[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
WASTE AND INEFFICIENCY IN THE FEDERAL GOVERNMENT: GAO'S 2016
DUPLICATION REPORT
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
APRIL 13, 2016
__________
Serial No. 114-79
__________
Printed for the use of the Committee on Oversight and Government Reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
JASON CHAFFETZ, Utah, 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
JIM JORDAN, Ohio ELEANOR HOLMES NORTON, District of
TIM WALBERG, Michigan Columbia
JUSTIN AMASH, Michigan WM. LACY CLAY, Missouri
PAUL A. GOSAR, Arizona STEPHEN F. LYNCH, Massachusetts
SCOTT DesJARLAIS, Tennessee JIM COOPER, Tennessee
TREY GOWDY, South Carolina GERALD E. CONNOLLY, Virginia
BLAKE FARENTHOLD, Texas MATT CARTWRIGHT, Pennsylvania
CYNTHIA M. LUMMIS, Wyoming TAMMY DUCKWORTH, Illinois
THOMAS MASSIE, Kentucky ROBIN L. KELLY, Illinois
MARK MEADOWS, North Carolina BRENDA L. LAWRENCE, Michigan
RON DeSANTIS, Florida TED LIEU, California
MICK MULVANEY, South Carolina BONNIE WATSON COLEMAN, New Jersey
KEN BUCK, Colorado STACEY E. PLASKETT, Virgin Islands
MARK WALKER, North Carolina MARK DeSAULNIER, California
ROD BLUM, Iowa BRENDAN F. BOYLE, Pennsylvania
JODY B. HICE, Georgia PETER WELCH, Vermont
STEVE RUSSELL, Oklahoma MICHELLE LUJAN GRISHAM, New Mexico
EARL L. ``BUDDY'' CARTER, Georgia
GLENN GROTHMAN, Wisconsin
WILL HURD, Texas
GARY J. PALMER, Alabama
Jennifer Hemingway, Staff Director
David Rapallo, Minority Staff Director
Katie Bailey, Government Operations Subcommittee Staff Director
Katy Rother, Senior Counsel
Sharon Casey, Deputy Chief Clerk
C O N T E N T S
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Page
Hearing held on April 13, 2016................................... 1
WITNESSES
The Hon. Gene L. Dodaro, Comptroller General of the U.S., U.S.
Government Accountability Office
Oral Statement............................................... 5
Written Statement............................................ 7
Mr. John Dalrymple, Deputy Commissioner, Services and
Enforcement, Internal Revenue Service, U.S. Department of
Treasury
Oral Statement............................................... 33
Written Statement............................................ 35
Mr. David Tillotson, Deputy Director, Defense Chief Management
Officer, U.S. Department of Defense
Oral Statement............................................... 45
Written Statement............................................ 47
Dr. Patrick H. Conway, Acting Principal Deputy Administrator,
Deputy Administrator for Innovation and Quality, and Chief
Medical Officer, Centers for Medicare and Medicaid Services,
U.S. Department of Health and Human Services
Oral Statement............................................... 53
Written Statement............................................ 55
APPENDIX
2016-04-22 Dalrymple-IRS to Meadows-Hearing Follow-up Stingray... 104
RESPONSE Dalrymple-IRS to Chaffetz QFRs 2016-05-18............... 106
2016-09-02 Tillotson-DOD to JC-Hearing Follow-up Questions....... 120
WASTE AND INEFFICIENCY IN THE FEDERAL GOVERNMENT: GAO'S 2016
DUPLICATION REPORT
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Wednesday, April 13, 2016
House of Representatives,
Committee on Oversight and Government Reform,
Washington, D.C.
The committee met, pursuant to call, at 10:01 a.m., in Room
2154, Rayburn House Office Building, Hon. Jason Chaffetz
[chairman of the committee] presiding.
Present: Representatives Chaffetz, Mica, Duncan, Jordan,
Walberg, Amash, Gosar, Farenthold, Massie, Meadows, DeSantis,
Buck, Walker, Blum, Russell, Carter, Grothman, Hurd, Palmer,
Cummings, Maloney, Connolly, Cartwright, Kelly, DeSaulnier, and
Lujan Grisham.
Chairman Chaffetz. The Committee on Oversight and
Government Reform will come to order. Without objection, the
chair is authorized to declare a recess at any time.
I appreciate the group that we have assembled today. This
is always of keen interest, the duplication report. Government
is so big, so wide, so expansive, we're talking about trillions
of dollars in expenditures, and we're always seeking ways to
make the government's dollars more effective, more efficient.
This morning the Government Accountability Office has
released its sixth annual report on opportunities to reduce
fragmentation, overlap, and duplication in the Federal
Government to achieve financial and other benefits. And over
the course of the 6 years, the GAO has highlighted 250 areas of
the Federal Government and recommended more than 600 corrective
actions.
We cannot thank enough the men and women who serve in the
GAO, the good work that they do, doing hard work, looking under
the hood, and really coming up with important recommendations
that we as Members of Congress desperately need in order to do
our jobs properly.
Forty-one percent of the recommended corrective actions
have been fully addressed and closed, which GAO reports will
save about $125 billion by the year 2025. This report reveals
that persistent efforts to address inefficiencies and resolve
wasteful spending can provide significant benefits to the
public. Yet, with only 41 percent of actions addressed, more,
obviously, needs to be done. And taking action at just three
agencies, the Department of Defense, the Department of Health
and Human Services, and the Internal Revenue Service, if we did
just those three, we would save literally billions upon
billions of dollars. Combined, these agencies account for more
than half of all Federal spending in fiscal year 2015.
More than half of all corrective actions in GAO's annual
reports are directed at these three agencies. Yet, all three
agencies have more than 60 percent of the recommended actions
still open. For example, the GAO estimates the IRS could save
hundreds of millions of dollars in increased revenue by
enhancing its online services.
In 2013, GAO recommended the IRS develop a methodology for
its allocation of enforcement resources. The IRS developed a
methodology, but to date it has chosen not to implement it.
Such inaction costs taxpayers time and money. The IRS needs to
explain their refusal to take this corrective action.
In a new area highlighted in this year's report, the IRS is
using a paper-based system to receive and track tips on tax
noncompliance through public referral programs in nine
different offices. GAO estimates that coordination and
information sharing could help the IRS identify and collect
billions of dollars in tax revenue.
It shouldn't take a GAO report to point out that
coordinating investigations prevents duplicative work and
ensures taxpayer resources are used efficiently and
effectively.
In 2015, GAO recommended the Centers for Medicare and
Medicaid Services should ensure States report accurate and
complete data on State sources of funds. Seems fairly
reasonable. GAO estimates that CMS could save the taxpayers
hundreds of millions of dollars, but CMS has not taken this
action.
And in 2013, the GAO recommended the Department of Defense
implement a plan to guide joint basing, meaning multiple
military services using a single base to achieve efficiencies.
The DOD has yet to complete this action, even though it could
save as much as $2.3 billion over a 20-year period.
Why do we need to come back year after year to discuss the
same actions? That's in part what we're going to be discussing
today. Obviously, the Federal Government has an obligation not
to waste taxpayer dollars. We're pulling money out of
somebody's pocket and then we're trying to give it to somebody
else and use that, and we've got to be very, very cognizant of
this wasteful taxpayer spending.
All Federal workers should consider it part of their job
description to prevent waste and should embrace their role as
fiduciaries for the American public. Disagreements over policy
can lead to disagreements over appropriate spending, but the
imperative to prevent waste is something we can all agree on on
both sides of the aisle. When we know it's about waste and
inefficiency, we have to act. This GAO annual report provides a
roadmap to tackling that known waste and inefficiency is out
there.
So we have a lot of questions, a host of questions here,
but we do look forward to and want to maximize the time for
member input. So with that, I'd like to recognize the ranking
member, Mr. Cummings of Maryland, for his opening statement.
Mr. Cummings. Thank you very much, Mr. Chairman, for once
again holding what has become a tradition for our committee and
for making sure that GAO's report gets the attention it
warrants. This type of oversight is one of the core functions
of our committee.
Today, we will focus on GAO's sixth annual report on
duplicative programs and opportunities for cost savings in the
Federal Government. This report allows the executive branch and
Congress to work together to identify critical areas where we
can reduce waste and make Federal programs more efficient and
effective. This report is interesting because it focuses on
both the executive branch and Congress.
Since 2011, GAO's reports have consistently shown that
Congress has been doing far worse than the executive branch in
implementing GAO's recommendations. Today's report is no
different. It shows that Congress could be doing much more to
foster a more efficient, effective, and accountable government.
According to the GAO, the executive branch has fully or
partially completed 81 percent of GAO's recommendations--81
percent. That is an impressive success rate, particularly in
the light of the budget cuts agencies have endured in recent
years.
Congress, on the other hand, has implemented only about 46
percent of GAO's recommendations. Even with that 46 percent,
it's kind of generous because GAO gives Congress credit for
taking partial action by just moving a bill through committee,
even if it has not been passed either in the House or the
Senate.
Mr. Chairman, during last year's hearing you thanked GAO
for, ``providing Congress and the executive branch with a
roadmap to achieve needed savings.'' According to the GAO, the
administration has done a much better job of following that
roadmap than we here in Congress.
Specifically, GAO made 459 recommendations for the
executive branch and 372 have now been fully or partially
completed. In contrast, GAO has made 85 recommendations for
Congress, but only 37 of those have been fully or partially
completed. GAO's new report highlights areas where Congress
could legislate right now to eliminate waste and duplication.
For example, GAO recommended that Congress pass legislation
to protect private citizens who report tax fraud to the IRS
from retaliation by their employers. It is vital that we
protect these whistleblowers and reward them for their service.
That is why in February Senator Baldwin and I introduced
the WARN Act. Our bill would increase incentives for people who
blow the whistle on financial crimes, including
misrepresentations of tax liabilities and public filings. The
bill has been endorsed by many organizations, including POGO,
Americans for Financial Reform, the AFL-CIO, and the
Communications Workers of America, and I hope Congress can
consider this bill this year.
GAO also recommended that Congress lower the threshold
requiring employers to electronically file W-2s to help IRS
detect fraudulent refund claims. The GAO's 2016 report also
recognizes improvements by Federal agencies and includes a
number of recommendations for Federal agencies going forward.
For example, GAO highlighted a number of success stories at the
Centers for Medicare and Medicaid Services, including
eliminating duplicative contracts and improving processes for
identifying improper payments. Through improvements to
Medicaid, the Medicaid Integrity Program, CMS helped recover
nearly $657 million of improper Medicaid payments in fiscal
year 2015, according to the GAO.
On the flip side, GAO found that the Department of Defense
still has 79 major weapon systems programs of a total
acquisition cost of over $14 trillion. DOD spends $100 billion
each year on these systems but has failed to strategically
manage those investments, resulting in inefficiency and waste.
Taxpayers and our troops deserve better than that.
I want to thank all of our witnesses today. To Mr. Dodaro,
you and your talented staff provide a critical service to the
Congress and the American people with this annual report, as
well as with the work you do every day to help ensure our tax
dollars are spent wisely. And I hope that you will share with
all of your employees how grateful we are for their pursuit of
excellence and for them helping to provide us with the roadmaps
to make a difference.
And with that, Mr. Chairman, I yield back.
Chairman Chaffetz. I thank the gentleman.
We'll hold the record open for 5 legislative days for any
members who'd like to submit a written statement.
Chairman Chaffetz. And we'll now recognize our panel of
witnesses. We have quite a few people to swear in. But we're
first pleased to welcome the Honorable Gene Dodaro, who's the
comptroller general of the United States at the United States
Government Accountability Office.
Sir, we're pleased to have you come before our committee.
Again, you are one of the more important people that we have
come here, you have given your insight and your commitment to
these issues. And, again, I can't thank your staff enough for
the great work that they do behind the scenes.
A number of those key staff people are here. We wanted to
maximize the opportunity for members to dive deeper into some
of these issues. And pursuant to committee rules, we are going
to swear these people in as well.
These experts that are here include Ms. Cathleen Berrick,
managing director for defense capabilities on the management
team; Mr. Paul Francis, managing director, Acquisition and
Sourcing Management team; Mr. Chris Mihm, managing director,
Strategic Issues team; Ms. Nikki Clowers, managing director,
Health Care team; Ms. Orice Williams Brown, managing director,
Financial Markets and Community Investment team; Mr. Phillip
Herr, managing director, Physical Infrastructure team; Ms.
Barbara Bovbjerg, managing director, Education, Workforce and
Income Security team; Mr. Seto Bagdoyan--I hope I pronounced it
properly--Forensic Audits and Investigative Services team; and
Mr. Dave Powner, director, Information Technology team.
My apologies if I didn't get all of those names proper.
We also have Mr. John Dalrymple, deputy commissioner for
services and enforcement at the Internal Revenue Service at the
United States Department of Treasury; Mr. David Tillotson,
deputy director and defense chief management officer at the
United States Department of Defense; and Dr. Patrick Conway.
And, Doctor, you've got a title here. Acting principal
deputy administrator, deputy chief administrator for innovation
and quality, and chief medical officer at the Centers for
Medicare and Medicaid Services at the United States Department
of Health and Human Services.
So I thank you again for all of your good work and for your
being here.
Pursuant to committee rules, all witnesses are to be sworn
before they testify. For those on the panel as well as those
accompanying Mr. Dodaro, if you all please rise and raise your
right hand.
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
Thank you. You may all be seated.
Please let the record reflect that all witnesses answered
in the affirmative.
We would ask the four panelists that are here at the table
to please limit your oral testimony to 5 minutes, then members
will have ample time to ask questions.
And, Mr. Dodaro,it's your discretion if you want to yield
time to particular individuals as we get into the questions,
and we have a seat there if need be. But, Mr. Dodaro, you're
now recognized for 5 minutes.
WITNESS STATEMENTS
STATEMENT OF GENE L. DODARO
Mr. Dodaro. Thank you very much, Mr. Chairman. Good morning
to you, Ranking Member Cummings, members of the committee.
We're very pleased to be here today to discuss GAO's sixth
annual report on overlap, duplication, and fragmentation in the
Federal Government, and also other opportunities to achieve
cost savings and revenue enhancements.
In this report, we introduce 92 new actions that the
Congress and the executive branch can take in 37 different
areas. And to give you some examples, in the overlap,
duplication, fragmentation area, we highlight 12 areas. For
example, we found that the Defense Department is procuring
commercial services for satellites, and in the billion dollars
that they spend, about 30 percent of that was spent outside
their central procurement agency by the different services and
other agencies throughout the Department. And as a result, in
the central agency, the costs were about 15 percent less than
purchasing it outside the central offices. So we think there's
better money to be saved there, tens of billions of dollars.
We also found nine referral programs at IRS for
whistleblowers and others to report improper activities that
would give IRS some tips to follow up for tax enforcement
purposes and potentially produce billions of dollars in
additional revenue owed the government. But these systems were
manually operated, they were fragmented, they weren't
coordinated, and there were a lot of opportunities to
streamline and provide better communication to the people
providing tips.
Also, we found there was potential for duplicative
healthcare spending between people who were on Medicaid or in
the State exchanges. There's some amount of transfer time that
could be made if people's income levels change or they become
eligible for Medicaid or the services. But we found that
activities outside that normal transition period, and we
recommended that in order to minimize any duplicate Federal
spending, that better coordination would need to take place and
better oversight by CMS over the Medicaid programs at the State
level and with the exchanges.
