[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
EXAMINING SOLUTIONS TO CLOSE THE $106 BILLION IMPROPER PAYMENTS GAP
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT OPERATIONS
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JULY 9, 2014
__________
Serial No. 113-123
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
______
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia PETER WELCH, Vermont
THOMAS MASSIE, Kentucky TONY CARDENAS, California
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan Vacancy
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Government Operations
JOHN L. MICA, Florida, Chairman
TIM WALBERG, Michigan GERALD E. CONNOLLY, Virginia
MICHAEL R. TURNER, Ohio Ranking Minority Member
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
THOMAS MASSIE, Kentucky MARK POCAN, Wisconsin
MARK MEADOWS, North Carolina
C O N T E N T S
----------
Page
Hearing held on July 9, 2014..................................... 1
WITNESSES
Mr. Beryl Davis, Director, Financial Management and Assurance,
U.S. Government Accountability Office
Oral Statement............................................... 10
Written Statement............................................ 13
Ms. Beth Cobert, Deputy Director for Management, U.S. Office of
Management and Budget
Oral Statement............................................... 33
Written Statement............................................ 35
Mr. Mark Easton, Deputy Chief Financial Officer, Office of the
Under Secretary of Defense (Comptroller), U.S. Department of
State
Oral Statement............................................... 40
Written Statement............................................ 42
Shantanu Agrawal, M.D., Deputy Administrator and Director, Center
for Program Integrity, Centers for Medicare and Medicaid
Services, U.S. Department of Health and Human Services
Oral Statement............................................... 48
Written Statement............................................ 51
The Hon. John Koskinen, Commissioner, U.S. Internal Revenue
Service
Oral Statement............................................... 58
Written Statement............................................ 61
APPENDIX
Improper Payments Rate from 2008-2013 from OMB, Submitted by Mr.
Mica........................................................... 122
Improper Payments Chart for 2013, Submitted by Mr. Mica.......... 123
Republican Guidance 8/2/13 Govt.Ops Hearing ``Examining the
Skyrocketing Problem of Identity Theft Related Tax Fraud at
IRS''.......................................................... 124
Staff Report: Oversight of Conference Spending Saves Taxpayers
Hundreds of Millions of Dollars................................ 126
EXAMINING SOLUTIONS TO CLOSE THE $106 BILLION IMPROPER PAYMENTS GAP
----------
Wednesday, July 9, 2014
House of Representatives,
Subcommittee on Government Operations,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 1:39 p.m., in
Room 2154, Rayburn House Office Building, Hon. John Mica
[chairman of the subcommittee] presiding.
Present: Representatives Mica, Meadows, Massie, Issa, and
Connolly.
Also Present: Representatives Jordan, DeSantis, and Clay.
Staff Present: Ali Ahmad, Professional Staff Member;
Melissa Beaumont, Assistant Clerk; Molly Boyl, Deputy General
Counsel and Parliamentarian; David Brewer, Senior Counsel;
Caitlin Carroll, Press Secretary; Katelyn E. Christ,
Professional Staff Member; Drew Colliatie, Professional Staff
Member; John Cuaderes, Deputy Staff Director; Adam P. Fromm,
Director of Member Services and Committee Operations; Linda
Good, Chief Clerk; Tyler Grimm, Senior Professional Staff
Member; Jennifer Hemingway, Deputy Policy Director; Christopher
Hixon, Chief Counsel for Oversight; Michael R. Kiko,
Legislative Assistant; Mark D. Marin, Deputy Staff Director for
Oversight; Jeffrey Post, Senior Professional Staff Member;
Laura L. Rush, Deputy Chief Clerk; Jessica Seale, Digital
Director; Andrew Shult, Deputy Digital Director; Katy
Summerlin, Press Assistant; Peter Warren, Legislative Policy
Director; Rebecca Watkins, Communications Director; Eric Cho,
Detailee; Tamara Alexander, Minority Counsel; Meghan Berroya,
Minority Deputy Chief Counsel; Jaron Bourke, Minority Director
of Administration; Aryele Bradford, Minority Press Secretary;
Portia Brown, Minority Counsel; Devon Hill, Minority Research
Assistant; Jennifer Hoffman, Minority Communications Director;
and Cecelia Thomas, Minority Counsel.
Mr. Mica. Good afternoon. I'd like to welcome everyone to
the Subcommittee on Government Operations, a subcommittee of
the House Government Oversight and Reform Committee. Pleased to
welcome Members.
And the title of today's hearing is ``Examining Solutions
to Close the $106 Billion Improper Payments Gap.''
The order of business will be today that we'll have opening
statements by Members, and we have one panel of witnesses.
We'll recognize them, swear them in, and they will provide the
committee with their statements. And then we'll go to questions
after we've completed hearing from the witnesses assembled
today.
Again, I thank everyone for participating and attending.
This is an important topic and actually part of the oversight
committee's mission, and that's to accomplish two fundamental
responsibilities. A lot of hardworking Americans send their
taxpayer dollars here to Washington. They deserve to know how
that money is spent. They need to make certain that our
government operates efficiently, economically. And our
responsibility in this committee and its predecessors back to
their early 1800s is to protect those citizen rights and hold
folks accountable in the Federal Government.
So that's the reason we're here today. And the purpose of
this hearing is one in a series of hearings that we've had on
improper payments, and this is an update hearing.
I'll start by yielding to myself, and I have some opening
comments. Then we'll go to, as I said, the other Members.
First of all, again, we're going to discuss the very
serious and, unfortunately, a very persistent problem of
improper payments across the Federal Government.
Now, listen to this. The amounts here are absolutely
staggering. But just in fiscal year 2013, agencies reported
over $100 billion in improper payments. I asked the staff to go
back and see how consistent this has been, has it changed much.
And, actually, it's over $100 billion each of the last 5 years.
That's a staggering half-a-trillion dollars in improper
payments at a time when we're running trillions of dollars of
deficit and that we're scrambling to try to do the best we can
to make, again, Federal fiscal ends meet. It's an incredible
amount of money that has been misappropriated and mispaid with
improper payments.
Let me take just a minute and review some of the staggering
statistics. The sheer number award has to go to CMS, the
Centers for Medicare and Medicaid Services, which paid out,
again, a huge amount of money. I think about $60 billion of the
$100 billion is just an--let's put this little chart that we've
got up here.
This chart says it all, and the chart shows Medicare
Advantage and Medicaid. You add them up, and you have about $60
billion total improper payments out of about $100 billion. So,
in sheer dollars alone, one of the areas that concerns me and
every American is health care and the staggering cost of health
care. And here we have improper payments to the tune of over
$60 billion in just those programs.
Now, that sets the dollar record. However, one of my major
concerns is the improper-payment error rate. And the chart
here, the red shows the error rate. And soaring off the charts
is the error rate for Earned Income Tax Credit, and that is
overseen by IRS. So it's about 25 percent error rate in the
Earned Income Tax Credit area. That's astounding.
A quarter of these improper payments are done through,
again, error. The error rate is less than in the health care.
That's the only thing, I guess, we could say good about, again,
the huge amount of dollars going out from that area.
So IRS--and we've asked them to join us today, talk about
their progress, or lack of progress, where they are in trying
to get this huge error rate under control.
There are many examples, and I'll put some of them in the
record. I won't cover all of them today. But, for example, if
you want to go back to health care, CMS has paid individuals
who are incarcerated in correctional facilities, so individuals
in prison, behind bars, who are generally not eligible for
healthcare benefits, they paid some $33 million between 2009
and 2011 to people behind bars. That's just the Medicare
program.
If we look at some of the other areas where money is going
out the door, in my State, a mother of three with a sixth-grade
education defrauded the Federal Government out of at least $3
million with an identity-theft tax fraud scheme. She was caught
because she announced on her Facebook page that she was, ``the
queen of IRS tax fraud.'' And I've also conducted hearings on
the issue of identity theft and tax fraud that occurs through
that scheme.
Improper payments are one of the most important areas in
our committee's jurisdiction and one of which Congress has been
very active. It's not like Congress hasn't acted on the issue
of improper payments.
Now, listen to this. Twelve years ago, we passed the
Improper Payments Information Act, which requires agencies to
do basic reporting to the White House Office of Management and
Budget to address the so-called improper payments, which
included overpayments, underpayments, payments to the wrong
individuals, and payments where there's no documentation.
That's 12 years ago.
Four years ago, we passed the Improper Payments Elimination
and Recovery Act, which requires agencies to produce plans to
reduce the payment errors and attempt to recoup improper paid
funds.
Two years ago, we passed the Improper Payments Elimination
and Recovery Improvement Act, which created a Do Not Pay
initiative to prevent fraud and payments to deceased
individuals and strengthen agencies' abilities to recover
improperly paid taxpayer dollars.
In fiscal year 2013, the total estimated improper payments
were over $105 billion, according to the GAO's review of agency
reports. So, today, we're going to hear from GAO and OMB.
Unfortunately, the picture hasn't gotten much better, even with
the passage of a number of laws that I cited.
The Department of Defense, let's talk about them for a
second. While DOD does a report and they have found that a
relatively small number of improper payments are made, it's
important to note that GAO's total improper-payments figure
does not include the Department of Defense. GAO has grave
reservations even about DOD's ability to track and accurately
report its improper payments.
Now, back to Medicare and Medicaid and CMS, which is
responsible, also, for many high-error programs, including the
program with the highest amount of improper payments, and
that's Medicare Fee-for-Service. In fiscal year 2013, roughly
10 percent, or $36 billion, of payments were made by Medicare
Fee-for-Service, and those were improper payments that were
made.
The IRS, again, administers the Earned Income Tax Credit.
They do have one of the highest rates, as I said, about 25
percent, and the second-highest number of improper payments in
total dollars--again, a smaller number of dollars but a higher
error rate. Their improper payments were $14.5 billion in last
fiscal year.
IRS also faces the grappling problem with increased
identity theft, and I mentioned that before. And, again, the
estimates we have from IRS indicate that that could run as high
as $21 billion in fraudulent tax returns through 2017.
Finally, I am pleased to see all of our witnesses,
particularly pleased to see IRS Commissioner Koskinen. I had
actually invited Debra Holland, the head of IRS Wage and
Investment Division, to testify today. Mr. Koskinen, who heads
IRS, has agreed to come at his own volition, and pleased to
have him here.
I may, in fact, call Debra Holland back; want to put her
and the agency on notice. And while I'm glad he's here, we'll
have an opportunity to question him, but I may, again, continue
this hearing with her at a future date. And given the
Commissioner's broad responsibility, he does open himself to
questions not only about this but a whole host of IRS issues
that have been before this committee.
So I look forward to hearing from IRS, CMS, GAO, OMB on how
best we can tackle this problem that seems to be eliminating
resolution and not getting better. In fact, the dollars are
very concerning.
So, with that opening comment, I'll yield to the gentleman
from Virginia, Mr. Connolly.
Mr. Connolly. I thank my friend.
Before I start, if the chairman of the full committee has
an opening statement, I would certainly defer to him.
Mr. Mica. He does. And we can, with your permission----
Mr. Connolly. I would defer to the chairman.
Mr. Mica. He came in late. And we're going to recognize Mr.
Issa, the chairman of the full committee.
Mr. Issa. Well, thank you, Mr. Connolly.
Commissioner, welcome.
Ms. Davis, I want to signal you out for an excellent
report, that I know these take time and they're hard to put
together.
What I got out of your report, what I hope the Commissioner
is prepared to talk about today, is an amount of money that the
American people cannot begin to understand. More than 100 years
of giving away a million dollars a day, somehow, you know,
causes people--or more than 1,000 years of giving away a
million dollars a day, it represents such a large amount of
money that nobody can really understood what it would be like
to just stack up those bills that long.
But normally when we have these kinds of hearings, everyone
comes in and everyone says, if you just gave us more money, we
could fix that. Commissioner, consider it said that if we gave
you lots more money in addition to the $11 billion budget, $1.8
billion for IT, and 90,000 employees, with more people, you
could, in fact, reduce some of this.
One of the challenges is, ultimately, that slide that
Chairman Mica put up represents self-inflicted wounds in
addition to fraud. There is no reason that earned income
credit--basically, people with relatively small--have such a
huge amount of fraud. That is a system failure.
CMS and Medicare, which sadly or happily fall under your
purview, have, in fact, built a system that is rampant with
fraud.
And I'll just briefly remind the committee of something
that our committee was very proud of. During the spending of
the stimulus, we had authorized the RAT Board and the oversight
that went on. And what we discovered was that it wasn't very
expensive, a few million dollars, to set up a team that, in
fact, was able to find, for example, doctors in Kansas who
suddenly made new applications to have offices in Los Angeles
and then proceeded to send large amounts of billing to
Medicare.
The system that they put in place looked through the data,
saw it as a red flag. Discovering that it was an improbability
that so many doctors would suddenly be in L.A., they did two
things. They called the doctors' offices, and before they got
past the receptionist, they were very quickly put to the
doctor, who was immediately available to say, ``Heck, no, I
don't go to California, and I'm not there.''
They did the second thing, which is they went to Google
Earth and they looked at the building that was being applied
for, and they quickly saw that it was a strip mall with no
appropriate space for medical offices. They flagged it in
realtime and very quickly were able to get to a fraud before
large disbursements went out.
That is proven technology that cost a fraction of what the
portion of the budget that deals with fraud at the IRS spends.
With the passage of the DATA Act, with the help of the ranking
member, many of the procedures are in place and sit at Treasury
today. These are leverageable technologies that are not about
how much money; they're about a willingness to employ them.
Money may be needed to scale, but that money certainly would be
easy to justify if, in fact, the tools were used.
So what I'm hoping to hear today is not a request for more
money, but it's a statement, hopefully by both DOD and IRS,
about how you can use modern technology to work smarter, not
harder. If there are systems that need to be in place or
changes, hopefully you'll be proactive in suggesting them.
But I think, Ms. Davis, you've done a few of these before,
so this isn't new work for you. Doing these reports year after
year and seeing the numbers substantially similar--$100
billion, $100 billion, $100 billion, and pretty soon it's
heading toward a trillion--tells us that they have a system
failure.
And, Commissioner, I know you understand that it takes
system changes to make large changes, tens or twenties of
billions of dollars in changes. Simply plussing up the number
of people to do the same work will get you, at best, an
incremental increase and very hard to quantify as worth the
taxpayers' money.
So, again, I've used my 5 minutes. I've used it to say that
I'm hoping this hearing will very much be about the proactive
system changes that the largest single areas of improper
payments in our government are sitting before us today, the
Department of Defense and the IRS, under their offices.
So, Mr. Connolly, I want to thank you.
This is an important hearing. This is one of those hearings
that the committee does that is always the same no matter which
party sits in the chair.
And I thank the chairman and yield back.
Mr. Mica. I thank you, Chairman Issa.
I now recognize Ranking Member Connolly.
Mr. Connolly. I thank you, both chairmen.
And Chairman Issa makes a good point; this can't be all
about money. Money isn't everything when it comes to resources
for, you know, fulfilling our missions.
On the other hand, money is not nothing. And this Congress
has certainly take the precept that money isn't everything to a
very logical but harmful conclusion, especially when it comes
to resources for the IRS.
But I remember Ms. Davis, the head of GAO, testifying about
the lack of resources at GAO and how there's a return on
investment. You know, when we invest in investigative and audit
functions, the recovery rate is fairly high. Likewise, when we
invest in collection rates and investigative resources for the
IRS, there is a return on that investment, which I will return
to in just a little bit.
I think it's important to keep both in mind. Money is not
the solution to everything, but that isn't the argument for
stripping bare the resources so that we can't really do or
can't perform our mission and our function.
I want to thank Chairman Mica, especially, for holding the
hearing. As Chairman Issa has said, actually, this subject has
been, sort of, the purview of this committee for a long time.
And we did some really, I thought, thoughtful and
groundbreaking work under Todd Platts, who was a previous
subcommittee chairman of this committee. Because this is
something where it seems to me we can find bipartisan common
ground. We're not going to agree on everything, but I think,
actually, we might agree certainly on the goals we want to set
for ourselves.
It's important to know the Federal Government has reduced
the reported government-wide improper-payment rate by 35
percent over the last 4 years, down from 5.42 percent in fiscal
2009 to 3.53 percent in fiscal 2013. That tells me the Federal
Government is taking this issue seriously, and I think this
committee can take some credit for that.
However, Federal agency improper-payment estimates still
add up to at least $106 billion a year as of last year, which
is, as the chairman said and the chairman of the subcommittee
said, unacceptable by any standard.
And when I think about the magnitude of that, when we talk
about numbers involving sequestration over a 10-year period or
debt-reduction plans or the big deal, this one item is over a
trillion dollars in a 10-year time period and probably more. So
the payoff for whittling it down is really important, and it's
something I'm glad the Federal Government is taking seriously,
but we need to make more progress.
Despite the imposing magnitude of the problem, I'm
confident we can bring the figure under control, because, as
the chairman showed in that chart, five programs account for
$82.9 billion or 78 percent of the amount we're talking about.
So it's not something so scattered over thousands of agencies
and divisions that it's going to be hard to get our arms around
it.
Actually, the chart the subcommittee chairman put up there
really kind of gives us the scope of the problem, which means
it is something manageable. While no silver bullet exists, a
targeted approach, to me, on those concentrated areas, I think,
could have high payoff.
Further, having examined the issue in depth, I'm also
convinced that when it comes to combating improper payments,
we'd be wise to take heed of Ben Franklin, ``An ounce of
prevention is worth a pound of cure.'' Antiquated pay-and-chase
approaches that seek to recover improper overpayments after the
fact are labor-intensive, time-consuming, and they're going to
have diminishing returns.
And, finally, successfully bolstering the Federal
Government's ability to prevent improper payments requires two
to tango, and Congress itself is not off the hook. As Deputy
Director Cobert's written testimony notes, there is compelling
evidence that investments in administrative resources can
significantly decrease the rate of improper payments.
From the Social Security Administration saving taxpayers an
estimated $9 in avoided improper payments for every dollar
spent on disability review, to the Health Care Fraud and Abuse
Control Program recovering $8.10 for every dollar spent on
healthcare fraud and abuse investigations over the past 3
years, it's indisputable to me that investing taxpayer dollars
wisely, maybe even modestly, into administrative resources can
significantly reduce this deficit and yield to much better
rules.
And yet, when Members seek to offset amendments in
appropriations acts, it's invariably these same valuable
administrative tools that are the first in line for the
guillotine.
As Commissioner Koskinen can attest, Congress' pennywise
and pound-foolish approach sometimes to management is not
limited to improper payments. Consider the independent National
Taxpayer Advocate 2013 annual report that said, for every
dollar appropriated to the IRS in fiscal year 2013, the IRS
collected an astounding $255 in legally owed taxes. In fact,
the amount of tax money probably left on the table every year
uncollected but properly owed far exceeds the dollar amount
ascribed to improper payments.
If the chief executive officer of a Fortune 500 company
were told that each dollar he or she allocated to his or her
company's accounts receivable department could generate many
multiples of dollars in return, it's awfully difficult to see
how a corporate board would allow that CEO to escape that
investment.
