[Senate Hearing 109-159]
[From the U.S. Government Publishing Office]
S. Hrg. 109-159
AN ASSESSMENT OF THE PRESIDENT'S MANAGEMENT AGENDA
=======================================================================
HEARING
before the
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND INTERNATIONAL
SECURITY
of the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
APRIL 21, 2005
__________
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia
Michael D. Bopp, Staff Director and Chief Counsel
Joyce A. Rechtschaffen, Minority Staff Director and Counsel
Amy B. Newhouse, Chief Clerk
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND INTERNATIONAL
SECURITY
TOM COBURN, Oklahoma, Chairman
TED STEVENS, Alaska THOMAS CARPER, Delaware
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
LINCOLN D. CHAFEE, Rhode Island DANIEL AKAKA, Hawaii
ROBERT F. BENNETT, Utah MARK DAYTON, Minnesota
PETE V. DOMENICI, New Mexico FRANK LAUTENBERG, New Jersey
JOHN W. WARNER, Virginia MARK PRYOR, Arkansas
Katy French, Staff Director
Sean Davis, Legislative Assistant
Sheila Murphy, Minority Staff Director
John Kilvington, Minority Deputy Staff Director
Liz Scranton, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Coburn............................................... 1
Senator Collins.............................................. 3
Senator Akaka................................................ 3
Senator Lautenberg........................................... 4
Senator Carper............................................... 6
WITNESSES
Thursday, April 21, 2005
Hon. David M. Walker, Comptroller General of the United States,
U.S. Government Accountability Office.......................... 11
Hon. Clay Johnson, III, Deputy Director for Management, Office of
Management and Budget.......................................... 14
Alphabetical List of Witnesses
Johnson, Hon. Clay, III:
Testimony.................................................... 14
Prepared statement........................................... 57
Walker, Hon. David M.:
Testimony.................................................... 11
Prepared statement........................................... 27
Appendix
Questions and responses for the record from:
Mr. Walker................................................... 63
Mr. Johnson with an attachment............................... 73
AN ASSESSMENT OF THE PRESIDENT'S MANAGEMENT AGENDA
----------
THURSDAY, APRIL 21, 2005
U.S. Senate,
Subcommittee on Federal Financial Management,
Government Information, and International Security,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:30 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Tom Coburn,
Chairman of the Subcommittee, presiding.
Present: Senators Coburn, Collins, Akaka, Carper, and
Lautenberg.
OPENING STATEMENT OF SENATOR COBURN
Senator Coburn. The Subcommittee will come to order. One
the things we are going to try do with our Subcommittee is run
on a timely basis. I know the Senate does not have the
reputation for doing that, but we are going to lead by example.
This year the Federal Government is expected to spend
almost $2.5 trillion, making our Federal budget larger than the
economies of Canada, Mexico, and Australia combined. Put
another way, Washington will spend more than $22,000 per
American household this year--$22,000. That is more than the
average household income of Oklahoma.
Regardless of one's politics, that is a lot of money. The
American public has entrusted both Congress and the President
with ensuring that those dollars are spent wisely. Therefore,
this Subcommittee convened this hearing today to discuss
current efforts by the Administration to strengthen the
management and accountability of Federal programs. The
Subcommittee Ranking Member, Senator Carper, and I, have had a
long interest in ensuring that taxpayer dollars are spent
wisely and efficiently.
While Congress has the responsibility to appropriate the
funds necessary to operate the government, the Executive Branch
is charged with implementing the will of Congress and managing
the day-to-day activities of myriad Federal programs. Since
assuming office in January 2001, President Bush has sought to
make the Federal Government more effective by setting clear
goals, bringing reform to entitlement programs, and focusing
Federal resources on programs that are effective.
In 2001, the Office of Management and Budget (OMB) launched
the President's Management Agenda, referred to as PMA. The PMA
contains a multi-part strategy to strengthen the management of
Federal programs and activities and improve government
accountability.
The PMA is the latest in a series of initiatives over the
past 40 years designed to improve the performance and
accountability of Federal agencies. Beginning with President
Johnson's ``Planning Programming and Budgeting System'' in
1966, each successive initiative has been built on the
foundation of its predecessors. President Nixon introduced his
``Management by Objective'' that aimed to expose redundant and
ineffective programs by identifying goals and expected results
for Federal programs. Later, President Carter introduced the
zero-based budgeting concept in 1977 that forced each program
to prove its value on an annual basis.
GPRA, the Government Performance Results Act of 1993,
signed by President Clinton, is the most recent legislative
effort regarding budget and performance integration. GPRA
directed Federal agencies to improve management, clarify
program responsibility, and account for program performance
through strategic and annual performance plans. The Program
Assessment Rating Tool (PART), which is an integral component
of PMA, builds on GPRA and seeks to better align budgetary
decisions with program performance.
As we will hear from our witnesses, the PMA consists of
five government-wide initiatives: Strategic management of human
capital, competitive sourcing, improved financial performance,
e-Government, and budget and performance integration. Each of
these initiatives has been developed to streamline Federal
programs, to improve the availability and use of important
information regarding programmatic and budgetary decisions, and
to help the Federal Government meet future challenges.
Through today's assessment of the PMA, we hope to discuss
such questions as: In what areas has the PMA been most
successful and where can it be more effective? What lessons
have been learned and how have those lessons been integrated
and applied?
We are pleased to have with us representatives from the
Government Accountability Office (GAO), and the Office of
Management and Budget, who will offer their assessments
regarding how Congress and OMB can work better together to
manage this country's finances.
We are privileged to have the Hon. David Walker,
Comptroller General of the Government Accountability Office,
with us today. GAO has extensive experience with not only the
PMA but also GPRA and its predecessor initiatives. Mr. Walker
will shed some light on the effectiveness of the PMA and the
interaction between PMA's PART process, which aims to link
program performance with the budget process, and GPRA.
We will also hear from the Hon. Clay Johnson III, the
Deputy Director for Management at the Office of Management and
Budget, who will provide us with OMB's perspective on the PMA
today. I particularly look forward to hearing from Mr. Johnson
regarding the budget and performance integration initiative and
the PART process. I am also interested to hear more regarding
how the Federal Government is matching money spent on hundreds
of programs with program results. Can we achieve the desired
results more efficiently, more effectively, and at a lower cost
to taxpayers? I look forward to discussing with both of you
ways in which the Executive and Legislative Branches can better
work to ensure that taxpayer dollars are spent wisely.
Before I introduce our witnesses, I would like to recognize
my Chairman, Senator Collins, who may wish to make an opening
statement.
OPENING STATEMENT OF SENATOR COLLINS
Senator Collins. Thank you very much, Mr. Chairman. I want
to congratulate you on chairing what I think is your first
Subcommittee hearing since coming to the Senate. You have been
a real champion of the taxpayer, always on the watch for waste,
fraud, and abuse. I am very pleased that you have chosen to
join our Committee, which historically has played an important
role in identifying and fighting fraud, waste, and abuse in
government programs.
In particular, you have accepted the daunting task of
ensuring that Federal agencies are spending taxpayers' dollars
wisely and efficiently through the oversight of their financial
and information technology management. More and more, as our
witnesses well know, financial management systems and
technology play a key role in our ongoing efforts to combat
waste, fraud, and abuse, and to ensure that the taxpayers get
full value for their investment.
Our continued success in this area, then, will depend
heavily on the effectiveness of these management systems.
Furthermore, the failure of several high-profile Federal IT
systems, such as the FBI's Trilogy program, are among the most
prominent examples of wasteful Federal spending in recent
years.
So, the topic you have chosen for your first hearing, the
President's Management Agenda, is an important one and one that
I have discussed with both of our witnesses many times. I think
that this Subcommittee is going to help ensure that tax dollars
are well spent, and I very much am delighted to have you here
in your new capacity, and I congratulate you for your
leadership.
Senator Coburn. Thank you, Madam Chairman. Senator Akaka.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. Thank you very much, Mr. Chairman. I want to
recognize the presence of our Chairman, Senator Collins, and
thank her for her good work as Chairman of the full Committee
on Homeland Security and Governmental Affairs. As the former
Ranking Member of this Subcommittee, I want to wish you, Mr.
