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Hearing Of The Senate Homeland Security And Governmental Affairs Committee - Recovery And Reinvestment Spending: Implementing A Bold Oversight Strategy

Statement

By:
Date:
Location: Washington, DC

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SEN. LIEBERMAN: I'm going to begin with a quote from Benjamin Franklin which is always a safe thing to do. "It takes many good deeds to build a good reputation and only one bad one to lose it." And so, it is, in some ways, with the Recovery Act. We all want the Recovery Act to succeed, in fact, we all need it to succeed to protect and create jobs to start our economy growing again, but a mistake, a story about how taxpayer money is being wasted or funneled to improper uses, that will really undercut faith in this program and I suppose once more in government no matter what other parts of the program are successful. I understand that's a large undertaking to say that we will attempt to prevent any misuse of this money, but that has to be our goal because of the importance of this project to our national economic revivable.

So our committee wants to use these hearings in cooperation with the administration, particularly Mr. Devaney, with you, whom we welcome this morning, as a way together to assure ourselves that we have systems set up to guarantee two things as best we can. One is that the money moves out quickly which is what we want it to do, but two, that we set up systems that both prevent waste, fraud, and abuse and, also, detect potential problems in that regard so we can stop them before they occur.

To help with the very kind of supervision I'm talking about, the bill, the legislation which created the Recovery Act also created a Recovery Accountability and Transparency Board composed of a chairman and 10 Inspectors General from across the Federal government. That board met for the first time last Friday and its chairman, Earl Devaney, on loan from his job and good work as Inspector General at the Interior Department, joins us here today. We look forward to hearing how that first meeting went and what plans or recommendations emerged from that or have been put in place already.

The Recovery Act also included $250 million dollars for Federal Inspectors General to hire additional experienced auditors and investigators for their agencies and we'd like to hear about how that's going. There's a special problem that we note around the country and I've heard some indication of it in Connecticut that state and local agencies, which are now being stretched thin by the recession, in some cases, letting people go, to make sure that they have the capacity to the best of our ability to determine, to effectively manage, Recovery Act funds at the state and local levels.

I'm going to be holding a committee hearing next Tuesday in Connecticut to explore in that state and local setting how the money is being spent and watched as it's being spent at the state and local levels.

Also, I'm pleased to welcome again this morning, Rob Nabors, Deputy Director at the Office of Management and Budget, in addition to providing overall guidance to Federal agencies. On Recovery Act implementation, OMB has stood up the Web site, http://www.recovery.gov, which will allow citizens, journalist, and bloggers, I suppose, to keep an eye on stimulus spending and report waste, fraud, abuse, or theft if they suspect it. I continue to be impressed by the numbers of usage here. The last I heard, Rob, and you can bring us up-to-date in your testimony, that the site is getting about 4,000 hits a second. That's astounding! This can be a marvelous tool, not only to monitor Recovery Act spending, but could eventually help us develop powerful tools to monitor all Federal spending.

For http://www.recovery.gov to work to its best potential, it's going to need, I think, to allow users as best we can to burrow into the details of where and how the money is being spent. I want to follow up this morning on concerns raised at our last hearing about how we could actually do that; how the data trail can be followed and not turn cold at some of the precise point spending should be monitored and that's at the specific contract level.

I understand, Chairman Devaney, that the board is taking over responsibility for the content of http://www.recovery.gov while OMB will remain responsible for the collection of data that feeds into the Web site, so I'd like to hear from you about how that part of it is going.

And, Mr. Nabors, finally, it's important for us in these regular hearings to get a sense of how much of the money is actually out there. We've seen some glimmering of economic upturn lately; obviously, employment numbers continue to be bad, but some other upturn and I wonder whether some of that may be related to the first spending of the stimulus dollars. Again, we ask these questions in the spirit of trying to make this program work well and working together with the Administration.

I close with gratitude to my staff with yet another piece of wisdom from Mr. Franklin. "By failing to prepare, you are preparing to fail." End of quote. So with our economy at stake, the American Recovery and Reinvestment Act really is too big and too important to fail and that's what we're all about with your help this morning and every day. Thank you. Senator Collins?

SEN. COLLINS: Thank you, Mr. Chairman. I feel like I should quote Abraham Lincoln or something to get into the spirit of this day, but I'll proceed nonetheless. Nearly two months ago, the president signed into law the American Recovery and Reinvestment Act to help turn around our economy. Now, the challenge is to make sure that the billions of dollars provided by that law achieve the purpose of boosting our economy and saving and creating jobs.

As my Senate colleagues and I worked to craft this bill, we established an oversight board and imposed tough reporting requirements to help ensure transparency and accountability in the expenditure of these funds. We remain determined to protect this critical spending from waste, fraud and mismanagement. Several provisions included in the law provide safeguards and oversight of stimulus spending. Perhaps, however, the most important is the Recovery Act Transparency Board created to coordinate Federal oversight efforts.

As the Chairman has indicated, the GAO and many of our nation's Inspectors General also have been provided with additional funding to carry out investigations and reporting requirements. A new Web site, http://www.recovery.gov, has been launched to report on expenditures and to provide the public with access to stimulus information. The more eyes that we have on this spending, the better. The http://www.recovery.gov Web site is now up and running and, as the Chairman has indicated, is tremendously popular.

It is my understanding that it has already received some three hundred million hits. It is now linked to the Individual Recovery Act Web sites for states and for Federal agencies.

I've included a link to the http://www.recovery.gov Web site from my own Senate Web site as well as a special Web site I created to provide Mainers with specific information about Recovery Act spending as it relates to our state. Technology not only allows an abundance of information to be shared quickly with people across this nation, but also helps to ensure transparency and accountability.

The American people have high expectations for the Recovery Act. The President has estimated that it will save or create approximately 3.5 million jobs and help to turn the economy around. Taxpayer dollars will be used to improve growth in schools, enhance healthcare, and invest in infrastructure and science. Regardless of the purpose, each dollar must be spent wisely.

Funds need to be disbursed quickly to meet the goals of stimulating the economy, but we must ensure that haste does not make waste or permit fraud and mismanagement. Striking the right balance between speed and caution will be difficult, but it is essential as we administer the grants and contracts funded by this law.

Press reports have already questioned whether some of the first few contracts using stimulus funds were awarded without sufficient transparency and whether contracting mistakes were made. Although the press has generally described these as "sloppy paperwork," this is not a reassuring start. Problems like these can easily erode public confidence and leave our economic goals unrealized.

Today's hearing will provide us with a more in-depth look at the most important oversight organization, the Recovery Accountability and Transparency Board, and I look forward to hearing from Mr. Devaney, the Board's recently appointed Chairman. From OMB, I'm particularly interested in hearing how OMB expects to address the challenges of tracking funds at the state and local level, the very issue that the issue raised, and ensuring transparency, accountability, and competition in stimulus contracting.

Our government has an obligation to make sure that these vital dollars provide the maximum possible benefit to our economy. The American taxpayers deserve no less from their investment.

Thank you, Mr. Chairman.

SEN. LIEBERMAN: Thank you very much, Senator Collins.

We'll start with Mr. Nabors. I note, Mr. Nabors, in one of the recent news stories on Peter Orszag, that it mentioned that he drank a lot of high caffeine tea during the day. I note the presence of the bottle of Zero Coke there. I share that particular addiction and, with that sense of brotherhood, I now invite your testimony.

MR. NABORS: It might be best just to close at that point, sir.

SEN. LIEBERMAN: Go right ahead.

MR. NABORS: Chairman Lieberman, Ranking Member Collins, Senator Burris, thank you for inviting me to testify about the implementation of the Recovery Act. Today, I'd like to talk about the progress we've made since the last hearing in addressing our shared goal and that is to implement the Recovery Act as wisely and as quickly as possible. I'll start by talking about where we are with respect to spending Recovery Act funds.

As of this morning, Federal agencies have obligated about $51 billion dollars; that is up from about $15 billion dollars when we last met. While just two agencies had issued notices of obligation at the beginning of March, an additional thirteen have done so since then. This includes the Department of Transportation, the Department of Housing and Urban Development, the Department of Labor, the Department of Education, and HA Chess.

