays by carefully coordinating with

the acquisition team to determine the availability, quantity, quality and cost of domestic construction material needed for the specific projects. The appropriate level

of acquisition planning and contract administration will mitigate the risk of construction delays and cost overruns.

Q13. I am concerned that the funding for ‘‘external construction grants’’ at NIST—

$180 million for a program that was not authorized or reviewed by this committee and whose origin was simply a single line in an appropriation bill.

This program appears to be a particularly high oversight risk—does the Department plan to take any special action to ensure funding for this program

is spent wisely and in a manner that advances NIST’s mission?

A13. The Recovery Act appropriated $180 million to NIST ‘‘for a competitive construction grant program for research science buildings.’’ Consistent with the legislation, NIST intends to award the grant funds on a competitive basis. NIST will comply with all federal guidelines to ensure maximum competition, fair treatment of

proposals received, and that funding is spent wisely. NIST will also closely adhere

to the additional oversight requirements of the Recovery Act and OMB Recovery Act

guidance.

Q14. In your testimony you indicate that the ‘‘Recovery Act’’ was intended to jumpstart the economy and create millions of jobs; yet you mention several activities

that will be funded by the stimulus that do not seem to do either.

For instance, how many jobs do you expect the $170 million for climate modeling activities to create?

A14. The Recovery Act funds for climate modeling will be used to acquire two largescale supercomputing systems, including associated networking and storage needs,

and to perform modifications to data center space to house these systems. These

funds will also be used for technical and support activities needed for a systematic,

comprehensive and sustainable Climate Data Record Program. These activities will

create, or maintain, short-term jobs amongst the construction, facility engineering

and management, software development and systems engineering sectors. In addition, it is estimated the economy will benefit from a host of indirect jobs that the

acquisition will affect (e.g., manufacturing, shipping, and storage of supercomputers

and facilities equipment).

Q15. How many jobs will the $20 million for research on electronic medical records

at NIST create?

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A15. DOC recognizes that the Recovery Act funding carries with it the additional

criteria of creating jobs and stimulating economic activity along with advancing the

underlying program goals. We expect that as we receive grant applications and contract bids, we will develop an understanding of what the potential recipients believe

the jobs creation potential of their proposals will be. In addition, the recipients of

these grants and contracts will be required to report on the jobs created through

this funding.

Q16. How many jobs do you expect the $200 million to upgrade computers at libraries and community colleges to create?

A16. The purpose of the Broadband Technology Opportunities Program is to stimulate demand for broadband, economic growth, and job creation. NTIA will structure

this program to accomplish these purposes. As NTIA evaluates any grant application, whether it proposes to expand computer center capacity to community colleges

and public libraries, or offer broadband to unserved and under-served communities,

the agency will consider the extent to which the applicant proposes to create new

jobs. In this regard, the agency will consider the local employment opportunities

presented by the actual project—such as the procurement and installation of computers—as well as the long-term employment opportunities presented by bringing

state-of-the-art computing systems to local communities and thereby enabling such

communities to witness the transformative power of broadband.

Q17. The Recovery Act includes $1 billion for the 2010 Decennial Census. Your agency performs a decennial census every ten years, correct?

Given the fact that the Census is expected, allocated and, appropriated every

10 years, why would it be necessary to provide additional funds for it in a

stimulus bill that was designed to create jobs that would otherwise not exist?

A17. The U.S. Census Bureau counts America’s population every 10 years. The $1

billion provided in the Recovery Act will help the Census Bureau conduct a more

accurate census in. 2010 and will create jobs.

Consistent with direction in the Recovery Act, the Census Bureau will use Recovery Act funds to recruit over 2,000 partnership specialists, partnership assistants

and other partnership support staff. This will quadruple the partnership staff funded through the regular appropriations process. This program is instrumental in

helping to improve the mail out/mail back response rate. Higher mail back response

rates result in a more accurate and less expensive census. The additional partnership staff will be hired in areas of the country that are most difficult to count, including areas with large numbers of recent immigrants, race and ethnic minorities,

dense urban neighborhoods, rural and tribal areas.

The Census Bureau will be increasing media buys from the current media contractor. Increasing media buys will provide more exposure for the upcoming census.

A major focus of increased advertising and other promotions will be in the minoritybased areas that have historically lower than average mail back response rates.

Recovery Act funds will also be used to increase Coverage Follow-Up (CFU). In

this operation, the Census Bureau will contact households that may have made errors on the census form in reporting the number of persons in the household. The

Census Bureau will hire an additional 1,250 temporary telephone interviewers to

conduct this operation, who will work from commercial call centers.

The balance of Census Bureau Recovery Act funds will focus on funding early census operations, including staffing 494 local census offices throughout the country,

group quarters data collection efforts (e.g., college dormitories, prisons, etc.), update/

leave (i.e., leave a form and update the address list for the respondent to mail back

in areas with non-traditional addresses), and update/enumerate (i.e., update the address list and conduct the enumeration interview in areas we believe it is more efficient to get the enumeration in person).

Q18. In your testimony, you mention ‘‘streamlined processes’’ that have been established to get money out the door and into the community.

What types of barriers do you face either in regulations or laws that would

make this more difficult? (Davis-Bacon, Federal bidding practices, environmental regulations, etc.)

A18. We are committed to complying with all requirements. We have not identified

any of the existing laws or regulations as particularly burdensome in implementing

the Recovery Act.

Q19. It has been widely reported that ACORN is one of the organizations that may

be awarded contracts to assist in producing the 2010 decennial census. As you

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know, the Federal Government relies on the Census for allocation of seats in

the House of Representatives as well as determinations on all areas of federal

funding. Given the number of federal investigations and criminal charges that

have been brought against ACORN and a number of its employees, do you feel

confident there will be no misuse of taxpayer dollars and that they can provide

scientifically reliable and accurate data?

A19. The Census Bureau is not contracting with ACORN to assist in conducting the

2010 Census, nor with any other national or local partner. No data is being requested or received from ACORN or any other organization that partners with the

Census Bureau. ACORN is among the hundreds of national organizations that have

signed up as a partner with the Census Bureau to promote participation in the 2010

Decennial Census. These organizations will assure members of the communities

they serve that participation in the census is safe, and beneficial to local communities. ACORN will not have any role in hiring or collecting census data.

Q20. The Recovery Act included $430 million for NOAA acquisition, construction

and repair of ships, facilities, equipment and satellite instruments.

How has the $430 million been divided up?

A20.

• $7.4 million for accelerating improvements (Dual Polarization capabilities) to

the Nation’s NEXRAD Doppler weather radar system

• $9 million for accelerating NOAA/National Weather Service, Alaska Region

(Weather Forecast Office) construction projects in Barrow and Nome, Alaska

• $74 million to accelerate climate sensor development and risk mitigation for

the National Polar-orbiting Operational Environmental Satellite System

(NPOESS) program

• $78 million to complete the construction of a Fisheries Survey Vessel

• $261.6 million has been allocated for NOAA facility construction and repairs:

• $142 million for construction of the Main Facility of the NOAA Pacific Regional Center on Ford Island, Pearl Harbor, Hawaii;

• $102 million for construction of the replacement facility for the NOAA

Southwest Fisheries Science Center in La Jolla, California;

• $9 million for construction of the replacement facility for the NOAA Fairbanks Satellite Operations Facility in Fairbanks, Alaska;

• $8.6 million to address high priority NOAA facility repair projects.

Q21. How much will be going to the NPOESS and GOES–R programs?

A21. NOAA has allocated $74 million for accelerating satellite development. $48

million will be used for climate sensor development, specifically, to complete procurement activities for the Clouds and the Earth’s Radiant Energy System (CERES)

FM–6 and to continue development and production of the Total Solar Irradiance

Sensor (TSIS) for NPOESS C–1. The remaining $26 million will accelerate funding

for NPOESS. Funds will allow NOAA to perform critical NPOESS development activities and address risk mitigation within the program.

Q22. How do these satellite programs compare with construction and repair of

NOAA ships and other facilities in competing for this funding?

A22. The projects selected are capital infrastructure investments that are needed to

sustain NOAA’s mission. Facility and ship maintenance is required to ensure the

health and safety of our employees, while satellite observations are required for

weather forecasting for the Nation. These projects have been ongoing, and have previously been included in NOAA’s budget requests. Thus, investments in both capital

infrastructure and satellite programs support NOAA’s mission.

Q23. In the Recovery Act, $170 million was set aside for climate modeling. It is my

understanding that President Bush’s FY09 budget request for the Office of Oceanic and Atmospheric Research was about $382 million. This includes operating and procurement funding for all of NOAA research labs, the Sea Grant

College Program, the Undersea Research Program AND the NOAA Climate

Program Office, the office under which climate modeling is conducted. The set

aside seems to be a substantial amount compared with the funding of the entire

Program Office in years past. Furthermore, we have learned that other organizations that conduct world-class climate modeling, like the National Center for

Atmospheric Research, sets aside $5 million from their budget every year, so

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that every four years they can make a substantial upgrade to their computing

capacity.

Please explain exactly how this $170 million will be spent in a responsible

manner if similar facilities can do the same level of upgrades for less than onequarter of this amount.

A23. NOAA’s global climate models are among the best in the world and played a

premier role in the last Intergovernmental Panel on Climate Change (IPCC). Currently, the high performance computing (HPC) available to the Nation’s climate scientists allows global climate models to resolve climate research questions down to

the scale of continents. Additional research HPC capacity for climate would be targeted toward using currently available higher resolution models to meet stakeholder

demand for regional to local scale climate information. The additional HPC would

also be used to produce more comprehensive climate outlooks with advanced models

that improve treatments of processes critical to our understanding of climate

change, such as aerosols and clouds. These advanced models would also include

processes that are missing in today’s models, such as ice sheet melting that is crucial to address sea-level rise. Another example of what advanced models would include are complex biogeochemical cycles that can be applied to answer questions

about the carbon cycle and interaction of climate and ecosystems, such as the effects

of ocean acidification.

NOAA will use money from the Recovery Act to acquire two large-scale supercomputing systems and associated networking and storage in support of advanced environmental modeling to address critical gaps in climate modeling and climate data

records. Recovery Act money will also be utilized to modify data center space to

house these systems; NOAA estimates that construction and outfitting will be complete and the systems will be in place by mid-to-late FY10.

Below is the proposed spending plan for the High Performance Computing funding.

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ANSWERS TO POST-HEARING QUESTIONS

Responses by Matthew Rogers, Senior Advisor, U.S. Department of Energy

Questions submitted by Chairman Brad Miller

Q1. The Inspector General has now released the report on the Department’s acquisition workforce he described during the hearing. It states that, despite the effort

the Department has devoted to closing gaps, sustaining the emphasis will be difficult. Further, the Department will see an increased need for project directors

and contracting officer representatives as Recovery Act activities increase. How

will you incorporate the Inspector General’s recommendations into the Department’s effort to shore up its acquisition management function?

A1. The Department has long focused attention on both the size and qualifications

of its acquisition workforce. With respect to the Inspector General’s recommendations, the Office of Human Capital Management is gathering information in accordance with 5 CFR 337.201 to support a Secretarial approval of Direct Hire Authority

to facilitate hiring of contract specialists and federal project directors, among other

segments of the acquisition workforce. In addition, in August 2008, the Department

received approval from the Office of Personnel Management to waive reduction in

the annuity of federal retirees if necessary to re-hire qualified individuals to augment the acquisition workforce. This allows us the ability to quickly bring individuals on-board with the necessary experience and skill to support the Department’s

immediate contract and financial assistance support needs. If Direct Hire Authority

is considered to be appropriate and is approved, such authority will permit the Department to bring applicants on more quickly and will enable DOE to compete more

effectively for scarce acquisition resources against other federal agencies that currently have Direct Hire Authority. DOE can also make use of the special Recovery

Act authority that provides for certain excepted service appointments.

In addition to these workforce initiatives, the Department is leveraging internal

resources by shifting workload and resources from offices that are not receiving substantial Recovery Act funding to offices that have received substantial amounts of

Recovery Act funding. The Department will use existing personnel vehicles to ensure proper alignment of funding and staffing. In essence, the Department is adopting a virtually mobile workforce model by leveraging its resources and using technology to allow employees to assist other organizations without traveling to that

site.

As part of the Department’s initiative to institutionalize strong contract and

project management practices, DOE has identified impediments to performance, outlined in the Department’s Root Cause Analysis Corrective Action Plan, dated July

2008. One impediment that was identified is an inadequate number of federal contracting and project management personnel with appropriate skills to plan, direct

and oversee project execution. As part of the effort to identify solutions to inadequate staffing, an algorithm, based on bench-marking with other federal agencies,

was developed to facilitate identification of the right staff size for a given project.

This algorithm will help identify gaps in current project staffing and inform future

staffing decisions.

Complementary to this effort is the Department’s conduct of an annual Gap Analysis Study to assess current and future skill gaps. The results of this annual study

will serve to drive the Department’s strategies for acquisition workforce development, training, and recruitment.

Q2. The President has made the expansion of renewable energy a cornerstone of his

energy policy. If we are to get the full benefit of that new source of supply, the

transmission grid will need updates to compensate for the variability in output

that can be expected from the solar and wind generators. The Department receives Recovery Act funds to advance both of these goals; how are these resources

being managed to match grid improvements to the expansion of renewable supply sources?

A2. The Department anticipates applying Recovery Act funding to support a variety

of smart grid technologies through a merit-based, competitive solicitation process.

The term ‘‘smart grid’’ encompasses a portfolio of approaches to integrate information technologies and computer-based controls more fully into the planning and operations of the electric power system. These systems can be used to enable greater

levels of renewable power generation.

For example, phasor measurement units can be deployed in the electric transmission system to collect detailed information about the status of the grid. These

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systems can be used to monitor the variable generation from wind energy systems

due to changes in the weather and can provide the ability to offset dips in generation with other resources.

Advanced metering infrastructure (AMI) involves a two-way communications network and smart grid devices installed at the customer level. AMI devices such as

smart meters enable participation in demand response programs such as dynamic

pricing, which can be used by utilities to lower demand during peak periods or during those times when variable resources are not available. Smart meters can also

be used to make it easier for customers to install and operate rooftop photovoltaic

arrays and account for the two-way flow of power into the home and back into the

grid.

The Recovery Act will also support energy storage demonstrations projects. Energy storage will address the effects of increased renewables on the grid in a variety

of ways. Ancillary services provided by fast storage, such as flywheels and batteries,

will accommodate the additional need for frequency regulation. These technologies

have minimal carbon footprint and are twice as effective as regulation by fossil fuel

generators. Large battery systems in the tens of megawatts (MW) range will aid in

smoothing wind and mitigating ramps. Compressed air energy storage projects will

be able to store hundreds of MW diurnally. This can greatly enhance the utilization

of renewable energy in areas such as California and Texas where wind is anti-correlated. Projects in all these areas will be solicited in a competitive process.

The Recovery Act also provides funding for an assessment of electricity-related resources and interconnection-level grid planning. These funds will be used to support

collaborative analyses (by federal, State, industry and Non-Governmental Organization (NGO) representatives) of a broad range of electricity futures and their associated transmission requirements. These analyses will also take into account major

uncertainties that could affect transmission requirements, such as the prospects for

offshore wind development, cost reductions for photovoltaic devices, and improved

batteries for plug-in hybrid electric vehicles.

Q3. The Department transferred $10 million to the National Institute of Standards

and Technology for standards development work related to the electrical grid upgrades. Will the Department wait to make awards for grid projects employing

Recovery Act funds until these standards are available? If not, how does the Department address the risk that projects will invest in incompatible technologies

as a result?

A3. The Department is working with the National Institute of Standards and Technology (NIST) to accelerate the development of standards for the smart grid. Next

steps involve the development of a roadmap to identify the high value technology

interfaces where standards agreement can significantly reduce costs and unleash innovation.

While final, fully agreed upon and mature standards could enable deployments to

proceed more efficiently, the best way to proceed is for deployments and standards

development to move forward in parallel. The large extent of our electric system

means that standards for automation are needed in many areas, and indeed, many

applicable standards already exist. But this is a landscape in motion. Given the

rapid change in technology and the emerging value to consumers, the economy, and

the environment that characterize these early stages of market entry for smart grid,

co-development is a reasonable path forward. The Department therefore does not

see the need to delay implementation of the Recovery Act for smart grid activities.

As part of the smart grid project solicitation process, the Department plans to require applicants to address how inter-operability considerations will be applied and

updated with any changes in standards.

Q4. In his March 20 memorandum, the President established a process for communications with outside sources relating to Recovery Act activities. What steps has

the Department taken to implement the internal controls needed to assure compliance with the President’s direction?

A4. After the President issued the March 20th memorandum, the Office of General

Counsel briefed the Recovery Act leadership principals from every program and

every major function and outlined the communication process as it relates to outside

sources and Recovery Act funding. In addition, the programs sent out guidance to

the field offices explaining acceptable and unacceptable communication practices.

Secretary Chu also issued a department-wide advisory on this topic. The Department is committed to complying with the President’s direction and maintaining integrity in the distribution of Recovery Act funds.

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Questions submitted by Representative Paul C. Broun

Q1. One of the selling points of the stimulus bill was that action was needed immediately. How long will it take you to spend all of the money directed to your

agencies?

A1. The Department intends to have all funds obligated by September 30, 2010.

Some investments will be spent after September 2011, but these will generally be

large projects that will start in 2009 or 2010 but require a longer timeframe for full

completion.

Q2a. Current OMB, guidance only requires that money be tracked to two layers

down. For example, a state and a city would have to report data, but not the

contractor or the subcontractor. Do you intend to require additional reporting

beyond OMB guidance?

A2a. The Department of Energy will comply with all reporting requirements in the

‘‘Updated Implementing Guidance for the American Recovery and Reinvestment Act

of 2009’’ issued by OMB on April 3, 2009. Our current internal reporting requirements and data tracking activities include contracting and grants information that

is directly fed to Recovery.gov from USASpending.gov and the Federal Business Opportunities (FBO.gov) websites. In addition to that data, we will gather data that

is reported by the recipients of Recovery Act funds directly to Recovery.gov, both of

which have the potential to go beyond the State and city levels.

Q2b. Do you believe two layers of accountability are enough?

A2b. The Department recognizes the importance of accountability in managing Recovery Act funds and believes consistency in adhering to levels of reporting established by OMB is critical. To comply with OMB guidance, the Department will utilize a variety of methods to ensure the funds are spent effectively and efficiently.

These methods include tracking funds execution, implementing risk mitigation

strategies, assessing performance, and conducting site visits. These types of actions

taken together with levels of reporting are important considerations and must be

assessed as a whole.

Q3. Please list the top three risks at your agency associated with stimulus funding.

A3. As the Department distributes and manages Recovery Act funds, we face some

challenges in contract management, grant administration, and human capital. To

address concerns in contract management and grant administration, we have developed strong oversight strategies, provided programs with guidance, upgraded process controls, and engaged in risk mitigation planning. Given the reporting requirements of the Recovery Act, we recognize the need to significantly improve oversight

activities and we are currently developing plans to monitor award recipients, validate reported outcomes, and conduct site visits. To address the human resource

challenges, the Department’s Office of Procurement and Assistance Management is

aggressively recruiting additional contracting specialists and will avail itself of opportunities to increase staffing through direct hire authority, temporary reassignment of personnel from other programs, and temporary hires.

Q4. What contracts at your agency are ‘‘mission critical?’’ That is, if the specific contract were to experience cost-overruns, schedule delays, or performance problems

would it affect the mission of the agency?

A4. The Department of Energy has disparate missions which involve high-level energy research and development, weapons production and stockpile management, and

environmental remediation, restoration, and site closure. DOE obligates approximately 85 percent of its annual budget for executing the functions and activities associated with these programs to its management and operating and other major site

and facility management contracts. These contractors manage and operate DOEowned scientific, engineering, and production facilities, and environmental cleanup

sites in direct accomplishment of DOE’s missions. Currently, these contractors have

approximately 100,000 employees as compared to DOE’s approximately 14,000 federal employees. These management and operations contracts are considered the

most critical contracts supporting the Department’s missions.

Q5. The DOE IG identified contract administration as ‘‘one of the most significant

management challenges facing the Department.’’ Please discuss the current status of your agency’s ability to issue contracts and manage grants.

Q5a. Do you have adequate resources?

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A5a. The Department, like most federal agencies, is addressing the challenges of

supporting existing acquisition and financial assistance requirements together with

the significant increase in pre-award and post-award workload resulting from the

Recovery Act. The Department’s strategy for meeting these needs is both short- and

long-term. Consistent with the objectives of the Recovery Act to expedite the obligation of funds, the Department is supplementing its high impact acquisition workforce with acquisition and program personnel assigned to areas that are not directly

or significantly impacted by the Recovery Act. DOE is also leveraging existing information management systems to speed the solicitation, evaluation, and award of Recovery Act procurement and financial assistance instruments, and to provide postaward administration. As necessary and appropriate, the Department is also

supplementing its existing acquisition workforce with temporary contractor support.

To ensure that appropriate federal personnel are in place to manage and oversee

the disbursement of Recovery Act funding, the Department has identified essential

staffing needs, in both acquisition and program organizations and is pursuing expedited hiring strategies, including Direct-Hire authority and use of the Department

of Veterans Affairs’ Veterans and Disability Program and the Reemployed Annuitant program.

Q5b. Are your employees adequately trained?

A5b. The Department has one of the most comprehensive acquisition, and financial

assistance training and certification programs for both its acquisition and project

management workforce. While some competency gaps continue to exist, they are

moderate to small gaps. Multiple training classes were delivered in fiscal year 2008

and are being delivered in fiscal year 2009 to specifically address those gaps. In addition, the certification program for financial assistance specialists was recently revised to increase mandatory minimum training and experience requirements and to

establish certification requirements for Technical Project Officers who oversee the

technical aspects of financial assistance projects and activities.

Q5c. Do you have adequate staff levels?

A5c. The Department has a short-term (one-year) gap of 31 GS–1102s (contract specialists). While progress has been made in closing the Department’s resource gaps,

market conditions present a challenge. The Department is competing with other federal agencies for a limited pool of qualified acquisition professionals. Competition is

fierce, particularly in the Washington, DC, metropolitan area, both from other federal agencies and from the private sector. The Department is using and/or pursuing

a number of tools to effectively recruit and hire qualified individuals to fill current

and future staffing needs, including Direct-Hire Authority, the Department of Veterans Affairs’ Veterans and Disability Program, and the Re-employed Annuitant

Program.

Q5d. What can Congress do to help?

A5d. The Department is currently limited to spending no more than 0.5 percent of

its Recovery Act funding on management and oversight of the programs, projects,

and activities funded in that Act, a situation we face alone among agencies funded

in the Act. That limitation seriously constrains our ability to carry out the Recovery

Act, by sharply limiting the number of additional personnel we can hire to manage

and support these, added programs. Replacing that restriction with the limited

transfer authority which the explanatory statement accompanying the Act indicates

was intended would go a long way in assisting the Department to carry out the Recovery Act more effectively.

Q6a. Understanding that coordination is sometimes necessary, IGs should not be

used as an agency’s internal auditor. What in-house auditing and program

evaluation capabilities do your agencies have?

A6a. The Department recognizes the Office of Inspector General is required to exercise independence during audits and reviews. Within the Office of the Chief Financial Officer, the Office of Internal Review is tasked with performing internal assessments of critical financial management activities. In addition to performing cyclical

assessments of Departmental operations and maintaining a capability for ad hoc assessments, the Office of Internal Review coordinates a corporate management control program to evaluate internal control systems on an on-going basis. After the

Recovery Act was passed, the Office of Internal Review took a lead role in conducting and facilitating Department-wide risk assessments to identify existing or

potential vulnerabilities within our programs. The Office of the Chief Financial Officer’s Office of Program Analysis and Evaluation also maintains a robust program

evaluation capability and has taken concrete actions to ensure corporate planning

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and evaluation of projects are well managed and effective. These organizations are

also leaders in establishing internal controls guidance, developing documentation

standards, and coordinating external reporting requirements, outcome validation,

and early issues identification.

Q6b. Have your agencies ever tasked IG to conduct work on your behalf?

A6b. Since the Department of Energy received an unprecedented level of funding

from the Recovery Act, the Department requested that the Office of Inspector General provide grant fraud training to headquarters and field offices. In addition, we

asked the Office of Inspector General to prioritize the first round of their Recovery

Act reviews on programs that received substantial funding increases and/or are associated with high risks.

Q7a. How has the Internet portal www.grants.gov operated recently?

A7a. The Department of Energy’s users have experienced significant problems with

the grants.gov system, including lack of advance notice by the Department of Health

and Human Services (HHS) of systems changes and problems logging onto the system. The applicant community has also experienced problems in submitting applications due to delays by HHS in implementing software changes to the system.

Q7b. What is the Federal Government doing to ensure its operation and effectiveness?

A7b. The Office of Management and Budget (OMB) is working with the Department

of Health and Human Services to resolve performance issues of the system. In the

meantime, OMB has requested that agencies, including DOE, find alternative systems to receive and manage financial assistance applications for Recovery Act

projects and activities.

Accordingly, while Grants.gov remains a viable tool for the posting of Funding Opportunity Announcements, DOE is not using Grants.gov to collect and retrieve proposals for financial assistance actions, including those relating to Recovery Act

projects and activities. Alternatively, DOE is using FedConnect, a commercial system, and DOE’s Industry Interactive Procurement System (IIPS), an in-house system, for receiving applications.

Q7c. What impact would the crashing of this site have on the ability to issue grants?

A7c. The impact on the Department of Energy would be minimal since we are currently using alternative approaches for receiving applications for DOE financial assistance opportunities.

Q8. I am concerned that the ‘‘Buy American’’ provisions in the Stimulus legislation

could add significant costs to and restrict agency flexibility in spending for

science-related construction and facilities.

How will this provision be implemented with respect to construction of scientific

buildings, facilities, and major research equipment and how will you work to

ensure the restrictions do not result in cost overruns and delays?

NOTE: the language specifically states: SEC. 1605. USE OF AMERICAN IRON,

STEEL, AND MANUFACTURED GOODS. (a) None of the funds appropriated

or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work

unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.

A8. Our goal in implementing the Recovery Act is to stimulate the economy through

jump-starting job creation by accelerating planned conventional construction

projects and the procurement of major items of equipment. We are evaluating

whether the Buy American provision has significant impacts on a project-by-project

basis. The primary area of concern is scientific equipment and instrumentation

within construction projects already underway. After we better understand the provision’s impacts on our projects, we may consider using one of the Buy American

exception provisions; but to date we have not made any exception requests.

Q9. Mr. Rogers: GAO’s testimony mentions four specific examples that highlight

risks at science agencies—three of which are at DOE.

How do you plan on addressing their concerns?

A9. Loan Guarantee Program

GAO recommended that the Loan Guarantee Program (LGP) complete internal

loan selection policies and procedures, amend application guidance for more speciVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00158 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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ficity, and further define performance metrics to measure outcomes. The LGP has

finalized a policies and procedures document.

The Department’s generic loan application guidance document states that the determination of the technical merit of the project will be influenced by the quality

of the independent engineering reports, including the credentials of the consultants,

scope of the undertaking, and strength of the opinions provided. Due to the unique

nature of each project, the Department will provide more detailed requirements for

the required independent engineering reports during its preliminarily review of application submissions. The Department notes that two independent engineering reports will be separately prepared by two independent engineering firms. This information will then be reviewed and analyzed for a third time by the LGP’s underwriting team. On the basis of the detailed reports and multiple reviews, the Department will determine whether the application process should move forward or if applicants require additional guidance.

The Department has developed an initial draft set of performance measures and

metrics for the loan guarantee program. The Department will continue to refine

these measures with the aim of completing the effort by the time of the fiscal year

2010 budget submission.

Research and Development Selection Process for Oil and Natural Gas Projects

The Office of Fossil Energy fully supports GAO’s recommendation to modify the

Department’s oil and natural gas research and development selection process. Specifically, the Department agrees with GAO’s recommendation to avoid activities that

industry would conduct without federal funding. The FY 2010 budgets propose to

terminate DOE’s mandatory and discretionary oil and gas R&D, except for methane

hydrates, which has a long-termer, higher-risk focus. In FY 2009 the Department

is including an evaluation criterion in all oil and gas R&D solicitations to formally

assess whether industry would undertake the research without federal funding. The

Department is compiling information on industry’s current and planned research activities to help reviewers make this evaluation and requires that proposers specifically address this criterion in their application.

Coal Technology Program

The Office of Fossil Energy has taken significant steps in working with the National Energy Technology Laboratory (NETL) to address GAO’s concerns dealing

with a variety of project and program challenges in jointly funding private sector

projects demonstrating clean coal and carbon capture and sequestration technologies. These actions include improved project management practices such as the

establishment of the NETL Federal Project Management Center and project manager certification training. The Department is considering evaluation of the Center

and the additional training on project management. In addition, recent Funding Opportunity Announcements have been released with specific time limits on the length

of negotiations in order to facilitate closure on the terms of a cooperative agreement.

The Department is considering more rigorous cost-effectiveness criteria to address

GAO’s concerns for project selection. The Department is implementing GAO’s recommendation to require a 50 percent private sector cost-share (in cash, as opposed

to projected revenues from electricity sale) and full-funding prior to award (vs. incremental funding). While many demonstration projects have unique risks that are

challenging to mitigate, the Office of Fossil Energy has worked hard to address

these risks and continues to take appropriate actions to limit their effects.

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ANSWERS TO POST-HEARING QUESTIONS

Responses by Todd J. Zinser, Inspector General, U.S. Department of Commerce

Questions submitted by Chairman Brad Miller

Q1. What indicators will your office use to determine if the training provided to Department contract and grant management staff is resulting in earlier detection

of fraud or other problems?

A1. The training we provide has a number of purposes which help to strengthen

our fraud awareness and detection programs across the Department. The relationships we develop during these training sessions with the program offices help facilitate open communications which can result in more timely inquiries and notices to

our investigation team when unusual trends are identified. When calls are received,

they are logged in a tracking system, which will allow us to link those contacts back

to our outreach and training efforts.

Q2. Is the current presentation of Recovery Act information on the Department’s web

site adequate to meet the Act’s requirement for transparency? If not, what improvements would you suggest?

A2. We have reviewed the Department’s Recovery Act web site and the requirements established by the Office of Management and Budget in its Recovery Act

Guidelines for recovery related web pages, and discussed the content and implementation of the web site with Department officials. Based on our review, we found that

the Department’s Recovery Act web site (http://www.commerce.gov/recovery) conforms with OMB’s requirements, including providing a prominent link to Recovery.gov and a link to the Office of Inspector General’s web site. Although reporting

by agencies is still evolving and stimulus funds have just begun to be disbursed,

we expect the Department’s Recovery Act web site will continue to meet the Act’s

requirement for transparency by posting major communications, funding notifications, and financial and activity reports. This site is intended to expand and evolve

as additional information becomes available, so we will continue to assess whether

it is meeting accountability and transparency standards and advise the Department

of any concerns we might have as they arise.

Q3. The Act gives you the responsibility to protect ‘‘. . . employee[s] of any non-federal employer receiving covered funds . . .’’ who provide information concerning

waste, fraud, and abuse of Recovery Act funds. How do you intend to ensure

your responses to whistleblower complaints are made within the mandated 180-

day review period? Under what circumstances will you choose to discontinue or

not to conduct a whistleblower’s requested investigation? How will you protect

such whistleblowers from retaliation?

A3. We intend to make whistleblower complaints under the Recovery Act, a top priority when they are received. Our Office of Investigations has been tasked with this

responsibility. We will meet the statutorily mandated 180-day review period for

these complaints through a tracking system we have designed and implemented.

The system provides for a focal point to log dates of receipt of complaints, status,

and due dates for follow-up and disposition. The tracking system will be monitored

on a regular basis to ensure that we remain aware of statutory timeframes.

The Act requires that we investigate unless we find that the complaint is frivolous, it does not relate to covered funds, or another federal or State judicial or administrative proceeding has previously been invoked to resolve the compliant. This

will require an initial determination by our office in that regard. If we determine

that a complaint does not meet the requirements for an investigation we will close

the compliant. The Act mandates that Inspectors General list all such complaints

in their semi-annual reports to Congress. Additionally, the Act specifically provides

for final remedies for the protection of a whistleblower through a report issued by

the IG to the Head of the Department. In the event that the OIG report establishes

a fording of probable cause that retaliation has occurred, the burden of proof will

shift to the employer to prove that they did not retaliate. It will then be up to the

Secretary to adjudicate the matter and apply remedies provided under the stature.

These include: 1. Order the employer to take affirmative action to abate the reprisal;

2. Order the employer to reinstate the employee and provide him/her with appropriate compensation; or 3. Order the employer to pay the complainant’s costs reasonably incurred in bringing the complaint.

While these remedies are good, the Department should consider including a standard provision in all contracts and grants awarded under the Recovery Act, stating

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that a finding by the Department of whistleblower reprisal by a contractor or financial assistance recipient may result in termination of funding under the respective

contract or financial assistance award. We intend to discuss this recommendation

with the Department as another means of strengthening whistleblower protection.

Questions submitted by Representative Paul C. Broun

Q1. Please list the top three risks at your agency associated with stimulus funding.

A1. Our top three stimulus funding risks are as follows:

1. Meeting the Act’s Aggressive Spending Timeline: The Recovery Act requires funds to be spent quickly, giving bureaus little time to staff up and

gear operations to accommodate the new and expanded programs, grants,

and contracts that this funding will support. This aggressive spending

timeline significantly increases the risks for fraud and waste in both stimulus-funded activities and the Department’s traditionally funded operations.

This applies across the government—not just to the Department of Commerce.

2. Shoring Up Grants and Contracts Management: The Recovery Act’s emphasis on grants and contract spending puts additional pressure on weak

management and administrative operations that we have identified in OIG

work over the years, particularly with regard to three aspects of the Department’s grant and contract management and operations:

• A decentralized grants management structure, which consists of three

separate management systems operated by three different bureaus—each

managing a subset of Commerce grant activity according to policies established at the Department level;

• The shortage of qualified contracting specialists, technical specialists, and

subject matter experts—particularly in light of the anticipated shift from

cost-type contracts, which are predominantly used today, to fixed-price

contracts, which require different knowledge and skill sets; and,

• The significant dollars dedicated to funding construction grants and contracts, two areas that are inherently risky and historically difficult to

manage effectively.

3. Fraud Potential: Under the Recovery Act the Department of Commerce received a significant amount of funding, almost double that which is routinely

received on an annual basis. Regardless of the strength of the existing internal controls, anytime there is an influx of money of this magnitude, there

is an increased potential for fraud. For example, Internet scams linked to Recovery Act funding have already been identified. While Congress provided

certain safeguards in the Act, continued diligence by OIGs and agencies will

be essential to mitigate this increased risk of fraud.

Q2. What contracts at your agency are ‘‘mission critical’’? That is, if the specific contract were to experience cost overruns, schedule delays, or performance problems,

would it affect the mission of the agency?

A2. We have not conducted an audit to determine all the mission critical contracts

in the Department, but we have discussed with Departmental officials that each bureau should engage in such an exercise to identify its mission critical controls. Those

we have identified are as follows:

Contracts for the 2010 decennial census, NOAA satellites, and digital/broadband

expansion support key mission-critical operations for the Department of Commerce.

These contracts, costing billions of dollars, support programs that are essential to

determining Congressional representation, allocating federal and State funding for

community improvements, public health, education, and transportation, and public

safety and security. Failure to execute these contracts effectively would seriously

impact its mission.

2010 census contracts

Deadlines for the delivery of decennial counts—which are used for apportionment,

to redraw congressional districts, and to distribute hundreds of billions of dollars in

federal funds—are set by law. The Census Bureau is facing significant challenges

in preparing for the 2010 decennial as a result of problems with its plan for automating its major operations, which had to be significantly scaled back late in the

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decade. Four contracts, representing approximately $2.2 billion, are critical to the

bureau’s ability to conduct a successful census.

• Field Data Collection Automation (FDCA) contract for hand-held computers

and related systems and automation support for decennial field operations.

• Decennial Response Integration System (DRIS) contract for integration of all

data responses, including mail-back forms and non-response follow-up.

• Decennial Access and Dissemination System II contract for data tabulation

and dissemination services.

• 2010 Communication Campaign contract for integrated communications that

includes a mix of public relations, partnership materials, grassroots marketing, special events and more to help ensure that all people are reached in

the most efficient and effective manner.

NOAA contracts

Two NOAA satellite systems currently in development are critical to the Nation’s

ability to provide continuous long- and short-term weather and environmental data:

the National Polar-orbiting Operational Environmental Satellite System (NPOESS)

and the Geostationary Operational Environmental Satellite R–Series (GOES–R).

Both of these systems have experienced significant cost overruns and schedule

delays. They are intended to replace aging satellites that are nearing the end of

their life cycles, and must be deployed in time to avoid a gap in critical satellite

coverage.

Digital/broadband conversion

The National Telecommunications and Information Administration’s (NTIA) $1

billion contract to prepare consumers for the switch to all-digital programming and

the management support contract the agency expects to award in support of the

$4.7 billion broadband program are also mission-critical initiatives for the Department.

Q3. Where do you believe your office should concentrate its time and resources—focusing on high-risk programs or on the most expensive programs?

A3. Our work on Recovery Act oversight is risk-based. As part of the Recovery Act,

the Department’s bureaus themselves will be assessing the risk within their programs and developing plans and operating procedures to adequately address these

risks. As part of our oversight, we will be reviewing the draft plans and providing

feedback to ensure that the bureaus have implemented adequate preventive, detective and monitoring controls over Recovery Act programs. While our risk assessment

results are preliminary, we believe the Broadband program represents the highest

risk to the Department.

Q4. Despite campaign promises by the President to not issue signing statements, and

to ensure whistleblower protections, the President recently issued a signing statement that said the following:

‘‘Sections 714(1) and 714(2) in Division D prohibit the use of appropriations to

pay the salary of any federal officer or employee who interferes with or prohibits

certain communications between federal employees and Members of Congress. I

do not interpret this provision to detract from my authority to direct the heads

of certain executive departments to supervise, control, and correct employees’

communications with the Congress in cases where such communications would

be unlawful or would reveal information that is properly privileged or otherwise

confidential.’’

How do you reconcile the President’s campaign promise with his recent signing

statement?

• If you believe that these statements are consistent, do you believe they have a

chilling effect on whistleblowers?

• What affect will this have on your ability to uncover waste, fraud, and abuse?

A4. The IG Act and Departmental orders provide clear authority for the IG to receive whistleblower complaints, complete investigations, and protect the identity of

whistleblowers regardless of the nature of the information provided in their complaints.

As part of our Recovery Act efforts we are conducting fraud awareness briefings,

which include a discussion of whistleblower protections under the Whistleblower

Protection Act and the Recovery Act. In that regard, we do not think that the PresiVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00162 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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dent’s signing statement will affect our ability to protect the identity of whistleblowers or to uncover fraud, waste, and abuse.

Q5. The stimulus bill contains $350 million for the IG community and GAO to provide oversight:

• What entity will provide oversight of how these funds are spent?

• How can the taxpayers be sure that the IG community and the GAO are spending this money wisely?

A5. OMB’s Updated Implementing Guidance for the Recovery Act establishes an

independent requirement for OIGs to report monthly on their total Recovery Act

spending. It is our understanding that these reports will be posted to Recovery.gov,

and we will include in our reporting the office’s Recovery Act activities. Stimulus

funding provided to the OIG will be spent primarily on personnel and travel to conduct oversight, and potentially to hire specialized contract support. One measure of

how we spend these funds will be the work products that we produce and publish

on our Recovery Act web page. Congress is, however, the entity that is in the best

position to provide oversight to the IG community.

Q6. Are you concerned that the Recovery Accountability and Transparency (RAAT)

Board will create a new level of bureaucracy and ultimately undermine your

independence?

• Does the RAAT Board, or anyone in the Administration, have the ability to

terminate your investigations?

• What steps are you required to take in order to maintain an investigation if

directed to terminate one?

A6. I serve as a member of the Recovery Accountability and Transparency Board

with 10 other Inspectors General, including the Board’s Chairman. The RAAT Board

has discussed this issue and cannot envision a case where the Board would consider

asking an inspector general to terminate an investigation. Based on these discussions, we do not anticipate this circumstance arising.

Q7. Understanding that coordination is sometimes necessary, IGs should not be used

as an agency’s internal auditor.

• Have you ever been asked by an agency to do work?

• What was your response?

A7. We have, on occasion, initiated work at the request of the Secretary. For example, in the past year we conducted work in response to a request from the Secretary

regarding the Decennial Census.

Commerce agencies are familiar with the authority, responsibilities, and duties

accorded to the OIG under the Inspector General Act, including our mandate for

maintaining independence. There are times, however, when our interactions with

Department officials to prevent and detect fraud, waste, and abuse may result in

an audit or investigation. We are often called on by program managers and grants

officers to provide assistance when they suspect misuse of funds or other program

irregularities. In these instances, we conduct a preliminary analysis to determine

whether additional follow-up work is warranted and take the appropriate next step

based on our findings.

Q8. What lessons can be learned from other initiatives (like the Reconstruction in

Iraq, Katrina Relief, or the Troubled Asset Relief Program) that attempted to

balance expediency with accountability? Are these lessons currently being included in your oversight plans?

A8. The Department of Commerce received emergency funding to assist recovery efforts in the aftermath of Hurricanes Katrina and Rita in 2005 and Andrew in 1992.

Though the size of these allocations and the scope of spending were significantly

smaller than Commerce’s Recovery Act funds and programming, the Department

nonetheless was faced with some similar challenges: establishing strong internal

controls to safeguard funds, accelerating the awards process, keeping contractors

and grantees accountable, and ensuring programs meet their objectives.

Our oversight of the Department’s use of hurricane-related funds found that Commerce took steps to ensure that contracts and grants were awarded quickly and appropriately, and that funded projects were sound in concept and responsive to the

economic recovery needs of the area. But we identified weaknesses in grantees’ reporting and in departmental oversight of their performance. We found that conducting site visits was critical to effectively monitoring the progress of funded

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projects, many of which involved construction and a range of economic development

activities—common focuses for Recovery Act funding.

This work also reinforced the recognition that balancing expedience with accountability requires vigilant attention to maintaining comprehensive systems of internal

controls; robust mechanisms for developing accurate budget estimates and tracking

project costs; sufficient staff in terms of both skill and number to oversee contractor

performance; and timely, systematic contractor and recipient reporting. These lessons learned are being included in our oversight plans for Recovery Act spending.

Q9. Mr. Zinser: I am particularly concerned with the part of your written testimony

in which you state that a recently completed audit of NOAA satellite acquisition

contracts found that contractors were receiving high award fees for projects that

were experiencing serious performance shortfalls and large cost overruns. Will

you please expand on your audit findings and explain to the Committee why

contractors are being rewarded for failing?

• How will the sudden influx of funding from the Recovery Act and the Omnibus

Appropriations bill affect the success (or failure) of these satellite acquisition

programs?

A9. Our September 2006 audit report, Poor Oversight and Ineffective Incentives

Leave NPOESS Program Well Over Budget and Behind Schedule, found that the

prime contractor (Northrup Grumman) had received more than $123 million in

award fees—84 percent of the available fee pool—for the first six award periods of

the NPOESS contract, despite ongoing, significant delays and cost overruns. We

found that the contract’s award fee plan did not sufficiently tie fee amounts to critical, high-risk tasks; that program officials were awarding interim fees even though

the contractor was missing key milestones, and that the contract allowed for unearned fees to be ‘‘rolled over’’ to subsequent fee periods to give the contractor additional chances to earn them. Our report provided recommendations for correcting

these problems.

The practice of awarding high fees to contractors for programs that are failing,

behind schedule, and over budget is a systemic problem throughout the government.

Other OIGs, as well as GAO, have reported these abuses. As a result, federal agencies, including the Department of Commerce, as well as the Office Federal Procurement Policy (OFPP) are reviewing award-fee policies and practices and are issuing

new guidance to ensure award-fee contracts truly promote and reward excellent performance.

Sustained funding for NOAA’s satellite programs is critical. The development and

launch of these satellites, which will modernize the government’s environmental

monitoring capabilities, are high risk programs that will be at even greater risk if

there are any gaps in satellite funding. Continued congressional support for these

programs is, therefore, critical. It is imperative that NOAA, NASA and the Air

Force address the management and technical issues with the NPOESS satellite program, however, in our view it is equally important that the program receives sustained funding.

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ANSWERS TO POST-HEARING QUESTIONS

Responses by Thomas C. Cross, Interim Inspector General, National Science Foundation

Questions submitted by Chairman Brad Miller

Q1. Your testimony regarding the capability of the Foundation’s grants management

staff expressed a concern about their ability to deal with the increased workload

expected from the Recovery Act. How can you monitor performance in those offices to detect if a workload problem is occurring?

A1. Any time an agency receives a significant amount of new funding without a concomitant increase in funding for the administrative costs associated with managing

and overseeing programs, there is an increased risk of fraud and abuse. With the

Recovery Act, NSF will increase the amount of funding available to the scientific

community by $3 billion, nearly half of NSF’s regular annual appropriation. However, NSF did not receive any additional funding in its salaries and expenses appropriation. We are already working to monitor how NSF will mitigate this potential

risk. First, we are reviewing the processes through which NSF intends to award the

bulk of these funds. By using already-existing programs and processes, to the extent

possible, NSF can potentially mitigate the impact on its staff. Second, as NSF begins making awards and then moves into the post-award monitoring phase, we will

continue to monitor NSF’s processes and identify those areas that may be in need

of improvement. Finally, through ongoing communications with NSF staff at all levels, we can identify potential workload problems before they occur and assess NSF’s

actions to reduce those problems.

Q2. What indicators will your office use to determine if the training you provided

to Foundation contract and grant management staff is resulting in earlier detection of fraud or other problems?

A2. We believe that the training and resources we have provided to the agency

about uncovering grant fraud, combined with the additional information required of

recipients of Recovery Act funds, will ultimately yield more referrals to our investigators than what would otherwise be the case. Although we maintain statistics on

hotline contacts, in the past they have not been categorized according to source. We

are reconsidering this policy to better track how we obtain our referrals. An increase

in referrals from the agency would be an indication of the effectiveness of the training, and an increase in queries or other communications concerning potential fraud

would show an improved awareness of fraud issues by agency personnel.

Q3. Is the current presentation of Recovery Act information on the Foundation’s web

site adequate to meet the Act’s requirement for transparency? If not, what improvements would you suggest?

A3. The OIG is currently reviewing the NSF’s web site presentation of the Recovery

Act and expects to provide suggestions to improve the transparency and accountability to the public. NSF is generally following the common Recovery Act web page

formats set forth in the Office of Management and Budget’s implementation guidance. In addition, the Foundation’s web page incorporates some of the best practices

suggested in the guidance. For example, the Foundation has placed the Recovery

web page link at a prominent place on the NSF home page and has made an effort

to ensure that as much content as possible is accessible to a wide audience, including persons with disabilities. Because the Recovery web page will mostly likely be

the primary means for NSF to inform and communicate with the public and the research community about Recovery Act activities, we are taking the time to review

the web site more closely to help ensure that it will disseminate information effectively.