In areas of cost savings and revenue enhancements, we've
got a number of recommendations this year that are new. We have
opportunities to save a lot of money in overpayments for
disability programs by the Social Security Administration.
There are billions to be saved in revamping some of the payment
policies that guide Medicare spending. There's greater need for
oversight to save--you could save hundreds of millions of
dollars, if not billions, by greater oversight of CMS over
Medicaid spending and the States' activities. There's also
millions that could be saved by the Federal agencies having
better access to excess personal property at DOD and ammunition
that's discarded but could be used by other Federal agencies so
we don't have to buy it twice in that process. And there's some
fees that could be raised that haven't been raised in over 20
years to help provide more resources, in particular to deal
with deferred maintenance in our National Parks.
To date, as Mr. Chairman mentioned and Mr. Cummings in
their opening statements, Congress and the administration have
acted on many of our recommendations. Of the 544 that we've
made previously, 41 percent have been implemented, 34 percent
partially, 20 percent not yet implemented at all. There are
tens of billions of dollars in additional savings to be had in
the offing here if those recommendations are fully acted upon.
To date, as you mentioned, Mr. Chairman, in your opening
statement, it's about $125 billion that have been saved or will
be saved over the coming years. We're pleased that the Congress
has taken action. A lot of the large dollar savings have come
from congressional action. And also in a number of areas where
the agencies have taken action, it's because of congressional
urging as well.
But there's a lot more that could be done. I am very
pleased to be here today to talk about those opportunities in
addition to the new areas that we have added to the list. Thank
you for holding this annual hearing. It makes a big difference
in getting support.
And I will pass on to our staff your thanks and
appreciation for their hard work, Mr. Chairman, Congressman
Cummings. Thank you for your comments. And I would be happy to
answer questions at the appropriate point.
[Prepared statement of Mr. Dodaro follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Chaffetz. Thank you.
Mr. Dalrymple, you are now recognized for 5 minutes.
STATEMENT OF JOHN DALRYMPLE
Mr. Dalrymple. Thank you. Chairman Chaffetz, Ranking Member
Cummings, and members of the committee, I'm here to discuss
findings of the Government Accountability Office, GAO, related
to its sixth annual review of duplicative programs. We
appreciate GAO's studies of the IRS and its programs. Their
findings, insights, and recommendations are invaluable to us as
they help assure we are successful in accomplishing our mission
of collecting over $3 trillion annually. Without independent
auditors and evaluators, we simply could not be as effective.
Since fiscal year 2013, the IRS has taken action to address
more than 82 percent of all of GAO recommendations made,
including those highlighted in this report. Between fiscal year
2011 and 2015, the IRS received more than 2,100 recommendations
from GAO and our inspector general's auditors, with GAO
recommendations accounting for roughly 30 percent of those.
Given the sheer number and scope of recommendations the IRS
receives on a wide variety of areas, the reality of resource
and budget limitations precludes us from taking every action
recommended as quickly as we might prefer. The IRS has to look
at total universe of recommendations across the enterprise
through a larger lens and make strategic decisions about
actions most important to address those audit findings.
To that end, we very much appreciate the initiative GAO
started this year where they review and prioritize the universe
of open recommendations. This helps us better understand what
they think are the most critical.
Overwhelmingly, GAO and IRS are on the same page. Our top
priorities are generally the same as theirs. This increases our
confidence that we are acting on the most important
recommendations first.
The two IRS programs highlighted in this year's GAO
duplicative program study, referrals and identify theft, are
illustrative of the value we get from GAO recommendations and
the actions we take. IRS referral programs, which involve
individuals and businesses reporting alleged noncompliance with
tax laws, the GAO study reports several areas needing
improvements, and we got right to work. We now have a team in
place tasked with reengineering parts of the referral process
to be more streamlined and effective.
In fiscal year 2012 through 2015, about 93 percent of
information referrals did not lead to audits, but about 7
percent did. This is a much higher overall audit rate, which is
hovering around 0.7 percent for the general population. What's
more, the audits based on those referrals yielded over $209
million in addition tax assessments recommended.
What these figures reveal is that our screening process is
effectively identifying the productive referrals for audit and
it's making an important contribution to tax administration.
With the improvements we plan to make as a result of the GAO
recommendations, our referral processes are being streamlined
and will be more efficient and effective.
While unique relative to other referrals, the GAO report on
the IRS whistleblower program offers a snapshot in time for a
program under constant scrutiny for its processes that are
continually refined. Even before GAO began its most recent
evaluation on the IRS whistleblower program, we had begun
addressing the major issues that were identified. The GAO
findings confirmed we were taking the right actions in
streamlining the process for claims, making dramatic reductions
to the inventory of cases at particular phases of the process,
and instilling new leadership with a strong background in
bringing about operational efficiencies.
Another IRS program highlighted in this year's GAO
duplicative program report is our identify theft program, which
GAO has almost continually reviewed in recent years and
prompted important program improvements. As we confront the
growing problem with stolen identify refund fraud, the IRS is
using a multipronged approach to protect taxpayers and their
information.
The IRS has made this area a high priority and has been
making steady progress. The additional $290 million in fiscal
year 2016 funds afforded to IRS by the Congress had allowed us
to allocate more resources to combating this insidious crime.
About 2,000 individuals have been convicted on Federal charges
related to refund fraud involving identify theft over the past
few years. Using our improved filters, we stopped 1.4 million
returns last year and kept criminals from collecting about $8.7
billion in fraudulent refunds.
GAO has been helpful in identifying areas where improvement
to this program can be made. We have acted on those recommended
improvements and continue to look for ways to strengthen our
defenses against this crime and stop the victimization of
taxpayers and the entire tax ecosystem.
I'd be happy to take questions at the proper time. Thank
you.
[Prepared statement of Mr. Dalrymple follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. [Presiding.] Thank you so much for your
testimony.
Mr. Tillotson, you are recognized for 5 minutes.
STATEMENT OF DAVID TILLOTSON
Mr. Tillotson. Thank you, Mr. Chairman. First of all, good
morning to the chair, ranking member----
Mr. Meadows. Can pull the mic a little bit closer to you?
Thank you.
Mr. Tillotson. Certainly. Is that better?
Very good. Thank you to the chair, Ranking Member Cummings,
members of the committee. Thank you for the opportunity to
discuss the Department's progress on addressing the General
Accountability Office's findings related to duplication,
fragmentation, and overlap in the Department.
I also want to add my thanks to those of the chair and the
ranking member to the Honorable Mr. Gene Dodaro and the GAO for
the work that they do. Candidly, while one is not always happy
to hear that we could be doing things better, the truth is we
all know full well that we can do things better. And in fact,
as the acting deputy chief management officer for the
Department of Defense, that's actually my job description, is
to find those things. So to be perfectly honest, having
assistance in identifying opportunities bothers me not at all.
So we look forward to our continued work with the Government
Accountability Office.
As the ADCMO or assistant deputy chief management officer,
I provide direction and advice on improvements to business
processes and practices in the Department with a particular
emphasis on finding efficiencies in overhead and mission
support. So clearly our intent of my office and Mr. Dodaro
align very well.
Last year, the deputy secretary asked the DCMO office to
put together a series of efficiency initiatives that would help
free up needed funds to meet emerging needs within the top line
of the Department. Initiatives we are leading include
headquarters reduction, service contract requirements reviews,
information technology optimization and business optimization
to include exchanges and commissaries. We've also been working
on select business processes, to include the hiring process,
conference approvals, and the process for coordinating and
promulgating DOD issuances.
When completed, these initiatives will result in $7.7
billion in forecasted savings over the period from fiscal year
2017 to 2021 and a further reduction of 25 percent of
headquarters costs. Several of these topics are areas that were
identified either in previous GAO reports or in the current
2016 report.
The Department appreciates the GAO's work in this area. The
GAO identified a total of 101 recommendations directed solely
to the Department in its first four annual reports from 2011 to
2014 and we have fully addressed or partially addressed 87
percent of these recommendations. The GAO identified an
additional 19 recommendations in 2015 for the Department, and
we've fully or partially addressed 47 percent of those. I fully
acknowledge that means we have more to do, and we will continue
to make progress.
One specific area in which we have made significant
progress is in the area of DOD contract management for broad
acquisitions. In its High Risk Series Update Report published
in February 2015, the GAO recognized progress made regarding
the management and oversight of contracting techniques, noting
that departmental leadership has taken significant steps to
plan and monitor progress over the last several years. As a
result, the GAO made a decision to remove contracting
techniques and approaches from the scope of the DOD contract
management high risk areas.
Another example of the Department's progress, and it aligns
with a recommendation made in the 2016 report, involves the
management of leased space. In 2014, the Department, using a
baseline of 5.4 million square feet of DOD-occupied space in
the national capital region set out to reduce that space. Our
initial plan calls for reduction of 1.2 million square feet
prior to 2020. To date, we've eliminated 267,000 square feet of
leased space use in the national capital region by making
better use of government space, and we intend to get an
additional 886,000 square feet out of reductions in leased
space use by 2020, which will save $43 million a year.
In addition to those 14 efforts, we are going to look more
broadly across the entirety of DOD property and broadly across
the country. So I anticipate more progress in that area.
Mr. Chairman, Ranking Member, the Department looks forward
to continuing to work both with this committee and with the GAO
to continue to implement recommended actions. We take our duty
to be a steward of the taxpayers' dollars very seriously and we
look forward to continuing to work on the opportunities
identified in the 2016 report. Thank you.
[Prepared statement of Mr. Tillotson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Thank you for your testimony.
Dr. Conway, you're recognized for 5 minutes.
STATEMENT OF PATRICK H. CONWAY
Dr. Conway. Thank you. Chairman Chaffetz, Ranking Member
Cummings, and members of the committee, thank you for the
invitation to discuss the Centers for Medicare and Medicaid
Services operation of the Medicare and Medicaid programs. We
share this committee's commitment to serving beneficiaries and
protecting taxpayer dollars.
As stewards of the Medicare and Medicaid Marketplace and
the Children's Health Insurance Program, CMS is serving almost
140 million Americans, and we want these programs to be as
effective and efficient as possible. We view the GAO as an
important partner in these efforts and appreciate and take
seriously GAO's work and their recommendations and are working
to address and implement them.
We are making important progress in all our efforts to
reduce duplication, improve efficiency, and protect taxpayer
dollars, all while providing our beneficiaries with high
quality care. And last year we have implemented 38 GAO
recommendations and have submitted approximately 100 additional
recommendations to the GAO for their review and closure.
One of our driving forces at CMS is changing the way health
care is delivered in this country, moving towards paying
providers based on quality rather than the quantity of care
they give patients. As a practicing physician, I know how
important this work is. Now an estimated 30 percent of Medicare
payments are tied to alternative payment models and millions of
American patients are benefiting from better-coordinated,
improved quality of care.
Our work to reduce hospital-acquired conditions such as
ulcers, infections, and avoidable traumas represents over
87,000 lives saved and an estimated $20 billion in cost
savings. We've seen an estimated 565,000 fewer hospital
readmissions, meaning that beneficiaries didn't have to
experience an extra hospital stay and Medicare did not face
expenses for extra care.
Consistent with the recommendations from the GAO, CMS has
taken several steps over the past years to improve transparency
into supplemental payments in Medicaid and around the section
1115 research and demonstration programs used for States to
pursue innovations. We are collecting annual upper payment
limit data, which includes provider-specific information, and
continue to review payment methodology to determine compliance
with statutory requirements. All section 1115 demonstrations
are available publicly and include specific terms and
conditions that must be followed as a result of the
demonstration. We've also identified and made publicly
available the criteria we're using.
As the healthcare delivery system moves towards more
integrated care and away from fee for service, more States are
using managed care to serve Medicaid beneficiaries. Recognizing
these changes in GAO's work, we proposed improvements to
Medicaid managed care, aligning it with Medicare Advantage and
private coverage plans, supporting State delivery system
reform, promoting quality of care, strengthening program and
fiscal integrity, incorporating best practices for managed
long-term services and supports, and enhancing the beneficiary
experience.
A commitment to program integrity underpins all our work.
CMS is moving away from a so-called ``pay-and-chase'' program
integrity model towards one focused on prevention. Today we are
utilizing sophisticated predictive analytics technology, the
Fraud Prevention System, to identify investigative leads to
further protect the Medicare program from inappropriate billing
practices. In the first 3 years of its implementation, the FPS
identified and prevented $820 million in inappropriate
payments, and in calendar year 2014 alone the FPS had a 10 to 1
return on investment.
At the direction of Congress, CMS is using risk-based
screening of providers and suppliers to enhance our ability to
screen providers upon enrollment and identify those that may be
at heightened risk for committing fraud. These new tools have
saved the Medicare program approximately $2.4 billion in
avoided cost. We have deactivated billing privileges for more
than 540,000 providers and suppliers that do not meet Medicare
requirements and revoked an additional 34,000-plus providers
and suppliers since 2011.
Perhaps most importantly, increased screening efforts have
allowed CMS to deny over 7,000 applications in the last 12
months, preventing these providers and suppliers from ever
submitting a claim. We are also increasing our site visits to
Medicare-enrolled providers and suppliers.
CMS is dedicated to promoting better care, protecting
patient safety, reducing healthcare costs, and providing people
access to the right care at the right time, when and where they
need it. This includes continually strengthening and improving
Medicare and Medicaid programs that provide vital services to
millions of Americans.
We look forward to working with both the GAO and this
committee towards our mutual goals of providing value and
quality to all the beneficiaries we serve and taxpayers. Thank
you.
[Prepared statement of Dr. Conway follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Thank you, Dr. Conway.
Thank each of you for your testimony.
And I'm going to recognize the gentleman from Tennessee for
a series of questions. But before I do that, I think it's
important as we look at this particular issue on duplicative
services and efficiencies to recognize really one of the
greatest assets that the Federal Government has, and that's its
Federal employees. And in doing that it's very easy to start
looking at the inefficiencies and the problems and undermine
really our Federal workforce.
So I wanted to go on record to say a thank you to the 99.5
percent of the Federal workforce that does an outstanding job
each and every day. And sometimes we focus on that 0.5 percent
and paint a very broad brush. I don't want this hearing to do
that as we really look at meaningful ways to make sure that we
have a cost savings.
And so with that I would recognize the gentleman from
Tennessee, my good friend Mr. Duncan, for 5 minutes.
Mr. Duncan. Well, thank you very much, Mr. Chairman. And
thank you and Chairman Chaffetz for calling this hearing, an
annual hearing that I think is one of the most important
hearings that we hold each year.
Mr. Dodaro, I think the work that your agency does is
extremely important and valuable for us.
I have several different questions. I won't have time to
get into all of them. But we have background information from
the staff that says that the Department of Defense now has
weapons acquisition programs that total $1.3 trillion, spending
over $100 billion annually on weapon system acquisition. I know
you've put out several recommendations over the years, and
especially in 2011 a report saying it was very inefficient,
their weapons acquisition program, and that there were
duplications and so forth.
Do you think that the Department of Defense has done enough
in regard to your recommendations that you've made on that in
the past or could there be additional savings in that area?
Mr. Dodaro. I think they can definitely do more. We've
appreciated what they've done. They've adopted some of the best
practices recommendations that we've suggested. They've begun
looking at things. But I'm concerned that some of the reforms
haven't been implemented very consistently over time. I'll ask
Mr. Francis, who's our expert in this area, to give you a more
thorough answer. But there's more that could be done.