Chairman, and your Ranking Member, Senator Carper, well. Our
former colleague, Senator Peter Fitzgerald, and I held many
hearings, and successfully sponsored legislation to increase
financial transparency within the Federal Government, and draw
attention to the national security needs of our country. I know
you are truly committed to government efficiency and
accountability, Mr. Chairman, and I look forward to working
with you.
I also want to join you in welcoming our witnesses today,
both of whom appeared before the Subcommittee on Oversight of
Government Management 2 months ago to discuss GAO's high-risk
list. At our hearing I expressed my disappointment that so many
areas within the Department of Defense remain on the list. Out
of the 25 high-risk area on this year's list, eight are unique
to DOD, and several more are government-wide issues that
directly impact DOD. These deficiencies keep DOD from getting a
clean audit and result in billions of dollars in waste.
As the Ranking Member of both OGM and Armed Services
Readiness Subcommittees, I have worked hard to improve the
efficiency of DOD programs and operations. I know the
Comptroller General will discuss some of DOD's management
shortfalls, and I applaud his persistent focus on the
Department's financial performance and program accountability.
Mr. Chairman, last week, I joined with Senator Ensign and
Senator Voinovich, who are the Chairmen of the Armed Services
Readiness and Oversight of Government Management Subcommittees
respectively, to introduce S. 780, legislation to create a new
position of Deputy Secretary of Defense for Management. Our
bill is based on a recommendation made by Mr. Walker, and I
invite you to cosponsor this measure that will designate one
person accountable for the integration and implementation of
management and defense business reforms.
Another area within the President's Management Agenda is
strategic management of human capital. Again, pointing to
problems in DOD and a recommendation of the Comptroller
General, I note that DOD has failed to develop a comprehensive,
strategic workforce plan to guide its human capital efforts.
These are the issues; these are the concerns that we are
looking at. I look forward to working with you, Mr. Chairman,
Senator Carper and, of course, Senator Collins, and I wish all
of you well. Thank you.
Senator Coburn. Thank you, Senator Akaka. Senator
Lautenberg.
OPENING STATEMENT OF SENATOR LAUTENBERG
Senator Lautenberg. Thanks, Mr. Chairman, and my good
wishes also for your first venture as Chairman, and the subject
is a very important one. I am glad it is being taken up. So I
thank you for convening this hearing.
Mr. Chairman, I come from the business world, and I started
a company with a couple of other fellows whose father, like
mine, came from factory employment. I left that company 23
years ago that now employs more than 40,000 people, and we
would never have gotten there if I had not run a tight ship and
I knew what I expected from my program managers, and I held
them accountable. But I also rewarded their successes. The
result was an outstanding growth record for more than 40 years.
So I understand and I applaud the President's desire to
instill the best management practices in our Federal
Government. We should be demanding accountability from our
government programs and making sure they accomplish the goals
we set out for them. Government can be and often is a great
force for good in America. It provides health care for poor and
the elderly and it helps kids go to college. If I had not had
the GI bill to boost me along, I never would have, frankly,
been able to go to college as I did. Government also helps keep
our communities vital and does research to fight childhood
disease and disability.
Mr. Chairman, we have to make sure these programs are
accomplishing their goals. It is not only a matter of spending
the taxpayers' money wisely, although we must always do that.
It is a matter of making sure that money we spend in government
gets to the people who need it, actually doing the good work
that is required out there in the country.
But I learned something else in my business years, and you
get what you pay for. So we may have to make sure that we are
measuring the right things. We cannot allow program evaluations
to look simply at expenditures without looking at the
successes. And I also want to express a serious concern about
one of the five key pillars of the PMA, and it is called
competitive outsourcing.
Now, last year, the government held 217 competitions with
about 12,500 full-time jobs at stake. Federal workers competed
against private contractors for their jobs. The public
employees won the competition more than 90 percent of the time.
And I note from my own experience that what I had by way of
support when I was in the corporate sector was very efficient
and well done, but I see people in government who come to work
for a heck of a lot less than they would make in the private
side, with as much enthusiasm and commitment as we see in the
private side.
So I ask my colleagues, are we spending more energy on
competing jobs than its ultimately worth? Instead of having
Federal employees spend time competing for their jobs, why
don't we just let them do their jobs? And not without measure
and not without expectations of success and commitment.
I always found in my business experience that the employees
were our greatest asset, because if we had good performance by
our employees, the customers would come, and the same thing is
true, I believe, in government. If the programs are successful,
if it shows an attempt by government to improve life's
conditions, then we will get the support of the people out
there.
So we have to maintain good and dedicated employees as part
of our organization, and we have to try to keep them reasonably
happy. You have to invest in them, help them plan for the
future. The Federal Government hasn't done this enough, in my
judgment, because very often we throw employee compensation in
a basket called waste, fraud, and abuse, and that is not always
the case. Indeed, GAO found that during the downsizing in the
1990's, the Federal Government did not plan well for its future
in human capital needs. As a result, the Federal workforce has
suffered.
Mr. Chairman, we all know that we have to treat people
right to get results. We hope that contracting out jobs,
because the government has decided on a policy--we have to
examine what it is that we get for the changes we make, and I
am sure that you will do that, and I thank you, Mr. Chairman.
Senator Coburn. Thank you, Senator.
It is a great privilege for me to have as a Ranking Member
and integral, even part of this Subcommittee, Senator Carper.
Of note, both of our initials are T.C., so that makes for a lot
of fun at times.
I want to commit to him now that this Subcommittee will be
run on a bipartisan basis. It will be partisan only on issues
that are important to the future of this country, and he has
demonstrated his commitment through his life, his votes, and
his service to care about the future of our country and to care
about its economic consequences through waste. And so I could
not have somebody that I am, first of all, closer to or aligned
with in terms of his dedication, and I am very pleased that he
is the Ranking Member on this Subcommittee.
And I also know that he has an extreme interest in not only
making sure we spend our money wisely but the money that is due
the Federal Government from income taxes that are not collected
that should be collected is something that we are going to look
at, and I make that commitment to him at this hearing that we
will do that.
Senator Carper.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. Thank you, Mr. Chairman. I am glad I came
just for that introduction. [Laughter.]
For my colleagues and our guests, along with Senators Lamar
Alexander, George Voinovich, and Mark Pryor, I asked our
leaders, we asked Senators Tom Daschle and Bill Frist at the
end of last year if we could put together really a school for
new Senators modeled after the New Governors School within the
National Governors' Association--plunk it right down in the
middle of the U.S. Senate--and it gave me an opportunity to get
to know then Senator-elect Coburn and his wife and all the
other new Members. It was a wonderful experience for me. I
don't know that it was of great help to our incoming Members,
but it sure was helpful to those of us who hosted it and gave
us real insights into our new colleagues. And I am delighted
that we ended up--T.C. West and T.C. East--on the same
Subcommittee and have the chance to work together. And he has
been in the Senate now--for what?--3 or 4 months, and I think
he has shown as much vigilance in trying to do something about
the budget deficit as anybody around, and God knows when we are
pushing $400 billion in Federal budget deficit, we need some
vigilance and some leadership, and I know we have it right here
to my left.
I like being on your right, to the right of you.
Senator Coburn. You are actually on my left to them.
[Laughter.]
Senator Carper. I have a statement I would like to offer,
if I could, Mr. Chairman.
Senator Coburn. Please do.
Senator Carper. All right. First of all, let me just say to
General Walker--I saw him almost as much as I saw my wife this
week. This is the second hearing today that he has testified
at, and I don't know how--maybe they have cloned you. I don't
know. There are days I wish we could clone me. That is a scary
thought. But we are glad you are here, and, Mr. Johnson,
welcome, we look forward to hearing from both of you.
I think it is most appropriate, Mr. Chairman and my
colleagues, that at our first hearing we are going to get an
update on the President's Management Agenda, and while I don't
agree with every single aspect of what the President has put
forward, I do applaud him and his team for working aggressively
since his first days in Washington to try to make our
government work a little bit better and a little bit smarter.
At a time when our Federal budget deficit is not just
approaching $400 billion, but I believe if you add in the
supplemental, the emergency supplemental that is before us
today in the Senate, if you add that in, we are going to be
running a deficit that will exceed $400 billion, and we need to
do all that we can to make every dollar count.
