U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

29–010 

" ! SENATE 113th Congress 

1st Session 

REPORT

2013

113–111 

Calendar No. 199 

SECURITY CLEARANCE OVERSIGHT AND 

REFORM ENHANCEMENT ACT 

R E P O R T 

OF THE

COMMITTEE ON HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

WITH ADDITIONAL VIEWS 

[TO ACCOMPANY S. 1276]

TO INCREASE OVERSIGHT OF THE REVOLVING FUND OF THE OFFICE OF PERSONNEL MANAGEMENT, STRENGTHEN THE AUTHORITY TO TERMINATE OR DEBAR EMPLOYEES AND CONTRACTORS INVOLVED IN MISCONDUCT AFFECTING THE INTEGRITY 

OF SECURITY CLEARANCE BACKGROUND INVESTIGATIONS, ENHANCE TRANSPARENCY REGARDING THE CRITERIA UTILIZED BY 

FEDERAL DEPARTMENTS AND AGENCIES TO DETERMINE WHEN 

A SECURITY CLEARANCE IS REQUIRED, AND FOR OTHER PURPOSES 

SEPTEMBER 25 (legislative day, SEPTEMBER 24), 2013.—Ordered to be 

printed 


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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

THOMAS R. CARPER, Delaware Chairman 

CARL LEVIN, Michigan 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

TAMMY BALDWIN, Wisconsin 

HEIDI HEITKAMP, North Dakota 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

MICHAEL B. ENZI, Wyoming 

KELLY AYOTTE, New Hampshire 

JEFF CHIESA, New Jersey 

RICHARD J. KESSLER, Staff Director 

JOHN P. KILVINGTON, Deputy Staff Director 

BETH M. GROSSMAN, Chief Counsel 

LAWRENCE B. NOVEY, Chief Counsel for Governmental Affairs 

ANTHONY S. MCCLAIN, Staff Director, Subcommittee on the Efficiency and Effectiveness of 

Federal Programs and the Federal Workforce 

KEITH B. ASHDOWN, Minority Staff Director 

CHRISTOPHER J. BARKLEY, Minority Deputy Staff Director 

ANDREW C. DOCKHAM, Minority Chief Counsel 

CATHARINE A. BAILEY, Minority Director of Governmental Affairs 

LAURA W. KILBRIDE, Chief Clerk 


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Calendar No. 199 

113th Congress SENATE REPORT " ! 1st Session 113–111 

SECURITY CLEARANCE OVERSIGHT AND REFORM 

ENHANCEMENT ACT 

SEPTEMBER 25 (legislative day, SEPTEMBER 24), 2013.—Ordered to be printed 

Mr. CARPER, from the Committee on Homeland Security and 

Governmental Affairs, submitted the following 

R E P O R T 

together with 

ADDITIONAL VIEWS 

[To accompany S. 1276] 

The Committee on Homeland Security and Governmental Affairs, 

to which was referred the bill (S. 1276) to increase oversight of the 

Revolving Fund of the Office of Personnel Management, strengthen 

the authority to terminate or debar employees and contractors involved in misconduct affecting the integrity of security clearance 

background investigations, enhance transparency regarding the criteria utilized by Federal departments and agencies to determine 

when a security clearance is required, and for other purposes, having considered the same, reports favorably thereon with an amendment in the nature of a substitute and recommends that the bill, 

as amended, do pass. 

CONTENTS 

Page 

I. Purpose and Summary .................................................................................. 2 

II. Background and Need for Legislation .......................................................... 2 

III. Legislative History ......................................................................................... 3 

IV. Section-by-Section Analysis of the Bill, as Reported .................................. 4 

V. Congressional Budget Office Cost Estimate ................................................ 4 

VI. Evaluation of Regulatory Impact .................................................................. 5 

VII. Changes in Existing Law .............................................................................. 7 


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1 U.S. Office of Personnel Management, ‘‘Background Investigations.’’ Accessed Sept. 20, 2013. 

http://www.opm.gov/investigations/background-investigations. 2Testimony of Patrick E. McFarland, Inspector General, U.S. Office of Personnel Management, before the Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on the Efficiency and Effectiveness of Federal Programs and the Federal Workforce: 

‘‘Safeguarding our Nation’s Secrets: Examining The Security Clearance Process,’’ June 20, 2013. 