Mr. Duncan. All right.
Mr. Francis. Good morning, Mr. Duncan.
Yes, I think one of the things that we've talked about is
portfolio management, which is basically an approach for the
Department to look at its weapon system portfolio as a whole.
Because one of the looming problems for defense is when you get
beyond the next 5-year plan, there's much more demand for money
for weapon systems than there's money available. And so the
Department has to take a more holistic look across weapon
systems to see what the best mix of investments are for them.
And right now the Department has multiple processes that are
fragmented for budgeting requirements and acquisitions and the
services all do their own thing. So we pretty much have a
process that optimizes for individual weapon systems, but we
need to look more across the board.
Mr. Duncan. All right. Well, thank you very much.
The week before last I was on a trip with three Senators
and another Member of the House and we met with Admiral Harris,
who is the head of the Pacific Command. And we were talking
about the problems the Defense Department is facing in
acquiring some of the more expensive weapons and things that
they need, and we talked about how that the costs have been
shooting way up have been in the pay and benefits and so forth.
And many top leaders have talked about that problem, how
it's cutting into being able to buy the equipment that they
want, and Admiral Harris said that he thought that we needed to
have another BRAC.
Mr. Tillotson, do you have any opinion on that?
And also, Mr. Dodaro, if you all looked into that?
Mr. Tillotson. Surely. It is the Department's position that
another round of BRAC would be appropriate. Mr. Dodaro's
findings about the use of leased space and underutilization of
government space relates to making better use of the space that
we have and we certainly agree we should do that.
But having said that, there's a large amount of space that
is more industrial and involves a lot of bases that are at this
point largely underutilized and we do believe there's excess
capacity that could be reviewed. So we would endorse another
round of BRAC.
Mr. Dodaro. There's definitely excess property. Our work,
though, focused on reviewing past BRAC rounds have shown that
the Department needs to make additional improvements in its
methodology for estimating BRAC savings and actually bringing
those savings to realization. The initial estimates are far in
excess of what DOD eventually achieves through the BRAC rounds
due to continual changes in requirements and other things.
So our opinion, if the Congress decides to grant them their
request for another round of BRAC, they really need to
implement our recommendations so that Congress has assurance
that there really, at the end of the day, will be the savings
that should be achieved through any process of this kind. We
have many outstanding recommendations that the Department has
not yet implemented in this regard.
Mr. Duncan. Another area, before my time runs out, you
mentioned potentially saving billions on Social Security
disability payments. Will you tell us about what needs to be
done in that area?
Mr. Dodaro. Yes. Right now people can receive full
disability benefits and unemployment benefits at the same time.
Now, there's some ability, if somebody's on disability, they
can give permission to try to work, because, obviously, we want
them to get back to work. But if they take a job and then
they're eventually laid off from that position, they can
collect both benefits, and we don't think that this is a
prudent use of the Federal Government's money, to get both full
disability benefits and unemployment benefits at the same time.
CBO's estimated, I believe, they could save about $1.3 billion
over a few year period if this change is made.
Mr. Duncan. All right. Thank you very, Mr. Chairman.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman from Pennsylvania, Mr.
Cartwright, for 5 minutes.
Mr. Cartwright. I thank Chairman Meadows. And I also thank
Chairman Chaffetz for calling this important hearing.
Mr. Tillotson, one of the issues GAO included in this
year's duplication report is DOD's storage of occupational and
environmental surveillance data. Am I correct in that?
Mr. Tillotson. Yes. That's correct.
Mr. Cartwright. Can you explain what the term means,
occupational and environmental surveillance data?
Mr. Tillotson. Surely. As the Department conducts its
industrial activities, there's a requirement, commensurate with
both law and OSHA standards, that we collect information on any
conditions that may eventually cause us to have to go back and
look at impacts on the workforce or impacts on the work
environment.
Mr. Cartwright. And so this has an impact on Active-Duty
service men and women and also veterans. Am I correct in that?
Mr. Tillotson. That is correct.
Mr. Cartwright. All right. So DOD uses this information to
track biological, chemical, and physical health hazards to our
servicemen and our servicewomen, right?
Mr. Tillotson. That is correct.
Mr. Cartwright. All right. What benefit does DOD get from
collecting that type of information?
Mr. Tillotson. So two benefits come out of it. First of
all, we collect it. If we link environmental issues with
impacts on Active-Duty servicemembers or even civilian workers,
then it allows us to take corrective action to ensure that the
condition does not continue. It also allows us to position
ourselves to provide appropriate compensation should that
condition actually emerge. And I think the Department is moving
aggressively in the totality of its medical community to look
at a better way to manage its medical information across both
the Active-Duty and civilian force. So this is an activity area
that's got great attention in the Department with significant
investment.
Mr. Cartwright. I thank you for that. I think you just
touched on it. The Department of Veterans Affairs also makes
use of this type of environmental and health information to
establish disability benefits for veterans. Am I correct in
that?
Mr. Tillotson. That is correct.
Mr. Cartwright. So it's critical this kind of information
be accurate and useable to help protect our Active-Duty
servicemembers and our veterans, right?
Mr. Tillotson. Yes, sir.
Mr. Cartwright. Mr. Dodaro, thank you for being here as
well, and all your good work.
According to GAO, it's not clear that the quality of the
data that's being collected is reliable. In a report issued in
May 2015, GAO said, ``Some of the military services have
developed their own guidance, resulting in inconsistent
approaches in levels of effort, which has reduced DOD's ability
to be confident that the data are sufficiently reliable.'' Have
I read that correctly?
Mr. Dodaro. That's correct.
Mr. Cartwright. So does it concern you that DOD does not
know if the data it is collecting is accurate?
Mr. Dodaro. Yes, it does.
Mr. Cartwright. Now, Mr. Tillotson, GAO recommended in that
2015 report that DOD establish clear policies and procedures
for performing quality assurance reviews of the data collected.
DOD responded to GAO that it would need additional resources to
clarify its policies. Is DOD taking any actions to improve the
quality of the data it is collecting?
Mr. Tillotson. Yes, we are in fact doing that. New policies
are, in fact, in draft. They're due to be issued this year. And
we did make the resources available to do this, because we,
like you, felt that this was an important undertaking to put in
place.
We've tied that into our broader issues of increasing
standardization of medical practices across the Department. The
establishment of the Defense Health Agency, the establishment
of the Defense Health Program appropriation have all been
value-added activities. This body, this Congress, has acted on
those in prior years.
Mr. Cartwright. Well, thank you for that. But separate from
the question of quality is how the information is processed and
whether that's being done efficiently. According to the GAO
report, OEHS data is stored in two different database systems.
Mr. Dodaro, did GAO identify problems with the use of two
separate systems?
Mr. Dodaro. I'm going to ask Ms. Clowers, who's the head of
our Health Care team, to respond, please.
Ms. Clowers. Yes, sir, we did. We found, as you mentioned,
there were two different systems, referred to as MESL and
DOEHRS, in which the data is stored. So we found both potential
for duplication of entry of the data, but importantly, that you
couldn't get a comprehensive sense of all of the issues that
were being raised by the data with using two different systems.
Mr. Cartwright. So two separate systems.
Mr. Tillotson, why is DOD using two separate systems?
Mr. Tillotson. So this is part of the corrective actions we
have underway in the broader medical community. Prior to
establishment of the Defense Health Program, prior to more
integration across the Department, medical practices were run
largely in the military departments.
Mr. Cartwright. Well, I want to jump in here. It's been
more than 10 years since GAO first highlighted the issue of
problems with DOD's management of occupational health data. Mr.
Tillotson, why is it taking so long to fix these problems?
Mr. Tillotson. I can't give you a satisfactory answer to
that. I can tell you we are working on it and we are looking to
resolve the issue.
Mr. Cartwright. Well, look, we owe it to our
servicemembers, Active-Duty men and women, and our veterans to
collect this information accurately and to fix these problems,
and I urge you to give it your every attention.
Mr. Tillotson. Thank you, Congressman. We will.
Mr. Cartwright. I yield back.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman from Florida, Mr. Mica,
for 5 minutes.
Mr. Mica. Well, thank you, Mr. Chairman. And thank you for
holding this hearing.
Again, some of the waste and inefficiency of the Federal
Government is identified annually by GAO. And I appreciate what
you've done, Mr. Dodaro, of bringing this to our attention.
A couple of areas. First, some of DOD's--you probably have
one of the biggest hawks in Congress. I vote for everything. I
voted for the omnibus because we cut, cut, cut DOD. But I sit
in these hearings, and I'm the senior person now on the
National Security Subcommittee on the panel, been on it since
the beginning of time, and I see more and more waste.
I see another report, Mr. Dodaro, that DOD, in fact, its
inventory of properties and assets is almost nonexistent. Is
that correct?
Mr. Dodaro. Yeah. We've been very concerned about the lack
of good information with----
Mr. Mica. Yeah, they don't have a good inventory even of
their properties and their assets, and this report highlights
it again. And that's a concern. We have billions of dollars'
worth of assets, both domestically and internationally, and we
can't even account for it. So, again, I think this is
troubling.
Now, the other thing too is we work with some of the folks
in the DOD committee, authorization committee. We did
substantial acquisition reform. And you talk about procurement
and acquisition, that's part of problem. Isn't it, sir? It's
the procedures. They're cumbersome. They're outdated. They're
bureaucratic. There's red tape. And sometimes you don't get the
best buy for the taxpayers, right?
Mr. Dodaro. Well, that's a problem, but it's also a
problem, as you point out, if you don't know what you have,
what condition it's in----
Mr. Mica. Well, okay. Those are assets, but acquiring new
assets, it's just as bad. And one of the things that concerns
me is we pass these reforms--now, I know it takes a while to
implement, and I met with some of the folks. I have one of the
biggest acquisition activities assimilation in the Army down in
my district. I sit with the folks. We passed this stuff last
year. Well, first there's no secretary of Army in place, or
there hasn't been. Then there's no chief of staff. Then there's
no one over the programs. You've got these vacancies, which is
part of the problem.
And I ask: Have you implemented the acquisition reforms?
No. It's no--sort of no, no, no I get. Or are they in place?
No, no, no. Or decisions are somewhere in the chain of command.
Maybe, Mr. Tillotson, you can tell us what's happening
there.
Mr. Tillotson. Certainly. So let me address kind of all
three of your issues.
On the inventory, I agree with Mr. Dodaro, the inventory is
not as it should be. It is part of the broader audit status of
the Department, and, in fact, Mr. Dodaro, I, and the OMB folks
are meeting this afternoon to talk about progress on audit,
which will include inventory. So it's an area we are aware of.
Mr. Mica. So inventory we really can't even audit because
we don't have----
Mr. Tillotson. Correct. You have to have full existence and
complete to do that.
Mr. Mica. It's troubling.
Mr. Tillotson. We agree.
On the issue of acquisition reform, Mr. Kendall has moved
out quickly with the new guidance to put some of those new
procedures in place.
I would respond a little bit to Mr. Dodaro's earlier
remarks about strategic portfolio management. We agree, and, in
fact, over the last 3 years the deputy secretary of defense has
led a strategic portfolio review on an annual basis. So not
only are the reviews done within the military departments
across their business space, but then it comes to a
departmental level where the vice chairman of the Joint Chiefs,
the deputy secretary of defense, and all the heads of the
agencies do a strategic review of all the investments and
investment plans so that to your point and to Mr. Dodaro's
point, we can rationalize investments going forward.
Mr. Mica. Well, we have a bill actually that deals with
some property disposal and management. How many people in the
audience own property? Raise your hand. Almost everybody,
right? Okay. Would you have the Federal Government manage that
property? Hell, no. You'd be nuts. And we do that.
And the biggest property owner, probably the biggest one,
is DOD. You can't get anyone to make a decision to dispose of
property. I've been trying--we have 177,000 acres at NASA
sitting there, an extra 16,000 acres with the Air Force. I'm
trying to get 400 acres surplus property to transfer to do a
commercial cargo center next to our port in Canaveral, not even
in my district, 5,000 jobs it would create, and I've been
working on it for 4 years.
The other thing too you got to do is you got to get some
permanency to some of these military people. I'm now on my
third commander. They change them every 2 years. We need to get
these guys 3 years at least, maybe 4, some stability in the
process. I was dealing with incompetent people in the past,
then I get someone competent, and I got a second competent, but
they're there and gone. How can you manage anything with the
turnover that we have?
So just a little frustration, Mr. Chairman. But it drives
me batty.
Just one thing for the members. Did you see what the
private sector did this past week in landing that booster
rocket on the barge? You got to look at that and see what the
private sector can do when we unleash the private sector. God
forbid we should give them a lease on doing things with private
property and moving projects ahead.
Thank you. I yield back the balance of my time.
Mr. Meadows. I thank the gentleman from Florida. I know
that excess properties has been something that has been a
priority for the gentleman from Florida for a long time.
Mr. Mica. Mr. Chairman, incidentally, the bill that we're
passing, I don't know if I said it, it does not apply to DOD--
--
Mr. Meadows. Right.
Mr. Mica. --the one that everyone's been working on. And
that's something we need to look at. Thank you.
Mr. Meadows. The chair recognizes the gentlewoman from
Illinois, Ms. Kelly, for 5 minutes.
Ms. Kelly. Thank you, Mr. Chair.
And welcome to the witnesses.
Dr. Conway, last year the United States spent over a
trillion dollars on Medicare and health-related expenditures. I
think we can all agree that there are opportunities to increase
efficiency and reduce waste in Medicare and Medicaid spending.
I'm the chair of the Congressional Black Caucus Health
Brain Trust, so this is something I'm very interested in and
meet with a lot of people that are concerned with the future of
Medicaid and Medicare.
I want to start by clarifying what is covered by the term
``improper payments.'' Improper payments covers both
overpayments and underpayments. Is that correct?
Dr. Conway. That is correct. So improper payments is both
overpayments and underpayments.
Ms. Kelly. Okay. And improper payments can include payments
made to fraudulent claims, but it also can include legitimate
claims that include mistakes. Is that right?
Dr. Conway. Yes, it can. A proportion is fraudulent claims.
But the majority of improper payments are actually due to
documentation or other errors in the submission of the claim
that was for, on further review, often legitimate medical
service.
Ms. Kelly. Okay. One area GAO identified for potential
duplication is in healthcare coverage for people who are
hovering around the poverty line and moving between Medicaid
and the federally subsidized coverage provided through the
Affordable Care Act exchanges. In the report GAO released today
it said that HHS concurred with GAO's recommendations and
highlighted the actions the Department has already taken to
ensure the accuracy of Medicaid eligibility determinations made
through the exchanges.
What steps has CMS taken to ensure the recipients of
Medicaid or Federal subsidies are not receiving duplicative
coverage?
Dr. Conway. Yes. So we appreciate the GAO's work here. Let
me describe briefly some of steps that we've taken.
One, the account transfer process. We have accounts
transferring between Marketplace and Medicaid working closely
with our States and private health plans on a daily basis. We
now review account transfers on a weekly basis.
In terms of duplicative coverage, either by Medicaid and
Marketplace, and the most common reason for this, to give you a
tangible example, somebody may have Marketplace, for example,
coverage, lose their job, then qualify for Medicaid.
We do what's called data matching with the States. We've
been working closely with the States as they have a critical
role here. We are doing periodic data matching now.
