[Senate Hearing 106-712]
[From the U.S. Government Publishing Office]
S. Hrg. 106-712
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2001
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
on
H.R. 4871/S. 2900
AN ACT MAKING APPROPRIATIONS FOR THE TREASURY DEPARTMENT, THE UNITED
STATES POSTAL SERVICE, THE EXECUTIVE OFFICE OF THE PRESIDENT, AND
CERTAIN INDEPENDENT AGENCIES FOR THE FISCAL YEAR ENDING SEPTEMBER 30,
2001, AND FOR OTHER PURPOSES
__________
Department of the Treasury
Executive Office of the President
Nondepartmental witnesses
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate
______
U.S. GOVERNMENT PRINTING OFFICE
62-810 cc WASHINGTON : 2000
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
20402
COMMITTEE ON APPROPRIATIONS
TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico ERNEST F. HOLLINGS, South Carolina
CHRISTOPHER S. BOND, Missouri PATRICK J. LEAHY, Vermont
SLADE GORTON, Washington FRANK R. LAUTENBERG, New Jersey
MITCH McCONNELL, Kentucky TOM HARKIN, Iowa
CONRAD BURNS, Montana BARBARA A. MIKULSKI, Maryland
RICHARD C. SHELBY, Alabama HARRY REID, Nevada
JUDD GREGG, New Hampshire HERB KOHL, Wisconsin
ROBERT F. BENNETT, Utah PATTY MURRAY, Washington
BEN NIGHTHORSE CAMPBELL, Colorado BYRON DORGAN, North Dakota
LARRY CRAIG, Idaho DIANNE FEINSTEIN, California
KAY BAILEY HUTCHISON, Texas RICHARD J. DURBIN, Illinois
JON KYL, Arizona
Steven J. Cortese, Staff Director
Lisa Sutherland, Deputy Staff Director
James H. English, Minority Staff Director
------
Subcommittee on Treasury and General Government
BEN NIGHTHORSE CAMPBELL, Colorado, Chairman
RICHARD C. SHELBY, Alabama BYRON L. DORGAN, North Dakota
JON KYL, Arizona BARBARA A. MIKULSKI, Maryland
TED STEVENS, Alaska ROBERT C. BYRD, West Virginia
(ex officio) (ex officio)
Professional Staff
Patricia A. Raymond
Tammy Perrin
Lula Edwards
Chip Walgren (Minority)
Administrative Support
Lis Blevins (Minority)
C O N T E N T S
----------
Thursday, March 23, 2000
Page
Department of the Treasury: Internal Revenue Service............. 1
Thursday, March 30, 2000
Department of the Treasury....................................... 85
Bureau of Alcohol, Tobacco and Firearms...................... 115
U.S. Customs Service......................................... 100
U.S. Secret Service.......................................... 126
Federal Law Enforcement Training Center...................... 148
Financial Crimes Enforcement Network......................... 155
Tuesday, April 4, 2000
Department of the Treasury: Office of the Secretary.............. 199
Thursday, April 6, 2000
Executive Office of the President: Office of National Drug
Control Policy................................................. 231
Material submitted subsequent to the conclusion of hearing:
Merit Systems Protection Board............................... 285
Office of Personnel Management............................... 289
Nondepartmental witnesses........................................ 295
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2001
----------
THURSDAY, MARCH 23, 2000
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10 a.m., in room SD-124, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell, Stevens, and Dorgan.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
STATEMENT OF CHARLES ROSSOTTI, COMMISSIONER
opening remarks
Senator Campbell. Good morning, the committee will be in
order. This morning we will be talking with the Commissioner of
the Internal Revenue Service, Mr. Charles Rossotti. Welcome,
Commissioner. Glad to see you again.
The IRS is requesting a 9 percent increase for fiscal year
2001, almost $729 million more than this year. Over half of
that is for inflationary increases to allow the agency to at
least maintain current levels. The Commissioner has requested
$119 million as the next installment for the information
technology investments account. Congress has already provided
$506 million for this computer modernization project with
stringent requirements for the release of funds. We have
approved the release of only $68 million so far and we are
reviewing a third request to release $176.3 million. I am sure
we will be talking about this in greater detail this morning.
The Commissioner is also asking for $42 million more to
reorganize the agency. Commissioner, the agency has come a long
way, and we are very proud of it. I also have no doubt that the
ongoing reorganization needs to be done, but I would like to
know how they are going to spend the $140 million provided so
far.
Last, but certainly not least, the Commissioner is asking
for a total of $217 million in supplemental and regular
appropriations for staffing tax administration for balance and
equity, also known as STABLE. As I understand it, this
initiative would provide almost 2,000 additional staff
throughout the IRS. Each of these requests might certainly be
justified on their own merits. The problem arises when there
just is not enough money to go around.
It should be noted that the requested level for the
Treasury and General Government bill is almost 20 percent more
than last year, and last year was a good year for agencies
under our jurisdiction I believe. As everyone is aware,
Congress has not yet passed a budget resolution and therefore
has not made a decision about the funding levels for fiscal
year 2001. I think it is safe to assume that the allocation
this subcommittee will receive will not be sufficient to fund
all the requests made by agencies under our jurisdiction.
Having said that however, I would like to note that the
Commissioner is to be commended for what he has already
accomplished at the Internal Revenue Service. Effecting changes
at an agency the size of the IRS is like trying to turn an
aircraft carrier around on a dime. I certainly appreciate the
trips you have made to Colorado, as I am sure Senator Dorgan
appreciates your trips to North Dakota. You have envisioned an
agency which you believe can accomplish competing goals, and
that is not easy. Being customer friendly, while at the same
time collecting taxes due is a tough thing to do. It is my hope
that we will be able to provide sufficient funding to help you
in your efforts.
With that I would like to turn to Senator Dorgan.
statement of senator byron l. dorgan
Senator Dorgan. Mr. Chairman, thank you very much. Let me
also thank the Commissioner for being here today with your
staff.
Last year, Mr. Commissioner, you talked about the efforts
that you were undertaking to put the word service back in the
Internal Revenue Service in a real way, and I must say that you
have kept your word. In North Dakota, for example, we have tax-
mobiles moving around the State, and I met one of your
employees in an airport recently and I could just see the
excitement in her eyes as she was telling me about being out in
the tax-mobile. She liked that. She liked it because she felt
that as an employee of the Federal Government she was actually
able to go out and help people and extend service. That is one
of the employees down in the ranks someplace who appreciated
it, not even discussing the appreciation I am sure the
taxpayers in North Dakota and around the country have.
You have done a number of other things, problem-solving
days and a range of other changes in hours, and I think that is
very important. As a former tax administrator I know, and you
especially know, that this tax system of ours is still
``voluntary.'' If 10 million people decide they are not paying
taxes, you do not have a ghost of a chance to enforce 10
million actions in court against them. People pay taxes on a
voluntary basis in this country because they understand they
have an obligation to do so and feel a responsibility to do so.
As long as we have widespread compliance in this system, this
system will work.
Part of that is for the Internal Revenue Service to extend
a helping hand through expanded service to taxpayers. So I want
to just say, thanks for keeping your word and moving down the
road in that direction. That I think is helpful to us and
helpful to our tax system.
I have some of the same comments that Senator Campbell has
made. I do not know exactly how we are going to be able to deal
with all of the interests and needs with respect to the
allocations of the subcommittee, but we are going to do the
best we can.
Let me just include the rest of my statement in the record
with just one additional statement. I remain interested, Mr.
Commissioner, in a range of issues on enforcement, the
aggressive use of tax shelters is very troubling these days. I
have read a great deal about it. I continue to be very troubled
by the issue of transfer pricing and wonder whether you have
the resources to deal with that. So we will talk about a few of
these issues, but let me put the rest of my statement in the
record and welcome you and your staff to the subcommittee this
morning.
[The statement follows:]
Prepared Statement of Senator Byron L. Dorgan
Thank you, Mr. Chairman. As occurred last year, Commissioner
Rossotti is the first witness before this subcommittee for this year's
round of budget hearings. And as the Internal Revenue Service is the
largest single component of this subcommittee's budget--in terms of
both level of appropriations as well as total employees--it is only
fitting that the IRS Commissioner go first.
I want to first recognize the efforts that the Commissioner has
undertaken to put ``service'' back into the Internal Revenue Service
since we met approximately 13 months ago. At last year's hearing he
made that a commitment to us and I believe he has made strides in
meeting that commitment. I especially appreciate his willingness to
make a ``taxmobile'' available to taxpayers in rural parts of my state
of North Dakota. The taxmobile started making stops in North Dakota
last month and it has been received warmly by taxpayers who value face-
to-face service from what is often viewed as a faceless and
intimidating government entity. I have also had the opportunity to
speak with IRS employees in North Dakota who also find great benefits
with their experiences with the taxmobile--even though it may take them
away from their regular duties for a day or two. I hope your people are
reporting back to you that the taxmobile is working and perhaps we can
see the program expanded to other rural areas.
Your $8.841 billion budget request calls for a $729 million
increase over last year's appropriation. This assumes a Supplemental
request for $40 million in initial funding for your staffing initiative
known as STABLE which--frankly--is unlikely to be approved. Your budget
documents state that nearly half of this requested increase ($336
million) is merely to maintain current levels for pay, benefits and
non-labor inflationary costs. It does not reflect your expressed desire
to increase staffing to stabilize and strengthen tax compliance and
customer service programs. It does not include key aspects of your on-
going modernization efforts at reorganizing the IRS to meet the
requirements of the IRS Restructuring and Reform Act of 1998. Nor does
it reflect the $119 million you have requested for continued computer
upgrades of your core business systems in the Information Technology
Investment Account (ITIA).
This troubles me because a compelling case can be made for the
majority of these increases. Your submitted statement certainly lays
out such a case. However, the Administration's budget request for this
subcommittee seeks increases in funding for all the Departments and
Agencies under our jurisdiction by nearly $2.5 billion--that's billion
with a ``b''--over the levels we appropriated last year. It is
extremely unlikely that we will get an allocation that will allow us to
meet all of these requests and we are going to need your assistance in
determining what are your highest priorities as we develop a spending
plan for the coming fiscal year.
During my round of questioning, I will want to follow up on some of
the issues we discussed last year to learn how well your goals are
being implemented. One area will be rural tax assistance. Mr. LaFever
spoke last year of some goals he wanted to achieve and I want to
explore how this service has improved. Another area was the ``one-
stop'' tax shops. Last year, Mr. Commissioner, you indicated you had
established one in Utah. I want to explore with you how this service
has expanded.
I would also like to discuss with you several other matters that I
know are of interest to the IRS and Congress. For example, what is the
IRS doing to combat the peddling of aggressive corporate tax shelters
and other schemes--including transfer pricing--that are used by large
corporations to avoid taxes, and how are you allocating resources to
respond to them? Does the IRS have the tools it needs to deal with this
growing problem? What progress is the IRS making in its congressionally
mandated study of one of the tools it now uses to improve its transfer
pricing enforcement? There are a few other areas that I hope to discuss
with you after your testimony, if time permits.
Again, thank you Mr. Commissioner for joining us this morning to
discuss the continued improvement of the IRS and your many budgetary
requirements.
Senator Campbell. With that, Mr. Commissioner, why don't
you go ahead and proceed?
STATEMENT of Charles Rossotti
Mr. Rossotti. Senator Campbell and Senator Dorgan, thank
you for those opening comments. Some of the more specific
questions I would be glad to respond to on tax shelters and
some of the budget items, but let me just give an overview
here.
As you know, I think the committee knows that we are really
guiding most of what we are doing by the directions that we
felt we were given in the Restructuring and Reform Act which
calls for probably the most significant changes in the way the
IRS works in many, many years.
I was glad to hear both of you note in your opening
statements, I think we are already witnessing some positive
results in the form of the implementation of the 71 taxpayer
rights that were in the restructuring act, and delivering on
improved service to taxpayers, for example, during this filing
season. As well I should note the completion, very
successfully, of our year 2000 conversion program, which was a
major and risky program, but fortunately has concluded with
very few problems as we entered this filing season.
Despite those improvements, Mr. Chairman, it is a fact that
we cannot claim today that the IRS is meeting what I would
consider the legitimate service expectations of the compliant
taxpayers that Senator Dorgan referred to. At the same time,
our level of compliance activities is dropping. Also, as has
been pointed out by many observers, the systems that we use to
manage an account for our $1.8 trillion of tax revenue are
inherently deficient. These problems are severe and if they are
not addressed I think they would certainly, over time,
undermine the fairness and viability of the Federal tax system.
On the other hand, these problems are not new. They are not
newly identified, nor do I believe that they are impossible to
solve. In fact, I think we have in place today, at a top level
at least, all the plans that we need that will allow us to
address these problems. We have implemented the many and
complex provisions, taxpayer rights provisions of the
restructuring act.
We have completed a whole system of measuring performance
throughout the IRS. Our reorganization, which is aimed at
increasing our customer focus as well as our management
accountability and efficiency, is progressing rapidly. We have
a whole new top management team in place.
Building on that foundation, we are now beginning the long
process of reengineering our business practices and our
technology, which you noted, Mr. Chairman, in your opening
statement. We have submitted some requests to this committee
for release of the money. We believe that this will help us to
increase service to taxpayers as well as our compliance
effectiveness and our efficiency.
Trends in IRS Workload
To succeed in all of this though, which is a massive
change, we will need adequate budget resources in fiscal 2001,
both to address our critical operational needs and to invest in
new technology. I should note, as is noted here on this chart,
that the rapidly expanding economy is steadily increasing the
IRS workload.
Just to give one example, since 1993, the number of
individual tax returns with over $100,000 reported income,
which are generally the more complex kind of returns, have
increased by 63 percent. In the meantime, the IRS staff has
dropped by 17,000 staff since that period.
On top of those general trends, as you could see in the
second chart, the Restructuring and Reform Act has, as we now
know it, added about 4,500 full-time equivalent positions to
administer the code sections listed there.
Finally, since our compliance personnel, our auditors and
examiners and collectors, represent the largest component of
the budget and since they are the ones that are required to
administer most of these provisions, our net compliance
staffing available to do actual casework has declined very
rapidly, which you can see on the red line on this chart.
Now on top of that, besides these direct effects, there are
some very pervasive changes in the way business is done under
RRA, which understandably and as has been reported widely has
created some uncertainty, some confusion, and a great deal of
relearning of the way jobs are done among our employees and
managers. So the effect of that has been to increase the amount
of time required to complete each case.
When it is all put together the bottom line is that our
compliance activity, our number of exams and collections have
been cut about in half since 1997. This is not because we have
diverted people to service so much, because the service is
also, while improving, still not at an acceptable level.
That is why, Mr. Chairman, that we have asked in this
budget, to meet these pressing operational requirements, for an
increase in staffing, which as you noted we refer to as STABLE.
This initiative requests a total of 2,833 additional staff.