Q4. The Act gives you the responsibility to protect ‘‘. . . employee[s] of any non-federal employer receiving covered funds . . .’’ who provide information concerning

waste, fraud and abuse of Recovery Act funds How do you intend to ensure your

responses to whistleblower complaints are made within the mandated 180-day

review period? Under what circumstances will you choose to discontinue or not

to conduct a whistleblower’s requested investigation? How will you protect such

whistleblowers from retaliation?

A4. With OIG resources already stretched and the anticipation of a significant increase in allegations of fraud, waste, and abuse of Recovery Act funds, we recognize

that meeting these time requirements will be a challenge. However, we have taken

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a proactive approach by educating our staff on the specific whistleblower responsibilities we have under the Act and emphasizing the new time requirements.

We will incorporate additional milestones specific for Recovery Act cases into our

existing electronic case management tracking system and monitor them closely to

ensure that we adhere to them. We also are planning to hire additional staff to handle the anticipated increase in whistleblower and other cases.

Allegations that we receive concerning Recovery Act funding will be thoroughly

reviewed and evaluated. In the case of a whistleblower complaint, the initial review

will include determining if the funds in question or the alleged retaliation involves

Recovery Act funds. We will also evaluate the substance of the matter and the supporting evidence to determine its merits and whether a full investigation is warranted. Decisions to discontinue an investigation are based on the evidence identified during the investigation and are reviewed by management to ensure the decision is consistent with the IG community’s Quality Standards for Investigations.

In the case of whistleblowers who allege retaliation, the identity of the complainant has already been compromised, and the best protection we can provide is a timely and thorough investigation to provide them a remedy if appropriate. When a

whistleblower submits a confidential allegation to our office, on the other hand, our

standard practice is to protect him or her from retaliation, as in the case of anyone

who reports fraud, waste, or abuse. It is the office policy not to identify the source

of allegations, and we have procedures to provide complainants with Confidential

Source status, when requested, to further protect their identity.

One step that we have already initiated is to educate through our outreach program the recipients of Recovery Act funds of the requirements they must comply

with, including the section covering whistleblowers. By ensuring that recipients are

aware that this protection covers State and local government employees, as well as

contractors, and that the Act requires our office to investigate any allegations of retaliation, we reinforce the serious consequences of retaliation. Additionally, completing timely, thorough investigations and referring our results to the Agency for

action, when appropriate, serve as a further deterrent.

Questions submitted by Representative Paul C. Broun

Q1. Please list the top three risks at your agency associated with stimulus funding.

A1. First, while NSF received $3 billion in additional funding, nearly half of its regular annual appropriation, it did not receive any additional funding for its administrative activities. Consequently, NSF faces the risks associated with spending these

funds appropriately, within a very demanding timeframe, without an increase in

staffing. Second, over the past several years, we have identified the management

of large-facility projects as one of NSF’s top challenges. Through the Recovery Act,

NSF received an additional $400 million in its Major Research Equipment and Facility Construction appropriation for these large science-infrastructure projects. NSF

will continue to be challenged to properly oversee these complex efforts. Finally,

NSF’s mission of supporting basic science and engineering research and education,

where outcomes are less tangible in the short-term, is unique among federal agencies. With respect to stimulus funding, NSF will be challenged to identify, track, and

report on how it will meet the goals of the Recovery Act in a way that provides

meaningful information to the public on NSF’s unique role. This will also require

increased agency effort to monitor a large volume of new grants awarded over a relatively short period of time to ensure that the associated funding is accurately accounted for and expended properly.

Q2. What contracts at your agency are ‘‘mission critical?’’ That is, if the specific contract were to experience cost-overruns, schedule delays, or performance problems

would it affect the mission of the agency?

A2. As you are aware, NSF’s mission generally is to support all fields of science and

engineering primarily through providing grants for research and education. Unlike

many other federal agencies, NSF does not conduct its own research or operate its

own laboratories. Thus, NSF’s achievement of its mission is not dependent upon a

handful of contracts, rather it is dependent upon a community of thousands of researchers in all scientific disciplines.

However, there is one area of NSF’s activities to which this question is particularly germane. NSF has a more direct role in its management of the United States

Antarctic Program (USAP), which is administered under the agency’s largest single

contract. In addition to funding research, NSF provides scientists with logistics,

operational, and laboratory support in Antarctica. This includes a year-round inland

research station at the South Pole; two year-round coastal research stations with

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extensive laboratory and computing capabilities; summer research camps; ice-breaking research ships; U.S. Air Force and Air National Guard air transports; a fleet

of ski-equipped LC–130 airplanes; Twin Otter airplanes; helicopters; U.S. Coast

Guard and commercial icebreakers for channel breaking; treaty inspection missions;

a variety of over-snow vehicles; and automated, unmanned weather and geophysical

observatories. NSF provides the bulk of these services through a contract, currently

with Raytheon Polar Services Company, and is currently conducting a competition

for its renewal. For USAP, this contract is clearly ‘‘mission critical.’’

Q3. Where do you believe your office should concentrate its time and resources—focusing on high risk programs, or on the most expensive programs?

A3. Our office will use its process for identifying the highest-risk programs as the

primary means for allocating OIG time and resources. It should be noted, however,

that many of the most expensive programs will be assessed as high-risk based in

part on the amount of funding involved. To identify high-risk programs, we will

evaluate factors such as significant past audit and investigation findings, current

program management challenges, complexity of the program and related activities,

issues of substantial concern to the Congress and Administration that impact the

program, NSF’s own risk assessments, and the dollar value of the program. Programs that have significant risk factors in other areas, such as institutions that

have been repeatedly faulted for mishandling of NSF funds, will also be a priority

for OIG. Our established risk-based approach—including consideration of program

expense—will enable our office to target Recovery Act programs that potentially

pose the greatest problems in terms of ineffectiveness, inefficiency, fraud, waste and

abuse.

Q4. Despite campaign promises by the President to not issue signing statements, and

to ensure whistleblower protections, the President recently issued a signing statement that said the following:

‘‘Sections 714(1) and 714(2) in Division D prohibit the use of appropriations to

pay the salary of any federal officer or employee who interferes with or prohibits

certain communications between federal employees and Members of Congress. I

do not interpret this provision to detract from my authority to direct the heads

of executive departments to supervise, control, and correct employees’ communications with the Congress in cases where such communications would be unlawful

or would reveal information that is properly privileged or otherwise confidential.’’

How do you reconcile the President’s campaign promise with his recent signing

statement? If you believe that these statements are consistent, do you believe they

have a chilling effect on whistleblowers? What affect will this have on your ability to uncover waste, fraud, and abuse?

A4. We do not believe that the President’s statement will have any effect on our

ability to uncover waste, fraud and abuse. Given the independent status of an OIG,

we also believe the statement is unlikely to deter whistleblowers from approaching

our office.

Q5. The stimulus bill contains $350 million for the IG community and GAO to provide oversight. What entity will provide oversight of how these funds are spent?

How can the taxpayers be sure that the IG community and the GAO are spending this money wisely?

A5. OIGs are subject to oversight by Congress, OMB, and the new CIGIE. Moreover, specifically in the case of Recovery Act funding, the Recovery Accountability

and Transparency (RAT) Board will provide coordination and general oversight of

related OIG activities and expenditures. If inappropriate or illegal behavior within

an OIG is at issue, the Integrity Committee of the CIGIE has shown in recent years

that it is capable of policing the OIG community for OIG senior staff that might

be engaged in improper conduct.

With regard to whether or not the money is spent wisely, the IG community is

largely operating in a fish bowl. Under the Act’s requirements for transparency,

OIGs must report their activities and expenditures related to the Recovery Act on

a monthly basis. Taxpayers will be able to decide for themselves, by seeing the products issued and the expenditures made, whether or not OIG money is being spent

prudently. Our office posted its first Recovery Act report for the month of March

on our web site on April 8.

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Q6. Are you concerned that the Recovery Accountability and Transparency (RAT)

Board will create a new level of bureaucracy and ultimately undermine your

independence?

A6. For those of us who administer, receive and oversee Recovery Act funds, the

Act requires an unprecedented measure of transparency and accountability. It is apparent that the procedures followed in the past by agencies and their OIGs will not

be sufficient to accomplish the goals of the legislation. We therefore view the Board

not as an impediment to getting things done, but as supporting the efforts of the

community to establish and effectively coordinate oversight in response to the

heightened standards in the Recovery Act.

Our communications with the Board so far have been reassuring in that regard.

It has indicated that it will work to coordinate efforts of OIGs when appropriate,

disseminate best practices, and otherwise be as supportive as possible. We are satisfied that the protections of our independence included in the Recovery Act are adequate. We also take comfort in the fact that the Board is comprised entirely of agency Inspectors General.

Q7. Does the RAT Board, or anyone in the Administration, have the ability to terminate your investigations?

A7. No. The Board may request that we refrain from an investigation, but the Recovery Act states that each IG makes the final decision on audits and investigations.

Q8. What steps are you required to take in order to maintain an investigation if directed to terminate one?

A8. We are required to respond within 30 days to the Board, the agency, and the

Congress, with our reasons for rejecting the Board’s request.

Q9. Understanding that coordination is sometimes necessary, IGs should not be used

as an agency’s internal auditor. Have you ever been tasked by an agency to do

work? What was your response?

A9. Every year, the NSF OIG goes through an annual audit planning process to determine the most significant areas on which to focus our audit efforts. As part of

this process, the OIG solicits information and audit ideas from both the National

Science Board (NSB) and the NSF. The agency typically identifies institutions or

particular awards that they believe present a significant risk to NSF and federal

funds. After a thorough review, we choose audits to conduct based on our own risk

assessment, and they may include audit ideas brought to the OIG by NSF or the

NSB. By requesting input from the agency, we are able to focus our work on substantive matters without compromising our independence.

In addition, the NSB or NSF may make requests for audits anytime during the

year. For example, approximately two years ago at the request of the NSB, the OIG

conducted a review of the Joint Statement of Understanding entered into between

the NSB Chairman and the Governor of Hawaii. To ensure independence during an

agency-requested audit, the OIG is solely responsible for determining the scope,

planning, execution, and the reporting of audit results. If the agency requests a review that supports its management function, but OIG decides not to perform it because it is not a priority for our oversight function, the agency may expend its own

funds to have the review performed by a contractor.

Q10. What lessons can be learned from other initiatives (like the Reconstruction in

Iraq, Katrina Relief, or the Troubled Asset Relief Program) that attempted to

balance expediency with accountability? Are these lessons currently being included in your oversight plans?

A10. Although NSF played only a minor role in Katrina relief, we are aware that

the IG community successfully coordinated its efforts to an unprecedented degree

to assure appropriate oversight of the Gulf Coast recovery funds. IG Phyllis K.

Fong, Chair of the CIGIE, recently outlined a number of key lessons learned by the

IG community during the Hurricane Katrina relief efforts in her testimony before

the Senate Committee on Homeland Security and Government Affairs on March 5,

2009. From NSF’s perspective, the most relevant lessons pertain to: 1) the efficacy

of risk management activities; 2) interagency data sharing and; 3) staffing.

Risk management activities are of critical importance because not all programs

(or grants) are created equal when it comes to risk, and they therefore require different levels of oversight. Interagency data sharing refers to the difficulty of sharing

data or conducting matches of computer databases across agencies due to federal

privacy laws. From an accountability perspective, we know through first-hand experience that it is not easy to determine whether a grant applicant has received dupliVerDate 11-MAY-2000 15:10 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00168 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858 SCIENCE1 PsN: SCIENCE1
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cate funding from another federal agency for doing the same work. Staffing concerns

arose during the Katrina relief oversight effort, as OIGs had to improvise to ensure

proper oversight of both Katrina and their agencies’ normal activities.

Both risk management and staffing issues figure prominently in our oversight

planning. To date, we have shared numerous resources related to risk with NSF;

participated on their implementation planning teams, in large part to advise them

on risk management issues; and are currently reviewing past audit findings for

their relevance to the implementation of Recovery Act funding. With regard to staffing, we are mindful of the need to provide active oversight to both Recovery Act

funds and NSF’s regular appropriation. Once we see NSF’s agency plan, we will develop our own spending plan to ensure that resources are effectively allocated between these two imperatives. We are already preparing to hire at least two more

full-time staff by the end of the fiscal year, and we have submitted a request to

OPM for authority to hire retired annuitants.

Q11. Mr. Cross: In your testimony, you indicate you have launched an ‘‘outreach effort’’ to educate agency managers and the public about your role under the Recovery Act How have you reached out to the public and what types of issues

have you focused your outreach efforts on? How do you expect the public to be

made aware of the use of funds by NSF and how will they communicate concerns to you?

A11. We maintain a multi-pronged outreach effort to reach personnel within NSF

and the research community, including both principal investigators and institution

officials/research administrators.

Within NSF, we have established a liaison program, whereby a team from OIG,

generally composed of one investigator and one auditor, is assigned to every directorate and office. Our liaisons meet with their NSF counterparts in both formal and

informal settings providing briefings; attending staff meetings; and providing outreach resources and OIG material, such as Semiannual Reports and Audit Plans.

We regularly present to NSF’s Program Managers. We also maintain a presence on

NSF’s Announce Channel, a system of television monitors throughout the agency on

which important information is shared. Our Announce presentations include the

NSF Hotline information. We are in the process of producing a new presentation

alerting agency personnel to the requirements for whistleblower allegations under

the Recovery Act. We have an internal (within NSF) web page, from which NSF personnel can access OIG resources, including presentations, audits, Semiannual Reports, and material addressing fraud and research misconduct.

Regarding our outreach to the research community, we maintain effective lines of

communication through presentations, workshops, briefings, meetings, and site visits. We routinely present to members of groups like the Society of Research Administrators International and National Council of University Research Administrators,

who have the best vantage point from which to identify fraud or waste in the expenditure of NSF grant funds. We also regularly participate in NSF Regional

Grants Workshops, which are forums for new faculty, researchers, and administrators. At the last such conference, our staff provided our recently completed brochure

entitled A Guide to NSF OIG and The American Recovery and Reinvestment Act

(ARRA) of 2009. This handout explained the Recovery Act, identified the NSF OIG

priorities regarding the Act, addressed the whistleblower protections under the Act,

and provided contact information regarding misuse of stimulus funds. Finally, we

routinely present to groups involved in applying for or administering NSF awards

or performing supported research. We always include information for contacting us

to report concerns. We are incorporating Recovery Act-related topics into all such

presentations.

We publicize our address, telephone numbers, telephone hotline, e-mail hotline,

and web-based hotline. It is our intention that all parties involved in the research

enterprise—from NSF program personnel to research administrators to principal investigators and their collaborators—will know how to communicate with us and

bring information to our attention.

Q12. Mr. Cross: In your testimony, you indicate that your work generally focuses on

completed projects and expenditures; however, with the stimulus funding the

goal is to prevent the waste of taxpayer dollars before the money is committed

I understand your office will prepare an implementation plan for Recovery Act

oversight once the agencies approved plan is returned from OMB. But other

than training activities you mentioned, will your office have any role prior to

the money being committed to specific projects or research?

A12. While NSF has not yet provided the OIG with its spending plan or submitted

its agency-wide recovery plan to OMB, we believe it is critical that we start work

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as early as possible to help ensure Recovery Act funds are spent appropriately and

expeditiously. We have already started real-time reviews that will enable us to more

quickly respond to potential areas of concern. We plan to conduct these reviews

while NSF develops its plans, policies, and procedures in order to provide timely

feedback to NSF. This timely feedback will allow NSF to take corrective actions and

prevent problems before they arise.

Because NSF will rely in large part on its existing policies, procedures, systems,

and processes, our first review will focus on whether they are adequate to ensure

that its awardees understand and are accomplishing the goals of the Recovery Act,

accounting properly for ARRA funds, and reporting accurately and in a timely manner on ARRA funds and activities. By verifying that NSF has sound systems in

place, we can help ensure NSF meets the Recovery Act’s expectations for transparency and accountability.

Q13. Mr. Cross: Since the goal of the stimulus is to create jobs, has anyone in your

office been tasked with verifying the number of jobs a specific grant or project

actually will create or created? Are you aware of anyone in the agency that will

be verifying that?

A13. Chairman Devaney of the Recovery Accountability and Transparency Board

recently told an IG working group on which we participate that the Council of Economic Advisors is discussing how to define ‘‘jobs created’’ and ‘‘jobs saved’’ with regard to the Recovery Act. Once it has determined standard definitions to be applied

government-wide, we are expecting the administration to provide the agencies and

OIGs with guidance on this key issue. At that time, we will determine what approach is appropriate. In the meantime, we have been discussing with NSF issues

surrounding how to capture the data and validate it. We are aware that the agency

has had some preliminary internal discussions about this subject, but it has not yet

determined how to verify jobs or other measurable economic benefits that are generated by Recovery Act funds.

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1GAO, Department of Energy: New Loan Guarantee Program Should Complete Activities Necessary for Effective and Accountable Program Management, GAO–08–750 (Washington, D.C.:

July 2008).

ANSWERS TO POST-HEARING QUESTIONS

Responses by Patricia Dalton, Managing Director, Natural Resources and Environment Division, U.S. Government Accountability Office

Questions submitted by Chairman Brad Miller

Q1. Are you satisfied with the progress DOE has made in implementing the recommendations in your reports for improving its loan guarantee programs, and

that it is ready to properly handle these projects? Are you confident that DOE

is prepared to appropriately evaluate and manage the higher-risk projects Secretary Chu wishes to pursue?

A1. DOE has taken several actions in response to the recommendations in our July

2008 report.1 We recently began to evaluate these actions as part of our annual

mandated review of the program. However, because we have not completed that

evaluation, we are not in a position to say whether we are confident that DOE has

taken adequate steps to ensure that the program will be well managed. The American Recovery and Reinvestment Act of 2009 (Recovery Act) changed the program by

providing $6 billion to pay the subsidy costs of loan guarantees for projects that can

be started quickly and associated administrative expenses of up to $25 million. At

the same time, Secretary Chu directed the program to expedite the issuance of loan

guarantees. As a result, DOE is continuing to develop the program while also accelerating its implementation, which may present challenges and additional risks. We

will evaluate and report on these apparent increased risks as part of our ongoing

review.

Q2. What improvements would you recommend for agency systems submitting data

to Recovery.gov to meet accountability and transparency requirements?

A2. We are currently in the process of issuing our first report under the Recovery

Act. The focus of this report is the steps the 16 states and selected localities are

taking to comply with federal requirements and efficiently and effectively use the

influx of the Act’s funds. Because the IGs are expected to audit federal agencies’ operations and programs related to the Recovery Act, we have not directly examined

federal agency systems that submit data to the Recovery.gov web site. However, we

plan to examine accountability and transparency issues, including Recovery.gov web

site information, as an element of our bimonthly reviews.

Q3. Is the current presentation of Recovery Act information on the agency’s web site

adequate to meet the Act’s requirement for transparency? If not, what improvements would you suggest?

A3. Transparency issues related to information on the Recovery.gov web site will be

an important element of our bimonthly Recovery Act reviews. Our first Recovery Act

report is focused on the steps the 16 states and selected localities are taking to comply with federal requirements and efficiently and effectively use the influx of the

Act’s funds. [GAO9]Our subsequent reviews will examine the states’ use of Recovery

Act funds, including the level of detail of their submissions, and whether web site

information is accurate, well-organized, understandable, and complete.

Questions submitted by Representative Paul C. Broun

Q1. Please list the top three risks at your agency associated with stimulus funding.

A1. Our prior work has identified several areas that deserve special attention from

federal agency management and the IG’s office to ensure that funds are put to best

use. Specifically, we are concerned about risks for (1) new programs that do not

have established management and internal control activities; (2) existing programs

that do not have adequate staff to distribute and oversee a significant infusion of

funds; and (3) fraud, waste, and abuse because billions of dollars are going out

quickly and eligibility requirements are being established or changed.

Q2. To all panelists, what contracts at your agency are ‘‘mission critical?’’ That is,

if the specific contract were to experience cost-overruns, schedule delays, or performance problems would it affect the mission of the agency?

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2 31 U.S.C. §§ 716(a), (d).

A2. This question can better be answered by the departmental IGs because the Recovery Act has directed the IGs to review the federal agencies’ related operations

and programs and GAO to review the use of funds by states and localities. In addition, the Recovery Accountability and Transparency Board will help prevent waste,

fraud, and abuse by reviewing contracts and grants to ensure they meet applicable

standards, follow competition requirements, and are overseen by sufficient numbers

of trained acquisition and grants personnel.

Q3. Where do you believe your office should concentrate its time and resources—focusing on high risk programs, or on the most expensive programs?

A3. We are particularly concerned about high-risk programs because of the potential for fraud or waste that results in little, if any, benefit to the taxpayers. Experience tells us that this risk grows when billions of dollars are going out quickly and

eligibility requirements are being established or changed. Accordingly, we plan to

focus on new programs that lack established policies and procedures for ensuring

the proper use of Recovery Act funds and existing programs with known

vulnerabilities that are receiving a significant infusion of funds.

Q4. Despite campaign promises by the President to not issue signing statements, and

to ensure whistleblower protections, the President recently issued a signing statement that said the following:

‘‘Sections 714(1) and 714(2) in Division D prohibit the use of appropriations to

pay the salary of any federal officer or employee who interferes with or prohibits

certain communications between federal employees and Members of Congress. I

do not interpret this provision to detract from my authority to direct the heads

of executive departments to supervise, control, and correct employees’ communications with the Congress in cases where such communications would be unlawful

or would reveal information that is properly privileged or otherwise confidential.’’

How do you reconcile the President’s campaign promise with his recent signing

statement?

• If you believe that these statements are consistent, do you believe they have a

chilling effect on whistleblowers?

• What effect will this have on your ability to uncover waste, fraud, and abuse?

A4. While the consistency of the President’s campaign promises with the quoted

signing statement is beyond the scope of GAO’s work, we can tell you that our ability to uncover waste, fraud, and abuse is unaffected by the President’s signing statement. GAO has independent authority to access information needed for our work

under both our organic statute and the Recovery Act.

Under our organic statute, GAO has authority to access information needed for

the effective and efficient performance of GAO reviews and evaluations. Subject to

certain limited exceptions, all agencies must provide the Comptroller General access

to information he requires about the duties, powers, activities, organization and financial transactions of that agency.2 Under section 902 of the Recovery Act, GAO

has additional authority to examine the records of contractors or their subcontractors pertinent to contracts they are awarded from funds made available by the Act.

GAO may also interview officers and employees of such contractors or their subcontractors as well as officers or employees of any State or local government agency

administering the contract, regarding such transactions.

Q5. To all panelists, the stimulus bill contains $350 million for the IG community

and GAO to provide oversight.

• What entity will provide oversight of how these funds are spent?

• How can the taxpayers be sure that the IG community and the GAO are spending this money wisely?

A5. The Recovery Act delineates an important set of responsibilities for the accountability community to ensure that the Act’s $787 billion maximizes the benefits to

the taxpayers. GAO is charged with reviewing the use of funds by selected states

and localities, and IGs will audit federal agencies’ operations and programs. To

make the most effective use of the accountability community’s limited funds and,

in particular, to avoid duplication of effort, GAO has outreached to each of the federal IGs and will continue to coordinate with them in the next years as we review

Recovery Act activities. We believe that many eyes can best ensure that all of the

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3GAO, Excluded Parties List System: Suspended and Debarred Businesses and Individuals

Improperly Receive Federal Funds, GAO–09–419T (Washington, D.C.: Feb. 26, 2009). 4 National Procurement Fraud Task Force, Grant Fraud Committee, A Guide to Grant Oversight and Best Practices for Combating Grant Fraud (Washington, D.C.: Feb. 2009).

Recovery Act funds are used efficiently and effectively. This includes continued oversight by Congressional committees, including the Subcommittee on Investigations

and Oversight. In addition, the House Committee on Oversight and Government Reform has oversight responsibility over the Government Accountability Office. GAO

also has its own Inspector General, recently established as a statutory office rather

than an administratively created one by the GAO Act of 2008, who could be requested to investigate GAO’s usage of stimulus funds.

Q6. Are you concerned that the Recovery Accountability and Transparency (RAT)

Board will create a new level of bureaucracy and ultimately undermine your

independence?

• Does the RAT Board, or anyone in the Administration, have the ability to terminate your investigations?

• What steps are you required to take in order to maintain an investigation if

directed to terminate one?

A6. GAO is not concerned that the Recovery Accountability and Transparency

Board will undermine our independence. The Board does not have the ability to terminate our investigations. It must coordinate its investigations with the Comptroller

General pursuant to section 1528 of the American Recovery and Reinvestment Act.

Furthermore, no one in the administration may terminate our investigations because GAO is an independent legislative agency.

Q7. Understanding that coordination is sometimes necessary, IGs should not be used

as an agency’s internal auditor.

• Have you ever been tasked by an agency to do work?

• What was your response?

A7. This question is not relevant to GAO because it is a Congressional agency.

Q8. What lessons can be learned from other initiatives (like the Reconstruction in

Iraq, Katrina Relief, or the Troubled Asset Relief Program) that attempted to

balance expediency with accountability?

• Are these lessons currently being included in your oversight plans?

A8. A key lesson learned from our work on disaster relief after Hurricanes Katrina

and Rita is that agencies sometimes do not focus on the importance of preventive

controls, including (1) validating data used in decision making against other government or third-party sources; (2) inspecting whenever possible to confirm information

prior to payment; (3) conducting system edit checks to identify problems before payments are made; and (4) training staff on fraud awareness. In addition, we testified

in February 2009 that businesses and individuals that have been excluded for egregious offenses ranging from national security violations to tax fraud have improperly received federal contracts and other funds.3 Also in February 2009, the National Procurement Fraud Task Force published a white paper that identified best

practices and made recommendations for agencies to consider in preventing fraud,

waste, and abuse in grants they administer.4 These recommendations included enhanced certifications, increased training, improved communications with grant recipients, increased information sharing concerning potential fraud, and rigorous

oversight of how grant dollars are spent after they are awarded. Our audit approach

includes verification that states and localities are implementing preventive controls.

Q9. Given that three of your four high-risk programs are in DOE, how confident are

you that they can manage the creation of a new agency, ARPA–E?

A9. ARPA–E has several similarities with DOE’s innovative technology loan guarantee program, one of the four programs that I identified as needing special attention. Specifically, we are concerned that because ARPA–E is new, DOE has not completed a number of key management and internal control activities. As a result,

DOE may not be well positioned to manage the $400 million in Recovery Act funds

to ensure that they are effectively and efficiently used with controls to prevent fraud

or waste.

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5GAO, Clean Coal: DOE’s Decision to Restructure FutureGen Should Be Based on a Comprehensive Analysis of Costs, Benefits, and Risks, GAO–09–248 (Washington, D.C.: Feb. 2009).

Q10. The Secretary of Energy recently stated that he would reinstate FutureGen with

some modifications. Please explain the risks of going forward with FutureGen

as originally planned by DOE.

A10. Our February 2009 report found that the former Secretary of Energy restructured the original FutureGen project primarily because of concerns that DOE was

contractually responsible to pay 74 percent of the project’s rapidly rising costs.5 Specifically, we found that the FutureGen project was projected to grow from $950 million (in 2004 dollars) to about $1.3 billion (in 2005 dollars)—an increase of about

$370 million, or 39 percent. However, because the former Secretary of Energy’s decision was not based on a systematic and comprehensive comparison of the costs, benefits, and risks of the original FutureGen versus the restructured FutureGen, we

recommended that, before implementing significant changes to FutureGen or before

obligating additional funds for such purposes, DOE prepare a comprehensive analysis that compares the relative costs, benefits, and risks of a range of options that

includes (1) the original FutureGen program, (2) incremental changes to the original

program, and (3) the restructured FutureGen program.

Q11. The Stimulus bill requires GAO to provide bimonthly reports of states and localities use of funds.

• How was the decision made to conduct reviews on only 16 entities at a time?

• Are you worried that this is insufficient?

A11. We decided to follow 16 states and the District of Columbia over the next few

years in order to provide an ongoing longitudinal analysis of the use of funds under

the Recovery Act. We selected these 16 states on the basis of outlay projections, percentage of the U.S. population represented, unemployment rates and changes, and

a mix of states’ poverty levels, geographic coverage and representation of both urban

and rural areas. They contain about 65 percent of the U.S. population and are estimated to receive about two-thirds of the intergovernmental grants funds available

through the Recovery Act. The states are Arizona, California, Colorado, Florida,

Georgia, Iowa, Illinois, Massachusetts, Michigan, Mississippi, New Jersey, New

York, North Carolina, Ohio, Pennsylvania, and Texas. We will also sample localities

within these states to provide a perspective on the use of Recovery Act funds at a

local level.

In addition, we will review the recipient reports from all 50 states as part of our

responsibilities to review these filings. These recipient reports are to include information on funds received, the amount of recovery funds obligated or expended to

projects or activities, and the projects or activities for which funds were obligated

or expended. Depending on our assessments, we may visit states other than the 16

core group to review targeted areas.

Q12. Given the recent scandals with companies misusing recovery funds to bestow

bonuses to employees, and the lack of oversight that allowed such actions to

take place, would it be beneficial for Congress to ‘‘flex’’ its oversight responsibilities by significantly increasing the number of hearings and other legislative

tools to keep a closer eye on agencies?

• Or do you feel that a stepped up effort by GAO and the Inspector General offices of the different departments will be able to keep such mismanagement of

funding to a minimum?

A12. We believe that Congressional oversight hearings have the salutary effect of

encouraging all parties involved—federal agencies, State and local governments, and

the auditors—to redouble their efforts to ensure that federal funds are effectively

and efficiently spent in compliance with laws and regulations.

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Appendix 2:

ADDITIONAL MATERIAL FOR THE RECORD

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FOLLOW THE MONEY, PART II: GOVERNMENT

AND PUBLIC RESOURCES FOR RECOVERY

ACT OVERSIGHT

TUESDAY, MAY 5, 2009

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT, COMMITTEE ON SCIENCE AND TECHNOLOGY, Washington, DC.

The Subcommittee met, pursuant to call, at 2:10 p.m., in Room

2318 of the Rayburn House Office Building, Hon. Brad Miller

[Chairman of the Subcommittee] presiding.

222

223

HEARING CHARTER

SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT

COMMITTEE ON SCIENCE AND TECHNOLOGY

U.S. HOUSE OF REPRESENTATIVES

Follow the Money, Part II:

Government and Public Resources

for Recovery Act Oversight

TUESDAY, MAY 5, 2009

2:00 P.M.–4:00 P.M.

2318 RAYBURN HOUSE OFFICE BUILDING

I. Summary

The Subcommittee will meet on May 5, 2009, to continue oversight of the accountability and transparency provisions in the American Recovery and Reinvestment Act

(hereafter cited as the ‘‘Recovery Act’’). The first panel will examine the establishment of the Recovery Accountability and Transparency Board, set up under the Act

to coordinate the efforts underway to measure the outcomes from the investment of

the Recovery Act’s $787 billion. The Board’s new Chairman and the Acting Comptroller General of the Government Accountability Office (GAO) will also discuss

what progress has occurred on oversight since the Subcommittee’s previous hearing

in March.

Witnesses on the second panel have been invited to testify on the policies, processes and organizations that will provide the public its ability to participate in Recovery Act oversight. With the capabilities of the Internet, new channels for gathering information increase the opportunity to forestall misuse of government resources as they happen, not when they are identified in audits months or years

later. The Recovery Act calls for citizen involvement; the Subcommittee has asked

the panel how to assure this happens.

II. Witness List

Panel I

• Mr. Earl Devaney, Chairman, Recovery Accountability and Transparency Board

• Mr. Gene Dodaro, Comptroller General of the United States (Acting), Government Accountability Office

Panel II

• Dr. Clarence Newsome, President, Shaw University (Raleigh, NC), representing

the National Association for Equal Opportunity in Higher Education

• Dr. Gary Bass, Founder and Executive Director, OMB Watch (Washington, DC)

• Dr. Jerry Ellig, Senior Research Fellow, Regulatory Studies Program, The

Mercatus Center, George Mason University (Arlington, VA)

• Ms. Danielle Brian, Executive Director, Project on Government Oversight

(Washington, DC)

• Mr. Eric Gillespie, Senior Vice President, Products, Technology and Information,

Onvia (Seattle, WA)

III. Panel I: Managing the Oversight Corps

Subtitle B of the Recovery Act’s Title XV provides the statutory foundation for the

Recovery Accountability and Transparency Board, established to ‘‘. . . coordinate

and conduct oversight of covered funds to prevent fraud, waste, and abuse.’’ President Obama named Mr. Devaney to chair the Board on February 23. Besides Mr.

Devaney, the Board is made up of ten Inspectors General from federal agencies receiving funds in the Recovery Act. Two Board members, the IGs from the DepartVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00003 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
224

1P.L. 111–5, Section 1554.

2Section 1523(a)(2)(C).

3Section 3(b).

4Section 1523(a)(2)(D) and (E).

5Section 1526(a).

ments of Commerce and Energy, testified at the Subcommittee’s earlier hearing on

March 19.

At that time, the Board had not met; as Mr. Devaney told the Committee on Oversight and Government Reform, ‘‘The status of the Board is what you might expect

just 30 days after the Recovery and Reinvestment Act of 2009 was signed into law.’’

The Board finally met on March 27. Mr. Devaney has been asked to describe for

the Subcommittee the progress made by the Board in assuming its responsibilities.

In the Recovery Act, Congress explicitly required that grants and contracts issued

using these funds be awarded using competitive procedures and for fixed prices,1 as defined in the Federal Acquisition Regulation (unless exempted by the Act). This

could be an item of special concern to agencies under the jurisdiction of the Committee, as research and development contracts are regularly awarded on a cost-reimbursable basis. The selection of contract type is normally a function of how much

knowledge the agency has about the product or service it intends to buy and how

confident it is that its needs will not change during the life of the contract. For

NASA, which received $400 million in the Recovery Act to support the development

of the Space Shuttle’s replacement vehicles, this means that contracts using these

funds have a higher likelihood of drawing Board attention. On the other hand, research grants issued by the National Science Foundation are normally awarded

after undergoing merit review and are issued for fixed amounts. Thus, the NSF Inspector General is less likely to find this to be an issue. The Board is specifically

tasked to review agency success at accomplishing these goals. The Board must also

review whether the agencies properly report information on grants and contracts

and identify what will be delivered by the recipient.

The Board will also have the responsibility to examine Recovery Act spending to

detect ‘‘. . . wasteful spending, poor contract or grant management, or other abuses

. . ..’’ 2 While the Board has the authority to initiate its own audits, the Act clearly

expects the Board to rely on the Inspectors General for the bulk of audit and investigation work. The Board will likely find its most important contributions to be distributing the workload most effectively and identifying topics that need immediate

attention. Insight on specific Recovery Act projects, however, will come from direct

work by an agency inspector general or cooperating State or local oversight offices.

‘‘The President and the heads of federal departments and agencies,’’ says the Act,

‘‘shall manage and expend the funds made available in this Act so as to achieve the

purposes specified . . ., including commencing expenditures and activities as quickly as possible consistent with prudent management.’’ 3 Mr. Devaney and Mr. Dodaro

would likely agree with the witnesses at the Subcommittee’s hearing in March that

satisfying these simultaneous mandates puts a spotlight on the performance of the

program managers and contracting officers directly managing the funds. As the government’s representatives closest to the actual performance of a particular grant or

contract, they have an early opportunity to prevent wasteful spending. They can just

as easily be the source of the ‘‘poor contract or grant management’’ that the Board

will seek out. Members expressed concerns numerous times about this issue at the

March hearing.

In the course of its activities, the Board will collect information particularly useful

in helping Congress gauge the severity of this problem. The Board will review

whether agencies have an adequate number of people to determine what the agency

needs, conduct competitions that result in maximum value for the money, and then

manage the grantee or contractor to produce the expected outcome at the desired

time and for the agreed cost.4 What training these people receive will also be scrutinized so that gaps in institutional knowledge and preparedness can be closed. This

information will also be valuable as Congress considers reform of government acquisition generally.

Central to the Board’s interaction with the public is the Recovery.gov web site, established by Section 1526 of the Recovery Act. The goal is to produce ‘‘a user-friendly, public-facing web site to foster greater accountability and transparency in the

use of covered funds.’’ 5 The statute has specific requirements for the types of data

that are to be made available, such as the agency plans for distributing Recovery

Act funds to be provided May 1.

The Recovery Act defines an expansive role for the public in oversight of Recovery

Act activities, and Recovery.gov should be viewed as the data well that citizens can

draw on to obtain source material. The Act requires the web site to ‘‘. . . provide

225

a means for the public to give feedback on the performance of contracts that expend

covered funds,’’ and in Section 1514 of the Act Inspectors General are directed to:

‘‘. . . review, as appropriate, any concerns raised by the public about specific

investments using funds made available in this Act. Any findings of such reviews not related to an ongoing criminal proceeding shall be relayed immediately to the head of the department or agency concerned.’’

Whether Recovery.gov is able to provide the support to interested citizens desiring

to offer such support for oversight has been questioned in the early days of Recovery

Act implementation. The Subcommittee has asked Mr. Devaney to discuss the

Board’s plans for management of the web site; he will likely refer to the online

forum the National Academy on Public Administration conducted for the Board this

week seeking suggestions for web site improvements. Mr. Devaney is likely to stress

for the Subcommittee that Recovery.gov is a work in progress and that improvements to the site will likely be made throughout the life of the Board. The complexity of the task, involving the collection of data from multiple sources, assuring

the quality of that data, and presenting it in comprehensible terms to the public,

is formidable.

In the Recovery Act, the Government Accountability Office is focused more on how

states, cities and other localities handle their allocations of Recovery Act resources.

However, in the course of its regular work, GAO is likely to discover problems with

the use of Recovery Act funds. The public is also likely to ignore the distinctions

the Recovery Act makes in assigning oversight responsibilities and provide GAO

with information that will need to be provided to the Board and Inspectors General

for action. Thus the cooperation between GAO and the Board will be an important

aspect in promoting Recovery Act oversight.

The Subcommittee has asked Mr. Dodaro to follow up on GAO’s testimony at the

Subcommittee’s first hearing. GAO recently testified on the ability of Grants.gov,

the web site that is supposed to allow application for any federal grant from one

site, to handle the increased workload generated by the Recovery Act. In its first

report examining implementation of the Act by the States, GAO reports on concerns

expressed by officials that lack of resources may hamper the submission of data sufficient to meet the accountability and transparency requirements of the Act. Given

GAO’s responsibility for regular oversight of government activities, he was specifically asked for comments on public contributions to assist with oversight and on

whistleblower protection. The Recovery Act offered new protection to whistleblowers

in State and local governments and employed by contractors, and it is the responsibility of the Board and the Inspectors General to provide those protections. Mr.

Dodaro should be able to provide additional insights on the issues Mr. Devaney now

faces.

IV. Panel II: Public Perspectives on the Recovery Act

Witnesses on Panel II have been asked to discuss several different aspects examining how the Recovery Act is working or will work. This begins with the most basic

question—how does someone who might benefit from Recovery Act funds learn how

to compete for them?—to assuring that the oversight mechanism set up in the Act

will improve our ability to ‘‘follow the money’’ and determine if it has contributed

to ‘‘. . . provid[ing] investments needed to increase economic efficiency by spurring

technological advances in science and health . . .’’ along with the other overall goals

of the Act.

The Committee has continuing interests in the health of the American university

system, driven by the need for educated citizens and the contributions colleges and

universities make to economic development. Members of the Committee worked to

include significant funding increases for science and technology programs in the Recovery Act. While the Recovery Act itself and the total level of resources available

received wide publicity, potential beneficiaries have little assistance in actually obtaining funds if they are unfamiliar with the often opaque methods by which agencies conduct competitions and award grants and contracts. Members of the Committee also promote improved educational opportunities for communities that are

hampered by historic barriers to top-quality education. The Subcommittee has

therefore invited Dr. Clarence Newsome, representing the institutions of the National Association for Equal Opportunity in Higher Education, to describe their efforts to take advantage of the Recovery Act’s opportunities to fill immediate and

long-term needs for improvements at their campuses.

Dr. Bass has been asked to discuss the broadest set of oversight issues. If the Recovery Act is an experiment in encouraging information flow so that we can detect

problems with federal spending earlier, is the initial structure actually accomplishing that goal? If the Act is trying to harness the collective knowledge that citiVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00005 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
226

zens may have about the particular projects being funded with Recovery Act dollars,

can they find information on those projects and then easily find the proper person

who needs to know that the funds are not being used as described by the contract

or grant? Dr. Bass helped establish the Coalition for an Accountable Recovery,

which has argued that the government does not collect enough information to provide the accountability and transparency sought by the Recovery Act. Unless states

and localities present data on their use of Recovery Act funds, the ability to detect

trouble may be lost.

Simply implementing the Recovery Act itself is also a work in progress. Guidance

from the Office of Management and Budget to the agencies has evolved. Given Dr.

Bass’s experience at OMB Watch, the Subcommittee has asked for his comments on

how accountability and transparency should be accomplished; he should also be able

to comment on what the results of this experiment will mean for the regular operations of the Federal Government.

Dr. Ellig, of the Mercatus Center, is testifying at the suggestion of Dr. Broun, the

Ranking Member. He has interests similar to those discussed by Dr. Bass, and will

also discuss criteria for measuring the Act’s performance. Dr. Ellig should also provide comments on the guidance issued to the agencies by the Office of Management

and Budget on subjects such as counting the number of jobs produced or preserved

by Recovery Act investments. Dr. Ellig has extensive knowledge about the Government Performance and Results Act of 1993, and helps to prepare the Mercatus Center Annual Performance Report Scorecard, which evaluates the annual agency

GPRA Performance Reports for transparency and documentation of program outcomes. [While Congress spent a lot of effort on GPRA-related matters in the 1990s,

the Bush Administration implemented a new initiative, the PART Process (Program

Assessment and Results Tool), that largely supplanted GPRA. OMB managed PART

and neither Congress nor the White House seemed to find any interest in GPRA

plans or results after the initiative of PART by then-OMB Director Mitch Daniels.]

Whistleblowers will be critical sources of information when conducting oversight

of Recovery Act projects. The Act establishes new protections for whistleblowers

working in State and local organizations, and for employees working for recipients

of grants and contractors. The law requires the appropriate Inspector General to investigate a case unless it is the subject of another administrative or judicial process,

does not involve Recovery Act funds or is determined to be frivolous. The Inspector

General involved has 180 days to prepare a final report that goes to the whistleblower, that person’s employer, the head of the funding agency and the Board. Because the Act has extended these protections to non-Federal employees, there may

be new and unique issues that arise if it becomes necessary for an Inspector General

to enforce these powers. The Subcommittee has asked Danielle Brian, Executive Director of the Project on Government Oversight, to evaluate the new protections. The

Subcommittee asked for her comments on the difficulties that may arise, and for

advice on how to let prospective whistleblowers know of their rights under the Act.

Developing and managing Recovery.gov will pose challenges for the Board. To

offer some insight on the extent of that challenge, the Subcommittee will receive testimony on a private-sector equivalent, Recovery.org. This web site was developed by

Onvia, a Seattle company whose regular business involves identifying and tracking

government procurement opportunities, and alerting private companies interesting

in bidding. After passage of the Recovery Act, the company decided to use its capabilities to develop a tracking site for use by the public.

The Subcommittee has invited Eric Gillespie, the company’s Senior Vice President

for technology, to describe what was required to prepare the site, where to find the

data for display, and how to present data for different audiences with different interests seeking different information from the site. Onvia has identified some 90,000

‘‘purchasing units’’ across the U.S. that generate procurement opportunities. Each

has unique rules for how funds should be spent and requirements for transparency.

While Mr. Bass’s coalition argues that data on spending should be provided down

to contractor level, Mr. Gillespie’s experience indicates this cannot be achieved overnight—if at all. Not all jurisdictions make their data accessible on the net to outside

organizations. Changes must be tracked sometimes at hourly intervals, as it can’t

be guaranteed that postings will be permanent. States and localities may not have

funds to collect, process and provide this data; Chairman Towns of the Oversight

and Government Reform Committee is considering legislation to assist the states

with funds to address this issue. While the Act provides the Board with $84 million

to fund its operations, building the data infrastructure it authorizes will take that

and more.

The Board has a statutory termination date of September 30, 2013, and Mr.

Devaney is considering what will be left behind when the Board is done. Some agencies are already viewing their work overseeing Recovery Act activities as a new

227

model for managing regular appropriations. The database behind Recovery.gov will

embody many lessons learned about understanding where the Federal Government’s

resources go and how they affect the economy. It may become possible to shorten

the time to determine the effectiveness of federal spending in order to react quickly

to failure or reinforce success. The legacy of the Recovery Act may go beyond the

physical infrastructure and economic benefits to include new ways to illuminate government performance for citizens.

228

Chairman MILLER. The meeting will come to order.

We are in the middle of a recession. We are trying to figure out how to spend $500 billion quickly in a way that stimulates the

economy as much as possible, and we are trying to do with a minimum of waste, fraud, and abuse. All that is important, but there

is a resolution on the Floor honoring my alma mater for winning

the national men’s basketball championship. I hope you understand

the priority there.

I do welcome everyone to the Committee’s second hearing on

oversight related to the American Recovery and Reconstruction Act.

These hearings are titled ‘‘Follow the Money,’’ after the character

in the movie and the book, ‘‘All the President’s Men,’’ the ‘‘Deep

Throat’’ character who told Bernstein and Woodward to trace the

money back to find out where the corruption began. Now we are

at the front end trying to figure out where the money is going to

go.

And we hope we will not end up with anything as sordid as that

was, but perhaps by starting this effort and knowing at the outset

the care that must be taken we can avoid it.

Our hearing in March featured inspectors general describing

their efforts to establish the oversight mechanisms called for in the

Act, and now we will hear from Mr. Devaney, Chairman of the new

Recovery Accountability and Transparency Board. He has before

him the daunting task of sitting at the top of the Recovery Act

oversight pyramid. He has to marshal the capabilities of the inspectors general devoted to Recovery Act oversight, coordinate their

deployment across multiple agencies, cooperate with opposite numbers in cities and states, share all the lessons learned, and run a

data management operation trying to turn a massive amount of information into answers to the questions we all have.

Are we improving the economy? How many people have we put

to work? Or how many have—how many jobs have we saved? He

was not able to testify in March at our first hearing, but he said

that he would appear as soon as possible, and he has proven good

to that word, and we welcome him today.

We also welcome General Gene Dodaro, head of the Government

Accountability Office, GAO. His job description is very similar to

Mr. Devaney’s except that his jurisdiction covers all of Federal

Government. Mr. Dodaro will bring us up to date on the progress

our science agencies have made in using their Recovery Act appropriations.