However, the revulsion sometimes expressed for the IRS here
in Congress is so deeply engrained culturally that, since 2010,
we've relinquished a golden opportunity to strengthen
enforcement of our laws to catch tax cheats and reduce the
deficit by a substantial amount of money. By my rough back-of-
the-envelope calculation, we're talking well over $3 trillion,
potentially, on the table over a 10-year period. That's a very
significant chunk of money. So I believe that investments make
a difference.
And I'd also add one other thing, Mr. Chairman, that
sometimes gets overlooked because we focus so much on the IRS,
but one of the partners here for CMS and the IRS, when we look
at Medicare and Medicaid fraud, is the U.S. Attorneys' Office.
Last year, for example, the Boston U.S. Attorney's office, if I
got my numbers right, helped identify and recover $3.5 billion
in Medicare fraud. That's one U.S. Attorney office; there are
99.
So working with the Department of Justice is also
important. We need the U.S. attorney in every office across the
United States to take this issue of fraud and waste seriously
and make it a priority. Because when we have their support and
their active machinery at work, Commissioner Koskinen has a
very powerful ally in trying to undertake his mission. So I
think that's an important part of this, too, that we want to
keep in mind.
With that, Mr. Chairman, I look forward to the testimony of
our friends at the panel, and I thank you so much for holding
this hearing.
Mr. Mica. Mr. Meadows?
Mr. Meadows. Thank you, Mr. Chairman. And I'll keep my
remarks very brief.
I'm looking forward to hearing from each one of you, but to
give your staff, really, some prep time, what I would ask each
of you is, you can satisfy the ranking member, Mr. Connolly,
and myself if you can quantitatively give, if we invest more
money, where it's actually going to provide a return.
Now, Mr. Koskinen, I've read your testimony, and I've got
your return on investment. And as a business guy, that's what I
look for, is a return on investment. But I can tell you that I
looked at the details, in terms of money spent, number of
employees, with regards to the Earned Income Tax Credit, and I
see no correlation between employees and money in terms of
recoupment.
And so I look forward to you answering in a quantitative--
and that's what I'm looking for, each one of you, really a
matrix, if we invest another billions dollars, what will we
see, in terms of reducing this number.
Because it is systemic; it is not a new problem. And,
honestly, as Mr. Connolly said, when we're dealing with these
kind of numbers, $106 billion, eventually it adds up to real
money.
And so I look forward to hearing from each one of you, and
I'll yield the balance of my time back to the chairman.
Mr. Mica. Well, thank you.
Mr. Mica. And thank you for yielding to me for just a
second to just put a couple of things in the record.
Now, first of all, this is one of the smallest
subcommittees in Congress. We have a very limited, just
over----
Mr. Meadows. Mr. Chairman, I would say most efficient.
Mr. Mica. Yeah, but--well, it's smallest in numbers, but
let me just say that the savings from this subcommittee are
substantial.
I just, you know, I heard this about--this commentary that,
just give us more money, that Chairman Issa talked about that.
I asked them to pull the report that we did in January of this
year on just conference spending. This is on IRS. And I just
don't tell these agencies to come in here and give them a hard
time and not expect some results.
But in conference spending alone, and through the work of
our subcommittee, we reduced expenditures in IRS, from 2010 to
2012, 87 percent in conference spending. They went from $37.6
million in fiscal year 2010 to $4.9 million after we hammered
them, again, about--I have no problem with people going to
conferences. I represent one of the best conference areas in
the world, Orlando, and some great deals. But the spending was
out of control, and you can save money.
So whether it's improper payments, then--and I just pulled
the improper payments. Now, something's rotten in Denmark, and
something sure as hell is rotten in Washington. If you go from
2008 back to 2004, you've got totals of improper payments, $38
billion, up to 2008, $73. Most of them in the $30s, low $40s.
And then you jump from 2009 to last year, $106, $116--these are
billion dollars. I just was doing quick math when I finished
that. Again, over half a trillion in 5 years, and a relatively
small amount.
So something has got to be done to get this under control,
period. And we passed laws, and something is not happening. I
cited at least four laws that we passed. So this hearing, or as
many hearings as we have, we're going to figure out a way to
stem this.
And the ranking member just said, over a 10-year period,
trillions of dollars. You could balance the Federal budget just
by some of this.
Excuse me for getting a little bit intense about this, but
this is serious, and we're going to follow it through.
Okay----
Mr. Connolly. Mr. Chairman?
Mr. Mica. Yes.
Mr. Connolly. Could I also just ask unanimous----
Mr. Mica. And, oh, I ask unanimous----
Mr. Connolly. Yeah.
Mr. Mica. --consent to put--that was what I started with--
both this little chart--it's not identified, but it's the rate
from 2013 to 2009 and then 2004 to 2008 on improper payments.
Without objection, so ordered.
Mr. Mica. And the improper-payments 2013 chart in the
record, without objection.
Mr. Connolly. And, Mr. Chairman, I'd just--to be fair to
the IRS, I want to note, the four primary legislative requests
are not for money. They're actually for expanded authorities,
and they list them here. And I would just ask that we enter
that into the record.
Mr. Mica. Yes.
Mr. Connolly. I want to be fair. I was talking about more
resources, not the IRS.
Mr. Mica. All right.
Mr. Connolly. Thank you, Mr. Chairman.
Mr. Mica. Thank you.
And, without objection, those items will also be noted in
the record at this point.
Okay. There being no further opening statements--and
Members will have 7 days to submit opening statements for the
record, Members that are not here.
And we may be joined by some other members. There's, I
think, at least one classified, or possibly two, Member
briefings going on simultaneously.
So, without objection, so ordered.
Now, I would like to first introduce our panel of
witnesses. We have first, Ms. Beryl Davis is the Director for
Financial Management and Assurance at the Government
Accountability Office; Ms. Beth Cobert is Deputy Director for
Management at the Office of Management and Budget; Mr. Mark
Easton is Deputy Chief Financial Officer at the Department of
State; Mr. Shantanu Agrawal is Deputy Administrator and
Director of the Centers for Medicare and Medicaid Services'
Center for Program Integrity; and Mr. John Koskinen is the
Commissioner of the Internal Revenue Service.
Some of you have been here before; some of you have not.
This is an investigative panel. We do swear in all of our
witnesses. If you'll stand, please. Raise your right hand.
Do you solemnly swear or affirm that the testimony you're
about to give before this subcommittee of Congress is the whole
truth and nothing but the truth?
And all of the witnesses, the record will reflect, have
answered in the affirmative.
Have a seat. Again, you're welcome.
And, first, I will recognize--and, again, those who haven't
been here, we try to limit you not exactly, but we try to keep
it close to 5 minutes. If you have written testimony,
additional data, through the request of the chair, it will be
included in the record.
So, with that, let's recognize and start off with Ms. Beryl
Davis, Director of Financial Management and Assurance at the
Government Accountability Office.
Welcome, and you're recognized.
WITNESS STATEMENTS
STATEMENT OF BERYL DAVIS
Ms. Davis. Chairman Mica, Ranking Member Connolly, Chairman
Issa, and Mr. Meadows, I am pleased to be here today to discuss
the issue of improper payments in Federal programs.
My testimony will focus on Federal agencies' reported
estimates of improper payments, remaining challenges in meeting
requirements to estimate and report improper payments, and
strategies for reducing improper payments.
In fiscal year 2013, Federal agency estimated improper
payments totaled nearly $106 billion. This estimate was
attributable to 84 programs spread among 18 agencies. The five
programs with the highest dollar amounts accounted for almost
$83 billion or 78 percent of the government-wide total.
This same year, OMB reported a government-wide improper-
payment error rate of 3.5 percent of total program outlays when
including DOD's Defense Finance and Accounting Service
Commercial Pay program. However, in May 2013, GAO reported
major deficiencies in DOD's process for estimating improper
payments for this program in fiscal year 2012. Consequently,
the 2013 estimate may not be reliable. When excluding the DFAS
Commercial Pay program, the reported government-wide error rate
was 4 percent in 2013, compared to a revised estimate of 4.3
percent the year before.
In fiscal year 2013, Federal agencies reported improper-
payment error rates for seven risk-susceptible programs that
exceeded 10 percent. These seven programs accounted for more
than 50 percent of the government-wide estimate.
Federal agencies have continued to identify new programs as
risk-susceptible and report improper-payment amounts. A net of
10 additional programs were added by OMB in the 2013
government-wide estimate when compared to the prior year. The
most notable addition was the Department of Education's Direct
Loan Program, with an estimate of approximately $1.1 billion.
Despite progress in reporting improper payments, in GAO's
fiscal year 2013 audit of the Financial Report of the United
States Government, we reported the issue of improper payments
as a material weakness in internal control because the Federal
Government is unable to determine the full extent to which
improper payments occur and reasonably assure that appropriate
actions are taken to reduce them.
We found that four Federal agencies have not yet reported
estimates for four risk-susceptible programs. For example, HHS
has cited statutory limitations for its State-administered
Temporary Assistance for Needy Families program which kept it
from requiring State assistance in developing an improper-
payment estimate. In addition, two programs that did report
estimates were not included in the government-wide total
because their estimation methodologies were not approved by
OMB.
As GAO has previously reported, there are a number of
strategies that can help agencies to reduce improper payments,
including analyzing the root causes of improper payments and
designing and implementing effective preventive and detective
controls.
Regarding root causes, identifying and analyzing the root
causes of improper payments is key to developing corrective
actions. While some agencies reported the causes of improper
payments last year in three general categories, as required by
OMB, more robust root-cause analysis may help to identify
needed corrective actions and thus assist in developing and
implementing effective preventive controls.
Regarding preventive controls, strong preventive controls
serve as the frontline defense against improper payments. This
can increase public confidence and avoid the pay-and-chase
aspects of recovering improper payments.
Preventive controls involve a variety of activities, such
as upfront validation of eligibility through data shared among
agencies. One example of such data-sharing is agencies' use of
the Do Not Pay initiative. Other preventive controls include
predictive analytic technologies to identify patterns of high
risk for fraudulent activities, program design reviews and
refinements, and training programs for providers, staff, and
beneficiaries.
Finally, regarding detective controls, agencies need
effective detection techniques to quickly identify and recover
improper payments that do occur. Detection techniques include
data mining and recovery auditing. For example, in fiscal year
2013, the Medicare Fee-for-Service Recovery Audit Program
reported recovering $3.7 billion.
Another area for further exploration is a broader use of
incentives for States to implement effective preventive and
detection controls in State-administered programs. Designed and
implemented effectively, these strategies could help advance
the Federal Government's efforts to reduce improper payments.
Chairman Mica, Ranking Member Connolly, Chairman Issa, and
Mr. Meadows, thank you very much for the opportunity to be
here. This completes my prepared statement, and I'd be happy to
answer any questions.
Mr. Mica. Thank you.
[Prepared statement of Ms. Davis follows:]
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Mr. Mica. And we'll have questions when we've heard from
all the witnesses.
We recognize now Ms. Beth Cobert, and she is the Deputy
Director for Management at OMB.
Welcome, and you're recognized.
STATEMENT OF BETH COBERT
Ms. Cobert. Thank you. Thank you, Chairman Mica, Ranking
Member Connolly, Mr. Meadows, for inviting me today to discuss
the Federal Government's efforts to stop improper payments. I
appreciate the opportunity to update the subcommittee on this
topic.
When the President took office in 2009, improper-payment
rates were on the rise, with the fiscal year 2009 rate coming
in at 5.42 percent, the highest figure to date. We are pleased
to report that, since 2009, the administration, working
together with Congress, has significantly reduced improper
payments.
As a result of this concerted effort, the government-wide
improper-payment rate has dropped steadily for 4 consecutive
years, from 5.42 percent in fiscal year 2009 to 3.53 percent in
fiscal year 2013. And, as noted, the fiscal year 2013 measure
does include DOD commercial payments.
Over the past year, we reduced improper-payment rates in
major program areas, including Medicaid, Medicare Advantage
Part C, unemployment insurance, the Supplemental Nutrition
Assistance Program, Pell grants, and the Social Security
Supplemental Security Income program and the Retirement,
Survivors, and Disability Income program. Furthermore, agencies
recovered more than $22 billion in overpayments through payment
recapture audits and other methods.
In programs administered at the State and at the local
level, the Federal Government has been working directly with
States to ensure that appropriate corrective actions are put in
place to reduce improper payments.
In other instances, Federal agencies have implemented
innovative techniques to ensure that benefit payments are
accurate. For example, the Supplemental Security Income program
has been integrating the Access to Financial Institutions, AFI,
bank verification process. AFI electronically verifies bank
account balances with financial institutions so SSI can ensure
that beneficiaries do not exceed program asset thresholds.
While we are pleased to see progress, we acknowledge that
more work needs to be done. There are areas where we did not
see progress in fiscal year 2013. For these and for all areas,
we will continue to work closely with agencies to find the root
causes of improper payments and address them.
To build on our progress, we are working on a number of
fronts. We are conducting a careful analysis of program-
specific corrective actions to identify those with the highest
return on investment or potential for substantially reducing
improper payments.
We are also focused on leveraging technology and sharing
data to address improper payments, as exemplified by the Do Not
Pay initiative. Do Not Pay uses data-matching and predictive
analytics to prevent improper payments before they occur.
The budget includes proposals to build on congressional and
administrative action to further reduce improper payments. The
fiscal year 2015 budget includes a number of program integrity
proposals aimed at improving government efficiency, which is a
core focus of the overall President's management agenda.
For example, the budget strengthens Medicare, Medicaid, and
the Children's Health Insurance Program by providing tools and
funding to fight fraud, waste, and abuse. It also supports the
Internal Revenue Service efforts aimed at improving enforcement
of current tax laws and reducing the tax gap.
These proposals will provide additional savings for the
government and taxpayers and will support government-wide
efforts to improve the management and oversight of Federal
resources.
There is compelling evidence that investments in program
integrity can significantly decrease the rate of improper
payments and recoup many times their initial investments. As
was noted earlier, for every dollar spent by the SSA on
disability reviews, the government saves an estimated $9 in
avoided benefit payments.
To help bolster the value of the Do Not Pay system, the
President's fiscal year 2015 budget reproposes providing the
Treasury Do Not Pay system access to the SSA full Death Master
File, which includes the most timely information available on
death information received from State sources.
We look forward to continuing to work with Congress on
other matters, including the Improper Payments Agency
Cooperation Enhancement Act, IPACE, which includes many
administration priorities on sharing data to prevent improper
payments.
I'd like to close by emphasizing that stopping improper
payments remains a priority for this administration. We have
taken an aggressive approach to attacking waste, fraud, and
abuse within Federal agencies, and we will continue to seek out
new and innovative tools to help us in this fight. While we are
proud of the progress we have made, we know there is much more
work to be done to improve the accuracy and integrity of
Federal payments.
I look forward to continuing to work with this subcommittee
and other committees, as well as the GAO, the inspectors
general community, and agencies, to make more strides in
reducing improper payments. All of these stakeholders are our
partners in this endeavor, and they all play a critical role in
holding the Federal Government accountable for reducing
improper payments.
Thank you for inviting me to testify. I look forward to
answering your questions.
Mr. Mica. Thank you.
[Prepared statement of Ms. Cobert follows:]
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Mr. Mica. And I'll now recognize Mr. Mark Easton. He's the
Deputy Chief Financial Officer at the Department of Defense.
STATEMENT OF MARK EASTON
Mr. Easton. Thank you.
Chairman Mica, Ranking Member Connolly, Congressman
Meadows, thank you for the opportunity to discuss the actions
the Department of Defense is taking to reduce improper payments
and achieve full compliance with IPERIA.
I submitted a statement for the record and will summarize
it briefly.
As the Deputy Chief Financial Officer of DOD, I am
responsible for financial policy, systems compliance, internal
controls governing the financial and accounting aspects of all
business operations across the Department. I am proud to have
served in the Department for over 40 years, both in uniform and
as a civilian.
I'm also very mindful of our stewardship responsibilities
and am keenly aware that the Department of Defense financial
management remains on the GAO's high-risk list and that we are
the only Federal agency without a positive financial audit
opinion. I'm also convinced that this status will change over
time, and remain committed to our broader improvements in
financial management, including the improper payments.
Most importantly, I should add that Secretary Hagel, Deputy
Secretary Work, my new boss, and the Chief Financial Officer,
Mike McCord, and other senior leaders throughout the Department
are equally committed.
In short, we feel we have a sound and active program in
place to identify, report, eliminate, and, if need be, recover
improper payments. We estimate that less than 1 percent of all
of our payments meet the definition of ``improper.'' That is
low compared to the government-wide rate of a little over 3-1/2
percent for fiscal year 2013. And, moreover, the nature of many
of our improper payments allow us to resolve them quickly.
Our record of minimal improper payments is particularly
noteworthy considering the size and complexity of the
Department's business operations. Consider that, last year, the
Defense Finance and Accounting Service, or DFAS, handled nearly
90 percent of our total payments and disbursed nearly $580
billion, including 162 million pay transactions, 6 million
travel payments, and nearly 10 million commercial invoices.
Of course, there is always room for improvement. We
constantly strive to reduce improper-payment rates where we can
cost-effectively do so. Our overall financial improvement and
audit readiness effort, more commonly known as the FIAR Plan,
will continue to provide increased confidence and credibility
in the numbers we report. These efforts, plus our collaboration
with OMB, GAO, and the Congress, help us to sustain this focus.
In my larger statement, I described five broad categories
of payments that we used as reporting elements. These are
commercial payments to vendors, civilian and military payrolls,
travel payments, retired annuitant pay, and the similar
payments by other organizations outside DFAS. I described our
approach to controlling improper payments for each of them and
will be happy to provide additional details this morning if you
wish; otherwise, they are made a part of the record.
I have also provided an update on recent audit results from
GAO and the DOD Inspector General, who provides an annual
compliance assessment. Each report helps to identify additional
opportunities to strengthen financial management and improve on
our improper-payment reduction program.
Many of the issues and challenges highlighted in the
reports are the same ones that affect our financial reporting
and audit capabilities. We concur with those issues and
recognize that, until solved, they will continue to limit the
confidence that you have in our efforts to accurately report
improper payments.
We also appreciate their recognition of the progress we are
making.
Mr. Chairman, in conclusion, I'd emphasize that we have a
fundamentally sound improper-payment program at DOD that
minimizes improper payments to very small levels. Our more
comprehensive efforts to improve financial information and meet
financial reporting requirements and audit standards will also
improve the efficiency of our improper-payment efforts as well
as reinforce the completeness and credibility of our improper-
payment rates report. I will further--it will further improve
our attempts to minimize improper payments while also
establishing an infrastructure that will greatly improve
efficiency.
Less than 2 weeks ago, Bob Hale, the DOD's longest-serving
CFO, left office for a well-deserved retirement, but, most
importantly, he left a legacy that assigned a high priority to
improving DOD financial management over the long term. Our
current CFO, Under Secretary Mike McCord, is equally committed
to improving the quality of our financial information and
achieving auditability, and that includes full compliance with
IPERIA.