In addition to obligations, there is other evidence of accelerating spending activity. Agencies have announced nearly $151 billion dollars in formula and block grants that will be made available to states. These allocations enable states to foresee important increases to their budgets and can influence state decision- making and benefit the economy even before they are technically obligated. Nearly five hundred Recovery Act contracting opportunities and notices have been posted; seventy-one Recovery Act grant opportunities have been posted; and as of yesterday, Making Work Pay tax cuts were fully implemented benefiting 95 percent of working families.

SEN. LIEBERMAN: Can I interrupt you and I apologize; we'll give you more time, explain what that means about the Making Work Pay tax cuts. I understood that it might go in depending on the employers decision as early as April.

MR. NABORS: It actually started in February and there was an April 1 deadline, so at this point, it should be fully implemented.

SEN. LIEBERMAN: I see. So the people should really begin to see, now -- either have seen or see as of April 1, a reduction in the payroll taxes.

MR. NABORS: Exactly.

SEN. LIEBERMAN: That's great. I originally had heard that it might not happen until June. Was that--maybe that was during the consideration of the bill? Okay. That's great. Thank you.

MR. NABORS: It's important to be absolutely clear that, while getting funds into the economy is important, it is critical to do so in a responsible and transparent way. This remains a priority for the Administration and the American people who continue to monitor the government actions through http://www.recovery.gov. As Senator Collins, mentioned, the http://www.recovery.gov had had a total of about three hundred million hits. That's double the level since the last time we spoke.

Speaking on behalf of OMB, I can tell you that we are taking numerous steps towards effective implementation of the Recovery Act. We are reviewing numerous agency spend plants to ensure that funds are invested appropriately and with sufficient planning ahead of the actual obligations. We have facilitated the launch of Recovery Web sites at all major agencies which are linked through http://www.recovery.gov. We have worked with Federal agencies to improve the timeliness and completeness of their financial reports that are publicly available through http://www.recovery.gov.

And, perhaps most importantly, we are preparing to release tomorrow additional guidance to enhance agency reporting requirements and clarify recipient reporting. In order to get the most up-to-date information possible, the updated guidance requires agencies to report more frequently and in more detail. We will ask agencies to provide information about significant funding announcements to OMB as they occur. We're not going to wait; we're going to ask them to report that information to us as the spending decisions occur in order to provide a better, real-time sense of what projects are being funded, where they are being funded, and how much funding they are actually receiving.

We will define agency and program plan requirements with a detailed template geared towards performance and oversight. We will eliminate the transition into a monthly financial report that was included in the original guidance. The monthly report was originally intended to provide a more detailed level of reporting, but instead, we will continue the weekly financial report with enhanced reporting requirements so that more up-to-date information will remain available for the public, Congress, and Federal managers.

To further ensure that recovery funds are tracked and monitored to the sub-recipient and project levels, the updated guidance also provides significantly more detail on recipient reporting and establishes data collection methods, standard data definitions, and a process in which the recipient information will flow into http://www.recovery.gov.

The guidance will clarify several points. For instance, our guidance will establish that the Administration will be able to track the vast majority of recovery funding to the sub-recipient and project levels. For contracts, which total about $60 billion dollars of the Recovery Act, we will be able to track Federal contracts awarded, how prime contractors are using the funds, and information on any subcontracts that they award. For the approximately $300 billion dollars in grants that are subject to recipient reporting requirements, we will be able to collect detailed information on Federal grants awarded and subawards from the primary recipient.

Overall, we anticipate that we will be able to collect subgrant information in about 95 percent of the cases and we are working to expand that going into the future to collect the other 5 percent.

I'd just like to stop here and acknowledge when we came before you the last time, we heard the concerns that this committee raised with regard to making sure that we follow this money as far down through the chain as possible. As much as possible, in everything that we are doing going forward, we're trying to capture those concerns. This is a first step towards addressing some of your concerns and we're going to continue to make steps going into the future.

We're going to ensure that recipient data collection will be centralized. OMB will oversee the development of a central collection system for recipient reporting which will lower government-wide system modification costs, improve the consistency and availability of data, and alleviate reporting burdens for the recipients by establishing this central point of collection. We're only going to make a limited number of exemptions to that centralized point and we are going to make those exemptions for those agencies that have clear expertise or systems already set up where it might be disruptive to create a secondary system.

Recovery Act reporting will be standardized via the terms and conditions for Federal grants, loans, contracts, and other awards. This will also assist agencies in implementing 'Bavis Bacon' and 'Buy American' provisions.

And, finally, OMB is interested in public views on this guidance and will be accepting public feedback through April 17. After this date, OMB will plan to issue another update to their guidance based on those comments from stakeholders, including Federal agencies, Congress, state and local government officials, grant and contract recipients, and citizens.

These are just a few of the things that we are trying to do to address the concerns that you've raised in the past.

To point to another issue raised by members of this committee, the Administration is committed to ensuring that agencies have the skills and capacity to plan effectively, award and administer contracts, and carry out programs funded by the Recovery Act.

Per the advice of this committee, we are reviewing the use of a government-wide contingency contracting core in limited circumstances; however, given the likelihood that the activities of the Recovery Act will require many agencies to handle an increased workload over an extended period of time, we are also encouraging agencies to use various existing authorities and options such as the direct hire authority or coordinated interagency recruitment efforts. We are looking at all available personnel authorities that are currently available.

For example, on March 17, the Office of Personnel Management authorized the government-wide use of accepted service appointment so that agencies can quickly hire additional staff without sacrificing veterans preferences.

We are also reviewing a bill introduced by Senator Collins recently which will authorize Federal agencies to reemploy retired Federal employees on a limited basis without offsetting the annuity from salary. Employing retirees could be a promising means of building capacity for Recovery Act implementation and we are supportive of the kinds of additional flexibilities proposed in this legislation.

With that, I'll conclude by reiterating that all levels and branches of government have been entrusted with a great deal of responsibility for helping to lead the nation out of an economic crisis. We share the burden of living up to the expectations of the American people and delivering the transparency and accountability and performance that we promised. Thank you and I look forward to your questions.

SEN. LIEBERMAN: Thanks very much, Mr. Nabors. That was very helpful in many regards and I thank you for responding to the concerns and questions raised by the committee at the last hearing. Mr. Devaney, welcome. Obviously, we've enjoyed the presence of you and your testimony before at this committee and we welcome you in the new capacity and thank you very much for taking on these responsibilities.

MR. DEVANEY: Thank you, Mr. Chairman, Ranking Member Collins, and Senator Burris. I want to thank you for the opportunity to testify today. I've had the honor of testifying, as you mentioned, before this committee in the past as the Inspector General of Interior and, as you know, the President has recently appointed me to Chair the Recovery Accountability and Transparency Board and it is in that capacity today that I appear before you.

I'm pleased to tell you that the board has recently obtained office space and is busy acquiring a staff of highly skilled oversight and IT professionals. Our first board meeting, as mentioned earlier, was held last week and we have set in motion a number of initiatives to ensure that the board fulfills all of its responsibilities under the Act.

The members of the board and I view the board as having a dual mission. First, the board is responsible for establishing and maintaining a Web site, the purpose of which is not only to foster historic levels of transparency, but to do so in a user friendly way. Second, the board will coordinate and conduct oversight of recovery funds to prevent fraud, waste, or mismanagement.

Even before the Recovery Act was signed into law by the President, OMB and GSA had begun designing the architecture and creating the implementation plant for the Web site. A great deal of credit must be given to OMB and GSA for their efforts to launch this Web site. Because of their efforts, all Americans can visit the Web site today as we've talked about at http://www.recovery.gov, however, I think it's important to point out that the creation of this Web site is an evolving process with multiple phases. It is not a single event. As you know, the Recovery Act vests the board with the authority to maintain this Web site.

Now that this first phase of getting http://www.recovery.gov up and running is over, I am eager for the board to start the second phase of development. During this second phase, the board will begin to manage the Web site's design and content; OMB will retain responsibility for the reporting guidance and the collection and verification of data; and GSA will continue to host the Web site. I am confident that this division of labor will provide the best opportunity to maximize recovery.gov's use as a transparency and accountability tool and I'm equally confident that we will also have the opportunity to achieve an unprecedented level of citizen participation.

Our teams across the Federal government have developed multiple strategies to help prevent fraud, waste, or mismanagement of recovery funds. In fact, this committee recently heard testimony about some of those preventative strategies from the Chair of the IG council, Phyllis Wong. What I can tell you today is that IG is quickly transforming those strategies into real action.