That was split between a fiscal year 2000 supplemental and a
2001 request, but at a total annual cost of $188 million. With
this staffing level we would expect that in 2001 the IRS will
be able to stabilize the level of exam and collection
compliance activity while still implementing these taxpayer
rights provisions, and also allow us to maintain or maybe
slightly increase our service levels.
So the idea is that this staffing increment would enable us
to meet our critical operational needs while we transition to a
new and more efficient organization structure and new
technology. That, as you noted, Mr. Chairman, is the second key
part of our budget.
IRS Computer Systems
The IRS depends entirely on our computer systems to
administer the tax system and to properly account for our $1.8
trillion in tax revenue. As many observers have noted, and I
have to say having come in with 28 years in the technology
business, it was quite a shock to me to see the systems that we
depend on because they are really fundamentally, and I would
say irremediably deficient. We cannot depend on these systems
in the long term.
Our plan for reengineering all these systems has been
described in my testimony in more detail, and also in the
submission we made to this committee. To sum it up, in 2001 we
are requesting $119 million to continue progress on the
information technology investment program. We have also
requested, to ensure continued funding, an advanced
appropriation for 2002. We have $40 million for pressing short
term needs in 2001.
I do want to note that while there is no way that we can
avoid risk in managing a program of this size and complexity,
we do feel that we can manage these risks and can achieve our
goals just as we did with our $1.4 billion Y2K program. I think
that we now have in place many of the elements that are needed
to do this properly which were not really in place fully in the
past.
Just to note some of the key items that we have to manage
this program. We now have a single centrally managed
information systems organization, a very active top level
governance process which I personally chair and which includes
all of our key executives. We are adhering rigorously to
architectural, technological, and methodological standards. We
awarded a prime contract to manage the development and
integration activities.
I think most importantly, we have an unwavering commitment
to an open process which includes all observers, GAO, TIGTA,
OMB, Treasury and all of our internal people to get together
and forthrightly confront problems and issues and make
adjustments to schedules and scope as reality dictates. We will
not hesitate to make changes to ensure that we get the value
for the taxpayer's money in this program.
So to conclude, Mr. Chairman, I believe we are making real
progress on the goals and mandates that Congress gave us almost
unanimously in passing the restructuring act. If Congress can
provide continued and assured support for IRS modernization
such as continue our 2001 budget request I think we will be
able to produce visible, tangible changes in service,
compliance, and productivity, which I believe is what the
taxpayers of America deserve and expect.
Thank you, Mr. Chairman.
[The statement follows:]
Prepared Statement of Charles O. Rossotti
introduction
Mr. Chairman and distinguished Members of the Subcommittee, the
fiscal year 2001 budget request is submitted at a remarkable time for
the Internal Revenue Service and America's taxpayers. Following the
clear directions set forth by the landmark IRS Restructuring and Reform
Act of 1998 (RRA 98), the IRS is planning and implementing the most
significant changes to its organization, technology and the way it
serves taxpayers in almost a half-century. However, many years of hard
work lie ahead to make this modernization a reality, and fiscal year
2000 and fiscal year 2001 represent critical junctures in our efforts.
Neither Congress nor the IRS could have anticipated all the
implications, including resources, needed to implement the full scope
of RRA 98 which covers 71 new taxpayer rights and organizational and
technological modernization. Delivering on RRA 98's mandates remains a
learning process. In the 20 months since this bill was passed we have
learned a great deal and at this point I am convinced we can succeed
through the combination of a limited increase in staff resources and
investments in technology and organization.
The fiscal year 2001 budget request provides an overview of the
strategic direction that the IRS is following to meet the public's
expectations. Since our program involves massive and complex change,
there is considerable risk that progress will not always happen as
planned or expected, and that setbacks will occur. Although there is no
way to avoid risk, we can identify, confront and manage it carefully by
adhering to best established practices and honestly communicating what
the IRS is doing and why. This is our commitment to the Congress and
the public.
During fiscal year 2000, my senior management team and I will
revise our strategic plan, as originally sent to Congress in 1997 (and
revised through an interim update included in the fiscal year 2000 and
fiscal year 2001 Congressional Justifications) to reflect the
reorganized IRS. In addition, the revised strategic plan will address
key external factors as part of our strategic and operational planning
activities.
how to deliver most efficiently and economically on rra 98's mandates
The Challenge
Through the Restructuring Act, Congress asked the IRS to achieve
three goals. One, we must respect taxpayer rights and provide high
quality service to every taxpayer. Two, we must ensure that the taxes
that are due are paid. And three, in an era of tight budget caps we
must do all of this very efficiently. I cannot stress enough that we
must achieve all of our goals to succeed. Our purpose is not to move an
imaginary pendulum one way or the other; it is to improve the entire
way the IRS works.
Fulfilling RRA 98's mandate required changes in every aspect of how
the IRS works, including implementing the taxpayer rights provisions I
have mentioned, many of which were effective on the date of enactment.
We also had to carry out changes in the way performance is measured,
people are managed and evaluated, and the organization is structured.
In addition, we began the long process of reengineering and replacing
nearly every basic business system.
At the same time, the IRS had to continue to fulfill essential
operational requirements, including providing service to taxpayers
during each filing season, administering roughly 801 tax law changes
from the Taxpayer Relief Act of 1997, including nearly 300 new
provisions, and completing the enormous Y2K program.
The IRS also received recommendations from many sources to improve
service or fix problems. For example, last year, the IRS received 58
audit reports from the Treasury Inspector General for Tax
Administration (TIGTA) containing 314 specific recommendations, and 74
reports from GAO containing 42 specific recommendations. In addition,
27 TIGTA and 36 GAO audits are underway. The National Taxpayer Advocate
also identified and made recommendations on the top 20 problems
affecting taxpayers. Addressing and managing these changes requires
significant management attention, and many require additional
resources, including information systems resources, to implement.
Over the last 2 years, we have managed all of our major changes and
risks by grouping them into a few basic change programs, each with a
management process and a carefully planned and controlled schedule that
reflected our best current judgment on priorities, resource limitations
and risks.
Our first priority was implementing RRA 98 taxpayer rights
provisions. However, given the short time frames, and many competing
demands, our capacity to provide guidance to the public and employees
and to conduct training for 100,000 employees was stretched to the
limit.
Ensuring legal compliance was the initial focus. Often, we did not
know the amount of time and resources needed to carry out these
provisions. In fiscal year 1999, for example, we briefed and trained
our staff on 55 RRA 98 provisions and provided a total of 2 million
hours of training. We estimate that nearly 3,000 full time equivalent
(FTE) personnel were required for RRA 98's specific administrative
provisions.
We are at the stage where we have implemented the RRA 98 legal
provisions. However, we still have several years to make them work more
efficiently and with higher quality. Training and management are the
immediate challenges and in fiscal year 2000, we will continue a high
level of training.
I want to stress that we are wholly committed to faithfully
implementing each and every one of the taxpayer rights provisions and
make them work as intended, while still fulfilling our mandate to
collect taxes that are due. We will get the job done and we will get it
right. However, we will also make mistakes along the way and there is
not yet an acceptable level of quality, efficiency and effectiveness
for some of these provisions.
Two Different Paths: One Clear Choice
Mr. Chairman, quite apart from RRA 98, or any problems or
initiatives the IRS is pursuing, the expanding economy continues to
steadily increase the IRS' workload. Over a period of years, this
expanding workload has compounded to reach fairly significant levels.
For example, since 1993, the number of individual tax returns with over
$100,000 in reported income, which are generally the more complex
returns, have increased by 63 percent. Meanwhile, because of budget
constraints, the IRS staff has dropped by 17,000 FTE since fiscal year
1993. At the same time, the new TRA and RRA 98 taxpayer rights required
new procedures and increased time per case. These conflicting trends,
increased demands, and reduced staff have not been addressed by new
technology. During this period, almost all of the technology spending
and focus were devoted to addressing the Y2K problem and responding to
TRA and RRA 98.
This conflicting set of trends has left the IRS in a position in
which we are not yet meeting the legitimate service expectations of the
vast majority of compliant taxpayers who voluntarily pay their taxes,
while compliance activity, such as examination coverage and collection
enforcement activity, is dropping rapidly, thus potentially undermining
the fairness of the whole tax system.
Broadly speaking, one can conceive of two ways to reverse this
downtrend. The first is to add staff in the traditional manner to
process more returns, answer more telephone calls and letters, and
increase casework such as examinations and collection cases. This
approach would require hiring more than 8,000 staff just to return to
the fiscal year 1997 level of activity and then adding 2,000 more staff
annually to remain even with the increasing workload.
Given the growing economy and increased demands of complying with
RRA 98, this approach would be extremely expensive. For the vast
majority of taxpayers, it would also not meet modern expectations for
service levels because no amount of staff can fully compensate for the
IRS systems deficiencies. In addition, in today's labor market, the IRS
would have difficulty attracting and retaining sufficient and qualified
staff.
There is, however, another way, and it is the basis for our fiscal
year 2001 budget request. By investing in reengineering IRS' business
practices and technology together with limited staffing increases, we
will be able to perform all aspects of the IRS mission more effectively
and efficiently and in line with the best private and public sector
practices. This second approach will, over time, enable the IRS to meet
public expectations for its mission with lower growth in staff and
future budgets.
Although we need additional staff resources to succeed, the amount
is only modestly more than present levels of staff and would still be
less than the IRS staffing level of 1997. This approach is possible
since our basic strategy to meet increased workload and service demands
depends on reengineering business practices and technology. Freeing up
positions through business systems investment is a critical
requirement. By investing in technology and improved business
practices, the fiscal year 2001 budget request avoids the traditional
staff increases that would otherwise be required. It is important to
stress, however, that the investment in modernization is essential for
this approach to work.
strategic direction: ``standing up'' the new irs
During the second half of fiscal year 2000 and throughout fiscal
year 2001 and beyond, we will continue implementing the new IRS. This
process includes realigning our personnel resources and putting in
place: (1) revised business practices and strategies, (2) a new
organization and management, (3) new information technology, and (4) a
balanced performance measurement system.
revised business practices and strategies
How the IRS interacts with taxpayers is defined by its business
practices. They determine how tax filing is performed, what notices are
sent under what circumstances, the way phones are answered, how
collections of balances due are carried out and how examinations are
conducted.
Closely related to business practices are the IRS strategies that
guide them, such as how returns are selected for examination, what
compliance issues are emphasized, and how we encourage electronic
filing. Both strategies and practices are also constrained by, and to a
considerable degree determined by, the established organizational
structure and the installed technology base. These are the two
principal instruments through which the IRS executes its business
practices and strategies.
The strategies the IRS will pursue include: (1) preventing taxpayer
problems or addressing them as early as possible; (2) improving
taxpayer communications; (3) making TRA and RRA 98 taxpayers rights
work more efficiently and effectively; (4) broadening electronic tax
administration use as mandated by RRA 98; (5) leveraging IRS resources
through effective partnerships with tax administration organizations
and groups that deal regularly with taxpayers; (6) tailoring practices
and strategies to specific taxpayer needs and problems; and (7)
addressing serious areas of noncompliance with specific strategies.
new organization and management
Why is the IRS reorganizing? A key reason is that our slow progress
to make improvements is due in large part to the twin barriers of
organizational structure and obsolete computer systems. The traditional
IRS structure does not adequately support taxpayer demands. It
represents the way many businesses were organized for many years--
around internal technical disciplines and geographical locations.
Following the directions set by RRA 98, the IRS is creating a
modernized structure similar to those widely used in the private
sector: organizing around customers' needs, in this case taxpayers. The
future customer-focused organization consists of:
--Four operating divisions--Wage and Investment Income (W&I), Small
Business and Self-Employed (SB/SE), Large and Mid-size Business
(L&MSB); Tax Exempt and Government Entities (TE/GE);
--Two service organizations--Information Systems and Agency-wide
Shared Services;
--Separate specialized independent channels for taxpayers--Appeals
and the Taxpayer Advocate Service;
--Criminal Investigation, which is a line unit and will have sole
responsibility for investigation of criminal violations of the
tax law;
--Chief Counsel, which will provide tax advice, guidance and
legislative services to all components of the IRS; and
--A smaller National Headquarters office which will assume the
overall role of setting broad policy, reviewing plans and goals
of the operating units, and developing major improvement
initiatives.
Each operating division will be responsible for creating and
executing business practices and strategies to meet those needs, and
managers at all levels will be expected to be knowledgeable in the
substantive problems and issues that arise in administering the tax law
in their respective divisions.
The organization will be led by management teams, including
individuals with the broad range of experience needed to lead each unit
in the dual task of managing current operations while modernizing
business practices and technology to achieve the new mission and
strategic goals. The leaders of these units have now all been selected
and are rapidly putting in place the remainder of the management
structure in each unit.
new information technology
Reorganizing the IRS' outdated structure and replacing its archaic
technology will take years to fully accomplish, but it is absolutely
necessary if we are to reach a higher level of performance. For any
information-intensive, service-oriented enterprise, such as the IRS,
information technology will continue to be an essential resource on
which all organizational performance depends.
The IRS is no different from the private sector in this respect,
but it faces some unique challenges. IRS' core data systems are
fundamentally deficient. The large and extremely fragmented nature of
the IRS' technology inventory creates many problems, including poor
service to end users, high cost, long timelines to implement changes
and improvements, and control and security difficulties.
Technology modernization is essential to carrying out RRA 98,
organizational modernization and providing additional services and
efficiencies, but it is risky by its very nature, size and complexity.
In fact, there is no way to avoid risk. However, we are not repeating
past mistakes. We are prudently and carefully managing the process,
providing for a careful review and external validation of each and
every part of the program and making necessary adjustments.
The IRS is establishing an overall architecture for a set of new
systems that will accommodate all essential tax administration
functions according to modern standards of technology and financial
management. During this process, the new and old systems must co-exist
and exchange data accurately for an extended period until data is
gradually converted from old systems to new ones. In 1998, the IRS
established the Core Business Systems Executive Steering Committee to
provide a framework for the overall management of this process. This
committee consists of top executives, chaired by the Commissioner, and
supported by key staff groups.
balanced performance measures
The IRS Balanced Performance Measurement System is being developed
as part of the effort to modernize the IRS and reflect the agency's
priorities, as articulated in the IRS mission statement and in
accordance with RRA 98.
In September 1999, a ``Balanced Measures Regulation'' was issued to
formally establish the IRS' new performance management system. The
issuance of the regulation, which followed a public comment period,
sets forth the structure for measuring organizational and employee
performance within the IRS. The IRS has taken great steps to integrate
its budget request with these balanced performance measures to ensure
compliance with the Government Performance and Results Act of 1993.
This year the IRS will adopt its strategic goals as its annual
performance goals. This framework will assist the IRS in describing how
programs and initiatives tie to achievement of the mission and goals as
reflected in improvements in the measurement results.