So we continue to work through the set of issues, both
testing systems with States and private health plans, both at
the Federal and State level. And through data matching and
using data, reducing any people that may have coverage both in
Marketplace and Medicaid at the same time.
Ms. Kelly. Okay. Another area was how CMS verifies the
eligibility of Medicare providers and suppliers. And they found
without stronger controls and better verification, CMS may be
making payments to providers without a legitimate address,
whose licenses have expired or have been revoked, or in some
cases who have actually died. One recommendation made was to
upgrade the software.
Dr. Conway. Yes. Thank you for that question. We are doing
that. We agree with the recommendation. We're updating the
software. We're doing four major actions in this area. One, the
software updates for address verification and other
verification modalities. Two, increase site visits so that we
are visiting sites at an increased frequency. Three, more
continuous monitoring of data and checking with postal data and
other sources in terms of the enrollment process. So we are
upgrading our systems and using data to address these program
integrity issues.
Ms. Kelly. Do you have enough people and the right people
in place to carry this out?
Dr. Conway. Thank you for the question. You know, managing
resources in the Federal Government, I've managed both in the
private sector and the Federal Government, is incredibly
challenging. We have, you know, in total approximately 6,000
CMS employees trying to manage a program of huge scope and
complexity. I think whether it's program integrity or quality
arenas or other policies or Marketplace Medicaid, we have a
staff, and I appreciate the comments earlier, that I think is
mission driven, wants to deliver on that mission. When you look
at our employee viewpoint surveys, that comes across clearly.
The other thing that comes across is a feeling that they don't
always have the resources and the training and the ability to
improve the system as much as they would want.
Ms. Kelly. Okay. And just quickly, Mr. Dodaro, just any
comments about what you just heard or anything you want to add?
Mr. Dodaro. No. I'm very pleased that CMS has taken action
on a number of our recommendations in these areas. There are
still some outstanding recommendations, particularly as it
relates to Medicaid. I'm very concerned that we've not had a
good oversight over the managed care portion of Medicaid at the
State level. CMS is in the process of instituting a process
that will provide more audits of what's going on in the managed
care portion of Medicaid at that level.
I'm still concerned, though, that we have a disagreement
with them about the definition of budget neutrality for
demonstration projects. The ones that we've looked at we don't
believe have been budget neutral and it's costing the Federal
Government tens of billions of dollars in additional money.
They've made their criteria more transparent, as Dr. Conway
says, but we don't agree with the implementation of the
criteria that we've seen in those areas.
There's also many things that we've recommended that
Congress could do to streamline spending in Medicare and the
Medicaid program as well.
So we're pleased. We've had ongoing dialogue with CMS. We
plan to continue that and to press for full implementation of
our outstanding recommendations.
Ms. Kelly. Okay. Thank you. And I yield back.
Mr. Meadows. I thank the gentlewoman.
The chair recognizes the gentleman from Michigan, Mr.
Walberg, for 5 minutes.
Mr. Walberg. Thank you, Mr. Chairman.
And thanks to the panel for being here. And, Mr. Dodaro,
thanks for the heavy lifting and sharp penciling and
pinpointing that you continue to do. One man's opinion in an
overlarge Federal Government, but nonetheless.
One area that I'm interested in is the unobligated balances
that are out there. Some staggering in nature, at least to my
opinion. Is there any value to allowing agencies to hold excess
appropriations to the next fiscal year? And I guess I would add
quickly to that, at what point does it become a problem?
Mr. Dodaro. Yeah. I think, you know, agencies need--and it
depends on the program and the activity. So it's variable. They
need to have a little bit of a potential buffer depending on
the nature of the programs. But the ones we looked at, they had
set criteria for what they thought they needed in addition to
hold in appropriations. They were well above their own
criteria. And that's why we called it excess.
So the amount of unobligated balances that we had pointed
out in those areas are ones that, in our view, should be
deobligated or rescinded by the Congress.
Mr. Walberg. And specifically, let me get to a specific one
here in the State Department, one area I've been in fact
dealing with back in the district, the Consular and Border
Security Programs. It was $440 million over its target for
unobligated balances in fiscal year 2014. How did that account
end up almost half a billion dollars over target?
Mr. Mihm. Well, sir, as Mr. Dodaro mentioned, is that very
often these types of programs, accounts for service, that you
mentioned over at State Department environment, or Department
of Energy was another, will have spending obligations or needs
that will cross fiscal years.
Our point to this is, is that they have had targets that
they have put in place of the amount of money that they need to
have each year to handle that type of flexibility or to
understand that their spending will cross years. When this is
way out of whack, as it was with consular services, as it was
with parts of the Department of Energy, they need to be able to
roll that back or at least they need to have greater
transparency and understanding as to what money they actually
need, how they're going to spend it, and then be publicly
reporting on where they are on that.
Mr. Walberg. I guess my concern would be, if that'd be the
case, and they said at 25 percent----
Mr. Mihm. Yes, sir.
Mr. Walberg. --why not fix the problem by next year just
saying we're going to set it at 40 percent? That doesn't seem
to get in touch with reality of trying to live within one's
means and truthfully set those targets.
Mr. Mihm. Well, setting it at--you know, they could flex--
you know, move it each year and say: We're going from 25
percent to 40 percent or even down beyond that. What the
goals--and, again, these are goals that they have set for
themselves. These are based on historically what they think
they need to carry over from year to year----
Mr. Walberg. And they have to justify it?
Mr. Mihm. Yes, but not at the level that we think that
there should be that level of transparency. And that's the
whole point on this.
RPTR DEAN
EDTR ZAMORA
Mr. Dodaro. One of the things we do every year,
Congressman, is we scrub a lot of these accounts and provide
the information to the appropriation committees. And in some
cases, the appropriations committees will not approve
additional money if there are large carryover balances. And so
we keep an eye on these activities quite a bit. And the
agencies have to justify, but we try to flag these for the
appropriators so that they can focus on whether or not to take
action.
Mr. Walberg. Have any Customs and Border Patrol officials
been held accountable for, as I see here, 2012, 2013, 2014,
right around 40 percent than where they have ended up over
target, have any accountability, thus far?
Mr. Mihm. There typically isn't accountability at any
individual level on this or even an institutional level. What
we are talking about is improving management processes that get
a better transparency and better management over time so that
you don't--there will be fluctuations, sir, is exactly what you
are saying and that is to be expected. But what we do want to
see is that if you set your own targets, you ought to be able
to pretty consistently hit those targets, and if not, have good
explanations to the Congress and others as to why a particular
year was an anomaly.
Mr. Walberg. Well, another problem--and thank you for that
answer. Another problem that State, for instance, in their area
of fraud prevention, they claim that they had that level of
balance develop because fraud prevention activities fees could
only be spent on antifraud activities. They didn't have enough
fraud to spend it on? Do they have that significant problem in
not being able to use the funds at other portions of their
budget or their processes?
Mr. Mihm. Well, what we found, sir, is that, you know, when
we look at all agencies across government, and State is no
different than this, is that there are very often internal
control weaknesses that are in place and opportunities for
agencies to tighten up their antifraud activities. Certainly,
we think, you know, within the parameters of the 25 percent,
that that is something that State or any other agency ought to
be able to improve internal controls with that amount of
resources.
Mr. Walberg. I see my time has expired. I yield back.
Mr. Meadows. I thank the gentleman from Michigan.
The chair recognizes the gentleman from Arizona, Mr. Gosar
for 5 minutes.
Mr. Gosar. Thank you, Mr. Chairman.
Mr. Dalrymple, in your own written testimony you state that
the IRS is making steady progress on a vast majority of actions
recommended by the GAO. However, in 2013 the Treasury Inspector
General for Tax Administration recommended the Wage and
Investment Division of the IRS assess the value of information
referral process. Why has the IRS not acted on this
recommendation yet?
Mr. Dalrymple. Well, we have begun acting on the GAO
recommendation. We literally have a team of folks from across
our various organizations looking at the referral program. We
intend, within the 60 days from the date of the report, to
actually put together a timeline. Our intentions at this point
in time are to limit the number of organizations that have
referrals. In other words, we intend to bring the referral
process down to, you know, one centralized activity. And our
intention is to, at some point in time in the very near future,
have an online opportunity for taxpayers to make referrals.
So we are looking at all of the recommendations that have
been made both by the GAO and the Treasury Inspector General
for Tax Administration. And I believe we are going to be quite
responsive to the issues that have been raised.
Mr. Gosar. You know, there is an old adage, trust is a
series of promises kept. The IRS is behind the 8 ball on that
one. Can you explain why the IRS has failed to better
coordinate and share information between programs?
Mr. Dalrymple. Well, a lot of these programs grew up over
time. So, for example, we----
Mr. Gosar. Well, I know. But what is happening is, is that
you should have a constant evaluation and, you know,
predication as an ongoing exercise, and we haven't seen that.
Mr. Dalrymple. Well, in this particular instance, we had a
series of referral programs that grew up in each individual
operating division over a period of time. Now, should we have
looked at that and addressed it earlier? Yeah, I think we
should have. The fact is that my view of this is that the
auditors were very helpful in terms of focusing our attention
on this. And now that we have focused attention on it, we are
taking action.
Mr. Gosar. And so we can expect some results here shortly?
Mr. Dalrymple. Absolutely.
Mr. Gosar. Okay. Mr. Dodaro, as you may know, fraud within
and throughout the VA is rampant. With regards to unemployment
benefits, why doesn't the VA use IRS data to verify applicants'
self-reported earnings?
Mr. Dodaro. I am not sure. I will have to give you an
answer for the record for that.
Mr. Gosar. I appreciate that. I am going to go to a second
one. What does the VA need to do to make sure that the process
for determining unemployment eligibility is applied uniformly?
Mr. Dodaro. Yeah, no. I am sorry, on this one, on the VA
one I am going to have to get back to you on that.
Mr. Gosar. You know, this is critical. I love you guys, but
the VA is a mess, an absolute disgusting mess. And we need some
actions in regards to this. And, you know, it behooves us to
have those ideas, the facts so that Congress can address those.
Mr. Dodaro. We will get you the facts. I will get you an
answer today. But, you know, we agree in terms of the
criticality of the VA. I added them to our high risk list last
year in terms of health care that needs to be addressed.
Mr. Gosar. We would also like to have some models that they
can follow so that we are not reinventing the wheel for them.
So I think they need some parenting outright.
I am going to bring up another one. It is the prevailing
wage. I believe in a fair wage for a fair job that is fair to
the taxpayers. But we have seen a huge rise in the number of
businesses going out of business because of the Department of
Labor in regards to the calculation of prevailing wage. This is
a huge issue across the country. Do you see an equitable aspect
of just recalculating this in a very transparent fashion?
Mr. Dodaro. Yeah, we have not looked at that issue in a
while, so I would have to go back and take a look. We did a
long time ago, but it has been a number of years since we have
had the resources to be able to look at it again.
Mr. Gosar. We would love you to because, you know, I think
from the standpoint, as long as it is a transparent schedule,
which has been the major complaint for particularly smaller
business along the lines in my district, in my State, we have
had a lot of subcontractors, small contractors put out of
business in regards to working with the Department of Defense.
And this would be something that, I think, that both sides
could go along with, making sure that it is a transparent
schedule, that it is a fair wage for a fair job, and fair to
the taxpayer.
Mr. Dodaro. We will take a look at that. I understand your
concern.
Mr. Gosar. I appreciate it. And thank you for what you do.
Mr. Dodaro. Sure.
Mr. Gosar. I yield back.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman from North Carolina, Mr.
Walker for 5 minutes.
Mr. Walker. Thank you, Mr. Chairman. Thank you gentlemen
and others for being here today. I have got a couple of
questions. I would like to start with Mr. Dodaro. Why is the
referral process being conducted by hand and through the mail?
Isn't this an archaic, kind of out-of-date process? Can you
speak to that for a minute?
Mr. Dodaro. Yes, it is archaic.
Mr. Walker. Okay.
Mr. Dodaro. And particularly given the volume of
complaints. I think at one information referral office had
87,000 referrals one year. And so they are manually reading
them. But then when they refer it to another part of the IRS,
they manually look at it again as well. So I am very pleased,
as Mr. Dalrymple indicated, they are going through an online
electronic process, but this is outdated.
Mr. Walker. So, Mr. Dalrymple, you did talk about the plans
to move it online. Can you give us a little more specificity on
what that looks like and a timeline?
Mr. Dalrymple. Well, we are just in the planning stages
right now so I really can't give you any more specificity about
exactly what it is going to look like. We have to, you know,
engineer that process, et cetera. But it is pretty clear to us
that our process isn't working for either the taxpayers or for
us at this point in time. So we are going to make some major
changes to that program.
Mr. Walker. I hear that sounds like you have got some great
intentions there. But in your forecasting, is there any kind of
timeline? I know you said you are talking about some plans. Can
you be a little bit more specific?
Mr. Dalrymple. We will be responding to the GAO reports in
May. And at that point in time, we will have a timeline
together that will actually lay out what we are going to do and
a timeline for getting it done.
Mr. Walker. Okay. I look forward to seeing that in May.
Mr. Dodaro, how might greater coordination between the
referral programs increase savings for the IRS and the American
taxpayer? Can you talk about that for a minute?
Mr. Dodaro. Sure, sure. I mean, well, first of all, I think
it will increase the timeliness. A lot of the information that
it gets, you know, they need to react quickly in order to be
able to move and investigate, evaluate the referral, whether it
is legitimate or not, and apply resources properly. Secondly,
it will enable them to get back to whoever made the lead, if
they identified themselves, in a way that will encourage people
to send additional information in there as well.
As Mr. Dalrymple mentioned, the percentage of returns that
the IRS has been auditing on their own has been going down. So
they are auditing less returns, so that makes the ability to
get leads and referrals all that more important and put it at a
greater premium. So this will enable them to move more quickly.
It will enable them to ferret out which ones they should spend
time on and dedicate time on. So I believe this has high
potential.
Mr. Walker. It sounds like it. It is very encouraging to
hear. I know the GAO has identified a lack of leadership within
many levels of the IRS referral programs. What are we doing to
improve this failure of leadership over programs that have the
potential to reduce the tax gap? Can you speak to that?
Mr. Dodaro. Sure. I will ask Mr. Mihm to take over.
Mr. Mihm. Well, thank you, sir, for the question. As Mr.
Dalrymple noted in his conversation on an earlier question, is
that the problem with the referral programs is that they grew
up over time on a singular basis. And so one division within
our business unit within the IRS would have a referral program,
versus another one would have a referral program. And so they
were viewed as referral programs rather than an integrated set
of initiatives that are underway. Very similar to what local
governments do when they have a 311 number, where you don't
have to know what your problem is when you call. There is no
wrong door. That is what needs to happen with the referral
program.
We shouldn't make someone that has an issue referred
understand and have to navigate the various processes and
programs that are existing within the IRS. And I know from Mr.
Dalrymple and his colleagues that that is something that they
are committed to.
Mr. Walker. Okay. I have one more question. It is a little
lengthy so stay with me here. When whistleblowers contact the
IRS, they are potentially taking considerable risk. I think we
would agree with that part. Despite this, the IRS takes years
to process claims with poor communications that goes back to
these whistleblowers. Why are we not taking steps to evaluate
the effectiveness of the whistleblower pilot program and other
steps to improve communication with these people that come
forward?