The Chairman and I have already been talking about not only
making sure that we are doing the right thing on the spending
side and so forth, but to make sure the folks, businesses or
individuals, who owe taxes, that they legally owe, that we are
doing the very best job that we can to make sure we collect
those dollars. Actually, frankly, we are looking forward to
hearing from both of you and from the folks you lead to see how
we might do that better.
But I was pleased to learn that many agencies are now
getting a better handle on their finances--not all, but many.
Agencies are apparently getting their annual written financial
statements in earlier, and I believe most of those statements
are in better shape than they have been in years gone by, and I
think we all agree that is real progress.
I am also pleased the Administration is beginning this year
to tackle the problem of improper payments, and more than $45
billion, I am told, in improper payments were made in fiscal
year 2004. If that is true, if that is even close to being
true, that is a huge number. Whether it is $45 or $35 or $25
billion, we need to work together to tackle this problem,
because with every double payment that goes out or
inappropriate payment that goes out with every individual
vendor who accidentally or fraudulently receives a payment that
he or she is not entitled to, a worthy program is denied
resources that could be put to better use.
I look forward to our hearing today about how OMB intends
to meet the President's goals for reducing improper payments. I
would also like to hear about what might need to be done to
strengthen our agencies' internal controls to detect and
prevent wasteful and unnecessary payments before they happen.
That said, I do have some concerns about the way that some
of the initiatives in the President's Management Agenda are
being implemented. The President's initiatives to improve human
capital management across the Federal Government is a good
example, and some of his initiatives in this area are most
worthwhile, and I think they are supported by just about all of
us.
It is difficult for many agencies to bring qualified
personnel on board, for example, and this job will be even more
difficult in the coming years as workers from my generation,
the boomers, begin to retire.
In addition, there is some logic to the idea that employee
performance should play a bigger role in determining how an
individual is paid. I believed that as a Governor, and I
believe that today. If personnel reform proposals currently
being implemented at the Department of Defense and the
Department of Homeland Security are indications of how we
intend to address these and other human capital problems, in
some respects we may want to go back to the drawing board.
I don't need to remind everybody, Mr. Chairman, on this
Subcommittee that the employees at the Department of Defense
and the employees at the Department of Homeland Security are
for the most part opposed to the new personnel systems at their
departments. Some of them may be even suing to prevent the new
systems from going into effect out of a concern that proposals
in areas like employee appeal and union rights go much too far.
Some are also concerned that the proposed pay-for-
performance systems each Department will be phasing in don't
provide employees with enough protection against favoritism or
other potential management abuses. This is having an effect, I
am told, on morale, and the two Departments could very well
have an impact on recruitment and retention in the future, and
we have all got to be mindful of that and attentive to it.
Before we talk about exporting from the Department of
Defense or Department of Homeland Security to other agencies,
as the President has suggested, we just need to be mindful of
these concerns and, I think, to address them.
And I also have some concerns that I would like to share,
Mr. Chairman, about the President's competitive sourcing
initiatives. I think maybe Senator Lautenberg may have been
addressing this. I am not sure. While I support the idea of
increased competition for Federal work that is not inherently
governmental, I am not entirely comfortable with the degree to
which the revised rules governing how competitions should be
run may favor private bidders in some respects and make it more
difficult to be sure that the bidder who can do the best work
at the lowest price always winds up with the contract.
I would like to see the rules further revised so that
Federal employees always have the right to reorganize
themselves and to put their best bid forward, and I would also
like to see Federal employees given the same right that their
competitors in the private sector have to protest decisions
made by an agency in a competition. I believe we need to work
to refine the rules so we can always say that the winner of a
public-private competition is the party that can give the best
value to the taxpayers for their money.
And, finally, I would also like to briefly address the
President's initiatives on performance-based budgeting and the
mechanism being used to enforce it, and that is the Program
Assessment Rating Tool. I think it uses an acronym. I don't
like to use acronyms, so I am going to try to continue to say
that phrase over again: Program Assessment Rating Tool.
I will never be one who will argue that a program that is
ineffective or that has served its purpose and is no longer
needed should continue to receive funding. I am not interested
in that; neither are you. However, we need to be careful before
deeming a program a failure and defunding it. And the Program
Assessment Rating Tool is, I think, an interesting proposal. I
have no problem looking at programs on a regular basis to
determine whether or not they are accomplishing what they are
intended for them to accomplish when we first created them. We
need to be certain, though, that the Program Assessment Rating
Tool or whatever mechanism we use to make these evaluations is
separated from politics and ideology and is closely coordinated
with existing mechanisms that agencies and Congress use to
align budgets with program goals and outcomes.
We also need to make sure that a program's intended
beneficiaries outside of Washington have a say before an
evaluation is completed.
I am going to stop there, Mr. Chairman. I have a bit more,
but I would just ask unanimous consent for it to be entered for
the record. We welcome our witnesses, and thank you very much.
Senator Coburn. Without objection, it will be entered.
[The prepared statement of Senator Carper follows:]
PREPARED STATEMENT OF SENATOR CARPER
Thank you, Mr. Chairman. I'm pleased to join you here today at the
first hearing of the Subcommittee on Federal Financial Management,
Government Information and International Security. Our name is long,
our jurisdiction is broad and issues we'll be focusing on over the next
2 years are vitally important ones. I look forward to working with you
in a bipartisan way to help our government be a better steward of
taxpayer dollars and to make our Nation safer from terrorism.
I think it's very appropriate, Mr. Chairman, that at our first
hearing we'll be hearing an update on the President's Management
Agenda. While I don't agree with every aspect of what the President has
put forward, I applaud him for working aggressively since his first
days in Washington to try to make government work better and smarter.
At a time when our Federal budget deficit is soaring, we need to do
all we can to make every dollar count. I was pleased to learn, then,
that many agencies are now getting a better handle on their finances.
Agencies are apparently getting their annual financial statements in
earlier. And I believe most of those statements are in better shape
than they have been in years past. this is real progress.
I'm also pleased that the administration is beginning this year to
tackle the problem of improper payments. More than $45 billion in
improper payments were made in 2004. We need to work together to tackle
this problem. With every double payment that goes out, with every
individual or vendor or accidentally or fraudulently receives a payment
he or she is not entitled to, a worthy program is denied resources that
could be put to good use.
I look forward to hearing today about how OMB intends to meet the
President's ambitious goals for reducing improper payments. I'd also
like to hear about what might need to be done to strengthen agencies'
internal controls to detect and prevent wasteful and unnecessary
payments before they happen.
That said, I'm concerned about the way some of the initiatives in
the President's Management Agenda are being implemented. The
President's initiative to improve human capital management across the
Federal Government is a good example.
Some of the President's personnel proposals are worthwhile. It's
difficult for many agencies to bring qualified personnel onboard, for
example. This job will be even more difficult in the coming years as
Federal workers from my generation begin to retire in the coming years.
In addition, there's some logic to the idea that employee performance
should play a bigger role in determining how an individual is paid. If
the personnel reform proposals currently being implemented at the
Department of Defense and the Department of Homeland Security are
indications of how we intend to address these and other human capital
problems, however, we might need to go back to the drawing board.
I don't need to remind anyone on this Subcommittee that the
employees at the Department of Defense and the Department of Homeland
Security are very much opposed to the new personnel systems at their
departments. Some of them are even suing to prevent the new systems
from going into effect out of concern that proposals in areas like
employee appeals and union rights go much too far. Some are also
concerned that the proposed pay-for-performance systems each department
will be phasing in don't provide employees with enough protection
against favoritism and other management abuses. This is having an
impact on morale in the two departments and could very well have an
impact on recruitment and retention in the future. Before we talk about
exporting the Defense or Homeland Security models to other agencies, as
the President has suggested, we need to address some of these issues.
I also have concerns about the President's competitive sourcing
initiative. While I support the idea of increasing competition for
Federal work that's not inherently governmental, I'm uncomfortable with
the degree to which the revised rules governing how competitions should
be run favor private bidders, in some respects, and make it more
difficult to be sure that the bidder who can do the best work at the
lowest price winds always up with the contract. I'd like to see the
rules further revised so that Federal employees always have the right
to reorganize themselves and put their best bid forward. I'd also like
to see Federal employees given the same right that their competitors in
the private sector have to protest decisions made by an agency in a
competition. We need to work to refine the rules so we can always say
that the winner of a public-private competition is the party that can
give taxpayers the best value for their money.