GAO has also issued the first of its reports examining State and

local use of Recovery Act funds. It mentions the loss of funding and

staff at stake in local oversight organizations at the same time that

we are asking for the State and local governments to play a significant role in monitoring Recovery Act projects. That should concern

us, as it will directly affect our ability to build a system that can

follow a Recovery Act dollar as it leaves our Treasury and then

goes, to use one example, to the Department of Transportation,

from there to the Department of Transportation in North Carolina,

and eventually becomes asphalt paving, a part of the Raleigh Beltline, Interstate 440. It seems like a simple task, but Dr. Bass and

Mr. Gillespie before explained that there remain a number of

issues, and Mr. Devaney will have to deal with these issues.

229

Dr. Ellig will also raise some questions about the methods of reporting performance as Recovery Act initiatives advance. Traditionally oversight has been an after-the-fact focus, when someone has

done wrong, and by the time we get here, the money is already

gone, and there is nothing much we can do about it except scold

the people who were responsible. Perhaps provide a good deterrent

for others to make the same mistakes.

But with the Recovery Act we are trying to set out a new approach, giving the people, all the American people, the opportunity

to look at the raw data, or as raw as possible, and bring to bear

their own experience, their own experience and some knowledge

from places we may not have expected, to help us avoid—spot the

danger ahead. We are in essence deputizing the entire American

citizenry to help with the oversight of this program.

A whole industry is growing up around the release of National

Weather Service data benefiting other important sectors of the

economy like agriculture and utilities. That model works because

the Weather Service takes seriously its responsibility to provide

high-quality data, check for accuracy and integrity, and we need

Recovery Act data to do the same thing.

Very often discovery of the misuse of public resources cannot

happen without the willing of someone to step forward to say something is wrong, to blow the whistle. That can be a life-altering decision for those who do blow the whistle, and there is pressure to

avoid damaging the organization of which they are a part, sometimes intense pressure. The Recovery Act adds to the protections

that whistleblowers get outside of the Federal Government because

those folks will be perfectly positioned to tell us if something is

going wrong.

We had—have to make sure the potential whistleblowers know

that those protections will be effective and that they are safe to do

their duty to step forward and tell us that something is wrong. Ms.

Brian has long experience with those issues and will help us with

that.

I have a special welcome for one of our witnesses today. Dr. Clarence Newsome, the President of Shaw University in Raleigh. Dr.

Newsome has told me for some time of his concern that—for smaller institutions like his it is—for them it is not easy to find out

about opportunities in the Recovery Act, and I have heard the

same thing from elected officials in small towns in my district, telling me the same thing, trying to figure out a way to get access to

some of the funds for worthy projects in their own communities.

Funds in the Recovery Act are supposed to be distributed based

upon competition so that all the best ideas should be in the running, but as we try to speed those funds into the economy, I think

we are all concerned that there is a fair chance that less competitive projects don’t win out by default because they have access to

better information.

Every August, Washington goes into a slumber known as the August recess. Dr. Broun and Ms. Dahlkemper and I will not sleep

through August. We will be home in our districts talking to people.

There is our chance to find out how Congress is doing, how we are

doing, and with this hearings, with these hearings we want to

make sure that we can answer questions about Recovery Act.

230

Again, we are trying to spent $500 billion or so—the total

amount of recovery is closer to 800 billion, but about 600—more

than 60 percent of it is spending as opposed to tax cuts, and we

are trying to spend it quickly and at the same time spend it efficiently without waste or abuse, which is no small task.

And with that I now recognize Dr. Broun, the Ranking Republican on the Committee.

[The prepared statement of Chairman Miller follows:]

PREPARED STATEMENT OF CHAIRMAN BRAD MILLER

I’d like to welcome everyone to the Subcommittee’s second hearing on oversight

related to the American Recovery and Reconstruction Act. These hearings are titled,

‘‘Follow the Money.’’ We are, of course, borrowing Hal Holbrook’s classic coaching,

in his role as ‘‘Deep Throat’’ from the movie All the President’s Men, on how Bernstein and Woodward could reveal the corruption at the heart of the Watergate scandal.

Let us hope we never reveal anything that sordid in this effort. However, the Recovery Act will spend $787 billion in public funds, a sum that makes ‘‘following the

money’’ important.

Our hearing in March featured Inspectors General describing their efforts to establish the oversight mechanisms called for in the Act. Now we will hear from Mr.

Devaney, Chairman of the new Recovery Accountability and Transparency Board.

He has a daunting task seated at the top of the Recovery Act oversight pyramid.

He has to marshal the capabilities of the Inspectors General devoted to Recovery

Act oversight, coordinate their deployment across multiple agencies, cooperate with

opposite numbers in states and cities, share all the lessons learned—and run a datamanagement operation trying to turn a massive amount of information into answers

to the questions we all have: ‘‘Are we improving the economy,’’ and ‘‘how many people have we put to work?’’ He wasn’t able to testify in March but promised to appear

later. He is a man of his word.

We also welcome Comptroller General Gene Dodaro, head of the Government Accountability Office (GAO). His job description is very similar to Mr. Devaney’s except that his jurisdiction covers all of the Federal Government. Mr. Dodaro will

bring us up to date on the progress our science agencies have made in using their

Recovery Act appropriations. GAO has also issued the first of its reports examining

State and local use of Recovery Act funds. The report points out the loss of funding

and staff at State and local oversight organizations at the same time we are asking

for their help monitoring Recovery Act projects.

This should concern us, as it will directly affect our ability to build the system

that can follow a Recovery Act dollar as it leaves the Treasury, then goes (for example) to the Department of Transportation, from there to the transportation department of the State of North Carolina, and then to pay for the asphalt in the machine

filling potholes on Interstate 440 near Raleigh. It seems a simple task, but Dr. Bass

and Mr. Gillespie will explain that there remain a number of issues Mr. Devaney

will have to deal with. Dr. Ellig will also raise some questions about the methods

for reporting performance as Recovery Act activities advance.

Traditionally, oversight has had an after-the-fact focus here in Washington. By

the time we learn what went wrong, the money’s already gone and we have nothing

to show for it. With the Recovery Act, we’re trying out a new approach: give many

people the opportunity to look at a data set and bring to bear their own expertise

and experience, and some unanticipated knowledge may be revealed or unexpected

danger avoided.

A whole industry has grown up around the release of National Weather Service

data, benefiting other important sectors of the economy like agriculture and utilities. But that model works because the Weather Service takes seriously its responsibility to provide high-quality data, checked for accuracy and integrity. We will need

that for Recovery Act data as well.

Very often, discovery of the misuse of public resources cannot happen without the

willingness of one person to step forward and say, ‘‘something’s wrong.’’ This can

be a life-altering decision, and the pressure to avoid damaging an organization can

be intense. The Recovery Act adds new protections for whistleblowers outside the

Federal Government, because they will be perfectly placed to see what’s happening

after funds begin flowing within the grant or contract. Now we have to make people

believe the protections will actually work. Ms. Brian has long experience with these

issues to share with us here.

231

I have a special welcome for one witness, Dr. Clarence Newsome, the president

of Shaw University in Raleigh, North Carolina. Dr. Newsome has been telling me

of his concern that for smaller institutions such as his, it is not easy to learn about

the opportunities in the Recovery Act. I’ve also had elected officials in some of the

small towns in my district telling me similar stories.

Funds in the Recovery Act are supposed to be distributed based on competition,

so all the best ideas should be in the running. As we also try to speed these funds

into the economy, I’m concerned that we may not give some folks a fair chance, and

that some other less-competitive projects will succeed by default.

Every August, Washington D.C. goes into a slumber known as August recess. But

for Member’s themselves, August is far from a recess or vacation. That is the month

that I, and I’m sure every other Member of this committee, go home, talk to my

constituents and ask the question, ‘‘how are we doing? Is Congress doing what it

needs to do for you’’?

With these hearings, we’re making sure we can answer those questions, with regard to the Recovery Act. Again, I’d like to thank everyone for joining us today, and

I now recognize the Ranking Member, Dr. Broun, for his opening statement.

Mr. BROUN. Thank you, Mr. Chairman. Let me welcome our witnesses here today. I think I shook hands with the two in the first

panel. I apologize for not having shook hands with the other witnesses, but welcome. We are glad to have you.

This is the second hearing that this committee has held on this

very important topic, the Stimulus Act oversight. While it is no secret that my colleagues on this side of the desk and I voted against

the stimulus bill, this committee does have an obligation to make

sure that if taxpayers’ money is going to be spent, that it be done

appropriately.

As I said at the previous hearing, the identifying of waste, fraud,

and abuse is a non-partisan endeavor. In addition to providing

oversight of stimulus funding, it is also important for Congress to

accurately assess the effectiveness of the Act by using metrics to

track success and evaluate outcomes. Without this Congress is simply spending money based on evaluations just as random as how

to determine the ultimate funding level for the Act.

Like the TARP bail-out, funding levels seem to have been chosen

arbitrarily as if drawn from a hat. Presumably the anticipated results were as well. The President advertised 3.5 million jobs as a

result of this Act, yet I am not sure how many folks will be able

to explain where that number came from or how it will be ultimately verified. Perhaps it came from the same hat the funding

level was pulled from.

The National Bureau of Economic Research, the group of economists tasked with determining the start and end of economic

downturns, announced that December 2007 was the start of the

current recession. Their research also indicated that economic

downturns have usually lasted between six and sixteen months

since the Great Depression.

Take into consideration that most of the stimulus spending won’t

occur until after 2010, and that the CBO determined that the Stimulus Bill will actually decrease gross domestic product in the out

years by crowding out private investment. One has to wonder what

we are doing for this—what we are doing this for. Our children and

grandchildren who ultimately are going to pay for this deserve an

answer.

The stimulus bill put taxpayers on the line for $3.27 trillion

when you add debt servicing and account for program extensions.

Under the Obama budget the national debt will double in five

232

years and triple in ten. That is outrageous. Add to that the revelation that the Federal Government has already run out of money

halfway through this fiscal year, and we have a recipe for disaster.

Whether or not you agree with the underlying Act, we still have

to make sure that the government is capable of spending this

money appropriately, with as little waste, fraud, and abuse as is

possible and in a manner that directly benefits our country. In

order to determine if the Act does, indeed, benefit the Nation, we

need to clarify—we need to clearly define metrics for this success.

Simply put, the American people need to know what they got for

their money. Since the stimulus bill was sold as a means to jumpstart our economy and create jobs, it is important to identify baselines, track progress, and evaluate whether those outcomes were

the result of a stimulus act or by other means.

On today’s second panel we will hear from outside groups who

can contribute greatly to ensuring that the funds are spent appropriately in a transparent and accountable manner. With agencies,

inspector generals, OMB, GAO, and the RAT Board, and Congress,

overwhelmed by the size of the spending, everyday citizens and

outside groups will prove to be critical in ferreting out waste,

fraud, and abuse.

That can also help evaluate not only the effectiveness of the

spending, but also whether the Administration has followed

through on its ambitious promise of transparency and accountability.

In addition to the witnesses appearing before us, I would also

like to include in the written record a letter from the Americans

for Tax Reform. Their letter clearly highlights the fallacy of government wealth creation, concerns with employment metrics, and also

some of the challenges associated with transparency and accountability.

Thank you, Mr. Chairman. I look forward to the witnesses’ testimony and yield back the rest of my time.

[The prepared statement of Mr. Broun follows:]

PREPARED STATEMENT OF REPRESENTATIVE PAUL C. BROUN

Thank you, Mr. Chairman. Let me welcome our witnesses here today, and thank

them for attending. This is the second hearing that this committee has held on a

very important topic—Stimulus Act oversight. While it’s no secret that my colleagues on this side of the dais and I voted against the stimulus bill, this committee

does have an obligation to make sure that if taxpayer money is going to be spent

that it be done appropriately. As I said at the previous hearing, identifying waste,

fraud, and abuse is a nonpartisan endeavor.

In addition to providing oversight of stimulus funding, it is also important for

Congress to accurately assess the effectiveness of the Act by using metrics to track

success and evaluate outcomes. Without this, Congress is simply spending money

based on evaluations just as random as how it determined the ultimate funding

level for the Act.

Like the TARP bail-out, funding levels seem to have been chosen arbitrarily as

if drawn from a hat. Presumably, the anticipated results were as well. The President advertised 3.5 million jobs as a result of this Act, yet I’m not sure how many

folks will be able to explain where that number came from or how it will ultimately

be verified. Perhaps it came from the same hat the funding level was pulled from.

The National Bureau for Economic Research (the group of economists tasked with

determining the start and end of economic downturns) announced that December

2007 was the start of the current recession. Their research also indicated that economic downturns have usually lasted between six and sixteen months since the

Great Depression. Take into consideration that most of the stimulus spending won’t

occur until after 2010, and that the CBO determined that the stimulus bill will acVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00012 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
233

tually decrease gross domestic product in the out-years by crowding out private investment, and one has to wonder what we are doing this for. Our children and

grandchildren, who ultimately are going to pay for this, deserve an answer.

The stimulus bill put taxpayers on the line for $3.27 trillion when you add debt

servicing and account for program extensions. Under the Obama budget, the national debt will double in five years and triple in ten. Add to that the revelation

that the Federal Government has already run out of money half way through this

fiscal year, and we have a recipe for disaster.

Whether or not you agree with the underlying Act, we still have to make sure

that the government is capable of spending this money appropriately, with as little

waste, fraud, and abuse as possible, and in a manner that directly benefits our

country. In order to determine if the Act does indeed benefit the Nation, we need

to clearly define metrics for its success. Simply put, the American people need to

know what they got for their money. Since the stimulus bill was sold as a means

to jump-start our economy and create jobs, it is important to identify baselines,

track progress, and evaluate whether those outcomes were a result of the Stimulus

Act, or by other means.

On today’s second panel we will hear from outside groups who can contribute

greatly to ensuring that the funds are spent appropriately in a transparent and accountable manner. With Agencies, Inspector Generals, OMB, GAO, the RAT Board,

and Congress overwhelmed by the size of the spending, everyday citizens and outside groups will prove to be crucial in ferreting out waste, fraud and abuse. They

can also help evaluate not only the effectiveness of the spending, but also whether

the Administration has followed through on its ambitious promise of transparency

and accountability.

In addition to the witnesses appearing before us, I would also like to include in

the written record a letter from the Americans for Tax Reform. Their letter clearly

highlights the fallacy of government wealth creation, concerns with employment

metrics, and also some of challenges associated with transparency and accountability.

Thank you, Mr. Chairman. I look forward to the witnesses testimony and yield

back my time.

[The information follows:]

234

235

236

237

Chairman MILLER. Thank you, Dr. Broun. If you could attach

that letter to your testimony, it can be part of the record.

Mr. BROUN. Thank you, sir. Appreciate it.

Chairman MILLER. And without objection, we will take opening

statements submitted by other Members to include in the record.

It is so ordered.

Panel I

Chairman MILLER. It is now my pleasure to introduce our first

panel of witnesses, although I have largely introduced them already in my opening statement.

Mr. Earl Devaney is the Chairman of the Recovery Accountability and Transparency Board established by H.R. 1 and is formerly the Inspector General of the Department of the Interior.

Mr. Gene Dodaro is the Acting Comptroller General of the

United States Government Accountability Office, the GAO.

As our witnesses should know, you have five minutes for your

spoken testimony. Written testimony will be included in the record

for the hearing. When you have completed your spoken testimony,

we will begin with questions, and we will alternate with each Member having five minutes to question the panel.

It is the practice of this committee or the Subcommittee to receive testimony under oath. Do either of you have any objections

to taking an oath? The record can reflect that neither did. You also

have the right to be represented by counsel. Do either of you have

238

counsel here? And the witnesses both responded no. We ask you

these questions to put you at ease for your testimony.

If you would now please stand and raise your right hand. Do you

swear to tell the truth and nothing but the truth? The record

should reflect that both witnesses did take the oath.

We will now start with Mr. Devaney. Mr. Devaney, you may

begin.

STATEMENT OF MR. EARL E. DEVANEY, CHAIRMAN,

RECOVERY ACCOUNTABILITY AND TRANSPARENCY BOARD

Mr. DEVANEY. Mr. Chairman, Ranking Member Broun, and

Members of the Subcommittee, I want to thank you for the opportunity to appear before you today to discuss the efforts and

progress of the Recovery Board. My testimony today will address

the current status and mission of the Board, and after I make my

opening remarks, I will be glad to answer any questions.

Mr. Chairman, the members of the Board and I view the Board

as having a duel mission. First, the Board is responsible for establishing and maintaining a web site; the purpose of which is not

only to foster historic levels of transparency of Recovery funds but

to do so in a user-friendly way.

Second, the Board will coordinate and conduct oversight of Recovery funds to help minimize fraud, waste, or mismanagement. I

am pleased to tell you that the Board continues to advance its mission of accountability and has recently taken several important

steps to achieve its goal of an unprecedented level of transparency

of recovery funds.

With respect to the accountability mission, the Board has formed

a Recovery funds working group. Unlike the Board, which is by law

composed of ten specific IGs and a chairperson, the working group

was created to foster participation and input from all 28 IGs that

oversee agencies receiving Recovery funds. The working group is

co-chaired by the Department of Transportation’s IG and a former

IG who is on the Board’s staff. The working group has already

identified a number of projects such as creating a Recovery audit

work plan, suggesting ways to improve the single audit process,

and identifying high-risk programs in the agencies.

Beyond the Federal Government IG community, the Board has

interacted with many others involved in the oversight of recovery

funds. As a part of its initial outreach the Board’s procurement

compliance staff is meeting with senior procurement executives

from each agency receiving funds. The Board’s staff has also developed a procurement checklist to assist federal agencies charged

with spending recovery funds. It is our hope that this type of agency outreach can help prevent fraud, waste, and mismanagement of

recovery funds before it happens.

The Board is also reaching out to assist states with their new Recovery Act responsibilities. This week, for example, I am hosting a

visit from a new Recovery IG of California, a state that will be receiving more than $45 billion in Recovery Act funds. I will be introducing her to the IGs who are overseeing monies headed for California, the Board staff, and the Recovery teams at OMB and GAO.

I hope to host similar meetings with oversight officials from other

states and cities in the future.

239

Last week I spoke, as I have several times before, at a meeting

of high-level State officials who convened in Washington to discuss

Recovery fund implementation issues. In addition, on May 20 I will

be speaking to a gathering of State IGs in Orlando. On each of

these occasions I deliver the message that the Board is here to assist them with their oversight, and they should feel free to tell us

about any help that they may need.

In order to better focus and utilize its resources, the Board has

formed two committees; one dedicated to the Board’s accountability

mandate and the other to the Board’s continuing development of

Recovery.gov. Each committee is currently composed of three Board

members. These committees meet in addition to the regular Board

meetings and then report back to the entire board on the status of

these critical initiatives, as well as giving recommendations for

moving forward.

The Board’s accountability committee, for instance, will discuss

strategies for not only receiving reports of fraud, waste, and mismanagement, and referring them to the appropriate IG, but also

analyzing and developing reports in light of available open-source

data. These reports will make the Board’s referrals more value

added for the IGs and will also contribute to risk-based predictions

about potential fraud.

On the IT side the Board’s Recovery.gov committee is working to

provide strategic direction on an entire range of IT efforts that are

before the Board.

Mr. Chairman, it is important to remember that the creation of

the web site is an involving process, with multiple phases. It is not

a single event. Now that the first phase of getting Recovery.gov is

up and running has ended, we are moving quickly to implement

the second phase of development. The Board is beginning to manage the web site’s design and content. OMB will still retain responsibility for the reporting guidance and the verification of the data,

and GSA will continue to host the web site and will work with the

Board to collect and store the data.

I am confident that this division of labor will provide the best opportunity to maximize Recovery.gov’s use as a transparency and accountability tool, and I am equally confident that we will have the

opportunity to achieve unparalleled citizen participation.

On the subject of citizen participation, we also hope to employ

the creative and innovative ideas the public may have for the future of Recovery.gov. The Board just this past week hosted an electronic town hall with NAPA and OMB, designed to engage the public recipients and IT professionals and our State and local and tribal partners.

While my impression was that we would get a high level of participation, the overwhelming response to our electronic town hall

surpassed even my wildest expectations. At the end of this event

the site had received well over 4.2 million hits, over 1,800 citizens

had taken the time to register online, and we feel we have close

to 550 solid ideas. NAPRA is now in the process of assembling and

analyzing these ideas which will then allow us to move quickly to

a competitive process for vendor selections.

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Mr. Chairman, I think I have run out of time, so why don’t I just

stop there because I think the questions are going to be more informative.

[The prepared statement of Mr. Devaney follows:]

PREPARED STATEMENT OF EARL E. DEVANEY

Mr. Chairman and Members of the Subcommittee, I want to thank you for the

opportunity to appear before you today to discuss the efforts and progress of the Recovery Accountability and Transparency Board (the Board). As you know, the President recently appointed me Chairman of that Board, which was established by the

American Recovery and Reinvestment Act of 2009 (the Recovery Act). My testimony

today will address the current status and mission of the Board, and after I make

my opening remarks, I will be glad to answer any questions you have for me.

The Members of the Board and I view the Board as having a dual mission. First,

the Board is responsible for establishing and maintaining a web site, the purpose

of which is not only to foster historic levels of transparency of Recovery Act funds

but to do so in a user-friendly manner. Second, the Board will coordinate and conduct oversight of Recovery Act funds to help minimize fraud, waste or mismanagement. I am pleased to tell you that the Board continues to effect its mission of accountability and has recently taken several important steps to achieve its goal of

unprecedented transparency of Recovery Act funds.

With respect to our accountability mission, the Board has formed a Recovery

Funds Working Group. Unlike the Board, which by the Recovery Act’s terms is composed of 10 specific agency IGs and a Chairperson, the Working Group was created

to foster participation and input from all 28 Offices of Inspectors General that oversee an agency receiving Recovery Act funds. The Working Group is co-chaired by

the Department of Transportation Inspector General (IG) and a former IG who is

now on the Board’s staff. The Working Group has identified a number of initial

projects, such as creating a Recovery Audit Work Plan, suggesting ways to improve

the Single Audit process, and identifying high-risk programs at the agency level.

Beyond the federal IG community, the Board is interacting with others involved

in federal and State oversight and management of Recovery Act funds. As part of

its initial outreach, the Board’s procurement compliance staff is meeting with senior

procurement executives from each agency receiving funds. The Board’s staff has also

developed a procurement checklist to assist federal agencies charged with spending

Recovery Act funds. It is our hope that this type of agency outreach can help to prevent fraud, waste, and mismanagement of Recovery Act funds before such funds

leave the agencies.

The Board is also reaching out to assist states with their new Recovery Act responsibilities. This week, for example, I am hosting a visit by the new Recovery IG

of California, a state that will be receiving more than $45 billion in Recovery Act

funds. I will be introducing her to the IGs who will be overseeing monies headed

for California, the Board’s staff, and the Recovery Teams at the Office of Management and Budget (OMB) and the Government Accountability Office (GAO). I hope

to host similar meetings with oversight officials from other states and municipalities

in the near future. Last week I spoke, as I have several times before, at a meeting

of governors and other high-level State officials who convened in Washington to discuss Recovery Act fund implementation issues. In addition, on May 20th, I will be

speaking to a gathering of all State IGs in Orlando for the Spring Conference of the

Association of Inspectors General. On each of these occasions, I deliver the message

that the Board is here to assist with State oversight and that they should feel free

to call on us for any help that they may need.

I can assure you that the Board considers this type of assistance to be one of its

highest priorities. Clearly, for the Board to accomplish its mission of accountability,

we will need to ensure open communications and frequent interactions with State

and local officials engaged in oversight, as well as with the GAO.

In order to better focus and utilize its resources, the Board has formed two committees: one dedicated to the Board’s accountability mandate and the other to the

Board’s information technology (IT) operations and the continuing development of

Recovery.gov. Each committee is currently composed of three or four Board members. These committees meet in addition to the regular Board meetings and then

report back to the entire Board on the status of these critical initiatives, as well

as any recommendations they may have for moving forward.

The Board’s accountability committee, for instance, will discuss strategies for not

only receiving reports of fraud, waste, and mismanagement and referring them to

the appropriate IG, but also analyzing and developing reports in light of available

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open-source data. These analyses will make the Board’s referrals more value-added

for the IGs and will also contribute greatly to risk-based predictions about any potential fraud. On the IT side, the Board’s Recovery.gov committee is working to provide strategic direction on the entire range of IT efforts that are before the Board.

Mr. Chairman, a great deal of credit must be extended to OMB and GSA for their

efforts to launch Recovery.gov. Because of their efforts, all Americans can visit the

web site today. However, it is important to remember that the creation of this web

site is an evolving process with multiple phases. It is not a single event.

Now that the first phase of getting Recovery.gov up and running has ended, we

are moving quickly to implement the second phase of development: The Board is beginning to manage the web site’s design and content, OMB will still retain responsibility for the reporting guidance and the verification of data, and GSA will continue

to host the web site and will work with the Board to collect and store the data. I

am confident that this division of labor will provide the best opportunity to maximize Recovery.gov’s use as a transparency and accountability tool, and I am equally

confident that we will also have the opportunity to achieve an unparalleled level of

citizen participation.

On the subject of citizen participation, we also hope to employ the creative and

innovative ideas the public may have for the future of Recovery.gov. The Board just

this past week held an online Recovery Dialogue on Information Technology Solutions, or, as it has sometimes been referred to, an ‘‘electronic town hall.’’ In partnership with the non-profit National Academy of Public Administration (NAPA) and

OMB, we hosted a national online dialogue to engage the public, potential stimulus

recipients, IT professionals, and State, local and tribal partners in answering the

key question: What ideas, tools, and approaches can make Recovery.gov a place

where the public can monitor the expenditure and use of Recovery Act funds?

Through this online dialogue, which ran from April 27th through May 3rd, participants from across the Nation were able to recommend, discuss and vote on the best

ideas, tools, and approaches to web site design, data collection, data warehousing,

and data analysis, as well as fraud, waste, and abuse detection.

While my impression was that we would get a high level of participation, the

overwhelming response to our electronic town hall surpassed my expectations. On

the first day alone the Recovery Dialogue site received more than 593,000 hits. The

feedback we received was also encouraging. As one participant said, ‘‘Traditionally,

the U.S. [Government] has only really been a successful early IT adopter via NSA

or NASA, and actions such as this National Dialogue give me hope that may

change.’’ NAPA is now in the process of assembling the great ideas that emerged

from this exercise, which will then enable us to move quickly to a competitive process of vendor selections.

Perhaps even more importantly, we are excited about the public’s potential contribution to the Board’s mission of accountability. I am convinced that heightened

citizen participation will act as a force multiplier for IGs and others charged with

oversight of Recovery Act funds. The public—which in many cases is in the best position to see how money is actually being awarded and spent at the lowest levels—

will likely be our ‘‘first responders’’ to potential fraud, waste, and mismanagement

of Recovery Act funds.

I want to assure this subcommittee that—just as I am aware of the potential

power that citizen participation can bring to the Board’s efforts—I am acutely aware

of the damage that can be done by only appearing to give weight to that participation and in reality letting it languish unheard. The Board’s committee on accountability, as I mentioned earlier, has already begun analyzing the best methods of collecting, managing, and analyzing the public’s comments and feedback. Currently,

that committee is weighing options for a comprehensive referral management system, which would include a hotline service, through which the public would be able

to share potentially crucial information with the Board.

This hotline (which will allow for input in all manner of communication) cannot

simply be an off-the-shelf, ‘‘plain vanilla’’ hotline, with personnel who do not understand what questions to ask or what information to obtain. The Board faces a new

challenge here in that, typically, hotlines are set up to address a single agency or

a specific type of funding, and yet the Recovery Act has given the Board oversight

responsibility for numerous and varied agency appropriations. For example, a hotline service might easily train its personnel to process information relating just to

grants awarded by the Department of Education. However, in the Board’s case, any

hotline personnel will need to be able to understand and digest information about

education grants, as well as federal construction contracts, rural development loans,

or broadband technology programs. The Board will strive to ensure that any hotline

personnel and technology will be both expansive and thorough enough to meet this

challenge.

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Whenever citizens have the potential to assist oversight and enforcement entities,

legitimate concerns are raised about whistleblower protection. The Recovery Act explicitly states that employees of non-federal employers cannot be fired, demoted, or

otherwise discriminated against as punishment for disclosing to the Board or several other entities any information that they believe is evidence of fraud, waste, or

gross mismanagement of Recovery Act funds. If citizens believe they are being retaliated against for such disclosures, they may either contact the Board or submit

a complaint directly to the appropriate IG.

Mr. Chairman, while I was the IG at the Department of the Interior, I believe

I had a well-deserved reputation for aggressively investigating whistleblower complaints of federal employees. I intend to now extend that practice outside the federal

arena. If citizens trust in their government, they will eagerly participate in the

transparency and accountability of the Recovery Act funds. And, in a circular fashion, such transparency and accountability make the foundation upon which the public trust is built. Because I believe that public contributions to transparency and accountability are critical to the Board’s success, I plan to do everything I can to earn

and keep safe that public trust.

Mr. Chairman and Members of the Subcommittee, that concludes my prepared

testimony. Thank you for this opportunity. I will now be glad to answer any questions you might have.

BIOGRAPHY FOR EARL E. DEVANEY

Earl E. Devaney was appointed by President Obama on February 23, 2009 to

chair the Recovery Act Accountability and Transparency Board (Board). In this role,

Mr. Devaney will lead the Board in its dual mission of delivering unprecedented levels of transparency through Recovery.gov and coordinating and conducting oversight

of Recovery funds to prevent fraud, waste of abuse.

Devoting his full attention to his duties as Board Chairman, Mr. Devaney is on

leave as the Inspector General for the Department of the Interior. He was nominated by President Clinton on July 1, 1999 to be the seventh Inspector General for

the Department of the Interior, and confirmed by the full Senate on August 3, 1999.

As head of the Office of Inspector General, he was responsible for overseeing the

administration of a nationwide, independent program of audits, evaluations, and investigations involving the Department of the Interiors programs and operations.

Mr. Devaney transformed the Office of Inspector General into an innovative organization dedicated not only to detecting fraud, waste, and mismanagement, but also

to assisting the Department in identifying and implementing new and better ways

of conducting business. Mr. Devaney and his team of senior managers worked diligently toward developing strong working relationships with senior departmental

managers, congressional staff and key congressmen and senators. Armed with a philosophy that blends cooperation with strong oversight and enforcement, the Office

of Inspector General for the Department of the Interior made significant advances

under the leadership and vision of Mr. Devaney.

Mr. Devaney began his law enforcement career in 1968 as a police officer in his

native State of Massachusetts. After graduating from Franklin and Marshall College in 1970 with a degree in Government, he became a Special Agent with the

United States Secret Service.

At the time of his retirement from the Secret Service in 1991, Mr. Devaney was

serving as the Special Agent-in-Charge of the Fraud Division and had become an

internationally recognized white collar crime expert regularly sought by major

media outlets. During his tenure with the Secret Service, Mr. Devaney was the recipient of five U.S. Department of Treasury Special Achievement Awards and numerous honors and awards from a wide variety of professional organizations.

Upon leaving the Secret Service, Mr. Devaney became the Director of the Office

of Criminal Enforcement, Forensics and Training for the U.S. Environmental Protection Agency. In this position, Mr. Devaney oversaw all of EPA’s criminal investigators, EPA’s Forensics Service Center, and the National Enforcement Training

Institute. Mr. Devaney’s years of managerial excellence were recognized in 1998 by

the prestigious Meritorious Presidential Rank Award for outstanding government

service.

Chairman MILLER. Thank you, Mr. Devaney. You were just barely over time.

Mr. Dodaro, you are recognized for five minutes.

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STATEMENT OF MR. GENE L. DODARO, ACTING COMPTROLLER

GENERAL, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

Mr. DODARO. Thank you very much, Mr. Chairman. I am pleased

to be here with you and Ranking Member Broun and Congresswoman Dahlkemper. I am very pleased to have this opportunity to

discuss how GAO has been working with the broader accountability

community to carry out our responsibilities under the Recovery

Act.

The Act assigns GAO a range of responsibilities to include bimonthly reviews of the uses of the Recovery funds by selected

states and localities. Now, given the inter-governmental nature of

this task, it has been a priority from the beginning to make sure

that we are coordinating properly with the broader accountability

community. Soon after the Act was passed, I outreached to the inspector general community and within a couple of weeks of the

Act’s passage we met with 17 inspectors general, or their representatives. I also outreached to the State community, and we had

a conference call with over 46 State audit offices and dozens of

local audit offices across the country. We are coordinating, of

course, with Mr. Devaney’s board functions as well.

Now, this coordination activity really served us well as we took

our teams to the field. In order to fulfill the responsibilities for the

bimonthly reviews, we selected 16 states and the District of Columbia to do a longitudinal study over the next two or three years of

the uses of the Recovery funds, by those jurisdictions and what impact those funds would have in those localities. These 16 states and

the District of Columbia are expected to receive over two-thirds of

the amount of Recovery Act funds flowing to states and localities. Now, during fiscal year 2009, there are estimated outlays of $49

billion that are expected to go to the states and localities, and in

the question and answer period I can talk about the projected outlay ratio rate over the next few years if you would like and how

the composition of the funding will be changing from 2009 to 2012,

to the states and localities. But in—for fiscal year 2009, over 90

percent of the $49 billion to be distributed to the states and localities is going to be in the health area, education area, and transportation area.

Now, the three largest programs are the Medicaid Program,

which is the federal matching share, and the highways area for the

transportation area, and the State Stabilization Fund in the education area. So we focused largely on those three programs in our

first bimonthly review, and our report was issued last month.

Now, basically in terms of the uses of the funds, most of the

funds were drawn down in the Medicaid area. The 16 states and

the District had an allocation of about $16.9 billion. They had collectively drawn down $7.9 billion or about 40 percent, 47 percent

of their allocation.

In the highways area, about $15.5 billion had been allocated to the 17 jurisdictions. About $3.3 billion had been obligated, and by

obligated that means the Federal Department of Transportation

and the State Department of Transportation had agreed on

projects. So there were about 950 projects, but most of them were

in the competitive bid stage during the April and May timeframe

and were not yet awarded so that there was not a significant

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1Pub. L. No. 111–5 (Feb. 17, 2009).

2GAO, American Recovery and Reinvestment Act: GAO’s Role in Helping to Ensure Accountability and Transparency for Science Funding, GAO–09–515T (Washington, D.C.: Mar. 19,

2009). 3GAO, Recovery Act: As Initial Implementation Unfolds in States and Localities, Continued

Attention to Accountability Issues Is Essential, GAO–09–580 (Washington, D.C.: Apr. 23, 2009).

amount of Recovery Act funds yet distributed in the transportation

area.

In the State Stabilization Fund area over $20 billion was allocated to these states, but before they can award—spend the money,

they have to submit an application to the Department of Education, who reviews it and then gives them the ability to spend the

money. Of the 16 states at the time our report was issued only two

states, California and Illinois, had received approval from the department.

Now, we made a series of recommendations to strengthen the accountability features at the State level. A big concern was that the

states were under fiscal constraints, and they had cut back some

of their accountability and oversight mechanisms, both in the management area and audit area, and we suggested that OMB clarify

whether or not Recovery Act funds could be used to strengthen the

State and local accountability mechanisms. And this is very important. And also we made a recommendation to more effectively use

the single audit process, which is the standard accountability tool,

to make sure that it can be more effective in providing adequate

oversight over the Recovery Act funds earlier in 2009, before the

vast majority of funds are spent in 2010 and 2011.

We also suggested that OMB provide greater guidance on methodologies to be used to report the number of jobs created and the

number of jobs preserved.

Now, with regard to the R&D funding in the agencies that we

reported to you on within this committee’s jurisdiction in March, of

the almost $22 billion in R&D funding, as of last week basically

$342 million of that had been obligated, largely in the Department

of Energy’s Office of Science, for funding some renovations at the

National laboratories.

And so, you know, but I would be happy in the question and answer session to talk more about our recommendations in this area

and any other questions that you would like to pose to me.

Thank you very much.

[The prepared statement of Mr. Dodaro follows:]

PREPARED STATEMENT OF GENE L. DODARO

Chairman Miller, Ranking Member Broun, and Members of the Subcommittee:

I am pleased to be here today to discuss our efforts to carry out GAO’s oversight

roles related to the American Recovery and Reinvestment Act of 2009 (Recovery

Act).1 An important part of our work entails coordinating with the accountability

community including the federal Inspectors General (IGs), the Recovery Accountability and Transparency Board, and State and local government auditors. I will

also provide updated information on the status of Recovery Act funds to be spent

for research and development (R&D) activities, about which we testified before this

subcommittee in March 2009.2

The Recovery Act delineates an important set of responsibilities for the accountability community. GAO is required to conduct bimonthly reviews of the use by selected states and localities of funds made available under the Act; we issued the

first of these bimonthly reviews on April 23, 2009.3 GAO is also charged with reporting on, among other things, specific areas including trade adjustment assistance,

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4GAO, American Recovery and Reinvestment Act: GAO’s Role in Helping to Ensure Accountability and Transparency, GAO–09–453T (Washington, D.C.: Mar. 5, 2009). 5We will track the following 16 states: Arizona, California, Colorado, Florida, Georgia, Iowa,

Illinois, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio,

Pennsylvania, and Texas. In addition, we will sample localities within these states to provide

a perspective on the use of Recovery Act funds at a local level. 6See appendix I of GAO–09–453T for a list of GAO’s mandates under the Recovery Act. In

addition to issuing our first bimonthly report, we have completed two other requirements under

the Act: First, on April 3, 2009, we announced the appointment of 13 members to the Health

Information Technology Policy Committee, a new advisory body established by the Recovery Act.

Second, on April 16, 2009, we reported on the actions of the Small Business Administration to,

among other things, increase liquidity in the secondary markets for Small Business Administration loans (see GAO, Small Business Administration’s Implementation of Administrative Provisions in the American Recovery and Reinvestment Act of 2009, GAO–09–507R (Washington, D.C.:

Apr. 16, 2009).

new education incentive grants, new health care tax credits, and the effects of national economic downturns on states—especially in the Medicaid area—over the past

several decades.4 IGs across government are expected to audit the efforts of federal

agencies’ operations and programs related to the Recovery Act, both individually

within their particular entities and collectively, as many of them are members of

the Recovery Accountability and Transparency Board (the Board). The Board will

help prevent waste, fraud, and abuse by reviewing contracts and grants to ensure

they meet applicable standards, satisfy applicable competition requirements, and

are overseen by sufficient numbers of trained acquisition and grants personnel. The

Board is charged with reporting to the President, Vice President, and the Congress

any potential problems requiring immediate attention in addition to reporting quarterly and annually.

As we testified before the Subcommittee on March 19, 2009, the Recovery Act’s combined spending and tax provisions are estimated to cost $787 billion, including

more than $21 billion in additional spending for R&D-related activities at the Department of Energy (DOE), Department of Commerce, National Science Foundation

(NSF), and National Aeronautics and Space Administration (NASA). These activities

include supporting fundamental research, demonstrating and deploying advanced

energy technologies, purchasing scientific instrumentation and equipment, and constructing or modernizing research facilities. Our earlier testimony identified several

R&D programs that deserve special attention from agency managers and IGs based

on our prior work. Sustained oversight attention on these programs will be critical

as Recovery Act funds are spent.

Because funding streams of the Recovery Act—including R&D funding—will flow

from different federal agencies to the states, localities and institutions within them,

we have been coordinating with the IGs and the Board, as well as with State and

local auditors. My statement today discusses (1) GAO’s efforts to fulfill its responsibilities under the Recovery Act; (2) GAO’s coordination with the Board, IGs, and

State and local government auditors; (3) GAO’s authorities to assist whistleblowers

and elicit concerns from the public; and (4) updated information on Recovery Act

funds to be spent for R&D from our previous testimony.

Our Reporting to Date Under the Recovery Act

In order to meet our mandate to conduct bimonthly reviews and prepare reports

on selected states’ and localities’ use of funds, we have selected 16 states and the

District of Columbia to track over the next few years to provide an ongoing longitudinal analysis of the use of funds under the Recovery Act.5 These states contain

about 65 percent of the U.S. population and are estimated to receive about twothirds of the intergovernmental grant funds available through the Recovery Act. In

addition to reporting on the core group of 16 states, we will review the recipient

reports from all 50 states. These recipient reports are to include information on

funds received, the amount of Recovery funds obligated or expended to projects or

activities, the projects or activities for which funds were obligated or expended, and

the number of jobs created or preserved as a result of Recovery Act funds. The Recovery Act also included a number of specific mandates on which GAO must take

action between April 2009 and February 2014.6

Our first bimonthly report, issued two weeks ago, covers the actions of selected

states and localities under the Recovery Act as of April 20, 2009. About 90 percent

of the $49 billion in Recovery Act funding being provided to states and localities in

fiscal year 2009 will be through health, transportation, and education programs.

(See app. I for federal programs that are receiving Recovery Act funding and are

administered by states and localities.) Our first report focused particularly on Recovery Act funds for the three largest programs in these categories—Medicaid FedVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00025 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
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eral Medical Assistance Percentage grant awards, highway infrastructure investment, and the Department of Education’s State Fiscal Stabilization Fund. We reported on the status of states’ activities related to these three programs. The report

contains separate appendixes on each of the 16 states and the District of Columbia

that discuss the plans and uses of funds in these three major programs as well as

selected other programs that are receiving Recovery Act funds. The report also

makes several recommendations to the Office of Management and Budget (OMB) directed toward improving accountability and transparency requirements; clarifying

the Recovery Act funds that can be used to support State efforts to ensure accountability and oversight; and improving communications with Recovery Act funds recipients about when funds become available for their use and when federal guidance

is modified or newly released. OMB concurred with the overall objectives of our recommendations and plans to work with us to further accountability for these funds.

In consultation with the Congress in exercising our general statutory authority to

evaluate the results of government programs and activities, we also will continue

to target programs for additional review using a risk-based approach and will incorporate reviews of Recovery Act funding where practicable when we are examining

base programs. There are many implementation challenges to ensuring adequate accountability and efficient and effective implementation of the Recovery Act. Experience tells us that the risk for fraud, waste, and abuse grows when billions of dollars

are going out quickly, eligibility requirements are being established or changed, new

programs are being created, or a mix of these characteristics. This suggests the need

for a risk-based approach to target for early attention specific programs and funding

structures based on known strengths, vulnerabilities, and weaknesses, such as a

track record of improper payments or contracting problems. Of particular concern

to this subcommittee will be the extent to which Recovery Act R&D funding is effectively expended, and we discuss the initial implementation of R&D funding below.

GAO’s Coordination with the Accountability Community

Regular and frequent GAO coordination with federal IGs, the Board, and State

and local government auditors is a critical component of our work to ensure effective

and efficient oversight. With several early coordination meetings, we laid the foundation for this ongoing coordination soon after the Act was passed. First, I reached

out to the IG community and, with Ms. Phyllis Fong, the Chairman of the Council

of Inspectors General on Integrity and Efficiency, hosted an internal coordination

meeting on February 25, 2009, with Inspectors General or their representatives

from 17 agencies. It was a very productive discussion in which we outlined coordination approaches going forward. In addition, soon after the President appointed him

as Chairman of the Board on February 23, 2009, I talked with Mr. Earl Devaney,

former Inspector General at the Department of the Interior, to begin to coordinate

such efforts as the audit of the U.S. Government’s consolidated financial statements

whereby GAO relies on the individual efforts of the IGs’ financial audits of their departments and entities across the government. I am confident that we will coordinate our respective efforts well, both with the IG community and with the Board.

We also reached out to the State and local audit community and participated in

initial coordination conference calls. The first call, on February 26, 2009, included

State auditors or their representatives from 46 states and the District of Columbia.

The next day, we held a similar discussion with auditors from many localities across

the country. State and local auditors perform very important oversight functions

within their jurisdictions and have unique knowledge about their governments; we

are continuing to coordinate with them closely as we carry out our responsibilities.

It is also important for us to coordinate with OMB, especially in regard to the

reporting requirements and other guidance to fund recipients and on what information is to be collected in order to adequately evaluate how well the Recovery Act

achieves its objectives. We participate in weekly coordination conference calls with

OMB, the Board, IGs, and State and local auditors. The impetus to schedule these

calls was a letter OMB Director Peter Orszag and I received from the National Association of State Auditors, Comptrollers, and Treasurers; the National Association

of State Budget Officers; the National Association of State Chief Information Officers; and the National Association of State Procurement Officials. This letter expressed their strong interest in coordinating reporting and compliance aspects of the

Recovery Act. During these calls, we provide updates on our Recovery Act activities,

and OMB provides updates on its actions. One important outcome of these calls thus

far has been to call OMB’s and the Board’s attention to the need to clarify certain

reporting requirements. For example, the Recovery Act requires federal agencies to

make information publicly available on the numbers of jobs created and retained as

a result of Recovery Act funded activities. Our work in the states yielded information that local level officials needed to define how to capture these data, and the

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State and local auditors were able to corroborate what we had heard. We included

a recommendation to OMB in our first bimonthly report on the Recovery Act actions

of selected states and localities to clarify this requirement, and OMB generally concurred with this recommendation.

In addition to these regular calls, we are actively participating in discussions with

State and local organizations to further foster coordination within the accountability

community. These organizations include the National Association of State Auditors,

Comptrollers, and Treasurers; the National Association of State Budget Officers; the

National Association of State Procurement Officials; the National Association of

State Chief Information Officers; the National Governors Association; the National

Conference of State Legislatures; and the National League of Cities. For example,

in March 2009, we participated—along with a State auditor, local auditor, and inspector general—in a webinar hosted by the National Association of State Auditors,

Comptrollers, and Treasurers for its members.

As Acting Comptroller General, I also serve as the Chairman of the National

Intergovernmental Audit Forum (NIAF). The NIAF is an association that has existed for over three decades as a means for federal, State, and local audit executives

to discuss issues of common interest and share best practices. NIAF’s upcoming May

meeting will bring together these executives, including OMB, to update them on the

Recovery Act and provide another opportunity to discuss emerging issues and challenges. In addition, a number of Intergovernmental Audit Forum meetings have

been scheduled at the regional level that seek to do the same, and this regional coordination is directly contributing to our work in the states. For example, GAO’s

western regional director recently made a presentation at the Pacific Northwest

Audit Forum regarding GAO’s efforts to coordinate with State and local officials in

conducting Recovery Act oversight. In conjunction with that forum and at other related forums, she has regularly participated in meetings, panel discussions, and

break-out discussions with the principals of State and local audit entities to coordinate efforts to provide oversight of Recovery Act spending.