For instance, at least six IGs have finished reviews of previously unimplemented IG or GAO recommendations. These reviews will allow their departments to take corrective actions now to ensure that effective controls are in place for handling these funds.

Interior's Office of Inspector General has developed a risk-based model to use in conjunction with recovery grant funds that is now assisting the department with developing its own risk-based models for grants with the hope of extending those models to contracts and cooperative agreements. Energy's Office of Inspector General has completed over thirty fraud awareness briefings nationwide involving over two thousand attendees. And several other IGs have audits and evaluations that are about to be released which will include recommendations that will be particularly helpful to their departments for Recovery Act activities.

At our first board meeting last week, both Phyllis Wong and I supported the board's decision to form a new recovery funds working group which will be co-chaired by board member Calvin Scovel, the IG of Transportation and a member of the board's staff, former IG John Higgins will be the other co-chair.

The purpose of this working group will be to ensure a maximum level of coordination and cooperation among the IGs necessary to prevent fraud, waste, and mismanagement.

Mr. Chairman, you and the members of the committee have noticed that I have been using the word 'prevent' to help describe the board's mission of accountability.

That is very deliberate on my part. The language of the Recovery Act strongly suggests that IGs and other oversight entities are being asked to minimize the risks inherent in distributing such an extraordinary amount of money and to maximize the opportunities to prevent fraud, waste, or mismanagement in the first instance before it happens.

I see the board actively detecting fraud trends, identifying best practices for conducting reviews, designing risk-based strategies to help focus the oversight community's limited resources. The new recovery funds working group will undoubtedly serve as a catalyst for an unprecedented leveraging of resources. We will also work closely with the Department of Justice to ensure that, when fraud is detected, a swift, coordinated process will follow.

Finally, I would like to talk about some of the biggest challenges I see the board having.

First and foremost is the matter of data quality. Simply stated, the Federal government systems have never been fully successful at producing timely and reliable data.

Second to data quality is the lack of inadequate number of procurement professionals at all levels of government, not only the Federal government. However, I am encouraged by the news that the Office of Personnel Management has tentative plans to hold a multi- agency job fair sometime in May to help agencies with their human resource needs in this arena.

And, finally, Mr. Chairman, I'm concerned that there may be a naïve impression that, given the amount of transparency and accountability called for in this Act, little or no fraud or waste will occur. I'm afraid that my thirty-eight years of Federal enforcement experience tells me otherwise and that some level of fraud or waste is regrettably inevitable. Obviously, the challenge for those of us charged with oversight will be to significantly minimize those losses. I promise to this committee today that my staff, the members of the board, and I will work tirelessly to reduce those losses to the lowest level possible.

Mr. Chairman, members of the committee, that concludes my oral remarks and I'll be glad to answer any questions.

SEN. LIEBERMAN: Thanks, Mr. Devaney. That's a good beginning. We'll do seven minute rounds of questions.

Mr. Nabors, let me talk first about the speed with which money is being spent because, obviously, one of the reasons the President asked Congress and Congress responded with the stimulus act quickly was to get the money out into the economy. You've mentioned some numbers, $51 billion obligated, I think you said another $151 billion which I take it is formula money that will go out to the states, but help to put that in some context for us. The total of the stimulus package was $780 billion, rounding off, that's over a two-year period. I remember, at one point, the Senate, I was pleased to say that the way we wrote it that 80 percent would be spent in the first two years as opposed to a lower number when it originally came through the House.

Give us a sense of how these numbers fit in. Obviously, if we divide the $780 but two, and you tell me if this is correct, then it would seem there would be $390 available this year. How much of that would you say has begun to move out into the economy? Am I choosing the right numbers as a reference point?

MR. NABORS: I think it's a little bit more complicated than that.

SEN. LIEBERMAN: Yeah. I suspected.

MR. NABORS: If you look at what both the OMB technical staff and the CBO technical staff were projecting, they were projecting a ramp up in year one and significantly more activity at the end of year one leading into year two and I think that's exactly what you're seeing right now. The numbers that I talked about were just grants, loans, and contracts. Within the $780 billion dollars that you referenced, there is additional money with regard to food stamps, unemployment benefits, and tax cuts. That money is not tracked in the numbers that I was talking about with regard to obligation, but that money is also making its way into the economic system as well.

SEN. LIEBERMAN: That money is -- that's a substantial amount of money.

MR. NABORS: Absolutely.

SEN. LIEBERMAN: That's many tens of billions and, presumably, as you indicated, with the reduction in the payroll tax credit, that has begun to feed in as of yesterday, as of April 1. I presume, with the food stamps and other programs, the extra benefits are already going out, but that they would go out over a period of time as people become eligible for those benefits.

MR. NABORS: That's correct. The food stamps money has not yet gone out, but it will go out soon and it will go out in an even way over the entire length of the program.

SEN. LIEBERMAN: Right.

MR. NABORS: With regard to unemployment insurance, those benefits are available through December of 2009, so it's on a slightly shorter timeframe than the rest of the benefits. But I think, overall, what you should expect to see is that agencies, and we are encouraging this type of behavior, agencies are taking time right now to plan their spending activities that we will see increased grants, loans, and contracts being made going into the summer and into the fall and there will be increased activity going into the end of this year and going into the beginning of next year. I think that both OMB and CBO were projecting large bumps in terms of the amount of spending that is being done probably by the end of this year and at the beginning of next year. So we're ramping up to that.

SEN. LIEBERMAN: Okay, so, what number do you use? I mean, the presumption was that all this money couldn't be spend in the first year, or even in the first two years. What, what percentage of it do you hope will be spent in the first year? And if you can, I may be pushing you to take a guess, what percentage do you think is already begun to flow out into the economy now?

MR. NABORS: Our goal is that, within the first 18 months, so by the, through this year and going into the next fiscal year.

SEN. LIEBERMAN: Right.

MR. NABORS: We would hope that 70 percent of the funding is actually spent. And I think we're on track to accomplish that.

SEN. LIEBERMAN: So that's a kind of front loading, if you will.

MR.NABORS: Yes.

SEN. LIEBERMAN: That's, doesn't count all of next fiscal year.

MR.NABORS: It doesn't, well it counts, counts all of next fiscal year. Doesn't count all of next calendar year.

SEN. LIEBERMAN: Okay, so by the end of fiscal year 2010, you hope to have spent 70 percent --

MR. NABORS: Correct.

SEN. LIEBERMAN: Of the money. And, which is a little lower than I think was originally anticipated. Is that just because, is that a, because of the capacity of the system to spend quickly, or is that just the way it ended up once we sent it to you?

MR. NABORS: I think that that's just a reflection of the changes in programs that were made as the bill was going through conference.

SEN. LIEBERMAN: Right.

MR. NABORS: I think that we will still have a responsible plan. I think over the, the period (ph) of the plan, we're still making significant investments that will, even the promise of the money will jumpstart the economy.

SEN. LIEBERMAN: Yeah. I know, I understand what I'm asking is very dependent on definitions, but what percentage of that would you say has been obligated now, which doesn't necessarily mean spent yet, but it's, it's into the flow.

MR. NABORS: I would want to get back to you with a more definitive answer for the record on that. I know the answers with regard to the spending side, I would want to talk to the treasury department with regard to some of the tax revenues that are floating out.

SEN. LIEBERMAN: Okay, but to summarize it, are you feeling good about the extent to which the system, the governmental agencies responsible have begun to move the money out into our economy, and to people's pockets?

MR. NABORS: I do. The agencies, we're still at a very early stage in the recovery act, and for the most part, the agencies are still in the, the planning phase. We want to make sure that the planning phase is as effective as possible. We are planning on working closely with Mr. Devaney to make sure that, as he mentioned, that we are trying to avoid waste, fraud and abuse up front. And as we develop those plans, more of that money will go out the door.

SEN. LIEBERMAN: Okay, thanks. Mr. Devaney, let me ask you about, not only do we oversee but the press does. I want to ask you to respond to the first two press stories I've seen. One is the New York Times reported that bids on some of the first construction projects are coming in lower than expected, which is good news. But then others sort of raise the question, particularly watching what's been happening in the area of Department of Defense acquisition, about whether the initial bids are accurate, and whether there won't be inflation as we go on.