Finally, I'd also like to address briefly the President's
initiative on performance-based budgeting and the mechanism being used
to enforce it--the Program Assessment Rating Tool, or PART.
I'll never be one who'd argue that a program that's ineffective or
that has served its purpose and is no longer needed should continue to
receive funding. However, we need to be careful before deeming a
program a failure and de-funding it.
PART is an interesting proposal. I have no problem looking at
programs on a regular basis to determine whether or not they're
accomplishing what we intended for them to accomplish when we first
created them. We need to be certain, however, that PART or whatever
mechanism we use to make these evaluations is separated from politics
and ideology and is closely coordinated with existing mechanisms
agencies and Congress use to align budgets with program goals and
outcomes. We also need to make sure that a program's intended
beneficiaries outside of Washington have a say before an evaluation is
completed.
In closing, Mr. Chairman, I'd like to say something about the
President's Management Agenda and its impact on the budget. The
President's FY 2006 budget proposal states that the management agenda
is a critical component of his plan to cut the budget deficit in half
by 2009. I have doubts about that plan for a variety of reasons. It's
clear to me, however, that even full and successful implementation of
the management agenda won't get us there. I can help, but it won't get
the job done on its own.
Non-defense discretionary spending, the target of many of the
spending reductions in the President's budget proposal, makes up only
about 16 percent, I believe, of the total Federal budget. I'm sure we
can find ways to improve the management of some of the funding in that
16 percent, or even to find and eliminate waste or inefficient use of
resources. If we truly want to tackle the fiscal problems facing us
right now, however, we'll need to take a look at the entire budgetary
picture, on the spending and revenue side, and make some tough
decisions.
Thank you, Mr. Chairman, for holding this hearing. I look forward
to working with you on these issues in the coming years.
Senator Carper. And, Mr. Chairman, I just look forward to
working with you and----
Senator Coburn. Well, I just wanted to let my accountant
come out in me a little bit. I do have a degree in accounting,
and although I am a physician----
Senator Carper. Well, you are multi----
Senator Coburn. I want for the record to note that the real
deficit this year is going to be $640 billion. It is going to
be a $410 billion deficit. We are going to add $80 billion on a
supplemental right now, and we are going to steal $150 billion
from Social Security that we are going to write an IOU for. So
in terms of the debt of the country this year, the deficit is
going to be at a minimum $640 billion. That is a real problem.
Let me thank our witnesses for coming. A brief
introduction, if I may. You are both very well known to the
Senate. The first witness is Hon. David Walker, Comptroller
General of the United States. He began his 15-year term as the
Nation's chief accountability officer and was appointed in 1998
as head of the U.S. General Accounting Office, now referred to
as the Government Accountability Office. Through his role as
Comptroller General, Mr. Walker oversees GAO's work to improve
the performance and accountability of the Federal Government,
including measures to improve the efficient use of taxpayers'
dollars.
Before his appointment as Comptroller General, Mr. Walker
had executive-level experience in both government and private
industry. He worked for Arthur Andersen LLP between 1989 and
1998 where he was partner and global managing director for
human capital services practice in Atlanta, Georgia. While a
partner at Arthur Andersen, he served as a public trustee for
Social Security and Medicare from 1990 to 1995.
Our second witness is the Hon. Clay Johnson III, Deputy
Director for Management at the Office of Management and Budget.
In his role he provides government-wide leadership to Executive
Branch agencies to improve agency and program performance.
Prior to this position, Mr. Johnson served as Assistant to the
President for Presidential Personnel and as Executive Director
of the Bush-Cheney transition team. From 1995 to 2000, he also
served as appointments director and chief of staff for then-
Governor George Bush.
Similar to Mr. Walker, prior to his government service he
had an impressive career in the private sector as chief
operating officer of the Dallas Museum of Art, president of
Horchow and Neiman Marcus mail order divisions.
I would like to thank you both for being here. In the
interest of time, your full statements will be made a part of
the record, and I would ask that you limit your opening
statements to 5 minutes. Mr. Walker.
TESTIMONY OF HON. DAVID M. WALKER,\1\ COMPTROLLER GENERAL OF
THE UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Walker. Chairman Coburn, Senator Carper, and Senator
Lautenberg, it is a pleasure to be back before you. Let me
congratulate you, Mr. Chairman, on your assuming this
chairmanship. I am very excited about the fact that you are
very interested in these issues. You have a lot of enthusiasm
for them. I know that Senator Carper and Senator Lautenberg and
others do as well. So I look forward to a long and mutually
beneficial relationship on issues of mutual interest and
concern to the country.
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\1\ The prepared statement of Mr. Walker appears in the Appendix on
page 27.
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I will provide an executive summary of my statement in the
interest of time.
This hearing is about the President's Management Agenda,
and let me state for the record that we believe that this has
been a very positive initiative in the aggregate. The
Administration's implementation of the President's Management
Agenda has demonstrated its commitment to improving Federal
management and performance. It has served to raise the
visibility of key management challenges, increased attention to
achieving outcome-based result, and reinforced the need for
agencies to focus on making sustained improvements in
addressing longstanding problems, including the items on GAO's
high-risk list. I might note that there is a very strong
correlation between the President's Management Agenda and GAO's
high-risk list, and that is not an accident. In fact, we worked
together in a very constructive manner to make progress on a
whole range of fronts, not just limited to the high-risk list
but with a special emphasis on the high-risk list.
As was mentioned by Senator Akaka, 14 of 25 high-risk areas
relate to the Department of Defense, directly or indirectly.
DOD is clearly the biggest major challenge that we have in the
business transformation effort in the Federal Government for
any single agency, and yet there are a number of challenges
that span a number of agencies within the Federal Government.
If I can, a few words about each of the key areas on the
President's Management Agenda.
First, financial management. In general, there has been
improvement with regard to financial management over the last
several years. We are continuing to see, as compared to several
years ago, a higher number of agencies that are receiving clean
opinions in their financial statements. There was an agreement
early in the Bush Administration between GAO, OMB, and the
Treasury Department to raise the bar on what is the standard
for success in financial management. It is not just a clean
opinion. The standard is also no major internal control
weaknesses, no major compliance problems, and timely, accurate
and useful information to make informed decisions on a day-to-
day basis. While we have continued to make progress with regard
to clean opinions on the financial statements, less than five
of the agencies have met that entire list of criteria, and DOD
is the laggard for all of the Federal Government with regard to
financial management.
I might also note there has been an acceleration of the due
date of audited financial statements and related annual
reports. Specifically, last year, by November 15, the agencies
had to report and then the consolidated financial statements
were issued on December 15. That is 45 days after the end of
the year for the agencies, 75 days after the end of the year
for the Federal Government, a very impressive improvement. At
the same point in time, we did see an increase in the number of
agency statements that had to be restated from the prior year,
which reinforces the importance of getting the systems and
controls in place such that you can have not only timely but
reliable financial information.
With regard to the second area, eliminating improper
payments, you properly pointed out, Senator Carper, there were
about $45 billion in improper payments for fiscal year 2004.
That is probably understated because there are still some
agencies that have not reported and there are others that are
refining their methodology. It is, however, important to note
that improper payments do not necessarily represent fraud,
waste, and abuse. Some of those improper payments may, in fact,
have been bona fide items but there was not a proper
documentation at the time the payment was made, and so not all
of those represent fraud, waste, abuse, and mismanagement. But
clearly it is an unacceptable number, and more needs to be done
in order to be able to get that number down.
With regard to the strategic management of human capital,
as Senator Lautenberg mentioned--I strongly agree that people
are the most valuable asset in a knowledge-based enterprise,
especially in a knowledge-based economy. For the most part,
that is what the government is and, therefore, it is important
to recognize that reality.
I would respectfully suggest more progress has been made in
the area of human capital in the last several years than in the
last couple of decades, in large part not just efforts within
the Executive Branch, but also because of actions by the
Congress.