Elimination of improper payments is and will continue to be
an important and visible part of financial management
stewardship at DOD.
That completes my statement, and I welcome your questions.
Mr. Mica. Thank you. And, as I said, we'll hold them.
[Prepared statement of Mr. Easton follows:]
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Mr. Mica. Now let me introduce and welcome Dr. Shantanu
Agrawal, who's the Deputy Administer and Director at the
Centers for Medicare and Medicaid Services' Center for Program
Integrity.
Welcome. You're recognized, sir.
STATEMENT OF SHANTANU AGRAWAL, M.D.
Dr. Agrawal. Thank you.
Chairman Mica, Ranking Member Connolly, Congressman
Meadows, thank you for the invitation to discuss the Centers
for Medicare and Medicaid Services' efforts to reduce improper
payments. CMS shares this subcommittee's commitment to
protecting the Medicare Trust Fund and ensuring taxpayer
dollars are spent on claims that are accurately paid.
Each year, CMS estimates its Medicare Fee-for-Service
improper-payment rate using the Comprehensive Error Rate
Testing, or CERT, process. In fiscal year 2013, the Medicare
Fee-for-Service improper-payment rate was 10.1 percent.
It's important to understand what improper payments are and
what they are not. Like other large and complex Federal
programs, Medicare, Medicaid, and CHIP are susceptible to
payment, billing, and coding errors. Improper payments do not
always represent an unnecessary loss of funds. They are not
also necessarily fraudulent, nor are they necessarily payments
for services that should not have been provided. Improper
payments can also represent either overpayments or
underpayments on billed claims.
Medicare Fee-for-Service improper payments can result from
a variety of circumstances, including: first, services with no
documentation; second, services with insufficient
documentation; third, incorrectly coded claims; fourth,
services provided that were not medically necessary; and, five,
any other errors, such as payments for noncovered services.
The vast majority, over 60 percent, of Medicare Fee-for-
Service improper payments are a result of insufficient
documentation. For example, if an end-stage renal disease
facility submitted a claim for 1 month of dialysis services for
a beneficiary but the submitted documentation did not include
the physician's order for dialysis and medications, as required
by Medicare policy, the CERT program would score the claim as
an improper payment.
Another example would be, if a physician submitted a claim
for an office visit with a Medicare beneficiary but the office
visit note lacked enough identifying information about the
beneficiary, the CERT program would score the claim as an
improper payment.
The factors contributing to improper payments are complex
and vary from year to year. For example, the leading drivers of
the improper-payment rate in fiscal year 2013 were hospital
outpatient departments, skilled nursing facilities, and home
health providers.
A contributing factor to the Fee-for-Service error rate was
the implementation of new home health policies requiring
documentation of a face-to-face encounter prior to initiating
home health services. This policy change will ultimately
strengthen the integrity of the program. However, since it
takes time for providers and suppliers to fully implement new
policies, especially those with new documentation requirements,
it's not unusual to see increases in error rates following
implementation of otherwise-warranted program integrity
policies.
CMS is committed to paying claims in an accurate and timely
manner and has a comprehensive strategy in place to address the
improper-payment rate.
First, CMS has put critical safeguards in place to make
sure that only legitimate providers are enrolling in the
Medicare program to make sure we do not allow bad actors to
bill the program and generate improper payments.
The Affordable Care Act required CMS to screen all existing
1.5 million Medicare suppliers and providers under new risk-
based procedures. Since March 25th, 2011, more than 930,000
providers and suppliers have been subject to the new screening
requirements. We have deactivated over 350,000 providers and
suppliers and revoked over 20,000 providers and suppliers,
meaning they are no longer able to bill the Medicare program.
CMS has demonstrated that provider enrollment actions
result in cost avoidance. For example, by revoking just 48
providers identified by our advanced predictive analytics
technology, CMS prevented $81 million in improper payments.
Second, CMS has designed its claim-processing systems to
detect anomalies in claims--for example, preventing payments
for services such as a hysterectomy for a man or prostate exam
for a woman.
Medicare pays about $3.3 million Fee-for-Service claims
each day. Due to the volume of claims processed by Medicare
each day, CMS relies heavily on automated edits to identify
inappropriate claims. The National Correct Coding Initiative
stops claims like these that never should be paid in Medicare
Part B and Medicaid. This program saved the Medicare program
over $500 million in fiscal year 2013 alone.
Third, CMS develops medical review strategies using the
improper-payment data to ensure that we target the areas of
highest risk and exposure. The review strategies range from
issuing comparative billing reports that educate providers
about their billing practices by showing the provider in
comparison to his or her State and national peers, to targeted
medical review of specific providers. Medical review resulted
in $5.6 billion in savings for fiscal year 2013.
As required by law, CMS also uses other contractors to
perform medical review on a primarily post-pay basis. These
contractors have returned $3.7 billion in the same time period.
Fourth, CMS is implementing prior authorization processes
used by the private sector to prevent potential improper
payments before they are made. To help address the high
improper-payment rate for power mobility devices, CMS
implemented the Medicare Prior Authorization of Power Mobility
Device Demonstration in seven high-risk States and has
announced plans to expand the demonstration to an additional 12
States. We are seeing real results from this demonstration.
CMS is committed to paying claims in an accurate and timely
manner and has a comprehensive strategy in place to address the
improper-payment rate. I look forward to answering this
subcommittee's questions on how we can improve our commitment
to ensuring the accuracy of payments made by CMS's programs.
Mr. Mica. Thank you.
[Prepared statement of Dr. Agrawal follows:]
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Mr. Mica. And we'll hear from our last witness, Mr. John
Koskinen, and he is the IRS Commissioner.
Welcome back. And you're recognized.
STATEMENT OF THE HON. JOHN KOSKINEN
Mr. Koskinen. Thank you, Chairman Mica, Ranking Member
Connolly, and Congressman Meadows, for the opportunity to
discuss the work being done by the IRS to reduce improper and
erroneous payments in the programs we administer.
These are important issues to the IRS to which I have
personally devoted substantial time. The IRS views improper and
erroneous payments as a very serious problem and one where we
continue to devote a significant amount of time and resources.
One of our major areas of focus is refund fraud, especially
fraud caused by identity theft. I'm pleased to report that, in
this area, over the last couple of years, the IRS has made
important progress. In 2013, we suspended or rejected 5.7
million suspicious returns worth more than $17.8 billion.
Through the end of May of this year, more than 3.7 million
suspicious returns have been suspended or rejected. We have
also opened more than 800 new investigations into identity
theft and refund fraud schemes thus far this year, bringing the
total number of active cases to more than 1,900.
Despite the progress, we realize that more needs to be
done. Fighting refund fraud caused by identity theft is an
ongoing battle for the IRS, as we must remain vigilant given
the propensity of identity thieves to develop new and more
complicated schemes.
And even with the progress we've made so far, I've recently
asked our senior leadership team to reevaluate everything we're
doing in this area and to consider additional steps we could
take related to refund fraud. For example, we are consolidating
employees working on identity-theft victims assistance across
the agency into a single office. We will also be limiting to
three the number of refunds that can be electronically
deposited into a single bank account or debit card.
We're also working to reduce improper payments by improving
compliance with regard to refundable tax credits, particularly
the Earned Income Tax Credit Program. Our programs that focus
on EITC combine to protect approximately $4 billion annually,
but we are concerned that the improper-payment rate for the
EITC remains unacceptably high, along with the dollar volume of
the payments that are made improperly.
As noted, this program--this problem has existed in a
steady state for several years, and when I began as
Commissioner, I advised our senior team that we need to make
improvements in these rates.
We again have pulled together what I call everybody who
knows anything about EITC in the agency into a working group
that is assessing all of our past and current efforts in this
area and exploring new possibilities for improving the EITC. I
view this as one of the most important areas of our activities.
One thing we've already done is disaggregate the problem
and see where most of the noncompliance is. We found that EITC
errors fall under three main categories. The first involves
claims for dependent children that people are not entitled to
claim. The second is misreporting of income. And the third is
improperly claiming the head of household or single filing
status.
Mr. Koskinen. We believe having made this more detailed
background study about EITC enforcement problems will help us
develop better compliance programs going forward.
But, as Congressman Connolly noted, we have advised that we
cannot do this alone. We need the help of Congress, which can
greatly assist our efforts both on the EITC and on refund fraud
by enacting several proposals in the administration's fiscal
2015 budget.
One would accelerate the due dates of third-party
information returns, which would allow us to match these
documents against income tax returns earlier in the filing
process and allow us to more quickly spot errors and potential
fraud.
Another legislative proposal would provide the IRS with
greater flexibility to address what are called correctable
errors, which would allow us to automatically fix more areas on
return--errors on returns prior to paying the refund than we
can do now.
Now, if we see an error, the only way we can correct it is
through an audit. We do on the average of 500,000 audits a
year, but we are not going to be able to audit our way out of
this problem.
The administration has also proposed expanding IRS access
to information in the National Directory of New Hires to cover
general tax administration purposes, which would include such
things as data matching and verification of taxpayer claims
during return processing.
We would hope that Congress would enact these proposals to
explicitly authorize us to regulate paid tax preparers as well.
Given that more than half of returns for EITC refunds are done
by paid preparers, this proposal would be an important addition
to our efforts to improve compliance in the area.
This is the first time we have pulled these legislative
proposals together as a package. Some of them have been out for
some time. But all of them would allow us to improve our
ability to deal with EITC refund fraud.
Even with those changes, which would be extremely helpful,
a major challenge to our efforts to reduce improper payments
remains our ongoing lack of resources. Without sufficient
funding, our ability to proceed with any new initiatives in the
area will be constrained.
I agree with Congressman Meadows. I am a believer, after 20
years in the private sector, in what do you get for what you
pay.
We have noted that, with the President's proposed budget
and increase in funding for the IRS of about $1.3 billion, we
would produce back to you over $2 billion in enforcement
revenues.
Our estimate is that, with the legislative proposals and
the resources, we would protect an additional $4 billion in
EITC improper payments from going out and we would improve
customer service levels, which we think this year are going to
fall to 53 percent.
With the budget resources, we would improve our taxpayer
services to 80 percent. We stand behind those numbers and would
be willing to be held accountable for them.
I also have a prepared statement that I am happy to submit
for the record.
We will continue to look forward to working with Congress
to find a solution to the problems we face in the improper
refund area.
Thank you very much.
[The statement of Mr. Koskinen follows:]
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Mr. Mica. Thank you.
And, without objection, your entire statement will be made
part of the record.
We will now turn to questions. And, actually, I will start
first with the IRS Commissioner.
Right now about 25 percent of the Earned Income Tax Credit
requests that are put into IRS are improperly paid. It is 24-
point-something percent. Is that correct?
Mr. Koskinen. That is the number. Yes.
Mr. Mica. Yeah. You outline some measures of spending some
more money and, also, asking for some more authority.
In the improper payments that we are talking about, we are
not also including fraudulent returns.
Mr. Koskinen. They are included. No. They----
Mr. Mica. They are?
Mr. Koskinen. Part of the EITC problem are fraud, fraud by
tax preparers, fraud by applicants. As I noted, one of the
reasons we want to have authority to regulate tax preparers----
Mr. Mica. Okay. Let me be a little bit more specific, then.
We didn't include identity theft in that category. Right?
Mr. Koskinen. No. Identity theft and the refund fraud
generally are erroneous payments, but they are not categorized
in the EITC improper payment category. But within the EITC
area, the improper payments do include fraud as well as
mistakes.
Mr. Mica. Have you had any outside consultants look at what
is going on? I mean, this is a staggering rate. Nearly a
quarter of all of these returns receive an improper payment,
for billions of dollars.
Has there been someone that has looked at this and analyzed
the--sort of the errors of your way or audited to come up with
suggestions? Is this an internal set of recommendations?
Mr. Koskinen. These are recommendations that are based on
the experience we have had over the 8 to 10 years thus far, not
very successfully dealing with this problem.
Mr. Mica. But, again, I come from the private sector and,
when you have got a--I couldn't function. I would have to close
down my business if I had a 20--close to 25 percent error rate
on payments.
Almost any business would go out of business. The
difference here is you have an unlimited resource, and that is
taxpayer dollars.
But has there been anyone outside that has been retained to
look at this problem, that you know of? And I know, John, you
have only been there since the beginning of the year.
Mr. Koskinen. No. We have had a series of audits by the
Inspector General, reviews by GAO. We have not, to my
knowledge,had anyone outside of the Agency actually look at
this. But we have had, as I say, a lot of experience.
The legislative proposals being pulled together results
from, as I say, the working groups we have had over the last 6
months saying, ``If you needed''--``If you are a blank slate,
what would it take to actually begin to attack the problem?''
Mr. Mica. Let me ask you another question.
Mr. Connolly and I have done a lot of work on IT. He has
actually done a lot more. About half of this $84 billion they
spend every year is wasted.
Part of your detecting this fraud is also done through
electronic means. Is that not correct?
Mr. Koskinen. That is correct.
Mr. Mica. Okay.
Mr. Koskinen. We have filters and analyses that we make.
Mr. Mica. Exactly.
Well, something isn't catching a huge number. 25 percent is
just off the chart. And it is a pretty technical operation.
Again, you are looking at electronic review of these
returns and money going out and--like water over Niagara Falls.
But there is something--some disconnect.
Mr. Koskinen. Yes. And part of it is we identify----
Mr. Mica. Are you asking for more money for personnel or
more money for technical equipment? And what----
Mr. Koskinen. As I say, we----
Mr. Mica. What is the mix?
Mr. Koskinen. The mix is--the amount of money we need for
EITC fraud is relatively modest. We do need continued support,
but it is, you know, a couple hundred million dollars for the
return review program that we have been trying to get----
Mr. Mica. But that is a tactic--that is a tactical
improvement?
Mr. Koskinen. Yes.
Mr. Mica. Software----
Mr. Koskinen. Technical improvement would allow us to
improve our thing.
But what we really need--we already----
Mr. Mica. See, again, I think--again, I just don't believe
that this solution that you are bringing to us is really going
to do it.
Mr. Koskinen. Well, let me explain a little more, if I
could.
Mr. Mica. Yeah.
Mr. Koskinen. The correctable error authority would allow
us where we see an error in the refund, which is just
legislative authority----
Mr. Mica. This is just legislative language. That costs
nothing. We can pass that.
Mr. Koskinen. I understand. No. No. That is what my point
is.
Mr. Mica. I don't see a problem with those requests.
Mr. Koskinen. Right.
Mr. Mica. I am talking about personnel versus the technical
equipment that it is--I mean, you can't possibly do these
returns and some guy, you know, with his spectacles looking
at----
Mr. Koskinen. Exactly. Our view is exactly that, that there
is no way for us to audit our----
Mr. Mica. And you are saying that is a couple-hundred-
million-dollar solution versus a multi-billion-dollar solution.
Mr. Koskinen. We already----
Mr. Mica. And I don't--I don't have a problem there. But,
again, I don't have the greatest faith, based on our most
recent hearings, in your technical capability as far as
computers and data and all of that and even retaining it.
A simple question: How long do you keep the records--the
electronic records on this data?
Mr. Koskinen. The electronic records for taxpayers are kept
for years. We have some records for States that go back 50
years.
Mr. Mica. Okay. And--well, again, we have had our issues
with emails and other communications. Records can go back to 50
years. These you have pretty accurate information and it is
entered electronically.
Mr. Koskinen. Yes. We save each exam file. Every taxpayer
record is saved separately. It is preserved. And those go back
so that we can audit 3 to 6 years' worth of returns.
Mr. Mica. Uh-huh.
Again, I am very skeptical about spending billions. I think
it may take some money to upgrade software and the technical
equipment that will, you know, help us reveal these fraudulent
and, also, improper payments.
But, again, I have no problem. I think Mr. Connolly and I
would be glad to look at the other legislative remedies that we
have.
Mr. Koskinen. Those are the significant part----
Mr. Mica. I don't want to take too much time.
Quick question for DOD. DOD--most people don't realize it,
but I understand it is not till 2017 that you'll even be
capable of an audit.
Mr. Easton. We will--the statutory requirement is to be
audit-ready by 2017. By the end of 2017, we intend to go into
full financial statement audit----
Mr. Mica. So I would have every reason to believe that some
of the improper payment data that you are bringing forward is
not totally correct or valid.
Mr. Easton. We stand behind the numbers that we report. The
fact that we don't have a clean financial opinion--in the
control environment that we have, we acknowledge why those
numbers are not believable, people are skeptical. We have gone
to great lengths to make sure that we have done as much as we
can.
Mr. Mica. And your improper payments wouldn't include--we
did a hearing here. I just about fell off the chair. The guy
that got the contract in Amsterdam. He wasn't an American.
Remember that one?
$800-million contract to supply fresh fruits and vegetables
in--I think it was Afghanistan or one of the conflict areas. He
milked that into almost a $5-billion improper payment.
Is that included--that kind of thing included here?
Mr. Easton. We--it depends on the circumstances. But I
understand----
Mr. Mica. But that is a specific one. You go back and
look----
Mr. Easton. Yes, sir.
Mr. Mica. --at that one. That one knocked me off my chair
when I heard that.
And there were questions raised about even his eligibility
as a proper vendor. I mean, it was just astounding how he
milked the taxpayer with an improper or fraudulent payment.
I would like a response from DOD on that one because I just
don't--again, all the information I have is your--your auditing
capability is very limited.
The information you have, financially reporting to Congress
is not what we can put our faith and trust in. And we still
have a long way to go before we get the accurate information.
With that, I yield to Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman. Actually, let me
pick up on where you just left off.
Mr. Easton, if you can't provide an unqualified audit until
2017--and we have reason--given the long history of the
Pentagon that, you know, you have got the biggest budget and
often, therefore, you have the biggest problems, but the idea
that you stand by your numbers makes many of us queasy on both
sides of the aisle, frankly.
I hope you won't stand too strongly behind your numbers
because there is every reason to believe you are understating
your improper payments, not deliberately, but given the fact
that you really can't provide an unqualified audit till 2017.
Do you want to comment?
Mr. Easton. There is a--there is a lot of reasons that make
a financial audit difficult in DOD, and I am convinced that we
are doing a lot right. There is clearly exceptions.
The control environment, I think, will continue to improve.
Next year we will begin to conduct audits of our budgetary
execution.
When we have made changes--for example, GAO pointed out the
statistical sampling for our commercial payments--and that has
been raised before--we were using a sampling methodology that
was not appropriate. We have made those adjustments.
I think that GAO's review in 2013 identified our
statistical sampling has been accurate in other areas. And so
we have reason to believe that the numbers are sound, but we
certainly understand why the skepticism exists with the
financial audit.
Mr. Connolly. Well, in 2012, that same GAO noted that two
of your programs were excluded from OMB's estimation of
improper payments.
Those two programs, the Defense Finance and Accounting
Service commercial pay and the U.S. Army Corps of Engineers
commercial pay, combined were worth $400 billion.
Are they now included in the improper payments estimate?