The second is, the press always loves, and we know this from the Department of Defense history, spending regarding toilets. And there is a press report that the Forest Service used an existing GSA schedule for the purchase of 22 precast concrete toilet buildings for the Mark Twain forest in Missouri, and therefore, did not solicit any other bids. My own understanding of this, I'm drawing a conclusion about the fairness of the price, is that when GSA purchases by schedule, it doesn't mean there's a lack of competition. So give us a quick response to both of those.

MR. DEVANEY: Let me start with toilets first. It --

SEN. LEIBERMAN: I'm not going to comment.

MR. DEVANEY: It's been my unfortunate -- the first thing that came to the door was this. And it was born from a story that chronicled eleven, the first eleven contracts actually that were let, and so when they came to our attention, we, we have the ability to do a preliminary inquiry and take a look and see, a probably identify if in fact, it was sloppy reporting. If something was pegged wrong, or something's not in the right database, we probably can do that. But of the eleven, we ended up referring nine of those to the, to the two IG's that had the nine contracts, and ---

SEN. LIEBERMAN: So they're going to follow up on that.

MR. DEVANEY: They're going to follow up on that and get back to us. But actually, if you're going to need to do interviews in the field, they're going to have to do that.

SEN. LIEBERMAN: Okay. And the gripe there was, or the suggestion that, by using a GSA schedule, they were avoiding the law's requirement for competitive contracting procedures.

MR. DEVANEY: Well, the law doesn't actually forbid using the GSA schedule. It just says that it should be competitive as often as possible. And, you know, the positive thing about the GSA schedule is, these companies have been vetted, and they have been used before. And it is something that I think contractors, contracting offices will think about when they're trying to move money fast.

SEN. LIEBERMAN: Okay, so we'll rely on you to let us know when you get the -- (inaudible) -- reports back. How about a quick response to the other story about the first bids on construction coming in lower than expected.

MR. DEVANEY: I'm really, I'll get back to you on that. I'm really not familiar with -- (inaudible) --

SEN. LIEBERMAN: Okay. Thank you. Senator Collins.

SEN. COLLINS: Thank you, Mr. Chairman. Mr. Devaney, you said that in your testimony that your many years of experience informs you, or convinces you that some level of waste or fraud, regrettably, is inevitable. The problem here is, the numbers are so huge, that even if we lose a very small percentage to waste fraud and abuse, it's a big number. Do you have an estimate based on your experience, a percentage estimate of what you're concerned will be lost to waste, fraud and abuse?

MR. DEVANEY: Well, as I mentioned in my testimony, our goal is to reduce any percentage to as low as we can possibly get it. And, know the transparency that's going to be in this arena is, has never before been in place. So I'm excited about the opportunity to have the force multiplier, to have citizens telling us about things that we probably wouldn't discover if it weren't for them calling in or emailing in that something's wrong. So, I think we have a good shot at reducing it to as low a level as we possibly can, but I think with that kind of money, I just, I've been in this business for 39 years.

With that kind of money on the table, the bad guys are going to come. And as we put up on the, we put up on recovery.gov today, I think a series of scams that have already started. People who, you know, we'll send you a stimulus check if you send us your social security number and your bank account, that kind of stuff has already started, started six days after the bill was signed. So, that kind of thing's almost inevitable, and we're going to try to get those kinds of things up on the website, get the press knowing about those kind of things, point people to the right departments that can help them with that.

SEN. COLLINS: The more eyes the better, clearly, as I said in my opening statement. The problem is, if you take 700 to 87 billion dollars, even if it's a one percent loss, you're talking about a huge amount of money. And that's why I think that it's really is important to, unless citizens in reporting, and to make sure that you have the resources to follow up on those tests. Because we've seen cases in the past where citizens or federal employees have called to blow the whistle on fraud, and the resources have not been adequate.

Which brings me to your testimony today on the two biggest challenges. The first is the quality of the data, the second is the lack of qualified procurement personnel. Mr. Neighbors very kindly mentioned the bill that I've introduced with Senator Cole, that would allow experienced federal employees who have retired to be re-employed temporarily, to help meet this surge capacity need. Do you support legislation that would allow for the rehiring of annuitants with their incurring a financial penalty?

MR. DEVANEY: Well, speaking personally, yes, I do. I don't think the board's taken a position on that, but I can't imagine that not being a good thing.

SEN. COLLINS: Thank you. Mr. Nabors, I want to bring to your attention an issue that's come up in Maine. And the people of Maine are trying hard to comply with the guidance and report accurately. But on some issues, it's been difficult to figure out exactly what OMB wants to have reported. And one of them centers on the very important issue of what constitutes a job. Now, since all of us are very interested in how many jobs are created, that was a major purpose of our working so hard to pass this bill.

This is an important measure of our success. Let me give you the specific example that the people of my state have given to me. There's a paving project that's going to be funded from the stimulus bill, from Topson (ph) to Gardener (ph) in Maine. And it's going to create much needed jobs. Those jobs are, however, temporary jobs. They're only going to exist as long as this paving project is underway. And it will take a number of months, but then it will be completed.

Then those individuals, theoretically at least, could go on to another project that's funded by the stimulus bill, the stimulus law, another transportation infrastructure project.

So how are they counted? Are they counted twice? Which isn't exactly accurate, because it's one person continuing to have a much needed job, but on two different projects. Are they counted twice? Because, after all, they are new jobs that are created and (in one sense ?). Are they not counted at all because they're temporary projects? What do I tell my constituents on how to comply?

MR. NABORS: You've put your finger on the exact issue, which is sort of confounding us in terms of making sure that we have a standard of reporting that. In the very near future, OMB is going to be putting out specific guidance with regard to how to calculate the job numbers board, working very closely with CEA, so that we have the best economic measures and the best economic minds thinking about this, so that we can standardize the, those types of issues across, not just states, but also across federal programs as well.

And just to give you one example of building on what you've just said, we'll get estimates from the Department of Transportation, who is very familiar with the type of issue that you are raising. The, and they use a calculation for job years. Well, job years is not the same as a job that the Department of Energy is calculating. What we are trying to do right now is come up with a methodology so that it can be standardized in such a way that everybody can use it in the same way, but most importantly, that it doesn't misrepresent the numbers. I think that with, you're absolutely right. The whole reason for the recovery act was to create or save jobs. I think the last thing that we want to do is misrepresent what's actually going on with the dollars that we are spending (ph). So within the next few weeks, you should see that guidance coming out, and we hope that it will be helpful to states and local governments in terms of making those types of calculations.

SEN. COLLINS: Thank you. Thank you, Mr. Chairman.

SEN. LIEBERMAN: Thanks very much, Senator Collins. Senator Burris, good morning.

SEN. ROLAND BURRIS (D-IL): Good morning, Mr. Chairman, ranking member Collins, and to our distinguished presenters. My question will initially go to piggyback on what Senator Collins is asking in reference to the ability bring in talent, Mr. Devaney, from the other government employees. Do we have a number of what, in terms of these agencies, what we're really looking for in terms of the number of personnel, and secondly, I would assume that these agencies with the stimulus packages have been provided for resources to, to handle that. And what size are we talking about in terms of cost in that regard?

MR. DEVANEY: Well senator, I think that it's fair to say that this is a problem across government. It's not any particular agency. It's absolutely across the board. There has been not much hiring in the procurement professional arena over the last decade. And at the same time, there has been sort of flat hiring. There's been an awful big increase in spending, and this bill just, dumped on top of that is causing a great deal of concern.

IG's are looking and working with the departments to see what the gaps are, what the needs are. The board is required to conduct a review, which we have just started, to look and see what the needs are and what the situation is. I think two days ago, and now up on recover.gov is the first report that's coming out of the Department of Energy, which suggests that they are understaffed in the procurement professional arena. Even though they've actually undertaken a hiring blitz over the last three or four years, and gone up in percentage.

Still, with this kind of money going to be spent, they're going to need to do better, and we have an aging workforce, we have people eligible to retire. And, so all of this is sort of coming together as a perfect storm, if you will. And it causes me great concern. I think OMB, OPM rather, is looking at a number of different kinds of solutions. And as I mentioned in my testimony, they're going to hold job fairs. But I think they're going to do a lot of, lot of thinking about issues like Senator Collins raised, with retired annuitants and, and other things to bring some relief to this very troubling area.

SEN. BURRIS: And Mr. Nabors had mentioned the fact that there's 51 billion that either been obligated or is already out there. And I would assume that we are tracking that pretty closely. Either one of you all want to respond that in terms of, are those dollars advanced, in advance of our tracking system, to make sure that they are going to get the same scrutiny that dollars will be six or seven months from now?