Mr. Dodaro. Yeah. We have looked at the whistleblower
program and made a number of recommendations. They need to more
timely get back. The IRS has the pilot program underway. They
need to evaluate whether or not that is going to be successful
and meet the needs of the people who are providing the
information. But communication here is really important.
The other thing that we point out in our evaluation is
there are monetary awards for whistleblowers. And so far, the
IRS has only issued about 31 specific monetary awards. So they
have to look at whether or not they are providing enough
incentives for people, both in communication and into awards.
Mr. Walker. Thank you, Mr. Dodaro.
Mr. Chairman, I yield back.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman from Oklahoma, Mr.
Russell for 5 minutes.
Mr. Russell. Thank you, Mr. Chairman. Thank you for all of
our witnesses that are here today. We do appreciate what you
do. I am a big fan of our government accounters and also our
inspectors general and others that help us ferret out waste and
have responsible government.
Mr. Dodaro, the GAO found that the Commerce Department's
new innovative technologies and manufacturing or ITM loan
guarantee program was essentially performing the same function
as four other Federal loan guarantee programs. The program was
set up, as you I am sure are aware, as a result of the 2010
reauthorization of the America COMPETES Act. And Congress
specifically directed Commerce to avoid duplication.
Given the preexisting programs, was it inevitable that ITM
would overlap with existing loan programs, or was there more
that Commerce could have done to avoid the now duplicate
existing programs?
Mr. Dodaro. We think there is more that could be done. We
have made a recommendation to Commerce to work with the SBA and
National Institute of Standards and Technologies. I think what
Congress was trying to do here was to deal with a niche that
there may be some gaps in the capital markets for innovation
for this particular purpose. And it is going to be very
difficult, though, I think, to find what that niche is going to
be and to avoid duplication with the other programs.
I think that Congress was also, quite frankly, frustrated
with the SBA's lack of timeliness in meeting these needs. And
so we have recommended that Commerce work with them to identify
what these capital needs are. I am pleased that they haven't
made any loan guarantees yet until they can find out and make
sure they are not duplicating. So we are going to stay on this.
We have a regular requirement to review it.
Mr. Russell. The report also shows that ITM's program is
copying the forms and application process used by the Small
Business Administration for its own loan program. How does this
contribute to duplication in the issuance of loans?
Mr. Dodaro. Well, it is going to duplicate it. Unless they
follow our recommendation and find the right niche to focus on,
it inevitably will result in duplication, in my opinion.
Mr. Russell. The GAO also recommended in the report that
the Commerce Department create targeted marketing materials in
coordination with the National Institute for Standards and
Technology so that the program offers guarantees to
manufacturers who do not currently have access to Federal loan
guarantees. If NIST has the best overall idea of which
borrowers would benefit most from the program, would you
recommend, or the GAO, that the loan guarantee program simply
be consolidated under NIST, or would one of the other agencies
with a preexisting program, and if not, why not?
Mr. Dodaro. I think that is a possibility that has to be
identified once Commerce does their homework and that there is
a proper plan. I think at that point somebody ought to
reassess. Now, I also would note, my understanding is Commerce
has talked to other Federal departments and agencies about
carrying out the program, and so far there have been no takers
in that regard. So I think that, you know, I will be very
interested to see what Commerce does with our recommendation.
And once it has the marketing materials and once it has
identified potential, you know, gaps in the capital markets,
whether or not it could be done by another existing program or
whether we really need another program.
Mr. Russell. Thank you for that.
Mr. Dodaro. I think the jury is out on that.
Mr. Russell. I appreciate that.
And, Mr. Chairman, being a true conservative, I will yield
back the balance of my time.
Mr. Meadows. Well, I thank the gentleman from Oklahoma.
The chair recognizes the gentleman from Alabama, Mr. Palmer
for 5 minutes.
Mr. Palmer. Thank you, Mr. Chairman.
Mr. Dodaro, I really appreciate the work you guys do. I
hate to say it, but I enjoy reading your reports. That probably
speaks volumes about my personality. But I do want to go back
to this issue of unobligated balances. And I know that you may
or may not be in a position to make a judgment on whether or
not this is sound fiscal policy, but I don't think we can make
the case that it is absolutely necessary to hold almost $900
billion in unobligated balances. Would you agree with that?
Mr. Dodaro. Yes.
Mr. Palmer. Okay. My point here, then, is that we are going
to debate over our budget in which we are being asked to
increase spending by $30 billion. If we were to reduce the
unobligated balances by approximately 3.5 percent, that would
more than cover the increase in spending. Does it not make
sense to do that, particularly in the context of if we are
holding money in unobligated balances and then having to borrow
money to fund other agencies, isn't there an interest cost
incurred in addition to the additional spending?
Mr. Dodaro. Well, it is definitely not an efficient way to
operate. I would say, though, that I don't believe it would be
probably prudent to do an across the board kind of reduction
there. I think you have to look at targeted areas and agencies,
and that is why we focused on specific areas. We do that every
year for the Congress, you know, because in some cases it may
make sense to have that and other cases not. But in no case
should it be in excess of what the needs are.
Mr. Palmer. Right. And I just use that as a generalization,
not in specific. I think you would have to look at each agency
individually. But the point is that it is not sound fiscal
management.
Mr. Dodaro. That is correct. That is why we focus on it.
Mr. Palmer. Okay. Mr. Dalrymple, I am going to direct some
questions to you about the tax gap. And the inspector general
for the Tax Administration, the Treasury Inspector General,
issued a report and in his report said that there needs to be
more timely and more accurate estimates of the tax gap.
Currently, the IRS reports this about every 5 years. Has the
IRS acted on the inspector general's recommendations?
Mr. Dalrymple. We intend to have the new tax gap report out
later this month, as a matter of fact. So we are acting on it
as we speak.
Mr. Palmer. Can you tell me how much the IRS collected?
What was the revenue total collected for 2015, fiscal year? It
was over $3 trillion, wasn't it?
Mr. Dalrymple. It was over $3 trillion, yes.
Mr. Palmer. Based on a report from the Urban Institute and
the Brookings Institution, over the past 30 years the tax gap
has ranged from 16 to 20 percent. Let's just say it is 16
percent. And if $3 trillion came into the IRS last year, that
means 16 percent--that is 84 percent of what should have been
collected. Now, I won't get into the math, but I will just give
you an idea. That means that somewhere in the range of $500
billion to $550 billion went uncollected. What is the IRS doing
to collect the taxes that are owed it?
Mr. Dalrymple. Well, we have a number of initiatives. I
mean, the tax gap itself, one of the things that needs to be
completely understood about the tax gap is that it is made up
of a lot of different moneys owed. And if we were going to go
after every sort of last cent of the tax gap, it would be an
incredibly intrusive process. Having said----
Mr. Palmer. Well, let me suggest this. Eighty-four percent
of it is underreporting, 10 percent is underpayment, 6 percent
is just flat nonfiling. And the point I am trying to make
here--and this may not be the proper forum to do it--but, you
know, even when you do collect some of the taxes, you still
have a net gap of somewhere between $380 billion and $400
billion. And I am on the Budget Committee, and this is one of
the things that makes me want to pull my hair out and at my age
I don't need to be doing that. We do everything in a 10-year
window. And if it is $380 billion a year, that is $3.8 trillion
in our 10-year window. Okay?
And then we have got improper payments. That is another one
of your reports I read, Mr. Dodaro, $124.7 billion in 2014. If
that is the average, that is $1.25 trillion over that 10-year
window. And we are looking at a $19 trillion debt? And we just
identified $5 trillion? Okay. It seems to me that it begs for a
flat tax, or a consumption tax, some way of collecting every
dime that is owed the government.
So I just want to see if the IRS can be more diligent in
making sure that we collect the revenue that is owed us because
we have got some serious fiscal issues facing the country.
Thank you for your indulgence, Mr. Chairman. I yield back.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman form Texas, Mr. Hurd for
5 minutes.
Mr. Hurd. Thank you, Mr. Chairman, for saving the best for
second to last.
Mr. Dodaro, it is always a pleasure to see you, sir. And I
want to shift gears a little bit, talking about Internet
availability on tribal lands. The GAO report on tribal Internet
access noted a lack of coordination between the FCC and USDA in
their efforts to increase Internet access on tribal lands. What
risks of duplication or inefficiency are presented by this lack
of coordination?
Mr. Dodaro. I am going to ask Mr. Herr who lead that work
to respond.
Mr. Herr. Yes, thanks for the question. One of the
challenges we saw there was that they were not doing
coordinated training. And one of the challenges for the tribal
groups is, one, getting to that training, but also just having
the administrative staff to take advantage of some of those
programs.
Mr. Hurd. Have the agencies made any progress on increasing
coordination?
Mr. Herr. We did the report last year. We will be following
up with them this year. They concurred with the
recommendations, so hopefully they are taking some steps
forward.
Mr. Hurd. Is this lack of coordination creating a risk that
the FCC and USDA is going to offer conflicting advice to folks
seeking to increase access on their land?
Mr. Herr. I think it is possible, yes.
Mr. Hurd. I am curious as you continue with this, so please
keep us informed on that.
Mr. Herr. We will. Thank you.
Mr. Hurd. Mr. Dodaro, to you and your team, commercial
satellite communications procurement is something I'm
interested in. And, Mr. Tillotson, we will get to you on some
questions on this.
And, Mr. Dodaro, first for you, or whoever on your team.
How has the DOD commercial satellite procurement strategy
changed over the past decade?
Mr. Dodaro. They have become more reliant on purchasing
commercial satellite services.
Mr. Hurd. Was the DOD procurement policy willfully ignored,
in your opinion?
Mr. Dodaro. Well, it definitely wasn't followed. And I will
leave it at that.
Mr. Hurd. And has the DOD or was the DOD procurement policy
effectively communicated to the various components?
Mr. Dodaro. I will ask Mr. Francis to respond to that. He
lead the work.
Mr. Francis. Mr. Hurd, my understanding is it was
effectively communicated. There is a couple of things that get
in the way. The two agencies that enforce the procurement
policy for CENTCOM is the Defense intelligence security agency
and the U.S. Strategic Command. While they have authority, they
don't necessarily have enforcement powers, so there are some
weaknesses there.
And then the funding for satellite communications actually
is done through the supplemental budget. So the incentives
aren't as strong, to be up front about that. And then when the
agencies or components go around the normal procurement
regulations, it is for reasons of exigency and so it becomes
harder to enforce.
Mr. Hurd. Mr. Tillotson, why has the DOD ignored several
recommendations over the past decade for more strategic
commercial satellite procurement strategy?
Mr. Tillotson. Sorry, I forgot to hit my button. So I would
not agree that we have ignored the policy. In fact, let me just
start with a couple of facts and figures. Since 2011, we have
actually reduced expenditures on commercial satellite usage by
$571 million. Right now DISA, the Defense Information Services
Agency manages about 90 percent of commercial satellite
communications. I think at the time the criticism was rendered
or the findings were rendered, there were certainly issues in
how coherent that policy should have been implemented. Since
that time, the Department has put more energy and effort into
this.
GAO correctly identifies that there are two agencies
involved. One is the Defense Information Services Agency, DISA,
who does largely kind of the commercial backbone kind of work.
And then there is the Strategic Command and the associated
military department space agencies that do the military
satellite communications. The Department has established the
Defense Space Council so that we can----
Mr. Hurd. So have all those entities been educated on what
the DOD procurement policy is?
Mr. Tillotson. Yes. Yes.
Mr. Hurd. So then why have some components independently
procured satellite communications as opposed to following the
department policy?
Mr. Tillotson. So with the establishment of the Defense
Space Council, in some cases we have deliberately allowed some
of those contracts to continue because it is cheaper to
continue the contract than simply to reissue the contract.
Again, I will go back and point out, we have actually reduced
commercial satellite communications use by $571 million since
2011.
Mr. Hurd. In my remaining 15 seconds, Mr. Dodaro, DHS and
their human resources IT investments, what is the best next
action there?
Mr. Dodaro. I think that this is a classic case for good
congressional oversight to find out exactly what their current
plan is. This to me was a classic case of mismanagement of this
effort over a number of years. There are 422 different systems
over there. There was lack of attention by management. They
have supposedly now focused more on it in coming up with a
validating business case again and a model. But I think
congressional oversight would be very appropriate and prudent
at this point to make sure that they right the ship here.
Mr. Hurd. Well, Mr. Dodaro, I do know someone that sits on
Oversight and Government Reform and Homeland Security
Committee, so I'll make sure he follows up on it.
Mr. Meadows. I thank the gentleman for his personal
interest on that particular topic.
And the chair recognizes the gentleman from California, Mr.
DeSaulnier for 5 minutes.
Mr. DeSaulnier. Thank you, Mr. Chairman. And to Mr. Dorado,
just thank you for your good work. It is always interesting and
thrilling to be here in this committee and see a government
agency doing so well, not that a lot of government agencies
don't do well.
I want to ask you a couple of questions that sort of segues
from the last comment about oversight. But the comparison
between the executive branch implementing your recommendations
and how you measure that versus us in Congress. And I am told
this is really a partisan issue. It just happens between the
administration and Congress, irrespective of who holds control
over those levels of power.
So, for instance, the GAO has made 459 recommendations of
the executive branch and 372 have now been fully or partially
completed, by your analysis. In contrast, the GAO has made 85
recommendations for Congress, but only 37 have been fully or
partially completed. That is 46 percent as opposed to 81
percent. So over time, have you or your predecessors given
friendly suggestions as to how we could be more successful or
is it just part of our role as a deliberative process that
makes it difficult?
Mr. Dodaro. I give friendly suggestions all the time, as
often as I can.
Mr. DeSaulnier. Well, hopefully they received it----
Mr. Dodaro. And they are, and they are. But, you know, I
pointed out in my opening statement, although the numbers, the
percentages are different, where the big dollar savings have
come from----
Mr. DeSaulnier. Is here.
Mr. Dodaro. --is through the Congress' actions. I also
pointed out that Congress has encouraged and indeed directed,
for example in the Defense Authorization bill, certain actions
by the DOD to implement our recommendations. So Congress has a
little bit of a hand in the executive branch implementation as
well.
But I have got a long list of specific legislative
recommendations for the Congress to act on that would save
billions of dollars for--I can give examples now, if you'd
like. For example, in Medicare, the number of hospitals have
moved to do what they call vertical integration, which is to
have physician practices operate as affiliates of the hospital.
So people get certain services there the same as they could in
a doctor's office. But right now, the hospital--if they go to
one of these hospital affiliated outpatient services, the
government reimburses them much more than if you go to a
physician office. We think it ought to be equalized. There are
billions of dollars that could be saved there. There are
certain cancer hospitals that were originally deemed special
rate payment hospitals in the 1980s, when there weren't that
many hospitals providing cancer services, that if their payment
rates are equalized now to other hospitals for similar
treatments, you could save $500 million right there.
On Medicare Advantage, there is an annual adjustment factor
that is supposed to be made to compare it to fee for service.
We don't think CMS is using the most up-to-date information to
make that adjustment. And we think that they could--the last
time we looked at it, we thought it could be several billion
dollars, at least $2 billion to $3 billion could be saved,
perhaps, on an annual basis going forward.
We are recommending that the Congress take action to lower
the requirement for electronic filing from 250 down to about 5,
for employers. This will help the IRS have better ability to
match and prevent identity theft, refund fraud, which last
year, by IRS estimates, the government lost about $3 billion,
and it could be more in that area.