Mr. Easton. Yes. They are included. They were included. I
think that the decision GAO made is because of the statistical
sampling anomalies that they found, which have been corrected,
that they excluded them in their reporting calculation.
Mr. Connolly. Right.
But if we just simply applied--this is going back to Mr.
Mica's point.
If we simply applied, you know, the rough rounded
percentage of improper payments of the total, 4 percent, and
400 billion was excluded for those reasons, perhaps we were
understating improper payments if it averaged out by $16
billion. You take the point.
Mr. Easton. Understand.
Mr. Connolly. Okay. So I just--I worry a little bit that we
may actually be understating, not deliberately--I am not one
who's conspiracy minded--but just because of the methodology
and the lack of qualified data and sometimes excluding it for
those reasons--good reasons, but that means we are not actually
getting the whole picture of improper payments.
Dr. Agrawal, I mentioned in my opening statement about the
role of U.S. attorneys. And my impression has been that, when
it comes to Medi---no.
We understand Medicare fraud is a subset of improper
payments. When we talk about improper payments, some of it is
simple clerical error.
Sometimes the data gets, you know, mixed up. ``We thought
you were 66 1/2 and eligible for full Medicare or Social
Security and, whoops, you are actually only 65'' or whatever it
may be. So--but given a big country and big numbers, that adds
up.
But in the case of Medicare, there is a subset of very
substantial fraud. And I cited the Boston U.S. attorney's
Office, which I happen to know about, which I think was number
1 in the country last year in uncovering fraud to the tune of--
and prosecuting and pursuing about $3-1/2 billion.
Now, there are--I think there are 99 U.S. attorneys in the
United States. Is it your sense that every one of those U.S.
attorneys is taking this issue seriously and is making it one
of their priorities? Because, if they are, our ability to
whittle down this part of the improper payment could be
considerable.
Dr. Agrawal. Yeah. Thank you for the question.
I couldn't comment on every U.S. Attorney's Office. But I
can tell you that OIG and DOJ are extremely focused on
healthcare fraud, and we work very closely with them on
investigating issues as well as taking action, initially,
administrative action on our end and then law enforcement
action on their end.
And I think, you know, for evidence of that, you just have
to look at the HCFAC numbers that show an 8 to 1 ROI for all
the HCFAC funding. That really is a combination of both the
administrative actions that I mentioned and all the law
enforcement work that is conducted as well.
Mr. Connolly. Okay. I would just plead with you, your
office and those in the position to exhort, continue to put the
pressure on the U.S. Attorneys.
Because, I mean, it is easy for somebody--I mean, they have
a lot of independent authority and they can set their own
priorities. This needs to be one of them.
And they are a powerful tool in helping us whittle down
that number and, frankly, putting perpetrators where they
belong who are defrauding the U.S. taxpayer.
With that, Commissioner Koskinen, first of all, I want to
clarify something because I think it was a little confusing.
Refund fraud that you cited, a subset of improper payments
or are you considering it a separate subject entirely?
Mr. Koskinen. It is a separate subject. We track it. We
treat it seriously. But it is not treated as an improper
payment, per se.
Mr. Connolly. Okay. If I can just stay on that, even though
it is not actually the subject, then, of this hearing, given
what you just said.
But this committee has also dealt with this issue of refund
fraud, and I seem to recall a few years ago somebody from IRS
talking about the exponential growth in this category in just a
brief 4-year period.
And if I heard you correctly, we are not talking about you
setting aside suspicious returns to the tune of millions a
year.
Mr. Koskinen. Yes. We stopped last year. Over $17 billion
in suspicious refund claims.
Mr. Connolly. Is this a relatively recent phenomena?
Mr. Koskinen. It exploded, really, in 2009 to 2012. Started
in Florida, Georgia, and, oddly enough, the District of
Columbia. But Florida was really the epicenter of it, and it
was overwhelming law enforcement. It overwhelmed the IRS.
More recently, in the last couple of years, we have made
significant progress in dealing with it.
Mr. Connolly. Yeah.
And, of course, if it happens--I have constituents this has
happened to.
And trying to recover the money they are legitimately owed,
once the fraud occurs, is a very complicated process; is it
not.
Mr. Koskinen. It is. We have made progress there. It used
to take almost a year to deal with an identity theft victim. We
are now down to about 120 days to resolve their accounts. And
our backlog is down to about 120,000.
Mr. Connolly. If the Chairman will indulge me, one last
question?
Mr. Mica. If I might.
Mr. Connolly. Yeah.
Mr. Mica. If you would yield to me for a second.
Mr. Connolly. Of course.
Mr. Mica. I just--we were talking about the hearing that we
held August 2nd, 2013, identity theft tax fraud. And, actually,
from fiscal year 2011 to 2012, IRS saw a 78 percent increase in
identity theft cases.
Now, listen to this. Taxpayer Advocate--I am sorry--
Taxpayer Advocate Service, which provides assistance to
victims, has seen a 650 percent increase in cases from 2008 to
2012. We will put that in the record, as we cited that.
Mr. Connolly. I thank the chairman for his intervention.
And, as he knows, the--our committee in another category of
bipartisan identification of problems I hope we can do
something about, this problem has been highlighted by this
committee.
And I appreciate Commissioner Koskinen's comment because I
can just tell you--and I know my colleagues, if you have had
similar casework, it can--the impact of this can range from
very inconvenient to devastating, depending on the size and
magnitude of the refund we are talking about and the financial
circumstances of the family involved.
So a very important issue and, unfortunately, because of
technology, just growing exponentially. Willie Horton once
said, ``I rob banks because that is where the money is.'' Well,
today's version of that is----
Mr. Mica. IRS.
Mr. Connolly. --I go after refunds because----
Mr. Koskinen. Let me simply stress that, over the last 2
years, with the assistance of U.S. attorneys, interestingly
enough, we have begun to make serious inroads into this. We
have, as I say, cut the backlog down of identify theft.
Mr. Connolly. Good.
Mr. Koskinen. We are stopping more with technology. More
filters are more effective. But we are basically--as somebody
said, we have drivenmost of the amateurs out. We are dealing
with organized crime here and around the world.
Mr. Connolly. Yeah. Well, it is a growing problem, and I am
glad you highlighted it. Thank you.
Mr. Chairman, I don't wish to impose. I just had one more
question.
Mr. Mica. Go right ahead. I have got extra time.
Mr. Connolly. Okay. I thank my chairman.
And my last question has to do with EITC. Mr. Koskinen, do
you know the genesis of the Earned Income Tax Credit program.
Mr. Koskinen. I----
Mr. Connolly. That is to say, who thought it up.
Mr. Koskinen. Well, it has been historically supported by--
on a bipartisan basis, my understanding is that President
Reagan, for instance, maintained that it was his favorite job
creation program, poverty program.
Mr. Connolly. Yeah.
Mr. Koskinen. It helps the working poor. It encourages
people to work.
Mr. Connolly. That is exactly right.
It was actually a conservative idea. It was not a liberal
idea. And it was a good one because it is not only well-
intentioned, but it is designed to end dependency and to get--
but to help lift people out of poverty.
But it is a complex program; is it not?
Mr. Koskinen. Yes. Part of the problem is every time
somebody tinkers with it, it gets more complex, in terms of
which children count, where they live, who has responsibility
for them.
Mr. Connolly. Who qualifies.
Mr. Koskinen. Part of the error rate is it is very
complicated for preparers and tax preparers--taxpayers to even
figure out what they are entitled to.
Mr. Connolly. In fact--correct me if I am wrong--but my
understanding is 57 percent of the returns--the EITC returns
filed are actually prepared by tax return preparers. Is that
correct?
Mr. Koskinen. That is correct.
Mr. Connolly. Yeah.
That tells you a lot about the complexity. I mean, that
wouldn't be happening if it were simple in determining
eligibility.
Mr. Koskinen. And most of those preparers do a good job.
But there is a significant amount of error rate, and some of it
intentional on the part of preparers----
Mr. Connolly. Yeah.
Mr. Koskinen. --some of whom take the refunds for
themselves.
Mr. Connolly. If we are worried about improper payments and
we hear that statistic, it requires a tax preparer in 57
percent of the cases--or at least it is preferred or required--
you have to ask yourself, ``Well, what could go wrong with
that?'' And, of course, the error rate is going to be high----
Mr. Koskinen. Right.
Mr. Connolly. --even inadvertent.
Mr. Koskinen. Correct.
Mr. Connolly. And I just wanted to stress that because this
is a conservative idea that I think actually is--does work, but
it is full of complexity that leads to an unintended
consequence, which is improper payment.
Mr. Koskinen. As I said, when I started, I looked at the
history and advised people that it is an unacceptable rate of
payment--improper payments, an unacceptable rate of dollars out
the door, and we need to do whatever we can to make a dent in
it.
Mr. Connolly. Thank you.
And I thank you, Mr. Chairman.
And I thank my colleagues for their indulgence.
Mr. Mica. Thank you, Mr. Connolly.
Mr. Koskinen, I can assure you that the late President
Reagan will be doing back flips in his California tomb if he--
if and when he learns today of a 25 percent--well, nearly 25
percent error rate in an IRS program which he championed, the
Earned Income Tax Credit.
With that, the gentleman from California, the----
Mr. Issa. Thank you, Mr. Chairman.
Mr. Mica. --Chairman of the full committee.
Mr. Issa, I want you to check the tomb when you go out
there.
Mr. Issa. Okay.
Mr. Commissioner----
Mr. Connolly. I want to second that motion, Mr. Chairman.
Mr. Mica. That was a--I don't know if you heard that. Were
you here, also?
Mr. Issa. I think you better read that one again. Once we--
--
Mr. Mica. Reagan is doing back flips in his tomb to find
out that the program that he championed, Earned Income Tax
Credit, had a 25 percent error rate.
And you weren't here either to----
Mr. Issa. Nixon isn't that keen about what has happened
with the EPA and OSHA either. So it happens.
Mr. Mica. The Commissioner informed the committee today
that taxpayers will be happy to know they keep your records for
as much as 50 years. They do have a little problem with 27
months on the----
Mr. Issa. That part I heard. And----
Mr. Connolly. Although it is important to note Nixon had a
lot more experience with the IRS than did President Reagan.
Mr. Mica. Well, he's probably doing some back flips, too,
out there in his tomb.
Mr. Issa. I would now ask unanimous consent my time be
restored.
Mr. Mica. All right.
Mr. Issa. Mr. Commissioner----
Mr. Mica. I yield to the chairman.
Mr. Issa. Oh, we are having too much fun for the subject
being so serious.
I think I covered what I wanted to cover in the opening
statement.
And I want to touch a few areas, Commissioner, since you
are here and it is an appropriate time.
The--we have had two large dumps from the IRS in the
targeting of conservatives that have occurred in the last few
days, one on the 3rd of July--I was in the air coming; so, I
didn't read them that day--and then more yesterday.
Additionally, we have had a response from your office to my
15 or so questions with lots of subparts, and I want to just
run through a couple of quick questions.
Your letter, although was partially responsive, didn't
respond to most of the specifics, including names of
individuals and so on.
Are you going to be responding further to my interrogatory
questions we gave you at the last hearing?
Mr. Koskinen. Yes. We will--we will respond to those as
quickly as we can. As I said in my letter to you, the Congress
has asked the IG to do an investigation of all of this.
He's asked us to give that a priority. So we are providing
as much information to you as we can without interfering with
that investigation.
Mr. Issa. Right.
Mr. Koskinen. But as he winds that up, which I hope will be
soon, we plan to respond to all of those interrogatories.
Mr. Issa. Well, oddly enough, both of us have been working
for 2 years. So concurrent working is part of it.
And that brings to a specific the producing of the backup
tapes and so on that, apparently, are at TIGTA. Backup tapes--
and we have experts in the audience from MIT and Ohio State
that will tell us that backup tapes can be duplicated.
We would ask that you go to TIGTA and essentially make
backup tapes and deliver them to us so that we can concurrently
work on them.
Things which are unique and can't be moved, we would
understand why they can only be in one place, but the others
certainly we would expect.
You know, for example, the BlackBerry could be difficult,
but you can make a backup of a BlackBerry's contents and it can
be restored to a new BlackBerry.
So if you would look into that, I would appreciate it.
The--I am going to be brief. You know, it is 2 years into
an investigation. You are the third commissioner since this
thing got rolling, maybe fourth to a certain extent.
And we find it interesting that, on the 3rd of July, in the
documents that were provided to us, we only learned of
something--and Mr. Jordan's going to primarily ask some
specific questions of you--but of the existence of a system
called OCS.
Are you familiar with that?
Mr. Koskinen. OTS, I may be, but I don't recognize the
initials.
Mr. Issa. ``OCS.''
OCS is your internal communication. It is an IRS chat.
Maybe some of the people behind you could raise their hands and
say they know about how, in fact, you have a system that
circumvents email and allows you to talk to each other, sort of
like an in-house text.
Are you familiar with it?
Mr. Koskinen. No. I have never used it. I didn't know we
had that.
Mr. Issa. Well, I am going to let Mr. Jordan go through the
series of question. I really think it should--deliver a time.
I am going to ask that the staff deliver the emails to you
during the intervening questions because I don't want you to be
blindsided, but I want it to be very clear.
Lois Lerner knew about that system. Lois Lerner asked and
wanted to make sure that it wasn't being tracked and traced.
And, most importantly, you have had--your Agency has had a
subpoena that would have covered the delivery--the preservation
and delivery of information on this alternate email system and,
to our knowledge, we have received no discovery from it.
So it is a serious concern. I am going to ask, for
efficiency, that they give you the documents. And then Mr.
Jordan, after you have had a chance to look at them, will--and
maybe let the people that are here with you be aware of them.
Because it is critical to us that we are only finding out
on the 3rd of July, 2 years into an investigation, that, in
fact, there is an entire other way to communicate, that Lois
Lerner very carefully wanted to make sure, just after--just
about the time that this whole thing erupted, she wanted to
make sure that it wasn't tracking and that it was a way to talk
between her colleagues.
Mr. Koskinen. As I say, I am not familiar with OCS. All I
can say is I have been assured numerous times that there has
been a search through every system in the IRS to make sure we
provided you all the Lois Lerner emails we can find.
Mr. Issa. It is not email. You have another communication
system, and it is one that is--the tracking is turned off even
though the default for the tracking is turned on.
It is a Microsoft system that you have within--within your
communication, and we are obviously opening a new track of
wanting to know more details about that.
Mr. Koskinen. We would be delighted to provide that.
Mr. Issa. Okay. I will close quickly. Because, like I say,
I want you to have full understanding. I want Mr. Jordan to
actually cover the point by point.
Since we last were together, Lois Lerner's attorney has
changed his position on Lois Lerner's compliance and basically
said that she printed out some, but not all, and that he was
misunderstood in the case--in the case of printing out emails
related to the Presidential Records Act.
And, again, this investigation is not about the President--
or the--I am sorry--about the Federal Records Act. It is about
targeting of conservatives.
To your knowledge, have you delivered the printed-out
copies of Lois Lerner's emails? And, if so, how do we tell the
difference between the ones she printed out that you took from
a file and ones you recovered from somewhere else?
Mr. Koskinen. To the first question, I have asked that
question myself some time ago as to whether there were hard
copies.
And I was told there were hard copies and they were all
produced to you in the ordinary course of our production. I
can't tell you whether all of her official records were printed
out and are included in that or not.
Your second question? I am sorry.
Mr. Issa. Well, the second question is, in fact, a favor.
In order for us to not look through what seemed to be
identical documents and we can't tell which ones were printed
out in hard copy and you took them and scanned them in to give
us tips and which ones were, in fact, documents that you got
from somewhere else, can you have your people give us either
the Bates numbers or a duplicate copy of the files that were
delivered that were specifically printed out by Lois Lerner in
compliance with the Federal Records Act so that we can separate
ones gotten from one source, which would have been Lois
Lerner's compliance, and the others? Because we have no way of
knowing where you got which papers from.
Mr. Koskinen. That is fine. I don't either, but we would be
happy to go back and determine that and send you up-to-date
details so you will know which we were found--which were found
as hard copies and which were found as emails.
Mr. Issa. That would be very appreciated.
I thank the chairman, and I yield back.
Mr. Mica. Mr. Clay.
Mr. Clay. Mr. Chairman, thank you.
Commissioner Koskinen, thank you for being here today.
Again, you just testified before this committee on June
23rd about Lois Lerner's computer crash. After that hearing,
Chairman Issa sent you a letter basically suggesting that you
made false statements about whether Lois Lerner printed out her
emails to comply with the Federal Records Act.
He wrote:``Ms. Lerner and the IRS are not being truthful
about her lost emails, in violation of federal law. Although
accusations of lying to Congress are common around here, they
are very serious.'' And so I want to give you a chance to
respond.
At a previous hearing, you testified: ``My understanding is
every employee is supposed to print records that are official
records on hard copy and keep them.''
And, in fact, the Internal Revenue manual, which sets forth
the policies governing the Internal Revenue Service has a
section entitled ``Emails as Possible Federal Records.''
That section states: ``If you create or receive email
messages during the course of your daily work, you are
responsible for ensuring that you manage them properly. The
department's current email policy requires emails and
attachments that meet the definition of a federal record be
added to the organization's files by printing them.''
So according to the manual, IRS employees were required to
print out emails that qualified as federal records. Is that
right?
Mr. Koskinen. That is correct. As I--go ahead.
Mr. Clay. Okay. In your testimony at our last hearing, you
also said that Ms. Lerner: ``printed hard-copy emails.''
Has the IRS provided those printed hard-copy emails to
Congress?
Mr. Koskinen. Yes, we have.
Mr. Clay. Oh. You have provided those. I am curious as to
why we are still inquiring about them.
Today, Ms. Lerner's attorney issued a statement informing
the committee that, during her tenure at the IRS, Ms. Lerner
did print some emails.
His statement continues, ``The facts are that Ms. Lerner
did not destroy any records subject to the Federal Records Act.
She did not cause the computer assigned to her to fail, and she
made every effort to recover the files on the computer.''
And, Mr. Chairman, I ask that this statement be placed in
the hearing record.
Mr. Mica. Without objection, so ordered.
Mr. Clay. Thank you, Mr. Chairman.
Mr. Mica. Let me just do a quick housekeeping.
Mr. Clay. Sure.
Mr. Mica. I am sorry, Mr. Clay, because I failed to do this
at the beginning.
I ask unanimous consent that Mr. Clay, the gentleman from
Missouri; Mr. Jordan, the gentleman from Ohio; Mr. DeSantis,
the gentleman from Florida, who are not on the subcommittee,
be--without objection, be allowed to participate fully in the
subcommittee proceedings. Without objection, so ordered.
I didn't do that, and I apologize. And we have been joined
by other members of the full committee and we want to give them
full access.
Thank you.
Mr. Clay. Thank you so much.
Commissioner, at our last hearing, when you discussed Ms.
Lerner's computer crashing, you said this: ``I don't know
whether anything that was lost was an official record or not.''
Is that correct?
Mr. Koskinen. That is correct.