But I would also agree it is not important just to give
management reasonable flexibility so we could modernize our
human capital policies and procedures to recognize 21st Century
realities. There need to be adequate safeguards and controls to
prevent abuse, and proper implementation of these authorities.
Doing this at DOD and at DHS, is of critical importance. How
you implement human capital reform matters, and the process
that you use is just as important as the policy framework that
you are employing.
Another initiative on the President's management agenda is
budget and performance integration. The Program Assessment
Rating Tool has strong conceptual merit. It is not perfect. No
tool is perfect. But the idea that you need to focus more on
how to link resources to results, how you can end up making
agencies accountable to focus on whether or not they are making
a difference in the lives of the American people, and whether
or not they are generating a positive return on investment.
This clearly has strong conceptual merit.
Unfortunately, it has not yet been used to a great extent
in determining actual resource allocations, and in order for
this tool to have a real meaningful and lasting impact, it has
got to translate into budget proposal actions by the
President--which it has to a certain extent, and I am sure that
Clay Johnson will talk about that. However, it has to be used
on Capitol Hill and incorporated into Congressional
decisionmaking in order to make a real and lasting difference.
Chairman Coburn, as you know, and Senator Carper and
Senator Lautenberg, because all of you have gotten a copy of
the report, ``21st Century Challenges: Reexamining the Base of
the Federal Government,'' never before have we had such a
compelling need to understand what works and what does not work
because we are on an imprudent and unsustainable fiscal path.
We need to make some tough choices and we need to have solid
facts in order to be able to understand what is working and
what is not.
The next initiative is e-Government, and I am about done,
Mr. Chairman. The Administration is focusing primarily on 25
OMB-sponsored e-Government initiatives where progress is mixed,
but it is an area where additional progress is being made.
And last, for now, is the competitive sourcing issue. This
is a complex and controversial topic. I will say that the
Administration did issue a new A-76 regulation that, in large
part, was consistent with the recommendations of the Commercial
Activities Panel, which I chaired. I will also note that the
Congress passed and we have now operationalized the authority
for agency tender officials to appeal decisions under A-76 on
behalf of employees to the GAO. We look forward to executing
that responsibility within the statutory 100-day period.
Thank you very much, Mr. Chairman. I look forward to
answering any questions you may have.
Senator Coburn. Thank you, General Walker. Mr. Johnson.
TESTIMONY OF HON. CLAY JOHNSON III,\1\ DEPUTY DIRECTOR FOR
MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET
Mr. Johnson. Mr. Chairman, Senators Carper and Lautenberg,
I thank you for having me here today. The Federal Government is
working to ensure taxpayer dollars buy more and go farther
every year. The American taxpayers expect it, and if they do
not expect it, they should; and the Federal Government is
showing that it can deliver.
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\1\ The prepared statement of Mr. Johnson appears in the Appendix
on page 57.
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Agencies are better managed and achieving greater results.
They are managing their finances and investments more
professionally and efficiently. They are providing better
service to the American people. They are helping civilian
employees be more effective and successful, all as David Walker
has pointed out.
I personally believe that more has been done in the last 4
years to really change the way the Federal Government works
than during any comparable period in recent history. The
Federal Government has shown that it can change, and it is a
good thing because, as David Walker points out, we must change.
We need to change. There is much still to do, but we have
already defined what we want and can accomplish in the next few
years, and we want to be held accountable for doing it. I have
submitted a longer statement for official entry, and I refer
you to that for an elaboration on those points.
I look forward to your questions.
Senator Coburn. Thank you, Mr. Johnson.
I just want to advise members we have four votes starting
at 3:45. And so what we will do is we will go through the
questioning, and if there is no objection--5 minutes apiece,
and then we will submit any questions that are left after that,
if we might.
Let me start with you, Mr. Johnson. The President's 2006
budget proposal requested or proposed the termination of almost
100 Federal programs, which would reduce spending by $8.8
billion alone in fiscal year 20006.
How did OMB put this list together? How did you determine
which programs were effective and ineffective? Why did the
budget propose maintaining or even increasing the budgets for
some of the programs that were rated ineffective? And how many
of the programs proposed for termination have been on this list
before?
Mr. Johnson. I think I have all of those points, but let me
go through and remind me if there is something I did not cover.
We start off evaluating programs with the premise that we
want programs to work. We are not engaging in a witch hunt by
trying to get rid of things. At some point, we conclude that we
have accomplished what we want to accomplish or there is no way
we can make it work or there is someone--the private sector, a
State, a municipality--that is better prepared to do that work,
and we recommend that the program be terminated or be reduced
or be combined with something else. But we start off with the
premise that we want programs to work, and we cannot figure out
how to make them work until we figure out what they are
accomplishing now. Are there management deficiencies? Are their
definitions of success accurate? Do they have good performance
goals, and good output goals, good efficiency measures? Are
they set up to succeed? Do they have a chance to succeed? Is
the enabling legislation perhaps in need of some rethinking?
So that is the primary answer why some programs that are
considered to be results not demonstrated or ineffective have
not been recommended for elimination or significant reductions,
because our first effort is to try to get them to work.
PART score is--again, someone commented, maybe you, Senator
Carper--there is nothing magical about the phrase PART or
Program Assessment Rating Tool, and there are 25 or 30
questions that we ask, and there is nothing magical about the
questions, although the issues that they address, I think, are
magical. Do you have a clear definition of success? Do you have
a clear definition of at what cost do you want to achieve
success? How are you performing relative to your standards?
In a big percentage of the cases--by now it is 30 percent
of all the programs we have assessed--we cannot demonstrate
that we are producing a desired result, either because we
cannot define the desired result; we can define it but we do
not know how to measure it; or we know how to measure it, but
we have not had the time yet to collect the measurements to
tell how we are performing. Thirty percent. When we first
started this program, it was 40 percent or over 40 percent.
But the key is that we ask ourselves questions that get at
what we are doing, what are we accomplishing. We are spending
the money, but are we getting anything for it? And is what we
are getting for it satisfactory? And are we getting the money
we spend over here, a return on that investment compared with
the spending over here? And if it is lower than this, then
might we want to reconsider and put more money here and less
money here and so forth?
It gives us information that we would not otherwise have to
have a more intelligent, more results-oriented conversation
about how we are spending our money. And once we have spent it,
it gives program management more information and more targets
about how to spend that money to really make a difference.
Senator Coburn. So last year, you had these same programs
running. And in the President's proposal last year for his
budget, how many programs did you recommend eliminating?
Mr. Johnson. Last year I think we recommended 50 or 60
programs be reduced significantly or eliminated.
Senator Coburn. How many did Congress reduce or eliminate?
Mr. Johnson. I don't know, but it was less than 10.
Senator Coburn. But that is an important point for us to
know. Here we have management under measured guidelines saying
this is ineffective. Here is why it is not. Are those 40 or so
that weren't eliminated or modified last year in this list
again?
Mr. Johnson. Almost all of them.
Senator Coburn. So what we are saying is either your
evaluations of them are wrong or the political situation is
such that we don't have the courage to address it. I mean,
there is no question there are politically popular programs
that might not be effective that we might duck in our
responsibility to address. There is nothing wrong with saying
that. It is the real world up here, and we need to know that.
And we need to talk about the ones that are because we ought to
be held accountable for it.
So how do you move us based on what you have put forward--
of course, part of the purpose of this hearing is to find out
why certain programs are there and what they are or are not
accomplishing. How do you move us? How do you get the
information to the members of this body and the House to make
that happen?
Mr. Johnson. In the most general sense, we have to make
performance more important. We have to make performance good
politics, for instance. We have to pay more attention to the
performance information that we now have on programs that
account for more than half the budget. It is about 60 percent
of the total spending, and this year it will be 80 percent, and
next year it will be 100 percent.
So there is more discussion about performance now than
there was 2 or 3 years ago when there was very little PART
information and there was really no standard, performance
information or consistently derived performance information to
refer to. So it is more than there was before. But it is not
enough.
For instance, we have plans and are working to produce a
website that will show the American people how their money is
being spent. Eventually all 1,200 programs or so that we have
in the Federal Government for which we spend all the money will
be available in lay terms for the average citizen to see what
the program is intended to do, how it is considered to be
working, what its goals are, how it is performing relative to
those goals, how it is performing relative to last year, and,
most importantly, the plan for improving performance next year.