The work of our 16 State teams that resulted in our first bimonthly report on the

actions of selected states and localities under the Recovery Act also exemplifies the

level of coordination we are undertaking with the accountability community. During

the conduct of our work, we collected documents from and interviewed State Auditors, Controllers, and Treasurers; State Inspectors General; and other key audit

community stakeholders to determine how they planned to conduct oversight of Recovery Act funds. We also coordinated as appropriate with legislative offices in the

states concerning State legislatures’ involvement with decisions on the use of Recovery Act funds. In addition, we relied on reporting and data collected from the Federal Audit Clearinghouse, which operates on behalf of OMB to assist oversight agencies in obtaining audit information on states, local governments, and non-profit organizations. Illustrative examples follow:

• Our team working in Georgia coordinated closely with that state’s State Accounting Office, the State Auditor, and Inspector General among others, to

understand their plans for mitigating risks and overseeing Recovery Act funding. For example, the Inspector General developed a database specifically to

track Recovery Act complaints and a public service announcement to alert the

public of how to report fraud, waste, and abuse.

• Our team working in North Carolina coordinated with the State Auditor regarding that state’s plans to ensure that Recovery Act funds are segregated

from other federal funds coming through traditional funding streams to help

ensure accountability and transparency.

• Our team working in New Jersey coordinated with the state’s new Recovery

Accountability Task Force, which will review how State and local agencies

spend Recovery Act funds as well as provide guidance and best practices on

project selection and internal controls. As part of the Task Force, the State

Comptroller has responsibility for coordinating all of the oversight agencies

within the state.

• Our team working in California is coordinating with the state’s newly appointed Recovery Act Inspector General, who is seeking to make sure that Recovery Act funds are spent as intended and to identify instances of waste,

fraud, and abuse. In addition, the team relied on the work of the State Auditor, whose most recent single audit identified numerous material weaknesses

associated with programs included in GAO’s review.

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7 31 U.S.C. § 716(a), (d).

GAO’s Authorities to Assist Whistleblowers and Elicit Public Contributions

Provisions in GAO’s authorizing statute, the Whistleblower Protection Act, and the

Recovery Act as well as a dedicated fraud reporting hotline facilitate our ability to

evaluate allegations of waste, fraud and abuse in the Federal Government. Under

our authorizing statute, we have authority to access information needed for the effective and efficient performance of our reviews and evaluations. Subject to certain

limited exceptions, all agencies must provide the Comptroller General access to information he requires about the duties, powers, activities, organization, and financial transactions of that agency,7 including for the purpose of evaluating whistleblower complaints.

Moreover, the Recovery Act applies certain federal whistleblower protections to

the employees of recipients of Recovery funds. The Whistleblower Protection Act prohibits personnel actions taken against federal employees in reprisal for the disclosure of evidence of a violation of any law, rule, or regulation, gross mismanagement,

a gross waste of funds, an abuse of authority, or a substantial and specific danger

to public health or safety. Similarly, the Recovery Act prohibits reprisals against

employees of nonfederal recipients of Recovery funds, but its protections only relate

to disclosures regarding the use of Recovery funds. The Recovery Act provides employees of a non-federal entity receiving a contract, grant, or other payment funded

in whole or part by Recovery funds may not be discharged, demoted, or otherwise

subject to discrimination as a reprisal for disclosing to the Board, an IG, the Comptroller General, the Congress, a State or federal regulatory or law enforcement agency, the employee’s supervisor, a court or grand jury, or a federal agency information

about mismanagement, waste, danger to public health or safety, or a violation of

law regarding the use of Recovery Act funds. People who believe they have been

subject to reprisal may submit a complaint to the appropriate inspector general for

investigation and seek redress through the courts. Table 1 outlines the coverage of

Whistleblower Act and Recovery Act provisions.

Section 902 of the Recovery Act gives us additional authority to examine the relevant records of contractors, subcontractors, or State or local agencies administering

contracts that are awarded with Recovery Act funds. We may also interview officers

and employees of such contractors or their subcontractors as well as officers or employees of any State or local agency administering such transactions. This additional

authority could be applied to examining allegations made by whistleblowers.

As part of our normal operations, we maintain a fraud reporting service. Anyone

can report evidence of fraudulent activity to FraudNet through an automated answering system, a dedicated fax line, a dedicated e-mail address, a dedicated mailing address, or an online form accessible from our web site at www.gao.gov. Information about how to provide evidence of fraud is available on our web site at http:/

/gao.gov/fraudnet.htm and on the last page of every GAO report. After the Recovery Act was passed, we coordinated with the IG community to publicize the use of

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8Pub. L. No. 110–343 (Oct. 3, 2008), the Emergency Economic Stabilization Act of 2008, seeks

to stabilize the Nation’s financial markets by, among other things, authorizing the Troubled

Asset Relief Program.

FraudNet as a means to solicit public input and gather information on potential instances of waste, fraud, and abuse in the allocation and spending of Recovery Act

funds. We also issued a press release on March 30, 2009, which was cited by the

national news media in articles about the Recovery Act. Over the past few months,

Fraudnet has received more than 25 allegations related to the misuse of Recovery

Act, Troubled Asset Relief Program,8 or other related funds. These allegations are

currently under review by GAO’s Forensic Audits and Special Investigations (FSI)

unit, a specialized team with many years of experience conducting fraud investigations. FSI coordinates with the IG community as appropriate to ensure that there

is no duplication of investigative efforts across the Federal Government. Further, in

cases where GAO determines that another agency is better positioned to perform

an investigation, FSI will refer relevant information to the appropriate agency. Although it is too soon to discuss details of the allegations we have received or the

status of ongoing investigations, we will continue to work with our partners in the

IG community, with the appropriate law enforcement agencies, and with the Congress, to ensure that all allegations are reviewed and investigated.

Updated Information on the Recovery Act’s R&D Funding

On March 19, 2009, we testified before this subcommittee on our role in helping

to ensure accountability and transparency for Recovery Act science R&D funding.

Our statement identified over $21 billion in related funding appropriated to DOE;

the National Institute of Standards and Technology (NIST) and the National Oceanographic and Atmospheric Administration (NOAA) within the Department of Commerce; NSF; and NASA. As initial implementation of the Recovery Act unfolds, we

are tracking these agencies’ activities to plan for science R&D expenditures. Table

2 provides information on the status of these agencies R&D-related Recovery Act

funds, as of April 28, 2009. To collect this information, we worked with agencies’

officials and coordinated with agencies’ IGs. As implementation of the Act progresses, further evaluations will continue to be coordinated with agencies’ IGs to

prevent duplication and minimize any overlap in our work.

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9See GAO, Recovery Act: Consistent Policies Needed to Ensure Equal Consideration of Grant

Applications, GAO–09–590R (Washington, D.C.: April 29, 2009).

As Table 2 shows, the status of agencies’ R&D-related funding varies. Officials

from each agency told us about the controls in place to ensure that their program

plans are approved before funds are either apportioned by OMB or allotted by their

agencies’ CFOs. For example, officials from each agency told us they are following

OMB’s April 3, 2009, guidance for implementing the Recovery Act. OMB’s guidance

requires that agencies’ submit program plans justifying Recovery Act expenditures

that include a program’s objectives, funding, activities, types of financial awards to

be used, schedule, environmental review compliance, performance measures, description of plans to ensure accountability and transparency, and a plan for monitoring and evaluation. In addition, this guidance requires that agencies submit the

program plans to OMB for approval by May 1, 2009, and states that OMB will approve these program plans by May 15, 2009. Officials from NIST, NOAA, and NSF

told us that their agencies’ CFOs will not allot funds for obligation until the House

Appropriations Subcommittee on Commerce, Justice, and Science has reviewed their

program plans. DOE CFO officials told us that the CFO will allot apportioned funds

after an internal DOE approval process, even if OMB has not yet approved program

plans; however, officials said DOE programs cannot obligate funds until OMB program plan approval is complete. As of April 28, 2009, only DOE’s Office of Science

had obligated any funds for R&D project expenditures. These obligations, totaling

$342 million will support various construction, facilities disposition, and general

plant projects at national laboratories, as well as procurement and installation of

experimental equipment and instrumentation. (See Appendix II for additional details on each agency’s planned uses of funds.)

Related to the efforts of the four federal agencies to obligate the R&D funds, our

April 29, 2009, report discussed our initial observations on improving grant submission policies that could help minimize disruptions to the grants application process

during the Recovery Act’s peak filing period.9 Our report was requested in response

to two OMB memoranda to federal agencies stating that the existing Grants.gov infrastructure would not be able to handle the influx of applications expected as key

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Recovery Act deadlines approached. We found that at least 10 agencies will accept

some or all applications outside of Grants.gov during the Recovery Act’s peak filing

period. For example, NSF and NASA are only accepting applications through their

own existing electronic systems for some grants. We recommended that the Director

of OMB take actions to increase the likelihood that applicants can successfully apply

for grants during the Recovery Act’s peak application filing period. Specifically, we

recommended that OMB (1) ensure that an announcement discussing agency alternate submission methods similar to that recently posted on Grants.gov is posted in

a prominent location on Recovery.gov and on all federal Websites or in all documents

where instructions for applying to Recovery Act grants are presented and (2) prominently post certain government policies for all grant applications submitted during

the peak filing period for Recovery Act grants, notifying applicants that, among

other things, if an application was deemed late they are notified of such an outcome

and are provided an opportunity to provide supporting documentation demonstrating they attempted to submit the application on time. OMB generally concurred with these recommendations.

In addition to direct expenditures, the Recovery Act also includes tax provisions

that benefit individuals and businesses. The Internal Revenue Service (IRS) recently

published a fact sheet on 12 different tax credits available under the Recovery Act

for various energy efficiency measures taken by homeowners and businesses as well

as for qualified renewable energy producers. Some of these credits are new, and others are modifications of existing tax credits previously included in the tax code. As

I testified in March 2009, one particular area that needs additional early attention

is identifying the data to be collected concerning the use and results of the Recovery

Act’s various tax provisions. Accountability and transparency are perhaps easier to

envision for the outlay portions of the stimulus package, but the billions of dollars

in tax provisions in the Recovery Act are considerably different than outlay programs in their implementation, privacy protections, and oversight. Most tax benefits

are entirely administered by the Internal Revenue Service (IRS), and all taxpayer

information, including the identity of those using the benefits, is protected by law

from disclosure. Further, unlike most outlay programs, IRS does not know who

makes use of the tax benefit until after the fact, if then. While IRS previously collected information that may have been sufficient to evaluate the benefits of energy

tax credits, IRS has not yet announced what information it will collect for the credits as revised or added by the Recovery Act.

In closing, I want to underscore that we welcome the responsibility that the Congress has placed on us to assist in the oversight, accountability, and transparency

of the Recovery Act. We will continue to coordinate closely with the rest of the accountability community and honor our ongoing commitment to promptly address information provided by whistleblowers. We are committed to completing our Recovery

Act work on the timetable envisioned by the Act and will keep the Congress fully

informed as our plans evolve.

Mr. Chairman, Representative Broun, and Members of the Subcommittee this

concludes my statement. I would be pleased to respond to any questions you may

have.

Staff Acknowledgments

Key contributors to this testimony were Richard Cheston (Assistant Director),

Divya Bali, Allison Bawden, Karen Keegan, Michelle Munn, and Barbara

Timmerman.

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1We are currently examining the potential benefits and challenges associated with plug-in hybrid electric and other plug-in vehicles; the status of development, factors that could delay availability or encourage development of these vehicles; and challenges to incorporating plug-in hybrid electric vehicles and other plug-ins into the federal fleet. 2See GAO, Clean Coal: DOE’s Decision to Restructure FutureGen Should Be Based on a Comprehensive Analysis of Costs, Benefits, and Risks, GAO–09–248 (Washington, D.C.: Feb. 13,

2009).

Appendix II:

Updated Recovery Act Funding

for R&D-Related Activities

To update information on Recovery Act funding for R&D-related activities, we met

with and interviewed Department of Energy (DOE), National Institute of Standards

and Technology (NIST), National Oceanographic and Atmospheric Administration

(NOAA), National Science Foundation (NSF), and National Aeronautics and Space

Administration (NASA) officials, and analyzed documentation they provided. We

also reviewed publicly available information provided by the Office of Management

and Budget (OMB), through the Recovery.gov web site, and agencies’ own recovery

web sites. Finally, we coordinated with each agency’s Inspector General (IG) to discuss the data we collected. We conducted this work in accordance with generally accepted government auditing standards.

Department of Energy

DOE’s program offices vary in the extent to which they have funds available to

obligate for expenditure. A little more than 40 percent of DOE’s R&D-related Recovery Act funding has been apportioned by OMB, and only DOE’s Office of Science

has obligated R&D project funds. OMB has not apportioned any funds to DOE’s Office of Fossil Energy and has only apportioned minimal funds to its Loan Guarantee

Program.

Energy Efficiency and Renewable Energy (EERE). The Recovery Act appropriated

$2.5 billion to EERE for R&D activities related to alternative and renewable energy

sources, such as biomass and geothermal. An additional $2.4 billion was appropriated for advanced transportation research focused on next-generation plug-in hybrid electric vehicles, their advanced battery components, and transportation electrification. OMB has apportioned all of EERE’s appropriation, and DOE’s Office of

the Chief Financial Officer (CFO) has generally allotted the funds to support the

R&D activities associated with vehicle technologies and electrification. EERE has

issued a solicitation for grants, which closes May 13, 2009, to establish development,

demonstration, evaluation, and education projects to accelerate the market introduction and penetration of advanced electric drive vehicles. In addition, EERE has

issued a solicitation for grant proposals supporting the construction of U.S.-based

manufacturing plants to produce batteries and electric drive components, which

closes May 19, 2009.1

Fossil Energy (FE). The Recovery Act appropriated $3.4 billion to FE for R&Drelated activities, including funds to support a third round of competition under the

Clean Coal Power Initiative; fossil energy R&D programs, such as fuel and power

systems research or FutureGen;2 and competitive grants for carbon capture and energy efficiency improvement projects. As of April 28, 2009, OMB had not apportioned any of these funds to DOE, and thus no funds have been allotted, obligated,

or expended. According to an FE official, OMB is unlikely to apportion funds to FE

until after May 15, 2009, when its program plans are expected to be approved.

Science. The Recovery Act included a $1.6 billion appropriation for DOE’s Office

of Science (Science). Nearly all $1.6 billion appropriated has been apportioned by

OMB to DOE without restriction, and the Secretary of Energy has announced priorities for $1.2 billion of these funds, including:

• $248 million for major construction, modernization, infrastructure improvements, and needed decommissioning of facilities at national laboratories;

• $330 million for operations and equipment procurement and installation at

major scientific user facilities;

• $277 million for competitive research collaborations on transformational basic

science needed to develop alternative energy sources;

• $90 million for core scientific research grants to be awarded to graduate students, post-docs, and Ph.D. scientists across the Nation for applications of nuVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00034 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
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3Pub. L. No. 110–69 (Aug. 9, 2007).

4Pub. L. No. 111–8 (March 11, 2009).

clear science and technology, and for alternative isotope production techniques; and

• $215 million to accelerate construction of two experimental facilities.

Science has obligated $342 million to support various approved construction,

infrastructure improvement, and facility decommissioning projects at national

laboratories, as well as procurement and installation of experimental equipment and instrumentation. Table 3 describes Science’s Recovery Act projects

at its national laboratories, including those for which funding has already

been obligated.

Advanced Research Projects Agency–Energy (ARPA–E). The Congress authorized

the establishment of ARPA–E within DOE in August 2007.3 ARPA–E supports

transformational energy technology research projects with the goal of enhancing the

Nation’s economic and energy security. ARPA–E received its first appropriation of

$400 million in the Recovery Act, which was soon followed by an additional $15 million in the Omnibus Appropriations Act, 2009.4 According to a DOE official, the Secretary of Energy signed a memorandum formally creating the new office on April

22, 2009, and designated an Acting Deputy Director until a presidential appointee

is confirmed by the Senate. As of April 28, 2009, DOE’s CFO had allotted $2 million

in program direction funds to ARPA–E to hire employees, set up office space, and

support requirements necessary to implement the provisions of the Recovery Act. In

addition, ARPA–E issued its first competitive solicitation on April 27, 2009, to fund

up to $150 million of high-risk, high-potential projects focused on innovative energy

technologies. Project proposals are due June 2, 2009, and awards are generally expected to range from $2 million to $5 million. According to a DOE official, ARPA–

E anticipates issuing more targeted solicitations associated with the remaining Recovery Act funds; however, the official said these solicitations are not likely to be

issued until a Senate confirmed appointee is in place to lead the organization.

Loan Guarantee Program (LGP). The Recovery Act included appropriations totaling $6 billion to LGP, which could support $60 billion in new loan guarantees, deVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00035 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
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5The Recovery Act appropriated $6 billion for the credit subsidy costs of approved projects—

i.e., the estimated net present value of long-term costs to the government from defaults, delinquencies and interest subsidies for those projects. The original loan guarantee program did not

receive an appropriation for such costs, which must therefore be paid by fees charged to borrowers. 6See GAO, Department of Energy: New Loan Guarantee Program Should Complete Activities

Necessary for Effective and Accountable Program Management, GAO–08–750 (Washington, D.C.:

July 7, 2008). 7The August 2006 solicitation invited applications for loan guarantees under DOE’s Innovative Technologies loan guarantee program. The Recovery Act added a new program that provides

loan guarantees for a different set of project categories, some of which overlap with those eligible

for loan guarantees under the original program.

pending on the credit subsidy rate. LGP officials told us the program plans that

they submitted to OMB on May 1, 2009, support new loan guarantees for renewable

energy systems, electric power transmission systems, and leading-edge biofuel

projects performing at the pilot or demonstration stage and that the Secretary of

Energy determines are likely to become commercial technologies.5 In addition, the

Secretary of Energy has announced a number of restructuring initiatives for the

program, which, as we reported in July 2008, faces a number of challenges.6 Officials have indicated that 6 of the 11 applicants who responded to DOE’s August

2006 solicitation for various types of innovative technology loan guarantees could be

eligible for loan guarantees under Recovery Act terms.7 We are currently examining

the status of LGP’s efforts to solicit and review loan guarantee applications, including its efforts to use Recovery Act funds, and its progress in implementing the recommendations in our July 2008 report.

Department of Commerce

As of April 28, 2009, OMB had apportioned all $1.41 billion directly appropriated

to NIST and NOAA for Recovery Act R&D-related activities. According to agency officials, funds have not yet been made available for obligation pending OMB and

Congressional approval of program plans.

NIST. NIST plans to spend the $580 million it was directly appropriated to support, competitive research grants, fellowships, and procurement of advanced research and measurement equipment and supplies. These funds are also planned to

support a construction grant program for research science buildings, construction of

new NIST facilities, and the reduction of the backlog of deferred maintenance for

existing NIST facilities. In addition, NIST will receive $10 million appropriated to

DOE under the Recovery Act for work on the electricity grid and $20 million appropriated to the Department of Health and Human Services to create and test standards related to health security. According to one official, NIST is working with OMB

to prepare solicitations and other grant-related documents, so the agency can quickly issue Recovery Act grant solicitations once its program plans are approved.

NOAA. The Recovery Act appropriated $830 million to NOAA for construction and

procurement related to R&D-related activities, including support for research operations and facilities; construction and repair of facilities, ships and equipment; and

research to address gaps in climate modeling and to establish climate data records

for research into the cause, effects, and ways to mitigate climate change. NOAA has

issued a competitive solicitation for up to $170 million in grants for shovel-ready

projects to restore marine and coastal habitats. Applications were due on April 6,

2009. A NOAA official told us that NOAA is working with OMB to draft solicitations

and other contract-related documents so the agency can quickly issue Recovery Act

contract solicitations once its program plans are approved.

NSF

The Recovery Act appropriated $3 billion to NSF for R&D-related activities, including competitive research grants; major research instrumentation and equipment

procurement and facilities construction; academic research facilities modernization;

and education and human resources. NSF officials believe their Recovery Act funds

can be obligated quickly once program plans are approved because, for example, $2

billion of the $3 billion will fund proposals that NSF’s independent expert review

panels have already deemed of merit but that NSF was not previously able to fund.

Specifically, NSF officials have stated that these grants will be awarded by September 30, 2009, and NSF expects its Recovery Act funds will allow the agency to

support an additional 50,000 investigators, post-doctoral fellows, graduate and undergraduate students, and teachers throughout the Nation.

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NASA

The Recovery Act appropriated $1 billion to NASA for expenditures on space exploration; Earth science and climate research missions; adding supercomputing capacity; aeronautics activities, including aviation safety research, environmental impact mitigation, and activities supporting the Next Generation Air Transportation

System; and restoration of facilities at the Johnson Space Center in Houston, Texas,

damaged during Hurricane Ike in 2008. $50 million to support restoration work at

the Johnson Space Center has been apportioned by OMB, and NASA has begun to

issue requests for proposals for this restoration work. According to a NASA official,

OMB has agreed with NASA on the funding priorities for the remaining $950 million appropriated, and funds will apportioned once OMB approves NASA’s program

plans.

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BIOGRAPHY FOR GENE L. DODARO

Gene L. Dodaro became Acting Comptroller General of the United States and

head of the Government Accountability Office on March 13, 2008.

Mr. Dodaro has testified before Congress dozens of times on important national

issues. Most recently he has testified on the American Reinvestment and Recovery

Act of 2009, the Troubled Asset Relief Program, federal assistance to the auto industry, U.S. involvement in Iraq and Pakistan, the Federal Government’s financial condition and fiscal outlook, and the need to modernize the U.S. financial regulatory

system. He has led efforts to fulfill GAO’s new audit responsibilities in connection

with the 2008 Economic Stabilization Act to help stabilize financial markets and institutions, as well as the American Recovery and Reinvestment Act—the stimulus

legislation designed to combat the economic downturn. Under Mr. Dodaro, GAO has

also undertaken initiatives such as a new transition web page and a new high-risk

list to help bring to the attention of the 111th Congress and the new Administration

the major challenges GAO has identified across the Federal Government, from improving food safety to rebuilding transportation infrastructure.

As Acting Comptroller General, Mr. Dodaro helps oversee the development and

issuance of hundreds of reports and testimonies each year to various committees

and individual Members of Congress. These and other GAO products have led to

hearings and legislation, billions of dollars in taxpayer savings, and improvements

to a wide range of government programs and services.

In a GAO career dating back more than 30 years, Mr. Dodaro has held a number

of key executive posts. For nine years, Mr. Dodaro served as the Chief Operating

Officer, the number two leadership position at the agency, assisting the Comptroller

General in providing direction and vision for GAO’s diverse, multi-disciplinary workforce. Mr. Dodaro led the development of GAO’s strategic plans for serving Congress

and improving government in the 21st Century. He also played a key role in guiding

the agency’s efforts to highlight current and emerging issues that warrant attention

from policy-makers.

Until 1999, Mr. Dodaro headed GAO’s Accounting and Information Management

Division, the agency’s largest unit, which specialized in financial management, computer technology, and budget issues. While there, he directed the first-ever audit of

the comprehensive financial statements covering all federal departments and agencies. Mr. Dodaro also helped conceive GAO’s strategy for strengthening computer security government-wide and led the updating of standards for internal controls in

the Federal Government.

Mr. Dodaro worked closely with the Congress and several administrations on

major management reform initiatives, including the 1994 Government Management

Reform Act, which expanded the Chief Financial Officers Act; the revised 1995 Paperwork Reduction Act and the Clinger-Cohen Act of 1996, which require agencies

to implement modern management practices for information technology management; and the 1996 refinements to the Single Audit Act, which outlines requirements for audits of federal assistance to State and local governments. Mr. Dodaro

also led management reviews of the Department of Justice, the Internal Revenue

Service, the Office of Management and Budget, and the Office of Personnel Management and has extensive experience working with State and local government officials.

Mr. Dodaro, who holds a Bachelor’s degree in accounting from Lycoming College

in Williamsport, Pennsylvania, is a fellow of the National Academy of Public Administration and a member of the Association of Government Accountants. Mr. Dodaro

has received many of GAO’s top honors as well as recognition from outside organizations, including the American Society for Public Administration, the Institute for Internal Auditors, and Federal Computer Week. These include:

• The 2008 Association of Government Accountants’ National President’s Award

in recognition of outstanding vision in leading GAO through a major transition and for partnering with AGA to improve government financial management.

• The 2006 Association of Government Accountants’ Elmer B. Staats Award for

improving government performance and government accountability.

• The 2003 American Society for Public Administration’s and the National

Academy of Public Administration’s National Public Service Award recognizing outstanding practitioners in public service.

• The 2001 Association of Government Accountants’ Frank Greathouse Distinguished Leadership Award for sustained outstanding leadership in financial

management.

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• The 2000 Institute of Internal Auditor’s (D.C. Chapter) Person of the Year for

leadership in addressing the Year 2000 computing challenge.

• The 1999 Federal Computer Week’s Information Technology Top 100 Award.

• The 1989 Arthur S. Flemming Award for outstanding individual performance

in government.

Mr. Dodaro will serve as Acting Comptroller General until the President nominates, and the Senate confirms, a successor from a list of candidates that will be

proposed by the Congress.

Mr. Dodaro is married to the former Joan McCabe and has three adult children.

DISCUSSION

Chairman MILLER. Thank you. By the standards the Committee

has set and other witnesses have set you both were very close to

your time limits, and I think it is probably a good thing that men

in your position are rule followers. I look forward to seeing if the

benefit of your example affects any Member of the Committee.

I do now recognize myself for five minutes of questioning, and

each Member here will have a turn.

INFORMATION TRANSPARENCY AND COMPATIBILITY

Mr. Devaney, the President, President Obama, promised a level

of transparency through the Internet, Recovery.gov. The public was

led to believe that that would be available, that would get right

down to who got the contract for pouring asphalt. But it has been

the experience of this subcommittee in the last two years, particularly with respect to IT projects, trying to assemble information

from—in different forms from different agencies and put it all in

one usable format, although that seems like that ought to be something readily accomplished, we find out that years later and millions of dollars later, what appeared to be a very qualified bidder

got the contract and what they produced is worse than what they

started with.

How do you intend to provide that level of transparency to see

how—who actually got the contract to pour asphalt?

Mr. DEVANEY. Mr. Chairman, obviously it will probably be done

through the Recovery.gov web site.

Chairman MILLER. Right.

Mr. DEVANEY. And as I mentioned in my testimony that web site

is evolving and developing, and I will be the first to admit today

that web site doesn’t give you that kind of information. The information, quite frankly, isn’t there yet. It hasn’t come back in yet,

but it will have to be—the web site will have to be ready to receive

the data that comes pouring back into the government in—October

is the big date. So we have a challenge here. We have about 140

days to move very quickly from this electronic town hall, which I

described, to where we get all these great ideas to, in the next

week or two, moving into some sort of a competitive process and

get the vendors working.

It is an enormous challenge. The integration issues are profound,

but I am optimistic by nature, a little bit—mixed in with a little

bit of realism, but optimistic, and I think it can be done. And my

hope, and our goal on the Board is that, you know, come October

or shortly thereafter the American public will begin to see the data

that they so desperately want to see. And we will ensure that that

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site gets better and better and better as time goes on. We are not

going to stop in October, obviously.

Chairman MILLER. Okay. Mr. Devaney, are you going to build an

IT team within your agency? Or are you going to rely upon private

contractors? How do you plan to proceed?

Mr. DEVANEY. Well, we have already assembled a team; a good,

solid IT team. I think I have got the best and brightest in government. We have sort of stolen them, if you will, from other agencies.

Borrowed them, and in some cases put a lot of leverage on agencies

to provide us with the very best people they have. Combined with

some contractor help we have and the vendors that will be involved

in the building of this infrastructure I think we can get it done.

Chairman MILLER. Okay. Mr. Dodaro, you are facing much the

same challenge. You are certainly familiar with trying to bring in

diverse data, inconsistent data, agencies that use different formats,

collect different data, et cetera, et cetera.

What are your observations or thoughts on the task of creating

from all that diverse data an integrated—from two different, from

two dozen agencies creating that in a format that will be usable in

a single format? Understandable.

Mr. DODARO. Yeah. First of all, I want to say I think that the

goals that are set out by the legislation and by the implementing

guidelines are very laudable goals, and I think set a standard for

transparency and accountability in federal spending that haven’t

been set before.

That being said, there will be definitely implementation challenges associated with making sure the data is complete, it is accurate, it is timely, and it is in an understandable format. And so

those things can be achieved with a lot of effort, but it will be a

challenge and a stretch goal, if you will, for the agencies in order

to be able to achieve that.

One of my earlier responsibilities was to help orchestrate the

first ever financial audit of the Federal Government’s financial

statements, and believe it or not, prior to 1997, there was never a

financial audit done of any federal department or agency, let alone

the consolidated statements of the U.S. Government, and that was

a monumental achievement, but it took time and effort. It can be

done, and I think the commitment is there, but we will have to

wait to see how implementation unfolds.

Chairman MILLER. Following the example set by the witnesses,

my time has expired.

Dr. Broun is recognized for five minutes.

Mr. BROUN. Thank you, Mr. Chairman. I have a question for

both of you gentlemen.

THE LEVEL OF DETAIL IN TRACKING CONTRACTS

Current OMB guidance only requires that money be tracked two

layers down. For example, a state and city would have to report

data but not the contractor or subcontractor. Do you intend to require additional reporting beyond the OMB guidance, and do you

believe two layers of accountability are enough to satisfy the President’s promise that, ‘‘Every American will be able to go online and

see where and how we are spending every dime?’’

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Mr. DEVANEY. I will answer that by saying that if I could make—

wave a magic wand, I would want to follow a dollar from cradle to

grave. As I said earlier, the division of labor here and as it should

be, is that OMB is responsible for providing the guidance as to

what needs to be reported. They are also going to be responsible

for scrubbing the data, which is—my fellow witness mentioned this

is going to be an enormous challenge to make sure that that data

is accurate.

So I think that we are going to have a situation where we are

going wait, probably, for OMB to come out with some additional

guidance in the future after a few quarters have gone by and we

see where the missing gaps are, and I am going to push them very

hard to give me as much data as possible.

Mr. BROUN. Do you intend to carry that all the way down to the

ultimate consumer——

Mr. DEVANEY. I would like to——

Mr. BROUN.—as the Chairman is talking?

Mr. DEVANEY.—do that.

Mr. BROUN. So two layers is not enough?

Mr. DEVANEY. I would like to get it down to where we can see

where it went at the end of the day. That is—from an accountability standpoint.

Mr. BROUN. Mr. Dodaro.

Mr. DODARO. Yeah. I agree completely with what Mr. Devaney

has just said. My understanding is that based upon input that had

been received by GAO State and local officials and others, OMB is

reevaluating the guidance that they have. I know this issue came

up when I testified on this subject before the Senate, and the expectation is and the hope is that more complete reporting will be

included in the next set of expanded guidance.

I mean, it definitely needs to be on the manager’s screen to make

sure there is adequate accountability, and if you have that, and the

real challenge will be to make sure it is in a cost-effective type of

reporting approach. But you need more complete reporting.

KEEPING ACCURATE JOB STATISTICS

Mr. BROUN. I agree with both of you, and I think this promise

that the President made is unfillable, and I don’t think it is going

to be, unfortunately.

Mr. Devaney, the Americans for Tax Reform point out an interesting contradiction in their letter. President Obama recently

claimed in his press conference marking his 100th day in office on

April 29, that the stimulus act has already saved 150,000 jobs.

Don’t know where he got that figure. Maybe pulled it out of the hat

like a lot of these figures are.

I also point out that the Bureau of Labor Statistics show 1.3 million jobs lost since the President took office. Given that you are

tasked with providing accountability with independence, how do

you plan to verify the actual number of jobs created?

Mr. DEVANEY. Well, sir, we haven’t really received any information about that on the web site—to the Recovery Board. It hasn’t

come into us. I am assuming that those figures come from a council

of economic advisors, which has been working in the jobs area and

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information—forthcoming information—hopefully soon—will be

coming forward about how to count jobs.

So we don’t have it yet. I eagerly await it, and as soon as I get

it, we will put it up.

Mr. BROUN. Well, I appreciate that, and I hope that you will

verify the numbers. I think very probably these numbers were just

picked out of the clear blue sky and are not authenticated or

authenticable at this point, but anyway, let me carry on.

WHISTLEBLOWERS

In her testimony, Ms. Brian describes Congress’s decision not to

provide meaningful protections for federal whistleblowers with respect to stimulus funding as, ‘‘simply absurd.’’ Separate from the

absence of such protections what options are available to you as

head of the RAT Board to assist in protecting federal whistleblowers?

Mr. DEVANEY. Sir, I have been pretty aggressive about protecting

whistleblowers in my former position as Inspector General of Interior. I don’t intend to abandon that practice now. When the Board

hears from a whistleblower, we are going to make sure that the appropriate IG gets the information, and if there is any charge of retaliation, I am going to be pretty aggressive about making sure

that we try to put a stop to that.

Mr. BROUN. Thank you very much. I trust that you will and look

forward to you doing so.

Mr. Chairman, I am out of my time.

Chairman MILLER. An even better example for all of us.

Ms. Dahlkemper is recognized for five minutes.

INDICATIONS OF SUCCESS

Ms. DAHLKEMPER. Thank you, and thank you both for coming

today and speaking in front of us.

As a new Member of Congress and someone who did vote for the

Recovery Act, obviously I feel a lot of obligation to make sure that

this money is spent in the way those of us who voted for it intended.

So, Mr. Devaney, with that in mind, looking to the future, when

you close down your office in 2013, what would you consider as success? Could you describe that to me, please?

Mr. DEVANEY. Well, we have held fraud, waste, or mismanagement to an absolute minimum, that we have been able to prevent

that from happening as opposed to merely detecting it after it happened.

With respect to the web site, my hope is that this web site will

serve as a prototype for how we provide transparency to the American people for years to come. I think if we do this right and take

our time, do it right, and that transparency becomes part of what

we do every day, that folks in the future will look to this web site

as a model for how to build future models, to democratize the process.

I mean, this is the very first time that I can recall that every dollar is being tagged by a specific title of Recovery funds, and for an

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IG that is very exciting because I get to—I get a better shot at

making sure that none of it is wasted or fraud takes place.

TRACKING MONEY AT THE LOCAL LEVEL

Ms. DAHLKEMPER. I have asked my staff, particularly back in my

district, to try to track what they can within my district. Can you

give me any suggestions on what I should be trying to do back in

my district in trying to make the transparency and the accountability there for the people in the third district of Pennsylvania?

Mr. DEVANEY. Well, I am hoping to give everybody in the third

district of Pennsylvania an opportunity—in the not too-distant future—to be able, for instance, to go on that web site and put in a

zip code and see the expenditures in their neighborhood or look at

across the country. Can’t do that now but I am very confident that

in the coming months, in the short amount of months, we are going

to be able to do that for you.

Ms. DAHLKEMPER. Summertime, fall, end of the year? When do

you——

Mr. DEVANEY. Well, I——

Ms. DAHLKEMPER.—have any thoughts on——

Mr. DEVANEY.I stay awake a little bit at night worrying about

October 10, which is when the data comes rushing into the government from the recipients, and so by then it has to work.

PREVENTING MISUSE OF GRANT AND CONTRACT FUNDS

Ms. DAHLKEMPER. Okay. Thank you.

And Mr. Dodaro, GAO has also been conducting extensive work

on the government’s acquisition resources. What improvements

need to be made to enhance an agency’s ability to intervene and

prevent misuse of funds at a time when speedily completing a

grant or contract action is also being emphasized?

Mr. DODARO. Yeah. The acquisition area is one, as you mentioned, that we have tracked a number of federal contracting activities on our high-risk list that we keep, and the acquisition workforce area, in particular, is important; that there be adequate numbers of people that are there in order to track some of the contracting activities. This has been a particular area we focus on at

the Department of Defense, where they have doubled the amount

of spending on contract services over the past several years, but

the acquisition workforce has grown less than one percent. So having adequate numbers of people are important. People have to be

trained properly. There has to be adequate reporting and monitoring of those activities.

Now, there it is also important that the proper contracting vehicles be used, that there be competition in contracting whenever

possible to ensure that the government has the best prices available for the services that they are trying to contract with.

So those are some of the fundamental things that, you know, we

think. In this area I know for the Recovery Act that the inspectors

general have been focused on trying to provide some best practices,

as we have up-front, to try to deal with the contracting activities

and following these best practices to minimize potential problems

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going forward. But it is an area to keep an eye on as the Recovery

Act money gets distributed over the next few years.

Ms. DAHLKEMPER. Thank you very much.

Chairman MILLER. Thank you. We do have votes coming up

shortly, but I will recognize myself for a second round of questioning, and we should have time for all three of us to ask a second

round, and the second panel will probably be after a series of votes.

I now recognize myself for five minutes.

Mr. Devaney, I—it may be true that not all of the accountability

we would—and transparency we would like to achieve with the Recovery Act is achievable right now, but the first step in achieving

a government that is accountable and transparent is to elect people

to office who will be transparent and accountable. And to see those

obstacles not as an excuse for being opaque and unaccountable but

as something to try to overcome and continue to try to overcome.

And our experience in trying to provide as much transparency and

accountability as possible now will improve our efforts later. It will

be a continuing effort to get more and more accountable and more

and more transparent.

AVAILABILITY OF INFORMATION

Mr. Dodaro, in your testimony you said the Department of Energy—I believe that Mr. Whittaker has a couple of graphics that

are—I think it is being displayed here for you. In your testimony

you say that the Department of Energy has obligated, I assume

contracted, $342 million of the funds allocated for the Office of

Science. In the appendix of your testimony you provide a great deal

of detail on the spending, but at the DOE Recovery Act web site

it is very easy to find the 342 number in the total obligations——

Mr. DODARO. Uh-huh.

Chairman MILLER.—but kind of impossible to find the level of detail that you have provided in the Appendix.

How did the GAO get the level of detail that you reported? Did

I say Mr. Dodaro?

Mr. DODARO. Yes.

Chairman MILLER. Right.

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268

Mr. DODARO. Right. Right. Our staff interviewed the people at

the Department of Energy and looked at the supporting documentation available. You know, obviously we have more access to

information than the general public would be, but that doesn’t

mean that the web sites could not be improved and additional level

of detail there, and I think that is the expectation going forward.

But we did it through normal auditing procedures that we have.

Chairman MILLER. What is the task of getting that level of detail

that is in the Appendix? Your testimony available to all God’s children with Internet access——

Mr. DODARO. Right.

Chairman MILLER.—which is most of God’s children in this country at least now, up at a usable forum?

Mr. DODARO. Yeah. I think that the task is to just put in the disciplined processes necessary in order to achieve that, and as I mentioned earlier in response to Congressman Broun’s question, I

mean, this is a stretch goal for agencies to have that level of detail

and timely reporting. It could be achieved, but there needs to be

disciplined processes put in place to make sure that when it is

posted, it is complete and accurate and timely, and I think that the

expectation of the Administration moving forward is to try to get

that level of detail provided.

Now, that money has been, you know, obligated, and as things

move through the process, you know, additional funds will become

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obligated, but I think the—it is just a matter of having the proper

procedures in place.

AGENCY COMPLIANCE WITH RECOVERY ACT REQUIREMENTS

Chairman MILLER. Okay. Mr. Devaney, our committee is looking

into contracting issues that one of the agencies within our subcommittee’s jurisdiction, our committee’s jurisdiction, and our initial efforts suggest that the staff, the contracting staff are not particularly aware of the legal requirements of the Recovery Act. And

that is worrisome, that if they don’t know about, they are not going

to do it very well.

What efforts are either of you making to try to make sure that

all those in government agencies know what the requirements are?

Mr. DEVANEY. Well, we have our compliance, procurement compliance staff out there talking to the chief procurement officers of

each of the agencies. I am not sure what agency you are referring

to, but there is the visit, there is the opportunity I had to speak

to the Cabinet on a couple of occasions and talking about, you

know, the work that we were seeing initially was sloppy, that mistakes were being made. It is probably true that this is—goes on all

the time, but the sunlight has never been shone on this work before.

So I know the Vice President, for instance, challenged the Secretaries to make sure that those kinds of guidance pieces that are

coming out of OMB get down to the lowest level, which is not always the case in most big departments. And every time we have

an opportunity to interact with those levels, we are trying to be

helpful and informative to them as to what the rules really are.

Mr. DODARO. Yeah. I would just say in response to your question

about, you know, our activities here, our responsibilities under the

Recovery Act are mostly to track the uses of the funds at the State

and local level, so we have been deferring to the inspectors general

to work with the federal departments and agencies.

Now, what we will plan to do is coordinate with them, if we see

some gaps or other areas that we can help out in, we will do that

as part of our coordination of follow-up activities.

Chairman MILLER. Okay. My time has expired.

Dr. Broun for five minutes.

OVERSIGHT AT THE STATE AND LOCAL LEVEL

Mr. BROUN. Thank you, Chairman. Just going along with what

the Chairman was just asking, State and local governments and

even the private sector are being overwhelmed with both funding

and new transparency requirements.

Does the Act allow states to use stimulus money to increase their

ability to comply with transparency and accountability requirements, and do you have any recommendations on how the Federal

Government can assist State and locals in meeting these requirements?

For both of you, please.

Mr. DODARO. I would say, you know, in our first report, Congressman, last month we recommended that OMB clarify this very

point. Now, some of these programs or existing programs that

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1OMB issued Memorandum M–09–18, ‘‘Payments to State Grantees for Administrative Costs

of Recovery Act Activities,’’ on May 11, 2009.

allow for administrative expenses to be recouped, a certain percentage of them, there are indirect costs, rate allocations that are in

some of the programs, but there is a lot of confusion out there at

the State and local level, and we recommended that OMB clarify

this. And I think they have a number of options available to them

in order to do this. Our understanding is they are looking at this

very carefully and hope to clarify it soon.1

I think this is a very important issue because I do believe that

a number of states have very legitimate concerns about their ability to implement adequate accountability, and this clarification if

very important.

Mr. BROUN. Mr. Devaney.

Mr. DEVANEY. Same thing. I think OMB is about to clarify that

issue and maybe bring a little help to the states. I hear this every

time I talk to them, and when asked if I would be supportive of

even legislation that might help in this area, I have been—I have

personally responded yes.

So they need help. They are overwhelmed with this responsibility. As you know, the federal IGs get a considerable amount of

money to perform oversight, and the states didn’t get anything. So

I am empathetic to that situation. I want to help them. I will do

anything to help them and be very supportive of any effort to make

sure that money gets down to them.

Mr. BROUN. Thank you. I appreciate that.

I understand there is some legislation that is going to help mitigate this issue, but I think this Act has tremendous unfunded mandates all the way down even to the local contractor that people just

don’t understand. In fact, a lot of states have looked at opting out

of various parts of this Act for that reason.

RESULTS FROM THE ONLINE DIALOGUE

Mr. Devaney, you noted in your testimony that you held an online dialogue to receive comments on how best to structure the Recovery.gov web site and how to best collect and analyze data.

What, if any, notable consensus or theme emerged from this dialogue?

Mr. DEVANEY. Well, I am still waiting for the official results from

NAPA [National Academy of Public Administration], which was our

partner in this, but my understanding is there is a number of really good, solid ideas that emerged from this exercise; some very notable people wrote to us and suggested things. As part of the process people were able to engage in running dialogue and actually

vote at the end of the day, so I haven’t seen the tallies of the votes,

but, you know, we had been looking already, of course, at what is

out there, but the people that I have doing that told me they were

surprised by some of the ideas. We have got to consider them, but

we have got to do it very quickly.

Mr. BROUN. When do you expect to announce how you plan to incorporate any suggestions as a result of that dialogue?

Mr. DEVANEY. Well, I think we are going to move very quickly

to the dialogue is being shaped by NAPA to reflect the buckets of

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information we got. We are going to take a look at that, then we

are going to move very quickly to having some people in to show

us things as opposed to just talking about them, and do that in a

competitive way in a very short period of time.

Mr. BROUN. All right. Very good. Do you expect the information

detailed on Recovery.gov will be maintained and updated throughout the life of the stimulus awards and grants?

Mr. DEVANEY. Yes. Absolutely.

Mr. BROUN. Do you believe that it would be appropriate as Dr.

Ellig suggested to include information on performance outcomes on

the Recovery.gov web site?

Mr. DEVANEY. I think the whole issue of performance metrics is

an issue that we haven’t really addressed yet, and as you may

know, there is an advisory panel that is supposed to be appointed

by the President to provide the Board with expert advice. I am very

much interested in having some performance people or a performance person on that panel and have made that known.

I want to very quickly get my hands around that as soon as I

can find the time to—once the vendors are selected that that is

being built, then I want to go back to the metrics and try to see

what we can do in that area.

Mr. BROUN. I think it is very critical to have those performance

metrics in place, and I thank you, sir.

My time is up.

Chairman MILLER. Dr. Broun—Ms. Dahlkemper for five minutes.

Ms. DAHLKEMPER. Mr. Devaney, during the drafting of the Recovery Act there was concern among the inspectors general that

the Board had been given too much power to determine what investigations they would be allowed to pursue, or that there was insufficient protection against political interference with investigations.

And ultimately the language in the Act made it clear that the inspectors general retain their independent discretion.

I just want to ask if you are comfortable with the Act’s language

limiting the Board’s authority in this area?

Mr. DEVANEY. Well, if I had written it, I may have written it differently. I certainly am not about to tell an inspector general that

they should not investigate something. I don’t think I would ever

do that. I think I have—I am expressing the view of the Board entirely, and I have made it known in any opportunity I have had before the IGs to tell them that. I am going to speak to them next

week down at their annual retreat. I will reiterate that. The board

is not about to tell somebody not to investigate something.

So, that language—it is implied in the language that the Board

would do that. We are not going to do that.

Ms. DAHLKEMPER. Okay. That is good to hear. That is all I have.

I don’t have any further questions.

Chairman MILLER. I don’t have any further questions either. We

have not yet been called to votes. I suppose it makes sense to excuse this panel. Thank you very much for being here, and we will

continue to talk with you about how to do this, and perhaps we

should begin the second panel, although we will probably not be

able to complete all the testimony of the panel before called to

votes.

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We will all just be at ease for a second while everyone gets repositioned.

The bell is calling us to vote, and I understand that Mr. Bilbray

has already gone on over to vote. It doesn’t take us 15 minutes to

get there, but it is an awkward time, so I think we will resume at

the end of the last vote. Thank you very much. See you shortly.

[Recess.]

Panel II

Chairman MILLER. Hello, again. I understand that Mr. Bilbray

will be substituting for Dr. Broun for the second panel, and he will

be here momentarily, but I will now introduce our second panel.

Dr. Clarence Newsome is the President of Shaw University in

Raleigh, a well-regarded institution, I think literally across the

street from my district. Dr. Gary Bass is the Founder and Executive Director at OMB Watch, not OMB as my notes say. I do know

the difference. OMB Watch has been very helpful to me, to my

staff, to this subcommittee in the last two years.