I. PURPOSE AND SUMMARY

The purpose of S. 1276 is to ensure that the Office of Personnel 

Management’s (OPM’s) Inspector General (IG) has the authority to 

obtain funding needed to audit and investigate critical OPM activities that are currently off limits to oversight by the IG due to an 

existing lack of authority. OPM oversees human resources-related 

matters for federal employees, such as hiring and benefits, as well 

as the pension and insurance plans for federal retirees. It also provides a range of commercial-like services to other federal agencies 

including human resource management, leadership training, and 

background investigations for security clearances. For these services, OPM collects customer-agency’s funds and deposits them into 

a Revolving Fund, which in turn pays for the personnel and other 

resources OPM uses to do its work for other agencies. 

Because OPM’s IG may currently not access Revolving Fund 

money to cover the costs of oversight, the IG is left to operate without the resources or personnel required to carry out thorough oversight of this $2 billion Revolving Fund and the services administered out of the Fund. S. 1276 will remedy this problem by authorizing the use of the Revolving Fund to pay for OPM’s IG to audit 

and investigate OPM activities paid for out of that Fund. 

II. BACKGROUND AND NEED FOR LEGISLATION

OPM is tasked with managing the federal workforce in a variety 

of ways, working with government agencies and employees on 

issues from recruitment to the resolution of labor disputes. Another 

major OPM function is the conducting of background investigations 

through its Federal Investigative Services (FIS) division. Currently, 

FIS conducts more than 90 percent of the background investigations for government employees and contractors, including most 

Defense Department investigations.1

Following leaks of classified data by National Security Agency 

contractor Edward Snowden, the Senate Homeland Security and 

Governmental Affairs Subcommittees on the Efficiency and Effectiveness of Federal Programs and the Federal Workforce and Financial and Contracting Oversight held a joint hearing on June 20, 

2013, titled ‘‘Safeguarding our Nation’s Secrets: Examining the Security Clearance Process.’’ Witnesses from OPM and FIS testified 

that while FIS used OPM’s Revolving Fund to collect payments 

from federal agencies to finance background investigations, the 

Fund has never been audited in its entirety because the costs of 

audits, investigations, and other oversight activities are prohibited 

from being charged against the Fund. At the hearing, due to the 

many concerns raised about the quality of the background investigations being carried out by OPM, the OPM Inspector General, 

Patrick E. McFarland, testified that the current insufficient level 

of oversight of the Fund and activities carried out with its resources was a ‘‘clear threat to national security.’’ 2


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http://www. hsgac.senate. gov/subcommittees/ fpfw/hearings/ examining- the-workforce-of- theus-intelligence- community-and-the- role-of-private-contractors. 3Testimony of Patrick E. McFarland, Inspector General, U.S. Office of Personnel Management, before the House Committee on Oversight and Government Reform, Subcommittee on 

Federal Workforce, U.S. Postal Service and the Census: ‘‘OPM’s Revolving Fund: A Cycle of Government Waste?’’, June 5, 2013. http://oversight. house.gov/wp-content/ uploads/2013/06/ 

McFarland-Testimony- Final2.pdf. 4 Id. 

5Office of Management and Budget, Fiscal Year 2014 Budget of the U.S. Government, Appendix, 2013, at page 1031, http:// www.whitehouse. gov/sites/default/ files/omb/budget/ fy2014/ 

assets/ appendix.pdf. 

Although FIS comprises the largest program within the Revolving Fund, there are numerous other programs and activities financed by the Fund. Currently, through the Fund, OPM interacts 

with over 200 Federal entities, including all major Federal departments and agencies, on activities such as Human Resources Solutions, USAJOBS, Human Resources Line of Business, HR Tools & 

Technology, Enterprise Human Resource Integration, and the Presidential Management Fellows Program.3

Indeed, OPM devotes more resources to administering the programs funded through the $2 billion Revolving Fund than to any 

of its other operational programs.4 Because of the security and fiscal implications of properly administering and financing this Fund, 

thorough oversight is a critical necessity. 