MR. NABORS: No, they're not in advance of our tracking system. Right now, we currently have a system in place where the agencies are reporting to us on a weekly basis on their financial activities. Grant information, contract information is coming to OMB, and we're making sure that that information is made public. A lot of the initial funding is, are obligations related to things like the, like Medicaid. And we, we have a very good idea on where that money is going, because it's largely going to states for health care types of costs.

SEN. BURRIS: Pardon me, and that's my next choice (ph). Now, are you sure the states are geared up to, will your computer be able to track down to the spending point of that contract or that grant from the states?

MR. NABORS: The guidance that we are going to put out tomorrow will put in place a system that will allow us to track subcontract recipients.

SEN. BURRIS: And will this put additional burden on the state resources? And Mr. Devaney, I think about the fraud issue and abuse issue. And being a former attorney general of my state, would certainly say that you have to look for those type of resources, especially your state attorney's general that could help you with that fraud and abuse tracking process. And I hope that there would be some attempt to bring those in, especially as a part of the overall tracking system.

MR. DEVANEY: Absolutely, senator. I think what we're looking to do is, we're going to have in house, an experienced prosecutor that's going to work at all levels of government; federal, state and local, with district attorneys, attorney generals, and try and figure a way to leverage our resources, to figure out how to best present fraud awareness training, and to help prosecutors at all levels of government.

SEN. BURRIS: As you know, what the, what will be reported, the sensational story where the one person got away with a major contract, and there out there, they're trying to do it. It's amazing how the schemes come about. You mentioned it already, where they're saying that, you know, already advertising with their schemes. They're trying to rip off the government.

And we spend more money trying to protect ourselves, which will then free up a lot of money to get out from people trying to rip us off. So I just hope that we are able to track this. Because as Senator Collins said, that is a lot of money when you're dealing with these numbers and these sizes. When you're talking about a tenth of one percent of a few billion dollars, the tax payers are going to start looking at all of us, saying, you know, why didn't we do something?

And of course, you've got to make sure that we do what the president said we're going to do, which is that we're going to watch every dime. I hope that we can probably watch every, you know, hundred million dollars, rather than every dime, because if we can watch every dime in this, I want to know what formula President Obama is going to be using. And I would want to commend every staff member on your team and on Mr. Nabors' team who protect our money. I mean, you all should get a major blue ribbon for that.

SEN. LIEBERMAN: Thank you, senator.

SEN. BURRIS: Thank you, Mr. President, Mr. Chairman.

SEN. LIEBERMAN: Thank you, Senator Burris. Senator McCaskill, welcome.

SEN. CLAIRE MCCASKILL (D-MO): Thank you very much. I know we're struggling with overseeing some of this money. And the last time we talked a little bit about the single audit. I completely, I heard back from most of the GAO and IG community on it. And I completely understand that we can't abandon some of the basics of the single audit, primarily the financial statement audit, because everybody depends on that for their bond rating.

And we got to have a schedule of expenditures in terms of federal awards, just so everybody can keep track of who's got what. But the requirement that 50 percent of all federal funds be covered, and the emphasis on the very large low risk programs, the aid (ph) level programs, as opposed to, for example, in my state, I think, and I think in all the states, where we're going to have some ugly story before this is all over, is in the weatherization program. I look at the Urban League of St. Louis, and typically, they get a million dollars a year for weatherization programming. They're gong to get 15 million.

Now, this is, you know, where do these crews come from? Are they competent to do the work? Has is been bid? And are they being told it's okay to turn the money back in, in the alternative of giving a second cousin, who has a pick up trick and two friends, you know, a bunch of money to go weatherize some homes, and then we go and check, and maybe they put weather stripping around the front door, and that's all that happened. I mean, this, you know, we're up here. And you get right down to it, I think the home weatherization program, even though it's not a huge, it's not like you know, Medicaid. It's not like child support.

But it is one of those places where you've got a low level program that now has incredibly high risk, because we're overloading that program with a whole bunch of money they've never had before. Where are we on looking at the annual supplement on A1-33? And what chances do we have of changing it this year to move out some of these A level low risk programs, and get at some of these smaller programs, where I think we're going to have some problems?

MR NABORS: Well, in response to your comments from the last hearing, and in response to your letter, I've asked the OMB staff to work with the key stakeholders to determine how the single audit process can be, can maximize the accountability and transparency of our recovery actions. By the end of April, OMB is planning on publishing an update to the compliance supplement for circular A1-33. And this will clarify the coverage of the single audit. It will highlight significant accountability requirements for recovery dollars. And it will help to ensure that appropriate recovery programs are designated as high risk and audited as major programs.

SEN. MCCASKILL: And are, and they're looking at the issue that I talked about, whether we, where we're putting a bunch of money, I mean, a lot of these programs are going to get looked at anyway. But when you've got such a huge bump up, that's where, I think --

MR. NABORS: And if I may, ma'am, you will know more about A1-33 than I will ever know. And I was hoping that I could have my staff come up and work with your staff as we're putting together this --

SEN. MCCASKILL: That would be terrific.

MR. NABORS: To make sure that we are, to the extent possible, capturing the concerns that you have.

SEN. MCCASKILL: That would be terrific. And what would, might be really helpful is to get somebody on the phone in a conference call at that time, that actually does an A1-33 audit in the state. You know, there are people in every state that take on this responsibility to do these audits. The practitioners at the state level, the government auditors at the state level, and I would think pulling together two or three of those people. I'm not talking about the elected state auditors, or the appointed state auditors.

I'm talking about, you know, I mean there was somebody in my office that had been doing the single audit, responsible for the single audit for 20 years. They know every, frankly they know a whole lot more about it than I do. And I think getting those kinds of practitioners together quickly, and you could do it very easily through the state auditor's association you could pull together five or six very senior state auditor practitioners, not the bosses, but the worker bees. The one that are actually going to do the work papers, then the ones that are actually going to look at internal controls, and all those kinds of things that those of us who hold the press conferences don't do.

MR. NABORS: We will do that.

SEN. MCCASKILL: Okay, great. Let me also ask you about the federal audit clearing house for single audits. This is going to be great location, 'cause I think all these state auditors, regardless of what you do with A1-33, are going to want to look at these funds. Because there's a lot of political pressure for them to look on these funds. Although a lot of state auditors aren't elected, but having said that, most of them are going to feel the pressure to look at this money and how it's being spent. Typically, the federal audit clearinghouse is not really particularly well suited for the average citizen. It kind, it's not really user friendly, you know, and auditors, and I know that Mr. Devaney will back me up on this. Many times they don't speak English. They're a little bit like the people that hang out at the Pentagon.

They have a lot of, you know, terminology that's not friendly for the average first person. Have you guys considered on the board, looking at the federal audit clearing house, and seeing if we could incorporate that into recovery.gov? Because it's going to be a great treasure trove of oversight information on the stimulus money. And it seems to me we ought to transplant that over to recovery.gov in a user friendly way that allows people to get to their own state audits to look at what's actually happening in their states in terms of oversight.

MR.: Well Senator, I think that's a great idea. I mean, really hadn't thought about, but I appreciate you bringing that up. And I, and I fully agree that if, whatever we do, it has to be in English, and not auditese (sp).

SEN. MCCASKILL: Yeah, okay, good. And speaking of English, we've been spending a lot of time on recovery.gov in my office. And the weekly updates, you know, kind of feel like internal use, you know, project plans. They don't feel like they're being written so people can look at it and really understand what's happening. And I don't think they're useful to most people, the weekly updates, they way they're, the terminology is, and the way its characterized.

And so, I would urge, I don't know. Let me ask you this. On recovery.gov, who, do you have folks that are, you know, like, kind of like the people who go into the restaurant that are working for the newspaper and see how well they do with their food? Do you have people accessing this website, and giving you objective third party feedback that aren't working there, in terms of what they're learning, what they're not learning, and how it works?

MR. NABORS: Well the, recovery.gov does have the, does have a link that allows the public to comment and add suggestions with regard to how we are performing. But I would defer to Mr. Devaney.

MR. DEVANEY: Well, every morning, Senator, I get up and I go to recovery.gov the first thing in the morning. And I share your concerns.

SEN. MCCASKILL: Poor thing.