Dr. Jerry Ellig is the Senior Research Feller, Fellow—Feller is

actually the North Carolina pronunciation—at the Mercatus Center

at the—at George Mason University. Ms. Danielle Brian is the Executive Director of POGO, the Project on Government Oversight,

and Mr. Eric Gillespie is the Senior Vice President of Products,

Technology, and Innovation and the Chief Information Officer of

Onvia Incorporated, which has created the private stimulus watch

web site Recovery.org.

As you know from having been here before, you will each have

five minutes for your spoken testimony. Your written testimony

will be included in the record. When you have completed your spoken testimony, your oral testimony, we will begin with questions,

and each Member will have five minutes to question the panel.

It is the practice of the Subcommittee to take testimony under

oath. Do any of you have any objection to taking an oath? No—all

witnesses appear to nod that they had no objection. If not, do you

have—you also have the right to be represented by counsel. Do any

of you have counsel here? And all the witnesses nodded that they

did not.

As I said before, we ask you these questions to put you at ease.

Please stand now and raise your right hand. Do you swear to tell

the truth and nothing but the truth? Each of the witnesses took the

oath.

We will now begin with President Newsome.

STATEMENT OF DR. CLARENCE G. NEWSOME, PRESIDENT,

SHAW UNIVERSITY

Dr. NEWSOME. Good afternoon, Mr. Chairman.

Chairman MILLER. Dr. Newsome, I think you need to turn your

microphone on.

Dr. NEWSOME. Okay. I will start again then. Good afternoon,

Chairman Miller and Members of the Subcommittee on Science and

Technology. I thank you for hosting this hearing to learn about

how historically black colleges and universities, HBCUs as we call

them, predominantly black institutions—PBIs—and other intended

273

beneficiaries of the Recovery and Reinvestment Act funds are

faring in accessing those dollars.

I am delighted to be here as the President of Shaw University,

a United Negro College Fund, UNCF, institution, and I am delighted to be here as a member of the Board of Directors of the National Association for Equal Opportunity in Higher Education,

NAFEO.

Shaw is the first, we claim, of the HBCUs to have been founded

in the South; two colleges, one school, ten departments, employ 120

faculty members to serve approximately 2,800 students by providing a variety of academic offerings that are geared towards today’s employment market.

With the initial phases of the work of Congress completed on the

Recovery Act, the legislation states that the goals of the Recovery

Act include, and I quote, ‘‘To provide investments needed to increase economic efficiency by spurring technological advances in

science and health.’’

The HBCU community, particularly through NAFEO, has at all

times suggested that one critical measure of success in achieving

this goal is the extent to which HBCUs and other under-resourced

institutions are able to access Recovery funds to make improvements to their infrastructures and enhance and expand research

capabilities.

With this in mind I would like to share with you some of the

challenges that Shaw University has experienced in seeking to access Recovery Act funds. While I refer to specific instances at

Shaw, I can assure you that other institutions around the Nation

like Shaw have had similar experiences in trying to access these

funds.

One of the largest challenges facing Shaw or any private institution in North Carolina is the lack of a mechanism for independent

institutions to receive funds through the Recovery Act. The State

of North Carolina thus far has limited funding to State institutions

and State agencies, leaving Shaw University and many others unable to receive even the slightest assistance from these funds.

Moreover, it is not clear at this point whether private and independent colleges will be able to participate in any meaningful way

in the stimulus funding that has been made available to the state.

In reaching out to federal institutions in order to seek assistance

from Recovery Act funding, Shaw has continuously been met with

uncertainty on the part of the agencies as to a process or procedure

to direct these monies to private institutions. In addition, many

agencies impose time constraints that make those funds all but inaccessible to such institutions.

One instance of this is the requirement that funds be spent within too narrow of a timeframe after receiving them, or even after applying for them. For many private institutions of higher learning

it is nearly impossible to get the three estimates on each portion

of the job as required by federal law, sign the contracts, and schedule construction or other work before the time limit has expired.

All of these challenges are made more difficult by the fact that

many of the institutions seeking these funds are not planning to

use them to begin a new program but to take a heretofore isolated

program and expand it to improve infrastructure and vastly imVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00053 Fmt 6601 Sfmt 6601 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
274

prove academic programs by institutionalizing them so they can be

studied more extensively and more inclusively than the current arrangement allows.

I want to share with you one example along that line, Mr. Chairman, at this point in order to stay within my timeframe. We have

a wonderful program going on in Bertie County, North Carolina,

with an experiment producing biodiesel fuel by way of growing

canola seed oil. I want to just flash a picture up here right quick

and show you how we are—this is the canola plant that is mostly

grown in Canada. We are paying farmers in Bertie County to grow

this plant, we are using the oil to produce biodiesel fuel. We are

even putting fuel in the Bertie County buses. There is the machine

that we are using. There is the bus. We are able to expand this

program—we will be able to expand this program significantly with

the help of some of these Recovery Act funds if they are made—

not only made available to the NSF, but made available to us by

way of a process that allows those funds to reach us.

I have some recommendations that I would like to share perhaps

upon the time that we come upon the question and answer session,

but at this point in time I would say thank you very much for giving me an opportunity to come and share with you.

[The prepared statement of Dr. Newsome follows:]

PREPARED STATEMENT OF CLARENCE G. NEWSOME

Good afternoon Chairman Miller, Ranking Member Sensenbrenner, and Members

of the Subcommittee on Science and Technology. I thank you for hosting this hearing to learn about how Historically Black Colleges and Universities (HBCUs), Predominantly Black Institutions (PBIs) and other intended beneficiaries of the Recovery and Reinvestment Act funds are faring in accessing those dollars targeted for

providing ‘‘investments needed to increase economic efficiency by spurring technological advances in sciences and health.’’

I am delighted to be here as the President of Shaw University, a United Negro

College Fund (UNCF) institution, and as a member of the Board of Directors of the

National Association for Equal Opportunity in Higher Education (NAFEO).

Background and Contextual Information

Shaw University is located in Raleigh, North Carolina, in the 2nd Congressional

District, represented by Congressman Bob Etheridge, and adjacent to the 13th Congressional District served by the distinguished Chairman of this subcommittee.

Shaw is the oldest and, I believe, the best private co-educational liberal arts historically black university in the South. Founded in 1865, by Missionary Henry Martin

Tupper, Shaw University is affiliated with the Baptist Church. Its former Leonard

School of Medicine was the first four-year medical school to train black doctors and

pharmacists in the South. Today, the primary mission of Shaw University is teaching with a commitment to maintaining excellence in research and academic programs that foster intellectual enhancement and technological skills. Two colleges,

one school, and ten departments employ 120 faculty members to serve approximately 2,800 students by providing a variety of academic offerings that are geared

toward today’s employment market.

The University offers thirty (30) undergraduate majors and is accredited by the

Commission on Colleges of the Southern Association of Colleges and Schools to

award the Associate, Bachelor’s and Master’s degrees. Three of its academic programs also have national accreditation. The Shaw Divinity School is one of only a

handful of divinity schools in the State of North Carolina to earn full accreditation

from the Association of Theological Schools (ATS) in the United States. The

kinesiotherapy program is accredited by the American Kinesiotherapy Association

and the teacher education program is accredited by the National Council for Accreditation of Teacher Education. The latter program is also approved by the North

Carolina Department of Public Instruction. The University’s science program attracts funding from major donors interested in increasing the number of minority

students in scientific research.

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1 Baskerville, Lezli, President & CEO, National Association for Equal Opportunity in Higher

Education (NAFEO) initially included these observations in Supreme Court briefs in The Regents of the University of California v. Allan Bakke (No. 76–811, October Term, 1976) and later

in United Steel Workers of America, AFL–CIO, Kaiser Aluminum & Chemical Corporation,

United States Equal Employment Opportunity Commission v. Brian Weber (Nos. 78–432, 78–435,

78–436, October Term 1978). They have been republished in several reports and publications

since then with the author’s permission.

In addition to its emphasis on teaching, Shaw University stresses character development, which includes religious, cultural, social, and ethical values.

Shaw University in one of the Nation’s 103 mission-based, equal educational opportunity institutions federally designated as Historically Black Colleges or Universities (HBCUs).

HBCUs, as a class of diverse institutions, were established in America in the mid1800s to welcome, nurture, and develop the progeny of the slave system. Unlike

nearly all other American colleges and universities, however, from their inception,

HBCUs have been open to students, faculty, and administrators of all races, colors,

creeds, ethnicities, religions and both genders, except in student bodies of institutions whose expressed mission was to provide education to exclusively males or females. HBCUs have, through the years, collectively offered academic and employment opportunities and attendant benefits and privileges to all without regard to

non-bona fide criteria or considerations, except where State law prohibited the

same. They have been and to this day, are menders and healers for wounded minds

and restless souls. They have produced, and continue to produce, sterling talent that

has benefited the Republic immeasurably, not only in material contribution, but also

in intellectual, cultural, moral, and spiritual offerings. These institutions have backgrounds of perpetual service to all people, with missions and goals of making educational opportunities a reality rather than an empty expectation.1 They are providing students with the intercultural, interpersonal, and political skills with which

to compete and thrive in a diverse yet still Balkanized world.

America’s black colleges and universities remain at the creative forefront of American education, offering the tools and skills necessary to prepare students to promote peace at home and abroad; secure our communities and our homeland; meet

pressing global and community health care needs; and fight injustice with the power

of ideas, and by closing the achievement gap and opening doors of opportunity to

those who are ill-served by many of the systems in our communities and the Nation.

They are continuing to do more for students with fewer resources than any other

higher education institutions.

Most HBCUs are the economic engines in their communities. According to a 2006

report by the National Center for Education Statistics, the short-term economic impact of HBCUs is $10 billion. Short-term economic impact was defined in that report

by the expenditures of the colleges and universities on salaries and other institutional expenditures, and the expenditures of undergraduate, graduate, and professional students attending the institution in the communities in which the institutions are located. This figure does not capture the vast other multipliers for out

years.

In testimony before the National Association for Equal Opportunity in Higher

Education, April 3, 2009, in Atlanta, Georgia, on ‘‘Ending the Cradle to Prison Pipeline, Establishing a Cradle to College and Career Pathway,’’ Lynn Huntley, Esquire,

President of the Southern Education Foundation (SEF), cited Department of Commerce data that also substantiate the major economic benefits provided by HBCUs

to the communities and states in which they are located. Huntley noted that the

economic impact of HBCUs ‘‘is evident not only in the job creation and community

investment terms, but in upgrading the skills, earning potential, and taxpaying capacities of their students.’’ Huntley cited a U.S. Department of Commerce study that

found ‘‘The total employment impact of . . . [101 HBCUs] included 180,142 total full

and part-time jobs . . .. To put that into perspective, the rolled-up employment impact of the Nation’s HBCUs exceeds the 177,000 jobs at the Bank of America in

2006, which is the Nation’s 23rd largest employer.’’

HBCUs foster innovation, economic growth and social mobility for disproportionate percentages of low-income and middle-income students, and they remain the

primary source of new knowledge that will fuel the Nation’s economic engine in the

future.

These richly diverse institutions, that are stimulating the economies in their service areas and producing excellent, diverse students in disproportionate numbers in

the teaching profession as well as in other high need disciplines and growth disciplines (health, the sciences, engineering, technology), are provided voice with pubVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00055 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
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lic and private policy-makers and policy shapers across the country by the National

Association for Equal Opportunity in Higher Education (NAFEO).

NAFEO is the 501(c)(3) not-for-profit, national membership association of the diverse class of institutions known as HBCUs and the new Predominantly Black Institutions (PBIs) added to the constellation of American colleges and universities by

the Higher Education Opportunity Act of 2008.

Founded in 1969, by a group of presidents of Historically Black Colleges and Universities, NAFEO is ‘‘the voice for blacks in higher education.’’ The association represents the presidents and chancellors of the Nation’s black colleges and universities: public, private and land-grant, two-year, four-year, graduate and professional,

historically and predominantly black colleges and universities in 35 states, the District of Columbia and the Virgin Islands, and the 500,000 students, 53,000 faculty

and five million alumni represented by NAFEO member institutions.

The 39 private black colleges and universities that belong to UNCF are members

of NAFEO, including Shaw University and Saint Augustine’s College, the other

HBCU located in Raleigh, North Carolina, as well as Bennett College, Johnson C.

Smith University, and Livingstone College, the other accredited private HBCUs located in North Carolina. Elizabeth City State University, Fayetteville State University, North Carolina A&T State University, and Winston Salem State University,

North Carolina’s public HBCUs, are among the 47 public colleges and universities

that belong to the Thurgood Marshall College Fund, and are also NAFEO member

institutions. The NAFEO membership also includes the 18 HBCU land-grant universities, black two-year institution that belong to the American Association of Community Colleges and other equal educational opportunity institutions that belong to

the new class of Predominantly Black Institutions (PBIs).

NAFEO was founded to provide an international voice for the Nation’s HBCUs;

to place and maintain the issue of equal opportunity in higher education on the national agenda; to advocate policies, programs and practices designed to preserve and

enhance HBCUs; and to increase the active participation of blacks at every level in

the formulation and implementation of policies and programs in American higher

education.

HBCU Championship of Inclusion of Higher Education Institutions in Recovery Act

Having established the reason and context for my appearance before you today,

I thank you Chairman Miller and Members of this Oversight and Investigations

Committee for holding this important hearing. Your examination of how different

groups are faring in accessing and using Recovery Act funds at this juncture is especially important because it gives Congress time before all of the Recovery Act funds

are disbursed, to make recommendations for any adjustments that may be suggested by what you learn from these hearings and your other investigative and oversight work.

Shaw University and NAFEO were pleased to be among the early champions of

the inclusion of America’s colleges and universities in the American Recovery and

Reinvestment Act. Speaking before four Presidential Transition Team work groups

on behalf of HBCUs and PBIs, NAFEO President Lezli Baskerville talked about the

immediate research and infrastructure needs of disproportionate numbers of HBCUs

and PBIs that reported deferred maintenance needs in the billions of dollars, and

that had large numbers of shovel-ready infrastructure projects, campus greening

and sustainability projects. NAFEO proposed the establishment of a higher education infrastructure initiative to support campus infrastructure projects that would

provide jobs immediately, strengthen the academic capacity of colleges and universities, and stimulate the economy of the service areas of the colleges and universities.

In making the case to Members of Congress and the Presidential Transition Team

for the proposed HBCU infrastructure grant program, and for additional research

dollars, NAFEO made a clear and compelling nexus between the strengthening of

HBCUs and stimulating the economy. Among other things, we cited findings from

NAFEO’s signature publications, The State of America’s Black Colleges: Expanding

Access, Ensuring Success, Promoting Global Competitiveness (Beckham Publications

Group, 2008) and The State of Blacks in Higher Education (Beckham Publications

Group, 2009)—copies of which have been provided to every Member of this committee. These publications respectively describe the strengths, accomplishments,

challenges and promise of HBCUs, and make a compelling economic case for additional investments in HBCUs. They document the tremendous progress that blacks

have made in attaining college degrees, disproportionate percentages of whom receive degrees in high need and growth fields from HBCUs. The State of Blacks in

Higher Education notes, for example, that HBCUs lead the Nation in awarding deVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00056 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
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grees in the sciences, technology, engineering, and mathematics (STEM): From

1996–2005, HBCUs accounted for seven of the top ten institutions awarding life and

medical science degrees to black women and nine of the top ten institutions warding

life and medical science degrees to black men. In 2006, 18 percent of all black

Ph.D.s in the life sciences received their Bachelor’s degrees from HBCUs. We argued

additionally that given that HBCUs compose roughly three percent of all institutions, they are doing a disproportionate share of the work in preparing black students for positions and research in the sciences. They must be afforded an adequate

level of public funding to shore up their laboratories, other facilities, and their infrastructures to enable them to continue their great work and keep pace with increasing demands.

The fact that an increasing number of students in the traditional age group of

18–24 years old seek to finish a degree or to learn new skills when the economy

stumbles; because an increasing number of persons in the workforce are expected

to return to colleges and universities to retool during these austere times, and large

numbers of Veterans will be returning to the civilian workforce and look to our colleges and universities to assist in transferring military skills to the civilian labor

force as well as learning new skills; and because the cost of a private HBCU is

$10,000 less than its traditionally white counterpart on average, according to The

College Board’s ‘‘Cost of College’’ report, enrollments are likely to surge at HBCUs

in the coming months. Our institutions must be prepared.

For all of the above reasons, NAFEO appealed to Congress as it was acting to

shore up our economy and stimulate future prosperity and productivity, to include

America’s colleges and universities in the plan, especially HBCUs, PBIs, and other

Minority-Serving Institutions (MSIs).

We appealed for support for TRIO and GEAR UP programs—pipeline and retention programs for many of our students. We urged an increase in the Pell maximum,

a refundable education tax credit, to assist students during this economic downturn,

and an increase in work-study dollars. Along with the Hispanic Association of Colleges and Universities (HACU), we appealed for support for the Minority-Serving Institutions Digital and Wireless Technology Opportunity Act of 2008, enacted by the

110th Congress in the Higher Education Opportunity Act.

Recognizing the importance of science and research to promoting short- and longterm economic growth, we urged support for increased funding for science and technology programs targeted at HBCUs, MSIs, low-income, first generation, traditionally under-served students, including the Course, Curriculum, and Laboratory Improvement (CCLI) Program at the National Science Foundation, and an NSF instrumentation acquisition focused on education in the STEM areas, and other targeted

stimulus programs.

We worked indefatigably to include a separate line item for educational infrastructure and within that provision, for an infrastructure program for HBCUs that

would provide funding to be distributed within 90-days to public and private, twoyear and four-year, non-profit institutions of higher education to support ‘‘shovel

ready’’ projects to modernize, renovate, repair or construct academic and research

facilities and student housing; and for campus greening and sustainability projects.

We additionally sought funding for the HBCU Historic Preservation program, administered by the Department of Interior, and for the suspension of the matching

funds requirement for that program. We submitted to Members of Congress and the

Administration documentation that the HBCU community has hundreds of millions

of dollars of infrastructure, greening, and historic preservation projects ready to go,

‘‘but for’’ the funding.

The HBCU Community also sought funding in the stimulus bill for loan subsidies

for the HBCU Capital Financing Program (Title III, Part D of the Higher Education

Act) that would allow the Secretary of Education and the Secretary of the Treasury

to guarantee an additional $61 million in loans, including those in the pipeline for

FY 2009.

As with all education and legislative processes, the American Recovery and Reinvestment Act, as passed, included some of the priorities of the HBCU and PBI communities and not others. We were pleased to get HBCU ‘‘Recovery Act’’ Preservation

Grants that included the suspension of the funding matching requirement; a $500

increase in the Pell Grant maximum; funds for higher education institution modernization, renovation, repair of facilities used for instruction, research, student

housing, for both public and private college facilities (the letter in the State Fiscal

Stabilization Funds for Government Services in DOEd). We were also pleased to

have included in the Recovery Act funds for a number of new or enhanced targeted

health, math, science, engineering, and teacher preparation programs.

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HBCU Skepticism About the Award of Recovery Funds Through States

NAFEO underscored that including HBCUs and PBIs in the American Recovery

and Reinvestment Act could assist HBCUs and MSIs to become equipped to play a

central and vital role in stimulating the economy, putting our nation on the path

to economic prosperity and returning it to global eminence. We admonished, however, that many in the HBCU community were concerned that if the Recovery Act

funds were administered by the states, HBCUs and other institutions and communities of least advantage, that have historically been ill- or under-served by their

states, might not fare well in accessing the Recovery dollars. We argued:

‘‘. . . that the higher education programs not be funded through the states.

HBCUs and other institutions and programs serving disproportionately large

percentages of low income, first generation, traditionally under-served populations historically and to this day have not fared well in receiving a fair share

of public dollars distributed through the sovereign states. In the context of the

economic stimulus bill, grants to the states for the benefit of HBCU/MSIs are

unnecessary and they introduce a level of bureaucratic decision-making that is

unlikely to serve the best interests of our institutions. Existing federal programs can be used to provide funds to HBCUs and to MSIs. We urge you to

adopt this approach in your bill. HACU shares our view that this would be in

the best interest of the HBCU and MSI communities . . ..’’

With funding in the final bill provided through the states, and with no separate

line item for educational infrastructures, (although stabilization funds could be used

for higher education infrastructure needs), we worked to assist in shaping the report

language, procedures and regulations for accessing the Recovery funds that would

flow through the states. We urged specifying that in distributing funds the governor

shall allocate all funds between public and private higher education institutions,

giving priority to those institutions that educate disproportionate percentages of

low-income, first generation, traditionally under-served students; those which the

have the smallest endowments; and those located in geographic areas of highest distress.

HBCU Challenges and Successes Accessing Recovery Act Resources

With the initial phases of the work of Congress completed on the Recovery Act,

the legislation stated that the goals of the Recovery Act as passed include, ‘‘. . . to

provide investments needed to increase economic efficiency by spurring technological

advances in science and health.’’ The HBCU Community has at all times suggested

that one critical measure of success in achieving this goal is the extent to which

HBCUs, MSIs, and other under-resourced institutions that are preparing disproportionate percentages of the growing populations in the labor force are able to access

Recovery funds, to make improvements to their infrastructures and enhance and expand research capabilities.

With this in mind, I would now like to share with you some of the challenges that

Shaw University has experienced in seeking to access Recovery Act funds. While I

will refer to specific instances at Shaw University, I can assure you that private institutions, HBCUs, MSIs, and PBIs around the Nation have had similar experiences

in trying to access these funds.

One of the largest challenges facing Shaw, or any private institution in North

Carolina, is the lack of a mechanism for independent institutions to receive funds

through the Recovery Act. The State of North Carolina, thus far, has limited funding to State institutions and State agencies, leaving Shaw University and many others unable to receive even the slightest assistance from these funds. Moreover, it

is not clear at this point whether private and independent colleges will be able to

participate in any meaningful way in the Stimulus Funding that has been made

available to the state.

In reaching out to federal institutions in order to seek assistance from Recovery

Act funding, Shaw has continuously been met with uncertainty on the part of the

agencies as to a process or procedure to direct these monies to private institutions.

In addition, many agencies impose time constraints that make those funds all but

inaccessible to such institutions.

One instance of this is the requirement that funds be spent within a certain

amount of time after receiving them, or even after applying for them. For many private institutions of higher learning it is nearly impossible to get the three estimates

on each portion of the job as required by federal law, sign the contracts, and schedule construction or other work before the time limit has expired.

All of these challenges are made more frustrating by the fact that many of the

institutions seeking these funds are not planning to use them to begin a new proVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00058 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
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gram, but to take a heretofore isolated program and expand it to improve infrastructure, and vastly improve academic programs by institutionalizing them so they can

be studied more extensively and more inclusively than the current arrangement allows.

For instance, Shaw University has a history of success in developing programs

through federal grants. In particular, Shaw University has pioneered in the research of photovoltaic/solar energy and in the production of biodiesel fuel. Our work

in the area of photovoltaic/solar energy has been funded by a Department of Defense

contract, which was awarded to the University to develop third-generation photo

cells for military drones. This contract, however, allows only enough funds to complete the specific project, and not enough to integrate ongoing study or future development into our science curriculum.

Additional funds would allow Shaw to take these findings and developments and

create a solar energy infrastructure on its main campus that would all but nullify

the need for external power sources. This would save the institution a great deal

of money and possibly generate revenue by selling excess energy to the local power

companies. Just as importantly, it would provide instructional opportunities for students throughout our math and sciences programs to help design, implement, monitor, and study a working solar plant of a significant size.

Obviously, with the growth of Green Energy technology throughout the Nation

and the world, this educational experience would afford our students a remarkable

head start on a new career, and set the stage for powerful advancements in the field

in the years to come.

Another example is the University’s biodiesel project funded by the National

Science Foundation. This program has received over 2.5 million dollars in NSF funding not tied to the Recovery Act. It is beginning to produce results that could revolutionize the energy industry and the farming industry, while helping to economically

revitalize Bertie County.

Currently, farmers in Bertie County, a county that has been economically depressed for generations, are being paid out of the grant to grow canola plants. These

plants can be used to manufacture canola oil, a healthy cooking oil. Currently, 90

percent of all canola oil consumed in the United States is imported from Canada.

Even more importantly for this nation’s environmental, economic, and energy production future, these crops have been converted into a biodiesel fuel that is currently being used to power cars and, quite cost-effectively, some Bertie County

school buses. This fuel could one day power a large energy production plant. In fact,

it is Shaw University’s intention to expand this program in order to create the first

zero-waste power plant in the State of North Carolina.

This means that farmers who had formerly been totally dependent, for example,

on tobacco, cotton, and peanut farming in order to make a scant living, can possibly

grow a new cash crop, and play an important role in energy production.

But the program does not end there. This project has also begun to look into the

use of biowaste for energy purposes, and is reaching out to many of the same farmers, as well as expanding to involve other farmers in the Roanoke/Chowan region

of the state, to identify possible waste streams and begin to look at new ways to

use these materials for energy production.

For example, chicken waste is a known carcinogen and an environmental hazard.

Our project is researching ways to convert 95 percent of this material for energy

production, thus all-but-negating the cancer risk, and vastly reducing its adverse environmental impact.

This program is exactly the type of program the Federal Government appears interested in funding, and it has had successes well worth the investment made by

the government. Recovery Act funds, if accessible to Shaw University, would allow

us to expand the program. We could involve more farmers, create more renewable

energy, and make new strides in developing biowaste applications. In addition, we

could partner with the agricultural high school in the county to improve their access

to the project for study, enable more Shaw students to have hands on experiences,

and improve the distance education facilities of our satellite campus in Bertie County.

In addition, our Institute for Health, Social, and Community Research could connect to the biodiesel fuel project in order to study the health challenges and needs

of minority and impoverished farm communities. This research could help to identify and address some of their particular concerns. In addition to addressing the

need for better diagnosis, treatment, and care of diseases such as hypertension, diabetes, etc., the IHSCR could also explore the unique health needs of the farming

community, such as the one in Bertie County, including possible environmental factors that could be creating health issues.

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Many institutions are not asking to start programs, but merely to expand and institutionalize them. Without access to these, or other similar, funds, these projects

could grow, blossom, and then run the very serious risk of dying on the vine.

Other institutions in the HBCU community have experienced similar challenges

to accessing the Recovery Act funds. In the few days since we received the invitation

to appear and testify this afternoon, we learned from NAFEO members that, because of the 90-day expenditure requirement, in order to learn about the funding

opportunities and respond in a timely manner, institutions have had to reassign

staff members so that one person monitors multiple web sites several times, weekly.

For many member institutions, including Shaw, the economic downturn has forced

layoffs of many staff, meaning that there is no one to track down funding opportunities, so these resources prove to be unavailable to them.

Because of the tremendous needs and breadth and scope of disciplines spanning

many federal and State agencies, staff with a clear understanding of the mission

and priorities of the colleges and universities, and ideally with expertise in institutional advancement and government relations must monitor their State web site

and multiple web sites of federal agencies. They report that the State stimulus accountability web sites and www.Recovery.gov web site are helpful. Our members

have found very useful the regional briefings provided by NAFEO, UNCF, TMCF,

and the White House Initiative on HBCUs, none of which would have been effective

without close collaboration with front-line administrators in a wide range of federal

agencies and their regional colleagues.

Our members report challenges in communicating with the states because, in

many instances, there is only web site access or access to information through the

respective congressional districts, all of which are overwhelmed by the volume of activity in the abbreviated timeframe. Without sufficient staff persons to assign a fullor even majority-time staff member to the function of reviewing information on the

various web sites and culling from the information sufficient details to make a recommendation as to whether their institution is eligible to participate and if the solicitation is aligned with the priorities of the institution, several NAFEO members

reported missing funding opportunities. Our members are relying on our membership services associations to augment the work of our staffs in tracking and reviewing Recovery Act opportunities. These include not only NAFEO, UNCF, and TMCF,

but also CIC, NAICU, NASULGC, and ACC, each of which was reported as being

helpful by one or more NAFEO members. Several noted that their congressional offices and the web sites and newsletters of their Members are helpful.

Some members who are able to track and identify opportunities online or through

other channels in time to make use of them reported other barriers to participation,

including the short turnaround time between the posting of the opportunity and the

required submission of the proposal. A common concern was the lack of adequate

time to prepare competitive submissions. Those colleges and universities in which

the personnel in the Office of Sponsored Programs ‘‘wear several other hats,’’ as is

true in most HBCUs, are at a particular disadvantage in this accelerated information dissemination/gathering and grant-making process.

The gravest concerns appear to be related to the processes by which some states

are notifying constituent institutions about the opportunities. Many report that the

traditional notification and publication requirements appear to have been dispensed

with or abbreviated in an effort to move resources rapidly. This truncated process

could only be equitable in this economic crisis if there were a concurrent affirmative

outreach and notification requirement to those communities and institutions in targeted stimulus communities, including communities of highest distress and institutions that serve disproportionate percentages of people from distressed districts.

We received a report from the State of Arkansas that one NAFEO member institution was included in the state’s plan because a member of the board happened

to be in the governor’s mansion at the time the finishing touches were being added

to the plan. Another, which has fared especially well in recent years in strengthening the institution and its service area and garnering both public and private resources, was not aware of the time or process for decision-making. In Mississippi,

one institution was incorrectly informed that as a private institution, it did not

qualify for any State Recovery funds. The Department of Education’s web site clearly indicates that under the State Fiscal Stabilization Funds for Government Services provision, modernization, renovation and repair funds are available for both

public and private college facilities.

One university that has adequate staff to be positioned well in this process, and

which prepared 25 submissions for funds under the Recovery Act, has made no

headway at the federal or State level, despite being vigilant, and maintaining continuous connections via telephone, e-mail, and pounding the pavement.

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One of the large, two-year public college systems reported faring well in accessing Recovery dollars. They received $1.5 million for a seven-week summer program to

train WEA certified, inner city youth ages 19–24 years old, for jobs the city needs

to fill immediately. While training, the students will work on the campuses in positions not covered by union agreement. The students will earn between $9 and $12

dollars per hour. This system was also included in the Community Development

Dislocated Worker plan. Even in this instance, concern was raised about the level

of bureaucracy as a barrier to securing the grant. The institution had to seek inclusion at the State level, in the city plan, and in the plan of the workforce board to

ultimately access the resources.

In the two days provided us to gather information from our members for this

hearing, we received no reports about efforts to access NSF funds. We anticipate

forthcoming reports that we will forward to the Subcommittee. The National Science

Foundation (NSF) has a long history of making limited awards of research, facilities

and program dollars to HBCUs. For example, according to data from NSF, six of

the top 20 predominantly white universities received more federal funds for research than 79 HBCUs combined. (Richard J. Bennof, ‘‘FY 2005 Federal S&E Obligations Reach Over 2,400 Academic and Nonprofit Institutions; Data Presented on

Minority-Serving Institutions,’’ National Science Foundation NSF 07–326 (revised),

Directorate for Social, Behavioral, and Economic Sciences, October 2007).

The NSF report shows that despite a clear and quantifiable record of success at

educating African American scientists and engineers, HBCUs continue to receive

disproportionately fewer federal dollars. The data show that among public four-year

colleges, 31.1 percent of black students are majoring in engineering or science compared to 25.9 percent at non-MSIs. At private not-for-profit four-year colleges, 27

percent of black students at HBCUs major in engineering and science compared to

20.8 percent at non-minority-serving institutions. (William E. Spriggs, ‘‘Major

Trends Facing Historically Black Colleges and Universities’’ in The State of America’s Black Colleges (NAFEO, 2008. Beckham Publications Group, p. 2). The data

also demonstrate that roughly 50 percent of black students who receive a four-year

degree in the natural and physical sciences, do so from an HBCU. The State of

Blacks in Higher Education (NAFEO 2009, Beckham Publications Group, p. vii).

We are eager, therefore, to determine how HBCUs fared at accessing NSF funds

for research grants. While we had no member reports at the time we submitted this

testimony, NAFEO was disappointed to learn from a review of the NSF web site

that while NSF will receive an additional $2 billion for Research and Related Activities, the Foundation plans to primarily fund proposals that are already in house.

‘‘[T]he Foundation does not anticipate a substantial increase in proposal submissions or requests to review proposals beyond what has already been put in place

for FY 2009.’’

Relative funding priorities, the NSF notes on its web site, ‘‘Funding of new Principal Investigators and high-risk, high-return research will be top priorities. With

the exception of the Academic Research Infrastructure Program, the Science Masters Program, and the Major Research Instrumentation Program, the majority of

proposals eligible for Recovery Act funding include those that are already in-house

and will be reviewed and/or awarded prior to September 30, 2009. NSF also will

consider proposals declined on or after October 1, 2008.’’ We hope that in spite of

these public pronouncements, NSF will use some share of its additional funding to

expand opportunities and funding to institutions like HBCUs, that can serve as incubators for research on eliminating all of the major disparities in this nation in

order to restore it national eminence. These institutions have also developed models

of excellence in health and wellness, greening and sustainability, teacher preparation, and in so many other fields that are central to stimulating our economy and

strengthening our communities.

We urge and encourage NSF to set aside some of its Recovery funds for science

instruction instrumentation purposes at HBCUs. This proposal was advanced by

Congresswoman Eddie Bernice Johnson as an amendments to the American Recovery and Revitalization Act of 2009. It would have been inestimably helpful to

HBCUs, many of which are not major research institutions, but which, nonetheless,

prepare disproportionate numbers of African American students to pursue advanced

and terminal degrees in the sciences, technology, engineering and mathematics.

These funds would permit HBCUs to purchase sorely needed science instrumentation for instruction, not research.

We eagerly await the results of the solicitations under the NSF Math and Science

Partnership Program. NSF Targeted Partnerships seek to improve student achievement in math or the sciences. Its Institute Partnerships seek to meet the national

needs for ‘‘teachers who have deep knowledge if disciplinary content and are schoolbased intellectual leaders in mathematics and science.’’ Given the record of HBCUs

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in preparing disproportionate numbers of diverse students in math and the sciences,

and its record of graduating 50 percent of African American teachers, we anticipate

that our members will fare well in this competition.

NSF funds are especially important to HBCUs to assist them to continue to attract, retain, adequately train, and graduate highly talented students in the growth

and high need disciplines.

HBCUs also have special interests and capabilities in securing their communities

and our Homeland; greening their campuses and communities; championing resource management and conservation; promoting energy conservation, energy efficiency and renewable energy and the range of issues relating to the sustainability

of our campuses, communities and our planet. We would like to be a good and longterm partner with the Federal Government, the states and our service communities

in these regards. We have the will and many of our institutions are today poised

to lead in some of these efforts. We need adequate resources.

Recommendations

To provide HBCUs a better opportunity of accessing the Recovery Act dollars they

need to make the investments in their infrastructures and research capabilities, and

to better position these equal educational opportunity institutions that are serving

disproportionate percentages of the growing populations of the states to better meet

the education, training, economic, research, civic, social, ecumenical, health and

human services needs of the communities in which they are located, we propose the

following:

1. Because large numbers of HBCUs and MSIs may not be able to participate

fully in playing their important role in stimulating the economy and preparing the next cohort of scientists, teachers, health professionals, engineers

and others using the State funding processes, we recommend requiring federal agencies to set aside funding for the Nation’s historically black colleges

and universities and other minority-serving institutions and provide Recovery funds for these institutions and their constituents directly to eligible institutions via programs already authorized by Congress to benefit these institutions and the communities they serve;

2. Require federal agencies to encourage and reward states that establish a

goal of including HBCUs, MSIs and other institutions of higher learning that

educate disproportionate percentages of low-income, first generation, traditionally under-served students, and students that are under-represented in

high need and growth industries in the states and the Nation in their Recovery activity;

3. Because the federal agencies over which this committee has jurisdiction

(NSF, the Department of Energy, Environmental Protection Agency, NASA,

Homeland Security, Federal Aviation Administration, Federal Emergency

Management Agency, and National Oceanic and Atmospheric Administration) are central to the scientific and technological advancement of this nation, and because some of the agencies have an especially poor record of supporting HBCUs and MSIs, require these agencies establish goals and take

affirmative outreach actions to include HBCUs, PBIs, HSIs, TCUs and other

MSIs among grantees, contractors, and partners for the important stimulus

and recovery work, and the long-term work of these agencies.

The above are just a few recommendations. We welcome the opportunity to continue dialogue with Members of this committee and your committee staffers about

other ideas and ways in which we can be of assistance to you.

Mr. Chairman and Members of this subcommittee, I thank you once again for

hosting this important hearing and for inviting me to participate. I hope that my

comments today, and my written testimony, provide you a snapshot of some of the

challenges incurred and opportunities created for Shaw University and other

HBCUs as the result of passage of the American Recovery and Reinvestment Act.

I hope that I was also able to put in clearer perspective for some Members of the

Committee and to underscore for others the vitally important role of HBCUs in

shoring up the economy, stimulating future prosperity and productivity, returning

the Nation to eminence and achieving the national goal of having 60 percent of

Americans hold a two- or four-year degree by 2020.

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BIOGRAPHY FOR CLARENCE G. NEWSOME

Dr. Clarence G. Newsome, 13th President of Shaw University, blazed trails

throughout his life. Born in Ahoskie, NC, Dr. Newsome went to Duke University

on a football scholarship, being named to the Dean’s list, and becoming one of the

first Black football players honored by being named to the Atlantic Coast Conference All-Academic team.

He also became the first Black commencement speaker at Duke University,

speaking at his graduation ceremonies, and sharing the stage with retired newscaster Walter Cronkite. In addition to his undergraduate degree, he received his

Master of Divinity (magna cum laude) and Doctor of Philosophy degrees from Duke

University. He interrupted his theological school studies for a year to serve as Acting Dean of the Office of Black Affairs (later Minority Affairs) and Director of the

University’s Summer Transitional Program.

For eight years, Dr. Newsome served on the Duke Divinity School faculty, teaching in the areas of American Christianity and Black Church History. He left Duke

University to take a position at the Howard University School of Divinity, being

named the Dean there in 1992. While Dean, he guided the School through two accreditations, began an international program with South Korean Seminaries, and

increased fundraising by over 100 percent during his tenure.

In 2003, Dr. Newsome was named Shaw University’s 13th President. While at

Shaw University, he has initiated a partnership program with three universities in

China; overseen the construction and opening of the Shaw University Center for

Childhood Education, Development, and Research and the Institute for Health, Social, and Community Research; and has increased fundraising significantly—including the acquisition of a five million dollar gift from The Christy and John Mack

Foundation—the largest Shaw has ever received from a foundation.

Dr. Newsome serves on the Board of Trustees at Duke University, and his name

was read into the Congressional Record as being one of the top religious educators

in the United States. He also serves on the North Carolina State Ethics Commission.

Dr. Newsome is married to the former Lynne Platt of Charlotte, and is the proud

father of Gina Lynn, a psychiatrist, and Brittany Ann, a filmmaker; and the very

proud grandfather of Kendellyn Marie.

Chairman MILLER. Thank you, Dr. Newsome. I should say that

part of the history of Shaw University is that Shaw University was

where the Student Non-Violence Coordinating Committee was

founded in 1960, by among others our colleague, John Lewis——

Dr. NEWSOME. That is right.

Chairman MILLER.—shortly after the Greensboro sit-ins that

were led by students at A&T, North Carolina A&T.

Dr. Bass.

STATEMENT OF DR. GARY D. BASS, FOUNDER AND EXECUTIVE

DIRECTOR, OMB WATCH

Dr. BASS. Thank you, Mr. Chairman, Mr. Bilbray. After hearing

the witnesses so far today I think—from an OMB Watch perspective I think it is safe to say that a remarkable job has been done

so far in the two and a half months since the law has been signed

into action, but it is not all we want, and I think that is what we

are hearing today.

The transparency is a high priority, but it is not the end game.

Transparency is simply a tool to get us to the accountability that

we have been talking about today.

In that context I want to summarize the written testimony by

raising five challenges we have.

The first challenge is who reports. If we don’t get sub-recipient

reporting, if we don’t get down to the lowest level or the smallest

denominator, we will not achieve true accountability.

The second question is related to the testimony we just heard,

how is the money to be obtained and allocated. We have grants.gov,

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we have fedbizopps.gov, we have State web sites, but it is not clear

how groups can actually apply and get that money. So—and there

is a great fear. This law was designed around both recovery and

reinvestment, that one of the objectives is to ensure equity, and so

we have to make sure that the money is reaching those areas

where it was intended to go.

The third question is what is going to be reported? We have

heard a fair amount about how data is going to come in. I want

to talk about three kinds of data. A lot of emphasis has been put

on the jobs data, which we need not only greater definition of jobs

as was mentioned by the previous panel, but I think we need related information, including what are the wages being paid, what

kinds of benefits, what are the demographics of the people getting

the jobs?

Beyond the jobs comes performance data. I think all of us will

be greatly interested in knowing precisely whether or not we are

actually achieving the objectives of what the Recovery Act really is.

This model, this new model that we are talking about in recovery,

presents a whole new opportunity, not just simply to find out who

is getting how much money, but we can now start talking about

has it been—is the money being used properly, and we can talk

about that in terms of performance.

The third kind of data that we need is going to be the request

for proposals and the actual contracts that were used. Now, OMB

has put out guidance saying they are going to have summaries of

contracts from the Federal Government, but as we all know the

bulk of the money right now is the formula money going out to the

states. There is nothing that is going to require clarity about ensuring competitive award systems or that those contracts are going to

be disclosed in any way for the public to see.

So who reports, how is the money allocated, what is being reported? The fourth one is—where is it going to be reported? We

need to have a centralized system where all of the sub-recipients

and recipients report. Not only do we need a centralized system,

but we are going to have to have—make sure it is apples to apples

in comparison. That means we are going to have to have the right

kind of language for standardizing the content as well as the mechanical, the machine-readable format of this. We are going to have

to have something that makes it accessible to everyone.

That—there are many models for this. There is something, extensible mark-up language is one example. There is a variant on XML

called XBRL. We can go into all kinds of technical language, but

the point is we need these standards if we are going to be able to

compare from state to state or even within states or within program areas.

And that leads me to the final challenge and question, and that

is, how will the public get access to any of this? And it seems to

me it is more than just an issue of what kind of web site Recovery.gov is going to be or what colors or what search or what zip

code you can put in. It seems to me that we have got to create the

structure that has not only people access, but machine-to-machine

readable access. If we do this right, if we do it right, the data that

comes into the centralized reporting should be available not only to

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states, to Congress, to agencies, but to all of us on this panel and

beyond this panel in terms of the public.

We can do the value added as well as the government can do.

So we have to create a new kind of democratic system with newer

technologies to achieve meaningful public access.

Let me just conclude by saying that the frame on Recovery Act

right now is about waste, fraud, and abuse, and we need to have

that frame. That is essential. There is a lot of money going out the

door. The hope and the opportunity of all of this debate, if we get

this right, if we get it right now and we build the longer-term beyond Recovery Act to talk about all federal spending down the

road, is to create a new kind of dialogue, a new kind of opportunity

for sharing information to improve the quality of programs that the

government is funding. Instead of always the ‘‘gotcha’’ politics, we

should be starting to talk about how we can make communities

better and really do what the Act called for, which is reinvesting

in our country.

Thank you.

[The prepared statement of Dr. Bass follows:]

PREPARED STATEMENT OF GARY D. BASS

Chairman Miller, Ranking Member Broun, Members of the Subcommittee:

My name is Gary Bass and I am the Executive Director of OMB Watch—an independent, nonpartisan watchdog organization. Thank you for inviting me to testify

today on what we all can agree is a crucial cause—making our government the most

effective and responsive it can absolutely be through transparency and accountability of Recovery Act spending.

OMB Watch was founded in the early 1980s and has spent over twenty-five years

advocating for government accountability, transparency and access to government

information, and citizen participation in governmental processes. OMB Watch believes citizens must take an active role in holding their government accountable,

and Recovery Act transparency will do much to enable this.

Our development of FedSpending.org, a web site that provides access to information about most of the Federal Government’s spending, demonstrated how the web

can be used for greater accountability. We also co-chair with Good Jobs First the

Coalition for An Accountable Recovery (CAR) that calls for greater transparency and

accountability with regard to federal recovery efforts. In other words, we have both

policy and practical experience with disclosure of federal spending information.

OMB Watch does not receive any government funding and, therefore, would not be

financially affected by actions taken with regards to improved transparency and accountability of the Recovery Act.

President Obama has been emphatic that he wants Recovery Act expenditures to

be transparent and accountable. While transparency is laudable for its own sake,

it should not be forgotten that transparency is a means to an end; it makes accountability possible. And it is accountability, after all, that makes government spending

more effective and efficient.

The challenge in creating such a system for the implementation of the Recovery

Act is to make a simple structure by which recipients of stimulus funds answerable

to taxpayers. To create such a system, those recipients must be able to enumerate

what services or goods they provided to the Nation, the state, and the local communities in which they work while explaining the degree of success of the projects they

undertook. The government has the obligation to taxpayers to ensure that recipients

are efficient in the delivery of the services or goods they were trusted to deliver.

Without a system that creates incentives that aligns the goals of the Recovery Act

with those of who receive funds to implement it, it is quite likely this effort will

fall short. And without knowing what every recipient is doing with the funds that

they receive, it is impossible to find instances of waste, fraud, and abuse. Nor is

it possible to discover those recipients that are exceptional stewards of the Nation’s

resources and deserve recognition for their work and additional opportunities to

serve their country.

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It may be necessary to place criminal and civil penalties in place to reduce waste,

fraud, and abuse. The Recovery Act does not specify any such penalties beyond

those existing prior to the enactment of the Act. Conversely, it is worth considering

ways of rewarding the most efficient entities receiving Recovery Act funds, either

through public praise or monetary bonuses in order to encourage good behavior.

This is all easier said than done. The concept of transparency in Recovery Act

spending is rather easy to articulate but quite difficult to implement. In order to

ensure that Recovery Act spending is fully transparent, the government and the

public should not only have access to data about who is getting money and what

they are doing with it, but also be able to easily access and understand that information. I believe there are three essential elements of spending transparency necessary for the Recovery Act:

1) Information about Who Receives Recovery Act Funds

Americans have a right to know how and where public dollars are being spent.

Reporting and oversight are necessary to ensure the honest and ethical use of public

funds. Without sufficient transparency, pay-to-play scandals and corruption are endemic to large, federal expenditures. Additionally, understanding which communities, companies, and individuals are supported by Recovery Act funds is a basic

fairness issue. Without it, some communities or sectors could be systematically excluded from support, while well-connected entities may get special deals. Proper

transparency mechanisms for tracking spending will help mitigate this.

2) Information about Effectiveness of Recovery Act Spending

Only by carefully tracking expenditures will public officials be able to judge the

effectiveness of public investments and be able to fine-tune or shift spending to

achieve maximum results. As with all federal spending, decisions on whether to

fund similar programs, contractors, or grantees in the future should be informed by

the effectiveness of their performance during the Recovery Act implementation.

3) Accessible, Understandable, and Usable data on Recovery Act Spending

Information flows from agencies to OMB should take place though publicly visible

channels. Recipient data transmission that is hidden from public view raises concerns about the timeliness and information fidelity of recipient reports. Aggregated

data, for example, obscures the fine-grain details of spending data that enable assessments by program advocates, government watchdogs, and the press. Data made

available through machine-readable feeds represent an ideal way to accomplish this.