Mr. Clay. But in Chairman Issa's letter to you, he claimed
that you testified to something different. He wrote that you
testified that Ms. Lerner fully maintained her official records
pursuant to the Federal Records Act. And I cannot seem to find
that statement.
Was that your testimony.
Mr. Koskinen. No. As I said in my letter to the chairman in
responding yesterday, I appreciated the opportunity to review
the record.
There is nothing in my statement that I would change. But
if I can provide any clarification, I am happy to do that, but
I have not suggested any changes in my testimony in the record.
Mr. Clay. Thank you for that response.
And before I conclude, I want to emphasize an important
fact. Lois Lerner's hard drive crashed on June the 13th, 2011.
16 days later, on June the 29th, was the first time she was
first informed that the IRS employees in Cincinnati were using
inappropriate search terms. And that is according to Inspector
General Russell George.
Is that correct, Mr. Commissioner?
Mr. Koskinen. That is my understanding.
Mr. Clay. And, with that, Mr. Chairman, I yield back. And I
thank you for your indulgence.
Mr. Connolly. Mr. Chairman. Mr. Chairman.
Mr. Mica. Yes.
Mr. Connolly. Just a unanimous consent request.
I propose this line of questioning. I would ask unanimous
consent that John Koskinen's letter addressed to Chairman Issa
dated July 8th be entered into the record.
Mr. Mica. Without objection, so ordered.
Mr. Connolly. I also would request that the statement by
William W. Taylor issued today, clarifying Ms. Lerner's
printing out of emails, brief statement, be entered into the
record.
Mr. Mica. Without objection, so ordered.
Mr. Connolly. I thank the Chairman.
Mr. Mica. Thank you.
Let me recognize Mr. Meadows, the gentleman from North
Carolina.
Mr. Meadows. Thank you, Mr. Chairman.
Ms. Cobert, I am going to come to you first because you
were saying that we have made great progress. I think you were
saying you had a lower percentage in this administration. You
have been able to cut this--improper payments way down. Is that
correct?
Ms. Cobert. We have. Yes.
Mr. Meadows. You went from 5.42 percent down to 3.53. Is
that your testimony?
Ms. Cobert. That is correct.
Mr. Meadows. All right. I am a little troubled because it
gives--if we talk percentages, it sounds a whole lot better
than reality.
And so I guess my question is: In terms of real dollars, I
am showing that we have really made no significant change,
that, in 2009, your percentage was--it was $106 billion in
improper payments. Would you agree with that?
Ms. Cobert. I believe that is correct.
Mr. Meadows. Okay. So the only reason the percentage came
down is because we are spending more. So 106, as it relates to
a higher number that we are spending, but we are still sending
out $106 billion in terms of improper payments. Is that
correct?
Ms. Cobert. The figure last year was $106 billion in
improper payments. $97 billion of that was the overpayment
portion. Yes.
Mr. Meadows. Okay. And so--and that is exactly the number
that it was in 2009, is that correct, in terms of total number?
Ms. Cobert. I believe that is correct.
Mr. Meadows. All right. So your testimony to say that we
are making good progress and all of us should be excited
doesn't really do anything to go to what Mr. Connolly said
about $106 billion being real money?
Ms. Cobert. We believe $106--we take the responsibility to
reduce both the percentage and the absolute dollars of improper
payments very seriously.
Mr. Meadows. Okay.
Ms. Cobert. We believe that we need to continue to work on
this issue. We are doing that accurately. We want to be----
Mr. Meadows. But to say we are making progress when we
still are wasting $106 billion, don't you think that that is an
inaccurate narrative?
Ms. Cobert. We have made progress in reducing the
percentage. We think that is important. And we think we need to
continue to focus on both of these issues.
Mr. Meadows. All right. So I am a numbers guy. So let's go
back to 2008.
What was the total in improper payments then?
Ms. Cobert. I don't have the exact figure in front of me.
Mr. Meadows. Well, I do. And that is why I asked the
question. It is $73 billion. And so we--we had an increase of
some $26-, $27 billion.
In a very short period of time between 2008 and 2009,
what--what caused that, in terms of improper payments?
Ms. Cobert. So as you look at the improper payments, one of
the ways we look at it is look at it program by program.
Some programs, as we have discussed, have higher rates than
others. Unemployment insurance, for example, has a higher rate
than DOD commercial payments.
So some of that is due to the change in mix. That still
means we have to keep looking at each one of those program
elements and say, ``What can we do to bring the level down and
the percentage down?''
Mr. Meadows. All right. So, in terms of level, in terms of
real numbers, most of these across--if you look at all the
payments, most of them haven't really gone down other than
unemployment insurance.
It had a decrease--a significant decrease of improper
payments of about $6 billion. Some have suggested it is just
because we have made it more inclusive in terms of being able
to get those benefits.
But how--how can we celebrate this in terms of improper
payments when we are really not making any progress in terms of
payments going to different people?
Ms. Cobert. What we are trying to do when we go through
each of these programs is to continue to say, as you said, how
can we take specific actions to reduce improper payments from
all different sources, to understand what is driving those, and
to look at the underlying root causes in conjunction with the
GAO, in conjunction with the IG. As----
Mr. Meadows. So do we give out bonuses based on people
making progress on this?
Ms. Cobert. We do hold senior account---senior officials in
agencies--there is a senior accountable official for each
program identified as the person responsible for making
progress on improper payments.
Mr. Meadows. So those officials in those agencies where we
didn't make progress shouldn't have gotten bonuses. Would you
agree with that?
Ms. Cobert. I believe that people need to be held
accountable for program performance.
Mr. Meadows. That is not the question I asked.
So should they have gotten a bonus if they didn't perform,
if this was one of the matrix of performance?
Ms. Cobert. The performance--their bonuses are based on the
specifics of their performance plan.
Mr. Meadows. Right.
And so, if they went the wrong way, do you think they
should have gotten bonuses? Your opinion. Nobody else's. Just
your opinion. Should they have gotten a bonus?
Ms. Cobert. I think they all are accountable.
Mr. Meadows. ``Yes'' or ``no.''
Ms. Cobert. That is why they are there.
Mr. Meadows. Just a ``yes'' or ``no.''
Ms. Cobert. You know, there is a----
Mr. Meadows. Well, obviously, you think they should. All
right. So let me--let me go on a little bit further.
Mr. Koskinen, what is your target this year for EITC in
terms of where you believe that we should be percentage-wise?
What is your target?
Mr. Koskinen. The target--pardon me.
Our target this year is to make an improvement. If you look
at----
Mr. Meadows. What is your number target?
Mr. Koskinen. Right now, on the basis of what we are doing,
unless we can change the way we are doing it--my concern is,
for the last 6 to 8 years, it has been at an unacceptable
level.
And one of the reasons we are asking for legislative
support to change the way we deal with it is that, if--as I
told our executives, if we keep doing the same thing the same
way, we should expect the same----
Mr. Meadows. So you don't have a number?
Mr. Koskinen. So I do not have a better number.
Mr. Meadows. All right. So let me ask you this question.
If the Chair will indulge me, and I will close with this.
You have a law on the books passed in 2002, amended in
2010, that says that you are required to have a target and you
are required to publish it.
And the Inspector General's report says that you haven't
done it for the last 3 years and, obviously, still today you
are not doing it.
So if you are not willing to follow the law in terms of
what is already passed, how will a new law help you accomplish
that?
Mr. Koskinen. Well, as I said earlier to your target, I
expect, if we don't have additional resources in terms of the
legislative support, that our target will be--we are going to
be right where we are and where we have been.
Mr. Meadows. But that is not what the law says.
Mr. Koskinen. Well, like I said, let's have a target. I
will say that our target then has to assume----
Mr. Meadows. So when can we expect you to publish it?
Because that is what the law says. So is there any
justification for not following the law, Mr. Koskinen?
Mr. Koskinen. None at all. We will publish our target. You
are exactly right. There is no reason not to--not to do that.
Mr. Meadows. All right. I will yield back.
Mr. Connolly. Would my friend yield?
Mr. Meadows. I am out of time, but I would be glad to yield
if the chairman will----
Mr. Connolly. If we could operate under the Darrell Issa
rules, you get a lot of time. Could you yield?
Mr. Meadows. I would be glad to yield to the----
Mr. Connolly. I meant that in a loving way.
I just--I wonder if my friend would ask the same question
of Ms. Davis from GAO that he put to Ms. Cobert because I think
he was making a very good point.
We have reason to believe we are understating the actual
amount of improper payments. I just wonder if we could just
give GAO an opportunity, if my friend would ask that question,
since it is his time allotment.
Mr. Meadows. Consider it asked, Ms. Davis.
Ms. Davis. Thank you.
As I also mentioned in my testimony, the GAO, when it
looked at the consolidated financial statements of the United
States Government, identified improper payments as material
weakness in internal controls due to the fact that we at this
point in time cannot estimate the full extent of improper
payments first and then assure that there are actions--
reasonable actions that are being taken to reduce them.
I will make a point that, while the goal is, of course, to
reduce improper payments and we did put forward some strategies
to do that, there are instances, of course, where an addition
to the improper payment figure is a good thing.
To be specific, this past year a net of 10 programs were
added to the improper payment government-wide estimate. It was
actually, I believe, about 12 programs that were added, and
then 6 came off, and there were 4 that were split.
But, in total, there was a net increase of improper--a net
increase of 10 programs that were added to the estimate of
improper payment.
So to the extent--the first point, as I made earlier about
having--knowing the extent of improper payments, that is a
positive thing.
Mr. Mica. Thank you.
Gentleman from Kentucky, Mr. Massie.
Mr. Massie. Thank you, Mr. Chairman.
Mr. Koskinen, I have a--I think, a simple question about
the tape backups at the IRS.
I think you testified earlier that the tape backups are
recycled every 6 months----
Mr. Koskinen. They are----
Mr. Massie. --at the time.
Mr. Koskinen. They are kept for 6 months and then the tapes
are put back into being recycled.
Mr. Massie. So the tapes are reused?
Mr. Koskinen. They are reused. Yes. They are reused until
they don't work.
Mr. Massie. So how long of a period is that? How many times
can you reuse the tapes? And how long do they last?
Mr. Koskinen. I don't know.
Mr. Massie. Does the IRS still recycle tapes, overwrite
them every 6 months, as a policy?
Mr. Koskinen. No. Ever since the start of the investigation
and the release of the IG's report, all backup tapes have been
saved. So we have the 6 months up to May of 2013 and everything
since then.
Mr. Massie. Here's what confuses me, because I had a chance
to talk to an expert in tape backups.
These tapes hydrolyze after about 6 years. In fact, they
are not guaranteed. And the manufacturer doesn't advise you to
recycle them.
In fact, their admirable qualities are their storage
density, transportability, and low cost, but not the length of
time that you can keep data on them.
So this expert was surprised that you are at the IRS
recycling what is something that is so cheap that it is
actually cheaper to use new material instead of recycling.
Can you confirm that these tapes were recycled and not
destroyed?
Mr. Koskinen. I can't tell you that off the top of my head,
but I would be happy to be checked.
I have been told sometime ago when I first started being
involved with this that the tapes were used and recycled and
they are recycled until they are no longer useable and then
they are disposed of.
But with regard----
Mr. Massie. But when they are no longer useable, they fail,
and the purpose is to prevent failures. That is what confuses
me.
Mr. Koskinen. I will be happy to get you information about
that.
Mr. Massie. So it is your understanding that these tapes
were recycled for reasons of economy.
Mr. Koskinen. That is my understanding.
Mr. Massie. Not to cover--to make sure that there were
never more than 6 months of data.
Mr. Koskinen. I never had any indication of that.
Mr. Massie. All right. Thank you very much.
I am going to yield the balance of my time to the gentleman
from Ohio.
Mr. Jordan. I thank the gentleman.
Commissioner Koskinen, 3 weeks ago in front of the Ways and
Means Committee you testified--we have actually got it on the
screen here--``Lois Lerner was not trying to destroy email. In
fact, she was working very hard to restore her emails.''
Do you stand by that statement?
Mr. Koskinen. As far as I know, yes.
Mr. Jordan. Okay. Then, I want to--I want to show you a few
emails that you have had a chance to review now. We got these
on July 3rd, 4 o'clock. And I want to show you three emails out
of 15,000 that you dumped on us on July 3rd.
Let's go first to this one. This is to--Lois Lerner to
Maria Hooke. ``I had a question today about OCS''--what the
chairman was asking you about earlier--``I was cautioning folks
about email and how we have had several occasions where
Congress has asked for emails and there has been an electronic
search for responsive emails. So we need to be cautious about
what we say in emails because Congress might get ahold of them
and the American people might actually find out what the IRS is
doing.''
But then she quotes, ``Someone asked if OCS conversations
were also searchable.''
Now, your response to the chairman was you don't know
anything about OCS. Is that--that true? You have no idea what
this system is?
Mr. Koskinen. Correct.
Mr. Jordan. It is our understanding, after our staff did
some background work, that this is an intra-office instant
messaging chat-type system that you have in place at the
Internal Revenue Service.
And this was followed up by a response from Ms. Hope--or
Hooke--excuse me. So, remember, Ms. Lerner says, ``I had a
question about OCS.''
And then Ms. Hooke responds--Ms. Hooke responds back, ``OCS
messages are not set to automatically save as the standard.''
You follow me, Mr. Koskinen?
Mr. Koskinen. Right along with you.
Mr. Jordan. I appreciate it.
And then, of course, the response from Ms. Lerner is,
``Perfect.'' So now I want to show you one more timeline. I
have one more slide, and it is actually the timeline from the
Inspector General.
March 28, 2013, discussion draft report was issued to the
IRS. And so here is what I see. Now, maybe--maybe you see
something different, but this is what I see, and my guess is
the American people see this.
At our last hearing, we learned that, on June 3rd, 2011,
Chairman Camp sent a letter to the Internal Revenue Service
saying, ``Hey, we are concerned about what we think may be
targeting of conservative groups.''
10 days later, June 13th, 2011, a bunch of computers
mysteriously crash, including Lois Lerner's computer.
Now we jump forward. March 28th, 2013, the Inspector
General gives the Internal Revenue Service the discussion draft
report, his audit.
And you all learn--well, you weren't there at the time, but
the IRS learns, and specifically Ms. Lerner learns, that you
have been caught with your hands in the cookie jar and that, in
fact, targeting was going on and now the Inspector General
knows it.
And so 12 days later we get this email exchange that we
just went through where Ms. Lerner says, ``Wow, I know I have
gotten rid of the emails''--when the computer crashed 2 years
earlier--``but I better double-check on this intra-office
instant messaging capability we have here at the Internal
Revenue Service.'' And she says, ``Perfect'' when she learns
that it is not traceable, not trackable, not stored.
And so my question to you--I mean, we know Ms. Lerner is
not being square with the American people. Remember, it was
just 31 days after this email exchange right here.
31 days later she went to a Bar Association speech here in
town and told the whole world Washington had nothing to with
it.
Even though she's trying to make sure her tracks are
covered, she told the whole world Washington didn't have
anything to do with it, it is a couple rogue agents, a couple
of line agents in Cincinnati. So we know she can't be trusted.
But what I want to know is: Why did it take us this long to
get these emails? We have been after these for 6 months and you
dump them on us on July 3rd.
Mr. Koskinen. First of all----
Mr. Jordan. Have you ever seen this--have you ever seen
this stuff before?
Mr. Koskinen. No. And I don't see anything in here where
Lois Lerner says, ``Wow, I got rid of my earlier emails and now
I have got to check on them.''
Mr. Jordan. I am not saying that. I am focusing on the
pattern.
Mr. Koskinen. I am sorry----
Mr. Jordan. I am focusing on the pattern.
Mr. Koskinen. I am sorry. You said, for the record, that
Lois Lerner had written----
Mr. Jordan. No, I didn't.
I said Dave Camp sent her a letter. 10 days later her
computer mysteriously crashes and seven other important people
at the IRS. And then I am saying here's the pattern again.
She learns that there is--oh, the Inspector General is
going to issue a report that says the IRS was, in fact,
targeting conservative groups and now, 12 days after that, she
says, ``We better make sure this OCS system doesn't track
anything, is not traceable, and Congress and, more importantly,
the American people can't get access to what we were talking
about.''
Mr. Koskinen. I understand you might----
Mr. Mica. Let me just interrupt a second.
Mr. Massie's time has expired. I am recognizing Mr.
Jordan----
Mr. Jordan. Thank you, Mr. Chairman.
Mr. Mica. --for his 5 minutes at this point.
Mr. Jordan. Thank you, Mr. Chairman.
Mr. Koskinen. I don't see anything in here about Congress--
using the OCS system or not helping Congress. It says, ``The
recommendation is to treat the conversation as if it is been
saved somewhere because it is possible''----
Mr. Jordan. Okay. Okay.
Mr. Koskinen. --``that somebody else did it.''
Mr. Jordan. All right. Fair enough.
Let's look at the first sentence in each email.
Lois Lerner says to Ms. Hooke, ``I had a question today
about OCS.''
First sentence Ms. Hooke says, ``OCS messages are not set
to automatically save as the standard.''
Lois Lerner's response, ``Perfect.''
That is what I see.
Mr. Koskinen. Well----
Mr. Jordan. Now, here's the point.
Mr. Connolly. Would my friend yield?
Mr. Jordan. When I am--I will be happy to yield here in a
second.
Mr. Connolly. I thank you.
Mr. Jordan. Have you made these emails--have you given
these emails to the FBI?
Mr. Koskinen. We provide all of the emails we provide to
all the investigators. So I am assuming this went to all six
investigators.
Mr. Jordan. Well, now, just a couple of weeks ago, when I
asked you did you tell the FBI that you--when you knew that you
had lost Lois Lerner's emails, you said you did not.
But now you are saying you have sent this--this information
to the FBI?
Mr. Koskinen. We send all of the--for the tax-writing
committees--and the FBI has 6103 for that--we have sent 960,000
documents, and we have sent those to everybody doing an
investigation, including the Justice Department.
Mr. Jordan. Have you or anyone at the IRS sat down with the
FBI and talked to them about the lost emails of Lois Lerner
and/or this email chain that we just discussed?
Mr. Koskinen. I have no understand--not to my
understanding.
Mr. Jordan. You have not. You personally have not.
Mr. Koskinen. I have personally not.
Mr. Jordan. The FBI has not talked to you about the lost
emails of Lois Lerner?
Mr. Koskinen. They have not.
Mr. Jordan. Has anyone at the Justice Department talked
with you or anyone at the Internal Revenue Service about Lois
Lerner's lost emails?
Mr. Koskinen. I don't know.
Mr. Jordan. So the FBI has not talked to you. And you don't
know if they talked to anyone in your Agency about----
Mr. Koskinen. I have no idea whether the Justice Department
has talked to anybody at the Agency. They have not talked to
me.
Mr. Jordan. The Justice Department--so, for the record, the
FBI and Justice Department have not talked to you about the
lost Lois Lerner emails?
Mr. Koskinen. That is correct.
Mr. Jordan. And they have not talked to you about this
email exchange right here?