MR. DEVANEY: I share your concern. Well, it's mine. So I --

SEN. MCCASKILL: I know it is yours. You got no choice.

MR. DEVANEY: I've got no choice. But let's say it this way, that the site, as I mentioned earlier in my testimony, is an evolving process. And this site is going to be, I believe, an opportunity to really have an historic level of transparency and citizen participation. And it may serve, if we do it right, as the model for how we do this in the future. And so, I am determined to get this right.

And I think, for instance, content management is an issue that we are now transitioning from. OMB's good works standing (ph) this site up to the board is going to take over content management. And I'm working very hard to get on my staff people who can write in English, and can, and put stuff up that people are going to be attracted to. And at the same time, the technology out there, it's phenomenal what we can do with this site, you know. And in a relatively short time, I think, we can have a site where people won't only go on at once, but want to come back the next day and the day after. Because we'll be able to drill down. As the information starts coming back in, to the level where people really want to see this in the neighborhood.

SEN. MCCASKILL: Well, let me just say that, and thank you, Mr. Chairman, for your indulgence.

I, let me just say that I think another idea I would give you is that, I discovered that the best thing I did when I was an auditor, was I hired a journalist to begin writing the summaries for audits. And, unfortunately for our democracy, there's a lot of journalists looking for work right now. And they understand how to write a lead. They understand how to keep it very concise.

They understand how to make it interesting. And I would certainly encourage you to look at the vast number of really qualified journalists that are out there looking for work right now. Because I think you could get some real talent that could really help us with that content in terms of making it interesting to people.

MR. DEVANEY: Senator, tomorrow I'm interviewing two journalists.

SEN. MCCASKILL: There you go. All right. Great minds think alike. Thank you, senator.

SEN. LIEBERMAN: Thank you, Senator McCaskill. Senator McCaskill has her own stimulus employment program. I appreciate that. We'll do a second round if people want to stay. I think we've got a while before the vote--o-rama starts. Let me just pick up on the website, if I might. The usage is really miraculous, or stunning. So, to the extent that you are analyzing now, am I correct in assuming that most of those hits are just looking for information about how this stimulus works, how you might get funds, or something of that kind?

MR. NABORS (?): I think -- Mr. Chairman, I think people are coming in right now out of curiosity and seeing what's there. And what I would say to them is keep coming back periodically, and I think you'll see it getting more robust, and more user-friendly. And I'm really excited about the idea -- there's some really terrific technologies out there that we can use -- interactive mapping, and drill down techniques. Well, you can get down to where I think people really want to see the rubber hit the road.

And I think, you know, the OMB's guidance coming out now will be very helpful in getting down to those lower levels that you've expressed some concern about. And then we need to display that. We need to be able to let people go on that website, click on their state, and then keep clicking until they get down to their city to see the projects, to see the money that's been spent in that area, and all of that's possible. It's not there now, but it will be.

SEN. LIEBERMAN: Okay, I appreciate that commitment to make that happen. Let me ask you about the extent to which this is interactive. For instance, tell us about the process if somebody calls -- its early, I know, in the program, but this will presumably happen (we're ?) open and say hey this stimulus act money in my town , or -- is being used badly, or my company got a grant and its being wasted. How do you funnel that to a point where you can respond to it and use it?

MR. NABORS (?): Well if the call were to come to us, we would, you know, we would do what we always do in any IG -- office, we would get as much information as possible, and then we would, in our case, we're going to be funneling that to the appropriate IG, and then asking that IG to get back to us.

SEN. LIEBERMAN: So, is there a clear portal for people to go to on the Recovery.gov website if they want to whistle blow?

MR. NABORS (?): There is a portal where they can make comments. There is a portal where they can tell a story if they want to.

SENATOR LIEBERMAN: Right.

MR. NABORS (?): I don't think we necessarily are, from the oversight perspective, interested in the stories as much as we are the citizen that might look across the street and see -- you know the website says a school is going to be built, and they look across and there's just a florist.

SEN. LIEBERMAN: Yeah.

MR. NABORS (?): So, we're going to have to develop the capacity, and this is no easy endeavor, to sift through the millions of citizen comments that are going to be coming in --

SEN. LIEBERMAN: Yeah, that's what was on my mind. It's pretty hard to do that right now, I assume.

MR. NABORS (?): No, we can't do that right now. And we're talking to, you know, groups that suggest they can do that for us. And, you know, but we want to make it real -- we want -- personally I believe that we'll lose the value of citizen participation if they don't think they're heard.

SEN. LIEBERMAN: I agree.

MR. NABORS (?): And so, if you write in to this site, and you never hear anything back, or you never see any action -- I mean, that's actually worse than inviting them to do it in the first place.

SEN. LIEBERMAN: Yeah, I agree.

MR. NABORS (?): So, we've got an enormous challenge here. I'm trying to get the smartest people I possibly can to come in to talk to us about this. It's never been done before --

SEN. LIEBERMAN: Right.

MR. NABORS (?): -- at this scale. So --

SEN. LIEBERMAN: Okay, that's a real challenge, and so we wish you well. I mean, I couldn't agree with you more, that people at least have to have a kind of automatic response that you got it, and somebody will go over it. But, to (ferret?) out all of that input, the whistle blowing that you really do want to know about is your challenge.

Let me go to a second part of this -- (on ?) the prevention part. What will your IGs do, what kind of systems will they set in place -- not just to detect, but to prevent on a program this large, with this much money moving out this quickly -- to prevent waste, fraud, and abuse?

MR. NABORS (?): Well, as I mentioned earlier, we've created a working group where we're all going to talk to each other on a regular basis. We're going to try and leverage our resources. There are going to be some IGs that are going to be able to easily handle the load, and there will be some IGs who don't have the staff to do it, so we're going to have to leverage resources, and achieve the highest level of cooperation, perhaps, than we've ever seen before in the IG community. And, I think IGs are -- right now, they're out there giving fraud prevention awareness training to the department staff.

They're out there talking to local enforcement and prosecutors -- they're doing a lot of that right now. They're developing risk models, as I mentioned in my testimony. We have to figure out what the risk models need to look like in this endeavor, so that we can focus our limited resources in the right place.

You know, a model that suggests that this particular kind of grant, or this particular kind of a contract, if we only have a certain amount of resources, let's expend it there. But IGs are not just doing that internally. I mentioned at my former office, they've taken that risk model that we've always had internally, and then shared it with the department and they're encouraging the department, and working with the department to help build their own risk models. So, IGs are out there, right now, working with the departments -- who, by the way are working from my overview, very well, in setting up their own internal (shops ?) to manage this money as, quite frankly, I've never seen them do before, so I'm encouraged by that.

SEN. LIEBERMAN: Okay, that's good news. Mr. Nabors let me ask you this question, and it may be hard to answer it now, but perhaps as we go on in this experience when you come back you can help us with it. Obviously, we've appropriated this enormous amount of money, because we all heard about the trillion dollar gap in normal demand in the economy, and we're trying to fill it every year for the next few years and get economic activity going again.

There has been some encouraging news lately, you know, and obviously the discouraging news is that the economy continues to bleed jobs. The encouraging news is that there's some evidence last month of consumer spending going up a little bit, of more activity in housing sales, and the market had -- the stock market's had their best month in March, in quite a while. So, I don't know whether you have any ability to relate that to the money that the Recovery and Reinvestment Act has put out into the economy thus far.

If you have it now, if you don't, I'd welcome it as we go on, which is the way, in a broader sense, for us to try to determine whether this Stimulus Act is achieving its purpose.

MR. NABORS (?): We don't have it now, but I'd be happy to work with our staff to generate that model for you.

SEN. LIEBERMAN: Okay, I appreciate it. I mean, it's hard to imagine that putting this much money out into the economy won't help some. I mean, the question is how we track, to the best of our ability, how much it has helped. I thank you. Senator Collins.

SEN. COLLINS: Thank you. Mr. Nabors, I want to bring up another area that really concerns me, and that is when the Omnibus Appropriations Bill was passed, without my support I would add, it did not reconcile the funding in that act with the funding that we have just approved a couple of weeks earlier as part of the Stimulus Bill. And the result is that (there is or there are ?) some federal agencies that are going to receive an enormous increase in funding far beyond what they've ever handled before. And let me give you a specific example, the Federal Railroad Administration, has traditionally been a very small agency that is responsible for dispersing some AMTRAK funding. Now, it's funding is going from $1.5 billion to over $10 billion.