Through feeds, the public can obtain important disclosures directly from the source,

mitigating distrust that may emerge from more filtered data.

Implementation of the Recovery Act to Date

OMB Watch has been intently monitoring the implementation of the Act and is

very encouraged by what we have seen so far. But as of today, the Federal Government’s efforts to make Recovery Act spending fully transparent and accountable still

have a long way to go.

This is not to say the task is easy or there hasn’t been significant progress. The

task which the Administration has undertaken—the tracking of hundreds of billions

of dollars that are being rapidly disbursed to thousands of recipients—is unprecedented and enormous. The Administration has made great strides within a very

short time frame and is already making some data available to the public. While

Recovery.gov and the recipient reporting requirements that will drive what data are

available remain less than ideal, I am cautiously optimistic that the system will continue to substantially improve.

The willingness of the Administration to solicit feedback from the public on its

designs has been very helpful in improving Recovery.gov and I am hopeful that they

will continue to implement the advice and recommendations of the Coalition for an

Accountable Recovery (CAR). The CAR coalition is co-chaired by OMB Watch and

Good Jobs First and is comprised of some 30 politically diverse organizations. It was

founded on the eve of passage of the Recovery Act to design and advocate for a Recovery Act spending tracking system that will provide the unprecedented level of

transparency and accountability in federal spending as articulated by President

Obama. As a coalition we have communicated to the Obama Administration our

ideas and have commented on guidance issued by OMB. Indeed, we are encouraged

by more recent interim guidance from OMB to the federal agencies issued on April

3 that we believe incorporated some of CAR’s recommendations.

Despite an open dialogue and receptive officials within the Obama Administration, there are still major obstacles to full transparency and accountability in the

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1OMB memo M–09–10.

2FormulaBlockGrants Allocation—April 14, 2009.

3OMB memo M–09–15.

current rules for Recovery.gov and recipient reporting. These obstacles fall into six

main areas: Multi-Tier Reporting; Direct Recipient Reporting and Registration; Solicitations (RFPs), Bids, and Contracts; Jobs Data; Performance Data; and Data Access.

Multi-Tier Reporting

The first major obstacle is the Act’s (and OMB’s) definition of ‘‘recipient.’’ This is

critical because it is recipients that are required to report on their use of and Recovery Act funds. Both the Recovery Act and OMB consider a recipient to be ‘‘any entity that receives Recovery Act funds directly from the Federal Government (including

Recovery Act funds received through grant, loan, or contract) other than an individual and includes a State that receives Recovery Act funds.’’ 1 While the current

reporting requirements apply to prime non-federal awardees only, they also require

that prime recipients report on any sub-awards (i.e., sub-grants, subcontracts, etc.)

they make. These requirements are problematic for two reasons:

First, Recovery Act funding remains visible only to the first tier of sub-awards.

For large projects, it is likely that there will be several tiers of sub-awarding. For

example, the Department of Energy has allocated $132 million to North Carolina

for its Weatherization Assistance for Low-Income Persons program.2 If North Carolina hires a contractor to implement the program, information reported by that contractor would be made available by the Department of Energy through Recovery.gov

according to current reporting requirements. However, if North Carolina gives some

of those funds to Raleigh, and Raleigh hires a contractor to implement the program,

then we would not, under current reporting requirements, be able to see which contractor was hired nor would we be able to see how well it executed the program.

Limiting reporting requirements to only the first two layers will obscure basic information—such as to whom the money went and on how that entity employed it—

on billions of dollars of Recovery Act spending.

Second, sub-awardees do not themselves report on their use of the funds. The

prime recipient has responsibility to report on any sub-awards made, hiding from

the public much of the details on Recovery Act activities by State hired contractors.

So, in this example, North Carolina would report to the Department of Energy on

its use of funds, and it would report that it sub-awarded the funds to Raleigh. The

Department of Energy would then submit a report to OMB. So not only can we not

see what happened to the funds after they were sub-granted to Raleigh, we have

access only to the Department of Energy’s report—not Raleigh’s nor North Carolina’s. Although spending and performance information (such as jobs data) may be

included in State government reports, performance information of those contractors

will not be available to the public, nor will any information on Recovery Act funds

that were used to hire subcontractors.

There is reason for optimism however. In its April 3 interim guidance (M–09–15),

OMB stated that it intends to eventually ‘‘expand the reporting model in the future

to also obtain . . . information [on awardees beyond first-level awards], once the

system capabilities and processes have been established.’’ 3 OMB Watch is eager to

see the details of such a model and we are withholding judgment until then. But

it is essential that all recipients of Recovery Act funds—possibly with a de minimis

level of, say, $25,000 that allows some exclusion—report directly to the Federal Government.

Direct Recipient Reporting and Registration

Another chief area of concern with Recovery Act transparency related to the definition of ‘‘recipient’’ is the means by which recipients report on the use of their

funds. Data from prime recipients are reported directly to the federal agency that

disbursed the funds, with the disbursing agency making that information available

on Recovery.gov. Not only would the public not be able to directly view these recipient reports, recipients of Recovery Act funds that are sub-awardees (e.g., subcontractors and sub-grantees) would not be required to report on the use of their

funds. The use of tens of billions of Recovery Act dollars by thousands (perhaps tens

of thousands) of Recovery Act funds recipients would be hidden from public scrutiny.

Direct reporting by recipients, rather than reporting back up through the chain

of funding, will eliminate the possibility that data will be manipulated or delayed

by agencies or companies higher in the chain. There will still be some level of

‘‘cleansing’’ of data necessary to identify and correct errors or to standardize names

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4 Ibid.

5 Ibid.

6OMB memo M–09–10.

of companies and State agencies (e.g., to standardize ‘‘Dept. of Transportation’’ vs.

‘‘Department of Transportation’’). But when data are ‘‘cleaned,’’ the raw reported

data should also be preserved and made available. A system that collects spending

and program performance data directly from all recipients ensures the raw data are

actually raw and not manipulated before the Federal Government receives it.

Again, the April 3 OMB interim guidance shows the government is moving in the

right direction in this respect. OMB states that it is ‘‘moving aggressively’’ to develop a central collection system for recipient reports.4 Agencies are to instruct recipients to begin submitting recipient reports (those specified in Sec. 1512 of the Recovery Act) on Oct. 10 of this year, and that they ‘‘should assume the central system

capability will be online and available no less than 45 days before the October 10,

2009 statutory quarterly reporting deadline.’’ 5 However, the guidance remains unclear about which recipients will report what data. By requiring first-hand reporting

directly from recipients, the data will likely be more accurate, comprehensive, and

timely.

In order to facilitate accurate reporting directly from all recipients, the government should require all recipients (this includes all sub-recipients) of Recovery Act

funds to register with OMB’s proposed central reporting system prior to receipt of

Recovery Act awards. The April 3 OMB interim guidance would require first-tier

sub-grantees to register with Central Contracting Registration (CCR) system but exclude first-tier subcontractors of prime contractors from this requirement. This bifurcated registration requirement would significantly hinder OMB’s efforts to centrally collection information on all sub-awardees. By excluding subcontractors and

additional tiers of sub-awardees from CCR registration, potentially thousands of recipients of Recovery Act funds would not be identified as such. If OMB expanded

its definition of ‘‘recipient’’ to include all tiers of sub-awardees and required all recipients to register with CCR, OMB Watch would strongly support this area of

OMB’s interim guidance for the Recovery Act implementation.

For a centralized registry and centralized reporting system to work there must

be standardized formats in how data are reported. There are various standards,

such as eXtensible Markup Language (XML), for transport and storage of data. One

type of XML schema is eXtensible Business Reporting Language (XBRL), which

gives each data element its own identity tag, thereby creating a taxonomy that is

easily readable by computer data processors. If done correctly, data can easily move

from registry to reporting systems, from federal agencies to State agencies, or to any

public source. The data is also easier to compare and analyze.

Solicitations (RFPs), Bids, and Contracts

While transparency in the use of Recovery Act funds is essential, the decisionmaking process by which those funds are awarded must also be transparent. Because billions of dollars of federal Recovery Act funds will be awarded through State

and local governments, solicitations for contracts at the State level should be advertised as widely as possible to ensure that a large pool of potential bidders are aware

of such projects. Without access to requests for proposals (RFPs), bids, and all of

the language of attendant awarded contracts, it will be difficult for outside stakeholders to assess the performance of any contractor using Recovery Act funds.

The first step to enabling transparency in the Recovery Act contract award process is to require that State and local governments report to the Federal Government

as quickly as possible any Recovery Act project RFPs they may be offering. The next

step is to make available online all bids received for all Recovery Act RFPs. If this

presents a confidentiality problem, it would be reasonable to adhere to the guidelines surrounding disclosures of bids as articulated in the Strengthening Transparency and Accountability in Federal Spending Act of 2008 (S. 3077) as introduced

in the 110th Congress by then Sen. Barack Obama.

Lastly, but most importantly, current Recovery Act law and OMB guidance6 requires agencies to post to the agency web site and to Recovery.gov summaries of contracts or orders (or modifications to an existing contracts or orders) over $500,000,

or any contract was not fixed-priced and competitively awarded. There are two problems with this requirement.

First, contract summaries will not offer the quality of data that will enable the

public to assess whether a given contractor did, in fact, faithfully carry out its fiduciary duties. Nor will the public be privy to assessing whether the awarded contract

adheres closely to the RFP under which it was granted. This is critical to developing

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7 Ibid.

true accountability in the Recovery Act contracting process. Access to all contract

agreement language is an essential element to any effort to oversee governmental

spending. While some will argue information contained within contracts can contains confidential business information, allowing for limited redactions in contracts

can help to alleviate those concerns.

The second problem with existing contract posting requirements is that the contract reporting threshold is too high. There could be thousands of contracts below

$500,000 that would escape public scrutiny and congressional oversight. Substantially lowering that threshold, say to $200,000, would allow the public to see much

more information on how Recovery Act funds are distributed without creating an

overly burdensome reporting requirement.

Jobs Data

Congress crafted and President Obama supported the Recovery Act as a means

to stimulate the economy with the express purpose of creating or saving millions

of jobs. To ascertain the effectiveness of the package, Congress appropriately built

into it a requirement that funding recipients and federal agencies report the number

of jobs created or saved by Recovery Act projects. While this provision is certainly

welcome, the law and OMB guidance could be substantially improved in two respects: The method of counting the number of jobs created or saved and the type

of data collected on those jobs.

Current employment data will be collected by federal agencies from prime recipients only. Prime recipients are responsible for ‘‘reporting on their use of funds as

well as any sub-awards (i.e., sub-grants, subcontracts, etc.) they make.’’ 7 In cases

in which a federal agency gives money to a state, the state would be required to

report employment data on each project that it has undertaken with those Recovery

Act funds. Aggregation of employment data by prime recipients will hinder transparency and accountability by obscuring the performance and results of individual

organizations that receive Recovery Act funds at the end of the funding chain.

OMB interim guidance states that recipients are to report a brief description and

an estimate of the jobs created or retained. Job creation and retention figures are

to be based on aggregate hours worked converted into a figure for full-time-equivalent (FTE) positions. Yet it leaves it up to each recipient to determine how many

hours equal a FTE, which will lead to substantial inconsistencies across all job data

that is reported. It would be advisable to require recipients to report the aggregate

hours figure as well as the FTEs, so that analysts and watchdogs can make valid

comparisons.

While it is encouraging that the procedures for employment reporting include the

collection of data on the types of jobs created (‘‘job titles or broader labor categories’’), it is disappointing that the guidance does not also provide for gathering

information on the quality of those jobs, especially wage levels and availability of

health coverage. Without such information, it will not be possible to safeguard

against the use of Recovery Act funds in the creation of substandard jobs. To assess

of the quality of jobs created by the Recovery Act, OMB Watch believes the OMB

should require employers should report: type of work; wage levels; health care coverage; and demographic characteristics of Recovery Act project workers.

Performance Data

In addition to the collection of the number of jobs saved and created as called for

in the Recovery Act and OMB interim guidance, there are a host of data that need

to be collected to allow the government and the public to discover how well or how

poorly Recovery Act programs are being implemented. Information on who receives

funds needs to be combined with information about what those recipients did with

the money. For example: How many homes were weatherized by the Energy Department’s Weatherization Assistance program? How many acres of marine habitat were

restored under NOAA’s Habitat Restoration project? What new research did NSF

undertake? How many and which NIST facilities were repaired?

Such information could be used to demonstrate the accomplishments of government funding just as easily as it could be used to draw scrutiny to waste, fraud and

abuse. This performance data also could be used as a valuable data set to help improve the quality and effectiveness of federal programs. Those involved in the delivery of government services seem to draw public attention only for failures. Yet a

good monitoring system doesn’t just give out grades, it also uses interim goals and

benchmarks so that self-correction and improvement can be undertaken. Moreover,

as federal funds move farther from the Federal Government through sub-awards,

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8 Ibid.

the Federal Government has less and less control. This type of monitoring system

mitigates against this loss of control by creating new opportunities for dialogue and

openness.

OMB Recovery Act interim guidance requires that agencies submit specific plans

for each Recovery Act program. One of the elements required in this plans is ‘‘expected quantifiable outcomes consistent with the intent and requirements of the legislation.’’ 8 The guidance also notes that the terms and conditions that are to accompany Recovery Act grant awards leaves ‘‘significant discretion to federal agencies’’

on how and what performance data awardees must report as part of their quarterly

recipient reports.

This flexibility is a necessary provision to allow for collection of agency- and program-specific performance data, but OMB needs to ensure that all federal agencies

will obtain sufficient data necessary to measure the impact of Recovery Act projects.

While flexibility and discretion with respect to measuring each agency’s programs

is desirable, OMB should immediately engage federal agencies to quickly devise

their Recovery Act performance data requirements to ensure that sufficient, relevant, and comparable data are collected from the beginning. OMB should also require federal agencies to seek public input on the performance data to be collected.

While providing the flexibility already mentioned, OMB should also issue guidance

to the agencies on core principles, such as equity, to incorporate in the data to be

collected.

While a comprehensive list of such data has yet to be compiled, the CAR coalition

has developed some examples of what performance benchmarks should include:

For general State funds:

• Total general fund expenditures, and expenditures specifically in elementary

and secondary education (K–12), higher education, Medicaid/SCHIP, human

services, transportation, corrections, and other areas;

• Per-pupil State K–12 expenditures as well as distribution by school districts;

• Changes in Medicaid eligibility and services with 2008 as a baseline.

For transportation projects:

• Net number of new lane miles, if any, generated by projects;

• New transit capacity should be tracked via new service mileage for fixed

guideways and expanded fleet capacity for all transit modes (in comparison

to replacement fleet purchases);

• Reporting on whether funds have been ‘‘flexed’’ over to other programs such

as public transit, inter-city rail, or pedestrian improvements as allowed by

law.

For school construction projects:

• The name of the school district (including school) or college/university, along

with the code assigned from the Common Core of Data, which is the Department of Education’s primary database on public elementary and secondary

education in the United States;

• Expected life of improvement;

• Whether matching funds were involved, how much, and source of the matching funds.

OMB should also be clear that the requirements for performance data collection

will follow Recovery Act funds so that any level of sub-awardee must collect the performance data specified by the agency for the project.

Access to Data

Even if the law was changed today to collect the information as described above,

these data would remain essentially useless unless they were made available in

such a way that the public could not only understand but also manipulate the data.

In terms of helping the public understand Recovery Act data, Recovery.gov will have

to present the collected data in a way that novice and experienced can access and

make sense of it. At the most basic level, a user should be able to search the data

on Recovery.gov for Recovery Act projects located in her state, zip code, city, or congressional district. She should be able to sort the data from largest expenditure to

smallest; from most jobs created to least; by entities receiving money, and by which

federal agency authorized each project. These are just a few examples of the kind

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of elementary searching and sorting functionality Recovery.gov should provide, but

does not currently have. There are knowledgeable and talented people working on

Recovery.gov right now, who no doubt see the value in these tools, but I cannot emphasize enough that it is this basic database functionality that will provide the sort

of transparency envisioned by Congress and President Obama.

Analysis and presentation of the data should not be the sole province of the Federal Government, however. There are many outside organizations that could make

use of Recovery.gov data for many purposes—some as yet unimagined. To accomplish this, these groups must have access to Recovery Act data in a machine-readable format, such as through a data feed like RSS (Real Simple Syndicate) or Atom.

These feeds should not be an option, but a requirement for every source of information (e.g., the central registry, the central reporting system, agency web sites).

OMB Watch’s database of federal spending, FedSpending.org, is a perfect example

of the importance of making data available in an understandable and accessible format. Before the creation of FedSpending.org, data on trillions of dollars in Federal

Government spending were nominally accessible to the public, but the presentation,

search, and sorting tools were abysmal, rendering the data difficult to understand

and virtually useless to the public. However, because these government data sets

were public, we were able to download the data and build a user-friendly, easilysearchable web site that opened up the data for millions of people. Since its launch

in October, 2006, FedSpending.org has attracted well over a hundred thousand

unique visitors a month, processed over ten million searches, and has been cited

hundreds of times in media reports. With the increased attention and scrutiny of

the Recovery Act spending, there are many more organizations—large and small,

for- and nonprofit—that would no doubt invent novel ways to add value to Recovery

Act spending data and work to make it more accessible to the public. This will only

work if the data are made available in the proper, ‘‘machine-readable’’ formats.

It is also essential that Recovery Act data be transmitted in such a way so as to

maximize access to as much unfiltered data as possible. Reporting data should be

available as close to the source of Recovery Act reporting as possible. Additionally,

OMB Watch’s experience with federal contract and grant data throughout the

FedSpending.org project has taught us there is certainly a need for some data

‘‘cleaning,’’ such as standardizing the name of funding recipients or ensuring address and zip code fields match on individual entries. Ideally, a ‘‘cleansed’’ data set

would be available in addition to the ‘‘raw’’ data.

These feeds do not negate the importance of a robust Recovery.gov web site as

many in the public will want an easy to use, searchable web site run by the government.

Recovery Act Transparency and the States

So far I have discussed elements of Recovery Act transparency that are in the domain of the Federal Government. However, State governments are already beginning to allocate hundreds of billions of dollars of federal funds for Recovery Act

projects. States will also add their own money to Recovery Act projects, the details

of which will not be reported on Recovery.gov. Many citizens, local media, and local

government watchdogs, therefore, will look to State Recovery Act web sites to learn

about their state’s implementation of the Recovery Act. My own review of State Recovery Act web sites has revealed a substantially uneven landscape.

As people query their state’s web site to find out how to receive Recovery Act

funds, how the funds will be allocated, who has received them already, and what

did they do with them, Americans will find that there is not a single State web site

that can provide the answer to all these basic questions of spending transparency.

For example, the Maryland and Washington State Recovery web sites have interactive maps showing county-by-county breakdowns of Recovery Act funding by category (health care, infrastructure, education, etc.). Yet one can’t perform a simple

search such as typing in a ZIP code to find a list of all Recovery Act projects within

a given neighborhood.

Washington State’s web site has information describing the kinds of grants that

are available to the state. It also has a useful list of programs that are providing

funding for State projects, but is thin on details about how to apply for funds. Rhode

Island’s site has only a detailed list of proposed Recovery Act projects per agency,

in PDF format, with no aggregate data, like the county-by-county summaries that

appear on Maryland’s site. When looking at State Recovery web sites last week in

preparation for this testimony, Virginia’s web site was experiencing technical errors.

And while we have yet to see the quality of spending data that may be available

on these sites, our experience so far indicates that it will vary as much as the quality of information today. It is here that the Federal Government should take the

lead and offer not only funds to assist states in enabling Recovery Act transparency,

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but it should also provide technical assistance and advice, including minimal functional requirements that must be achieved.

Another problem is its unclear how concerns about waste, fraud, and abuse on

State and local projects should be reported. While there are established hotlines for

waste, fraud, and abuse at the federal level, the same is not immediately apparent

for State and local governments. There is a lot of potential for abuse, especially at

the local level, and since these are federal funds that could be wasted, the Federal

Government should establish a clear reporting system for waste, fraud, and abuse

allegations for State and local Recovery Act projects.

Current Effort Is Unprecedented, But More Is Still Needed

It is clear what the Obama Administration is trying to accomplish with Recovery

Act transparency is unprecedented for our Federal Government. This is not to say

that the level of transparency as articulated by President Obama can never be

achieved. Implementing that degree of visibility will be an iterative process in which

the reporting model and collected data improve over time—and should extend well

beyond the Recovery Act to all future government spending. As the Recovery Accountability and Transparency Board implementing team learns more and more

about the challenges they face, better and better versions of Recovery.gov—and the

data reporting structure that supports the web site—will emerge. OMB Watch continues to be guardedly optimistic about the efforts of the Obama Administration to

promote transparency and accountability in Recovery Act spending. But there is still

much work to be done. The attention this committee is directing at Recovery Act

transparency in this hearing is a critical step on the path to a better accountability

system for Federal Government spending.

BIOGRAPHY FOR GARY D. BASS

Gary D. Bass is the founder and Executive Director of OMB Watch, a nonprofit

research and advocacy organization established in 1983 that promotes greater government accountability and transparency and increased citizen participation in public policy decisions.

An expert on federal budgetary, program management, regulatory and information policy issues, Dr. Bass has published extensively, testified before Congress, appeared on national television and presented to groups across the country. A specific

area of expertise is his understanding of the apparatus of government, particularly

the executive branch of the Federal Government. Dr. Bass has also been selected

as one of the NonProfit Times Power and Influence Top 50 every year since 1999.

In 2008, he received the Public Access To Government Information Award from the

American Association of Law Libraries.

Dr. Bass is a strong advocate for strengthening government transparency and

using newer technologies to empower citizens and community groups to challenge

unchecked institutional power. In 2006, he successfully championed passage of a law

that required the government to create a searchable web site providing information

about government spending. At the same time, OMB Watch launched

www.FedSpending.org, which has proven invaluable to journalists, public interest

organizations and citizens looking for information on more than $16.8 trillion in government spending—and serves as a model for how the government should implement its requirements to create a searchable web site. Data from FedSpending.org

has been cited in news stories nationwide, and Dr. Bass was selected as one of the

Federal 100—the top executives from government, industry, and academia who had

the greatest impact on the government information systems community—for his

work on FedSpending.org in 2007. And back in 1989, Dr. Bass created

www.RTKNET.org, (the Right-to-Know Network), a free online service that provides

the public access to government environmental data, including the Toxics Release

Inventory.

With the rapid increase in government secrecy following September 11, 2001, Dr.

Bass has spoken out against the erosion of the public’s right to know. He helped

form a powerful coalition, www.OpenTheGovernment.org, that includes journalists

and advocates who are pursuing more democracy and less secrecy. Honoring his role

in protecting public access to government information, the Freedom Forum inducted

him into the National Freedom of Information Act Hall of Fame in 2006.

In addition to his role at OMB Watch, Dr. Bass is an affiliated Associate Professor

at Georgetown University’s Public Policy Institute and also teaches in the Nonprofit

Management Executive Certificate program at Georgetown’s Center for Public and

Nonprofit Leadership. Prior to founding OMB Watch, Dr. Bass was President of the

Human Services Information Center. He also served as Director of Liaison for the

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International Year of Disabled Persons; worked as a consultant on several projects

in special education and the mental health of children and youth; and served as special assistant to Wilbur Cohen, then Chairman of the Michigan Governor’s Task

Force on the Investigation and Prevention of Abuse in Residential Institutions.

Dr. Bass received a combined doctorate in psychology and education from the University of Michigan, along with the University’s highest award for graduate student

teaching and several awards for academic excellence.

Chairman MILLER. Thank you, Dr. Bass.

Dr. Ellig.

STATEMENT OF DR. JERRY ELLIG, SENIOR RESEARCH

FELLOW, MERCATUS CENTER, GEORGE MASON UNIVERSITY

Dr. ELLIG. Thank you, Chairman Miller, Mr. Bilbray. I am delighted to be here this afternoon. I want to thank you for the invitation.

My name is Jerry Ellig. I am a Senior Research Fellow at the

Mercatus Center at George Mason University, and the reason I responded so quickly to the invitation to testify here is because for

more than a decade I have been involved with colleagues at the

Mercatus Center in various projects to try to encourage the development, the adoption, and the use of performance measurement

and performance information by the Federal Government.

Our biggest project just today, in fact, we released the results of

our 10th annual performance report scorecard, which examines the

quality of the performance reports that federal agencies produce

under the Government Performance and Results Act. We have been

doing this for 10 years. I can tell you we have seen a lot of improvement in the quality of reports that are produced, a lot of improvement in the quality of the performance information that agencies are producing. We have seen some evidence in some other research that agencies that produce better performance reports under

GPRA are also more likely to have more managers say they actually have and use performance information in their programs.

Our third goal, though, was to try to encourage folks in Congress

to make use of performance information for oversight and for appropriations, and quite frankly, we have seen less evidence of that

in past Congresses, and for that reason we are delighted that this

subcommittee is taking an interest in Recovery Act accountability

because we think this is a great opportunity to match up performance information with spending information.

I would like to make three points this afternoon. First off, the

Obama Administration in its guidance to agencies has said that

agencies’ Government Performance and Results Act measures and

goals should be used to account for the results of Recovery Act

spending. I think this is a great idea, and you are not going to get

the word but followed by a contradictory statement from me on

that, either. I sincerely believe it is a great idea. If I had written

the guidance, I would have said the same thing.

I have a couple of suggestions that would, I think, make this

even more effective. One would be that agencies in some way, either by OMB guidance or prodding from their oversight committees, ought to be urged to report performance information along

with the spending information so that the public, the media, other

folks can find out, you know, what they are getting in exchange for

the spending.

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1This testimony reflects only the views of the author and does not represent an official position of George Mason University. I would like to thank Stefanie Haeffele-Balch and Christina

Forsberg for research assistance.

The other point that I think would help improve the way this

would work is if agencies were explicitly required to do some rigorous program evaluation in order to control for other factors that

affect outcomes so that we know how much of the reported outcome

really was caused by the program spending and how much of the

outcome really was caused by the additional spending that occurred

as a result of the Recovery Act. Sort of basic application of the scientific method. Great thing for a subcommittee of the Science and

Technology Committee to be looking into.

Again, if the Administration doesn’t require agencies to do that,

it would be great to have Congressional oversight committees asking for the same type of information from agencies and making it

public.

Second point. Although I think it is a great idea for agencies to

use their GPRA goals and measures to account for Recovery Act results, some of the goals and measures still need to be improved. I

mentioned earlier that we released our 10th annual performance

report scorecard this morning. We compared the results in that

scorecard with Recovery Act appropriations in Division A of the Recovery Act. We found that only about 14 percent of the appropriations are going to agencies that got very good scores on our performance report scorecard and about a third of the appropriations

are going to agencies that got below satisfactory scores.

So this suggests that there is still a lot of room to improve the

GPRA measures and the GPRA goals before we have the—we fulfill

the promise of full transparency and accountability for the Recovery Act spending.

Finally, just a word on measuring the other thing that people are

interested in out of the Recovery Act, in addition to the program

outcomes, which is creation of jobs and the employment effects. I

just want to emphasize that in order to understand the Recovery

Act’s effects on employment, what we need is macro-economic analysis that takes into account the effect of the spending as well as

the effect of the borrowing and that the numbers that are reported

in a database as jobs created or preserved by the Recovery Act are

only giving us part of the picture, which is the number of people

hired or that weren’t fired because of the Recovery Act spending.

We need to net that against the employment effects of the borrowing in order to figure out the actual effect of the Recovery Act

on employment. So to figure that out, keep your eye on the macroeconomic analysis rather than the numbers reported in the database.

And this is where I will stop.

[The prepared statement of Dr. Ellig follows:]

PREPARED STATEMENT OF JERRY ELLIG

Mr. Chairman and Members of the Committee:

Thank you for the opportunity to testify today on Recovery Act oversight.

I am a research fellow with the Mercatus Center, a 501(c)(3) research, educational, and outreach organization affiliated with George Mason University.1 Along

with several colleagues at the Mercatus Center’s Government Accountability Project,

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2GPRA Sec. 1115. Emphasis added.

3The Mercatus Performance Report Scorecard is available at www.mercatus.org/scorecard 4Maurice McTigue, Henry Wray, and Jerry Ellig, 10th Annual Performance Report Scorecard:

Which Federal Agencies Best Inform the Public? (Arlington, VA: Mercatus Center at George

Mason University, 2009), pp. 12–13, www.mercatus.org/scorecard 5 Jerry Ellig, ‘‘Has GPRA Increased the Availability and Use of Performance Information?,’’

Mercatus Center Working Paper No. 09–03 (March 2009). http://www.mercatus.org/

PublicationDetails.aspx?id=26478

I have spent more than a decade working to encourage the development, adoption,

and use of outcome-based performance measures in federal agencies.

Reliable performance measurement requires application of the scientific method

to control for various factors that affect desired outcomes. Only by controlling for

other variables can we determine how much of an observed result was actually

caused by a federal program or a change in federal spending. Consequently, it is

especially gratifying to see the Oversight and Investigations Subcommittee of the

House Science and Technology Committee taking such a strong interest in Recovery

Act oversight.

Outcome-oriented performance measurement isn’t just a good idea; it’s the law.

The Government Performance and Results Act of 1993 (GPRA) requires federal agencies to produce strategic plans with performance measures, annual performance

plans with performance goals, and annual performance reports that measure

progress toward those goals. Measures are supposed to track the agencies’ ‘‘outputs,

service levels and outcomes.’’ 2

Just this morning, we released the results of the Mercatus Center’s tenth annual

Performance Report Scorecard, which evaluates the transparency and quality of disclosure in agencies’ annual GPRA performance reports.3 The Scorecard evaluates

the GPRA reports produced by the 24 agencies covered by the Chief Financial Officers’ Act, according to 12 criteria derived from GPRA. Our evaluation produces a

ranking, and some of the agencies at the top have become quite competitive over

the past ten years. (Individual agency scores and rankings are available at

www.mercatus.org/scorecard.) But we did not produce the Scorecard just because

people like to read about rankings. Our work on government accountability seeks

to:

1. Prompt federal agencies to improve the quality of information they provide

about outcomes—the tangible benefits they produce for the public.

2. Promote the use of this performance information in federal agency decisionmaking.

3. Encourage Congress to use GPRA performance information for oversight and

budgeting.

There is ample evidence that the quality of performance information produced by

federal agencies has improved a great deal. Based on the change our Scorecard has

documented during the past decade, we estimate that the quality of federal agencies’

GPRA reports has improved, on average, by at least 75 percent.4

Similarly, there is evidence that GPRA has encouraged federal agencies to use

performance information. After controlling for other factors, agencies with higher

Scorecard scores have higher percentages of managers who say they have outcome,

output, or efficiency measures for their programs when surveyed by the Government

Accountability Office (GAO). Agencies with higher Scorecard scores also have higher

percentages of managers who say that they use performance information to manage

their programs and activities.5

Unfortunately, there is less evidence that previous Congresses used GPRA performance information for oversight and budgeting purposes. For this reason, we welcome this subcommittee’s focus on using performance data for Recovery Act oversight.

I would like to make three points in my testimony today:

1. The use of GPRA goals and measures to account for results of the Recovery

Act, as the Administration plans to do, is highly desirable. This increases the

odds that taxpayers will get the maximum possible value for their dollars.

The current approach would be improved if all agencies were explicitly required to (1) report outcome information for each program alongside cost information and (2) identify the amount of change in program outcomes caused

by Recovery Act funding, either by devising measures that isolate the effects

of the additional spending or conducting program evaluations that control for

other factors that might affect outcomes.

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6Peter R. Orszag, Memorandum for the Heads of Departments and Agencies, Updated Implementing Guidance for the American Recovery and Reinvestment Act of 2009 (April 3, 2009), p.

18: ‘‘To the extent possible, Recovery Act goals should be expressed in the same terms as programs’ goals in departmental Government Performance Results Act strategic plans.’’ 7Orszag memo, p. 78.

8Orszag memo, p. 18.

9Orszag memo, p. 22.

10Orszag memo, p. 19. 11 Harry P. Hatry, Performance Measurement: Getting Results (Washington, DC: Urban Institute, 1999), p. 15. Emphasis added. 12Office of Management and Budget, ‘‘What Constitutes Strong Evidence of a Program’s Effectiveness?’’ http://www.whitehouse.gov/omb/part/2004¥program¥eval.pdf

2. Despite the substantial progress we have seen in GPRA reporting, many

agencies’ GPRA goals and measures still need substantial improvement if

citizens are to receive a full, fair, and accurate accounting of what their Recovery Act dollars accomplish. Only 14 percent of Recovery Act appropriations went to agencies whose reports received a ‘‘very good’’ score on the

Mercatus Center’s Performance Report Scorecard for fiscal 2008. Congress

can play a significant role in improving agencies’ GPRA goals and measures

by actually using GPRA performance information for oversight of both Recovery Act spending and all other federal spending. This would increase the incentive for agencies to produce and use good information, and it would reallocate scarce resources towards more effective programs.

3. Estimating the Recovery Act’s effects on employment requires serious macroeconomic analysis that takes into account both the immediate and obvious

employment effects of the spending and the not so obvious employment effects of the borrowing. Macroeconomic analysis of the Recovery Act’s net effect on employment plays the same role that program evaluation plays in determining how much of the observed outcome was actually caused by a federal program. Calculating the net effect is important because some people

may just switch jobs toward one created by federal spending. For this reason,

it would be extremely inaccurate to portray only the employment created by

the spending as the full effect of the Recovery Act on employment.

1. GPRA goals and measures are desirable for Recovery Act oversight

Office of Management and Budget (OMB) Director Peter Orszag’s April 3 memo

on Recovery Act implementation directs agencies to use their GPRA goals and measures for Recovery Act planning and reporting to the maximum extent possible.6

Agency Recovery Act implementation plans must identify outcomes and outputs.

Agencies are to report the program’s targets for each measure with and without the

Recovery Act funding, along with the difference—the incremental change in performance expected to result from the Recovery Act funding.7 They must also ‘‘specify

the length of the period between measurements (e.g., monthly, quarterly), the measurement methodology, and how the results will be made readily accessible to the

public.’’ 8

OMB also expects agencies to collect performance information from entities who

receive funding: ‘‘To the extent possible, agencies should instruct recipients to collect

and report performance information as part of their quarterly submissions that is

consistent with the agency’s program performance measures.’’ 9 Finally, the agency

must explain its ‘‘plans to organize program cost and performance information available at applicable recipient levels.’’ 10

This focus on linking Recovery Act expenditures with GPRA goals and measures

is crucial to ensuring that taxpayers receive full value for their dollars. In particular, GPRA requires agencies to establish goals for outcomes. Outcomes are the

actual benefits created, or harms avoided, for citizens. ‘‘Outcomes are not what the

program did but the consequences of what the program did.’’ 11 Outcome measurement is necessary if congressional and agency decisions are to be based on actual

evidence of the effects of Recovery Act spending.

Full transparency requires accurate disclosure to the public of outcomes actually

achieved. The most informative outcome indicators isolate the government agency’s

direct effect on the outcome from other causes and indicate how much of the change

in the outcome was due to the government’s action.

When such an indicator cannot be constructed, it is still often possible to measure

outcomes and then assess the effects of government actions through comparisons of

‘‘treatment’’ and ‘‘control’’ groups, field trials, or statistical analysis that attempts

to separate the effects of various factors.12 This is the role of program evaluation.

A program evaluation is defined as ‘‘an assessment, through objective measurement

and systematic analysis, of the manner and extent to which federal programs

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13 31 U.S.C. § 1115(f)(2).

achieve intended objectives.’’ 13 Under GPRA, agency strategic plans must identify

program evaluations used to reevaluate goals and objectives and set forth a schedule

of program evaluations. The agency’s annual performance report must summarize

the results of program evaluations concluded in that fiscal year.

A simple example illustrates why program evaluation is essential for true accountability. Suppose the Department of Transportation quickly uses Recovery Act

money for road and bridge repairs that are completed in time for the summer driving season, and then we observe that there are fewer accidents on the roads during

the ensuing summer months. It’s plausible that the repairs contributed to the reduction in accidents, because previous DOT research finds that accidents are indeed

correlated with the condition of roads. But we cannot simply assume that Recovery

Act road projects caused all of the observed improvement in safety. Perhaps there

were fewer cars on the road due to the recession, or maybe mild weather helped

reduce accidents. Or maybe lower gas prices led to a big surge in summer driving

compared to last year, so that the change in accidents between the previous year

and the current year actually understates the improvement in safety caused by the

road repairs. Accurate measurement of the effects of the spending requires a comparison of the actual observed results to a baseline—the results that would likely

have occurred in the absence of the spending.

If we do not control for other factors that affect outcomes, we will not really know

whether the Recovery Act projects caused the outcomes, or how much of the outcome

they caused. Reported data on outcomes could either overstate or understate the effects of the Recovery Act on program outcomes. This insight is, of course, nothing

more than Scientific Method 101—control for other factors that could affect the observed results. But it sometimes gets ignored when agencies report performance

data and then presume the agency’s actions are the only thing that caused the

progress captured by the performance measures.

Mirroring GPRA, the OMB Recovery Act memo requires agencies to use GPRA’s

outcome goals and measures wherever possible, disclose results to the public, and

explain plans for program evaluation. These are all positive steps that will promote

accountability for results.

I can think of two possible improvements that would further promote accountability and transparency.

First, the OMB memo appears to leave agencies with the responsibility of deciding

how they will inform the public about the GPRA outcomes produced by Recovery

Act spending. One highly useful format would clearly juxtapose expenditures with

results. There are several ways to accomplish this. One would be to require agencies

to report outcome data alongside the expenditure data to be posted on Recovery.gov;

spending and results would then be available from the same database. Another option would be to require agencies to report annually on how Recovery Act funding

affected each outcome in their annual performance reports required under GPRA.

If the Administration, or individual agencies, decline to report on Recovery Act outcomes in a way that is linked to costs, then oversight committees could of course

request that information from the agencies under their jurisdiction and make that

information public.

Second, although the OMB memo mentions program evaluation, it does not underscore the central role program evaluation plays in determining how much of the

change in an observed outcome was actually caused by a federal program rather

than other causes. Agencies are required to explain their plans for program evaluation of Recovery Act spending, but they are not explicitly required to do program

evaluation. More reliable estimates of the effects of Recovery Act funding would be

available if agencies were required to perform program evaluations—perhaps for

any program for which Recovery Act spending exceeds some defined threshold.

Again, if the Administration does not require agencies to do this and they do not

choose to do soon their own, requests from oversight committees could prompt action.

2. GPRA goals and measures still need improvement

Although the quality of agencies’ GPRA reporting has improved substantially during the past decade, there is still a great deal of variation. For some agencies, reporting the effects of Recovery Act spending on GPRA goals and measures provides

ready-made accountability. Other agencies, however, must significantly improve

their GPRA goals and measures if they are to provide the ‘‘full transparency and

accountability’’ promised on an early version of the Recovery.gov web site.

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14McTigue, Wray, and Ellig (2009), pp. 30–31. 15 Recovery Act, Sec. 1531a. 16Orszag memo, p. 23.

Figure 1 classifies the Recovery Act’s $334 billion in appropriations (listed in Division A of the legislation) according to the scores each agency received on the

Mercatus Performance Report Scorecard for fiscal year 2008. An expert team evaluates each report on 12 criteria derived from GPRA. On each criterion, the report

receives a score that can range from 1 (no useful content) to 5 (best practice that

other agencies should adopt). The maximum possible score is 60, with a minimum

of 12. An average of 3 points on every criterion yields a score of 36, which could

be considered ‘‘satisfactory.’’

Reports with scores in the ‘‘very good’’ range (48+ points) are most likely to

achieve ‘‘full transparency and accountability.’’ But as Figure 1 shows, only 16 percent of the appropriations in the Recovery Act go to agencies whose reports met this

standard in fiscal year 2008.

About 55 percent of appropriations go to agencies whose reports received a ‘‘satisfactory’’ score of 36 or better in fiscal year 2008. Almost one-third of Recovery Act

appropriations go to agencies who achieved unsatisfactory scores. Thus, a substantial portion of Recovery Act funding goes to agencies whose GPRA goals and measures do not yet provide adequate accountability for results.

Congress could play a helpful role in improving the quality of performance reporting. Between fiscal year 1999 and fiscal year 2008, the quality of GPRA reports

tended to improve more at agencies where lower percentages of managers surveyed

by the Government Accountability Office (GAO) identify ‘‘lack of ongoing congressional commitment and support for using performance information’’ as a hindrance

to performance management.14 If oversight committees express a clear interest in

obtaining accurate, valid, outcome-oriented GPRA measures to evaluate program results, then agencies will likely respond by improving the quality of their GPRA

measures.

3. Ascertaining the Recovery Act’s effects on employment requires serious

macroeconomic analysis

The Recovery Act seeks to promote economic recovery in addition to accomplishing

specific program goals. The Act proposes to measure recovery in two different ways.

First, the Council of Economic Advisers is responsible for measuring the effects of

the Recovery Act on ‘‘employment, estimated economic growth, and other key economic indicators’’ in quarterly reports to congressional appropriations committees.15

Second, recipients of funds are supposed to report the number of full-time equivalent jobs created or retained as a result of Recovery Act spending.16

There are some practical problems with measuring how many jobs are created or

retained as a result of the spending. The April 3 Peter Orszag memo provides definiVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00092 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
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17GPRA Sec. 1115.

tions for ‘‘created’’ and ‘‘retained,’’ but it simply says recipients of funds are to provide estimates of jobs created or retained without providing guidance on how to calculate a credible, accurate, and verifiable estimate. It is not clear how Congress and

the public are to know whether the jobs recipients claim they created or retained

really were created or retained because of the Recovery Act spending.

In contrast, GPRA has a much stronger requirement for agency performance

measures. The law does not simply assume Congress and the public must take it

on faith that the reported measures accurately reflect results. Rather, agencies must

‘‘describe the means to be used to verify and validate measured values.’’ 17 Ideally,

agencies should provide sources for all performance data and the underlying analysis that produced it so that Congress, inspectors general, GAO, auditors, and interested members of the public can ascertain for themselves whether the performance

data are accurate.

Several steps are needed to apply this principle to job data reported by recipients

of Recovery Act funds. First, agencies should require recipients to present credible

explanations of how the Recovery Act funding caused the jobs to be created or retained, rather than just reporting their estimates. Second, agencies should explain

how they verify and validate the jobs data reported by the recipients. Third, the Recovery Accountability and Transparency Board should use random audits to confirm

the accuracy of the reported information. Fourth, the Administration should make

all of this information available for public scrutiny via Recovery.gov. If agencies and

the board do not do these things, oversight committees could prompt action by asking for this information.

Those steps would help ensure the accuracy and verifiability of the job data reported by funding recipients. However, data on the number of people the funding

recipients hired or retained does not tell us the net effect of the Recovery Act on

employment, for two reasons.

First, nothing in the legislation or the reporting process guarantees that the people hired as a result of the spending are people who would otherwise have been unemployed. It is quite possible that some of the people hired with Recovery Act funds

will simply be switching from some other job. If a person switches jobs as a result

of Recovery Act funding, total employment does not increase unless the person’s

former employer hires a replacement. We will not know whether this happens, because there is no provision for it in the reporting process.

Second, the money borrowed to fund the spending and tax breaks in the Recovery

Act is not ‘‘free’’; it has alternative uses. Since the Federal Government will borrow

an additional $787 billion to fund the Recovery Act, there is $787 billion less available in the capital markets to be used for other public or private purposes. To understand this, we need not venture into the economics jargon about ‘‘multipliers’’

and ‘‘crowding out.’’ Deep down, we all know that using money for one purpose

means that the same dollars cannot be used for some other purpose. The reason the

Recovery Act was limited to $787 billion, instead of $1 trillion or $5 trillion, is that

all responsible decision-makers know we give up something when we decide to

spend money for one thing instead of something else. Pulling $787 billion out of the capital markets will have some kind of effect on

U.S. employment and economic growth. Economists who specialize in macroeconomics will hotly debate whether this effect is large or small. The better ones

will analyze the data as it comes in to figure out what’s actually happening. I am

not here today to argue that this effect will be large or small, because macroeconomics is not my area of specialization. My only point is that we will not know

the true effect of the Recovery Act on employment unless we take into account the

effect of the borrowing on economic growth and employment.

This is information that the recipients of the funding cannot be expected to know

or report. Therefore, it is inevitable that the data on jobs created and retained will

overstate the effects of the Recovery Act on employment even if the data truthfully

and accurately reflect the number of jobs created or retained as a result of the

spending. This point is worth emphasizing because it will be very tempting to assume that the raw data on jobs measures the full effect of the Recovery Act on employment. In fact, the numbers generated by this reporting will not tell the whole

story.

As an economist, I do not have much confidence in economists’ prediction—particularly macroeconomic attempts to make predictions about the overall economy.

But I’ll offer a two-part macroeconomic prediction that I’m willing to stand behind:

America will have an economic recovery sometime, and the recovery will be caused

by a variety of factors. Just as program evaluation helps determine how much of

the observed outcome was caused by a federal program, so too is macroeconomic

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analysis necessary to determine how much of the recovery is caused by the Recovery

Act and how much is caused by other factors. I presume this is why Congress chose

to require those quarterly reports from the Council of Economic Advisers in addition

to the jobs reporting requirements for funding recipients.

The bottom line: To assess the Recovery Act’s effects on employment, keep your

eye on the macroeconomic analysis.

Conclusion

It is especially appropriate for the Oversight Subcommittee of the Science and

Technology Committee to concern itself with accountability for results under the Recovery Act. Full and accurate accountability for results requires application of the

scientific method to determine how much of the change in outcomes was actually

caused by federal programs and Recovery Act spending.

The Administration’s proposal to use GPRA goals and measures to evaluate the

effects of Recovery Act spending is an excellent one. Accuracy and transparency

would be improved if agencies reported outcome information along with cost information and OMB explicitly required agencies to assess how much of the change in

outcomes is directly attributable to Recovery Act spending. Many agency GPRA

goals and measures still fall short of providing full accountability for outcomes, and

agencies need to improve these to ensure full accountability for program outcomes

affected by Recovery Act spending. Finally, both the Administration and Congress

should apply the same fundamental program evaluation principles to assess the Recovery Act’s effects on economic recovery and employment. Accurate assessment of

the Recovery Act’s effect on employment requires valid and verifiable job data combined with macroeconomic analysis to determine how much of the employment

change was actually caused by the Recovery Act rather than other factors.

BIOGRAPHY FOR JERRY ELLIG

Dr. Jerry Ellig has been a senior research fellow at the Mercatus Center at

George Mason University since 1996. Between August 2001 and August 2003, he

served as Deputy Director and Acting Director of the Office of Policy Planning at

the Federal Trade Commission. Dr. Ellig has also served as a senior economist for

the Joint Economic Committee of the U.S. Congress and as an Assistant Professor

of Economics at George Mason University.