The purpose of all this is to try to create in the Federal
Government a culture that we can and we should improve
performance of every program every year.
Senator Coburn. Thank you. Senator Carper.
Senator Carper. Thanks, Mr. Chairman.
Mr. Chairman, I know you said the number, and I thought I
caught it, but what did you say the budget deficit was likely
to be for this fiscal year when you added in the emergency
supplemental?
Senator Coburn. Six hundred forty billion dollars when you
consider the money we will take from Social Security and write
an IOU. That does not include all the other funds out there
that we will take money and write IOUs for.
Senator Carper. All right. The 100 programs that the
Administration I think had called for either downsizing or
eliminating, what was the annualized cost for those programs?
Mr. Johnson. I think it is $20-some-odd billion.
Senator Carper. I heard the number $8 billion earlier. What
was that?
Mr. Johnson. The 150 programs that we have recommended for
elimination and reduction, and I think the expenditure of that
150 is 20-some-odd, and maybe the eliminations is $8 billion.
I am sorry. We will get back to you with that information.
Senator Carper. Whether it is $8 or $20 billion, with a
budget deficit of $600-some billion, if that is all we do,
clearly it is not enough, which I think reminds us that there
is not just the domestic discretionary spending but there is
defense spending, there is entitlement programs, and there are
revenues and whether or not we are collecting the monies that
are owed. And together I think they all need to be part of
reducing the budget deficit.
I was Governor of my State during the 1990's so I was not
following quite as closely what was going on down here, but I
think part of what happened, in order to enable us to actually
balance the budget and start running surpluses at the end of
the last decade, one was that revenue growth was very strong,
the economy was very strong. And that is always helpful. But
there was, I think, a little bit of work done on both the
discretionary spending side and on the entitlement side, just a
little on both sides. So it takes some of all that, so have us
keep that in mind.
I want to come back, if I could, to the issue of improper
payments for a little bit, if you will. And the number $45
billion is one that I expressed, and I just want to come back.
Is that an annual number? We believe that as much as $45
million in improper payments, as you said, not fraudulent,
maybe not totally wasteful payments, but $45 billion in
improper payments. Give us some example of payments that may be
improper, but we would say, well, that is not fraudulent or
that is not really wasteful, it is improper. Can you give us
some examples of that?
Mr. Walker. Sure. The $45 billion, Senator, is annual, and
that is the fiscal year 2004 estimate from the agencies that
have reported so far.
Mr. Johnson. It is $40 billion too much and $5 billion too
little, so it is a net of $35 billion too much.
Senator Carper. Oh, OK.
Mr. Walker. Again, everybody has not reported yet, and many
agencies are still refining their methodologies. One example
might be where a payment was made, and it might have been a
bona fide payment, but they did not have all the supporting
documentation they should have had in order to make the
payment.
Another example is where the program paid something twice,
and, by the way, under current law, if the Federal Government
does not pay promptly, it has to pay interest and in some cases
penalties. On the other hand, if a contractor is paid twice,
not only does the contractor not have to let us know that, but
they do not have to pay interest and there is no penalty even
if they hold on to the money for an extended period of time. We
do not have a level playing field there. So those would be two
examples I would give you on each side.
Senator Carper. Just based on those two examples, is there
something that you would want to suggest to us that we do in
response to particularly that last situation?
Mr. Walker. Well, I have suggested before that Congress
might want to try to take steps to create a more level playing
field with regard to overpayments. Specifically whether there
should be some notification requirement or whether under
certain circumstances interest should accrue and penalties
should be imposed.
Now, in some cases, quite frankly, the government's
internal controls are poor and its financial systems are so
poor that the government is part of the problem. On the other
hand, if the contractor is aware of it, then it is something
that needs to have additional transparency, and we need to
improve the related incentives.
Senator Carper. OK. Well, we might want to explore that a
bit further with you, if we could.
One of the things that I think I heard you say, General
Walker, was that you started talking about this PART program,
and I noted it said not used fully, and that is as far as I
got. But can you just go back and complete that paragraph for
us, please?
Mr. Walker. First, I think it is important to have a
methodology, and the Program Assessment Rating Tool is the
Administration's methodology for assessing the effectiveness of
programs. I think it is important that it apply to all major
programs. Nothing can really be off the table eventually, and
we also need to take the same concept with regard to the tax
side, including tax preferences at some point. Right now it is
limited to the program side.
Once the assessment is made, then there has to be a point
in time where the President will then say, All right, based
upon this result, we are going to end up either cutting back,
merging, or eliminating programs, and that is what Mr. Johnson
was talking about. The Administration does not always do it the
first time that they have an ineffective result, but after a
reasonable period of time, they may make such a proposal.
But then what has to happen is it comes to the Congress,
and then the key question is: What does the Congress do with
the information?
Candidly, we are currently on an imprudent and
unsustainable fiscal path. The base of government, whether it
be on the spending side, mandatory or discretionary, or the tax
side, is unsustainable. One of the things that has to happen is
a cultural change not just within the Executive Branch, but
also within the Legislative Branch to understand that every
dollar spent today on an item that is not effective is a dollar
we will not have in the future for something that could be
effective. And every additional dollar of debt today is a tax
increase for our kids and grandkids in the future. That is
where we are at. That is how bad our fiscal situation is.
Senator Carper. Would you describe that as a debt tax?
Mr. Walker. Well, you do not pay taxes--I think the taxes
will come before somebody dies.
Senator Carper. No. Debt, d-e-b-t.
Mr. Walker. Oh, debt tax. I thought you said ``death tax.''
You could call it that, Senator. I will give you credit for
that.
Senator Carper. Thank you so much.
Senator Coburn. Senator Lautenberg.
Senator Lautenberg. Thanks, Mr. Chairman. Again, we are
fortunate to have two such distinguished witnesses here, and it
is hard for me to understand how two such intelligent and
trained people can be so wrong. But other than that, why----
[Laughter.]
Mr. Chairman, you raised a question in your remarks before
that I think deserves some kind of a response, and that was in
talking about the deficit and what is happening. And I find it
a little bit mysterious to look at the low value of the dollar
in trading places and to see our trade deficits continue to
expand. Why? We never seem to get a satisfactory answer to
that.
And the other thing, Mr. Chairman, in fairness, lots of
people who have made their money in business, legitimate
entrepreneurs, etc., accumulated fortunes in some cases. Why,
in this time of war, was it necessary to reduce our revenues? I
will never understand that, and I am a beneficiary--no, I will
not even describe it that way--I am a recipient of the tax
breaks? But in terms of the legacy--Mr. Walker, you mentioned
legacy--to our kids, I have got 10 grandchildren, and the best
thing I can leave them is not more money because money in a
society that is disgruntled or worse, it does not do any good.
I would rather leave them a society that is operating in
harmony, where everybody has a chance, where life-saving
research can be conducted, and I do not have to meet with
parents and families of kids who have diabetes or cerebral
palsy or autism or other conditions. So when we look at our
indebtedness, I think we have to look at the whole picture,
really including the revenue side of things.
And I would ask either one of you, is the mantra that is
being followed here shrinking the size of government? Is that
the principal guidepost, a principal guidepost? Let me put it
that way.
Mr. Johnson. No, sir, it is not. It is making the money we
spend work better.
Senator Lautenberg. Well, we will all agree to that, but do
we find that contractors in the case of competing assignments--
I think we had 12,000 of our positions were competed last year;
91 percent of them, I understand, were won by Federal
employees. Do they lose their jobs because a private
contractor--as we saw, by the way, in the thousands who are
employed as screeners at airports, when we had terrible output
by the employees of private contractors, still with problems
but vastly improved from where they used to be.
How much is due to private contractors being able to pay
lower wages or reduce benefits? Do we look at that side of
things? Why will someone do this job for less money? How do
they get to do it?
Mr. Walker. Well, Senator, several things. One, first I
would say that the management agenda from my standpoint is more
about improving economy, efficiency, effectiveness, and
responsiveness with regard to existing Federal programs.
With regard to competitive sourcing, you are correct in
saying that a majority of the A-76 competitions are won by
Federal workers. Even in circumstances where they are not, many
times those Federal workers are hired by the contractor who
does win because they have knowledge, skills, and experience
that are of interest to that contractor.