In CY 1999, balanced measures at the operational level were
approved for Tax Exempt and Government Entities, Large and Mid-size
Business, Appeals, the Taxpayer Advocate Service, Research, Statistics
of Income, and additional Customer Service product lines. These
measures are undergoing final design and implementation for use in
field operations units. Other measures teams formed in CY 1999 that are
expected to have approved balanced measures in early CY 2000 include
Information Systems, Criminal Investigation, Counsel, Submission
Processing, and Agency Wide Shared Services.
By necessity, our first performance measures priority was to
develop measures that were consistent with the IRS' strategic goals and
with section 1204 of RRA 98 which prohibits use of enforcement
statistics to measure the performance or set goals for any individual.
In fiscal year 2000, we largely completed the initial development of
operational performance measures, and will begin development of
strategic measures. Strategic measures will measure broad performance
of our four major operating divisions and for the IRS as a whole. Our
strategic performance measures' objective is to provide quantitative
indications of the overall success of each major unit and of the whole
IRS in reaching our three strategic goals.
fiscal year 2001 budget request
To deliver on the RRA 98 mandates for improved service and taxpayer
treatment while also increasing compliance effectiveness, IRS requires
increased funding in fiscal year 2001. With improved management and
technology enabling the delivery of improved service and increased
compliance effectiveness, the IRS will be positioned to succeed with
limited resources in future years. As the streamlined management and
new technology become effective, the IRS can also improve efficiency
and maintain a stable workforce in relation to the economy. However, we
face a major budget challenge in fiscal year 2000 and fiscal year 2001,
which, unless addressed, will threaten not only the IRS reform and
restructuring program, but the entire tax system.
The fiscal year 2001 request is $8.841 billion (without the Earned
Income Tax Credit Account), $769 million more than the final fiscal
year 2000 enacted level of $8.072 billion. This is $729 million over
the fiscal year 2000 proposed funding level of $8.112 billion, which
includes a $40 million supplemental to stabilize the IRS workforce. Of
this increase, $119 million is for resuming funding of the Information
Technology Investment Account (ITIA) for which there was no funding in
fiscal year 2000. The IRS requires this increase in fiscal year 2001 to
deliver on the RRA 98 mandates, manage organizational modernization,
and invest in critically needed information technology.
Our budget request has two broad management categories: (1)
Maintaining Current Operations, and (2) Modernization. Increases to
maintain current operations include more FTE to assist in stabilizing
enforcement activity levels and modestly increasing service levels, and
to provide adequate non-labor resources for increasing electronic tax
filing capability and contractual support for critical operational
activities of the agency. Increases for modernization include funds for
completing organizational modernization, business line investments, and
replenishing of ITIA. The requested resources provide for full
implementation of RRA 98 along with plans to modernize and realign the
IRS organization, and fund the workforce.
maintaining current operations
To implement RRA 98, the IRS must modernize its organizational
structure and technological base. However, during this time, we must
also maintain operational activity at acceptable levels.
As I discussed earlier in my testimony, RRA 98 established 71
taxpayer rights provisions, each of which imposed additional procedures
or new requirements for tax administration. This increased the time
required to handle existing cases and required the IRS to divert
compliance personnel to handle new procedures such as Innocent Spouse
and Third Party Notice provisions. In addition, other compliance
personnel were re-assigned to provide extended hours of telephone and
walk-in service. This came on the heels of declining staffing from
fiscal year 1996 through fiscal year 1999.
In part because of these changes and increased workload demands,
the number of examination and collection cases handled declined by
half. This illustrates the need to balance the continued improvements
in customer service with funding adequate to maintain enforcement
activity to collect unpaid taxes and address areas of potential under-
reporting of income.
Current Services Level
The IRS is requesting a net increase of $336 million to maintain
the current services level. The IRS is a labor-intensive organization
and we must have a stable workforce. To maintain current operations,
carry out a successful filing season, oversee tax administration
programs, and implement organizational modernization, the IRS must have
the resources to pay for the inflationary costs associated with
statutory pay and other mandatory increases.
Since 1992, the IRS workforce has decreased more than 16 percent
while handling significant increases in workload due to tax law changes
and customer demand. The downward trend in FTE is the result of: (1)
reduced funding in general; (2) inadequate funding for pay components,
such as costs of within-grades (WIGs) and promotions; and (3)
insufficient funding of non-labor inflationary costs for required
agency-wide shared services support costs. During the last few years,
costs for Support Services have been cut to a bare minimum. In
addition, the IRS has proactively reduced rent costs. From fiscal year
1996 through fiscal year 1998, the IRS released 2.5 million square feet
of space for savings of $40.8 million. There is little room for further
cost reductions. Any further cuts in agency-wide shared services
support will result in further FTE reductions.
It is vital to note that the long-term decline in the IRS workforce
due to funding constraints has led to a situation where virtually no
hiring has been done since 1995 in critical front-line skilled
positions. For example, in a revenue agent workforce that was over
15,000 in 1995 and hovers at 12,000 today, the IRS has only hired 75
revenue agents since 1995. Funding of our current services request,
together with the STABLE initiative discussed next, will allow us to
begin the process of meeting the need for critical skilled positions.
Stabilizing the Workforce (STABLE)
The IRS is requesting $144 million and 1,633 FTE to stabilize and
strengthen tax compliance and customer service programs in fiscal year
2001 and $39.8 million and 301 FTE for a fiscal year 2000 proposed
supplemental. This request is collectively known as the STABLE
(Staffing Tax Administration for Balance and Equity) Initiative.
Efforts have been made to improve toll-free service, improve access
to new web-based products and information, and expand electronic
filing/payment options. However, staffing resources devoted to critical
compliance and enforcement programs have declined by more than 20
percent over the last 5 years.
Beyond the reduction in staffing levels, annual growth in return
filings and additional workload from RRA 98 contributed to a steady
erosion of enforcement presence, audit coverage, and case closures in
front-line compliance programs. Current estimates of additional work
directly related to RRA 98 total nearly 3,000 FTE for Compliance and
Customer Service activities. Although the IRS is fully committed to
delivering on every mandate and objective of RRA 98, it is essential
that we restore and maintain adequate staffing levels in our key
program areas.
To ensure that the benefits of this initiative are realized as
quickly as possible, the IRS has proposed a supplemental fiscal year
2000 appropriation, which, if approved by Congress, would allow the
hiring of 301 FTE in fiscal year 2000. This would ensure that most
training of new hires would be undertaken in fiscal year 2000, allowing
the impact of these new hires to be fully maximized in fiscal year
2001.
With this staffing level, we expect that in 2001, the IRS will be
able to slightly increase levels of service and stabilize the level of
exam and collection activity while complying with the taxpayer rights
provisions of RRA 98.
Electronic Tax Administration (ETA)
The IRS is requesting $3 million for ETA to continue progress
toward achieving the congressional goal that 80 percent of all tax and
information returns be filed electronically by 2007. In RRA 98,
Congress established the interim goal that all returns prepared
electronically, but filed on paper (approximately 80 million) be filed
electronically by 2003. Increasing taxpayers' awareness and
understanding of IRS e-file products, services and benefits will help
close the gap between the projected range of 44.1-49.4 million returns
being filed electronically in 2003 and the aggressive goals established
by Congress. This funding will be used to expand marketing efforts that
communicate the benefits of IRS e-file to both taxpayers and
practitioners. The IRS plans to advertise in the television, radio, and
print media; continue the launch of a business marketing campaign; and
conduct the necessary marketing research to ensure that ETA products
and services meet our customers' needs.
Contract Management
In fiscal year 2001, we are requesting an increase of $44 million
to fund necessary contracts that support general operations, mandatory
contractual arrangements and necessary outside expertise. In prior year
budgets, we funded these contracts--which were absolutely necessary to
conduct business--by reducing funding available for staffing. This is
in contrast to our fiscal year 2001 request that simply requests the
necessary funding. Mr. Chairman, I would like to stress that
contractual support is critical to maintaining operations and
implementing RRA 98 and the Modernization program. Our contractual
support is in three categories: mandatory, operational and expertise
contracts. I would like to describe for you the type of contracts and
provide examples:
--Mandatory contracts make up 44 percent of the total budget and are
required by law, or agreement with other Federal agencies.
These include National Archives storage of tax records;
Treasury's Financial Management Service activities for tax
refunds and lockbox collections; and Low Income Taxpayer Clinic
grants.
--Operational Contracts make up 32 percent of total budget and
support IRS operations. Examples include funding for Currency
Transaction Report processing, FedWorld management of the IRS
Web Site, and Multilingual Interpretation services for Walk-in
offices.
--Expertise Contracts make up the remaining 24 percent and are
required to obtain expertise outside the IRS for activities
including outside services for customer satisfaction surveys
and rewriting of IRS Forms and Publications in plain English.
modernization
The IRS budget is only a small part of the cost to the public of
administering our tax system. Most of the costs, both tangible and
intangible, are related to what the public encounters when it must deal
with the IRS. The tangible cost is each taxpayer's time and money. The
intangible cost is the frustration of being treated poorly when making
an honest effort to comply with a complex tax code. Moreover, this
frustration has occurred at a time when the level of service that many
people are receiving from other service providers has been increasing.
In order to provide better service to taxpayers across the board, we
need to reengineer the entire way the agency does business.
In addition, the tax system depends on each taxpayer who is
voluntarily paying the tax owed having confidence that his or her
neighbor or competitor is also paying. Modernization will enable the
IRS compliance activities to identify more effectively areas of non-
compliance and to address them promptly, accurately and fairly.
Organizational Modernization
In fiscal year 2001, an additional $42 million is being requested
to cover IRS reorganization expenses. These costs will peak in fiscal
year 2001, decline in fiscal year 2002, and end in fiscal year 2003.
The IRS organizational modernization involves the first complete
reorganization of the IRS since 1952. Essentially all management
positions above the first line are being redefined; district and
regional offices are being eliminated; and some new front-line
positions are being created. This massive change is being done with the
objective of minimizing physical relocation and associated costs.
However, some relocation of personnel and a great deal of reassigning
and retraining are required. In addition, some managerial and
administrative positions are being eliminated and it is necessary to
assist the incumbents in these positions either to find new positions
in the IRS or to retire.
Together with the $140 million included in the fiscal year 2000
base for this effort, this request will be used to cover all the
expenses of the reorganization. These costs include buyouts,
recruitment, relocations, employee training, equipment, services and
supplies, telecommunications moves and installations, and modifications
of information systems to the new organizational structure. Resources
are also requested for design work, space alterations, and contract
movers to physically align employees with their operating divisions for
the Area and Industry Offices, Chief Counsel Headquarters, Information
Systems, and the National Office. These resources cover all aspects of
organizational change that will complement the IRS' systems
modernization efforts and implement the RRA 98 reorganization mandate.
Business Reengineering and Technology Investments
The IRS depends entirely on its computer systems to administer the
tax system and to collect and properly account for $1.9 trillion of tax
revenue. Nearly every IRS employee depends on computer systems to
perform his or her daily activities, such as processing returns,
answering taxpayer questions, adjusting taxpayer accounts, sending out
notices and letters, conducting examinations and collecting overdue
accounts.
However, the IRS base of existing systems, which evolved over a 40-
year period, is totally inadequate to support these activities at an
acceptable level of service to the public, internal efficiency, or
acceptable risk. GAO and TIGTA repeatedly identify serious problems and
risks in IRS operations and financial management, many of which cannot
realistically be rectified except by a near total replacement of IRS'
systems.
In addition, nearly all the numerous changes required to improve
service to taxpayers under RRA 98, and to increase the effectiveness of
compliance activities depend on improvements to IRS' information
systems. As indicated earlier in the testimony, it would be extremely
expensive and require very large increases in staff to meet the service
and compliance demands of an increasing economy and the RRA 98 mandates
by simply adding staff. Instead, the IRS must reengineer and replace
its archaic processes and systems.
Since reengineering the IRS' business practices and systems is a
massive job that will take many years, it is necessary to set
priorities and adopt time phased plans since the needs and
opportunities for systems improvements are far greater than can be
accommodated in any one year, or even a few years.
Business Line Investments
Most of the largest scale and most complex systems' improvements
will be accomplished through the agency-wide Core Business Systems
program that is funded by the ITIA and is discussed below. However,
there are dozens of smaller and more focused high-priority needs to
support and improve operations. They are either too specific to be
included in the Core Business Systems program, or, if they were
included, would not be delivered for many years. The IRS has gone
through a prioritization process for these business line investments
and requests funding for $40 million in fiscal year 2001 for only the
highest priority of such projects.
We are requesting the $40 million to develop, redesign or acquire
new systems to improve:
(1) The Taxpayer Advocate's ability to identify problems and
recommend changes to the business process by redesigning and
consolidating multiple, stand-alone systems into one management and
control system;
(2) The management and reporting of taxpayer and employee
complaints by designing a new system;
(3) The new Tax Exempt/Government Entities organization's ability
to process determination requests, contacts with requestors and track
the deposits of fees;
(4) The notices sent to taxpayers, including the clarity and
reduction of the need for multiple contacts with taxpayers;
(5) The Chief Counsel Case Management activities, including
modernizing many business rules and updating the system to save costly
manual work and improve Counsel's ability to timely deal with the
Courts, taxpayers and IRS' needs; and
(6) The walk-in sites' efficiency and service to taxpayers by
providing automated management tools of tax information to about 125
walk-in sites.
ITIA Funded Core Business Systems
The Core Business Systems program is an agency-wide program
designed to reengineer all of the basic IRS' business processes and the
computer systems that support them. After the award of the PRIME
contract in December of 1998, the IRS spent CY 1999 and the early part
of CY 2000 building the management and governance process necessary to
manage this huge program; developing plans for the near-term and
medium-term projects; and beginning to update architectural and
technology infrastructure plans. This program is being very carefully
managed at the highest levels within the agency and adjustments to
plans are made frequently based on experience to date and on risks
anticipated.
The first, relatively small projects to be delivered will provide
for improved telephone service during fiscal year 2001 and provide
improved tax computation capabilities to examiners. Further
enhancements to taxpayer service over the Internet and increased
electronic tax administration services will follow. Two critically
important projects will be planned in detail in fiscal year 2000 and
are expected to proceed to development stages in fiscal year 2001. They
will replace the archaic tape-based system that maintains all taxpayer
records and improve our financial management systems. Other critical
projects to improve service and compliance programs, including
correspondence, collection and exam are in the early states of design
and further plans will depend on results of the design efforts.
In support of these business projects, work will proceed in fiscal
year 2000 to complete institutionalization of the ITIA governance
process and the Enterprise Life Cycle methodology. This will provide
for the first complete update of the technology blueprint since 1997
and complete major infrastructure and architectural work necessary to
support the other projects. Security issues are being given special
attention in this work. In fiscal year 2001, continued update of the
blueprint and other architectural and technology standards will be done
and additional work on infrastructure will continue as necessary to
support the business projects.
The Congress through the specified ITIA wisely planned the funding
for this core business systems program. This account represents a
practical means of funding a long-term program such as the IRS
technology modernization program. Under ITIA, Congress appropriates the
funds for the program as a whole and the IRS is allowed to plan for
continuity of the program subject to stringent reviews and safeguards.