S. 1276 would ensure that such oversight occurs. It does so by 

authorizing Revolving Fund monies to be spent on the costs of audits, investigations, and oversight activities by the IG. This same 

legislative proposal was included in the President’s Fiscal Year 

2014 budget request.5

III. LEGISLATIVE HISTORY

On July 10, 2013, Senator Tester introduced S. 1276, with Senators McCaskill, Portman, Coburn and Ron Johnson as cosponsors, 

and the bill was referred to the Senate Committee on Homeland 

Security and Governmental Affairs. In the House of Representatives, similar legislation, H.R. 2860, has been introduced by Reps. 

Blake Farenthold and Stephen Lynch. 

As introduced, S. 1276 contained three provisions: (1) the provision related to the Revolving Fund described above; (2) a provision 

codifying the need for the Office of Personnel Management to have 

a quality assurance process in place to handle cases in which background investigations are compromised; and (3) a provision requiring the federal government to update its policies for determining 

which employees require a security clearance. 

The Committee considered the bill at a business meeting on July 

31, 2013. Senator Tester offered a substitute amendment striking 

the provisions other than the one authorizing the use of Revolving 

Fund resources for oversight activities. The Committee adopted the 

substitute amendment, as modified, and ordered the underlying bill 

reported favorably, both en bloc by voice vote. Members present for 

the vote on the amendment and on the bill were Senators Carper, 

Levin, McCaskill, Tester, Begich, Baldwin, Coburn, Johnson, 

Ayotte, and Chiesa. 


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IV. SECTION-BY-SECTION ANALYSIS OF THE BILL, AS REPORTED

Section 1—Short Title. This section states that the Act may be 

cited as the ‘‘Security Clearance Oversight and Reform Enhancement Act.’’ 

Section 2—Oversight of the Revolving Fund of the Office of Personnel Management. This section amends 5 U.S.C. § 1304(e), to authorize the costs of OPM Inspector General audits, investigations, 

and oversight activities relating to the Revolving Fund and the 

functions financed by the Fund, to be charged against the Fund. 

Specifically, 5 U.S.C. § 1304(e)(1) currently states that the Revolving Fund is available to OPM for financing investigations and 

other services that other agencies request OPM to perform on a reimbursable basis. Section 2(a) of the bill amends § 1304(e)(1) to also 

make the Fund available to OPM for the cost of audits, investigations, and oversight that are conducted by OPM’s IG and that relate to the Fund and the functions financed by the Fund. 

In addition, 5 U.S.C. § 1304(e)(5) currently requires that OPM 

must prepare a budget each year for the operations financed by the 

Revolving Fund, and that the budget must be submitted to Congress for consideration. Section 2(b) of the bill amends § 1304(e)(5) 

to require OPM’s IG to estimate the amount that will be needed 

for adequate oversight of the Fund and of the functions financed 

by the Fund, and to require that OPM must include that estimate 

in its annual budget for the Fund. The legislation also specifies 

that the estimate from OPM’s IG may not exceed 0.33 percent of 

the total amount of expected expenditures from the Revolving Fund 

that OPM includes in the budget for Congress. 

V. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

AUGUST 23, 2013. 

Hon. TOM CARPER, 

Chairman, Committee on Homeland Security and Governmental Affairs, U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 1276, the Security Clearance Oversight and Reform Enhancement Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Matthew Pickford. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

S. 1276—Security Clearance Oversight and Reform Enhancement 

Act 

S. 1276 would permit activities of the Office of Personnel Management’s (OPM) Office of the Inspector General (IG) to receive 

funding through the OPM Revolving Fund. The bill also would set 

a limit on the funds available. Under current law, the OPM Revolving Fund provides about $2 billion a year for a variety of functions, 

including background investigations to determine an individual’s 

suitability for a security clearance, but the IG is not permitted to 

use those funds to audit and provide oversight of the fund’s finances. 