With regard to compensation, which you touch on, there can
be differences in compensation between the government and
private sector. Sometimes the private sector pays more,
sometimes the government pays more than private sector for
positions of similar skills and knowledge. I have some directly
relevant experience in seeing that.
But one of the things that happens--as you know, having
been one of the founders of ADP--is through leveraging
technology and through improving processes, many times you can
do more with fewer people and at less cost. Therefore, a lot of
the efficiencies happen through improving processes and
leveraging technology rather than necessarily solely based upon
the people dimension.
Senator Lautenberg. Have you evaluated the morale of the
people who are part of the review process? Do we know what
effects it has on employee morale?
Mr. Walker. We have not done a specific study on that,
Senator. I will tell you, there is absolutely no question that
to the extent that you are going through that exercise, it is a
matter of concern to employees; just as when you end up going
to a market-based and performance-oriented compensation system,
that is also a matter of concern to employees.
That does not necessarily mean you should not do it, but it
comes back to what I said before. How you do it, when you do
it, on what basis you do it matters. You need to make sure that
you have adequate communications and safeguards to maximize the
chance of success and minimize the possibility of abuse or
counterproductive consequences.
Senator Lautenberg. Mr. Walker, you always talk straight,
and I appreciate it.
Mr. Chairman, I think this is about the first time that we
have seen this country reduce taxes while we are at war, and
that is also a mystifying factor for me.
Thank you very much.
Senator Coburn. Thank you, Senator Lautenberg.
I would just put into the record that the Administration
asked for slashing of 65 Federal programs in their 2005 budget;
13 ended up on the chopping block because they had received
poor grades from the Administration through the PART system. Of
those 13 program, Congress eliminated one. Two of them they
increased the funding for, totally proven ineffective, not
doing what they are supposed to do. That is why I come back to
the point that I made earlier.
What you all do and what you all recommend, if we are not
paying attention, if we are not exposing, if we are not making
sure that the members of this body understand where we are
ineffective and allow your processing, observational tools and
management tools to be used, then it will be for naught,
because if there is no action on the basis of assessment, there
is no reason to do the assessment and waste that money.
Let's just take an example of one and, Mr. Johnson, maybe
you can help me: Safe and drug-free schools State grants. A
really important thing to a lot of people. Personally, in
Oklahoma when they have been associated with those programs,
but yet it comes up on the block. Why is this State grant
program listed as ineffective and targeted for elimination? Can
you tell me?
Mr. Johnson. I do not know the particulars of that program.
Senator Coburn. OK.
Mr. Johnson. PART should clarify what the weaknesses of the
program are, and I am sorry, but I do not have that program
information here in front of me.
Senator Coburn. Is part of the problem with some of the
programs that Congress does not define further down what they
want to achieve out of the program? Is part of our problem when
we have an idea that is there to assist citizens of this
country, we put the idea out but we do not define it in a clear
enough and concise way so that the agencies can carry out the
intent of Congress?
Mr. Johnson. That is some of the problem where they define
it maybe in terms of outputs instead of outcomes.
Another part of the problem is they do not build enough
accountability measures into the program. A lot of our money is
spent, whether we give it to States or nonprofit organizations
or whatever, to do the work locally, and we do not hold them
accountable for getting something in return for the money.
Senator Coburn. In other words, no oversight?
Mr. Johnson. Well, there is oversight but just no
accountability. We need to have oversight within the agencies,
and Congress needs to have oversight of the Executive Branch.
But then we need to have the ability--rules need to allow us,
laws that authorize and the money appropriated for the programs
need to allow us to hold local entities accountable for this.
CDBG, for instance, is much talked about now as part of the
Strengthening America's Communities Initiative. We generally
allow municipalities to do pretty much whatever they want to
with that money. We do not insist that money be used for
creating economic vitality in low-income areas where there
would not be economic vitality otherwise. That is why we are
proposing that be changed.
Mr. Walker. Senator, can I comment on that?
Senator Coburn. Sure.
Mr. Walker. Senator, I think over many years the tendency
is, if you give more money to it or if you provide an
additional tax preference, the assumption is that you are going
to have a positive impact. That is an invalid assumption. There
is a need to engage in a much more disciplined, fundamental,
and periodic review not just on the spending side, but also on
the tax preference side and the regulatory side about what is
working and what is not working with regard to the base.
In many cases there is a need to have more transparency
over what kinds of activities are going on right now. I mean,
you articulated numbers, but those are probably not widely
known, and so there needs to be more transparency in order to
facilitate more accountability both within the Executive Branch
as well as within the Legislative Branch.
Senator Coburn. Let me spend a minute. OMB has a scorecard
rating system, and the scorecard issued December 31, 2004. Of
the 24 major department agencies listed, OMB received the
highest number of failing grades. Out of all these agencies
listed, OMB got the highest number of failing grades, and I
want to give you a chance to talk with us about that. What is
the current status of OMB getting its house in order? If you
are going to be assessing people, you have got to assess
yourself. And when you have the poorest performance based on
the number of grades, it is going to question some people's
right for you to assess them. Talk with us about that, if you
would.
Mr. Johnson. And I am assuming here that the adage of ``Do
as we say not as we do'' won't cut it?
Senator Coburn. No, I don't think that is going to cut it.
Mr. Johnson. OK. The most difficult part of the bad grades
are that--we measure both progress and status. Progress means
did the agency do what they said they are going to do in the
last quarter. We had last quarter three red scores, so in three
out of five cases we did not do what we said we were going to
do. There is no excuse for that. There were nine in the entire
Federal Government. This next quarter, I am reasonably certain
that OMB will have no red scores in progress.
So, Director Bolton has made it very clear: Red progress
scores are unacceptable. He talked to the operating people at
OMB, and we will do as we say we are going to do.
On the progress scores, I think we have a non-red score in
the human capital initiative. In the competitive sourcing
initiative, we will move off red in competitive sourcing
because we have done a study in the budget performance
integration. We will move soon off red on budget performance
integration because we have a strategic plan now, which was
something we said we were going to do which we had not done.
In some areas like IT and financial management, there is a
little complication in that we are tied to the Executive Office
of the President, and it is hard to audit a separate part of
the Executive Office of the President.
Senator Coburn. But you would admit that is an important
area, the Executive Office of the President? If he is going to
lead this Nation, he ought to be audited and they ought to be
efficient and they ought to be doing the same things that
everybody else in the government is doing.
Mr. Johnson. Yes, the auditing of the Executive Office of
the President is important. I don't know about the history of
that. General Walker could probably talk to that but, yes, we
should be held accountable.
Senator Coburn. Well, it is interesting. Here is the little
scorecard that we have in our packet, and I think have you seen
this as well. DOD, Defense, has two reds and three yellows. OMB
has four reds and a yellow. The Corps of Engineers, which I
find tremendously wasteful in this country in terms of what I
have seen they have done in my own State, four reds and one
yellow, which means they are not--what this really says is they
are not managed well. Right?
Mr. Johnson. They have opportunities to manage better.
Senator Coburn. Well, you can look at it that way. If we
were doing it in a profit scenario in the private sector, some
heads would roll in terms of management decisions, and so I
wanted to give you a chance to answer that because that is
going to be in this, and we need to see--and I guess I would
like a commitment from you to hear from you, I would like to
hear directly back to our Subcommittee, to Senator Carper and
myself, what your performance rating is when you turn the next
corner and send that back to----
Mr. Johnson. For OMB.
Senator Coburn. Yes, sir.
Mr. Johnson. All right.
Senator Coburn. Send that back to us. Senator Carper.
Mr. Johnson. Can I make one comment on the scores?
Senator Coburn. Sure.
Mr. Johnson. In the fall of 2001, when the scorecard was
first utilized--and there are 130 scores there, 5 initiatives,
26 agencies--110 of them were red, bright red. Right now 40 are
red, 40 are green, roughly, and 50 are yellow. The average
agency now is yellow. The average agency 3\1/2\ years ago was
red. And if you look in detail at what it takes to be yellow,
it is a very different place. It is a very different place to
be served by. It is a very different place to work. So OMB has
not moved as the Federal Government in general has, but overall
the Federal Government is a very different place, fiscally and
as a place to work, than it was 4 years ago, and it will be
better still 4 years from now.