No funds are released from the ITIA until the IRS prepares a plan for
specific increments of funding and is reviewed and approved by the
Treasury, OMB, GAO and the two Appropriations Subcommittees. This
approval, however, still only provides the IRS authority to proceed up
to a certain funding level. No funds are actually obligated except
through a rigorous internal process within the IRS, which is managed by
the IRS Executive Steering Committee chaired by the Commissioner.
In fiscal year 2001, we are requesting $119 million to continue
progress as anticipated on the ITIA funded Core Business Systems
program. In fiscal year 2000, we requested no funds for ITIA. Remaining
balances from prior year appropriations plus the new $119 million
request will support a spending level in fiscal year 2001 of $330
million. To ensure continued funding, we are requesting an advanced
appropriation of $375 million for fiscal year 2002.
conclusion
Mr. Chairman, I believe we are making real progress on the goals
and mandates set forth by the Restructuring Act to bring meaningful,
positive changes to the IRS and America's taxpayers. It is true that no
one fully understood everything that would be required to implement
this far-reaching Act. However, if Congress can provide continued and
assured support for IRS modernization, such as that contained in our
fiscal year 2001 budget request, we will be able to produce the
visible, tangible changes in service, compliance and productivity that
America's taxpayers expect and deserve. Thank you.
[GRAPHIC] [TIFF OMITTED] T13MA23.001
[GRAPHIC] [TIFF OMITTED] T13MA23.002
Senator Campbell. Thank you. Before I ask some questions,
Commissioner Rossotti, I would like to ask the chairman of the
full committee, Senator Stevens--I know he has a burning
interest in your office--if he has some comments.
STATEMENT of senator ted stevens
Senator Stevens. Nice to see you here. I wrote to you last
July about a problem that has developed, and I penned in a
personal note to you about it. It comes about because, in
connection with the Alaska Native Corporations NOL amendment of
some years ago your office has seen fit to reverse and
reinterpret the private letter rulings which were issued and
relied upon by three of those corporations. The net result is
these corporations who did recover despite a terrible period,
the NOLs really allowed them to stay in business, now face
substantial taxes and interest which would not be due at all if
it had not been for the reinterpretation.
I am sorry to say, I got a reply from one of your
assistants who did not really respond to the problem of why
should the IRS reverse a private letter ruling that applied to
people in such dire straits. These are corporations for Alaska
Native people primarily living in the Arctic. They are the
Bering Straits, Cobb Inlet Regional Corporation and Aluet
Corporation. They have tried to find ways to work this out.
Their counsel, their tax advocate has come and seen me several
times.
I would not normally bring this up at a hearing. I know you
cannot discuss it, the merits of the decision, but I urge you
to go back and take a look at it. I think this is terrible
policy to allow your people the ability to reverse private
letter rulings which have been relied upon, decisions were made
based upon those rulings. Now to go back and reassess the tax
that was due then after the computation under the private
letter ruling, I really just do not understand it.
Commissioner, I would urge you to look at it. These people
because of a lot of things that are going on in the world,
primarily because of the restrictions on mining and oil and gas
development during the period of this Administration, are back
in hard straits again. The assessments that are coming from the
IRS will in two instances bankrupt these companies. And they
are companies that every person is a Native stockholder. That
is, the stockholder is a Native person. Their employment is
primarily Native. These corporations were created by an act of
Congress.
I just do not understand this reversal of policy, and I
would urge you to personally take a look at it. That is my
personal request on it. We have been working with these
corporations now since 1971. Twelve of them were created then
and 12 of them are still going now. None of them has ever gone
bankrupt. The NOL legislation saved at least nine of them, and
your predecessors issued those rulings and we see no reason for
a reversal.
I cannot find any justification other than people did not
like what was done then. But you know, time passes and
decisions are made upon past decisions and past
interpretations. We should not have something like this to
bring this kind of chaos into Alaska. I would appreciate it,
Mr. Rossotti, if you could personally look into it.
Mr. Rossotti. Senator, I promise you I will. I am aware of
the issue. I have not delved into the details of it, but
certainly based on your request, I promise you that I will look
into it and we will look at every possibility for trying to
work with those Native corporations.
Senator Stevens. I was a Government lawyer for a long time,
Mr. Rossotti. I do not mind telling you I saw a lot of things
my predecessors did I would not have decided that way. I am
afraid that is what your people have done, and had they been
there at the time the circumstance would be different. But once
the rulings are issued and relied upon, I just do not believe
that you should permit your subordinates to reverse them. Thank
you.
Mr. Rossotti. We will take that very seriously, Senator.
IMPLEMENTATION of the restructuring and reform act
Senator Campbell. Mr. Rossotti, the IRS Restructuring and
Reform Act of 1998 which is called the RRA Act of 1998 placed a
number of requirements on the IRS and I would like to know a
little bit about the cost and how it is implemented. Were those
costs accommodated within your budget to implement the RRA?
Mr. Rossotti. Mr. Chairman, I think that at the time RRA
was passed there were many provisions and it was very difficult
to estimate exactly how they would be administered and what the
impact would be. We did make some attempts to do that and
discussed them a little bit in last year's budget, but I do not
think anyone could have known exactly how they would play out.
I think we have much better information today and actually
that is exactly what this chart is over here. This shows by
code section the principal sections of the Restructuring and
Reform Act which have created resource requirements.
Just to pick out one example or a couple of examples, if
you look under the innocent spouse case processing, that is the
provision which I think many members of Congress and myself
when I was working with the Congress were very interested in
getting. It gives the opportunity for spouses who may have
separated or had issues in their marriage to achieve relief
from a liability on a return that they may have signed and may
not have known about some of the issues that came up later
after that return was signed.
But we now have an enormous number of these claims in
inventory and they have turned out to be extremely complex to
adjudicate. We have about 46,000 of them which is a big
backlog. There are about 700 FTEs assigned to that. Prior to
the passage of the act it was basically negligible. I am not in
any way complaining about this section because I think it was
one of the ones that was most important to put in. It just has
turned out to be extremely complex to administer.
Senator Campbell. How much has it cost so far?
Mr. Rossotti. These are in terms of personnel, but I think
if you look at it--for example, we have requested 2,800 people
in STABLE, which is the initiative that we have asked for to
cover this and that would cost a total of $188 million a year.
That would actually not cover everything that is in here but it
would basically do as much as we think we need to do to cope
with these sections.
Senator Campbell. In the reform policies that you have
implemented, can taxpayers actually see any difference in their
interactions with the IRS now? As an example, when they make
phone calls, are they getting better service and accurate
information?
Mr. Rossotti. Senator, I think that they can, and I will
give you several examples. Just in the current filing season,
for example, a taxpayer is able to get through about 65 percent
of the time. Now that is not as good as it needs to be because
if you were in the private sector you would get 90 percent. But
last year it was about 50 percent and 2 years ago it was 20
percent. I mean, you had an 80 percent chance of getting a busy
signal.
So this is the number one complaint that I get from
congressional offices during the filing season, people say they
are put on hold too long, and I am very well aware of it. But
at least they are getting through 65 percent of the time, which
is a lot better.
ASSISTING taxpayers
The other thing is, as Senator Dorgan noted, we have put
people out again into the field and we have field offices open
on Saturdays and during extended hours during the filing
season. We have these problem-solving days that have really
helped to reduce the number of really difficult problem cases;
some of the things that were raised in your hearing, for
example. These are the kind of things that we have done
already.
Really what the whole point of the modernization is to make
those kinds of improvements embedded in our whole way of doing
business so that every taxpayer that deals with the IRS on
every occasion, whether they are by phone, in person, or on the
Internet, which we hope a lot of them will do, will be able to
get through, get the information they want, get their problem
solved, and be done with it. That is basically what the whole--
we have done some steps along the way but I would not claim
that we are anywhere near to 100 percent. But I think there is
visible progress.
Senator Campbell. I remember one of the complaints we heard
was they get different answers from different people.
Mr. Rossotti. That is a fair statement also because some of
these questions are complex and in the past every group was
trying to answer every question. Now we have got it managed on
a national basis so that we will basically be able to direct a
call to the person that really understands how to answer that
call. We are not quite there yet, but that is the way, the
direction that we are going.
Senator Campbell. Good. Do not direct them to me.
Mr. Rossotti. Or me either.
IRS performance
Senator Campbell. Your approach right from the beginning
was to structure it more like a corporation, treating people as
customers. I think that is a good idea. Do you send customer
service questionnaires out, or do you have some way of tracking
comments and responses on a card or a file?
Mr. Rossotti. That is another major thing that we have done
and the answer is yes. Now not on everything yet, but on most
of our major interactions we have--actually, in order to be
objective we have a third party, an outside party that sends
out on a random sample questionnaires to people that have
interacted with us, whether it is on the phone, or even on an
exam or a collection, and they get back these things. They do
not come to us. They come to the outside party and they
tabulate them for us.
What we have done now is we have gotten to the point now
where we are actually building this part of it into the
measurement system for our organizational units. So that the
people in the organization as part of their measurement, what
we call our balanced measurement system, the results of these
feedback surveys, it is not just information on the shelf. It
is part of the way we measure performance in the organization.
TAXPAYER rights
Senator Campbell. In that restructuring act it also shifted
the burden of proof from the taxpayer to the IRS and it also
instituted specific protections for the taxpayer against the
IRS. Does the IRS provide taxpayers with a clear disclosure of
what their rights are?
Mr. Rossotti. We do, Senator. It is not only a part of our
policy, it is in many cases built into the act. We have here,
for example, even in Spanish as an example, this kind of a
flyer that goes in with every time we contact the taxpayer, and
there are various types. For example, if we send out a notice
saying that there might be a collection action pending, we will
send out the specific----
Senator Campbell. So they are made aware of it when you
notify them that there may be action pending?
Mr. Rossotti. In every single case. It is required as part
of our process.
Senator Campbell. Let me ask Senator Dorgan, so I do not
hog the whole time here, if he would like to ask a few
questions, and then I will get back to a couple more.
TELEPHONE assistance
Senator Dorgan. I was going to ask about the response on
the telephone inquiries. I think you would agree that even 65
percent is short.
Mr. Rossotti. It is.
Senator Dorgan. I mean, 35 percent are trying to get some
help and are not getting it. We need to find a way to put
enough people on those phones and have enough phones so that
people get through.
Mr. Rossotti. Senator, that is exactly what we are doing. I
said we need to be comparable to private sector, which would be
90 percent, maybe even the best would be 95 percent. There are
two answers to that. One is that we do need some more staff,
and that is part of what the STABLE request is for.
We are not attempting to do it all with staff though. The
technology will also help us. The first project under our
information technology program is actually improving the call
routing and the call management. It will help us to get better
quality and better quantity by getting the right calls to the
right people by allowing taxpayers to get the information they
need directly if that is possible.
For example, on refunds, a lot of people just call us to
see if we got their return and when they are going to get their
refund. Those are very simple calls which we can--that is about
one-quarter of our calls during the filing season. We can give
that information to taxpayers very easily with technology.
So we have basically these two prongs to solve that
problem. One is we do need some additional staff and that is
what STABLE is about. But we are not really attempting to solve
the problem--we would need far too many staff years to be able
to solve it entirely with staff. The other prong is with the
technology.
PAPERLESS tax filing
Senator Dorgan. Commissioner, another issue that I have
been working on that relates to the amount of money you spend
processing paper is a plan that would allow Americans like
citizens of some 30 other countries to be able to file or
comply with an income tax requirement without having to file a
paper income tax return. You referred to electronic filing,
which obviously is one way to do that.
Another way to do it is to go to an elective system of
filing for people with more of a rough justice approach to
complying. By adjusting the W-4 just a bit you could actually,
with the plan that I have been working on, allow up to 70
million people to comply with their income tax obligation and
yet not have to file an income tax return. It would save a
great deal of time. Save you processing a lot of paper.
I assume that would save money if we had a return-free
system for 70 million people whose principal income is wages.
Those who have de minimis other income, interest and capital
gains, would then be exempt from tax. If you constructed a
system like that, where 70 million people could elect this
system and their withholding would then become their exact tax
liability, I assume you would save a substantial amount of
money in processing. Am I correct about that?
Mr. Rossotti. As you may remember, there is a requirement
in the restructuring act for us to provide a study of that and
we are going to do that.
Senator Dorgan. I did that. I put that in.
Mr. Rossotti. We are doing it. We are going to do it. It is
a bit complicated. I honestly do not know whether we would
save. I think there are some offsetting costs because we then
have to do some additional work to process the information we
need to actually calculate the liability. I guess it would
depend to some degree on whether the law was adjusted.
Senator Dorgan. You are missing my point. My point is not
that the tax agency would be the reconciler. Some countries do
that where the tax agency reconciles and you actually make the
calculation. That is not my point. My point is a return-free
system in which the actual withholding on a table provided by
the tax agency becomes the actual liability and there is no
paper in the system.
Mr. Rossotti. I think that would require legislative change
in order to----
Senator Dorgan. Oh, yes. That would be a very substantial
change.
Mr. Rossotti. Okay, I misunderstood. I think that becomes
the issue. If we tried to do it with all the existing
provisions of the statute we get into some fairly significant
complications, because we really even with third-party
reporting do not have all the information and we do not get it
in time.
If you change the law, maybe perhaps along the lines of
what you are saying, then that might be an entirely different
issue. But of course, that would then require the Congress to
consider whether----
Senator Dorgan. No, but my question of you is, if we do
that, and I think Congress will be considering something like
this, if you take people who elect to go off on a completely
different track and have their actual withholding, with some
adjustments on the W-4 form, some additional adjustments, the
actual withholding becomes their actual liability. Therefore,
no paper is required. No return filed.
PAPERLESS tax filing
Let us assume that 70 million people did not have to file
hard paper returns to the Internal Revenue Service. I am
assuming that you save a fair amount of money.
Mr. Rossotti. We would certainly save money if we did not
have to do anything, did not have to process those returns. I
would agree with that. I think we would have to look at though
what--if it was implemented in such a way that there was no
offsetting requirement to calculate the liability then I think
that would be true.
I think that would be the question that would have to be
determined though, what would be the offset--what would be the
Congress'--how would the Congress change the law to provide for
the calculation of that liability through the W-4 process or
through the withholding process? Because of course, right now
it is not sensitive to that. I mean, it is just a withholding.
It does not really determine your tax liability.
Senator Dorgan. I understand that. But I am looking at the
pony, you are looking at the manure here. I am trying to----
Mr. Rossotti. Maybe that is the job I am in.
Senator Dorgan. I am saying that there are examples of
plans in other countries that have income taxes that allow
people to file no return at all.
Mr. Rossotti. Right, I am aware of that.
Senator Dorgan. This is not a case where the tax agency
reconciles.
Mr. Rossotti. No, I understand. I do. I did not get it at
first, but I think I do. I think it just depends on how the law
was drafted. That is all.