So we have got also recommendations to the Congress where
they could eliminate payments that are made by the disability
program, where people can also collect unemployment insurance
at the same time so they are getting double benefits. And we
don't think that that is prudent to be able to do that. There
is also----
Mr. DeSaulnier. Let me stop you there.
Mr. Dodaro. Okay.
Mr. DeSaulnier. I get the sense you could go on long beyond
my 5 minutes. So all of those things I think we can agree on,
all the members.
Mr. Connolly. So in other words, there are no savings to be
had. Right?
Mr. DeSaulnier. So is there a way--the way I read your
report, it is sort of like when I was in local government and
civil grand jury, you know, how many of these recommendations
have you actually implemented? So since that is our
measurement, I just wonder--and this is just an open-ended
question. Perhaps you could respond to it at your leisure to me
or to the chair.
Is there a better measurement to get us to do what we need
to do in a friendly manner? Because, for instance, you give us
partial credit for passing a bill, even though it doesn't
become effectuated and signed into law. So it just strikes me
that these measurements, when you look at the executive branch,
it is pretty clear, either they have or have not or partially.
With us you get big advantages, you say. So is there another
way that we can measure that more clearly so we and the general
public can understand it?
Thank you, Mr. Chairman.
Mr. Dodaro. I will take a look at that.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman from Iowa, Mr. Blum for
5 minutes.
Mr. Blum. Thank you, Chairman Meadows. And I would like to
also thank the panel for being here today. I appreciate it very
much.
Mr. Dodaro, good to see you again.
Mr. Dodaro. Good to see you.
Mr. Blum. And I would like to commend you on the work that
you do and the work that the GAO does. It is very impressive. I
am a career businessman from the private sector, and I for one
can appreciate what your department does, many times unsung,
many times reports probably not read. But I share Mr. Palmer's
zest for reading your reports, and I think it is extremely
important to the taxpayers in this country the job that you do.
So thank you very much.
Mr. Dodaro. Thank you for those comments.
Mr. Blum. I would like to, as opposed to digging into the
details today, if you and I could just go to the 60,000-foot
level, I would appreciate that. I would like to ask you a
couple of questions. I am very interested, and I think my
constituents are interested in your answers, and the taxpayers
are as well.
First question, has the Federal Government, in your
estimation, your opinion, grown so large, so big that it cannot
effectively--that is the key word--be managed any longer?
Because as a businessman, I see this time and time again. And I
am coming to the conclusion it is so large it can't be managed.
What is your opinion of that?
Mr. Dodaro. There are definitely challenges in this regard.
Some of the Federal entities are very large entities. The
Department of Defense, for example; the IRS is a large agency;
HHS is huge. All three agencies represented today. But in my
view, that there are good management practices that could be
taken and to effectively manage these departments and agencies,
but there are not consistently applied management practices
that should be made that are made. And as a result, you don't
have as good of an effective management as you should to be
able to do this.
Mr. Blum. Great point, great point. What needs to change or
what needs to happen so that we apply management practices to
this huge bureaucracy that we have here? What needs to change,
in your estimation?
Mr. Dodaro. Yeah. No, no.
Mr. Blum. That is a very good point you raised.
Mr. Dodaro. Yeah, no. And it is a fair question. I think
part of the issue is there needs to be stronger congressional
oversight over the process. You know, when you think about it,
the executive branch agencies--and we are about ready to have
this happen again. Every change in the administration you take
out your top 3,000 political appointees and put all new people
in there in these agencies. There are vacancies that occur over
time. Nobody in the private sector would take your top tier
management all at once and move them out.
Mr. Blum. Correct.
Mr. Dodaro. But that is part of our democracy and it is
part of what happens. But Congress has a role for continuity
purposes, for confirming new people to lead these agencies. I
think there should be more attention by the executive branch on
management capabilities and experiences of people who are put
into these positions to manage them, that they have the right
qualifications, and they have the right experience. And that
there needs to be proper oversight and stewardship by the
Congress to ensure that they effectively carry out their
responsibilities. And the President needs to pay attention to
management issues as well as policy matters when they come into
place.
And so this whole notion of management often gets a second-
class status compared to policy orientations. And that is a
fundamental problem that plagues a lot of agencies.
Mr. Blum. We are going to spend nearly $4 trillion of our
citizens' money this next 12 months. What percentage do you
think is ineffectively spent or is wasted due to things like
duplication of services, due to waste, fraud, and abuse?
Because strong America now estimates it is as high as 30
percent in the Federal Government. What is your estimation?
Because you are here every day. You see it every--you are in
the belly of the beast, so to speak.
Mr. Dodaro. Yeah. Right, right. It is hard to give you a
good figure. But here is the way I look at it. All right? The
way I look at it is we have the latest estimate of improper
payments was $137 billion for 2015. Since improper payments
have been required to be reported by the Congress, it is over
$1 trillion in improper payments. So you have a lot of money
going out the door that perhaps shouldn't be going out the
door. Most of that is overpayments, not underpayments.
You have a tax gap that we talked about briefly earlier,
$385 billion in that tax gap, according to IRS's last estimate.
I am anxious to see what the new figure will be when it is
released. That is a lot of money that should be coming in the
door that is not coming in the door. And the duplication, tens
of billions of dollars in additional money could be saved.
Mr. Blum. A billion here and there adds up, doesn't it?
Mr. Dodaro. Fast.
Mr. Blum. And my last question to you is, what do we need
to do as a Congress, as a government to help make the GAO--
which I think is outstanding, by the way--more effective? What
can we do?
Mr. Dodaro. Well, we need your support to implement our
recommendations. I would do that number one. Most people in my
position would say give me more money, but I would say
implement our recommendations and work with us more. Congress
is a great partner with us. We don't have any enforcement
authority at the GAO. We can't compel people to implement our
recommendations, but Congress can and that is our enforcement
approach.
Mr. Blum. My time is up. And once again, I would like to
commend you on the great job that your organization does.
Mr. Dodaro. Thank you.
Mr. Blum. And I yield back the time I don't have, Mr.
Chairman.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman from the 11th District
of Virginia, my good friend, Mr. Connolly for 5 minutes.
Mr. Connolly. Thank you, Mr. Chairman. And just picking up
on your last point, my colleague from Iowa, Gene, I don't want
you to miss the opportunity. Yes, of course, we ought to
implement your recommendations. But every dollar we invest in
the GAO has what return on it?
Mr. Dodaro. $134 back for every dollar invested.
Mr. Connolly. So to your point, I know it is not always a
great idea on the conservative side of the aisle, but this one
has a return on it. And so investing in the GAO is a very smart
investment.
Mr. Meadows. And I join the gentleman in supporting his
notion there that we need to invest more in the GAO.
Mr. Connolly. I thank the chair.
You hear that, Gene? Run with it. For God's sake, it is a
special moment here.
And, by the way, to Mr. Blum's questioning too, this
committee in the past has done, I think, some very thoughtful
hearings on both the issue of improper payments, the largest
single chunk of which--identifiable chunk--is Medicare fraud.
And the second is money left on the table that the IRS could
not collect, did not collect, but is owed.
Those two categories, which if we actually could bring it
down theoretically to zero, would be an enormous dent on the
debt over 10 years. I mean, it would be in the trillions of
dollars. And it is something we ought to take a look at as a
Congress because that is low-hanging fruit. I know it involves
making the IRS more efficient and more effective, but it also
has a return on it. And right now we need it. Thank you, Mr.
Dodaro, for your thoughtful work again.
I want to talk, Mr. Dalrymple, about identity theft,
because identity theft, you know, diversion of refunds,
especially at IRS, has now become almost epidemic, has it not?
Mr. Dalrymple. That is true.
Mr. Connolly. That is true. And if I were to ask about
identity theft at the IRS, say 8 or 10 years ago, it would have
been a small part of your portfolio concern, would it not?
Mr. Dalrymple. It would have been----
Mr. Connolly. And if you can speak into the mic so we can
hear you.
Mr. Dalrymple. It would have been primarily 10 years ago,
unrelated to refund fraud.
Mr. Connolly. Right. And today, best estimate, how many
Americans are affected by refund fraud?
Mr. Dalrymple. I don't have estimates on how many people at
this point, but I can tell you that----
Mr. Connolly. Well, number of returns then.
Mr. Dalrymple. 1.4 million returns----
Mr. Connolly. Yeah.
Mr. Dalrymple. --in 2015 equated to about $8.7 billion in
refunds that were stopped.
Mr. Connolly. Right. And 10 years ago it would have been
negligible?
Mr. Dalrymple. Negligible, yes.
Mr. Connolly. And here is the other problem, is it not, it
is virtually a cost-free crime? The chances of us identifying
you for illegally diverting somebody's refund, and prosecuting
you, and convicting you, and even punishing you are pretty nil,
are they not?
Mr. Dalrymple. Well, we have prosecuted----
Mr. Connolly. I didn't ask that question.
Mr. Dalrymple. --prosecuted a lot of people but----
Mr. Connolly. A lot?
Mr. Dalrymple. Two thousand folks. But it pales in
comparison with the number of folks.
Mr. Connolly. Right, Right. That's an improvement, but it
is still a drop in the bucket. And again, I think Congress has
to provide resources to beef up that effort and to help restore
American confidence. I mean, here I am in a transaction with
the Federal agency trusting, of course, that that transaction
will be protected. And as a matter of fact, it is not going to
be, or for a lot of Americans.
Mr. Dodaro, to what extent is this problem the IRS is
experiencing a function of antiquated IT?
Mr. Dodaro. IT is definitely a solution to this issue for--
one thing I would do----
Mr. Connolly. Is it also part of the problem?
Mr. Dodaro. Well, there are benefits and risks associated
with any information technology initiative. And the idea is to
maximize your benefit, minimize your risk. Here I would give
Congress very good credit for acting on our recommendation.
For example, we found there was--one of the problems that
they had was the IRS did not have the W-2 information from
employers until April. And so the crooks were filing early, and
the IRS didn't have the W-2 to match. Congress fixed that in
the last year, and now the IRS will be getting the W-2
information at the end of January. So this put them in a better
position to identify this area.
We think also Congress ought to lower the threshold for
electronic filing of employers from 250 to 5 to 10, they will
give more data. Now, the issue is, though, is can the IRS
change its processes and systems to now take advantage of this
electronic information that is available? And also, the IRS
needs to do a better job of authenticating people before they
are using their systems and the approach.
So there are ways and techniques to do this. So if managed
properly, IT can be a big help here, even though it is causing
the problem to occur.
Mr. Connolly. Yeah. Well, I hope at some point we have a
chance to talk more in depth about this.
And, Mr. Chairman, we talked about it collaboratively, but
so much of the IT at the IRS is legacy systems, antiquated
systems, and multiple systems incompatible with each other and
often not suitable for encryption. No wonder we have a growing
problem. Thank you very much.
Mr. Meadows. I would note to the IRS that is a code word
for you need to come up with a plan to try to address it,
because we are willing to work in a bipartisan way to help you
address that problem.
Mr. Dalrymple. We appreciate that.
Mr. Meadows. All right. The chair recognizes the gentleman
from Georgia, Mr. Carter for 5 minutes.
Mr. Carter. Thank you, Mr. Chairman, and thank all of you
for being here today. We appreciate your presence here. This is
very important.
Mr. Dodaro, I want to start with you. I want to speak
specifically on a project that is listed in your list of
fragmentation and duplication, and that is the U.S. Embassy in
Kabul. It is my understanding that the State Department
didn't--did not have either a strategic facilities plan nor did
they follow their own cost containment and risk mitigation
project--policies, I should say. Is that true? Is that the way
you understand it?
Mr. Dodaro. I am going to ask Mr. Herr who lead the project
to respond.
Mr. Carter. I am sorry. Your name?
Mr. Herr. Phil Herr.
Mr. Dodaro. Phil Herr.
Mr. Carter. Okay.
Mr. Herr. That is correct, sir.
Mr. Carter. That is correct. So you are telling me that
they didn't have a strategic facilities plan, they didn't
follow their own cost containment and their own risk mitigation
policies.
Mr. Herr. Right. That is what we reported last year to this
committee.
Mr. Carter. So what does this say about the State
Department? What does this say about their construction
planning in general? Am I to take from this that it is not very
good at all?
Mr. Herr. Well, I think in this case the conditions on the
ground in Kabul are really challenging. We think that this kind
of a plan, a 2-year to 5-year period that could be updated
periodically would really help orient folks that come and go.
Many people are serving 1-year tours there.
But to your point about Kabul, it does not look good there.
We also have a large embassy construction program underway now.
Mr. Carter. So am I to understand that all these
developments and how dangerous a place it became while it was
under construction, they didn't plan for that? And when they
were planning, they didn't know that in advance?
Mr. Herr. Well, obviously, they would have known something.
But the idea of an overarching plan, that was not in place,
which we think would have been very helpful to them.
Mr. Carter. Would you say that the State Department's
failure to follow cost containment and to follow their own cost
mitigation policies is a good stewardship of taxpayers' money
whenever we are talking about a project of the magnitude of
$2.17 billion?
Mr. Herr. No, I would not.
Mr. Carter. Mr. Dodaro or Mr. Herr, in your May 2015 report
on the construction of the U.S. Embassy in Kabul, that is the
one you referenced earlier.
Mr. Herr. Yes.
Mr. Carter. You stated that the State Department's failures
to follow its cost containment/risk mitigation procedures
likely contributed to the fact that the cost for this project
increased 27 percent and that the project will finish 3 years
later than it was planned. Is that correct?
Mr. Herr. Yes.
Mr. Carter. So would I be correct in saying that when we
are talking about a project of this magnitude, and the State
Department is not only not following their own policies on
this, what are we to expect for smaller projects? I mean, we
are talking about a $2.17 billion project. That is big, even by
our standards.
Mr. Herr. I agree.
Mr. Carter. So I can only take from that and when we talk
about smaller projects, that they are not doing that either and
they are wasting money.
Let me get to the point. I have belabored the point too
long. Here is what is bothering me. Okay? I have the Federal
Law Enforcement Training Center in my district in Glynco,
Georgia. Okay? Full disclosure. Here is the State Department,
needs to build a new training facility or says they need to
build a new training facility for embassy personnel. And I
understand that. And listen, all of us understand what happened
in Benghazi. We don't want it to ever happen again. We want to
be as prepared as we can be.
Initially, in the report comparing FLETC with where they
are going to build it now at Fort Pickett, FLETC came in at
$260-some-odd million. Fort Pickett came in at $965-whatever
million. Then they went back. And you even compared both sites,
the GAO did, as did the State Department. In 6 different
factors the site at FLETC came out ahead in 4 of the 6. Only
one favored Fort Pickett. Yet they went back and they said,
okay, let's review it one more time. And then they came back
and said, no, it is not going to be $965 million to do it at
Fort Pickett, it is only going to be $465 million. We got it
down that much. Huh? I mean, come on. I was born at night, but
it wasn't last night. I mean, seriously. So what did they do?
They decide, well, we are going to build it in Fort Pickett
because that is where it needs to go. And here we are
duplicating.
You know, it is one thing for us to come here and talk
about where we have wasted money in the past, but my problem is
I can't let this go. It is with me. I have only been here for
15 months now and I just can't let it go because I see us
wasting money. Why are we doing--what can I do? Tell me. This
is keeping me up at night. I want to sleep. Tell me what I can
do.