It's an enormous increase in the funding that this very small agency (it's ?) going to have to get out the door properly in grants and contracts. Are you doing anything to target agencies, like this one, that are receiving, as a result of the combination of the Stimulus Act, and the Omnibus Bill, a massive increase in funds, but may not have the people, and the procedures in place to ensure the money is spent wisely?

MR. NABORS: This issue is one of the primary issues that we've been focused on since the passage of the Omnibus, making sure that there are the appropriate management and planning structure in place -- especially for these agencies that aren't use to seeing large sums of money. The Vice President has been very involved, personally, with regard to the FRA, and ensuring that they have both the personnel and the plans and procedures in place to ensure that this unprecedented amount of money, that was provided to them, is used for what's intended, and that's to both stimulate the economy, and to fundamentally transform the way our infrastructure system operates in this country.

It's going to be a challenge -- I won't try to soft ball that one. And it's a challenge that we are dealing with each and every day. But it's something that we're all very cognitive of, and it's something we're focused on, and it's something that we're working on every day.

SEN. COLLINS: Mr. Devaney, are you giving the extra scrutiny to agencies or programs that have had massive increases in funding? It seems to me that is a recipe for the kind of (some of the ?) problems that you've been talking about.

MR. DEVANEY: I think you're right, Senator. And I think this IG working group that we've put together, all of those IGs as I've mentioned, are at some stage in developing risk models, and the kind of things you're talking about would be the kind of agencies we would look at as a high risk, and so I think what you'll see emerging, at some point, is a strategy for IGs -- may be somewhat different in different departments, but over all we're going to try to identify those high risk areas, that one would certainly be one.

SEN. COLLINS: Mr. Devaney, you talked earlier about the email scams that are already going around.

MR. DEVANEY: Right.

SEN. COLLINS: And one of them asks people to send personal data and information in order to get their quote "stimulus check." And I'm fearful that a lot of people will fall for that scam because, and what I think was an error in policy, we did do these one-time checks a year or so ago at $300 or $600 to taxpayers. So this may well ring a bell with the citizens of this country, and they may respond to it.

Have you thought of enlisting groups like AARP, or there's a group called Triad (sp) that works with local prosecutors and AARP to try to educate seniors in particular. It's fine for the IGs to be aware of this, it's fine for the FTC to put out alerts, but that's not going to reach a lot of people who will receive these email scams. It seems to me that you need to get non-profit groups, senior centers, area agencies on aging involved. Is there any attempt to do that underway?

MR. DEVANEY: Not yet. But that's a wonderful idea. I mean, we've just been collecting all of the various scams. We've put them up, I think, two days ago on Recovery.gov, and we've been working with the various agencies like FTC, and we've got all of the linkage, you know, on Recovery.gov. We've got links to all of those agencies. We've got links to all of the IGs (with or that?) the respective agencies -- but groups like AARP, it's a wonderful idea. We'll do that.

SEN. COLLINS: Thank you. Let me just end with one final question, and that is to go back to the issue of, is waste and fraud inevitable? And I know there was a Wall Street Journal (editorial ?) or interview that you gave in which you expressed your concern that there could be as much as seven percent of the funds lost to waste, fraud, and abuse.

When you're talking about $787 billion, I think that amounts to something like $55 billion, and I just want to get on the record that we simply can't allow that. That is an unacceptable percentage no matter what number it's applied against. But when we're talking about a number this large, the economy will lose significant funding; the public will lose significant confidence in what we are doing if more than $50 billion is lost to waste, fraud, and abuse. So I believe it's incumbent upon all of us to ensure that that does not happen. I know what you're saying, and you're applying more than 30 years of federal law enforcement experience to this job, but we have to ensure that that does not happen.

MR. DEVANEY: I totally agree. The seven percent comes from a fairly (reputable ?) very reputable and well known association fraud examiners. And I was asked about the seven percent, and its $55.1 billion, and I was horrified when I first did that math. And, you know, I'm very hopeful that we would never, ever see something like that, but we've got to get it down to the lowest level possible, and I don't even like talking about the seven percent, because I don't want to acknowledge it could ever be that way. It's a number that's out there.

SEN. COLLINS: Thank you. Mr. Chairman, I want to commend you for the hearings we're holding because I think that the ideas that we're all generating, and passing on to you in this collaborative effort will help to ensure that we don't see that level of waste, fraud, and abuse. So, thank you for your leadership.

SEN. LIEBERMAN: Thank you, Senator Collins. Thanks for your contribution in that regard. I mean, obviously too often we authorize, we appropriate, and then we leave the rest to the Executive Branch. This is really too critical -- too big. And as I said in the beginning, it's too big for us to let it fail. So, together we've got to make it work. And I thank you. Senator McCaskill.

SEN. MCCASKILL: I'd like to talk a little bit, Mr. Devaney and Mr. Nabors, about blanket purchase agreements, and utilizing the catalogs of existing deals. You know, I've -- the toilets that have been talked about are in the Mark Twain National Forest and they're in my state. So, I've spent a lot of time going through it. And you know what? It wasn't a bad deal.

It made a great headline, and I want my friend, Senator Coburn, before you talk about the toilets, make sure I get you this memo, because you'll be impressed at in reality what they really did, was they looked carefully to find the least expensive way to build buildings for toilets that are accessible and low maintenance, and a good value in the Mark Twain National Forest.

But because they were toilets, and it was a lot of money, all of the sudden everybody got the vision of, you know, the gold hammer, and the, you know, five thousand dollar toilet seat.

But it brings me to an issue that I'm wondering if you all have talked about, and that is I was surprised when I got here, and I learned that agencies were soliciting other agencies to buy off their book of contracts because they got some kind of bump for it. And this was in Armed Services, (and or when?) we were looking at this in one agency, there was actually advertising by one agency saying use our existing contracts to buy off of, because I guess there's some kind of transfer of funds between the agencies if they use each others'.

So when GSA sells stuff to DOD they were able to get some extra money. Have you all looked at that in terms of (this or these ?) transference of funds between these agencies using existing contracts? Because that's not what we meant this money to be used for.

MR. DEVANEY?: Well, I would just tell you that as the IG of Interior I wrote some rather scathing reports about the use of the franchise funds at interior. I think Interior is one of seven departments that actually have that capacity. And things have gotten a lot better, they still have it, and some of the abusers that we've chronicled have been corrected. But none the less, there are seven entities -- I think they're only seven, that allow other departments to come in, and they will buy you, and take a piece, if you will, of the action --

SEN. MCCASKILL: Right.

MR. DEVANEY: -- some administrative fees. And you know, my critiques went to what they were doing with those fees after they got them.

SEN. MCCASKILL: Right.

MR. DEVANEY: But, none the less, it's a legislation that was passed by Congress, and they're allowed to have it. And I really haven't thought about these funds with those systems. I'm interested to hear that that's happening, and we'll look into it.

SEN. MCCASKILL: Yeah, because I think it's a place where we could have some abuse.

MR. DEVANEY: Right.

SEN. MCCASKILL: Because there's a lot of money being into the system, and because -- and of course they've got two masters here, all of these agencies. One is to get the money out quickly, and one is to make no mistakes. Those are two masters that are hard to serve at the same time.

So I think that that might be something we might want to look at. Let me also just briefly ask you about leasing versus construction. One of the things I discovered is that we have this bad habit of doing non-permanent buildings and we're leasing non-permanent buildings that eventually turn into permanent buildings that we buy. And is there any incentive in the way that we're putting this money out there that people would begin to engage in buying temporary buildings?

Army Material Command did a temporary building. Okay, well I went to the temporary building, and believe me this is not a temporary building -- this is a large office building, and they tried to tell me, well we could take it apart if we needed to. But, I'm curious if you all have put any rules in place about uses of this money for capital, as to whether or not people are going to lease temporary buildings, or if they in fact are going to invest in buying buildings.

Because right now construction costs are so low, they might even be lower than what we would pay to lease (a or the?) temporary building, which inevitably the government ends up getting around to buying at the end of the day. Have you all talked about that, or looked at that?

MR. DEVANEY (?): We've started talking about it. I think that one of the first eleven contracts that we were asked to look at, particularly as Chairman Towns on the House side, asked me to look at, involves such a matter. And so we referred that to the GSA IG, and we're waiting for them to get back to us. But I think we want to learn from that what the scope of that problem might be.