Senator Dorgan. I have been working on this for a couple
years. We have talked to Treasury and the IRS a bit. So I guess
I was just talking about whether money can be saved if you take
paper out of the system.
Mr. Rossotti. Sure.
tax SHELTERS
Senator Dorgan. Let me ask one additional question on the
issue of tax shelters. I know from having talked to the Service
and Treasury that you face a very difficult prospect here of
increasingly sophisticated tax shelters. I mean very
sophisticated tax shelters that are beginning to allow some of
the largest taxpayers to effectively avoid--or entities that
should be some of the largest taxpayers--to effectively avoid
their tax obligation through very sophisticated schemes.
Treasury is very concerned about that as are you.
Can you describe some of the challenges you face there?
Mr. Rossotti. Senator, first of all, let me just say that I
agree with you very much that this is one of the most
significant compliance issues that we have. And it is not
simply the money that is being lost. We do not know exactly how
much it is but we know that it is a great deal; many billions.
But it is also I think a threat to the fairness, the perceived
fairness of the system because the average taxpayer if they
think that the so-called big guy is getting away with
something, it undermines their confidence in the system.
As you said, if millions and millions of people decide they
do not want to pay any more because it is not fair, we are
really in trouble. So I take this very, very seriously.
Secretary Summers has decreed this is a top priority, as we
have, and I am pleased to tell you that I think at this moment
I can say that we have the beginnings of a very vigorous and I
hope will be a very effective program to deal with abusive
corporate tax shelters as we call them.
Just to tick off some of the things that we are doing, we
are working cooperatively with Treasury on this. Just a few
weeks ago we issued three new regulations that require
increased disclosure from both the taxpayers and the promoters
of these kinds of corporate tax shelters. That regulation which
was issued between us and Treasury I think will give us the
information we have to identify and discover these, because as
you noted they are really quite hard to find.
The other thing is part of our reorganization is going to
help us very much on this because part of it is that we have
set up one operating division for covering large and mid-sized
taxpayers, which previously that responsibility was dispersed
and we did not really have anybody directly in charge of it.
Now we have, I think, a very good, very well qualified team in
charge. They are going to get the information that we get from
these disclosures that are required by these new regulations,
and I think very actively pursue the ones that appear to be
abusive, much more aggressively, or let us say effectively than
we did in the past.
We also then will be able to take advantage of what we
learn from some of the casework that we do to feed this back
into some additional notices. We have been issuing notices and
various kinds of guidance when we find particular kinds of
these things to stamp them out. Some of them, as you probably
know, are really quite odd. I mean, you have a large U.S.
corporation leasing a city hall over in a European country and
then leasing it right back and claiming that that transaction
results in a tax deduction. And there is an infinite variety of
these things that come up.
So I am not going to claim that we are going to be able to
completely eliminate these, but I can I think fairly state to
you that today, partly through some of the other changes we
have made and with the cooperation of Treasury and the
Secretary, we have a much more vigorous program to deal with
this than we had even a few months ago.
Senator Dorgan. Thank you, Commissioner.
tax return information on the INTERNET
Senator Campbell. Commissioner, is the IRS considering
allowing taxpayers to log on the Internet to check the status
of their returns since you said that about one-fourth of your
calls are people checking the status?
Mr. Rossotti. That is one of our top priority initiatives
in our modernization program. Certainly it is feasible to do
that and we expect to do that, not in the next filing season,
not in 2001 but perhaps the following one. The critical gating
factor, the limiting factor there is really the privacy and
security. That is the issue.
Senator Campbell. Yes, we will have to plug in some PIN
number or a license number or Social Security or something?
Mr. Rossotti. That is the key. We have to be sure that the
taxpayer who is signing on is the taxpayer who is really
allowed to have that information. Of course, that is not an
easy thing to do. It is not impossible but we are working on
that very diligently. That is the gating factor.
Our current goal, I would say, although I cannot guarantee
that we will meet it, our current goal would be that in the
2002 filing season--in other words, 2 years from now, that we
would be able to do that. We do have a pilot project underway
to use the Internet with some practitioners, with appropriate
security with practitioners, and we are using that as a pilot
to try this out right now.
TECHNOLOGY investments
Senator Campbell. Let me talk about the total amount of
money. In fiscal year 1998 and 1999 we provided a total of $506
million for information technology investments. So far the IRS
has been allowed to spend only $68 million and Congress is
considering a request for another $176.3 million. You have also
requested $119 million more in fiscal year 2001 and a
commitment of an additional $375 million for fiscal year 2002,
which is a total of over $1 billion, and that has a real ring
to it.
I hope that given the congressional requirements for the
release of funds and the pace so far, could you give us some
assurances that the IRS is going to be able to justify the
expenditure of the remaining money, which is I guess over $261
million?
Mr. Rossotti. Let me just say, Senator, that because of the
history of less than successful efforts in the IRS in the past,
the modernization, I think the Congress very wisely--and this
was done before I got here, but very, very wisely put in place
a process which on the one hand puts money into this technology
investment account so there will be an assured funding once the
project starts, because if you start and stop a project, you
kill it basically. So the money is allocated into this
investment account.
But there is also I think the other side to, as you noted,
a very rigorous process for release of that money to the IRS
which requires many reviews and many standards to be met, which
is what----
Senator Campbell. We did that because we thought some of
the money was being misspent.
Mr. Rossotti. I think that the way this was set up was
really quite wise. I think if you look at the point you made
that what we have spent so far, is that a third piece of this
is our own responsibility internally. Even after it is released
to us it just authorizes us to basically obligate this money
for specific projects. But I can tell you that we have a
process in place that I personally am very actively involved
in, as is Mr. Cosgrave our CIO, and we do not release any of
this money for any specific project unless we feel to the best
of our knowledge that we know exactly what we are going to get
for it and we have a reasonable assurance that it will produce
what it is supposed to.
That is why actually we have only spent $68 million so far,
because we have been working very hard on the planning and the
analysis and the preparation work that is needed before we go
into what is really the much more expensive phase when you
actually begin to deploy these systems. I think we are now at
the stage where the first two--and they are still fairly
small--of the actual development projects is part of our
request before you now, which would allow us to put some things
in for the 2001 filing season.
As we get to later this calendar year we will be coming in,
we hope, if we are successful, with some much more significant
requests to begin some of the bigger projects. That is why the
money ramps up.
The thing that I really want to stress to the committee
though is that myself, my deputies, Mr. Cosgrave, the CIO, we
have an internal pledge to ourselves that we are not going to
spend a dollar of this money any differently than we would if
it was our own business, our own company. We are really going
to do everything that we know how to do to make sure that when
we commit money to one of these projects that we know what we
are going to get for it.
Even then, I do not say that we are not going to have risks
and we could not have some failures along the way, but I think
I can give assurance that we are not going to go down a path
where we spend hundreds of millions or billions on something it
does not produce anything, because we are just on top of it.
TECHNOLOGY investments
Senator Campbell. That has happened before, as you know. Do
you think you will be able to spend what you currently have
before the end of the fiscal year?
Mr. Rossotti. I think that we have a plan, if everything
goes the way we expect, we will be ramping up and spending the
money. But I think that we will have to work closely with the
committee throughout the year, because we monitor this every
month virtually. I think we need to work closely with your
committee and the House Appropriations Committee to give you
the reports, as well as to OMB. I can tell you that we are not
going to spend the money just because it is there. That is the
promise I will make to you.
You will see the reports, as will Treasury and OMB. It is a
very open process. We have these meetings and we have people
from all sides attending. As those that have attended know,
they are pretty hard-hitting. We really go into this in some
detail. That is what you have to do to run a project like this.
Senator Campbell. I thank you. Senator Dorgan, do you have
any further questions?
Senator Dorgan. Just one final question. Over the years
serving on Ways and Means and now here in the Senate, we have
gone through a lot of iterations with the IRS about the
equipment purchases and new technology in order to respond to
the challenges of processing and responding to taxpayers, and
we have had some very large equipment purchases that did not
work and did not produce the system that we expected. Where are
we now with all of that?
Mr. Rossotti. This is really what I was talking to Senator
Campbell about. Let me just make one slight clarification
because really the problem is not so much equipment. There are
some equipment problems, but mostly we have at this point
fairly modern equipment in terms of the actual computers. What
we have is we have 1960s and 1970s software systems running on
1999 computers. That is what we have.
For example, our entire file of taxpayer records, every
taxpayer in America, business, individual, is on tape files.
This is because the system that does that accounting, that
taxpayer accounting is the most basic system in the IRS, is
still the same system that was written during the Kennedy
Administration. I am not exaggerating this. This is a fact.
This was a machine language system that was written in the
1960s. It updates tape files. It gets updated once a week. It
runs on modern equipment but it is still the same old system.
This is what the whole modernization program is about. This
is why I said in my opening statement, those systems are not
fixable. There is not a matter of tweaking. We have to replace
them completely.
Now where are we? What we did is we----
TECHNOLOGY investments
Senator Dorgan. The reason I ask the question again is to
understand, were they not intended to be replaced about 10
years ago when you went through the major modernization
program?
Mr. Rossotti. Yes.
Senator Dorgan. If they were then, what happened?
Mr. Rossotti. That was before I got here, of course, but--
--
Senator Dorgan. I understand.
Mr. Rossotti. I think that the answer is, as I understand
it, yes, they were intended to be replaced.
Senator Dorgan. Talking about the software?
Mr. Rossotti. Yes. And to be fair, there was some software
that was replaced. But it was more that new software was added
on to the old software but they never replaced the irremediably
deficient software. I think that is why the project was viewed
as a failure. In reality, there were some things that were
delivered from that money that was spent. It was not a complete
waste.
But unfortunately, what it did not do is it did not
basically solve the problem, which is to replace these old
systems. So that is what the whole technology modernization
program is all about. It is not about adding on some new
things. It is about replacing what is a just fundamentally
inadequate base of systems. Not so much computers, hardware, as
it is the systems themselves.
In order to do that, it is not just the software. We have
to really rethink the whole way we do business. As you were a
tax commissioner, Senator Dorgan, you know the key to
collecting when you have somebody that is overdue is to get to
them quickly and clean up that account. Because of our systems
we take years. I mean, most of our people that are collectors
out in the field are working on accounts that are 2 or 3 years
from when a liability was developed. A lot of that has to do
with the whole process of collecting, as an example.
Senator Dorgan. Thank you, Commissioner.
Senator Campbell. Commissioner, we have no further
questions. Thank you for being here. I think you have received
some questions in writing from members who could not attend
this morning. If you could answer those as quickly as possible
in writing, we would appreciate it.
Mr. Rossotti. We will certainly do that, sir.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Ben Nighthorse Campbell
Question. RRA 98 enhanced the Taxpayer Advocate's Office by making
it an independent entity within the IRS, with advocates in the field
reporting directly to the Advocate's Office in D.C. instead of to the
IRS regional management structure.
How is the Taxpayer Advocate's office assisting taxpayers?
Answer. I am pleased to report that the new Taxpayer Advocate
Service officially transitioned as a modernized organization on March
12, 2000. We developed a modernized organization to deliver service to
each taxpayer through our casework, and to every taxpayer through
outreach, systemic analysis and advocacy.
Every state now has at least one Local Taxpayer Advocate. Local
Taxpayer Advocates work to resolve problems that individual taxpayers
have with the Internal Revenue Service. They also address taxpayer
problems when an IRS system, policy or procedure fails. Separate
addresses, telephone and fax numbers for Taxpayer Advocates are
included on notices of deficiency and are being published as the
telephone directories are updated.
We hired the Operating Division Taxpayer Advocate and several
Advocacy Analysts for the Wage and Investment Operating Division.
Advocacy Analysts identify and monitor the progress of procedural,
systemic and legislative changes designed to benefit taxpayers. They
also solicit feedback from taxpayers and key stakeholders about IRS
problems. We will hire an Operating Division Taxpayer Advocate for the
Small Business/Self Employed Operating Division and additional Advocacy
Analysts as the new IRS Operating Divisions become operational later
this year.
Question. What happens if a taxpayer cannot resolve the issue with
the assistance of the Advocate's Office? Are there any other remedies
available to the taxpayer?
Answer. Taxpayers always have the right to go to appeals or to the
tax court. In some instances Taxpayers will need to follow judicial
avenues to resolve their tax issues. This situation would occur if the
Taxpayer Advocate Service cannot provide the relief requested because
we don't have the delegated authority, or we feel that the action taken
by the function was appropriate.
Mr. Rossotti, Congress reaffirmed in RRA 98 your initial idea of a
structure which allows IRS employees to concentrate on a group of
taxpayers with similar needs, such as small business and self-employed
or large and mid-size business. We provided $140 million this year for
that effort.
Question. What is the status of that reorganization?
Answer. We are very much on course implementing Phase II
Modernization Design blueprints, meeting time-phased plans and critical
milestones. Our Tax Exempt/Government Entities Division was officially
established in December 1999, while our Large and Mid-Sized Business
Division will be in operation by June 2000. Both our Small Business/
Self-Employed and Wage & Investment Divisions are commencing the
necessary steps towards meeting the October 2000 operations start-up
milestone.
We have also recently convened our Business Systems Modernization
Organization Team to begin designing new and updating existing
essential business systems infrastructure and architectural blueprint
for the new IRS. This will provide for the first time complete update
of the technology blueprint since 1997. In the midst of these
modernization challenges and achievements, we continue to deliver day-
to-day business and operational activities at acceptable levels to
American taxpayers.
Question. Why does the IRS need an additional $42 million next
year?
Answer. In fiscal year 2001, an additional $42 million is being
requested to cover IRS reorganization expenses. These costs will peak
in fiscal year 2001, decline in fiscal year 2002, and end in fiscal
year 2003. IRS organization modernization involves the first complete
reorganization of this agency since 1952. Together with the $140
million included in the fiscal year 2000 base for this effort, this
request will be used to cover all expenses of the reorganization. These
costs include buyouts, recruitment, relocations, employee training,
equipment, services and supplies, telecommunications moves and
installations, and modifications of information systems to the new
organizational structure. Resources are also requested for design work,
space alterations, and contract movers to physically align employees
with their operating divisions for the Area and Industry Offices, Chief
Counsel Headquarters, Information Systems, and the National Office.
These resources cover all aspects of organizational change that will
complement the IRS' systems modernization efforts and implement the RRA
98 reorganization mandate.
Question. At what point do you expect that the reorganization will
be complete and the funding will be non-recurred?
Answer. If we receive our fiscal year 2001 budget request, $182.4
million would be in our base for organization modernization in fiscal
year 2001. We expect to non-recur much of that base in fiscal year 2002
and the remainder in fiscal year 2003.
The Administration has requested almost $40 million in supplemental
funding to allow the IRS to get a head start on a staffing increase,
code named STABLE for Staffing Tax Administration for Balance and
Equity. It now appears unlikely that Congress can agree to that
request.
Question. If that is the case, what would be the fiscal year 2001
need for STABLE?