Mr. Dodaro. Well, with regard--I mean, Congress has the
power of the purse, and they need to use it when they don't
believe that the agencies are taking appropriate actions. I
mean, you have the authority to be able to--nobody can spend
money without Congress' authority, and they can only spend it
on what you tell them to spend it on.
Mr. Carter. I hope you can understand my frustration with
this. This is very, very frustrating. And I guarantee you, I
will bet you every penny I have got in my pocket that when it
is finished at Fort Pickett, that it will be closer to $965
million than it will be to $465 million. You know that, I know
that, and they know that. So you see why I am frustrated? You
see why the American people are frustrated?
Mr. Dodaro. I look at this across government every day, so
I share your frustration.
Mr. Carter. Well, then share with me how can I get used to
it? Because I have to get some sleep, and I am not sleeping
tonight.
Mr. Meadows. The gentleman's time has expired.
Mr. Carter. Mr. Chairman, I need to know how I can get to
sleep tonight.
Mr. Dodaro. My advice to you, I have never gotten used to
it. Okay? You just have to work where you can to make
improvements and make it better.
Mr. Carter. Thank you, Mr. Chairman. I apologize.
Mr. Meadows. I thank the gentleman.
And the chair recognizes the ranking member of the full
committee, Mr. Cummings, the gentleman from Maryland, for 5
minutes.
Mr. Cummings. Thank you very much.
Mr. Dodaro, the Defense Department has 79 major weapon
systems programs, with a total estimated acquisition cost of
over $1.4 trillion. In August of 2015, the GAO released a
report on DOD's process for buying weapon systems. That report
said, ``DOD and the military plan to acquire more weapons than
they can afford, given the anticipated levels of funding.''
Are you familiar with that report, Mr. Dodaro?
Mr. Dodaro. Yes, I am familiar with it. And I have the
author here with me.
Mr. Cummings. Okay. And the GAO also found that the DOD
makes decisions to invest in weapons on a piecemeal basis with
each individual service making its own decisions about
spending. According to the GAO, and if the DOD managed its
investments as a department-wide portfolio rather than using
this piecemeal approach, it would ensure that these investments
are, ``strategy driven, affordable, and balance near and long-
term needs.'' But the DOD is not doing that, are they?
Mr. Dodaro. Not to the extent we think they should.
Mr. Cummings. And according to the Congressional Budget
Office, the DOD's projected cost for weapons and other major
equipment is going to increase by 21 percent by 2019 is a
whopping $541 billion. That is an enormous investment of
taxpayer dollars. Do you believe that the DOD could save money
if it used a portfolio approach rather than the piecemeal
approach it is currently using?
Mr. Dodaro. Yes. I will ask Mr. Francis to explain why.
Mr. Cummings. All right.
Mr. Francis. Yes, Mr. Cummings, we think they can save
money. What you can do with portfolio management is look at
what is the right mix of weapons for a given level of funding.
If you don't do that to the extent that is possible, you end up
optimizing for individual systems and then you will pay as much
as you can to get those systems in.
Now, the Department has taken some efforts, and I am sure
Mr. Tillotson will have some comments on that. But the DOD does
look at portfolios, but each organization looks at them
differently, defines them differently, and they can't integrate
the budgeting and acquisition requirements processes. So you
are right on the number.
CBO estimates a bow wave in the out years for procurement.
If you look at the Navy, the Navy is going to need about 30, 32
percent more money to bring the programs in that it already has
underway. And we have Joint Strike Fighter that is going to
start hitting peak years of $15 billion a year. So there is
real questions about how we are going to manage all of that.
And what you don't want to do is do that system by system
because you will give everything a haircut.
Mr. Cummings. Well, Mr. Tillotson, I am surprised to see
that the DOD does not agree with most of the GAO's
recommendations. For example, according to the GAO, ``DOD does
not plan to designate the Deputy Secretary of Defense when
appropriate delegate responsibility for overseeing portfolio
management as we recommended.'' Why is the DOD not planning to
implement GAO's recommendation?
Mr. Tillotson. So the Department actually agrees with the
GAO on the intent to move in the direction of strategic
portfolio management and to do a better job of it. So in fact,
we are not in disagreement with the direction the GAO is
suggesting. In fact, I would also state that over the last 3
years, the Deputy Secretary of Defense and the vice chairman
have conducted strategic portfolio reviews across families
weapon systems with this very outcome in mind that the GAO is
suggesting of how do I make a more rational investment
decision.
I think the key here has been that the Department
recognizes that the military departments tend to bring forward
individual piece parts, and as a result we needed to integrate
this at a department-wide level. That has been taking place now
consistently for the last--we have actually executed it the
last 2 years. There is a third round in progress. That is
something that Deputy Secretary Work brought on board when he
came and took the job. So we are moving in the direction the
GAO suggests.
Mr. Cummings. The GAO also said, ``DOD does not plan to
require annual enterprise level portfolio reviews that
integrate key portfolio review elements from the requirements,
acquisition, and budget processes as we recommended.'' Why not?
Mr. Tillotson. I think the disagreement is more over the
specifics of how to do it than it is over the intent. We think
that the requirements process needs to be scrubbed at a
portfolio level. The actual management of programs is a
management of programs issue. We don't want to make that the
centerpiece of the decision, but then the actual decision of
what resources do we apply against what programs is the place
where the portfolio process comes back into being. So we are
actually in agreement again with the intent of the GAO. I think
the differences are in implementation.
Mr. Cummings. All right. I see that my time has run out.
Thank you.
Mr. Meadows. The chair recognizes the gentleman from Ohio,
Mr. Jordan for 5 minutes.
Mr. Jordan. Thank you, Mr. Chairman.
Mr. Dalrymple, how long have you been at the IRS?
Mr. Dalrymple. I have been at the IRS for a total of about
33-1/2 years. I had a stint there, retired and come back.
Mr. Jordan. Oh, two tours. And what are your
responsibilities exactly?
Mr. Dalrymple. My responsibilities include all of the
enforcement activities at the IRS, examination, collection,
criminal investigation, all of the customer service activities,
including telephone services, submission processing.
Mr. Jordan. Do you deal with the Tax Exempt Division?
RPTR YORK
EDTR ZAMORA
Mr. Dalrymple. The Tax Exempt Division is part of----
Mr. Jordan. In your 2 tours at the IRS, did you have any
overlap with Ms. Lerner.
Mr. Tillotson. Actually, I think I overlapped with Ms.
Lerner for about 3 months.
Mr. Jordan. Just a short time. Okay. And do you report
directly to the Commissioner, or is there someone----
Mr. Tillotson. I do.
Mr. Jordan. --between--you report directly to the
Commissioner. Okay.
Now, my understanding of Mr. Dodaro's report, thereis that
$385 billion tax gap. Is that accurate? Do you agree with that,
with what they concluded?
Mr. Dalrymple. We are going to put out a new tax gap report
that actually----
Mr. Jordan. Do you disagree?
Mr. Dalrymple. --now on the end of the year, and that
figure will be adjusted based on the new information we have.
But it is not going to change dramatically.
Mr. Jordan. So he is close?
Mr. Dalrymple. Yes, yes.
Mr. Jordan. All right. And then he has 112 recommendations.
Right? I understand there is 112 recommendations for Treasury
to implement to help deal with the fact that we are not
collecting $385 billion.
Mr. Dalrymple. I am not certain how many of the
recommendations are exactly on point with the tax gap, but I--
--
Mr. Jordan. Overall recommendations that they recommend
that Treasury and IRS implement.
Mr. Dalrymple. Actually, I believe there is----
Mr. Jordan. How many are there, Mr. Dodaro?
Mr. Dodaro. I believe the 112 figure is correct.
Mr. Jordan. One hundred and twelve. Okay. And is it true,
Mr. Dalrymple, that you have only implemented about 50? Seventy
remain? You know, you haven't dealt with, haven't implemented,
unimplemented?
Mr. Dalrymple. We have unimplemented or partially addressed
actions without question.
Mr. Jordan. Mr. Dodaro, how many have they put in place?
Mr. Dodaro. There is still about 63 percent that need to be
implemented.
Mr. Jordan. So less than half. They have implemented less
than half to deal with this huge tax gap.
Changing subjects somewhat. So you are in charge of
enforcement. Do you know anything, Mr. Dalrymple, about the
StingRay technology?
Mr. Dalrymple. I know about the--I know the technology
exists. I know that we have employed it in certain
circumstances.
Mr. Jordan. How many times did the IRS use this technology
that mimics a cell phone tower, grabs up everyone in that
particular area's cell phone data, and gives the IRS, the same
IRS that targeted people, access to people in that geographic
location, the IRS knows where they are at and their cell number
and cell information? How many times has the IRS used that
technology?
Mr. Dalrymple. I would have to come back with the exact
number. I think it is about 37 times.
Mr. Jordan. Thirty-seven times. And in those 37 times, do
you know if the IRS got a warrant to use that technology?
Mr. Dalrymple. In every instance we would have had some
sort of court----
Mr. Jordan. That is not what I asked. Did you get a
warrant, probable cause warrant?
Mr. Dalrymple. Again, I would have to come back to you on
that.
Mr. Jordan. Can you get that back to me?
Mr. Dalrymple. Certainly.
Mr. Jordan. Does the IRS have a nondisclosure with the FBI
not disclosing that it is actually used? So when you employed
it and you supposedly grab somebody's--you know, not paid their
taxes or whatever you are trying to get, did you disclose to
them that you used StingRay technology to get them?
Mr. Dalrymple. Disclose it to the FBI?
Mr. Jordan. No. Do you have an agreement with the FBI that
says you will not disclose to the individual that you are using
the technology to, I assume, get information from or maybe get
that individual, not disclose to them or their counsel?
Mr. Dalrymple. Again, I would have to answer that for the
record. I am not certain.
Mr. Jordan. Okay. We would appreciate that as well. And do
you know if the IRS has received the Jones memo that the
Justice Department put together outlining how you will deal
with StingRay, how Federal agencies will deal with StingRay
technology, as we move forward?
Mr. Dalrymple. I am not familiar with the Jones memorandum.
Again, I would have to get back to you on that.
Mr. Jordan. Okay. So those four things.
Mr. Dalrymple. Sure.
Mr. Jordan. How many times you have used it; did you get a
warrant, probable cause warrant, not just something else or
whatever the IRS says may be sufficient or based on what courts
have said is not sufficient; do you have a nondisclosure with
the FBI; and have you received the Jones memo.
Mr. Dalrymple. We will get back to you on all four of
those.
Mr. Jordan. I appreciate it. Thank you, Mr. Chairman.
Mr. Meadows. I thank the gentlemen. And I want to add one
thing to that in terms of StingRay technology. Since you are
answering the gentleman back, I would like to ask if you have
ever bifurcated the information, i.e., if you didn't get a
warrant, if you were following them into their personal
household. And I would like you to respond to that as well.
The chair recognizes the gentlewoman from New Mexico, Ms.
Lujan Grisham.
Ms. Lujan Grisham. Thank you very much, Mr. Chairman. And I
am going to kind of go off topic, and I apologize kind of.
Except that I think that generally speaking, as Dr. Conway as
the chief medical officer--and while I absolutely appreciate
your discussion about ways to improve quality, and when we
really do that, those investments, in fact, save money in the
healthcare system. And I really want to talk about some issues
that I am sure you are aware, and if you weren't, this is a
great place to make you aware. But I have talked about it in
nearly every context that I can as a member of Congress.
But given the situation in our State, our governor
determined that all, 100 percent, of our behavioral health
providers were engaged in billing practices that rose to the
level of a credible allegation of fraud and so suspended
payments to all 15. Now, I disagree with that effort, but be
that as it may, that is a decision that the executive makes and
has full power to make that.
Here is the issue for me, given that 3 years later the
companies that came in are largely now gone, that there is no
behavioral health--and let me repeat that--there is no
behavioral health infrastructure, that there was no continuity
of care. There was no transition plan requirement. There has
been no requirement by the Federal Government for there to be
accurate, credible--I want to use that word on purpose--
credible data from the State of New Mexico, which HHS and CMS
have both agreed are completely missing in this design. We have
the worst public health outcomes in the country, including the
second highest overdose deaths related by and large to a very
fragile, very complex behavioral health population in the State
of New Mexico.
It would seem to me that as the chief medical officer, one
rule is we know that hospitalizations, overdose,
incarcerations, acute institutional care, is not the right
investment for both cost savings or quality in terms of
treating these patients. And I would guess that you probably
are also very aware that when you have got a highly complex
patient, say someone with schizophrenia, who has developed a
relationship with a provider, who is now successfully on a
medication management--which is very hard for many of these
patients to achieve--and then that is completely taken away,
and if you can get in, you see a different psychiatrist or
psychologist every single time you try to get access. Wouldn't
you agree that this would not be the kind of investment or
sound practices that any State or any Medicaid environment
should be engaged in?
Dr. Conway. Yes. So, Congresswoman, thanks for your
question. And I am very aware of the issue and do agree that
appropriate mental health and behavioral health treatment is
critical to Medicaid beneficiaries. We, CMS, have had-- have
been working with the State, as you said, since 2013 on this
issue. And recently, in March, responded in a letter
summarizing some of that work. We are currently working to
improve their behavioral health workforce.
Ms. Lujan Grisham. Can you talk about that a little?
Because I should also mention to the committee, and for the
record, that all 15 have been cleared by the Attorney General.
It has taken us 3 years to get this administration to require
the Human Services Department to repay these providers the
millions of dollars that they are--but they are defunct. So
what exact workforce investments are occurring in our State?
Because I am really aware of very little.
Dr. Conway. Yeah. So we are directly working with the State
assuring that the State is currently following CMS payment
suspension toolkit guidance with respect to----
Ms. Lujan Grisham. But how does that get us a new workforce
and behavioral health system up?
Dr. Conway. So on the Medicaid side, we are working
directly with the State on access-of-care issues, on ensuring
proper networks. We both, from the program integrity side, have
put in place guidance and are working directly with the State
on these issues moving forward on the Medicaid side as was----
Ms. Lujan Grisham. Given that 3 years has gone by--and I
apologize for interrupting you, but this--as a physician, I was
a cabinet secretary for health, this is untenable. Can you
provide something to this committee in writing that would talk
about ways in which, God forbid this ever occurs in any other
State anywhere ever again, what CMS ought to be doing to assure
that you didn't spend the kind of acute care dollars?
And, in fact, Mr. Chairman, people lost their lives in my
State and continue to do so. So I would appreciate that
response in writing to this committee, if I may, Mr. Chairman.
Dr. Conway. I agree with the principle of quality and
safety and access to care being paramount, and we will provide
a response.
Ms. Lujan Grisham. Thank you. Mr. Chairman, I yield back my
time. Thank you, sir.
Mr. Meadows. I thank the gentlewoman.
The chair recognizes the gentleman from Wisconsin, Mr.
Grothman for 5 minutes.
Mr. Grothman. Sure. We will do a followup on Mr. Jordan's
questions there to Mr. Dalrymple.
First of all, could you explain what that StingRay
technology is a little bit for our listening audience?
Mr. Dalrymple. As I understand it, it is technology that
allows law enforcement to capture cell phone information,
basically.
Mr. Grothman. Okay. You said you didn't know if you were
getting a warrant. You said you used it 37 times. Do you think
you should be getting a warrant?
Mr. Dalrymple. I am not certain we didn't get a warrant.