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Based on information from the OPM IG, CBO estimates that implementing this legislation would enable the IG to begin auditing 

the OPM Revolving Fund at a cost of $13 million over the 2014– 

2018 period, assuming appropriation of the necessary funds. Enacting the bill would not affect direct spending or revenues; therefore, 

pay-as-you-go procedures do not apply. 

S. 1276 would impose no intergovernmental or private-sector 

mandates as defined in the Unfunded Mandates Reform Act 

(UMRA) and would not affect the budgets of state, local, or tribal 

governments. 

The CBO staff contact for this estimate is Matthew Pickford. The 

estimate was approved by Theresa Gullo, Deputy Assistant Director for Budget Analysis. 

VI. EVALUATION OF REGULATORY IMPACT

Pursuant to the requirements of paragraph 11(b) of rule XXVI of 

the Standing Rules of the Senate, the Committee has considered 

the regulatory impact of this bill. The enactment of this legislation 

will not have a significant regulatory impact. There are no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and no costs on State, local, or tribal 

governments. The legislation contains no other regulatory impact. 


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ADDITIONAL VIEWS 

At the June 20, 2013 hearing witnesses also testified about the 

lack of government-wide standards in background investigations 

and awarding security clearances, and the need for improved guidance. A third provision requiring the federal government to update 

its policies for determining which employees require a security 

clearance was included in the original draft of the bill. This third 

provision was removed in the amendment offered by Sen. Tester 

pending OPM-ODNI guidance of ‘‘sensitive’’ national security designations. The Committee continues to be concerned about the lack 

of government wide standards in national security designations 

and will monitor the OPM-ODNI guidance. 

RON JOHNSON. 


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VII. CHANGES IN EXISTING STATUTE MADE BY THE BILL, AS

REPORTED

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, changes in existing law made by the bill, as 

reported, are shown as follows (existing law proposed to be omitted 

is enclosed in black brackets, new matter is printed in italic and 

existing law, in which no change is proposed, is shown in roman): 

UNITED STATES CODE 

* * * * * * * 

TITLE 5—GOVERNMENT ORGANIZATION 

AND EMPLOYEES 

* * * * * * * 

PART II—CIVIL SERVICE FUNCTIONS AND 

RESPONSIBILITIES 

* * * * * * * 

CHAPTER 13—SPECIAL AUTHORITY 

* * * * * * * 

§ 1304. Loyalty investigations; reports; revolving fund. 

(a) * * * 

* * * * * * * 

(e)(1) A revolving fund is available, to the Office without fiscal 

year limitation, for financing investigations, training, and such 

other functions as the Office is authorized or required to perform 

on a reimbursable basis, including personnel management services 

performed at the request of individual agencies (which would otherwise be the responsibility of such agencies), or at the request of 

nonappropriated fund instrumentalities, and for the cost of audits, 

investigations, and oversight activities relating to the fund and the 

functions financed by the fund, conducted by the Inspector General 

of the Office. However, the functions which may be financed in any 

fiscal year by the fund are restricted to those functions which are 

covered by the budget estimates submitted to the Congress for that 

fiscal year. To the maximum extent feasible, each individual activity shall be conducted generally on an actual cost basis over a reasonable period of time. 

* * * * * * * 

(5) The Office shall prepare a business-type budget providing full 

disclosure of the results of operations for each of the functions performed by the Office and financed by the fund, and such budget 

shall be transmitted to the Congress and considered, in the manner 

prescribed by law for wholly owned Government corporations. Each 

budget submitted under this paragraph shall include an estimate 


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from the Inspector General of the Office of the amount required to 

pay the reasonable expenses to adequately audit, investigate, and 

perform other oversight activities relating to the fund and the functions financed by the fund for the applicable fiscal year, which shall 

not exceed 0.33 percent of the total budgetary authority requested in 

the budget estimates submitted to Congress by the Office for that fiscal year. 

* * * * * * * 

Æ 


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