Answer. In the President's Budget the IRS requested $224 million
and 2,835 FTE for the STABLE initiative over a 2-year period which
includes a fiscal year 2000 supplemental. This approach was taken to
allow the IRS to advance hire and begin training earlier the new
personnel that this initiative supports. Doing so would allow the new
hires to be engaged in performing their jobs at a full level as early
as possible. The IRS still believes that this is the most rational and
sensible approach. If we were not to get the fiscal year 2000
supplemental, the entire initiative would have to be implemented in
fiscal year 2001.
The Service has since reevaluated its needs for STABLE for fiscal
year 2001 using the assumption that Congress might not fund the
supplemental in fiscal year 2000. That recosting identifies needs of
$213.2 million and 2,501 FTE in fiscal year 2001. The amounts
identified in the fiscal year 2001 Congressional Justification for
STABLE are higher because they assumed that 301 FTE, from the
supplemental, would already have been in place on October 1, 2000.
Question. How likely is it that the IRS will be able to hire almost
3,000 new full-time employees (FTE) in one year?
Answer. The IRS should be able to hire 3,000 new full-time
employees (FTE) in one year. The recruitment process is gearing up for
recruitment on college campuses this spring to bring revenue agents on
board October, 2000. After receiving the ``Compliance Initiative'' in
the fiscal year 1995 budget, IRS had a net increase of 4,671 on-rolls
between June 30, 1994 and June 30, 1995.
The IRS is requesting a total of $44 million for operational
support contracts. I am told that these are necessary because the IRS
does not have in-house expertise in certain areas.
Question. What kinds of functions are covered by these operational
contracts?
Answer. Contractual support is comprised of three categories:
mandatory, operational, and expertise. Below are some examples of each
type of contract:
--Mandatory contracts are required by law or agreement with other
Federal agencies. These include National Archives storage of
tax records; Treasury's Financial Management Service activities
for tax refunds and lockbox collections; and, Low Income
Taxpayer Clinic grants.
--Operational contracts support IRS operations. Examples include
funding for Currency Transaction Report processing, FedWorld
management of the IRS Web Site; and, Multilingual
Interpretation services for Walk-in offices.
--Expertise contracts are required to obtain expertise outside the
IRS. Some of these activities include developing and
administering customer satisfaction surveys and rewriting of
IRS Forms and Publications into ``plain English.''
Question. How long will the IRS need to rely upon outside expertise
in these areas? In other words, when can we expect that these funds
will be non-recurred?
Answer. The $44 million that the IRS is requesting is to restore
our unfunded operational level. Operational costs have risen because of
demands placed on the agency as a result of RRA 98, the reorganization,
and lower staffing levels. The changes caused by RRA 98 and the
reorganization have required expansion and adjustments to the scope of
work of many operational contracts. We see contracting out for services
as the best use of limited resources and as an enhancement to our areas
of unfamiliar expertise. Therefore, we do not foresee that these funds
will be non-recurred.
The IRS fiscal year 2001 budget request includes $144 million and
1,633 full time equivalent staff years (FTEs) for an initiative known
as Staffing Tax Administration for Balance and Equity (STABLE). STABLE
is intended to stabilize and strengthen tax compliance and customer
service programs. The FTEs being requested for this initiative are
allocated among submission processing, telephone and correspondence,
document matching, examination, collection, and tax exempt and
government entities.
Question. How does the IRS determine the number of FTEs to allocate
to each of the functional areas within the STABLE initiative?
Answer. There were three objectives for the STABLE initiative:
increase compliance activity, free up compliance staff that had been
detailed to customer service areas, and increase customer service.
We first applied staff to those areas that would allow new and
additional audit coverage and increase compliance case closures. Those
areas were defined as the Automated Collection System, Collection,
Underreporter for Information Returns, Examination, Tax Exempt and
Submission Processing. We also wished to free up half the staff from
Examination and Collections that do walk-in and Toll Free work during
the filing season (800 FTE). This allows 400 of these FTE to address
the backlog of cases in exam and collection and consequently improve
the audit coverage rate. Third, we wanted to increase customer service
levels that support Walk-in and Toll Free telephone service to the
taxpayer. This increase in fiscal year 2001 will allow IRS to perform
all aspects of IRS' mission more effectively and efficiently.
Question. Does the IRS have a business case showing the expected
benefits and costs for each part of the STABLE initiative?
Answer. The following performance information highlights the
objectives of the STABLE initiative to balance continued improvements
in customer service with targeted investments in compliance programs
that focus on high-income filers and sectors of the economy with
special enforcement needs.
------------------------------------------------------------------------
Measure Fiscal year 2000 Fiscal year 2001
------------------------------------------------------------------------
Toll-Free Level of Service...... 65 percent \1\.... 70 percent \2\
Field Audit Coverage > $100K.... 0.76 percent...... 0.81 percent
Field Collection Delinquent 751,745........... 1,009,774
Accounts Closed.
------------------------------------------------------------------------
\1\ Actual level of service as of March 11, 2000.
\2\ This revision is dependent on a call demand consistent with
experience thus far in fiscal year 2000, continued achievement of
current telephone performance, and increased staffing of 500 FTE
provided by the STABLE Initiative.
As the chart on the following page illustrates, the total return on
investment for the STABLE initiative is 5.3 to 1. Although STABLE is
not a revenue-driven initiative, Examination, Collection and Document
Matching functions will generate substantial direct enforcement
revenue.
[Dollars in millions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year 20000 Fiscal year 20001 Revenue Generated
---------------------------------------------------------------------------------------------------------------
Total 6-year
Budget activity Employment category Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal fiscal ROI
FTE Cost FTE Cost year year year year year year years
2000 2001 2002 2003 2004 2005 2000-2005
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Enhancing Compliance:
Automated Collection System...... Cust Svc Rep.................... 75 $11.8 450 $32.2 $46 $428 $810 $900 $900 $900 $3,984 23.4
Collection....................... Revenue Officer................. ........ ........ 33 3.2 ........ 4 28 39 45 45 161 8.1
Other........................... ........ ........ 17 1.2 ........ ........ ........ ........ ........ ........ ......... ........
Underreporter--Information Tax Exam (Temp)................. 40 4.8 200 12.8 15 68 93 104 108 108 496 7.9
Returns.
Examination...................... Revenue Agent................... 9 1.5 633 69.8 ........ -28 150 232 264 288 906 2.2
Other........................... 2 0.2 189 13.6 ........ ........ ........ ........ ........ ........ ......... ........
Tax Exempt....................... Technical....................... 4 0.6 68 6.4 ........ ........ 19 19 19 19 76 2.0
Submission Processing............ Cust Serv Rep................... 50 5.7 408 28.9 ........ ........ ........ ........ ........ ........ ......... ........
------------------------------------------------------------------------------------------------------------------------
Subtotal....................... ................................ 180 24.6 1,998 168.1 61 472 1,100 1,294 1,336 1,360 5,623 6.1
========================================================================================================================
``Freeing Up'' FTE:
Walk-Ins......................... Cust Serv Rep................... 48 6.3 200 15.4 ........ 61 65 67 69 70 332 4.1
Toll-Free Telephone Service...... Cust Serv Rep (Temp)............ 50 6.1 200 13.2 ........ 61 65 67 69 70 332 5.1
------------------------------------------------------------------------------------------------------------------------
Subtotal....................... ................................ 98 12.4 400 28.6 ........ 122 130 134 138 140 664 4.9
------------------------------------------------------------------------------------------------------------------------
Total.......................... ................................ 278 37.0 2,398 196.7 61 594 1,230 1,428 1,474 1,500 6,287 6.0
========================================================================================================================
Enhancing Customer Service:
Walk-Ins......................... Cust Serv Rep................... ........ ........ 33 2.5 ........ ........ ........ ........ ........ ........ ......... ........
Toll-Free Telephone Service...... Cust Serv Rep (Temp)............ 13 1.6 300 19.8 ........ ........ ........ ........ ........ ........ ......... ........
Underreporter--CAWR.............. Tax Examiner.................... 10 1.2 104 5.6 ........ ........ ........ ........ ........ ........ ......... ........
------------------------------------------------------------------------------------------------------------------------
Subtotal....................... ................................ 23 2.8 437 27.9 ........ ........ ........ ........ ........ ........ ......... ........
========================================================================================================================
Total--STABLE Initiative....... ................................ 301 39.8 2,835 224.6 61 594 1.230 1,428 1,474 1,500 6,287 5.3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
In its congressional justification, IRS notes, that ``staffing
resources devoted to compliance and enforcement programs have declined
by more than 20 percent over the last 5 years because of the need to
transfer compliance staff to customer service activities.'' Also
according to IRS, additional workload increases, including some
associated with the IRS Restructuring and Reform Act of 1998 (RRA 98),
have further eroded IRS' enforcement presence.
Question. How much of the decline in compliance and enforcement
programs stems from IRS employees' lack of understanding about how to
implement the provisions of RRA 98 rather than the additional work
associated with the provisions?
Answer. While it is true that enforcement revenue declined by 6.5
percent ($2.3B) between fiscal year 1998 and fiscal year 1999, total
net revenue collected rose by 6.4 percent ($105B). Our purpose in
shifting resources to customer service activities was to increase
voluntary compliance, which would result in taxpayers filing a correct
return, and paying the correct amount, thus increasing total net
revenue collected. We believe that the opportunity cost of implementing
RRA 98 provisions has resulted in an approximate 4 percent decline in
``output'' for both Examination and Collection in fiscal year 1999.
Reductions in various output measures beyond this can be partially
attributed to some initial lack of understanding regarding RRA 98,
especially in the Collection function. As stated in response to the
previous question, we are aggressively taking actions via training and
all-Collection and all-Examination manager's meetings to address the
concerns of our front-line employees regarding how RRA 98 has and has
not changed their job responsibilities.
Question. What actions are being taken to help ensure that
employees understand the specific requirements of RRA 98 as it relates
to their jobs?
Answer. The IRS has instituted an aggressive three-phased training
program to ensure that employees understand how the IRS Restructuring
and Reform Act of 1998 (RRA 98) affects their jobs.
Phase I (completed July 1998-January 1999)
--Provided basic training to 51,318 employees to explain the overall
objectives of the legislation, the reasons it was enacted, and
its immediate and long-term impact on the IRS;
--Posted information on IRS' internal web site and linked to an IRS
National Resource Center where employees could find information
and ask questions.
Phase II (completed May 1999-September 1999)
--Provided formal training on specific Act provisions to employees
whose direct responsibilities were affected. The training had
clear learning objectives, testing and evaluation;
--Delivered specialized training courses on: Due Process, Installment
Agreements, Offers-In-Compromise, Seizures, Relief from Joint
and Several Liability, Third-Party Contacts and Interest
Netting;
--Provided section 1203 training to 97,965 employees; and
--Delivered section 1204 training on the use of enforcement
statistics to all managers as well as all collection and
examination employees.
Phase III (to be completed during fiscal year 2000)
--The overview training of Phase I and the technical training of
Phase II have been incorporated into the basic employee
training programs of all job types in the IRS.
As part of the STABLE initiative, IRS has proposed a supplemental
fiscal year 2000 appropriation that would allow the hiring of 301 FTEs
in fiscal year 2000. That advance hiring, according to IRS, would
ensure that most training of new hires would be undertaken in fiscal
year 2000, allowing the impact of these new hires to be fully maximized
in fiscal year 2001.
Question. Since the persons hired in fiscal year 2000 will only be
on board for part of the fiscal year, how many persons will the IRS
have to hire in fiscal year 2000 to realize the 301 FTEs that year?
Answer. IRS would hire 1,202 people in fiscal year 2000 in order to
expend 301 FTE.
Question. When in fiscal year 2000 would IRS have to bring those
persons on board in order to ensure that most training is done in
fiscal year 2000?
Answer. We plan to hire these people at the beginning of July.
As required by RRA 98, IRS is in the midst of a major
reorganization designed to improve service to taxpayers. IRS plans to
reorganize around four operating divisions, each with beginning-to-end
responsibility for serving major groups of taxpayers. IRS has several
units within the new division already in place and has said that it
will ``stand-up'' the remaining units, including the two largest
divisions, by October 2000.
Question. What exactly does IRS mean when it says it will ``stand
up'' the organization by October 2000? Will all employees be assigned
to a new operating division by then?
Answer. The term ``stand up'' refers to five critical elements that
the IRS has determined must be met in order to efficiently and
effectively ``stand up'' a new organization. Those elements are:
--The Division Commissioner is in place and the key management
positions have been filled;
--All personnel actions have been completed to non-competitively and
competitively realign employees to the new division;
--The Budget has been created and financial management
responsibilities have been transferred to the Division
Commissioner;
--The Division has the delegated authority to fulfill its mission;
and
--Management Systems and necessary workarounds have been developed
and are in place to allow the Division to function.
All employees will be assigned to the new operating divisions by
10/1/00 because in order to effectively ``stand-up'' the organization,
we must follow the second ``stand-up'' element (mentioned above) by
completing all of the necessary personnel actions to non-competitively
and competitively realign all IRS employees by 10/1/00.
Question. What changes will be noticeable to taxpayers who try to
contact IRS, and how does IRS plan to inform taxpayers of any such
changes?
Answer. Essentially, the reorganization will be transparent to
taxpayers. However, they will be receiving an increased level of
service when they contact the IRS via telephone and correspondence and
e-mail resulting from enhanced modernization changes. The enhancements
include procedural changes, the Taxpayer Bill of Rights, new
technology, and new organizational structure.
Additionally, the IRS will continue with Problem Solving Days,
Taxpayer Advocate Service emphasis and the Citizens Advisory Panel to
increase accessibility to IRS and resolve issues. Taxpayers are also
beginning to experience enhanced services provided by the IRS' e-filing
program offering them the option of e-filing their federal and state
tax returns together, getting their telephone calls answered more
timely and more often, and receiving identifying information from
employees upon receipt of their call.
Conversely, we have been notifying taxpayers for the past 2 years
through a whole myriad of methods including press releases, marketing
campaigns, the Internet, meetings with liaison groups, outreach to the
Hill and Practitioner meetings. We plan to continue this method of
information sharing throughout this process.
The IRS request states that by investing in technology and improved
business practices, the fiscal year 2001 budget request avoids the
traditional staff increases that would otherwise be required.
Question. What specific information system and business practice
improvements to be implemented in fiscal years 2000 and 2001 will
produce the efficiency gains implicit in this statement?
Answer. Most of the business practice improvements we have been
pursuing in fiscal year 2000 and plan to pursue in fiscal year 2001 are
designed to improve our service to the taxpayer. These include:
--Increasing the use of easy to use alternatives to paper filing;
--Simplifying notices and correspondence;
--Meeting demands for walk-in assistance;
--Pursuing penalty reform;
--Improving and increasing use of upstream education and delinquency
prevention techniques;
--Identifying potential areas of non-compliance and developing
effective treatments;
--Providing a quality work environment;
--Providing better tools and training to enhance customer service;
--Improving service by reorganizing and refocusing along customer
segments; and,
--Measuring progress and performance against a balanced measurement
system.