Mr. Koskinen. That is correct.
Mr. Jordan. Okay.
Mr. Connolly. Would my friend yield?
Mr. Jordan. In just a second.
Let me go to one other thing--one other thing we noticed on
this email exchange between Ms. Lerner and Ms. Hooke.
It is--it is copied to Nanette Downing. Do you know who
Nanette Downing is?
Mr. Koskinen. I do not.
Mr. Jordan. Do not? Well, we do. She's the head of the
exams division at the Internal Revenue Service.
Any idea why the person who's head of the exams division is
getting copied on email that says, ``We want to make sure that
intra-office communications aren't tracked?''
I mean, particularly in light of the fact we also just
learned in the past few weeks that Ms. Lerner was hoping Mr.
Grassley, Senator Grassley, was going to be referred for an
exam, any idea why Nanette Downing is listed on this email
exchange, Commissioner?
Mr. Koskinen. I have no idea why.
Mr. Jordan. No idea?
Mr. Koskinen. None.
Mr. Jordan. Okay. Has the FBI talked to Nanette Downing? Do
you know that?
Mr. Koskinen. I do not know.
Mr. Jordan. All right.
Mr. Connolly. Would my friend yield?
Mr. Jordan. I would be happy to yield.
Mr. Connolly. I thank my friend.
I just want to point out, keeping that graphic up on the
screen, we have got to be real careful about not taking this
out of context.
Lois Lerner's answer, ``Perfect'' is not to this lower box
in red. It is to the last paragraph that says, ``My general
recommendation''--this is from Maria Hooke--``is to treat the
conversation as if it could be''--or ``is being saved
somewhere, as it is possible for either party of the
conversation to review the information.''
Mr. Jordan. You--after she said, ``I have already cautioned
people about what they say in emails'' after her computer's
crashed, after--after she's nervous about the OCS system and
``what we are going to say because it might be traceable and
trackable,'' you expect us and, more importantly, the American
people to believe that, ``Oh, yeah. Perfect. Now we know we
need to save these.''
That is the most ridiculous interpretation. There is no one
with any common sense who would reach that interpretation that
my colleague reached. No one would reach that--but if you want
to stick to it, God bless you.
Mr. Connolly. Well, I would just say to my friend----
Mr. Jordan. Notice the first line--this is what I said to
the Commissioner.
Mr. Connolly. I would just say to my----
Mr. Jordan. I had a question today about OCS. Suddenly here
is--here's how it plays out.
Mr. Connolly. I would----
Mr. Jordan. It is my time. It is my time, Mr. Chairman.
So suddenly Lois Lerner learns----
Mr. Connolly. Mr. Chairman, as a matter of personal
privilege----
Mr. Jordan. No. No. Wait.
Mr. Connolly. --I would caution our colleague----
Mr. Jordan. I will yield back. I will yield back.
Mr. Connolly. --that he not characterize another member as
ridiculous. What is----
Mr. Jordan. I didn't characterize you as ridiculous. I said
it is a ridiculous interpretation.
So notice the first sentence, ``I had a question about
OCS.'' Here is what happened. March 28th, the IRS gets a heads-
up the Inspector General caught them. Because we asked the
Inspector General to do the audit, he caught them targeting
conservative groups.
And now Lois Lerner says, ``You know what? I better double-
check and make sure this intra-office instant messaging''--that
that can't be traced, that can't be tracked.
And all I want to know is why the Commissioner took 6
months to get us this information.
We have been asking for this stuff forever and it is--Mr.
Commissioner, is there anything--here's a good question.
This one email where Lois Lerner says, ``Perfect,'' is
there any 6103 violation in that email? Why in the heck did it
take us 6 months to get this email chain?
There is not one chance there is any 6103 information
contained in these three emails, and, yet, that is what you
hide behind, ``Oh, we have got to check it off for 6103.''
There is no way. We could have had this 6 months ago, when
we first issued the subpoena when you took over. And we don't.
And we are supposed to believe----
Mr. Koskinen. We are working----
Mr. Jordan. We are supposed to believe she's saying, ``Oh,
perfect. We have''----
Mr. Koskinen. We are working our way through and have
completed the production for tax-writing committee----
Mr. Jordan. Yeah. So you give us----
Mr. Koskinen. Sixty-three times----
Mr. Jordan. July 3rd, 4 o'clock, the day before a holiday,
is when you give us 15,000. We see them.
Mr. Koskinen. Right. And you're going to get more, because
the----
Mr. Jordan. Well, let's hope we----
Mr. Koskinen. This committee has got 40,000. You've got
23,000 more to go--27,000 more to go. And I'm sure in those
27,000 there will be some other interesting email you'll have
to read, and it won't be because we didn't give it to you in
February. We're giving them to you as fast as we can.
And it's a significant volume of evidence. As I say, it's
almost a million pages of documents that have gone to the tax-
writing committee.
Mr. Jordan. All I'm saying is there's no 6103 problem with
these three, and we should've had them a long time ago. But
because, whoa--Lois Lerner is talking about, ``Be careful what
you say in emails. Make sure this OCS system is not
traceable.''
Mr. Koskinen. Remember----
Mr. Jordan. Six months, we get them on July 3rd at 4:00
p.m. With 15,000 other documents.
Mr. Koskinen. If I could note for the record, our first
request by the investigators was to go through the custodians
with search terms that had to do with the determination
process, not with the email process. Therefore, when we went
through, we pulled them by subject matter, and the first
email----
Mr. Jordan. That is simply not true. We asked clear back
last summer for everything. I asked Mr. Werfel in a committee
hearing just like this, ``I want every single piece of
correspondence Lois Lerner sent to anybody. We want all of
them.'' So this has been over a year that we've been asking for
this.
Mr. Koskinen. Right. And the prioritization was we would
produce to you all the emails that had a subject matter having
anything to do with the determination issue, which was the IG
report.
Mr. Jordan. Mr. Chairman?
Mr. Koskinen. Those are the first emails we produced. Then
we went back and searched to find all the other Lois Lerner
emails, and they're coming forward. And you're going to get
more. The tax writers have all 67,000. You'll get another
24,000 or 27,000. And I'm sure some of those will be
interesting to people, but it's not because we delayed them,
it's because that's the process we've had to produce them.
Mr. Mica. I thank the gentleman.
And I think we have another Member waiting, Mr. DeSantis,
the gentleman from Florida.
Mr. DeSantis. Thank you, Mr. Chairman.
I'll yield some time to the gentleman from Ohio.
Mr. Jordan. I thank you.
Here's the takeaway: Nine days after the IRS knows they're
in trouble, Lois Lerner is trying to cover her tracks. That's
why we've got the mail exchange here. She already knows her
emails are gone because the computer crashed back in 2011, 10
days after Dave Camp asked about it. So 9 days after the IRS
knows they're in trouble, she's trying to cover her tracks.
Thirty-one days after this email happens, she goes to a Bar
Association speech and blames some good public servants in
Cincinnati, says that's where the problem is, lies to the
American people. And we don't get that information after we've
been asking for it for a year.
And this guy tells us he hasn't even talked to the FBI.
What kind of investigation is going on when the FBI won't even
talk to the head of the agency that has this kind of stuff
going on with their email exchange and won't talk to the agency
that lost key evidence in an investigation that's about
people's First Amendment rights being targeted?
And we get these flippant answers from the Commissioner.
Mr. Koskinen. I----
Mr. Jordan. That's what just bothers----
Mr. Koskinen. I wouldn't----
Mr. Jordan. --that's what bothers every single American,
Mr. Chairman.
Mr. Koskinen. I wouldn't say there----
Mr. Jordan. With that, I would yield to my----
Mr. Koskinen. I wouldn't say there----
Mr. Jordan. --I'd yield to my colleague.
Mr. DeSantis. Well, I thank the gentleman from Ohio.
And----
Mr. Connolly. Mr. Chairman, I must say----
Mr. DeSantis. --these emails----
Mr. Connolly. --I object to this badgering of a witness. At
least the witness is entitled to respond after having his
comments characterized.
And this is not the standard of the subcommittee you and
I've set, Mr. Chairman.
Mr. Mica. Well----
Mr. Connolly. Characterizing Members of Congress and
abusing and badgering witnesses, that is not the standard this
subcommittee has set.
Mr. Jordan. Mr. Chairman, I did not mischaracterize----
Mr. Mica. Okay.
Mr. Jordan. --my colleague.
Mr. Mica. Okay.
Mr. Jordan. I characterized his interpretation as one that
I don't think very many Americans are going to reach. I did not
disparage my colleague. I have a great deal of respect for my
colleague.
Mr. Mica. I would rule that, again, I don't think he
disparaged the witness, but I think he spoke to, again----
Mr. Koskinen. I would just----
Mr. Mica. --a situation.
And we do want all the Members to be respectful of the
witnesses. He is not under a subpoena, and he came here
voluntarily. And, again, there are differences of opinion as to
what occurred, and our job is to get to the facts.
Mr. Koskinen. Right. And----
Mr. Connolly. I thank the chairman.
Mr. Koskinen. --I appreciate that, but I would just----
Mr. Mica. Did you want to respond, Mr. Koskinen?
Mr. Koskinen. Yes, I would appreciate that. Thank you very
much.
My only response was to disagree with the characterization
that my responses have been flippant. I've tried to be
responsive in any way that I can, both in my previous hearings
and now. I understand these are important matters, and any
information we can provide we will. But----
Mr. Jordan. How is it responsive when you wait 2 months to
tell the United States Congress that you lost Lois Lerner's
emails? How is that responsive? That's what the American people
want to know, Mr. Commissioner.
Mr. Koskinen. Yes. And----
Mr. Jordan. And you did not tell the FBI you lost Lois
Lerner's emails. How is that responsive? Tell me that.
Mr. Koskinen. Well, I can----
Mr. Jordan. You waited till you knew in April, and you
didn't tell us.
Mr. Koskinen. As I have testified to in two previous long
hearings, when we knew in April that there had been----
Mr. Jordan. You knew in April, and you told us in June.
Mr. Koskinen. And told you in June, and the reason was
because----
Mr. Jordan. Why'd you wait 2 months?
Mr. Koskinen. Can I answer this question?
Mr. Mica. Yes, you can. And go ahead.
Mr. Koskinen. Can I--thank you.
As I testified in two previous hearings, when I learned
about the situation in April and we began to collect the
information on how many other emails could we reproduce, my
judgment was at the time that we should produce and discover
exactly what the full context of the situation was and report
it.
Mr. DeSantis. Were you advised of that, Mr. Commissioner,
advised to keep quiet?
Mr. Koskinen. I was absolutely not. Nobody----
Mr. DeSantis. Okay. Can we play your clip of your testimony
in front of this committee last----
[Video shown.]
Mr. DeSantis. Okay. So you said you were advised, and now
you're saying you were not advised.
Mr. Koskinen. Sorry. It's a good question. I was advised by
the people in the organization working on the production of
documents. And I was advised----
Mr. DeSantis. So you were advised.
Mr. Koskinen. You asked me if I was advised not to say
anything. I was not advised by anyone not to say anything. I
was advised--in that clip, I noted I was at advised by our
people doing the research----
Mr. DeSantis. Okay, but that's----
Mr. Koskinen. --that there was a problem.
Mr. DeSantis. --what we're saying. Because, to us, that's a
distinction without a difference, because we're looking for the
truth. And your organization has not provided us with the truth
in a timely fashion.
What I'm seeing with Lois Lerner's emails is really a
culture of obstruction at the IRS. I mean, for her to be
worried right on the heels of this draft IG report that
Congress may search her instant messages, ooh, perfect that,
you know, the settings aren't like that, that is very, very
troubling. Because she wants to be able to conduct her
operations according to her ideology without oversight from the
American people on behalf of the Congress. So that is very,
very troubling to me.
And, you know, she's copying Nanette Downing, who is the
head of the Exams department, which is very much troubling.
So what you've told us--last hearing, you said the hard
drive crashed; well, these things happen. The odds of that
happening innocently right on the heels of Dave Camp's letter
are astronomical based on the hard-drive failure rate you gave
us, based on the fact that it was those 10 days right after
Camp, and based on the fact that it was totally unrecoverable.
They recovered data from the Challenger explosion from 9/11. So
somehow Lois Lerner's emails was totally unrecoverable.
So that is a coincidence of absolutely inexplicable
proportions. And I think that's why the American people, 75
percent, do not believe the explanation that the IRS has
provided.
Let me ask you this: Why are we just now hearing about this
OCS system? We've supposedly had the FBI investigating this for
a year. No one at the IRS ever told the FBI that there were
communications using this system?
Mr. Koskinen. I didn't----
Mr. DeSantis. Why didn't anyone at the IRS ever tell the
Congress----
Mr. Koskinen. I never----
Mr. DeSantis.--that there were these? The subpoenas are
written very broadly, and they would absolutely have included
this, not simply the email. So what is the reason for
withholding that from Congress?
Mr. Koskinen. You asked a lot of questions. If I could
answer them.
I have no information as to whether anybody told the FBI or
not or who was interviewed by the FBI about the OCS system. So
I have no basis of saying one way or the other. So I don't
think it's fair to say nobody told them. We don't know whether
anybody told them.
Secondly, we've produced the information to you, and you
now have--the tax writers have all 67,000 Lois Lerner emails.
You will soon have----
Mr. DeSantis. With OCS, you've produced that?
Mr. Koskinen. And OCS, as they noted, at this point--the
first I've heard about it; I'll look at this--says the OCS
system, whatever it is, by itself does not get retained. But,
as it's noted, you should assume--Lois Lerner is advised, you
should assume that it's retained because it's easy to turn it
into an email.
And I would also note, I have no--I'm not here to defend
Lois Lerner. I've never met her. But in terms of getting rid of
emails, it should be noted there were 43,000 Lois Lerner emails
from April 2011 until May of 2013 that have been produced. So,
in terms of getting rid of emails, there were 43,000 that she
didn't get rid of after the hard-drive crash.
Mr. DeSantis. Well, but that number is meaningless if there
are critical emails that have not been produced, that have:
``been destroyed.'' That means the American people aren't being
given the whole truth.
And I yield back.
Mr. Mica. Okay. Well, we've finished one round. I have some
additional questions; then I'll yield to other Members.
Well, we've gotten into a whole array of subjects. We
started with a 25 percent error-rate payments, which is, I
guess, the highest in government for Earned Income Tax Credits
under IRS, and we've come around to some of the issues relating
to the IRS probe.
I just read this Wall Street Journal article. I'd heard
about it just a few minutes ago. It raises some questions with
me. I guess the FBI began investigating, or at least told
Congress June 11th, over a year ago, that they were conducting
an IRS investigation.
Has this been going on over a year? Is that correct?
Mr. Koskinen. That's my understanding.
Mr. Mica. Yeah. And you came the end of last year, John; is
that----
Mr. Koskinen. I started on December 23rd.
Mr. Mica. Yeah. Okay. And it said in January the Justice
Department assigned the IRS probe to an Obama donor, Barbara
Bosserman, an attorney in the Civil Rights Division. So, since
January, basically since the time you took over IRS, she took
over the investigation.
So you have not had any conversation with Ms. Bosserman?
Mr. Koskinen. I've had no conversation with anybody at
Justice about this investigation.
Mr. Mica. Or FBI?
Mr. Koskinen. Or the FBI. I've had, actually, no
conversations with any of the staff investigators or----
Mr. Mica. You see, I mean, this raises a lot of questions.
Maybe some of them you don't know the answer to. But it's
startling that a supposed investigation that's been going on
for over a year, you're the new IRS Commissioner sent in to
clean up the mess, and, in fact, you have not spoken to them.
Mr. Koskinen. Well----
Mr. Mica. Is there any of your--have any of your folks that
have been involved in this--can you name someone who has talked
to the FBI?
Mr. Koskinen. I can't, but if the FBI----
Mr. Mica. Can you provide us with information as to who--I
mean, there must be some record of some contact. This
investigation supposedly has been going on since June 11th.
Congress notified over a year ago. You came in. They haven't
talked to you.
Mr. Koskinen. But they wouldn't talk to me because this
investigation goes from 2009 to 2013 and I wasn't there.
Mr. Mica. Well, I know, but, again--and you don't know who
they've talked to. But can you provide us with who they talked
to when?
We're trying to figure out who knew what when, to quote the
late Howard Baker, and some of the pieces to the puzzle don't
fit. Again, it raises a lot of questions.
Mr. Koskinen. To the extent I'm able, I'm happy to see if
we can provide you that information.
I do know, from having spent a lot of time with inspectors
general my last time around in the government in the 1990s,
that investigators sometimes are very hesitant to have their
witness list known, the people that they've actually talked to
who they're investigating. But to the extent that that
information is available, I'm sure we can provide it to you.
Mr. Mica. Okay. It, again, raises some very serious
questions.
Back to the payments, we'll look at your legislative
suggestions, Mr. Connolly and I. Maybe we can address those.
Tell me, physically, where do they process the Earned
Income Tax Credit returns? Is that done around the country?
At----
Mr. Koskinen. Yes.
Mr. Mica. --one location?
Mr. Koskinen. No. Basically, we have processing plants all
around the country, so it depends where you are.
Mr. Mica. Yeah.
Mr. Koskinen. And they are--they come in just like regular
returns.
Mr. Mica. And, again, John, you've been around a long time.
I just come from a business background. If I was losing 25
percent in improper payments, I would have someone come in and
give me an analysis. There are a lot of good firms around you
have the ability to contract. I think--and asking for billions
just doesn't cut it. I think you've got a technical and a
software, electronic evaluation issue. And it's astounding, the
amount of money that's involved here and----
Mr. Koskinen. Yes.
Mr. Mica. --again, the percentage of errors. But I think we
need to get someone in there immediately, if not sooner, and
see if that can't be corrected.
Mr. Koskinen. It would be helpful. As I say, we've had
several GAO reviews, several inspector general reviews over
time, independently making recommendations.
Mr. Mica. And Mr. Connolly and I have discussed, we held
one hearing in August on identity-theft-related tax fraud
issues. We haven't gotten into a lot of that. We put some
things in the record, but that doesn't seem to be clearing up
the way it should. And that's a multi----
Mr. Koskinen. That one I think we're making more progress
on.
Mr. Mica. Well, again, the information we had last August--
and that's why we'll hold another hearing.
Mr. Koskinen. I'd be happy to come back and talk with you
in more detail about that.
Mr. Mica. And we will definitely have that.
Mr. Koskinen. As I've told our people, I think we have a
good story on identity theft and refund fraud. And I have been
unhappy and I don't think we have a good story thus far on EITC
improper payments. I think it's----
Mr. Mica. Well----
Mr. Koskinen. --been there too long at too high a level.
And we need to actually--so I've asked people to go back to the
drawing board and rethink everything we do in that area.
Mr. Mica. Well, I just came back from a week in the
district, and I can tell you, Mr. IRS Commissioner, that there
is a canyon of disbelief and a lack of credibility the size of
the Grand Canyon when it comes to the general public and the
IRS operations right now. It's huge. And people are not buying,
again, some of the information that's been put out there.