Jerry has published numerous articles on government regulation and business

management in both scholarly and popular periodicals, including the Journal of

Regulatory Economics, Managerial and Decision Economics, Journal of Politics,

Business & Politics, Antitrust Bulletin, Competitive Intelligence Review, Federal

Communications Law Journal, Texas Review of Law & Politics, Wall Street Journal,

New York Times, Barron’s, and Washington Post. His co-authored/edited books include Dynamic Competition and Public Policy, New Horizons in Natural Gas Deregulation, and Municipal Entrepreneurship and Energy Policy. He is a co-author of

the Mercatus Center’s annual Performance Report Scorecard, which evaluates the

quality of the annual performance reports produced by 24 major federal agencies.

Jerry is a native of Cincinnati, Ohio and a graduate of St. Xavier High School.

He received his B.A. in Economics from Xavier University and his Ph.D. and M.A.

in Economics from George Mason University in Fairfax, VA.

Chairman MILLER. Thank you, Dr. Ellig.

Ms. Brian, was POGO the cartoon character who said, ‘‘We have

met the enemy and he is us?’’

Ms. BRIAN. Absolutely. That is not a mistake——

Chairman MILLER. Okay.

Ms. BRIAN.—that is our acronym.

Chairman MILLER. Ms. Brian is recognized for five minutes.

STATEMENT OF MS. DANIELLE BRIAN, EXECUTIVE DIRECTOR,

PROJECT ON GOVERNMENT OVERSIGHT (POGO)

Ms. BRIAN. Thank you very much, Chairman and Mr. Bilbray, for

inviting me to speak today. I am not only speaking on behalf of the

Project on Government Oversight, but we are also as an organization a member of the Coalition for an Accountable Recovery, as is

OMB Watch, and so I am just ascribing to those recommendations

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2 H.R. 2182, the Enhanced Oversight of State and Local Economic Recovery Act.

that Dr. Bass made in terms of the transparency for contracts.

That is something that is terribly important to us as well, and I

am going to be limiting my testimony to focusing on improving resources for auditors, investigators and whistleblowers.

I view the level of protection against waste, fraud, and abuse in

the Recovery Act with mixed feelings. On the one hand, certain

provisions provide a terrific opportunity to finally crack open the

opaque world of government contracting, so we could see this as a

changed world for the future and not just limited to the Recovery

Act.

On the other hand, some of the essential protections are insufficient and others are simply non-existent. Due to those weaknesses,

the velocity and magnitude of the Recovery Act spending makes me

very anxious.

One weakness that could be improved to stem losses is the significant lack, as we heard Mr. Devaney speaking specifically to, of

funding for State and local auditors and investigators. For every

dollar IGs investigate, for example, in audits, there is an average

return of more than $9, according to a recent GAO study.

Chairman Towns has introduced recently legislation2 that we believe is an essential step in trying to help provide adequate oversight of spending of these funds for those under-funded State and

local auditors.

Whistleblowers will also be essential to minimizing losses. According to a study last year by the Association of Certified Fraud

Examiners, nearly half of the initial detection of occupational

fraud, 46 percent, came from whistleblower tips rather than from

internal auditors. It was an extraordinary study, I thought.

For that reason I am distressed to testify that one of the most

significant weaknesses of the Recovery Act is in Section 1553, the

section protecting whistleblowers. While it provides meaningful

protections for State, local, and contractor whistleblowers, federal

employees are yet again left out in the cold. This is simply absurd.

Without solid protection it is far less likely that a federal employee

with knowledge of wrongdoing will come forward.

The good news is there is now a lot of activity to report—to repair that damage, and I can report that yesterday there was—I

was a member of a four-hour meeting at the White House discussing the need for federal protection—protection for federal whistleblowers, and there is discussion in both the House and Senate

and having hearings soon. So maybe this fundamental deficiency in

the Recovery Act could be resolved soon with stand-alone legislation. I certainly hope so.

For those whistleblowers who are already protected by the Recovery Act, though, I want to focus on what needs to happen for the

process to work effectively. First, potential whistleblowers need to

know what their protections are and where to go with their disclosures. An individual in their hometown who comes across misconduct is unlikely to know to which web site to turn. They may

not even know which federal agency has awarded the original contract.

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In light of this, clear language should be on Recovery.gov, on

State and local web sites, and on the web sites of each of the inspector general what whistleblower protections there are or are not

and how to report waste, fraud, and abuse.

IGs especially need to make a concerted effort to encourage people to come to them with their disclosures. Some IG offices are already doing a good job of this. However, POGO just released in

March our analysis of the IG, federal IG system and their accountability for how they do their work, and we found that many IGs

are simply not effective at working with whistleblowers. In fact, I

was just speaking with the Council of IGs about two weeks ago

where a few IGs argued quite forcefully that they do not see it is

appropriate for their offices to proactively reach out to whistleblowers.

To make 1553 work effectively, it is imperative for IGs to make

a concerted effort and sometimes change their culture to encourage

people to come to them with their disclosures.

Although the Council of IGs has recently announced a cross-cutting review of their hotline system, the results from that review

may come too late, and so I believe it is essential that interim steps

be taken closer to immediate than anything else to implement more

effective systems than those that are in place now.

The next problem is also on the IG side, handling the volume of

intake responsibly. Currently Recovery.gov simply has a page that

says, tell us your story. That is it. There are no explanations for

whistleblowers about what kinds of information to report, how they

are or are not protected, or how the information will be used. This

is an invitation for problems. We know from our own experience

you need to have very clear directions, a tracking system, and a

way to communicate further with the whistleblower for this to

work at all. Given the volume of intake they will be receiving, this

is an enormous but essential task.

Finally, when there is a successful case of a whistleblower disclosure identifying a problem, the IG needs to herald this as a case

well done. But even if the systems were to work perfectly, serious

and sustained oversight from both the Board chaired by Mr.

Devaney and the Congress are essential. The discretion given IGs

in the Recovery Act regarding when they will or will not investigate disclosures is so broad as to be very worrisome, and this is

where oversight will play an essential role.

Another area that requires Congressional oversight, and where

this committee in particular has shown great strength, is in overseeing the IGs themselves. For example, it is in large part because

of this committee’s terrific work that the NASA IG was finally

forced to resign after his poor performance, and this committee deserves credit for sticking with that issue over the last few years.

At the moment, the stars are not in complete alignment for taxpayers to benefit from whistleblower disclosures, audits, and investigations of misconduct in the Recovery Act spending, but the

weaknesses are fixable. We just need to fix them now, and I look

forward to working with the Committee to accomplish that goal.

[The prepared statement of Ms. Brian follows:]

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PREPARED STATEMENT OF DANIELLE BRIAN

Thank you for inviting me to testify today. It is terrific that the Science and Technology Committee is conducting oversight of the way in which science and technology-related agencies will manage the American Recovery and Reinvestment Act

(Recovery Act). POGO, as a member of the Coalition for an Accountable Recovery

(CAR), supports the recommendations in OMB Watch’s testimony, which would improve Recovery Act provisions for contract transparency, recipient reporting, and

public access to data, as he lays out in his testimony. Thus, I will limit my comments today to improving resources for auditors, investigators, and whistleblowers.

I view the level of protection against waste, fraud, and abuse in the Recovery Act

with mixed feelings. On the one hand, certain provisions provide a terrific opportunity to finally crack open the opaque world of government contracting. On the

other hand, some essential protections are insufficient, and others are simply nonexistent. Due to those weaknesses, the velocity and magnitude of Recovery Act

spending makes me very anxious. In fact, Earl Devaney, Chairman of the Recovery

Act Transparency and Accountability Board (RAT Board), recently noted that it is

‘‘inevitable’’ that taxpayer dollars will be lost to waste, fraud, and abuse.

One weakness that could be improved to stem those losses is the significant lack

of funding for State and local auditors and investigators. This is a case of pennywise and pound-foolish. For every dollar IGs invested in audits, there is an average

return of more than nine dollars, according to a GAO study last year of all IGs.

Chairman Edolphus Towns has introduced the Enhanced Oversight of State and

Local Economic Recovery Act, which we believe is an essential step to helping provide adequate oversight of the spending of these funds.

Whistleblowers will also be essential to minimizing losses. According to a study

last year by the Association of Certified Fraud Examiners, nearly half of the initial

detection of occupational fraud—46 percent—resulted from whistleblower tips. Whistleblowers are clearly a vital source of information about fraud.

For that reason, I am distressed to testify that one of the most significant weaknesses of the Recovery Act is in Section 1553, the section protecting whistleblowers.

While it provides meaningful protections for State, local, and contractor whistleblowers, federal employees are yet again left insufficiently protected. This is simply

absurd given the important role federal whistleblowers play as the first line of defense—they are the eyes and ears for taxpayers. This defect is not the fault of the

House. The House has repeatedly passed with almost no opposition, protections for

federal whistleblowers. And in the case of the Recovery Act, Representatives Chris

Van Hollen (D–MD) and Todd R. Platts (R–PA) introduced an amendment to cover

federal whistleblowers that was quickly passed by the House and incorporated into

the language that was sent to the Senate. However, the Senate objected to allowing

federal whistleblowers access to jury trials and to including protections for national

security whistleblowers without having held Senate hearings first. The White House

remained silent on this question, and as a result the House language protecting federal employees was stripped. And without solid protection, it is far less likely that

a federal employee with knowledge of wrongdoing will come forward with that

knowledge.

The good news is that there is now a lot of activity to repair that damage. The

White House is engaged, and both the House and Senate are planning hearings to

explore providing the missing protections to federal employees—so maybe soon this

fundamental deficiency in the Recovery Act will be resolved with stand-alone legislation? I certainly hope so.

For those whistleblowers who are protected by the Recovery Act, I want to focus

on what needs to happen for the process to work effectively.

First, potential whistleblowers need to know what their protections are and where

to go with their disclosures. This may be harder than you would think. An individual in their hometown who comes across misconduct in the spending of recovery

dollars is unlikely to be so immersed in the minutiae of the rules to know which

web site to look at—they may not even know which federal agency awarded the contract. In light of that, clear language should be on Recovery.gov, on State and local

web sites, and on the web sites of each of the Inspectors General about what the

whistleblower protections are and how to report waste, fraud, or abuse.

IGs especially need to make a concerted effort to encourage people to come to

them with their disclosures. Some IG offices are already good at doing this. However, POGO just released a report on the Inspectors General system in which we

found that many IGs are not effective at working with whistleblowers. In fact, I was

just speaking with the Council of IGs last week where a few IGs argued quite forcefully that they do not see it as appropriate for their offices to proactively reach out

to whistleblowers. Yet, the Recovery Act places this responsibility squarely in the

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hands of the IGs. So to make Section 1553 work effectively for those whistleblowers

who are protected, the culture in some of those IGs’ shops must change to one in

which they recognize that they should be proactive in that regard.

It will take a concerted and cooperative effort by agencies and their IGs to inform

recipients of Recovery Act funds of their whistleblower protections and that they

need to go to the IGs with disclosures of waste, fraud, and abuse.

The next problem is also on the IG side—handling the volume of intake responsibly. Currently, Recovery.gov simply has a page that says ‘‘Tell us your story.’’

There are no explanations for a whistleblower about what kinds of information to

report, how they are or are not protected, or how the information will be used. That

is an invitation for problems. We know from our own experience you need to have

very clear directions, a tracking system, and a way to communicate further with the

whistleblower for this to work at all. Given the volume of intake they will be receiving, this is an enormous but essential task, and one I know Earl Devaney is taking

very seriously as he prepares to take over the site.

In that regard, I am happy to report that the Council of IGs has announced a

cross-cutting review of all their hotline systems, I believe in part because POGO

identified a number of weaknesses. While that review will be valuable for improving

many of the tip-intake systems in the future, it may come too late to help protect

Recovery Act funds from waste, fraud and abuse—the money is going out the door

now and whistleblowers have already begun submitting tips. Because of the magnitude of funds being distributed, it is essential that interim steps be taken to implement more effective systems than those in place now. IGs should meet with representatives from the whistleblower community now in order to hash out best practices for outreach and tip intake. This is a terrific opportunity, not only to get it

right for the purposes of the Recovery Act, but also to strengthen the capacity of

many IGs to more effectively handle whistleblower cases.

Finally, and this will also mean a cultural change for some IGs, when there is

a successful case of a whistleblower disclosure identifying a problem, the IG needs

to herald it as a case well-done. Recently SIGTARP Neil Barofsky made a point in

his testimony of saying that nearly one-third of his investigations were initiated because of tips coming to him through whistleblowers. This is the kind of positive reinforcement that will encourage others to come forward with disclosures of wrongdoing.

But even if the systems were to work perfectly, serious and sustained oversight

from both the RAT Board and the Congress are essential. It is most likely that this

oversight will be necessary to ensure the discretion clause included in Section 1553

is not abused. I want to be clear here. The clause is important: without it, IGs would

have been required to investigate every single complaint received. As a person who

runs an organization that receives such complaints, I can assure you such a requirement would have wasted valuable time and energy. However, the discretion given

IGs regarding when they will or will not investigate disclosures is so broad as to

be very worrisome. You can’t legislate judgment, but I do think this is where oversight will play an essential role.

Another area that requires congressional oversight, and where this committee in

particular has shown great strength, is in overseeing the IGs themselves. For example, it is in large part because of this committee’s great work that the NASA IG

was finally forced to resign after his poor performance, and the Committee deserves

credit for sticking with that issue over the past several years.

At the moment, the stars are not in complete alignment for taxpayers to benefit

from whistleblower disclosures, audits, and investigations of misconduct in Recovery

Act spending. But the weaknesses are fixable—we just need to fix them now. I look

forward to working with the Committee to accomplish that goal.

BIOGRAPHY FOR DANIELLE BRIAN

Since 1993, Danielle Brian has been the Executive Director of the Project On Government Oversight (POGO), a nonprofit government watchdog organization. She frequently testifies before Congress, and often appears in major national media.

Under Ms. Brian’s direction, POGO has conducted numerous investigations that

have resulted in major public policy reforms, including:

• Cutting Wasteful Defense Contracts. Her investigations have led to the

cancellation of some of the largest government contracts, including the Boeing

tanker leasing scandal, the $13 billion Superconducting Supercollider, the $11

billion Army Crusader, and the Army’s Sergeant York Division Air Defense

Gun.

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• Exposing Oil and Gas Industry Fraud on Public Lands. Her

groundbreaking investigations into oil and gas industry fraud on public lands

led to the Justice Department’s recovery of nearly half a billion dollars, and

to rule changes that generate an additional $70 million annually.

• Increasing Nuclear Security. Her investigations into lax nuclear power

plant security led the Nuclear Regulatory Commission to order its contractors

responsible for security to improve training and working conditions for

guards. Her investigations into the U.S. nuclear weapons complex have also

successfully led the government toward consolidating nuclear materials and

making the complex more secure.

• Fighting Excessive Government Secrecy. Her investigations have uncovered and helped address excessive government secrecy. For instance, she filed

and won a lawsuit against then-Attorney General John Ashcroft for retroactively classifying FBI documents.

Under Ms. Brian’s leadership, POGO has also been working to strengthen the

oversight infrastructure of the government itself, through such programs as:

• POGO’s Congressional Oversight Training Series, monthly bipartisan

seminars teaching Capitol Hill staff the art of congressional oversight.

• Evaluating the federal Inspectors General (IG) system, and working to

strengthen both the independence as well as the accountability of IGs.

Ms. Brian serves on the Board of Taxpayers for Common Sense and HALT: Simple, Affordable, Accountable Justice for All. In 2006, Ms. Brian was inducted into

the Freedom of Information Act Hall of Fame; and in 2008, Ethisphere magazine

ranked her among the top 100 most influential people in business ethics. Ms. Brian

earned her Master’s degree in International Relations from the School of Advanced

International Studies at Johns Hopkins University in 1990, and her Bachelor’s degree in Government from Smith College in 1985.

Chairman MILLER. Thank you. I did not get a Christmas card

from Mr. Cobb this year.

Mr. Gillespie.

STATEMENT OF MR. ERIC GILLESPIE, SENIOR VICE PRESIDENT OF PRODUCTS, TECHNOLOGY, AND INNOVATION AND

CHIEF INFORMATION OFFICER, ONVIA, INC.

Mr. GILLESPIE. Chairman Miller, Mr. Bilbray, and Members of

the Committee, thank you for inviting me to testify today with such

a distinguished panel about oversight of the Recovery Act.

Simply stated, our business provides a comprehensive view of

government to businesses that want to do business with the government. We track all goods and services that are procured around

the country, across every industry; infrastructure, architecture, engineering, water, energy, information technology.

There are a variety of issues that create a transparency barrier

which limits visibility into how funds are spent between the Federal Government and State, local, and education agencies around

the country. The situation that everyone wants to avoid is one in

which Recovery Act money will have been spent and untold

amounts will have been lost, particularly at the State and local

level, before anyone is fully aware of the loss.

Mr. Devaney has previously testified that in his experience a

seven percent number is a good metric to use for fraud in spending.

That equates to $55 billion in the Recovery Act, which makes the

stimulus fraud the 60th largest economy in the world according to

the IMF. It is effectively the size of the GDP of Ecuador.

As a challenge, this market is highly fragmented. There are more

than 89,000 State, local, and education agencies around the counVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00099 Fmt 6601 Sfmt 6601 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
320

try and an estimated 20,000 of those are going to receive some

level of Recovery Act funding.

In addition, at those agencies there are hundreds of thousands

of people procuring goods and services, and there are more than

three million companies that are qualified to bid on Recovery Act

projects.

As you can see from these numbers, the sheer magnitude quickly

creates an intractable problem when it comes to tracking, especially when you compress it into a very aggressive timeline.

One more example to highlight that transparency barrier. Several weeks ago the Administration held a press conference touting

the 2,000th transportation project that was undertaken as a result

of the Recovery Act. That same day we had actually tracked almost

5,000 transportation projects that had been funded by the Recovery

Act. So there is a significant delta in the data as it exists today.

We set up our web site, Recovery.org, to primarily provide timely

information to businesses in the marketplace, the businesses that

create jobs with recovery funding. But an interesting user group

has emerged at Recovery.org. We are seeing the government come

and use Recovery.org. At the federal level, federal agencies are registering to get a comprehensive view of how the states are using

the dollars. States are registering to see how counties and cities are

using the dollars, and cities are registering to see how the other

cities are using the dollars to make sure they are getting their fair

share.

It took us about two weeks to develop and launch the site, and

it has a fairly simplistic interface which allows a user to select a

state, a country, or a city and see the projects in that geographic

area. Search engines, user interfaces, infrastructure are all things

that are key to a successful product like Recovery.gov, but the primary reason why we were able to launch Recovery.org in such a

short period of time, in two weeks, was the underlying standardized taxonomy and the data that we have. Without the data that

sits underneath it, none of the technology would have made it possible.

Representatives from OMB have previously testified that Recovery.gov receives hundreds of millions of hits, even reaching 3,000

hits per seconds at one point, and by any measure even those of

online commercial enterprises, it has been wildly successful. The

incredible volumes of traffic are, I think, emblematic of the intense

public interest in engaging with their government via technology.

And in my opinion it not unreasonable to think Recovery.gov could

have live searchable data in 30 to 45 days so that those hundreds

of millions of visitors and hits don’t go to waste. And they will if

the data is not available soon.

I have made a series of recommendations in my written testimony that I believe will help Recovery.gov, and without getting into

deep technical details—Dr. Bass touched on this—suffice it to say

that in order to maximize use and adoption the data has to be

available in formats that have low barriers to use. There are many

excellent, free, non-proprietary formats and standards that can be

leveraged, including the ones that Dr. Bass mentioned.

With that I will conclude by saying that while this may presently

feel like an impossible task, there is an enormous opportunity to

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use Recovery Act tracking to usher in a new era of transparency,

accountability, and performance, and it will set the stage for generations to come in terms of engaging in civic discourse with their

government. Recovery.gov can be the flagship for government transparency and accountability. We fully support the goals that Congress and the Administration have outlined and will continue to

serve in any way we can to that end.

Thank you for inviting me to testify here today, and I look forward to answering any questions you might have.

[The prepared statement of Mr. Gillespie follows:]

PREPARED STATEMENT OF ERIC GILLESPIE

Introduction and Overview

Chairman Miller, Ranking Member Broun, and Members of the Committee, thank

you for inviting me to testify today with this distinguished panel about oversight

of the American Recovery and Reinvestment Act of 2009 (ARRA). My name is Eric

Gillespie and I am the Chief Information Officer at Onvia, a 12-year-old, NASDAQtraded information services company based in Seattle, Washington.

Simply stated, our business model provides a comprehensive view of government

spending to companies that desire to sell their goods and services to agencies

around the country. We were purpose-built to track government purchasing events

in the State, local and education marketplace and are the widely recognized leader

in this space.

Our business at Onvia is comprised of two distinct parts. On one side, we facilitate procurement and vendor management for State, local and education agencies

through an eProcurement portal. We have more than 6,000 government users and

more than 50,000 business users, and we drive procurement compliance via both

technology and process. As an aside, this part of our business was started with a

small Department of Commerce grant many years ago to help disadvantaged business gain access to government contracts.

On the other side, we have a data subscription product that is designed to assist

companies that do business with the government. In total, we cover more than

89,000 State, local and education entities and have more than 8,000 paying subscribers. We also partner with organizations such as local Chambers of Commerce

to provide government contract visibility for their members.

Our products contain information about government spending, built up from millions of goods and services transactions from across every industry vertical—from

construction, engineering, and architecture to health care, energy, water, and information technology.

As draft versions of the stimulus bill were being published by the House and Senate at the beginning of the year, my team and I recognized that Recovery Act funds

would be primarily distributed through existing programs, from federal agencies to

states, counties and cities, and these funds would ultimately end up in the hands

of contractors and subcontractors who would create jobs outside the beltway.

Based on our experience we believed then as we do today that we have a unique

perspective to offer about filling the visibility gaps in the current flow of capital

from D.C. out to the thousands of government agencies that perform various functions in the communities in which we all live.

To that end, over the past four months we have met with a variety of agency and

Administration officials at the Office of Management and Budget, the TIGER team

at the Department of Transportation, the Small Business Administration, many

Members of Congress and their staff, and government watchdog groups here in

D.C., among others.

Throughout this journey we have attempted to serve as a resource to Federal,

State and local governments, offering advice, consulting, data and information, and

technology solutions to help solve the seemingly intractable problem of knowing

where every dollar of Recovery funds is being spent.

Current State of Recovery Act Tracking

The Administration has stated unequivocally that this unprecedented spending

requires an unprecedented level of accountability and transparency. Both the House

and the Senate included language in the draft Recovery legislation and amendments

as they made their way through Congress that would have tracked every dollar of

spending, accurately and in real-time, but key accountability provisions that would

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have tracked theses dollars down to the subcontractor level were not included in the

final bill.

The transparency provisions that did survive in ARRA were set in motion with

the passage of the Federal Funding Accountability and Transparency Act of 2006

which laid the basic foundation for collecting and exposing information about federal

appropriations. Although it has taken several years to enforce compliance and coordinate reporting, as examples of successful federal data systems the

FedBizOpps.gov (FBO) web site provides a single view into procurement across

agencies at the federal level, and the USASpending.gov web site provides online

transparency into those purchasing events.

As you well know, there is no parent-child relationship between the Federal,

State, county, and municipal governments and thus there is no comparable FBO–

USASpending platform for State, local and education procurement. In actuality

there are almost as many programs, rules, and platforms as there are agencies

around the country.

OMB has now issued two sets of complex, sometimes conflicting, directives in an

attempt to clarify what information should be tracked, to what level of government,

and how it should be reported as part of ARRA. These directives focus almost exclusively on federal agency compliance and ignore the fact that most spending will

occur at the State and local level by State and local officials.

Further complicating this, by design the states function independently from the

Federal Government and that separation of governmental powers is core to our Constitution. The states exist in part to preserve freedom, and attempts to centralize

and control the flow of information at the federal level are often met with resistance. Constitutional scholars will likely have heated debates about how the Administration should track data from the largest spending initiative in the history of civilization without setting a precedent of Soviet-like, centralized information control.

These combined issues create a ‘‘transparency barrier’’ that limits visibility into

how funds are spent between the Federal Government and State, local and education agencies around the county. The situation everyone wants to avoid is that

in which Recovery Act money will have been spent and untold amounts will have

been lost, particularly at the State and local level, before anyone is fully aware of

the loss. The Government Accountability Office (GAO) recently pointed out that

states are already struggling with how to oversee and manage stimulus expenditures.

The Transparency Barrier

Transparency and reporting to both Congress and the public at large, with full

disclosure of all entities, public and private, receiving funding from ARRA, tracking

grants and sub-grants, contracts and subcontracts, obligations and certifications,

and authenticating the sources of this data, serves as the backdrop for defining the

key challenges. Establishing accurate and timely job creation metrics adds yet another level of complexity.

The market is highly fragmented: there are more than 89,000 State, local and

education entities across the country, and an estimated 20,000 of these will receive

a portion of funds from ARRA. In addition there are hundreds of thousands of officials at these agencies who will have a role in procuring goods and services with

ARRA funds, and there are more than three million businesses that are qualified

to bid on ARRA-funded projects. You can see from these numbers how the sheer

magnitude quickly creates an intractable problem, especially when placed on an aggressive timeline.

The transparency barrier that exists between the Federal Government and State

and local government has been exposed with the passage of the ARRA and with the

speed at which these funds are being approved and disbursed.

Consider the example below of atypical capital flow from Congress to local subcontractors in the Recovery Act:

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Congress, the Administration, the States, the Municipalities, and the American

people are all attempting to track where capital is being obligated and spent at the

local level; this transparency barrier prevents that. Both the legislation and the directives from the Office of Management and Budget focus on federal agencies and

federal contractors, but largely ignore money that is spent at the local level and do

not provide for tracking the ultimate recipients of the funds—the contractors and

subcontractors. With the burden of tracking spending at a local level, Counties and

Cities are beginning to feel like they will be the scapegoats for misused funds.

There are four key challenges which must be addressed in order to see through

the opacity. First, untangling the vast amount of unstructured data across these

sundry entities is a Herculean task. Each entity has its own set of rules and

workflow that address procurement, formats for solicitations, reporting requirements for contract awards, vendor qualification, vendor lists, and data persistence

among many other areas. The categorization and compliance issues faced by the

Federal Government in implementing FBO.gov and the Federal Procurement Data

System (FPDS) over a number of years are similar, although given the wide dispersion of the State, local and education market the complexity is several orders of

magnitude greater when attempting to track ARRA funds.

Once a canonical view of the entities is established, the second primary challenge

can begin to be addressed: authentication of entities and their executives tasked

with certifying the ARRA spending. A structured registration and validation process

is required to ensure data integrity, along with a basic support center to handle

basic compliance questions and simple account issues like password resets. Executive certification is compounded by entities mixing stimulus funds with general

funds at the local level and tracking projects that are only partially funded by stimulus dollars, highlighting that self-reporting by fund recipients is certain to be

fraught with inaccuracy and latency. A method of objective and independent compliance reporting is necessary to ensure stipulations like ‘‘use it or lose it’’ are followed.

The third challenge is societal and technological. Ubiquitous Web 2.0 technologies,

principally in the private sector but increasingly in the public sector, have raised

the expectations of the American people in terms of their ability to navigate complex

information through relatively simple interfaces. Deep datasets and corresponding

real-time reporting engines are presumed in the case of available government data

as there is an abundance of information in the government market; the public expects the experience they get elsewhere on the web from what has been described

as ‘‘the most technologically savvy Administration.’’

The fourth challenge is the incredibly aggressive timeline on which funds are

being dispersed. An ‘‘aggressive but realistic’’ plan to achieve the transparency and

accountability goals of the Administration is required. The need to get capital moving in local economies, to create jobs as rapidly as possible, combined with the unprecedented level of spending, presents an opportunity for unprecedented waste and

fraud. The Chairman of the Recovery Accountability and Transparency Board, Earl

Devaney, estimated that $55 billion of taxpayer dollars may be lost to fraud, which

is particularly true at the State and local level where the Administration has very

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limited visibility. That’s five times the entire GDP of Afghanistan; about the same

as the GDP of Vietnam, Luxembourg, and Ecuador; and half the GDP of New Zealand, Egypt and Iraq.

According to figures from the World Bank and the International Monetary Fund,

the fraud alone in our ARRA spending will be the 60th largest economy in the

world. Eliminating the transparency barrier with only a one percent improvement

in fraud would save the American taxpayers $550 million. With the aggressive

timeline there is simply not an opportunity to spend months, or compared to some

implementation cycles years, developing a delivery platform, and there is little opportunity to stop waste before it starts rather than relying on investigations after

spending occurs.

Technology Platform

We appreciate the scope of the technical challenges associated with trying to track

Recovery Act spending. There are likely many ways to solve this problem technologically. We began solving it over a decade ago and have developed a proprietary,

dynamic platform with hundreds of servers, thousands of custom software programs,

deep web search technologies, scanning and optical character recognition functions

for hard copy material, and on-demand Freedom of Information Act (FOIA) request

processing. Our technologists and researchers have many years of experience in this

arena and are constantly looking for new and innovative ways to meet these tracking challenges. We provide a standardized view of the public record with these solutions.

When looking for a comparable analog for the technology footprint required to

track spending on a federal scale, consider both the ‘‘revenue side’’ and the ‘‘expense

side’’ of the federal budget. On the revenue side, the Internal Revenue Service (IRS)

tracks flows of capital in granular detail; every citizen and entity in the country reports their income, number of dependents, profits and losses on investments, the

home they own and interest paid on their mortgage, and the taxes paid on the car

they purchased, as examples. On the expense side where the purchase of goods and

services occurs, the government marketplace is by far the largest ‘‘industry’’ vertical;

citizens, businesses, non-profit organizations, State and local agencies, and schools

are involved in spending. However, the level of transparency and tracking on the

expense side pales in comparison to that on the revenue side. From a technology

perspective the IRS is able to sift through massive amounts of data on the revenue

side because they have established standardized forms for processing, invested in

large data centers, and employ countless programmers. For the Federal Government

the expense side of the equation is no less complex than the revenue side, it just

isn’t tracked and reported with the same veracity.

Until recently Americans have tolerated a lack of transparency in governmental

spending. The shift toward intolerance is being driven by the advance of technology,

the Internet, and the assumption that information should be and is easily accessible; the Internet generation has a new set of expectations. There has also been

a recent groundswell of ARRA expectations established with the many statements

made by President Obama about transparency, accountability, and efficacy.

The Development of Recovery.org

With the expected beneficiaries of these funds being a diverse group of mostly

small and medium businesses, economists agree that the ‘‘flywheel effect’’ of job creation from these stimulus dollars will happen principally in local communities.

Many of these beneficiaries are subcontractors to prime contractors who have been

awarded a contract by a State or local agency.

Given our subject matter expertise in this area we believed that in the short-term

it would be difficult to provide visibility to the American taxpayers for every dollar

of stimulus spending. At the end of March we launched a web site called Recovery.org which is principally targeted at companies that do business with the government. At Recovery.org we post early notices of projects, RFPs, bid documents,

amendments to these documents, and award information about contractor and subcontractor recipients of stimulus funds, and we do this as close to ‘‘real-time’’ as possible.

It took us about two weeks to develop and launch the site, and it has a somewhat

simplistic interface which allows the user to select from combinations of State, county and city.

It produces obligation and spending results as transactions occur every day in

those geographies.

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We are currently in the process of making the site navigable via an interactive

map so that users can drill down to their community and see the spending that is

most important to them via zoom controls.

Given the time constrained ‘‘use it or lose it’’ provisions contained in the legislation the bulk of the projects we are currently tracking at Recovery.org are related

to infrastructure and transportation.

With Recovery.org we have done precisely what the Administration has been encouraging with regard to government information: we took a large public dataset

and turned it into something searchable and useful.

The Complexity and Power of Data

The potential economic and societal impacts of exposing government-wide data in

standard formats are profound. However, the challenges with aggregating and presenting vast amounts of unstructured data in meaningful ways are many. The Federal Government has made an effort in recent years to open some of its data coffers,

some successfully and some unsuccessfully. While there has been significant

progress at the federal level as a result of the Coburn-Obama Act and

USASpending.gov for tracking and reporting, the process of obtaining quick, accurate information about federal spending remains difficult at best.

The most interesting and beneficial information, however, is not in the coffers of

the Federal Government but in the highly fragmented State, local and Education

marketplace—data about the communities in which we all live. Attempting to add

State and local data to the mix only serves to magnify current visibility gaps. For

State and local levels of government, there is no ecosystem of interaction, no interoperability, and no single source of truth.

To further complicate requirements for timely and standardized data collection

from State and local entities, many of these agencies perform a combination of essential services ranging from public safety to maintenance of physical infrastructure. Unlike the Federal Government’s established taxonomies for tracking spending

on goods and services, there is no universally accepted standard across these highly

fragmented State and local governments. What initially appears to be a relatively

simple set of functional spending categories is not easily mapped to a common stateby-state, municipality-by-municipality view.

For the moment let’s assume the data aggregation and standardization problems

can be solved for Recovery fund tracking, or for that matter any other dataset such

as TARP fund tracking. Consider the mash-up possibilities with census data, campaign contribution results, crime statistics, or tax information, to name a few views,

and imagine the level of citizen engagement that might be generated.

Unleashing data, however, isn’t solely about transparency and accountability, nor

solely about preventing waste, fraud and abuse, although much of the discussion

has thus far centered around those laudable goals. It is also about economic development and prosperity. If executed well, the Recovery Act cannot only have the expected direct impacts on the economy by infusing capital for stability and job creation, but by exposing more actionable data it can also have the ancillary benefit

of creating new businesses and redirecting capital flows to more efficient channels.

There are good precedents for this and the Administration has admirably taken

a leading position on promoting widely available data feeds with the web site

Data.gov. They have used the Human Genome Project as a shining example of how

unleashing data can lead to the greater good. In addition to this powerful National

Institutes of Health example, other examples include the GPS industry created by

the Department of Defense unleashing satellite data to the geospatial community,

and the trillion dollar intellectual property licensing industry supported by data unleashed by the U.S. Patent and Trademark Office. If successful at democratizing

large datasets and giving access to the public, Data.gov will likely also set an international gold standard for transparency.

Without getting into deep technical details, suffice it to say that in order to maximize use and adoption the data must to be made available in formats with low barriers to use. There are excellent, free, non-proprietary formats such as XML, JSON,

and YAML. There are other standards such as XBRL which the Securities and Exchange Commission has adopted for electronically collecting financial results from

companies.

Search engines, user interfaces, and infrastructure are all key to a successful

technology-based product like Recovery.gov but the primary reason we were able to

build Recovery.org in two weeks was our underlying, standardized taxonomy and

data. Without the data none of the other technology would have mattered.

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Recommendations for Recovery.gov

Representatives from OMB have previously testified that Recovery.gov receives

hundreds of millions of hits, reaching 3,000 hits per second at one point. By any

measure including those of online commercial enterprises it has been wildly successful. This is further emphasized by the traffic generated by Mr. Devaney’s recent National Dialogue on Information Technology Solutions online forum: 1.5 million visitors within the first 48 hours. These incredible volumes of traffic are emblematic

of the intense public interest in engaging with their government via technology. Recovery.gov represents an opportunity to meld the culture of web innovation with the

culture of citizen engagement.

It is difficult at this point to evaluate Recovery.gov as a tracking mechanism for

stimulus funds because very little data has been reported to OMB and the Recovery

Accountability and Transparency Board thus far. As I have testified, it has taken

our company more than 10 years to perfect the process of collecting large volumes

of data in various formats and while I wouldn’t expect it to take that long to track

Recovery Act funds, hurdles remain.

I have several tactical and strategic suggestions for improving functionality and

transparency on the site:

(1) A project impacting so many aspects of the government is not undertaken

without some level of risk. Data will never be perfect. Accept that and get

on with it. Adopt an implementation framework that is designed for

nimbleness, such as Agile Scrum, to facilitate speed.

(2) A good user experience is paramount to success. Consider the many needs

of the audience and distill them into a few basic, representative personas

around which the site can be designed. View transparency and accountability as a leading ‘‘brand’’ with constituent touch points, of which Recovery.gov is perhaps the most significant in terms of its appeal.

(3) Define a simple common vocabulary for constituents, developers, Congress,

the Administration, states and cities. This should include terms like appropriation, obligation, approval, certification and award, among others. Establish a standard corpus of entities and information about them. With the vocabulary and the entities, begin to develop simple data architecture concepts.

(4) Choose a basic data format as standard. This doesn’t require a significant

amount of research as there are many excellent choices available; as long

as an open, non-proprietary format is chosen it will be hard to go wrong.

(5) An initial dataset is requisite. Get a centralized database up and running

quickly and begin processing and standardizing larger volumes of data. It

doesn’t need to be perfect, and the broad interest from the user community

that has already been demonstrated will help to hone the approach.

(6) Implement a basic search engine so that spending can be filtered by variables like geography, Federal Supply Codes, and program area. Provide

businesses with an easy way to access projects on which they can bid; at

a time when businesses are struggling, providing details of Recovery-funded

projects serves to create and preserve jobs in local communities. With this,

government agencies will get more qualified contractors bidding on contracts and as a result taxpayers will get more value for their dollar—a

transparent system that is more efficient.

(7) Operate a Recovery Act program assistance center to assist federal, State

and local agencies with compliance, and assist potential recipients of funds

by answering questions about securing grants or contracts. Learnings from

this center should be used to inform further development of the site.

(8) As the dataset grows, provide raw data feeds via APIs to the public at-large.

It is not incumbent on the Federal Government to create unique and interesting views of the data and, instead, by providing data to developers the

public at-large can create engaging user experiences with the underlying

data.

(9) Look for best practices and pockets of innovation across the public and private sectors which can be adopted. To be successful this can’t be onerous

on either State, local and education entities or the private sector contractors

and subcontractors. It is also important to not create an inefficient parallel

universe of data and systems.

The benefits of allowing the public to have access to wide range of data, the tools

to interpret it, and the conduit to build on it, are fundamental to achieving the goals

of transparency and accountability. It is not unreasonable in my opinion to think

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Recovery.gov could have live, searchable data in a 30-to-45 day timeframe but the

hundreds of millions of hits received at Recovery.gov will go to waste unless the data

is available soon.

The communication agency McCann-Erickson’s slogan ‘‘Truth Well Told’’ is an apt

description of what I believe the Recovery.gov web site can achieve.

Conclusion

With that, I’ll conclude by saying that while this may presently feel like an impossible task, there is an enormous opportunity to use Recovery Act tracking to usher

in a new era of transparency, accountability and performance, and set the stage for

generations to come in terms of engaging in a civic discourse with their government.

There will also be a significant culture shift for many who work in the public sector,

and the shift will be particularly pronounced at the State, local and education levels

of government.

The technology is available to turn Recovery.gov into the flagship for government

transparency and accountability. We fully support the important goals that Congress and the Administration have outlined, and we will continue to serve in any

way we can.

Thank you again for inviting me to testify here today, and I look forward to answering any questions that you might have.

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BIOGRAPHY FOR ERIC GILLESPIE

Mr. Gillespie is an accomplished organizational leader and problem-solver recognized for developing and implementing strategic plans. His technology and business

development expertise spans a variety of industries, with emphasis in data and information services, software development, intellectual property and telecommunications. His views on data, technology, innovation and patents have been featured

by leading publications including Fortune, The Economist, the Wall Street Journal,

the International Herald Tribune, Intellectual Asset Management Magazine, and the

Chicago Tribune, among others.

DISCUSSION

Chairman MILLER. Thank you, Mr. Gillespie.

We will now have questions from the Members present, and I

recognize myself for five minutes.

ACHIEVING DETAIL IN DATA TRACKING

Mr. Bass, Dr. Bass, Mr. Gillespie, you heard my questions to, I

think it was Mr. Dodaro, about the Department of Energy having

obligated, contracted for $342 million in funds for the Office of

Science. It is set out in some detail in the appendix, but when you

go to the web site for the DOE, you can’t find anything below the

342 number.

And I asked how they got that number, and apparently they just

went in and looked at the written records and coded by hand. How

is—how difficult a task is it going to be—you touched on this in

your testimony, to get that level of detail, who the contractors are,

how much they got, in a way that can be on a web site that anybody can see and understand?

I guess Dr. Bass first and then Mr. Gillespie.

Dr. BASS. Mr. Chairman, first I would want to clarify that there

are, in essence, really two different reporting systems we are talking about. One is the reporting system from the federal agencies

that is currently happening, and that is where the Department of

Energy data is coming on weekly reports to Recovery.gov. That is

one reporting system.

The second, which was mentioned in the last panel, starts the

October, what is it, 7th? Is that the—10th. October 10? The first

reporting from the recipients, and that will tell us how the money

is actually being spent.

And they are two very different systems. They have to come together.

In terms of the first one, which is the agency reporting, I think

Mr. Gillespie’s point is completely on target that there already is

data that can be made publicly available. It is not rocket science

on how to make that data available. We have weekly reports as you

saw from the screen shot you took that came out of Excel spreadsheets. What Recovery.gov should be gathering today is the detailed

information that GAO got, in a consistent manner from each of the

agencies so that we, the public, can get not only access to it

through Recovery.gov in a searchable format, but access to the underlying data itself through various feeds so we can utilize it and

do various kinds of manipulation.

But having said that, I have got to be mindful that this is going

to be an iterative process. We are going to make mistakes. I think

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the first thing I thought of was when OMB put out guidance to the

agencies initially and told us to have a tag number that said ‘‘Recovery.’’ It had a number, which is great because we could start to

identify the dollars. But they forgot to say ‘‘put the name of the

program,’’ and so we had all these account numbers and no name,

and none of us knew what the heck the programs were with the

account numbers.

They are going to learn from mistakes like that, and I think we

are going to have to have all of us pitch in, and this is going to

be a bipartisan, it is going to be a non-governmental, it is going to

be a governmental effort to get this right.

Chairman MILLER. Mr. Gillespie.

Mr. GILLESPIE. Just to build off of what Dr. Bass said, the data

issue is a significant issue. Not surprisingly, the Department of Energy, people at the Department of Energy have registered at our

web site to look at data and help track data.

It is a large problem, and it gets larger as you get deeper into

State and local, and it is a very different animal at the State and

local procurement level than it is at the federal level and gets

many orders of magnitude greater as you get down lower.

Chairman MILLER. Mr. Gillespie’s business has created for a different reason, for different motive, a technology that does much of

what we want to try to do for purposes of accountability and oversight.

Ms. Brian, is it—how helpful to potential whistleblowers would

it be to have that kind of access to information so they could connect dots before blowing the whistle?

Ms. BRIAN. Well, it is fantastic because essentially, a whistleblower can be a person who walks down the street to see whether

the bridge is being built, and if it is—nothing is going on, that—

they need to be able to figure that out.

So information is the central keystone to being a whistleblower,

and so they need to have access to that information.

Chairman MILLER. I will yield back my last 17 seconds.

Mr. Bilbray.

Mr. BILBRAY. Yes. Thank you, Mr. Chairman. Mr. Chairman, as

the Ranking Member on the procurement Subcommittee of Government Oversight I am running back and forth between hearings, but

it is appropriate.

In fact, one of the things that really has kind of shown up that

one of the blatant problems we have run into in Afghanistan was

not the for-profit contracts but for the non-profit contracts and people claiming to have planted an orchard and then showing the picture of somebody else’s orchard and giving the wrong GPS locations.

MONITORING JOB CREATION

But I want to get back to the ability to count on some of these

things, and I would open this up to any of the panels who wants

to talk about this, but one of the things that is going to be asked

a lot about the success of this program is to calculate how many

jobs were created by this investment. How do we not only assess

it but document the creation of jobs under this program?

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Dr. BASS. I think there are several steps. The first is that we

have to have a better definition of what a job is so that we are all

talking apples to apples here. That is one step.

I think the second is if we do have sub-recipient reporting, Congressman, we will have the real opportunity to get information

from the horse’s mouth, if you will. This is an opportunity in this

model of Recovery Act to have the recipients who actually touch the

dollars to report on literally what kind of jobs they have either

saved or created, and instead of it being filtered one level up and

up and up and up, we have a chance to have it reported directly

so we all can see it.

If it is done in the right manner, we can tie that data to the originating contract so we can see how that all fits with one another.

This isn’t—as I say, in some respects this is a huge task, but we

can break it up into smaller parts and think about the dollars that

are really being dealt with here. We heard from the first panel that

the bulk of the dollars going out the door are really the health care

dollars, the Medicaid dollars.

So we could narrow the focus to some very specific areas like

transportation and other areas to try and tackle this.

Mr. BILBRAY. How do we do this, though, you know, we had an

instance here where the House tried to at least have a minimum

standard of disclosure, and that was the verified for everybody to

participate in the program. Our colleagues on the other side of the

aisle not only did not accept it, they had it stripped. They did not

want that level of investigation of just even checking that the Social Security number of anybody getting the programs or getting

the job, be identified.

With that attitude coming out of, you know, the House of Lords

on the other side, how do we assure the American people that we

are going to have the database, we are going to ask the questions,

we are going to go to the individual who is getting the job to make

sure that they actually had a job, that they were working on? How

do we do that, especially under this environment that we started

off with this thing where you actually had sort of a basic program

that was 99.6 percent successful taken out of the review process

from the get-go? Can we get that back in? Can we, you know, can

we kind of go back and try to recapture that mistake?

Dr. NEWSOME. Well, Congressman, my response is going to be

just perhaps a little off from your question, so I am going to pass

on real quickly, but I want you to know in the HBCU world and

colleges and universities like ours, we would feel ourselves privileged to be in a position to be measured and to be——

Mr. BILBRAY. If you could get——

Dr. NEWSOME. If we could have access.

Mr. BILBRAY. Uh-huh.

Dr. NEWSOME. There is another ‘‘A’’ that has to be added to this,

access, accountability. The first one is access. We would count it an

honor to be in a position to respond to a question like that because

we were receiving funds and being asked to demonstrate that we

were using those funds in the way intended.

Mr. BILBRAY. Now, let me just reinforce the fact—a lot of people

missed out and didn’t realize—not just your institution. You have

Catholic institutions that do huge outreach to disadvantaged, do

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huge outreach into the communities, and because they happen not

to fall under the public guise, they have been fenced out of the system.

Dr. NEWSOME. Absolutely.

Mr. BILBRAY. But let us get back to this data issue. If I can’t

even find out, if I am not even required to check that the Social

Security number and name matches, how can you require me to

track this and document it down the line when—can we add this

in after the fact?

Mr. GILLESPIE. It is a very difficult data problem, Congressman.

It has taken us 10 years to figure out how to do that. We do it

every day, but it is an intractable problem.