SEN. MCCASKILL: Yeah, I think you're going to see -- because these manufacturers can come in and do a pretty good sales pitch on temporary buildings, and I'm just worried that it will be a very seductive process, that people say we can just go for the lease of a temporary building. We don't have to jump through all the hoops that we have to with a capital expenditure, because we can take it out of a different fund, and with this stimulus money I think that's another area that we might have some abuse. So I'd appreciate any feedback we could get on that—

MR. DEVANEY: Sure.

SEN. MCCASKILL: Thank you Mr. Chairman.

SEN. LIEBERMAN: Thank you very much, Senator McCaskill. Senator Coburn, welcome.

SEN. TOM COBURN (R-OK): Thank you, and thanks for having the hearing, and thank you all. I've read your testimony. Let me just comment -- one of the problems that we have in the federal government is Congress telling us how we budget, because outside of the stimulus package, we lease almost 90 percent non-military. And we do that because the accounting rules we have charges the whole cost of building in the year in which you take occupancy, to the agency.

So we don't get to actually buy, we (have to?) lease, because it's the least budget impacting, which is silly and something we ought to change in the long run. I wasn't prepared to talk about toilets this morning, so I'll pass on that one.

(Off mike.)

Maybe, maybe not. We're looking for the truth, not the headline. Mr. Nabors, I have some real concerns with what you all are doing thus far. And let me explain them. If you go to Recovery.gov, and you put another computer right up next to it and go to USAspending.gov, you see two totally different approaches. In USAspending.gov you can go by city, you can go by contractor, you can go by grantee, you can go by department, and you can go all the way down to find out who's doing what.

And hopefully within 18 months, I'm waiting on a letter to come back from you all right now on that in terms of the subgrants, and subcontractors, but myself and Senator McCaskill were significantly involved in getting that done. Two things about that -- one, is what I'm hearing is your going to move USAspending.gov to the Recovery.gov, which scares me to death based on what I see in Recovery.gov. And number two is, you don't have anything that, right now, is searchable -- multiply searchable to get somebody to where they need to be like that, which you can on USAspending.gov.

So, would you mind settling me down a little bit in my worry, and gray hair accumulation, that you are going to go toward something like USAspending.gov? That it's multiply searchable, that you can use almost any matrix to get where you want (to do ?), and you can do it quickly? Because I spent 10 minutes this morning on Recovery.gov, and I want to tell you, there's nothing there. And I know it's early, and I'm not critical of that, I just want to know where you're going with it. Because if you're going in the direction of what it looks like, versus (what ?) USAspending, you're not going to give anybody the assurance of anything in this country about really finding out what's going on across the street.

MR. DEVANEY: Let me try to save your gray hairs.

SEN. COBURN: Okay, thank you.

MR. DEVANEY: Our plan -- I think it's a misunderstanding with regard to what we are trying to do with Recovery.gov. The reason why we didn't use USAspending.gov, right now, is because there seems to be such an overwhelming demand to get information as quickly as possible onto the websites. And the data systems that feed into USAspending.gov just aren't at the point right now where we can get information up as quickly as we believe that the public is demanding it.

But our goal, in the long-term, is to try to merge the best of both websites, the data quality, and the extensiveness of the data on USAspending, along with the search capabilities with the speed that we are trying to build into Recovery.gov.

Recovery.gov in my wildest dreams will become a model for being able to update our financial systems to a degree where it's not just where we're not just able to track Recovery Act spending in almost real time, but we can also do the same types of things with regard to overall federal spending. Because I know that the Recovery Act has a special place in our economy at this point, but I think that both you and the President share the joint objective that every dollar that the taxpayers provide to the Federal Government for spending is special as well. And we need to be able to track that money quickly as well.

So we're trying to, not necessarily bring USAspending into Recovery.gov, but try to learn the lessons from the two to make a website going into the future that allows us to better track federal spending.

SEN. COBURN: What is the difficulty of getting the data? My understanding was the difficulty of getting the data to USAspending.gov, is that the agencies weren't providing it --

MR. DEVANEY: -- I think the --

SEN. COBURN: It wasn't a technical problem, is that the agencies refused on a timely basis to bring it forward. And if they did, how's that going to be any different on Recovery.gov using the same agencies?

MR. DEVANEY: Well the batch processing, and the financial data that we use for USAspending.gov does have a significant delay, and we are trying to, at this point, speed up the extent to which data is available. So we're actually using, not just financial data on Recovery.gov, but potentially budgetary data, and other types of information, as well, to get that money out ahead of the normal time frame that our financial systems produce that amount of information.

SEN. COBURN: Right. Mr. Devaney, thank you for your years of service as IG. It's often times an unthankful job, but I know you've done a great job there, and I appreciate it. The seven percent figure bothers me. But the 10 percent figure on the Federal Government bothers me even more.

And if we look at what the Federal Government's doing in total, if you come in at seven percent, that's not acceptable, but it's better than what we're doing everywhere else. And what we ought to be doing is redoubling our efforts to where we get that down to about two or three percent, because after that there's diminishing returns on the dollar. So, I have heartburn over the $787 billion, I have heartburn over the $55.1 billion, but I don't think it's going to be in better hands, than in your hands to see if we can't limit that.

I would suggest, besides what Senator Collins, is you know ad council ads on TV for seniors about these scams. I mean, it doesn't cost much. You can get it out, you can get it out faster than AARP can. In two weeks from now you can have two or three weeks run of ad council ads where almost every senior in the country knows that don't fall for this scam.

And you may have covered this prior to me coming in -- when do you foresee, both of you can answer this, that we will actually have a viable, searchable, multiply searchable website on Recovery.gov?

MR. DEVANEY (?): Senator, we've been doing an awful lot of meeting on this, and we've been talking to a considerable amount of smart people, and we're going to try to hold an electronic town hall in the near future, where we solicit in the public in general, (in or and?) technology folks in general. And then move quickly after that, with the help of perhaps somebody like NAPA (sp) to select some vendors.

And there is some really amazing stuff out there that I think is going to make this site very exciting to go on. So I hope you will continue to visit it as we try to, you know, make this thing something that people are going to want to come to on a regular basis, and allow them to understand where their money has gone.

SEN. COBURN: Let me, if I may, Mr. Chairman --

SEN. LIEBERMAN: Yes.

SEN. COBURN: If we're a year from now, and a year is a pretty good, pretty fast pace to do something like this, but a year from now we will have spent about 17 percent of that money already. Can we do that within a year? Can you get it done within a year? I'm talking the real deal -- up where people can really use it?

MR. DEVANEY: Yes. I think we can. That's my goal.

SEN. COBURN: Would you be so kind as to keep this committee advised if you're going to fall behind that schedule?

MR. DEVANEY: All right.

SEN. COBURN: So that if it looks like you're not (a competent ?) -- you know, we spend $64 billion a year in this government on IT -- $36 billion of its wasted, and the American taxpayer needs to know that. Thirty six billion -- over half of what we spend on IT gets wasted every year. This is the one place where we shouldn't waste, and there shouldn't be a hick-up. We don't need another Harris Corp. census no bid contract that doesn't perform, that we paid a bonus for.

And Mr. President -- Mr. Chairman, you'd make a good president too.

SEN. LIEBERMAN: That's very kind of you. Thank you.

SEN. COBURN: I'd ask that my statement be submitted for the record.

SEN. LIEBERMAN: Without objection.

SEN. COBURN: And I thank you all.

SEN. LIEBERMAN: Thanks Senator Coburn, very good questions. Thanks Mr. Nabors, Mr. Devaney. I think it's been a very constructive exchange. I appreciate what you're both doing. First, to spend the money that we've appropriated, because that's why we appropriated it -- to get it out, to help the economy grow, and to protect and save millions of jobs. And secondly, to make sure with every human and technological resource we have, that that money is really spent for the purpose for which it's intended, and not wasted or frauded in any way.

So, I thank you. I found this so constructive, and Senator Collins did, that we're going to ask for a repeat performance. Because we really want to keep this going, and we hope you find it as productive as we do. We'll probably ask you to come back, you know, sometime later in May. So you'll have a little more time to see how it's going.

But, we'll leave the record of this hearing open for 15 days for additional questions or statements. I just end with thanking both of you. You're really both very impressive public servants, and we need you to do what you're doing. The hearing is adjourned.


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