Senator Coburn. I do not mean to demean your progress.
Mr. Johnson. I know.
Senator Coburn. And that is not my intention. I would note
for the record that the worst-performing agency is the
Smithsonian, and that is something--although not a great big
agency, every agency ought to be held accountable to the same
standards of performance and review and evaluation of their
stated goals, with the efficiency with which they get there.
Senator Carper.
Senator Carper. Thanks, Mr. Chairman. I want to return, Mr.
Chairman, to this notion of improper payments, and I
understand, if I have got this right, $40 billion maybe of
overpayments, $5 billion of underpayments, for a net of about
$35 billion.
My first thought is if we could just somehow cut that in
half, instead of having maybe $35 billion in bad payments, we
had $17 or $18 billion, that would actually come pretty close
to being equal to all the those programs that the
Administration had proposed that we downsize or eliminate.
Mr. Johnson. Our goal is to eliminate them, not to cut them
in half.
Senator Carper. Good. What further steps do the Chairman
here and myself and Members of this Subcommittee, Members of
the Senate, what do we need to do to enable you to do that?
Mr. Johnson. It varies by program. One thing General Walker
talked about is how we are an information economy and an
information organization, so you have this person that is
making the decision about is this person unemployed, is this
person eligible for this payment or that payment. And the way
to help that person decide accurately whether the person is
eligible or not is to give them the information they need.
So one of the things we have worked with you on, and in a
couple of cases successfully, is getting permission to get
employment information before someone over here who is making
unemployment compensation determinations or income information
from over here in front of someone who is making a
determination about student loan eligibility.
So there are obviously concerns about privacy we have to be
very sensitive about, but Congress has made it possible to
provide information from one part of the government to the
other part of the government to help us be more intelligent
about these kinds of situations. There will be other situations
like that, and in the future, openness to that and
understanding the dollar impact of this and understanding and
demanding that all the necessary steps be taken to protect
people's privacy, but at the same time make this information
available to help us reduce these costs.
But again, the need is different for each program. There
are about seven programs through which 90 percent of these
improper payments are made. And, again, the decision to be
made, the eligibility decision, is different for each one of
them.
Senator Carper. Any idea if any of those are out of the
Department of Defense or some other particular agency, or are
they across the government? Are some of them in the defense
programs as well as nondefense?
Mr. Walker. There would be some defense programs to
consider. For example, you talk about both sides of the ledger.
Part of the issue that Clay Johnson just talked about is data
sharing so you can do data matching. One aspect is to ensure
that you are only paying payments to people who are entitled to
the payment. I would argue that since it is taxpayer money,
while you have to be concerned with privacy in some
circumstances, the taxpayers have a need to know and a right to
know and the agencies that are responsible for administering
those programs should be able to do reasonable data sharing and
data matching to make sure the taxpayer money is not abused.
On the revenue side, one example would be, in cases where
contractors may be delinquent on their taxes. There needs to be
more visibility over who we are paying tremendous taxpayer
money to for contracts at the same point in time they are
delinquent on their Federal income taxes? That is another
example of where data sharing and data matching needs to
happen.
Senator Carper. I don't know if it is appropriate to ask
for the record, Mr. Chairman, but, Mr. Johnson, is it possible
for OMB to share with us on the Subcommittee an example of the
$45 billion or the $40 billion in overpayments, or maybe just
share with us by agency what they are?
Mr. Johnson. Yes.
Senator Carper. Could you do that, if you would, please.
Mr. Johnson. Sure.
Senator Carper. And let me just ask also for the record--if
both of you could do that, I would appreciate it--if you could
just submit for the record some specific steps that we ought to
be taking to empower you to go after, as you suggest, all of
those improper payments, that would be great.
Let me change focus, if you could a little bit, Mr.
Chairman, and to our guests, and I want us to focus a little
bit on financial statements, the annual financial statements
that are being submitted. I am wondering what benefits, if any,
do agencies derive by turning in their annual financial
statements earlier or on time? The quicker turnaround on these
statements, does it lead to more errors? Does it lead to
inaccurate data? Or are we just getting more timely, accurate
data than maybe was the case before?
Mr. Johnson. Let me give you the high-level view and then
for a more detailed answer give it to General Walker.
Senator Carper. What if he wants to give the high-level
view?
Mr. Johnson. That is why I want to jump in here and go
first. [Laughter.]
I was afraid you were going to ask.
It requires a tremendous amount of discipline, day-in and
day-out financial management discipline throughout the year, so
that at the end of the year you can publish your audited
financial statements in 45 days. If you have 5 months, you
really don't need that day-in and day-out discipline. So the
key to publishing it is what kind of day-in and day-out
discipline it demands of the agencies. And everybody just has
to account for their money day in and day out better in order
to publish audited financial statements in 45 days. Now, that
is the high-level view.
Senator Carper. How about that low-level view, Mr. Walker?
Mr. Walker. Well, a couple of comments.
Within the last couple of weeks, I have asked virtually
every group that I have spoken to, how many of you have read
the financial statements of the U.S. Government? Less than a
handful, and it involved hundreds of people.
Part of the problem is that we do not have enough people
focused on the annual performance and accountability reports of
the Federal Government to understand what our true financial
condition--fiscal imbalance is--and what kind of results are
being delivered with the resources and authorities agencies
have.
But with regard to the issue directly at hand, I believe
Clay Johnson is right in saying that one of the problems that
we had before was by giving agencies 5 months to be able to
publish audited financial statements, what was happening was
many of them were doing little to nothing during the year; they
were waiting until at or after the end of the year, spending a
lot of time and money re-creating records, and basically trying
to engage in a range of heroic activities that cost a lot of
money, that took a lot of time in order to publish financial
statements.
So by accelerating the date, it reinforces the importance
of having the right kind of controls and the right kind of
systems in place so you can provide timely, accurate, and
useful information on a day-to-day basis. Why, because you do
not have enough time in 45 days to be able to re-create the
books, engage in those heroic efforts, and have a prayer of
getting a clean opinion on your financial statement.
So it is really a means to an end rather than an end in and
of itself. Nonetheless, as Chairman Coburn said, last year we
had a $567 billion budget deficit. This year it is going to be
over $600 billion. Most people do not know that. You cannot
change something until you know about it and agree that it is
something that needs to be changed.
Senator Coburn. I think the important point is that is a
tool with which to make decisions to run your agency every day,
and if you do not have the numbers evaluating your agency, you
really are just running it by the seat of your pants. And so
putting accounting and financial controls into running the
government makes them better, and we do that in every other
area that is competitive in this country, and we ought to be
doing in the government.
I also wanted to make a couple other points, and I know we
are going to have to go for a vote, and I want to thank each of
you for being here.
The competitive bidding process is not designed to get the
government out of the business. One of the best benefits of it
is it makes the government more efficient because they know
they are going to have to competitively bid. And when they know
that--and one of the things I want to talk to Senator Carper
about is we have great response in terms of the VA regional
medical office. When they let employees start really
participating in making decisions to run it, what we have seen
is throughput and productivity skyrocket within the VA regional
medical offices off the model that was started in my home town
at the VA regional Office in Muskogee, Oklahoma. And it has
grown throughout the system, throughout the country.
But one of the parts of good management is allowing
information to flow up, and once our Federal managers really
start learning that, what they are going to find is they are
going to find all sorts of ideas on how we become more
efficient, we accomplish our tasks, and do it more efficiently.
I would like for you all to agree--we will have some
additional questions that we would like it put in writing to
you, if we may, Senator Carper and myself and other Members of
the Subcommittee. If you would answer those in a timely
fashion, we would appreciate it.
Senator Carper. One last question for you, Mr. Chairman.
What was your home town?
Senator Coburn. Muskogee, Oklahoma.
Senator Carper. So you are an Okie from Muskogee.
Senator Coburn. I am an OB from Muskogee. [Laughter.]
Mr. Johnson. But you forget, he does not like acronyms.
[Laughter.]
Senator Coburn. I would remind you this is T.C.-squared.
Thank you all very much for being here.
[Whereupon, at 3:50 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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