There will be close to $100 billion spent by the October 10 date

that Mr. Devaney spoke of on the previous panel that will be out

the door, and unless that level of transparency or that level of

tracking is put in place soon, those funds will be gone, and it will

be a forensic audit that is required to understand it as opposed to

being prognostic or preventative.

Dr. ELLIG. As with other kinds of performance information, you

are going to have to have random audits and other types of procedures to make sure that it is actually—to verify that the information that is being reported is actually accurate.

Ms. BRIAN. I think an additional factor is the deterrent effective

Congressional oversight, and I think having hearings like this on

a continuing basis so people will be afraid not to be reporting

would be a helpful way to keep people honest and reporting as

much as possible.

Mr. BILBRAY. Well, thank you, Mr. Chairman. To be, and you

know, not that I will be proactive, but the fact is I think there was

a strong consensus on both sides of the aisle here that the verify

and starting off with who was being employed was an essential

part of our credibility, and it is too bad that there are powers that

be. And I have a feeling on both of sides of the aisle over in the

Senate, that specifically did not want that kind of accountability,

and I think there is going to be a question asked again and again,

why in the world would you not want to check the minimum if you

are going to promise to be—to check everything else down the line.

And I think that is a real challenge that we have, and it didn’t

start in the House. It, you know, we ended up having to settle for

a deal that came from the Senate, but I still question why were the

people over there so hell bent not to have that accountability.

Thank you.

Dr. BASS. Could I just chime in on——

Chairman MILLER. Dr. Bass.

Dr. BASS.—the last point? I think, Congressman, I think given

what we have today, I think we have to assess the situation as it

is, and what I think is important to understand is that OMB has

the authority to request certain types of information, notwithstanding the specific statutory issue you were referring to, OMB

could be collecting information around what kinds of jobs are being

created, what are the wages being paid, what are the benefits that

people are getting, where are they—where are people who are getting employed, where are they coming from.

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These are the kinds of equity questions that many of us want to

have answered, and I think OMB can collect that.

Mr. BILBRAY. But if you do not know who it is, who got the job,

you can’t audit it. That is the key.

Dr. BASS. I am just saying you can have the authority to get this

far that I have just described.

PROVIDING EQUITABLE FUNDING ACCESS

Chairman MILLER. Dr.—I now recognize myself for another five

minutes.

Dr. Newsome, your testimony has hit upon one of the great frustrations for me in the six years and four months that I have been

in Congress and representing the district that I represent that includes both, for instance, Greensboro, the county of Guilford, and

Caswell County and Yanceyville, the disparity in the personnel,

and the resources to apply for funding programs to identify and

apply for is enormous and it results in an inequity in the funds

that actually flow.

You have identified it as a problem for HBCUs——

Dr. NEWSOME. Yes.

Chairman MILLER.—specifically in getting research funding, that

Shaw is at a competitive disadvantage in that way from—compared

to say, Duke. How can we get out of that? How can we provide

more, a more equitable way of providing grant funding and one

that does not give such an advantage to larger units that have the

personnel, the resources to identify and apply for funding?

Dr. NEWSOME. Thank you, Mr. Chairman. You are quite right in

suggesting that other minority institutions share the same kind of

challenges as Shaw University, and that basically is a kind of economy of scale issue.

I would suggest that one way to begin is by having representatives from these institutions participate in some very strategic conversations and discussions with State personnel in particular, because this is where we are having our logjams, our confusion, our

bottlenecks, and the like, and together work out some ways and

means to free these funds up to flow to these institutions.

At the State level, access is made possible primarily by way of

a web site, and the web site is constantly being bombarded with

all kinds of requests. In other words, it is overused. It is hard to

get through. It is hard to get responses. We need to come together

and have the people who are to benefit from these funds work hand

in hand with those who are charged and have a mandate to make

those funds available to come up with a very satisfactory resolution

and solution. Develop the policies, develop the procedures, and then

hold each other mutually accountable, because accountability

comes to light at that point as well.

The states are charged to make funds available. We want to

make sure those funds get where they should go. The recipients

ought to participate in the development of processes, procedures,

and policies to ensure that that happens.

Chairman MILLER. Okay. Thank you. Mr. Gillespie. I am sorry.

I am calling you when you are reading a note. Maybe your note includes the answer to the question.

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The—I said earlier that your web site—you developed your web

site for reasons that were not the same as the reasons that we are

trying to develop Recovery.gov as an instrument of accountability

and transparency—as a management tool for government—but to

help people who want to contract with the Federal Government.

But its effect is the same, is similar, and you have already run

the traps, many of the traps that Recovery.gov presumably will

have to run. Has anyone from Mr. Devaney’s staff talked to you

about how your web site works, what problems you have encountered, how you have overcome the obstacles, et cetera?

Mr. GILLESPIE. I received the first contact from Mr. Devaney’s office this week and expect to meet with them at the end of this

week.

CLOSING

Chairman MILLER. Okay.

I yield back my balance of my time.

Mr. Bilbray.

Mr. BILBRAY. Thank you, Mr. Chairman.

Chairman MILLER. I think Mr. Bilbray has no further questions

either.

Well, as Ms. Brian and others have suggested, this needs to be

something that we continue. We—when I have heard the phrase,

‘‘Bless us hearty,’’ it means well. It usually is not a compliment,

but the first step in providing accountability—as I have said before—and transparency is that you need to want to provide accountability and transparency. And we have now embarked upon

that, and we may have obstacles, we may not successfully deliver

as much accountability as we had hoped, but this will not be the

last time we spend government funds.

The obstacles that we encounter and overcome will be overcome

for the future. So this is a continuing effort, both with respect to

specifically the stimulus funding, the 500 billion or so that we are

spending, and actually, Mr. Gillespie, I think probably the correct

figure is more like 35 billion. It was only 35 billion in waste. I am

not sure how much comfort we should take in that number being

a little lower because almost 40 percent of the Recovery funds were

actually tax cuts.

But this is something we need to continue, we will continue to

hold hearings, and we hope we will not have to have hearings

where we call miscreants to account, to where our beginning admonishments that witnesses are entitled to counsel and are under

oath will actually be pertinent to the testimony we will get.

Dr. NEWSOME. Mr. Chairman, may I just offer one additional

word?

Chairman MILLER. Dr. Newsome.

Dr. NEWSOME. I serve—thank you. I serve on the North Carolina

State Ethics Commission, and I certainly am a proponent and a

champion for accountability, fair play, but in the final analysis the

end game is results. Results. And this is what this initiative is all

about.

The HBCU community has a short-term economic impact of $10

billion. Our contribution to the job market is around 180,000 plus,

making us the 23rd largest employer collectively in the Nation. Our

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campuses are full of creative and innovative energy. We take a little of nothing and turn it into something miraculous.

Who would have thought that an institution Shaw University’s

size would be helping to stimulate the economy in one of the poorest counties in the entire country, not just North Carolina, through

an NSF grant, paying farmers to grow a crop that grows during the

winter so that we add to their growth cycle, reducing their overhead by taking that crop, providing them fuel, reducing the overhead of the school system so that they can stretch their meager dollars to improve their performance. If we had the funds to augment

what we do, the results would be tremendous, redounding not just

to the benefit of the HBCUs and the contribution that they make

within that world, but to the health and well-being fiscally and otherwise, socially, of the Republic.

Thank you very much.

Mr. BILBRAY. Thank you, and Mr. Chairman, for the record, we

grow our crops in the winter all the time in California, but that is

different.

Chairman MILLER. I didn’t know you had a winter.

Mr. BILBRAY. Just happens to be the largest agricultural state in

the union there.

Chairman MILLER. All right. Before we bring this hearing to a

close, I do want to thank all the witnesses for testifying, and under

the rules of the Committee, the record will remain open for two

weeks for additional statements from Members, as well as for any

answers to any follow-up questions the Committee may have for

the witnesses.

The witnesses are now excused, and the hearing is adjourned.

[Whereupon, at 4:50 p.m., the Subcommittee was adjourned.]

(337)

Appendix:

ANSWERS TO POST-HEARING QUESTIONS

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ANSWERS TO POST-HEARING QUESTIONS

Responses by Earl E. Devaney, Chairman, Recovery Accountability and Transparency

Board

Questions submitted by Representative Paul C. Broun

Urgency of Funding

Q1. One of the selling points of the stimulus bill was that action was needed immediately.

• How long will it take to spend all of the money directed to agencies?

A1. The Office of Management and Budget (OMB) has provided guidance indicating

that 70 percent of stimulus funds will be disbursed by the fall of 2010. The remaining fluids will be disbursed over the life of the program. Some funding is aimed at

providing immediate relief to local and State economies, according to OMB. Other

funding applies to longer-term programs. Federal agency plans and programs are

now posted on the Board’s web site, Recovery.gov.

Contract Management

Q2. At our previous hearing, the DOE IG identified contract administration as ‘‘one

of the most significant management challenges facing the Department.’’ Please

discuss the current status of the Federal Government’s ability to issue contracts

and manage both grants and contracts.

• Does the government have adequate resources to issue, manage, and audit contracts?

• Are its employees adequately trained?

• Are auditing staff levels adequate?

• What can Congress do to help?

A2. In my judgment, Congress provided sufficient funding for these activities, but

staffing levels overall are not adequate. As required by the American Recovery and

Reinvestment Act of 2009 (the Recovery Act), the Board is reviewing whether there

are sufficient qualified acquisition and grant personnel overseeing Recovery funds

and whether they have adequate training. Meanwhile, while I do not believe that

audit staffing is adequate, I should note that Inspectors General are adding personnel to meet the increased demand for reviews, assessments and investigations

of potential Recovery program abuses. At the State and local government level, officials continue to tell us that they desperately need funds to adequately carry out

their oversight functions.

Barriers to Spending

Q3. In order to get money out the door and into communities quickly, have agencies

developed streamlined processes to expedite funding?

• Do these processes run the risk of increasing waste, fraud, and abuse?

• How do you, the agencies, or specific Inspectors General plan to prevent this?

• What types of barriers do agencies face when trying to push money out the

door? (Davis-Bacon, federal bidding practices, environmental regulations, etc.).

A3. On April 3, 2009, OMB provided guidance to all federal agencies issuing federal

contracts under the Recovery program to ‘‘expeditiously award contracts using available streamlining flexibilities.’’ The guidance also directed that agencies ‘‘effectively

expedite recovery expenditures in a manner that does not compromise program objectives or increase the risk of unintended consequences (e.g., accounting and/or payment errors, waste, fraud, etc.).’’

The risk of fraud and abuse is heightened, of course, when streamlined processes

are used. All federal agencies must make sure that they have rigorous safeguards

in place to closely monitor grants and contracts awarded under the Recovery Act.

These agencies also should review their contracting needs and add, as necessary,

contracting officers and program managers. Among other oversight issues, agencies

will need to closely monitor contracts to be certain that performance, cost and schedule goals are met.

At the Recovery Board and in the Inspector General community, we are focused

on detecting and preventing misuse of stimulus funds. I foresee the Board actively

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detecting fraud trends, identifying best practices for conducting reviews, and designing risk-based strategies to help focus the oversight community’s limited resources.

When fraud is detected, the Board will work closely with the Department of Justice

to ensure that a swift, coordinated inquiry follows. We have already received significant input from the Government Accountability Office, and we are a building a productive relationship with the GAO. To be successful in combating misuse of Recovery Act funds, the Board believes that it must forge close working relationships with

our State and local oversight partners. We are doing that. Finally, the best way to

deal with funding barriers is for agencies to put in place sufficient numbers of qualified acquisition and grants personnel.

Jobs Creation

Q4–Q8.

A4–A8. The Recovery Act delegates to the Board several critical functions, some of

which I discussed in the earlier answers. Jobs creation questions would be best answered by the Council of Economic Advisers. I suggest that you contact Scott

Adams, Senior Economist at the CEA, at (202) 395–1455.

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1See GAO, Recovery Act: As Initial Implementation Unfolds in States and Localities, Continued Attention to Accountability Issues Is Essential, GAO–09–580 (Washington, D.C.: Apr. 23,

2009). The Recovery Act directs GAO to conduct bimonthly reviews of the use of funds by selected states and localities. 2For more information about Recovery Act spending time frames, see the presentation by

CBO’s Director entitled Implementation Lags of Fiscal Policy to the International Monetary

Fund Fiscal Affairs and Research Departments Conference on Fiscal Policy on June 2, 2009.

ANSWERS TO POST-HEARING QUESTIONS

Responses by Gene L. Dodaro, Acting Comptroller General, U.S. Government Accountability Office

Questions submitted by Representative Paul C. Broun

Q1. One of the selling points of the stimulus bill was that action was needed immediately. How long will it take to spend all of the money directed to agencies?

A1. The American Recovery and Reinvestment Act of 2009 (Recovery Act) is esti- mated by the Congressional Budget Office (CBO) to cost $787 billion over the next

ten years. As we reported in our first bimonthly report on Recovery Act spending,1

the timeline of Recovery Act spending has been a key issue in the debate and design

of the Recovery Act because of the elapsed time until the appropriated funds are

spent. Figure 1 shows that, of the $282 billion appropriated for State and local governments, the Federal Government expects to outlay almost 60 percent of the funds

by October 2010. The remaining payments of Recovery Act funds drop off rapidly

in subsequent years.

Over time, the programmatic focus of Recovery Act spending will change.2 For example, about two-thirds of Recovery Act funds expected to be spent by states in the

current 2009 fiscal year will be health related, primarily temporary increases in

Medicaid FMAP funding. Health, education, and transportation are estimated to account for about 90 percent of fiscal year 2009 Recovery Act funding for states and

localities. However, by fiscal year 2012, transportation will be the largest share of

State and local Recovery Act funding. Taken together, transportation spending,

along with investments in the community development, energy, and environmental

areas that are geared more toward creating long-run economic growth opportunities,

will represent about two-thirds of State and local Recovery Act funding in 2012.

Q2. At our previous hearing, the DOE IG identified contract administration as ‘‘one

of the most significant management challenges facing the Department.’’ Please

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3GAO, High-Risk Series: An Update. GAO–09–271 (Washington, D.C.: Jan., 2009). 4GAO, NOAA: Next Steps to Strengthen Its Acquisition Function, GAO–06–594, (Washington,

D.C.: Jun. 7, 2006). 5See GAO, Geostationary Operational Environmental Satellites: Acquisition Is Under Way, but

Improvements Needed in Management and Oversight, GAO–09–323, (Washington, D.C.: April 2,

2009). 6GAO’s bimonthly Recovery Act work is focused on 16 states and the District of Columbia—

representing about 65 percent of the U.S. population and two-thirds of the intergovernmental

federal assistance available through the Recovery Act.

discuss the current status of the Federal Government’s ability to issue contracts

and manage both grants and contracts.

• Does the government have adequate resources to issue, manage, and audit contracts?

• Are its employees adequately trained?

• Are contracting staff levels adequate?

• Are auditing staff levels adequate?

• What can Congress do to help?

A2. While we have not conducted a comprehensive review of the Federal Government’s ability to issue contracts and manage grants and contracts, we track a number of federal contracting activities on the high-risk list that GAO maintains.3 A

survey of recent information from various agencies’ inspectors general (IGs) and previous GAO work indicates that contract management will be a challenge for federal

agencies and State and local governments in the efficient and effective delivery of

Recovery Act funds.

The ability of individual agencies to issue contracts and manage grants and contracts varies by agency. For example, the National Science Foundation (NSF) believes it has qualified grants and contract management staff in place. To speed the

process for awarding of research grants, NSF plans to use more than $2 billion in

Recovery Act funds to support grant proposals that were previously recommended

for funding through NSF’s peer review process but for which it did not have sufficient funds. In addition, on May 11, 2009, shortly after receiving approval of its Recovery Act spend plan from the Office of Management and Budget (OMB) and Congressional committees, NSF posted solicitations for awarding funding of its Academic Research Infrastructure and Major Research Instrumentation programs—two

of four programs for which it did not have in-house proposals. By contrast, the Department of Commerce’s Inspector General in March 2009 testified that spending

Recovery Act funds effectively and in a manner that meets the Act’s economic objectives poses significant risks for Commerce and will put significant strain on a number of already stretched resources and vulnerable operations. Specifically, the Commerce IG testified that the Recovery Act’s emphasis on grants and contracts spending puts additional pressure on weak management and administrative operations,

particularly with regards to the department’s shortage of qualified contracting specialists, technical specialists, and subject matter experts.

We have found examples of agency contract management and procurement issues

in our work. For example, in June 2006, we reported that Commerce’s National Oceanic and Atmospheric Administration (NOAA) lacked a knowledge-based process for

developing and producing complex systems—a situation that can increase the risk

of cost increases and schedule delays.4 In April 2009, we reported on the next generation of geostationary operational environmental satellites, called the Geostationary Operational Environmental Satellite-R series—which are under procurement by NOAA along with the National Aeronautics and Space Administration

(NASA). Specifically, we found that the program’s cost, schedule, and scope have

changed, key milestones are likely to be delayed, and improvements are needed in

management and oversight of the program.5

Regarding the adequacy of auditing staffs, our first bimonthly review of the use

by selected states and localities of Recovery Act funds found that many states are

concerned about their ability to track Recovery Act funds due to State hiring freezes

that resulted from budget shortfalls. For instance, New Jersey has not increased (1)

the number of State auditors or investigators, (2) funding specifically for Recovery

Act oversight, or (3) the Recovery Act oversight efforts by many State agencies.6

Moreover, State officials expect the Recovery Act to incur new regulations, increase

accounting and management workloads, change agency operating procedures, require modifications to information systems, and strain staff capacity, particularly for

contract management. To address states’ needs to meet the Recovery Act’s increased

audit requirements with a reduced number of staff, we recommended that the DirecVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00121 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
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tor of OMB should timely clarify what Recovery Act funds can be used to support

State efforts to ensure accountability and oversight.

Regarding possible Congressional actions, we believe that Congressional oversight

hearings have the salutary effect of encouraging all parties involved—federal agencies, State and local governments, and the auditors—to redouble their efforts to ensure that federal funds are effectively and efficiently spent in compliance with laws

and regulations.

Q3. In order to get money out the door and into communities quickly, have agencies

developed streamlined processes to expedite funding?

• Do these processes run the risk of increasing waste, fraud, and abuse?

• How do you, the agencies, or specific Inspectors General plan to prevent this?

• What types of barriers do agencies face when trying to push money out the

door? (Davis-Bacon, federal bidding practices, environmental regulations, etc.).

A3. A review of agency responses to us in preparing this testimony show the Department of Commerce, the Department of Energy (DOE), and NSF have all reported taking steps to minimize the potential for waste, fraud and abuse of Recovery

Act spending, while trying to meet government objectives that funds be spent quickly. Specifically:

• Commerce IG staff responsible for oversight of R&D-related Recovery Act

funds met with the National Institute for Standards and Technology’s (NIST)

Deputy Director and Chief Financial Officer (CFO) in early March 2009 to

discuss how to approach oversight. At that time, NIST staff gave the IG staff

an oversight and spending plan of its Recovery Act funds. In addition, the

Commerce IG staff had identified R&D-related high-risk programs that were

slated to receive Recovery Act funds and had begun approaching the appropriate programmatic officials to get further details of the agencies’ spending

plans.

• DOE’s CFO has employed a detailed tracking system linked to its existing accounting system that allows DOE to track recovery funds at the individual

project level. A DOE official told us that because DOE knew that Recovery

Act funds would need to be spent quickly, but in an accountable and transparent way, the department required each program office to prepare two-page

summaries of proposals for spending for DOE management review to assess

internal controls and risk management as a basis for approving funding. In

addition, DOE’s IG staff conducted briefings on fraud awareness for DOE employees who oversee Recovery Act funds.

• NSF officials report the foundation has developed formal policies and procedures for implementing the Recovery Act, a framework for allocating funds,

and effective management processes, refined over many decades, to ensure

that Recovery Act funds are awarded in a timely manner while maintaining

the integrity of award management processes. NSF has designated a Senior

Accountability Officer to oversee a Recovery Act Steering Committee drawn

from across the agency. Many members of the steering committee themselves

direct ‘‘tiger teams’’ with specific responsibilities aligned with the requirements of the Recovery Act. With regards to awarding funds, NSF has an established merit review process, which relies on a pool of volunteer national

and international experts, to evaluate the grant proposals the foundation receives. In addition, NSF believes it can spend the research grant funds quickly without bypassing its established merit review procedures because it has

grant proposals totaling more than $2 billion that its peer review panels earlier this fiscal year had judged were worthy of funding; however, NSF could

not fund these proposals because grant proposals substantially exceeded its

annual appropriation to support research grants.

In carrying out our responsibilities under the Recovery Act, we will continue to

evaluate State and local uses of funds and will continue to coordinate with the IG

and State auditor communities.

Q4. Since the goal of the stimulus bill is to create jobs, has anyone in your office

been tasked with verifying the number of jobs a specific grant or project will actually create?

A4. The Recovery Act directs GAO to examine the use of Recovery Act funds by selected states and localities. The act also expects GAO to review and comment on

estimates of the number of jobs created and the number of jobs retained that states

and localities submit in quarterly reports under the Act.

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7GAO–09–580.

Recipient reporting is required to begin on October 10, 2009, with subsequent

quarterly reports due thereafter. GAO has formed a team internally to review these

recipient reports. The team includes research methodologists, specialists in intergovernmental relations, and GAO’s chief economist. Together, this team is developing

a methodology for commenting on estimates of the numbers of jobs created or retained as reported by funds recipients. GAO will review analytical efforts to estimate the direct and indirect effects of Recovery Act spending on employment, recognizing the limitations of such models in predicting Recovery Act effects because of

their restricted geographical focus and imperfections in representing the complexity

of economic interactions.

Q5. A central objective of the stimulus funding is to ‘‘create or save 3.5 million jobs.’’

This has been stated by President Obama numerous times and will likely be a

key measure through which the success or failure of stimulus funding is measured. However, Dr. Ellig notes in his testimony that measuring the effect of stimulus spending on employment is very difficult to verify and validate, and that

agencies will need to work with OMB and others to develop methods for obtaining credible estimates. In particular, he notes that such efforts must account for

the net effect of job creation because some people may simply switch jobs from

their current position to one created by federal spending.

• Do you agree with Dr. Ellig’s assessment of the difficulties associated with determining jobs ‘‘created or saved?’’

• Do you think it is possible to obtain such measurements with intensive efforts?

• Do you believe the existing guidance to agencies on how best to obtain job estimates provides adequate guidance on how to calculate a credible estimate of

jobs created or saved?

• How would you suggest we evaluate the success or failure of this goal?

A5. In our first bimonthly report of the use by selected states and localities of funds

made available under the Recovery Act, we reported that OMB took an important

step in its April 3 guidance by issuing definitions, standard award terms and conditions, and clarified tracking and documenting Recovery Act expenditures;7 however,

we recommended that OMB continue to identify methodologies that can be used to:

• assess jobs created and retained from projects funded by the Recovery Act;

• determine the impact of Recovery Act spending when job creation is indirect;

and

• identify those programs, projects, or activities that in the past have demonstrated substantial job creation or are considered likely to do so in the future. Consider whether the approaches taken to estimate jobs created and

jobs retained in these cases can be replicated or adapted to other programs.

In addition, we noted that one way to develop these methodologies is to establish

a working group of federal, State, and local officials and subject matter experts.

OMB concurred with our overall recommendations. Furthermore, technical and

practical issues about recipient reporting are part of an ongoing discussion in which

GAO is participating—with OMB and representatives from State and local audit organizations—during weekly conference calls. OMB is expected to issue another

round of guidance on recipient reporting in mid-June.

Requiring recipients of Recovery Act funds to report jobs created or retained will

focus efforts on spending that creates employment and generates income. However,

the full impact of Recovery Act spending on employment and national income can

be tallied only at the aggregate level because of the complexity of the economy,

which makes it impossible to trace the direct and indirect impact of job creation or

retention from a single project or even a group of projects. Recipient reports on jobs

created or retained provide one perspective on the performance of local, State, and

regional economies and can be placed in context to allow assessment of the consistency of Recovery Act spending impacts with stronger economic growth.

Q6. Since employment was marketed as a rationale for the stimulus, and this committee is tasked with oversight of science, are there any difficulties determining

employment related to science money?

• Will science money more likely go to experienced and established principal investigators, or newer scientists?

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8 CBO letter dated March 2, 2009, to Senator Charles Grassley estimating year-by-year economic effects of the Recovery Act.

• Does the government currently have a system to monitor and track this sort

of information?

• If the money is more likely to go to proposals from more experienced PIs, then

how does this affect employment?

• If the money goes to less experienced PI’s and spurs employment, then what

happens after the money dries up? Have we created an unsustainable system?

A6. GAO identified more than $21 billion in Recovery Act funds that will broadly

support R&D activities at Commerce, DOE, NSF, and NASA. GAO is not aware of

any system the government currently has in place to monitor and track information

about Recovery Act funds received by individual principal investigators (PIs) or to

determine whether funds are being received by established PIs versus newer PIs.

Each agency receiving Recovery Act funds is establishing its own criteria for awarding these funds to applicants who meet these criteria. For example:

• NSF officials told us they are giving special consideration to those proposals

that would fund new investigators and/or are considered ‘‘highly transformative’’—high risk, and high payoff research activities.

• A DOE official responsible for standing up the new Advanced Research

Projects Agency–Energy (ARPA–E) told us that ARPA–E will focus on highrisk, high-potential, transformational energy technology projects that would

not have a place in the rest of DOE.

• Other R&D funds, such as funds for NASA’s Earth Science program, are

planned for expenditure using contracts rather than grants to individual PIs.

GAO has not evaluated the extent to which the scientific community will be affected by the absence of Recovery Act funds once Recovery Act-supported projects

are complete.

Q7. How do you calculate the employment effects of stimulus money associated with

science?

• In determining the net effect, should we count only the Principal Investigator,

or also research assistants and ‘‘downstream’’ employment as well?

• How should the government account for a Principal Investigator who already

has several grants and receives additional grants through stimulus money?

A7. Small research projects are likely to include the PI and a post-doctoral student

or a graduate student. Large research projects might include the PI, research team

leaders, post-doctoral associates, graduate students, and technicians. A calculation

of the employment benefits of the Recovery Act should consider only the portion of

the time that each research team member, including the PI, is scheduled for the

project. Because a post-doctoral associate or graduate student is more likely to work

full-time on the grant project, their positions could appropriately be counted among

new jobs created or jobs retained. However, it would seem inappropriate to count

a PI who is a university faculty member and working on at least one other grant

project as a job created or retained.

Q8. How should the government account for stimulus money that ‘‘crowds out’’ or

limits venture capital and private investment? Is there any way to determine the

amount of private investment prevented by public money?

A8. CBO’s macroeconomic model incorporates a basic assumption that, in the long

run, each dollar of additional debt crowds out about a third of a dollar’s worth of

private domestic capital (with the remainder of the rise in debt offset by increases

in private saving and inflows of foreign capital). Because of uncertainty about the

degree of crowding out, however, CBO has incorporated both more and less crowding

out into its range of estimates of the long-run effects of the Recovery Act legislation.8

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ANSWERS TO POST-HEARING QUESTIONS

Responses by Gary D. Bass, Founder and Executive Director, OMB Watch

Questions submitted by Representative Paul C. Broun

Job Creation

Q1. How hard is it to determine if a job has been created by the stimulus act?

• Do you have any recommendations for how the government should calculate

this net total?

A1. While I do not have the expertise to answer how hard it would be to determine

if a job has been created by the Act, I can say that the definition of a ‘‘job’’ must

first be consistent across all Recovery Act reporting.

OMB guidance on Recovery Act reporting (OMB memo M–09–15) states that recipients are to report a brief description and an estimate of the jobs created or retained. Job creation and retention figures are to be based on aggregate hours

worked converted into a figure for full-time-equivalent (FTE) positions. Yet it leaves

it up to each recipient to determine how many hours equal a FTE, which will lead

to substantial inconsistencies. It would be advisable to require recipients to report

the aggregate hours figure as well as the FTEs, so that analysts can make valid

comparisons.

I am also very concerned about OMB’s method of job estimate data collection. In

reference to an April 1, 2009 Federal Register Notice ‘‘Information Collection Activities: Proposed Collection; Comment Request,’’ (74 FR 14824), OMB specifies the format of the data that are to be collected from Recovery Act fund recipients. In the

notice, OMB indicates that an estimate of the number of jobs created or retained

be included in a narrative description of the Act’s impact on employment. If jobs,

or ‘‘full-time equivalents’’ (FTEs) are not reported as numbers—that is, data that

can be added, sorted, compared, etc.—it will be next to impossible to assess the total

number of jobs created or retained per project or for all of Recovery Act spending.

For example, if FTEs are reported in a separate numbers field, a web site database

using data from Recovery.gov could show users a summation of the FTEs resulting

from Recovery Act projects; sort projects by number of jobs created; or show just

those projects that created more than 100 jobs. If the number of FTEs appears within a block of text, this sort of analysis becomes much more difficult, if not impossible, to execute. Additionally, there should be an indicator of whether a job has

been created or retained so that the data can be sorted in that manner. It is likely

best to include this in a separate data field that corresponds to the jobs data.

Q2. A central objective of the stimulus funding is to ‘‘create or save 3.5 million jobs.’’

This has been stated by President Obama numerous times and will likely be a

key measure through which the success or failure of stimulus funding is measured. However, Dr. Ellig notes in his testimony that measuring the effect of stimulus spending on employment is very difficult to verify and validate, and that

agencies will need to work with OMB and others to develop methods for obtaining credible estimates. In particular he notes that such efforts must account for

the net effect of job creation because some people may simply switch jobs from

their current position to one created by federal spending.

Q2a. Do you agree with Dr. Ellig’s assessment of the difficulties associated with determining jobs ‘‘created or saved?’’

A2a. Yes. Arriving at reliable estimates of job creation and retention is certainly a

daunting challenge.

Q2b. Do you think it is possible to obtain such measurements with intensive efforts?

A2b. Although I agree that it will be somewhat difficult to measure job creation and

retention estimates, I am not skilled enough to say whether such efforts are entirely

futile.

Q2c. Do you believe the existing guidance to agencies on how best to obtain job estimates provides adequate guidance on how to calculate a credible estimate of

jobs created or saved?

A2c. As I noted in my answer to the first question, the OMB guidance on job estimation is critically flawed: OMB allows recipients of Recovery Act funds to determine how many weekly hours comprise a ‘‘full time equivalent,’’ which certainly create substantial inconsistencies in job-creation data. And as I also noted, the form

346

of the data that are to be collected will hinder even simple analyses by federal agencies and outside stakeholders.

Q2d. How would you suggest we evaluate the success or failure of this goal?

A2d. I do not have the expertise to address this question.

Q3. Since employment was marketed as a rationale for the stimulus, and this committee is tasked with oversight of science, are there any difficulties determining

employment related to science money?

Q3a. Will science money more likely go to experienced and established principal investigators, or newer scientists?

A3a. I do not have the expertise to address this question.

Q3b. Does the government currently have a system to monitor and track this sort of

information?

A3b. OMB guidance leaves this type of data collection requirement up to the federal

agencies. If, for example, the Department of Energy would like track the level of

experience of scientists and principal investigators working on Recovery Act

projects, it could require recipients of DOE Recovery Act funds to report that data.

However, because OMB grants such leeway to federal agencies, there is little opportunity, if any, for Members of Congress or the public to comment on which types

of data should be collected by the federal agencies.

Q3c. If the money is more likely to go to proposals from more experienced PIs, then

how does this affect employment?

A3c. I do not have the expertise to address this question.

Q3d. If the money goes to less experienced PIs and spurs employment, then what

happens after the money dries up? Have we created an unsustainable system?

A3d. I do not have the expertise to address this question.

Q4. How do you calculate the employment effects of stimulus money associated with

science?

Q4a. In determining the net effect, should we count only the Principal Investigator,

or also research assistants and ‘‘downstream’’ employment as well?

A4a. I do not have the expertise to address this question.

Q4b. How should the government account for a Principal Investigator who already

has several grants and receives additional grants through stimulus money?

A4b. I do not have the expertise to address this question.

Crowding Out

Q5. How should the government account for stimulus money that ‘‘crowds out’’ or

limits venture capital and private investment?

• Is there any way to determine the amount of private investment prevented by

public money?

A5. I do not have the expertise to address this question. However, I would note that

OMB Watch believes federal spending on community investments that create sustainable jobs will help the economy as well as invest in our future.

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1http://www.whitehouse.gov/omb/assets/memoranda¥fy2009/m09-15.pdf 2 Congressional Budget Office, A Preliminary Analysis of the President’s Budget and an Update of CBO’s Budget and Economic Outlook (March 2009), p. 29 available at http://

www.cbo.gov/ftpdocs/100xx/doc10014/03-20-PresidentBudget.pdf

ANSWERS TO POST-HEARING QUESTIONS

Responses by Jerry Ellig, Senior Research Fellow, Mercatus Center, George Mason

University

Questions submitted by Representative Paul C. Broun

Q1. How hard is it to determine if a job has been created by the stimulus act? Do

you have any recommendations for how the government should calculate this net

total? Do you agree with Dr. Ellig’s assessment of the difficulties associated with

determining jobs ‘‘created or saved’’? Do you believe the existing guidance to

agencies on how best to obtain job estimates provides adequate guidance on how

to calculate a credible estimate of jobs created or saved? Do you think it is possible to obtain such estimates with intensive efforts? How would you suggest we

evaluate the success or failure of this goal?

A1. The Office of Management and Budget’s April 3, 2009 Recovery Act guidance

to agencies makes a good start by defining what counts as jobs ‘‘created’’ and ‘‘retained,’’ specifying that all jobs should be reported as full-time equivalents, and encouraging recipients to specifically identify jobs attributable to the Recovery Act as

opposed to other federal awards.1

But focusing on recipients’ reporting to agencies misses a much bigger issue. The

Recovery Act might create jobs, induce people to switch jobs, or do some of both.

‘‘Job creation’’ figures reported by recipients of funding will include both kinds of

jobs. If a goal of the Recovery Act is to create more employment than would have

existed in its absence, then we will not know if this goal was accomplished unless

we know the net amount of employment created.

It is impossible for recipients of the money to calculate the net number of jobs

created or preserved by the stimulus spending. Even if the recipients conscientiously

do their best to present accurate numbers reflecting positions created or retained

in their organizations, they cannot know whether some of the people they hired or

retained would have been hired elsewhere. Some of the people hired or retained

would otherwise have been unemployed for some period of time, but others may

have moved from another job or would have found work elsewhere in the absence

of the stimulus spending. We cannot correct for this problem simply by instructing

recipients to report whether they hired unemployed people or retained people they

had been planning to lay off. It is not enough to know whether someone hired with

stimulus money was formerly unemployed or would have been discharged. We need

to know if that person would have been employed elsewhere in the absence of the

stimulus spending. It is unreasonable to expect the recipients of the stimulus money

to know this.

For this reason, even if the job figures reported by recipients of the funding really

do represent the most accurate estimate of jobs created or saved in their organizations, the reported figures will inevitably overstate the net number of jobs created

or retained. Merely reading the numbers reported in the database will, therefore,

overstate the effects of the Recovery Act on employment.

The ‘‘intensive effort’’ that needs to take place is not placing additional job reporting burdens on the recipients of the funding. Rather, the intensive effort needs to

take the form of rigorous macroeconomic analysis that determines how many net

jobs were created or preserved, after taking into account the effects of both the

spending and the borrowing. This requires examining how total employment responds to changes in spending and borrowing.

This is not easy and will inevitably be contentious. Policy-makers would do well

to keep in mind this statement from the Congressional Budget Office’s preliminary

analysis of the President’s budget in March:

Even after the fact, it will be quite difficult to assess the impact of ARRA on

the economy. Uncertainty is great about both how the economy would perform

in the absence of fiscal stimulus and the impact of stimulus. The best estimates

of the impact of stimulus will come later, from studies carefully designed to isolate the effects of particular categories of stimulus from other influences on the

economy.2

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Q2. Are there any difficulties determining employment related to science money? Will

science money more likely go to experienced and established principal investigators, or newer scientists? Does the government currently have a system to monitor and track this sort of information? If the money is more likely to go to proposals from more experienced PIs, then how does this affect employment? If the

money goes to less experienced PIs and spurs employment, then what happens

after the money dries up? Have we created an unsustainable system?

A2. Because of the speed with which the money is supposed to be spent, money

going to scientists will likely go to those who are best at getting their grant applications in quickly. This probably provides an advantage to more experienced scientists

who are already very familiar with the application processes and likely have many

well-developed ideas for research projects. As Dr. Newsome suggested in his testimony, the process probably also favors larger institutions with larger grants and

contracts staffs who have the time to keep track of available funding and respond

rapidly.

The question about sustainability is an excellent one, but it is not at all unique

to science-related spending. The spending in the Recovery Act is supposed to occur

quickly and temporarily, over the course of a few years. It is not supposed to permanently increase the size of federal expenditures. It is doubtful that the majority of

the jobs it directly funds will be sustainable after federal spending returns to more

normal levels. The theory underlying the Recovery Act is that having the Federal

Government borrow money to put people to work will lead to a more rapid economic

recovery. But there is no guarantee that the jobs that become available and sustainable as the economy recovers are the same ones the government is funding. For example, the Recovery Act will fund many road projects, but once the economy recovers the available jobs may well be in the airline or hotel industries. In short, many

of the people who take jobs funded under the Recovery Act may find that they have

to look for some other kind of employment after the Recovery Act spending stops

in a few years.

Q3. How do you calculate the employment effects of stimulus money associated with

science? In determining the net effect, should we count only the principal investigator, or also research assistants and ‘‘downstream’’ employment as well? How

should the government account for a principal investigator who already has several grants and receives additional grants through stimulus money?

A3. In principle, the employment effects of stimulus money associated with science

should be accounted for in the same way that employment effects of other spending

are accounted for. If the funding leads a principal investigator to hire additional research assistants or other staff, then these jobs could be counted as jobs created by

the stimulus spending.

If much of the research funding goes to experienced scientists who already have

grants, then one of several possible effects on employment could happen. An experienced PI might simply work longer hours, and thus the stimulus money might be

said to create ‘‘over-employment’’—the equivalent of working overtime. I do not

know whether this was anticipated when the legislation was passed. An experienced

PI might also direct a larger number of grants by bringing in more help and delegating more. In this case, the employment effect will not be to employ more PIs,

but to employ more junior colleagues, research assistants, and others to whom work

can be delegated. Assuming this is new employment, the situation seems no different than that of any other government contractor who adds personnel without

adding more top-level managers.

Q4. How should the government account for stimulus money that ‘‘crowds out’’ or

limits venture capital and private investment? Is there any way to determine the

amount of private investment prevented by public money?

A4. This question could be interpreted in two different ways. One way stimulus

money might ‘‘crowd out’’ private funding is if the money is spent on projects the

private sector would otherwise have funded. Alternatively, even if the money is

spent on projects the private sector would not have funded, it is possible that the

government spending merely displaces private investment or consumption spending.

In either case, the government spending would not increase the total amount of economic activity or employment.

The best way to prevent stimulus money from displacing projects that the private

sector would have funded is to ensure that the money is spent on projects that economic analysis suggests the private sector might under-provide. Basic research, for

example, might be under-provided by the private sector if it is difficult for private

firms to profit from research results that add to the general stock of human knowlVerDate 11-MAY-2000 15:07 Oct 23, 2009 Jkt 047858 PO 00000 Frm 00128 Fmt 6601 Sfmt 6621 C:\DWORK\I&O09\031909\47858A SCIENCE1 PsN: SCIENCE1
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3http://www.whitehouse.gov/administration/eop/cea/factsheets¥reports/

edge. More applied research that produces knowledge which can be protected by patents or trade secrets is less likely to be under-provided by the private sector. Therefore, the government can minimize crowding out of private research by focusing on

basic research that the private sector is unlikely to fund. Similarly, federal highway

funding could displace private investment in highways if it is used for projects that

could be financed by tolls. Federal highway funding is less likely to displace private

funding if it focuses on projects where tolling would not be practical.

The broader concept of ‘‘crowding out’’ stems from government borrowing to finance the Recovery Act. Government borrowing displaces at least some private investment, because the funds borrowed by the government are not available for other

borrowers. In the short-term, this means that the private sector borrows and invests

less, which can be expected to have a depressing effect on employment that partly

counteracts the stimulative effect of the government spending. Over the longer-term,

the economy may be less productive because there is less private capital.

The Recovery Act might not just crowd out private investment spending; it might

also crowd out private consumption spending. The government spends more, borrows the money from citizens, and citizens spend less than they otherwise would

have spent.

The exact size of any offsetting effects on investment or consumption spending

will be vigorously contested, even by well-meaning economists who are not pursuing

partisan or ideological agendas. Essentially, determining whether the Recovery Act

increases economic activity and employment boils down to a test of the Keynesian

economic model, which posits that government can expand GDP and employment

in a recession by borrowing and spending or cutting taxes. The Council of Economic

Advisers estimated the employment impact of the Recovery Act by using ‘‘multipliers’’ to project the effects of the spending and tax cuts on Gross Domestic Product,

then using rules of thumb to calculate the number of jobs the projected increase in

GDP would produce.3 If the CEA uses similar methods to assess the effects of the

Recovery Act on jobs, the resulting numbers will only be as reliable as the underlying Keynesian macroeconomics.

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ANSWERS TO POST-HEARING QUESTIONS

Responses by Eric Gillespie, Senior Vice President of Products, Technology, and Innovation and Chief Information Officer, Onvia, Inc.

Questions submitted by Representative Paul C. Broun

Recovery.gov

Q1. In your testimony you mention a number of recommendations for a Representative in Congress from the State of Recovery.gov.

• How early will those recommendations need to be adopted before more reporting starts to flow into the web site?

A1. A majority the recommendations made across panel members should have been

accounted for immediately following passage of the legislation and prior to capital

flowing to agencies. In some cases the directives issued by the Office of Management

and Budget (OMB) have clarified reporting requirements, but in others the requirements of federal, State and local agencies remain unclear.

Assumptions have been made by the Recovery Accountability and Transparency

Board (RATB) about the requisite level and quality of data for the Recovery.gov web

site. The RATB has spending oversight and investigative responsibility using reported data, with the Recovery.gov web site as an appendage. The site as envisaged

was intended to first provide visibility into stimulus spending to the public at-large;

the approach thus far, however, has been to provide an audit-level standard for use

by the Inspector General community to root out fraud, waste and abuse. While

clearly an important and necessary goal, setting the standard exclusively at this

level creates a latent view of the information for an audience that doesn’t require

such stringent standards.

The recommendations made by panel members should be undertaken immediately. Reporting and presenting basic datasets on the web site can and should

begin immediately. Perfecting the data and standards for audit purposes, or for that

matter for broader pubic visualizations, can occur over time. There is no downside

risk, rather only upside gain, to immediately exposing the data that is available.

Job Creation

Q2. Since employment was marketed as a rationale for the stimulus, and this committee is tasked with oversight of science, are there any difficulties determining

employment related to science money?

A2. There are significant issues with determining actual employment affected by

the legislation, both related to science funds and not related to science funds. The

original estimations made in the Job Impact of the American Recovery and Reinvestment Plan paper authored by Christina Romer, Chairman of the Council of Economic Advisors, and Jared Bernstein, Chief Economic Advisor to the Vice President,

have proven to be optimistic, but moreover, the formulaic process used to assess jobs

‘‘created or saved’’ has been widely challenged.

Chairman Max Baucus recently stated to Treasury Secretary Timothy Geithner

during a March hearing of the Senate Finance Committee, ‘‘You created a situation

where you cannot be wrong. If the economy loses two million jobs over the next few

years, you can say yes, but it would’ve lost 5.5 million jobs. If we create a million

jobs, you can say, well, it would have lost 2.5 million jobs. You’ve given yourself

complete leverage where you cannot be wrong, because you can take any scenario

and make yourself look correct.’’

The challenge is particularly pronounced when attempting to calculate jobs related to investments in science and technology. By its very nature, the economic impacts of research and development capital are often seen over very long periods of

time, especially when considering the many large and seemingly intractable problems often addressed by federal agencies such as the National Institutes of Health,

NASA, or the National Science Foundation. The indirect benefits of these investments are many but often immeasurable.

Q2a. Will science money more likely go to experienced and established principal investigators, or newer scientists?

A2a. It is unclear at this point in my opinion. One might assume, however, since

capital is being allocated through existing programs without fundamental changes

at the agency level, that the ratio of money going to established PIs versus newer

scientists will be comparable to historical patterns.

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Q2b. Does the government currently have a system to monitor and track this sort of

information?

A2b. I do not have an opinion on this subject.

Q2c. If the money is more likely to go to proposals from more experienced PIs, then

how does this affect employment?

A2c. I do not have an opinion on this subject.

Q2d. If the money goes to less experienced PIs and spurs employment, then what

happens after the money dries up? Have we created an unsustainable system?

A2d. In a recent presentation to the International Economic Development Council,

the highly respected economic modeling firm Regional Economic Models, Inc. forecasted that the net effect of the stimulus legislation on both jobs and GNP will go

negative in 2014 and through the outer years without additional intervention and

assistance by the Federal Government.

Subsequent modeling demonstrated that investments in education, with related

labor productivity, make job creation more sustainable over time. This would argue

for more investment in science and technology education to create a sustainable

model.

Q3. How do you calculate the employment effects of stimulus money associated with

science?

A3. For formulaic estimation, which has historically presented a grossly inaccurate

view of reality, actual performance results are required for ‘‘backtesting’’ analysis

and to estimate current impacts.

The question, in my opinion, should be ‘‘How do we take actual results from stimulus spending and use those results to inform future appropriations and spending?’’

in order to maximize the return on science and technology investments using taxpayer dollars.

Q3a. In determining the net effect, should we count only the Principal Investigator,

or also research assistants and ‘‘downstream’’ employment as well?

A3a. In order to accurately measure the efficacy of stimulus spending, both direct

and indirect employment should be measured for all funding, whenever possible and

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in as much detail as possible. This is the only way to inform future spending decisions and optimally allocate resources.

Q3b. How should the government account for a Principal Investigator who already

has several grants and receives additional grants through stimulus money?

A3b. I do not have an opinion on this subject.

Crowding Out

Q4. How should the government account for stimulus money that ‘‘crowds out’’ or

limits venture capital and private investment?

A4. The stimulus legislation was not crafted to account for this and funding is being

routed via agencies through existing programs. The priorities and agenda for innovation in areas that align with the goals of the Federal Government should continue

to be set by the Federal Government. The incentives are not there, however, for the

public sector to fill the market currently served by the private equity and venture

capital industries, and any attempt to do so poses a high risk of sub-optimal capital

allocation. The CIA’s venture capital arm, In-Q-Tel, has developed a successful

model that encourages private sector investment while at the same time incorporates innovation and best practices using public sector funds.

Q4a. Is there any way to determine the amount of private investment prevented by

pubic money?

A4a. This would, in my opinion, be a theoretical calculation at best and be wildly

inaccurate.

Æ