Although we will be implementing some new computer systems in
fiscal year 2000 and 2001, the majority of the systems that will
improve IRS efficiency will be implemented from fiscal year 2002
onward.
Question. If, during fiscal year 2001, IRS will still be in the
process of aligning field staff and workloads to the new organizational
structure, what kinds of efficiency improvements does IRS realistically
expect during this transition?
Answer. They will be minimal. Some of our performance measures will
show slight increases in fiscal year 2001, based on the STABLE
initiative being funded. However, the dramatic improvements in
performance will only be realized when business practices are
reengineered and technology is modernized. Unfortunately, almost all of
the technology spending and focus in the last 2 years has been devoted
to addressing the Y2K problem and responding to the IRS Restructuring
and Reform Act of 1998 requirements. We are just now beginning the
long-term program of business practice reengineering and technology
improvement that will allow the IRS to provide improved service and
taxpayer treatment while also increasing the effectiveness of
compliance.
Question. Has IRS considered the possibility that productivity may
actually decline during this transition period due to a combination of
factors, including employee uncertainty, management changes, and
training demands?
Answer. Although we realized that productivity would decline during
this transition period for the factors mentioned, most of the decline
to this point could be attributed to three other factors. First, the
expanding economy continues to steadily increase the IRS workload.
Since 1993, the number of individual tax returns over $100,000, which
are generally more complex, has increased by 63 percent. Meanwhile,
because of budget constraints, the IRS staff has dropped by 17,000 FTE
since fiscal year 1993, resulting in fewer staff to handle a greater
workload.
Second, on top of these general trends, certain specific provisions
of the IRS Restructuring and Reform Act alone have required about 4,000
additional FTE to administer.
Finally, almost all of the technology spending and focus in the
last 2 years has been devoted to addressing the Y2K problem and
responding to Taxpayer Relief Act of 1986 and RRA 98 requirements. We
are just now beginning the long-term program of business practice
reengineering and technology improvements that will allow the IRS to
provide improved service and taxpayer treatment while also increasing
the effectiveness of compliance.
The impacts are that productivity has already declined in audit
coverage, while improving in customer service. We have addressed the
declining productivity in audit coverage with our STABLE initiative
that will provide the compliance staff necessary to improve
productivity. In fact, by proposing a ``jump start'' on the STABLE
initiative through a fiscal year 2000 supplemental appropriation, we
hope to train the new staff hired in fiscal year 2000 so that full
performance and improved productivity are achieved more quickly.
Another major focus of IRS' reorganization efforts have been to
create pre-filing assistance groups within each operating division to
increase emphasis on helping taxpayers before they file their returns.
At the same time, IRS has said that most IRS employees and their front-
line supervisors will continue to do the same or similar work in the
new organization.
Question. To what extent will IRS be reallocating staff to pre-
filing groups, particularly in the divisions that serve individual
taxpayers and small businesses?
Answer. Investments in taxpayer education, and other pre-filing
activities will help taxpayers better understand their tax
responsibilities. In the end, these efforts will reduce taxpayer errors
and generate lower demand for audit staff. There are about 1,300 full-
time positions involved in pre-filing activities. The reorganized IRS
will require approximately 6,200 pre-filing positions in the Divisions
that serve individual taxpayers and small businesses. These positions
will provide taxpayer education and communication products and services
to more than 156 million individual and small business taxpayers.
IRS is currently calculating how many of these additional 4,900
positions can be filled by internal realignments. Obviously, increasing
the IRS staffing devoted to pre-filing functions by 4,900 will require
realigning some positions currently providing audit coverage and other
filing and post-filing activities. We were concerned about the effect a
staffing shift of this magnitude would have on our already declining
audit coverage rate in the short term. However, if our STABLE
initiative in the fiscal year 2001 budget were funded, audit coverage
rates would be stabilized and toll-free service, a key part of IRS pre-
filing activities, would slightly increase.
Question. What is the expected impact of any reallocation on
compliance staffing?
Answer. We believe that increasing the number of staff dedicated to
pre-filing activities will pay off in the long run in helping taxpayers
understand and comply with the tax laws. This understanding will
increase taxpayer compliance and reduce audit coverage requirements.
Therefore, to meet the increased demand for positions performing pre-
filing activities, IRS plans to draw down compliance staffing over time
as the W&I and SB/SE Divisions become operational.
However, until we reach that level of taxpayer understanding, it is
critical that taxpayers remain confident that everyone is meeting their
tax responsibilities. Any reduction of staffing from current compliance
levels will continue to aggravate a declining audit coverage rate.
Funding of the STABLE initiative will stem the decline in audit
coverage and lay a basis for long term taxpayer education efforts that
will increase taxpayer compliance.
Question. Does IRS' current staff have sufficient expertise to
design and implement planned pre-filing initiatives? If not, how will
IRS develop this expertise?
Answer. Yes, we have the expertise in place to effectively design
and implement planned pre-filing initiatives. We are more concerned
whether staffing will be available to provide these initiatives.
In the effort of designing and implementing planned pre-filing
initiatives, the Service followed a three-pronged approach. The first
aspect of this approach was to consult with various external
stakeholders for input and advice in designing the future
organizational structure based upon their needs as IRS customers.
Second, the Service brought together the vast experiences of its'
internal workforce to aid also in the design and implementation
efforts. This workforce represents the experience of each of the
current functions within the Service at various organizational levels.
For example, members serving on the design and implementation teams
include executives, top-, mid- and first-level management and first-
line employees representing each of various functions.
The third aspect of this approach was the hiring of a major
consulting firm to help guide the process and provide input and insight
from a private-sector perspective. Based upon this approach we believe
the design and implementation of pre-filing initiatives will represent
the needs of our customers in the four operating divisions. For
example, current walk-in employees are already involved in pre-filing
(as well as filing and post-filing) activities and will be trained to
accommodate new initiatives.
However, if the STABLE initiative is not funded in fiscal year
2001, the audit coverage rate will continue to decline as increased
returns (for taxpayers over $100,000 in income) are handled by a
constant or declining audit staff. Concerns over this continuing
decline will then increase pressure to transfer staff from pre-filing
activities (customer service) to post-filing activities (compliance).
Therefore, any advantages to be gained from a better-educated taxpayer
base will not be implemented. Moreover, customer service gains in the
past 2 years will be lost.
In its fiscal year 2000 appropriation, IRS received $140 million to
fund the reorganization initiatives. IRS' request for fiscal year 2001
includes an increase of $40 million on top of the $140 million base. In
both years, these funds were to cover expenses related to such things
as recruitment, relocation, buyouts, training, equipment, and
information system modifications.
Question. How is the $140 million for fiscal year 2000 being
allocated among these various areas? And
To what extent does IRS expect to use its buyout authority in
fiscal year 2000?
Answer. During the implementation of the Tax Exempt/Government
Entities and Large and Midsize Businesses operating divisions in fiscal
year 2000, the Service planned $10 million for buyouts; approximately
330 employees at $30,000 per buyout which includes the Voluntary
Separation Incentive Pay (the buyout), terminal leave and payment to
the OPM Retirement Fund.
Question. For fiscal year 2001, how is the total $182 million to be
allocated among these areas?
Answer. The following table shows the allocation of funding for
fiscal years 2000 and 2001:
ORGANIZATION MODERNIZATION EXPENSES
[In millions of dollars]
------------------------------------------------------------------------
Fiscal year Fiscal year
Category 2000 projected 2001 estimate
------------------------------------------------------------------------
Services & Supplies (Contracts)......... 17 29
Personnel Costs:
Buyouts............................. 10 36
Recruitment......................... 3 3
Moving Expenses: Relocations........... 41 17
Equipment............................... 5 4
Training................................ 27 27
Space & Housing......................... .............. 27
Rent.................................... 7 6
IS--Computer Moves...................... 11 11
IS--RIS Implementation.................. 19 22
-------------------------------
TOTAL FROM ORG MOD................ 140 182
------------------------------------------------------------------------
IRS is planning an extensive training effort in conjunction with
the reorganization effort. This training is referred to as
``modernization-related training.'' IRS also delivers other types of
training, referred to as ``sustainment training,'' as part of its day-
to-day operations.
Question. How do these two types of training relate to one another?
Answer. As part of its design work, the Phase IIB Modernization
Team defined modernization training as skills needed for working in the
new business unit and/or preparing for new business unit. Sustainment
training (e.g. CPE and advanced functional training) is defined as
skills enhancement and training not included in modernization. The
definition of modernization training evolved from being position-based
to being focused on skills acquisition (modernization) versus skills
enhancement (sustainment).
The design team conducted a course by course analysis of the total
training needs of each business unit, recommending 5.7 million hours of
training for all business units at an estimated cost of $29.9 million.
These costs were subsequently refined and adjusted downward based on
revised stand up dates, applying alternative delivery methods and
distinguishing between modernization and sustainment training.
Day-to-day or sustainment training continues as we move towards
standing up the new business units. Internal procedures guide decisions
as resources and demands change. Training to deliver a successful
filing season remains our top priority; followed by training to support
business units that have stood up and training of new hires and
employees assigned to new positions.
Question. What type of modernization-related training is currently
underway and what is planned for fiscal year 2001?
Answer. Each business unit has identified its training needs for
fiscal year 2000, and actions are being taken now to identify fiscal
year 2001 needs. Determining training needs is a dynamic process and is
changing as we bring the modernization plan from design to reality.
This year, much of the training efforts are devoted to training needs
assessment, analysis of needs, and design of training materials and
products.
In fiscal year 2001, design and development costs will continue,
and delivery will be an additional cost as we produce and present the
training to the various business unit populations Servicewide.
Limited training has occurred except for those units with newly
selected employees or employees already assigned to the new business
units. For example, the Taxpayer Advocate organization has obligated
$1.054 million this year. More training is anticipated as we move
closer to stand up.
Although we do not currently have an approved modernization
training plan, by the end of this month, all business units will have
validated their fiscal year 2000 training needs and certified as to the
availability of staff hours to attend training.
Question. For fiscal years 2000 and 2001, what is IRS' full
training budget when both modernization-related and sustainment
training are considered together? How much time would a typical front
line or management employee expect to spend in training?
Answer. The training budget totals $106 million in fiscal year 2000
and $109 million in fiscal year 2001 for modernization-related and
sustainment training. The fiscal year 2001 amount does not include
additional funds for training new employees under the STABLE
initiative.
A typical manager could expect to receive 40-120 hours of training
during fiscal year 2000 and fiscal year 2001 based on work assignments.
The typical frontline Revenue Officer can expect to attend training
amounting to the following number of hours.
Fiscal year 2000: a range of 120 to 134 hours, depending on work
assignments. This represents 40 hours of CPE, 6 hours of Electronic
Research, 16 hours Automated Trust Fund Recovery, and 72 hours of RO
Unit 4 for certain ROs.
Fiscal year 2001: a range of 100 to 120 hours, depending on work
assignments. This represents 40 hours of CPE, 8 hours of Electronic
Asset Locator Training, 4 hours of Fraud Referral Training, 32 hours of
Seizure Training and an undetermined number of hours for training
related to the technical requirements in the Small Business/Self
Employed Business Unit.
The typical frontline Revenue Agent can expect to attend training
amounting to the following number of hours:
Fiscal year 2000--approximately 205 hours. Training will consist of
80 hours CPE (optional and mandatory topics such as Electronic Research
and Third Party Contact) and other specialty and mandatory training,
e.g. TEFRA, Reports Generating software, UNAX, sexual harassment.
Fiscal year 2001--approximately 188 hours. Training will consist of
80 hours CPE (mandatory and optional topics), plus courses of varying
length dealing with new procedures in the business unit and various
mandatory training such as tax law changes, UNAX and sexual harassment.
In fiscal year 2001, it is anticipated that 800 Revenue Agents recruits
will be hired in April 2001. The new hires will receive Phase I and II
training, totaling 21.4 weeks of training including classroom and OJT.
New hires typically do not attend CPE.
The typical front-line employee in Submission Processing Centers
can expect to receive 40 to 45 hours of training, depending on work
assignments, during fiscal year 2000 and 2001. When the transition to 8
centers processing individual returns and 2 centers processing business
returns, a typical front-line employee could expect to receive an
additional 50 to 60 hours of training based on work assignments.
The typical frontline Tax Auditor can expect to attend training
amounting to the following number of hours:
Fiscal year 2000--approximately 195 hours. Training will consist of
80 hours CPE (optional and mandatory topics such as Electronic Research
and Third Party Contact) and other mandatory training.
Fiscal year 2001--approximately 174 hours. Training will consist of
80 hours CPE, plus courses of varying length for new procedures in the
business unit and various mandatory training such as UNAX and sexual
harassment.
The typical frontline employee in Tax-Exempt and Government
Entities can expect to attend training amounting to the following
number of hours.
Fiscal year 2000--a range of 100-160 hours, depending on work
assignments. Training will consist of 40 hours CPE, 40 hours
automation, 6 hours electronic research, 16 hours orientation to new
business unit, 120 hours for new hires in Phase I training, and
mandatory training such as UNAX, sexual harassment.
Fiscal year 2001--a range of 120-400 hours, depending on work
assignments. Training will consist of 40 hours CPE, 40 hours Phase II
automation, Phase I & II courses of varying length for new occupations
in business unit, and the various mandatory training such as UNAX and
sexual harassment.
During fiscal year 2000 and 2001, the typical new front-line
employee in Customer Service could expect to receive 64 to 176 hours of
training, depending on work assignments. A typical experienced front-
line employee in Customer Service could expect to receive 84 hours of
training, including 24 hours mandatory training, 40 hours continuing
skills enhancement training, and 20 hours of training related to their
work assignments.
IRS experienced some difficulty in developing and delivering early
training related to the Restructuring Act. This included (1) ``world
class customer service'' training that was discontinued and redesigned
on National Treasury Employees Union concerns and (2) section 1203
training that, according to the Commissioner, contributed to confusion
among employees.
Question. What is the IRS doing to ensure that planned
modernization-related training does not encounter similar problems?
Answer. RRA 98 is a technical and procedurally complex piece of
legislation with many provisions that required coordination between
Office of Chief Counsel, functional operations and training activities.
Decisions regarding procedures needed to be completed before technical
instructional products could be issued.
The configuration of the operating divisions calls for educational
resources to be part of the organizational structure; thus
accountability exists for ensuring alignment between procedural and
instructional activities. Staffs working on the new procedures will, in
large measure, be within the same entity as those developing training
products.
Training professionals are working with each operating division to
ensure training needs are identified and integrated into plans for
development and delivery.
Section 1205 of Title I of RRA 98 requires IRS to establish a
training program to ensure that IRS employees are trained in areas such
as taxpayer protections. IRS fiscal year 2001 budget request also
states that IRS shall maintain a training program to ensure that IRS
employees are trained in taxpayer rights, dealing courteously with
taxpayers, and cross-cultural relations.