Let me yield to Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman. I'm glad we're
returning to the subject matter of the hearing.
Ms. Davis, I'm not sure I understood your answer to my
question through Mr. Meadows.
The suspicion up here is that probably the number we're
using right now, $106 billion a year in improper payments,
understates the extent of the problem. Given the fact that DOD
does not yet have an unqualified audit, by definition, their
numbers could be squishy--hopefully they're not, but they could
be; given the fact that Mr. Koskinen does not include refund
fraud as an improper payment, even though, in the case of Dr.
Agrawal, Medicaid fraud is a subset of improper payments.
So please elaborate. Because we kind of have the impression
we're understating the number, and I couldn't quite understand
your answer, which seemed to be, no, it's pretty accurate. Did
I misread you?
Ms. Davis. We have stated in our audit of the financial
statements, the consolidated financial statements in the last
fiscal year that there's material weaknesses in internal
control government-wide because of the inability, at this point
in time, to actually get a handle of the number, to actually
determine the full extent of improper payments and, of course,
to ensure that appropriate actions are taken to reduce them.
You know, there are so many facets in this. As you are
aware, this coming year, in 2014, the definition of
``significant improper payments'' is actually going to change.
The rate is going down from 2.5 percent to 1.5 percent, and $10
million and/or still, you know, the ``million'' as being the
criteria. We think that there is a possibility, certainly, of
additional programs being added as the requirements for
addressing and assessing and identifying improper payments
change.
There are so many facets. As I mentioned just a few minutes
ago, the fact that additional programs are being recognized and
are coming onto the government-wide estimate, that's positive,
in the respect that now additional estimates are being, you
know, shown, identified. And, therefore, one would assume
programs can take appropriate action, now that they have
identified these additional, you know, internal control issues
related to improper payments and take actions to reduce them.
So, you know, the bottom line is that we are--the Federal
Government in total is unable to really identify the amount,
and, as time progresses, we will see changes in that amount.
It is important to note, I will say, that, you know--and
this has been mentioned before, but improper payments includes
errors or insufficient documentation of errors. So it doesn't
necessarily mean that money has been inappropriately spent.
Mr. Connolly. That's right.
Ms. Davis. And, also, the total includes underpayments as
well as overpayments.
It's a very complicated issue. It's not simple.
Mr. Connolly. Of course.
Ms. Davis. We'd like to see the numbers go down. We'd
absolutely like to see the rate go down. That's a very positive
aspect of the program.
Mr. Connolly. Is it GAO's view that some infusion of
targeted strategic resources could make a big difference?
Ms. Davis. You know, that's a difficult question to answer,
but let me--let me say that there are certain areas where--and
I think that, you know, as the subcommittee has noted, there
are certain areas that really need more attention. The
healthcare areas, as was mentioned, you know, looking at the
two Medicare programs, the Medicaid--and, actually, if you add
the prescription drug program, which is around $2.8 billion,
close to $3 billion, you're talking about $64 billion in
improper payments, you know, compared to the government-wide
total of $106 billion. So you're talking about over 60 percent
of the government-wide total, you know, is attributable to this
area.
So, to the extent that we can focus on areas--as, you know,
learned through this discussion here today at the subcommittee,
EITC has a very high rate. And what is of concern, too, is the
fact that this rate has actually increased. It was a little
under 23 percent last year; it's now 24 percent.
But, also, one of the big healthcare programs, Medicare
Fee-for-Service, that rate has gone up. It's now 10.1 percent.
It used to be, I think, 8.5 percent the year before. So you're
looking at, you know, issues related to programs increasing
their rates, you know, which is something that needs to be
addressed.
Mr. Connolly. Well, but my question was not whether it
needs to be addressed. We agree on that. I'm actually asking
you to go out on a limb. Would targeted resources make a
difference, in GAO's opinion? Or have you even looked at that?
``We can solve this problem without a dime extra''; is that
your position?
Ms. Davis. I don't think we've done any work that could
specifically address your question, and----
Mr. Connolly. Well----
Ms. Davis. --I would be hesitant for that reason to answer
it specifically with a ``yes'' or ``no.''
But, as you can see, because there are areas of concern,
you know, there needs to be attention. Now, whether that can be
accomplished with existing resources or additional resources
are needed, I would turn to the agencies to address
specifically those questions.
Mr. Connolly. Well, I would just respectfully say to you,
Ms. Davis, that once in a while Congress actually looks to GAO
to give recommendations, not just analysis of problems.
And your own agency has been before this committee and
testified as to the efficacy of additional resources for it. So
if we are to assume that some more resources for some more
investigators and auditors at GAO can really save us money, can
help uncover problems that, you know, could make us more
efficient and less wasteful, it might follow that these other
agencies could benefit from that, too.
Not to say money is the answer, but, as I said in my
opening statement, you can't take the position that money is
never the answer. I mean, sometimes targeted investments can
really have big payoffs. And that's my point, and I look to the
GAO someday to actually comment upon that in a meaningful way.
Thank you.
Mr. Mica. I thank the gentleman.
Mr. Meadows?
Mr. Meadows. Thank you, Mr. Chairman.
Let me follow up a little bit on that, in terms of numbers,
Mr. Koskinen, because I looked at the numbers. And I want to
give you the resources to do the job that you need to do to get
this 30 percent, 25 percent, whatever it is, under control.
Mr. Koskinen. Right.
Mr. Meadows. I'm not convinced--and what I guess I need you
to respond to--I'm not convinced that people or dollars make a
difference.
And the reason I say that is that, in fiscal year 2010,
when your budget was higher and your employees were higher, the
improper payments were also higher. Can you explain how that
would happen?
Mr. Koskinen. Actually, you probably have the numbers. When
I looked at them, over the last 6 to 8 years, what concerned me
was the numbers have been more or less flat. So they've been
the same, as you say, whether we had more people or not.
And that's why, when I asked people to go back to square
one and meet with me several times to figure out what is it
that we need to do, the focus came on the legislative issues,
that we need more authority to be able to stop refunds earlier,
that we see that, otherwise, to make those corrections, we have
to go out and do an audit, but each one is small enough that,
as you say--my judgment and ours is that we can't audit our way
out of this. We can't be tracking down each one. We've got to
be able to, when we see the error against our other databases,
be able to correct it right then, rather than send it out and
then have to do an audit and track people down.
So I do think the legislative changes--I think the taxpayer
regulation will help. As noted, 57 percent of the returns are
by tax preparers----
Mr. Meadows. Okay. And I knew you were going to go through
there, and so let me ask you--and I'm sorry to interrupt you.
Mr. Koskinen. No, that's okay.
Mr. Meadows. I'm trying not to be rude. I know you get
interrupted a lot.
So let me just, since you're going there, how is regulating
preparers that want to abide by the law going to fix the fraud
and those who--really, 30 percent, some of it is error, but
we've had testimony from your predecessor that would indicate
sometimes we had a thousand payments going to one particular
address, and you know that's accurate.
And so how would additional regulators on preparers, who
are well-intentioned, maybe make an error, actually
substantially reduce this? Because I read your testimony, and
that one was like nails on a chalkboard to me.
Mr. Koskinen. It's a good question. The regulation is
relatively straightforward. It requires basically passing a
minimum competency test and taking continuing education. So for
preparers----
Mr. Meadows. Yeah, but that just--I mean, listen, I was in
the real estate business, and you know what?
Mr. Koskinen. If you pass the basic course, you'll be in
there. And what it'll do----
Mr. Meadows. But this is not about basics.
Mr. Koskinen. But what it will do, is our judgment, is we
won't--the fraudsters, the people who are actually out keeping
the refunds----
Mr. Meadows. But that's what this is really about, is
fraudsters.
Mr. Koskinen. But it will allow--so the question is, if
you're a taxpayer, how will you be able to distinguish--if
you're in a moderate-income community, an immigrant community,
or any community, what this will allow, you would get a
certificate that said you've registered with the IRS, you've
taken the courses, you've tried to become informed. And I
suspect the fraudsters aren't going to do that.
And so what it will do is it will allow taxpayers to be
able to have a more----
Mr. Meadows. So like a Good Housekeeping Seal of Approval.
Mr. Koskinen. A Good Housekeeping Seal of Approval.
Mr. Meadows. Okay. All right.
Let me go on. I'm limited on time, but I'll listen to
further discussion on that.
Dr. Agrawal, I know that in a May 20th hearing you were
asked for some information from Mr. Chaffetz and Mr. Lankford,
and you were given a time to respond by June 19th. And that was
almost 3 weeks ago, and we've received nothing with regards to
that response.
Can we expect a response to their questions with regards to
the Medicare mismanagement by the end of the week? Are you
working on that?
Dr. Agrawal. We are working on it. And I'll check
immediately after this to make sure that you get a response as
soon as possible.
Mr. Mica. So what kind of timeframe do you need?
Dr. Agrawal. I think a week or 2 would be great.
Mr. Mica. Okay. So in 2 weeks, no later than 2 weeks, we
can have your response?
Dr. Agrawal. Sure.
Mr. Meadows. All right. Thank you.
I want to also go back, in my last remaining time, Mr.
Koskinen, since it's been illuminated that we have this record
problems with this new system that we just found out about,
that's not news to your staffers, is it, that they would have
an internal communication that is not email?
That is probably not even news to you. You may not have
known the name, but you've certainly seen people communicating
in your agency via a messaging system that is not email; isn't
that correct?
Mr. Koskinen. No, I've actually never seen that.
Mr. Meadows. You've never seen that?
Mr. Koskinen. No, I have not seen that in operation.
Mr. Meadows. You've never seen anybody communicating in
your agency----
Mr. Koskinen. I've never gotten anything that was----
Mr. Meadows. Okay. Well, you've got a couple of staffers.
Have you guys seen that, behind--I mean, have they seen it?
Mr. Koskinen. I don't know.
Mr. Meadows. Yeah.
Mr. Koskinen. They said they have. They've been doing it
for a while.
Mr. Meadows. It's like instant messaging. I mean, I know
that----
Mr. Koskinen. I don't do instant messaging either, so I'm
probably out of touch.
Mr. Meadows. Yeah, me either. But let me tell you my
concern, is the OMB--and we've got Ms. Cobert here today--gave
guidance in 2012 to have a senior official, a special person
within each agency to make sure that we have compliance with
regards to records.
Who's your senior person within the IRS or Treasury that
you would've appointed according to that guidance?
Mr. Koskinen. There's a man, whose last name I don't know,
who is in charge of the records. We have 2,000 information
resource counselors----
Mr. Meadows. That's not what I--it says that you're to
designate a senior agency official. So who is that?
Mr. Koskinen. I don't know his name, but there is one.
Actually, he just wrote a letter to NARA. Maybe I have a copy
of the letter. Hold on.
No, I don't. But we just----
Mr. Meadows. But when you found out, the last hearing, that
you didn't comply with the laws, the Federal records, did you
go back to that person and say, you know what, you messed up?
Mr. Koskinen. No, what I--actually, even before then, I've
gone back and said, we have to have a better----
Mr. Meadows. So you've talked to him; you just don't know
his name or her name.
Mr. Koskinen. I did not talk to him personally. But I do
know that, actually, ironically, I did go back and ask for more
information. And it turned out, when NARA did a review in 2011,
we got a score of 93, and when they did a review of our record
management system in 2012, we got a score of 99. So I think
it----
Mr. Meadows. So did it include those instant messages in
that scoring?
Mr. Koskinen. I have no idea.
Mr. Meadows. Can we find out?
Mr. Koskinen. I'm sure we can.
Mr. Meadows. Okay.
And I'll close with this, Mr. Chairman.
We have been denied access, the Oversight Committee, to
your senior official in terms of technology, the people that
are providing all these documents. I can't imagine why, if you
had nothing to hide, we would be denied access to those types
of people.
Can I have your commitment here today that you're willing
to make them available for us to ask questions, both the
majority and the minority?
Mr. Koskinen. Yes. As I've said, we've told the IG we're
not going to interfere with his----
Mr. Meadows. But that wouldn't interfere. Would you be
willing to commit to the committee today that we can have
access to those individuals to ask them questions? Yes or no?
Mr. Koskinen. Yes. We've already--actually, you've already
had a briefing from----
Mr. Meadows. So we can call them, you will identify them
today----
Mr. Koskinen. No----
Mr. Meadows. --and let us go ahead and start interviewing.
Mr. Koskinen. No. I should make it clear, and I thought I
had made it clear, that we've agreed to the IG's request that
we not do anything to interfere with his investigation----
Mr. Meadows. Well, that's not what the IG--the IG didn't
say that.
Mr. Koskinen. IG has asked us----
Mr. Meadows. The IG asked you to cooperate. He didn't say--
--
Mr. Koskinen. No, that's----
Mr. Meadows. --to not provide information or cooperate with
us, did he?
Mr. Koskinen. The IG asked us----
Mr. Meadows. I mean, we have information that would
indicate he didn't say that.
Mr. Koskinen. What the IG asked us was to give priority to
his investigation and not do anything that would interfere with
it, including talking to anyone that he was going to be talking
to.
So we have not pursued--we have told him, as soon as he
finishes his investigation, we will provide--and you can have
discussions with anybody you would like. We will do that.
Mr. Meadows. I'll----
Mr. Koskinen. We're committed to that.
Mr. Meadows. I'll yield back. I thank the patience of the
chair.
Mr. Mica. Okay.
Mr. Clay, the gentleman from Missouri, is recognized.
Mr. Clay. All right. It's Mr. Clay of Missouri, Mr.
Chairman. You remember. You're thinking of Bill Gray, but----
Mr. Mica. I apologize. I did that----
Mr. Clay. You served with Bill Gray, I understand.
Mr. Mica. --twice today, and I know you very well.
Mr. Clay. I know.
Mr. Mica. I had us in a different place. Thank you.
Mr. Meadows. He is looking at the ranking member's hair as
he looks by you.
Mr. Mica. That's the second time.
Mr. Clay. It always helps to have levity in here.
Mr. Easton, according to a 2012 GAO report, two DOD
programs were excluded from OMB's estimation of government-wide
improper-payments amount. These two programs, the Defense
Finance and Accounting Service Commercial Pay and U.S. Army
Corps of Engineers Commercial Pay, spent nearly $400 billion in
2011.
The reason for the exclusion was that those programs were
still developing their estimating methodologies. In other
words, they didn't know how bad their improper-payment problem
was.
Mr. Easton, have they figured that out yet?
Mr. Easton. They did. And, in fact, we did report both of
the numbers for the Commercial Pay program and for the Army
Corps of Engineers. The decision was apparently made to exclude
the numbers that we reported because of questions about the
statistical sampling estimation methodology. And there was one
in place in both of those programs.
Since then, at the recommendation of the GAO, we've gone
back and in both cases implemented an adequate--and we would
welcome GAO to come back and validate that--program for both of
those.
Mr. Clay. Okay. So are these programs' expenditures able to
be included in the next OMB government-wide estimation?
Mr. Easton. Yes, sir.
Mr. Clay. Yeah. Okay.
And I do understand that the DOD's estimating processes for
these programs is different from methodologies it uses for
other programs. Why is that the case?
Mr. Easton. In the case of the Commercial Pay program--that
was the specific program that was identified by GAO--there was
some concern about the variability of the payments. We can make
very, very small payments to very, very large payments.
And we were using, when we initiated the methodology, more
of a simple statistical sampling methodology. And my
understanding is that they recommended, and we implemented, a
stratified sampling methodology. So that was the distinction.
Mr. Clay. Okay.
And, Ms. Cobert, could you comment on the estimation
methodologies used for these two programs?
Ms. Cobert. We, in our oversight role, have worked with DOD
and incorporated the feedback from GAO and believe that the
sampling methodology, improved sampling methodology that Mr.
Easton described is now a sound one. That's why we've included
those numbers in this past year.
Mr. Clay. Okay. Thank you.
On another subject, my colleagues on the other side of the
aisle have spent a significant amount of time today focusing on
whether or not Lois Lerner has tried to hide information from
Congress. They have suggested that Ms. Lerner has done so by
intentionally crashing her hard drive and by using an intra-
office chat system at the IRS called ``OSC'' to avoid leaving
records on email.
I have just a few follow-up questions relating to this
topic. One, Mr. Commissioner, does the IRS have a policy to
withhold information from emails in order to obstruct
congressional information?
Mr. Koskinen. No.
Mr. Clay. Is the IRS policy to comply fully with all
congressional document requests and subpoenas?
Mr. Koskinen. It is.
Mr. Clay. Has the IRS been complying fully with all
congressional document requests and subpoenas that it has
received to date?
Mr. Koskinen. We are. It takes longer than people expect
and longer than we would like. We've spent about $18 million
doing it. But we are doing our very best to be totally
compliant.
Mr. Clay. And about how many documents have you supplied to
Congress to date since you got there?
Mr. Koskinen. Tax-writing committees overall have just a
little less than a million documents. Since I've been here,
we've probably provided 300,000 or 400,000 of those.
Mr. Clay. Do you think we're going to read all of that, Mr.
Chairman?
Are you aware of any IRS employee intentionally withholding
information in order to obstruct any congressional information?
Mr. Koskinen. I am not.
Mr. Clay. And I thank you very much for----
Mr. Connolly. Would my friend yield?
Mr. Clay. If the chairman would let me.
Mr. Mica. You have plenty of time. Go ahead.
Mr. Clay. Yes, I yield.
Mr. Connolly. I thank the chair, and I thank my friend.
Is it my friend's understanding, my friend from Missouri,
that--with respect to the issue of did somebody deliberately
crash their hard drive, maybe the inference to be drawn from
that might be, well, it's otherwise a rare event in the IRS
that a hard drive crashes.
And is it my friend's understanding that at our previous
full committee hearing the statistic was 3,000 hard drives in
the IRS alone have crashed so far this year, with almost half
the year still to go?
Mr. Clay. That is the testimony----
Mr. Koskinen. I think it's actually 2,000.
Mr. Connolly. I thought we heard 3,000 in the testimony,
but all right, 2,000. That means we're kind of on track to get
somewhere shy of 4,000; is that correct? Hardly an unusual
event.
And was it further my friend's understanding from the
testimony received that one of the reasons for that is that a
lot of the computers at IRS have not been updated according to
industry standards, they're kind of old by technology
standards?
Mr. Clay. And my friend from Virginia, and we know why that
is: Because in the past 4 years there have been dramatic cuts
to the IRS budget, mostly initiated by this House and the
appropriators who are responsible for that budget.
Mr. Connolly. Right.
And let me finally ask my friend, much has been made of the
fact that apparently staffers of the IRS resorted to Gmail and
Gchat and they actually used those private vehicles for
official business; is that correct?
Mr. Clay. Yes.
Mr. Connolly. Can you imagine if we applied the same
standard here on Capitol Hill to our staff and ourselves?
Perhaps it'd be embarrassing information, but not necessarily--
in fact, almost certainly not sinister. Would that be a fair
characterization, my friend from Missouri?
Mr. Clay. That would be fair, but I'm glad we have a
firewall.
Mr. Connolly. I thank my friend.
And I thank the chairman.