So----
Mr. Grothman. Well, the question is, though, do you think
you should have? I mean, if it turns out you didn't get a
warrant, are you going to say that was an oversight? We screwed
up? Are you going to say: We don't need a warrant? I mean, what
is the attitude of the IRS on this?
Mr. Dalrymple. I am not certain, to be honest, what the
requirements are for use of this technology, whether it is
required to have a warrant or not. So I will respond to that
question in full when we send the response back.
Mr. Grothman. Okay. You said you have used it 37 times.
Mr. Dalrymple. I said I think we have used it about 37
times and I would get back to the committee on exactly how many
times it has been used.
Mr. Grothman. Could be 36 or 38. Why did you use it?
Mr. Dalrymple. I am sorry?
Mr. Grothman. Why did you use it?
Mr. Dalrymple. We use it in the course of a tax
investigation.
Mr. Grothman. Like what sort of crisis was there that you
kind of had to know where people are? I mean, I would think
that would be kind of a really major thing. Can you give me
like a hypothetical or even real fact situation that caused you
to have to use this stuff?
Mr. Dalrymple. Well, we use it in drug cases. We use it in
counterterrorism work that we do. I mean, we use it across a
broad spectrum of activities that we have responsibility for.
Mr. Grothman. Those would be things that would be on just
the IRS' purview. Right? Terrorism and drugs----
Mr. Dalrymple. It is things that we have responsibility for
but not exclusively, yes.
Mr. Grothman. Like how do you mean responsibility? Just
that somebody is not reporting income?
Mr. Dalrymple. I am sorry?
Mr. Grothman. How do you mean responsibility?
Mr. Dalrymple. I mean, we do a lot of counterterrorism work
around anti-money laundering, drug cases that we are involved
in that affect tax administration. So, yeah, we have
responsibilities there.
Mr. Grothman. Are all the times you use it things for like
terrorism related or drug related?
Mr. Dalrymple. As I said earlier, I would have to get back
to the committee on exactly when we used it and how.
Mr. Grothman. Okay. Well, we will go on to Mr. Dodaro.
Okay. I want to ask you a little bit about disability benefits,
what you are doing on that sort of thing. I would like to ask
you, what do you do about overpayment on disability benefits,
getting them back? Could you give us kind of an overview of
what you are doing there?
Mr. Dodaro. Yes. We have issued a report on that. We feel
that the Social Security Administration could do a much better
job not only in preventing overpayments, but also their
concern--they waived, permanently waived, repayment of about
over $2 billion, I think, over a 10-year period of time. We
think that they are not properly processing work requirements.
When people start working, they are supposed to report that
to Social Security, and then they are supposed to take action.
But they weren't effectively processing the returns very
quickly for the work requirements because then they should take
them off the disability roles and cut off their payments.
Mr. Grothman. I want to ask you a general question here on
this disability. I, like I am sure just about every Congressman
up here, gets constant complaints of people who are on
disability who nobody can figure out why they are disabled.
What are you doing about that, and what can you do about it?
Can you comment on your position on that problem?
Mr. Dodaro. Yes. We do always have audits underway to look
at the processes for the initial disability claims. What they
are doing on continuing disability reviews, they are supposed
to continue to evaluate these people. We made lots of
recommendations to improve the process over there. Some of them
have been implemented, some of them have not been implemented.
Some require legislative action.
Mr. Grothman. How often do you check somebody? If I am on
disability for a bad back today, how often am I going to be
checked or see if it is all on the up and up?
Mr. Dodaro. It depends on--you know, we made
recommendations that they target better criteria on that sort
of thing. There are supposed to be reviews on a regular basis.
I can provide for the record what that schedule is, but there
is a schedule. They are behind in meeting the schedule. They
have backlogs of cases.
Mr. Grothman. Okay. I am out of time, but I will talk to
you later off the camera.
Mr. Meadows. I thank the gentleman.
The chair recognizes himself for a series of questions. I
want to thank all of you for your input today and the
informative dialogue that we have had. Additionally, I would be
remiss if I didn't thank our staff here. It certainly is just
an unbelievable, Herculean job that our staff does on a regular
basis to not only prepare the members of Congress, but to
really look in detail at the reports, Mr. Dodaro, that you
provide. And so I want to just acknowledge them.
Additionally, I would like to recognize a previous
colleague, Dr. Coburn. Obviously, this was part of his brain
trust, and the fact that we have duplicative services so long
past him leaving the upper chamber, we continue to see the
fruits of his vision. And so I want to acknowledge that as
well.
Mr. Dodaro, I want to come to you and certainly thank you
and your staff, and really for the other witnesses, just to let
you know, if the GAO ain't happy, I am not happy. And I will
just put it very bluntly. We are reading what they have, and I
think in a bipartisan way we are willing to attack it. There
may be some ideologically differing views on what we should
attack first. But as much as I have tried to make the GAO be a
political instrument, they won't do that. They keep it in a
nonpartisan. In fact, there are times when I want them to be
outraged, and you get the calm, cool Gene Dodaro there going,
well, we need to address this and address that. And I can't,
you know, I can't evoke emotion out of him.
And so I would say that because it is of benefit, I really
believe, to the three of you who are here today because you
have been asked to testify, because the implementation of those
recommendations have really fallen short of where most of us
believe that it should. And I say that in a kind way. But when
you don't implement the majority, words like ``we are making
progress,'' really are like nails on a chalkboard to me.
Because what I want to do is see a matrix of what you are going
to get done, when you are going to get it done. And so that is
what I would ask you.
Mr. Dodaro, one of the things that has been shared with me
is about shared services. And so we have had John come in a
couple of times and talking about the benefits of potentially
using shared services. We have had Ms. Cobert, Beth, come in
and talk about some of the shared services that she is looking
at. Now, thereis some challenges in terms of, you know, who is
at fault, you know, if they don't provide, and who is
ultimately responsible. But are you looking at that? Can you
look at that further? And perhaps maybe not across our entire
Federal Government, but in terms of some of those duplicative
services, how we could save some money where you have one
agency using services that perhaps we don't have to create
individual departments. I will let you respond to that.
Mr. Dodaro. Yes. I mean, one classic good example of where
there has been a lot of benefit, years ago there used to be a
proliferation of payroll systems across the Federal Government.
A lot of consolidation has taken place there through shared
services operations. Even with the GAO, we use shared service
providers.
Mr. Meadows. Right.
Mr. Dodaro. So I don't, you know, use them. So I think
there is a lot of potential there. We have looked at it
principally in the area of financial management services
because that is common, in terms of payroll processing and
other things. So that is an area I would like, quite frankly if
we had additional resources, to do more in, but we haven't done
a whole lot beyond the financial management area.
Mr. Meadows. Well, if you would see if there is a couple of
areas that we could address there more. I am making that
official request today. Perhaps we look in the IT area. There
is, you know, certainly some IT services that might be able to
be shared. You know, I see some of our experts here from that
particular field, but if you will look at it and get that back
to the committee.
Mr. Dodaro. Sure.
Mr. Meadows. Yes.
Mr. Dodaro. Sure.
Mr. Jordan. Mr. Dalrymple, the IRS sent a letter back to
Mr. Chaffetz in November of last year. And at the bottom of
page 2, top of page 3, at the end of the letter, it says: Until
July 2015, the IRS had one cell site simulator, one StingRay,
which was acquired in 2011. In July 2015, you began the process
to procure an additional cell site simulator.
Do you know if the IRS has actually received a second
StingRay?
Mr. Dalrymple. I am not certain whether we have it or not.
Again, I will get back to you on that too. We will come back.
Mr. Jordan. But the process was started, according to the
letter.
Mr. Dalrymple. Right.
Mr. Jordan. You know that?
Mr. Dalrymple. That part I do know, so I will----
Mr. Jordan. You don't know if you got the second one or
not?
Mr. Dalrymple. I am not certain at this point.
Mr. Jordan. We need that information too.
Mr. Dodaro, there is 112 recommendations that the GAO made
to the IRS to deal with the tax gap. Were any of those
recommendations for the IRS to procure another StingRay?
Mr. Dodaro. No. I have not heard of StingRay before this
hearing.
Mr. Jordan. So you gave 112 things, good ideas to do to
deal with a $385 billion tax gap, and they have implemented
less than 50 percent, 37 percent, according to what you said,
of the recommendations you gave them, and yet they are using
StingRay technology and potentially purchasing a second unit to
potentially infringe upon Americans' Fourth Amendment
liberties.
Mr. Dalrymple, that is why Mr. Grothman and I raised the
questions we did. You know, why don't you start with the 112
recommendations that Mr. Dodaro and his group did, the good
work they did on how to deal with the fact we ain't collecting
the money we are supposed to collect in light of the fact we
got a $19 trillion debt and everything else, instead of buying
StingRay technology and potentially infringing upon the
liberties of taxpaying Americans?
Mr. Meadows. I thank the gentleman.
Reclaiming my time, let me--Dr. Conway, I saw you shaking
your head yes when Gene Dodaro talked about the fact that we
needed to make sure that hospitals and private physicians, in
terms of the amount of money that we are actually paying them
back. I saw you shaking your head that--and I don't want to put
words in your mouth--but it is not linear or fair. Is that
correct?
Dr. Conway. There is--in the President's budget is a
recommendation around site-neutral payments which would
equalize payments for services across the hospital, outpatient,
and physician setting. And as you know, Congress passed----
Mr. Meadows. Right.
Dr. Conway. --legislation starting in January.
Mr. Meadows. So, Dr. Conway, can we get to this committee
within the next 120 days a plan on how CMS plans to address
that particular recommendation?
Dr. Conway. We will work to get back to you with that
information. Yes, sir.
Mr. Meadows. All right. So in 120 days, we will have some
kind of response from you?
Mr. Conway. We will attempt to meet that timeframe.
Mr. Meadows. Okay. What timeframe would be reasonable, Dr.
Conway?
Okay. I see the person that actually is doing the work who
says you can make the 120 days. All right. That is great. Thank
you.
And my final question, then I am going to recognize the
ranking member for his closing remarks.
Mr. Tillotson, let me share a concern that I have. We want
to always give our fighting men and women the resources that
they need. And yet what I heard today was a less than robust
implementation of some of the GAO reports as it relates to your
particular area. I also heard you saying, well, we are making
progress and all of that. What I don't want to do is see that
40 percent of what you implement that really have no impact,
substantial impact, in terms of the bottom line, get
implemented year after year, and the 60 percent that actually
would make very systemic changes continue to get rolled over.
And that is what I am seeing, that is what I am reading, is
that we are making limited progress as it relates to that. And
what happens is it makes it very difficult on someone who is
trying to make those appropriation decisions on giving you the
tools that you need, and yet we hear about gross
inefficiencies.
So it is incumbent upon you to help prioritize the
recommendations that the GAO is making on an annual basis and
say we are going to implement these. These have the most
significant--will you be able to report back to this committee
within 120 days on the top recommendations for the GAO that
have yet to be implemented and how you are going to implement
those?
Mr. Tillotson. Mr. Chairman, we will report back. Thank
you.
Mr. Meadows. Within 120 days?
Mr. Tillotson. Yes, sir.
Mr. Meadows. All right. Thank you. With that, I will
recognize the ranking member for his closing remarks.
Mr. Cummings. Mr. Dodaro, I just want to go back to Mr.
Jordan's questions. And talking about, I guess, not only
recommendations that may have been made with regard to the IRS,
but to other agencies, but let's zero in on the IRS. How much--
I mean, you take into consideration budget cuts. Right?
Mr. Dodaro. Yes, sir.
Mr. Cummings. And the ability to get these things done?
Mr. Dodaro. Yes. Yes. We make sure that our recommendations
are going to be, you know, cost-effective recommendations. Now,
typically, when we make a recommendation, the agency has
flexibility in how to implement it. We don't tell them, you
know, exactly how they need to implement the recommendation. So
they have flexibility in order to do that. But we take that
into account. And we believe our recommendations, if
implemented, will be cost effective. Now, some of them require
perhaps a little bit of an upfront investment to implement the
recommendations, but we believe that the benefits will exceed
the cost of implementing our recommendations.
When I report to you and the rest of the members of the
Congress that our recommendations implemented last year
resulted in financial benefits over $70 billion, that is net of
cost. So that is a net figure. So that is what we track.
Mr. Cummings. And we can do a lot better. Can't we?
Mr. Dodaro. Yes.
Mr. Cummings. Is the DOD spending too big to count?
Mr. Dodaro. Well, they haven't been able to account for it,
let me put it that way. I mean, they are the only major Federal
agency that has not been able to pass the test of an
independent audit. They have--just in the last year alone, they
have scaled back the audit requirements. They don't prepare a
full set of financial statements, only a 1-year budget data.
And they have not been able to get an opinion on 1-year budget
data. So I am concerned.
As Mr. Tillotson mentioned, you know, I have been having
meetings with the DOD--in fact, we have another one this
afternoon--to focus on the areas where they need to make
improvements. They are not fixing the underlying problems
satisfactorily. And what they have promised me is that they
were going to present a comprehensive corrective action plan
for making the changes necessary to be able to do it. But right
now, there is not proper accounting for the money that is being
spent, and there is not proper oversight over the assets that
the DOD has, the property, plant, and equipment issues that
they have. And they are in need of significant improvement.
Mr. Cummings. And, of course, everything you just said just
opens the door for all kinds of mischief, for lack of a more
stronger word.
Mr. Dodaro. What we say is control problems.
Mr. Cummings. Yeah. All right.
Mr. Dodaro. In an unemotional fashion.
Mr. Cummings. All right. Thank you all very much. I
appreciate it.
Mr. Meadows. I thank the gentleman.
Again, I want to thank each of you. Let me tell you why not
only this hearing is important, but it sets a benchmark every
year for us to look at. Whether it is a high-water mark or a
low-water mark, we will leave that up for debate for another
day. But in doing that, we need to set that standard for each
one of you. What I would encourage each of you, I would hope
that next year, that it is not the same 3 agencies that are
here that have yet to implement. And let me tell you the reason
why.
It is because along with that, improper payments of which
we will have a hearing in the coming weeks, those improper
payments go right across the same groups. You know, when we
look at improper payments, whether it is Medicaid, Medicare, or
any of those, certainly it is HHS and CMS having a role in
that. You know, there is a headline today or within the last
few hours, actually, ``The IRS admits that it encourages
illegals to steal Social Security numbers for taxes.'' Now, you
can't control what is in the press, but here my point is this,
is that it is all about the earned income tax credit. And if
there is something that is not allowing the IRS to go after
those improper payments, because this is not the first hearing,
I have been in four or five, where we continue to have this
problem. Enough is enough. It is time that we address that
problem. And if there is something from a statute standpoint
that doesn't allow you to share the Social Security numbers so
that you can do the proper vetting that you need to do, let us
know. We will work about that in a bipartisan way to address
it. But I hope that this is the last hearing where we are not
addressing that particular problem.
From a DOD standpoint, you know, there is too many stories
out there in terms of what we are spending. And the fact that
you can't pass an independent audit where you have the most
responsible, hardest working people willing to put, you know,
their lives on the line for the freedom of our country, and yet
from an accounting standpoint we can't do it. It is time that
we get our house in order. And so I encourage all of you to
work with the GAO on implementing those. I thank you.
If there is no other further business before the committee,
the committee stands adjourned.
[Whereupon, at 12:33 p.m., the committee was adjourned.]
APPENDIX
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