Mr. Clay. You're welcome.
And I yield back.
Mr. Mica. I thank the gentlemen for their little colloquy
there.
I'll go back and tell my folks that they can--I tried to
explain to them that they keep their records for 50 years but
they can't keep emails for 27 months. I talked about the
credibility of--Mr. Jordan?
Mr. Jordan. I thank the chairman.
I'll just pick up where Mr. Clay was. It seems to me that
the IRS had three duties here and they've breached all three.
First, they have a duty to preserve documents. We know they
didn't do that. They didn't do that right. They had some 6-
month tape that recycled, et cetera.
They had a duty to produce the documents that we actually
subpoenaed. They can't do that because they lost them; they
didn't preserve them.
And then they had a duty to disclose once they knew that
they didn't preserve and couldn't produce. And they didn't do
that in a timely fashion.
So they had three duties. They breached all three.
And Mr. Meadows, I think, asked an important question. We
want certain people to come in front of this committee and
elaborate on the fact that they've breached these three duties
they had to the American taxpayers, the American citizenry. And
they're saying they can't because the Inspector General told
them they couldn't do it.
So my question to you, Commissioner, is, how is cooperating
with Congress' investigation going to impede any Inspector
General investigation?
Mr. Koskinen. My understanding, the concern of the
Inspector General is that he is actually talking to everybody
who knows anything about the email situation and the crash of
the hard drive. He has asked us not to talk to any of those
people, asked us to give priority to his investigation----
Mr. Jordan. And you know what? We'd be happy to work around
his schedule. If the Inspector General wants to interview one
of the witnesses we want to interview and he wants to interview
them at 10:00, we'll say, you know what, we'll do it at 12:00.
Mr. Koskinen. The Inspector----
Mr. Jordan. You want to do it at 1:00, we'll do it at 3:00.
Mr. Koskinen. My----
Mr. Jordan. We'll do it the next day. We're happy to work.
What we want from you is a commitment for these people. The
committee sent you a letter 3 weeks ago. Thomas Kane, Acting
Deputy Associate Chief Counsel for Procurement and
Administration, will you commit to letting Mr. Kane come and
talk to this committee and the American people?
Mr. Koskinen. I've said that when the Inspector General is
done----
Mr. Jordan. No, no, no, no. I mean soon. We want this to
happen this month. We're not--we want----
Mr. Koskinen. I didn't ask----
Mr. Jordan. This has been a year investigation, Mr.
Commissioner. We want it to happen. You wait 2 months to tell
us you lost to the emails. We want to get to the truth as
quickly as possible.
We've got key witnesses: Thomas Kane; Lillie Wilburn, Field
Director, Information Technology Division. Will you commit to
letting her come talk to us this month?
Mr. Koskinen. I am sure she's one of the people the
Inspector General is going to talk to. I have told and talked
with the Inspector General. As soon as he's done talking to a
witness, we're happy to have them come----
Mr. Jordan. What does that--what is the big deal?
Mr. Koskinen. The big deal----
Mr. Jordan. If the Inspector General wants to talk to him
Monday, we'll talk to him Tuesday. If he wants to talk to him
on Tuesday, we'll talk to him on Monday.
Mr. Koskinen. Because the big deal is everybody, at least--
--
Mr. Jordan. How about John McDougal, Senior Trial Counsel,
Office of IRS Chief Counsel? Will you commit to letting us talk
to him?
Mr. Koskinen. My answer is the same. As soon as the
Inspector General completes his investigation----
Mr. Jordan. How convenient. How long is that going to take?
Two months?
Mr. Koskinen. I didn't ask----
Mr. Jordan. Three months? One year like the first audit
took?
Mr. Koskinen. The Congress asked the Inspector General to
do this investigation. The Inspector General is committed to
doing it quickly. Everyone has been interested in an
independent review, which the Inspector General----
Mr. Jordan. We're all fine with that, but there is no
reason we can't run our investigation at the same time he's
running his.
Mr. Koskinen. The Inspector General has advised us he
doesn't think that he can get an independent review of all of
this if other investigations are going on.
Mr. Jordan. Let me switch subjects here. I'm actually going
to try to stay in my--I appreciate the chair's leniency on the
time earlier.
Let me ask you this. To your knowledge, have any of these
instant messages, any OSC messages been turned over to Congress
in the last year?
Mr. Koskinen. I assume any of them that is noted in the
process there that were preserved as emails have all been
turned over.
Mr. Jordan. Have any that weren't preserved as emails been
turned over to Congress? Do you know?
Mr. Koskinen. All I know about the system is what I see in
the emails. And, apparently, if you don't save them, they don't
exist.
Mr. Jordan. That's a question we need to find out. Well, I
mean, who knows? You're telling us there's still thousands of
emails you have to get to us. So even if they've been turned
into emails, they may not have been turned over to us.
I'm asking, do you know if any of the OCS messages, whether
in instant messaging form that are somehow preserved or put
into emails, have they been turned over to us? And your
response is you don't know.
Mr. Koskinen. I don't know. And we'll be happy to let you
know----
Mr. Jordan. And we'd like that information soon. Not based
on when the Inspector General tells you you can give to us, but
soon.
Mr. Koskinen. That information we'll give you soon.
Mr. Jordan. Yeah, like tomorrow if you can get it. You've
got the guys back behind you who use it. Go find some folks at
the IRS who understand how quickly this works, and get that to
us.
Mr. Chairman, a whole new system--a whole new system that
this committee didn't know about, the American people didn't
know about, we find out just a couple days ago exists, and we
don't know whether we've got any of that information. That's
the key point.
And the fact that they also are saying we can't talk to
witnesses is just unbelievable. But hopefully we can make that
happen this month, as well.
With that, I'd yield back, Mr. Chairman.
Mr. Mica. Let's see. Mr. DeSantis?
Mr. DeSantis. Thank you, Mr. Chairman.
Mr. Commissioner, when you see the email with Lois Lerner
when she writes that, ``We need to be cautious about what we
say in emails'' because Congress has asked for those emails,
what is your response to that? Does that bother you in any way?
Mr. Koskinen. I don't know the background in which she
wrote that, so my sense is that she was not cautious. She said,
I was cautioning about them, and then we had several occasions
where they asked for them, and we need to be cautious because
they're actually going to be searchable. And so I'm----
Mr. DeSantis. Yeah. Right.
So, you know, we have a duty on behalf of the American
people to exercise oversight over the executive branch. And she
does not want to be subject to that oversight. So I think a lot
of Americans would look at that, I think they'd be concerned
that she would try to conduct her business in a way that was
not on the up and up.
And so I'd just--as the Commissioner, you weren't here at
this time; this doesn't reflect on you, what she wrote. But I
do want to know now, is this something that you would be
comfortable with, if this is how high officials underneath your
command behave themselves?
Mr. Koskinen. All I would note, as I say--you make a good
point. I'm not here to defend Lois Lerner, I have never met
her, she doesn't work at the IRS anymore.
All I would note is that she composed 43,000 emails, all of
which at some point you will get very soon. All of them have
already been----
Mr. DeSantis. I'm asking you, what does this make you feel?
Are you comfortable that high Federal officials are talking
about this, are conducting themselves in this way? Is that good
or not?
Mr. Koskinen. My view is that records should be kept, email
conversations should be preserved. We need a better email
retrievable system and a better system of record. That's the
view I have.
Mr. DeSantis. So you don't think the people who work for
you at the IRS should change the way they conduct their
business for the purpose of evading congressional oversight?
Are you on the record as saying you agree with that statement?
Mr. Koskinen. I am on the record of saying nobody in this
organization, any Federal organization, should do anything to
evade oversight. I'm a big--I spent 4 years working in the
Senate. The Senator I worked with----
Mr. DeSantis. No, I understand.
Mr. Koskinen. --was part of the Oversight Committee, so I'm
a big believer in oversight.
Mr. DeSantis. Can I--I just want to clear up a couple
inconsistencies in your testimony.
I had showed you your comment about being advised. You
initially said you weren't advised. Then I referred back to it.
Then I think you've clarified that to say you were not
necessarily advised by somebody in the administration; it was
that the document producers advised you that it would be better
to turn it all over at once.
So is that how you reconcile those statements?
Mr. Koskinen. No. I'm sorry. No, no, no. I was not advised
by anyone. It was my decision that the best way to proceed,
once we knew there was a difficulty, was to find out the full
context so we could make a complete report. I was not advised
by anyone to do that inside the IRS or outside.
I think the question being----
Mr. DeSantis. So you just misspoke in your testimony last--
--
Mr. Koskinen. Pardon?
Mr. DeSantis. So you misspoke in the video clip we played
when you said you were advised?
Mr. Koskinen. No, I--I'd be happy to see the clip again. My
point was that was on a different issue.
My point has been all along it was my decision--and I
remember clearly, I think, testifying to that--it was my
decision that we should get to the bottom of the situation,
collect all the emails we could find, and give the Congress a
full report of what the situation was. And that's what we did.
We published that report and gave it to you.
Mr. DeSantis. I think we can replay it at the appropriate
time, but Chairman Issa was asking you about this specific
issue about why you did not turn it over to Congress for 2
months.
Let me ask you this.
Mr. Koskinen. I'm sorry. My----
Mr. DeSantis. If the person----
Mr. Koskinen. My recollection of that is, I was--what I was
saying was I was advised about the difficulty. I was not
advised about delaying----
Mr. DeSantis. In fairness, that clip, you did not say it
was the difficulty; you just said you were advised and that's
why you didn't do it. But we can deal with that some other--let
me ask you this.
If the person who's currently in Lois Lerner's position
wrote that email saying that, look, Congress looks for these
things, we need to be careful what we say over email, let's
maybe use this other system, would that be something that you
would be comfortable with, if that individual who is in charge
of this division right now were conducting themselves in that
fashion?
Mr. Koskinen. My advice to anyone working for the IRS now
is that they should not do anything that would look--appear to
be, let alone be purposeful, to avoid oversight by the
Congress.
Mr. DeSantis. Do you think that you, as the IRS
Commissioner, if you come before Congress and you testify and
you either make factual statements that later appear not to be
the entire truth or maybe you just misspoke, do you believe
that you, as a high Federal official, as a civil officer of the
United States, have a duty of candor to us to come back and
correct the record?
Mr. Koskinen. I do. I don't know of any misstatements I've
made, but I would agree totally with you, if there is an
inconsistency or misstatement, I should come back.
As I said, I appreciated the chairman's letter to me giving
me a chance to reconsider, and I reconsidered and thought that
my statement was fine as stated.
But I don't know of any problems. But I do think, in all
candor, if someone has found an issue, I'm happy to come back
and explain it or discuss it further. As I told the chairman, I
would stand by and I do stand by my testimony. But if I can
provide clarification, I'm happy to do that.
Mr. DeSantis. I yield back. Thank you.
Mr. Meadows. Would the gentleman yield----
Mr. DeSantis. Yeah.
Mr. Meadows. --for just one quick question?
Mr. DeSantis. I yield to the gentleman from North Carolina.
Mr. Meadows. You know, you keep using one term. You say,
I've never met Ms. Lerner, you know, I don't know her. Have you
communicated, either directly or indirectly, with her or with
her attorneys, directly or indirectly?
Mr. Koskinen. I've not directly or otherwise communicated
with her. I met her attorney on a tennis court. He played on
the court next to me in the middle of the wintertime. I've
never talked to him about the case. I've never communicated
with Ms. Lerner. I wouldn't know how to communicate with Ms.
Lerner.
Mr. Meadows. Okay. Thank you.
I yield back.
Mr. Mica. We have--Chairman Issa has returned.
Did you seek time?
Mr. Issa. Thank you.
Mr. Mica. You're recognized.
Mr. Issa. Just briefly--and I apologize that I had to go to
the other committee--in light of this OCS development, do you
have an opinion, Commissioner, on how long before we'd be able
to get an understanding of the capabilities of how much of it
is preserved on tapes since you began preserving?
In other words, if you have 6 months of backup, I would
presume that this communication system would have 6 months, the
last 6 months' worth of the use of these communications, but
perhaps not further.
Are you aware of any of that since you became aware of this
document?
Mr. Koskinen. I'm not aware of any of it. All I'm aware is
we've produced every document we have of Lois Lerner's emails,
however they were generated.
Mr. Issa. But OCS is not an email system. It is a
communication system that has capability of tracking. That's
what the email tells us.
Mr. Koskinen. Right. I am happy to get you and the
committee full information about how the system runs, what its
backup is, what might exist wherever it might exist. And we'll
get that to you promptly.
Mr. Issa. Additionally, we asked for the names and an
opportunity to interview the individuals who supposedly were
not able to recover the data on Lois Lerner's disk. The reason
that that's critical is that expert after expert after expert
has said to us in very clear terms that there's no such thing
as a drive that there's no data recoverable on.
And I might mention that one of them had recovered the last
17 seconds from the Challenger's disaster after the tape had
been under water for a year. The fact is, these drives are
recoverable.
So it is critical that as you look at prioritizing the
fairly simple act in our interrogatories of giving us the names
of the individuals and making them available so we can go
through that process.
It's not our greatest desire to go down that road. Our
greatest desire, obviously, is to get to the bottom and the top
of who Lois Lerner worked with as she was targeting and
deliberately treating conservative groups because of their
values in a different way, an unfair way, to the way other
entities were treated.
That has been a decision made by this committee, well-
staffed. And, ultimately, as you know, the Ways and Means
Committee has referred criminal prosecution against Lois
Lerner. So that is the primary target. And what we're looking
for primarily, of course, is to find out who worked with Lois
Lerner in her operation to target conservative groups.
That's our big feature, but, along the way, we certainly
want to know about the disk drive because it now has become a
pretty unbelievable statement, that it was completely
unrecoverable. It may have been unrecoverable through the
techniques that they were using, but in your testimony you
talked about extraordinary----
Mr. Koskinen. Right.
Mr. Issa. --efforts.
This email that Mr. Jordan went through with you shows that
she was very concerned with not being tracked. And that's
inconsistent with a disk drive that we now understand was on a
notebook computer, one that went in and out. And if I read the
statements that we received on the computer she was using at
the time, that was a computer she took home. So the so-called
blue screen she discovered was probably a blue screen that she
came to work with. It was a device that had these records on
them and went in and out of, you know, your possession.
So I guess the question is, can we have those names in a
timely fashion? It certainly doesn't seem like a difficult or
time-consuming act to give us the names of the people in the
interrogatories.
Mr. Koskinen. Exactly. And as I've said, the Congress has
asked the IG to do an investigation. The IG has asked us to
give it a priority and not to do anything that would interfere
with their investigation of this very issue, which they hope to
conclude promptly.
As I've said--and I've talked to the IG about it--as soon
as they are through talking with a witness they're not going to
have to talk to again, they will let us know, and we'll be
happy to have that witness able to talk, and we'll provide you
that information. As soon as the IG is done, we're happy to
provide you any information you need and discussions you need.
Mr. Issa. And, Commissioner, I want to be cooperative, and
I know you want to be cooperative. Names of people is a
different process from scheduling when we would work with them.
And we certainly would coordinate with the IG to make sure
that, if you will, that we deconflict any schedule of when we
would talk to the same witnesses. But I think it is important
that we have an understanding of the window, how many people
we're going to be deposing.
And, you know, if you prefer, we can work directly with
TIGTA. But, in the past, we've normally made the request to you
and to Treasury, rather than working with the IG on the
specifics. Like I say, we'll work either way.
Mr. Koskinen. Fine. We can each have our discussions with
TIGTA.
Our discussion with TIGTA has been thus far that they
didn't want us talking to anyone, they didn't want anybody else
talking to them until they were through. Because, as they
explained to me, they talk to a person, they talk to somebody
else, then they want to come back and talk to the first person
again, and if that person has been out talking to others, it
begins to muddy the waters.
And so we've said they can have--the field is open, they
can have anything they need, any documents they need. We've
made sure they've always had documents because they're doing an
investigation anyway, but we've made sure they have all the
documents you've had. We've told them they can talk to anybody
they like anytime and that we will stay totally out of the way.
And that's what we're trying to do.
Mr. Issa. So I just want to understand one more time. Your
position is that it would be counter to the investigation being
done by TIGTA if we were to interview or even know the names of
any of the individuals related to the disk and the other
activities we're both investigating. Is that correct?
Mr. Koskinen. That's correct. That's my understanding.
Mr. Issa. Okay. We will talk to the IG, obviously,
directly. I think that would be appropriate----
Mr. Koskinen. That's fine.
Mr. Issa. --that we hear it firsthand.
Mr. Chairman, Ranking Member, I'll take this opportunity to
mention one interesting thing. I'm often asked by the press,
when are we going to release all of our work product? When are
we going to let witnesses basically see what other witnesses
have seen?
I think the Commissioner, on behalf of the IG, has made the
clear point that it is often selected information, limited
information that's made available, but, clearly, you don't make
all of the information available until you conclude your
investigation.
And I note that because that has been the history of our
committee, that most information remains unavailable to the
public even though both sides have it.
So I respect the need to make sure the IG does have what he
needs, and we'll work to make sure that we find some common
middle ground. And I appreciate your willingness to take care
of the other questions on the interrogatory.
Thank you, Mr. Chairman, Mr. Ranking Member. I yield back.
Mr. Connolly. Mr. Chairman?
Mr. Mica. Mr. Connolly.
Mr. Connolly. Just a brief comment on the chairman's--I
really appreciate the chairman's line of inquiry here because
we don't want to put the Commissioner in an impossible
position, where we're putting a set of interrogatories to him
and the TIGTA has sort of put them off-bounds pending the
investigation.
So I welcome the chairman's desire to get further
clarification from TIGTA so that we're not putting the
Commissioner in an impossible position and we're not
unwittingly treading on ground that needs to be protected.
So I thank the chairman for that clarification.
Mr. Mica. Well, I thank, first of all, the Members for
their participation.
Actually, Mr. Connolly, we've done, I think, 23 hearings.
We should count this as two.
Mr. Connolly. You know, Mr. Chairman, I want to say this to
you and Chairman Issa.
Mr. Mica. We've covered a lot of territory.
Mr. Connolly. I belong to two committees that apparently
practice the belief, passionate belief, that no human problem
cannot be significantly improved with another hearing.
Mr. Mica. All right.
Well, again, an interesting, hopefully productive hearing.
And we covered a great deal of information.
Most importantly, back to the original purpose, is the
half-a-trillion dollars in improper payments, a whole host of
other issues about fraudulent activity, gaming the taxpayers,
that need to be resolved. And we will hold hearings, as many as
we need, as I said before.
And we did divert a bit to some of the current IRS issues,
but I appreciate everyone coming and participating. I thank our
witnesses.
We'll leave the record open for a period of 10 days. You
may have additional questions submitted from the committee to
you, and we ask you be respondent and let us include that
material as part of the record.
Mr. Mica. There being no further business before this
Subcommittee on Government Operations, this hearing is
adjourned.
[Whereupon, at 4:38 p.m., the subcommittee was adjourned.]
APPENDIX
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Material Submitted for the Hearing Record
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