RRA 98 provides that it should be the goal of IRS to have at least
80 percent of all federal tax and information returns filed
electronically by 2007.
Question. What percentage of federal income tax returns were filed
electronically in 1999, and what percentage does IRS expect to be filed
electronically in 2000 and 2001?
Answer. In 1999, 23.4 percent of all individual income tax returns
were filed electronically. In 2000, we expect to receive approximately
27 percent of all individual income tax returns electronically. In
2001, we expect to receive between 29.5-32.1 percent electronically.
Question. What percentage of information returns were filed
electronically in 1999, and what percentage does IRS expect to be filed
electronically in 2000 and 2001?
Answer. In 1999, 94 percent of information returns were filed
either electronically or on magnetic tape. Updated projections for 2000
and 2001 are currently being prepared by the Office of the Assistant
Commissioner (Research and Statistics of Income). We will forward them
to you as soon as they become available.
Question. What annual growth rate in the electronic filing of tax
returns is necessary if IRS is to achieve the 80 percent goal by 2007?
How does IRS expect to achieve this growth rate?
Answer. By 2007, IRS expects to receive approximately 138.6 million
individual income tax returns. In order to reach the goal of 80 percent
in 2007, IRS would need to receive 110.9 million tax returns
electronically, or approximately 76 million more returns than the
approximately 35 million returns that will be filed electronically this
year. With 7 years to go to 2007, that means that the electronic filing
volumes would have to increase by approximately 11 million per year.
The IRS has developed a strategic plan for Electronic Tax
Administration entitled ``A Strategy for Growth'' in order to make
significant progress toward achieving the goals established by
Congress. As required by the IRS Restructuring and Reform Act of 1998,
the strategic plan was designed to eliminate barriers, provide
incentives and use competitive market forces to make significant
progress toward (1) the overriding goal of 80 percent of all tax and
information returns being filed electronically by 2007, and (2) the
interim goal that, to the extent practicable, all returns prepared
electronically should be filed electronically by 2003. The strategic
plan is updated annually to reflect new developments and to incorporate
the suggestions received from the Electronic Tax Administration
Advisory Committee and other interested stakeholders.
Question. What does IRS plan to do to increase electronic filing by
those taxpayers with a balance due?
Answer. Because of the expanded electronic payment options that are
being made available to taxpayers, more and more balance due filers are
choosing to file electronically. Through March 31, 2000, 986,452
taxpayers had electronically filed balance due returns compared to
726,693 in the comparable period last year, an increase of 35.8
percent.
Last year over 53,000 tax payments were made by credit card and
approximately 75,000 payments were made by Automated Clearing House
(ACH) Direct Debit where taxpayers can authorize either their checking
or savings to be debited as part of their electronic return. This
filing season, more electronic payment options (credit card and ACH
direct debit payment) have been made available to taxpayers, such as
accepting debit payments through TeleFile and accepting credit cards
for Forms 1040ES, estimated tax payments, and Forms 4868, extensions of
time to file. As of April 1, 2000, we have achieved a 205 percent
overall increase as compared to the same period last year. Under our
electronic payments initiative, the IRS will continue to expand the
electronic payment products and services available to taxpayers in
future years.
Question. Is there anything Congress can do legislatively to help
achieve the 80 percent goal?
Answer. Electronic tax administration would benefit from
Congressional support in the following three critical areas:
--Supporting the electronic filing provisions in the President's
fiscal year 2001 Budget;
--Supporting IRS' request for additional funding for ETA in fiscal
year 2001; and
--Supporting the privacy protections provision contained in the
Taxpayer Bill of Rights.
The President's fiscal year 2001 budget request contains two
provisions that are intended to make electronic filing of income tax
returns more attractive to taxpayers. These provisions would provide
taxpayers with:
--A temporary, refundable tax credit for the electronic filing of
individual income tax returns. The credit would be for tax
years 2002 through 2006--$10 for each electronically filed
return other than TeleFile returns, for which the credit would
be $5; and
--One or more no-cost options for preparing and filing individual
income tax returns over the Internet beginning no later than
tax year 2002.
The IRS also needs support of its fiscal year 2001 budget request
which includes $3 million for the expansion of electronic tax
administration's highly successful marketing campaign. In addition,
both the IRS and taxpayers would benefit from the privacy protection
provision in regard to electronic tax administration that is contained
in the Taxpayer Bill of Rights 2000.
One legislative proposal in the President's fiscal year 2001 budget
request calls for a refundable tax credit for persons who file
electronically. The credit will be $10 for those who file on-line and
$5 for those who file via the telephone.
Question. How were the amounts of this credit determined? Why is
the proposed credit less for persons who file via the telephone?
Answer. A number of factors were considered, but generally the
amount of the credit was set at the typical extra charge for electronic
filing for taxpayers who prepare their own returns using electronic tax
preparation software. If they choose to transmit their return
information to the software publisher for electronic filing with IRS,
the charge is typically about $10. Sometimes, there is no incremental
charge to the taxpayer; instead the extra cost is built into the price
of the software. The intent of the temporary tax credit is to encourage
taxpayers--especially those whose returns are already being prepared by
computer--to try electronic filing. We believe that once taxpayers try
it, they will realize how much their own burden is reduced and how much
faster and easier many types of errors are corrected that many or most
will continue to file electronically even without a tax credit.
The credit amount for taxpayers using the TeleFile system was set
lower since there is no charge to the taxpayer to use this system. The
$5 credit was viewed as a sufficient incentive to attract more eligible
taxpayers to use TeleFile.
Question. How do the credit amounts compare to the dollar savings
IRS realizes as a result of electronic filing? How does IRS determine
its dollar savings as a result of electronic filing?
Answer. We know that the incremental cost of processing an
electronic return is lower than the incremental cost of processing a
paper return. The difference is even larger when the relative costs of
correcting errors is considered. IRS, however, does not have good data
on incremental costs, although we are currently engaged in a
comprehensive review of the cost of processing electronic tax returns
which will enable us to make such estimates in the future.
Note that existing data shows that the average per return cost of
processing electronically filed returns is slightly less than the costs
for paper returns. Based on fiscal year 1999 return volumes, we
estimate the per unit cost for an electronically-filed return at $4.14
compared to $4.28 for a paper return. As electronic filing volumes
increase, fixed costs will be spread over the greater volume, and the
per return saving will increase substantially. The IRS also has
undertaken several changes that will further reduce costs for handling
electronic returns relative to paper returns. These include deploying
an authentication approach which will eliminate the paper signature
jurat, and consolidating and modernizing service center equipment and
procedures used for electronic returns.
Question. How many additional electronic returns does IRS expect
will be filed as a result of this credit?
Answer. In general, it is not possible to estimate the number of
additional electronic returns that will be filed solely in response to
the tax credit. This is attributable to the fact that recent data show
significant increases in the number of taxpayers choosing to file
electronically. We do not know whether or not the recent increase
reflects a new trend; that would have a direct impact on projections of
the number of additional returns that are e-filed as the result of the
tax credit. However, it is likely that the tax credit would induce at
least several million additional returns to be filed electronically.
The STABLE initiative includes 408 FTEs for transcribing 18 million
Schedule K-1s filed by partnerships, trusts, and S-corporations so that
IRS' Document Matching Program can reconcile that data with information
reported on individual tax returns.
Question. How many Schedule K-1s does IRS currently transcribe?
and,
How many Schedule K-1 cases are currently worked in the Document
Matching Program? And,
What have been the results of those cases?
Answer. IRS does not currently transcribe any K-1s received on
paper. As a result, there are no cases currently being worked in our
Automated Document Matching Program. As stated in the fiscal year 2001
STABLE initiative, 18 million paper documents, together with 11.5
million K-1s received electronically, provide information on income (or
losses) distributed to individual partners, beneficiaries, and
shareholders and represent in excess of $500 billion in total income.
Processing these documents will allow IRS' Document Matching Program
(Underreporter Program) to reconcile K-1 data with information reported
on individual tax returns.
Our plan, stated in the STABLE initiative, is supported in James R.
White's testimony for GAO before the Subcommittee on Oversight,
Committee on Ways and Means, House of Representatives on March 28,
2000. Mr. White testified that the ``IRS' plan is consistent with a
recommendation we made in 1995--namely that IRS devise ways to enter
all Schedule K-1 onto the computer so they can be used in the document
matching program and for other compliance programs.'' (GAO/T-GGD/AIMD-
00-133)
The STABLE initiative includes 500 FTEs for toll-free telephone
service for fiscal year 2000-2001. According to IRS, this staffing
increase is ``designed to address declining staffing levels and the
substantial increase in the amount of time required per case due to
provisions of RRA 98.'' At this requested level of staffing, IRS says
that it will be able to provide a 60-percent level of service.
Question. To what extent has the actual staffing for toll-free
telephone service declined between fiscal years 1998 and 2000? In
providing this comparison, please show separately, for each year, the
number of FTEs provided by (1) staff in the toll-free program; (2)
detailees from other program areas in the Customer Service function;
and (3) detailees from other IRS functions, such as Examination and
Collection.
Answer: FTEs for fiscal year 1998 to 2000 as well as detailees and
support from other functions are as follows:
----------------------------------------------------------------------------------------------------------------
Fiscal years
-----------------------------------------------
1998 1999 2000
----------------------------------------------------------------------------------------------------------------
Toll Free \1\................................................... 7,399 8,191 7,593
Exam details to Toll-Free....................................... 309 654 569
Appeals (Referral-mail/E-Mail support) details To Toll-Free..... .............. .............. 99
----------------------------------------------------------------------------------------------------------------
\1\ Detailees from other program areas within Customer Service are included in the Toll Free FTE above but are
not separately identifiable.
Question. What are the provisions of RRA 98 that are increasing the
time telephone representatives spend assisting taxpayers?
Answer. Provision 3705 requires that the IRS provide Spanish
language assistance and the option to taxpayers of speaking to a live
assistor. In fiscal year 2000, the IRS received 200 FTE to implement
this provision. We have identified an additional 259 FTE needed to
satisfy this provision in fiscal year 2001 for the toll-free operation.
Provision 3462, which addresses Offers in Compromise case processing in
the Automated Collection System (ACS), will require 138 FTE in fiscal
year 2001.
Question. What has IRS done to identify the underlying reasons for
this additional time, and what actions can IRS take to minimize such
increases?
Answer. Customer Service conducted a thorough analysis of the
fiscal year 1999 telephone operations. The results indicate that we
need to develop new methods of planning and preparing ourselves for
rapid shifts in market needs. Some of the actions IRS is taking to
minimize the effect of the increased need for live assistors (to
address provision 3705) are:
--Use of intelligent call routing;
--Implementation of a nationwide telephone system messaging feature
to allow callers to leave messages requesting service from
taxpayer service assistors; and
--Implementation of an integrated work planning and scheduling
process to more effectively align resources to provide service
to taxpayers.
IRS has initiated a call content study to assist us in better
defining taxpayer needs. We hope to use this information to provide our
employees with the training and tools to allow them to better serve
taxpayer needs.
Question. What other factors, if any, have increased the time
telephone representatives spend assisting taxpayers?
Answer. The handle times for the three major product lines (i.e.,
1040, 8815, and 4262) have increased slightly overall. Although better
call routing technology has enabled us to more efficiently direct
customers to the appropriate assistance, the following factors have
increased the time Customer Service Representatives spend providing
service to taxpayers:
--The types of calls our Customer Service Representatives handle have
also shifted to more difficult issues, which necessitate more
time to handle.
--The screening of Referral-Mail, which refers taxpayer questions to
specialists for response, for compliance messaging. To improve
customer service this year, we use employees for Referral-Mail
screening to collect pertinent data to facilitate the messaging
process. As a result, a slight increase in the time spent on
calls is to be expected.
One of the IRS' key performance indicators is ``toll-free level of
service.'' IRS defines that measure as ``the number of calls answered
(less those calls abandon while in the queue waiting for the next
available assistor) compared to the total number of calls attempted.''
The toll-free level of service declined significantly between 1998 (70
percent) and 1999 (53.3 percent). IRS' level of service goals for
fiscal year 2000 and 2001 are 58 percent and 60 percent respectively.
Question. What were the reasons for the decline in level of service
in fiscal year 1999 and what has IRS done, or does IRS plan to do, to
increase the level of service?
Answer. The primary reasons for the decline in toll-free level of
service in fiscal year 1999 are listed below:
--The Service expanded its hours of operation in 1999 to 7x24 service
without additional funding for the increased hours of coverage;
--There were technical problems with the nationwide implementation of
the Customer Service Intelligent Call Router, which allowed IRS
to manage the telephone operation on an enterprise-wide basis
for the first time; and
--There were increased training demands to implement the new tax law
requirements.
The 58 percent and 60 percent goals listed in the fiscal year 2001
Congressional Justification were based on the experience of the fiscal
year 1999 filing season. For the fiscal year 2000 filing season through
March 11, 2000, we are at a 65 percent level of service (LOS) as
compared to 50 percent for the same period in fiscal year 1999. Long-
term systems improvements that move IRS forward in our ability to
provide the appropriate type of service to meet the taxpayer's need
(for example, automation alternatives for basic questions regarding
return fact of filing or refund status) were made for the fiscal year
2000 filing season. These improvements include:
--Improving work and staff scheduling processes;
--Monitoring and reviewing telephone performance daily and
implementing appropriate corrective actions immediately;
--Focusing resources during times that affect the most customers.
Beginning April 18, 2000, tax law assistance will be on a 16
hours a day, 6 days a week basis; and
--Modifying tax packages to list TeleTax as the primary method of
resolution for tax refund inquiries and redesigning our
recorded script messages to provide more opportunities for
taxpayers to use the automated refund applications in Telephone
Routing Interactive System (TRIS) to reduce routine refund
calls handled by Customer Service Representatives.
Based on the current Level of Service (65 percent), combined with
reduced call demand from the systems improvements listed above, we are
revising our fiscal year 2001 filing season Level of Service goal to 70
percent. This revision is dependent on a call demand consistent with
experience thus far this fiscal year, continued achievement of current
telephone performance, and increased staffing of 500 FTEs provided by
the STABLE initiative.
This year, we plan to test a network prompt routing taxpayers
immediately to our automated refund application in TeleTax, which we
expect to further reduce demand for taxpayer calls to be answered by
Customer Service Representatives.
Question. Why does IRS not expect to regain or exceed 1998's level
of service?
Answer. Our ultimate goal is to provide a Level of Service that far
exceeds prior years. We expect to provide our customers service
commensurate with their experiences in dealing with ``best in class''
private sector companies. In keeping with ``best in class'' private
sector companies, we believe it is imperative that we provide customers
with enhanced automation alternatives when their needs can best be met
through automation. For example, basic questions regarding return fact
of filing or refund status can best be handled through automated
services.
Conversely, customers who have a problem with their refund or who
have received a notice need to interact with a Customer Service
Representative to resolve their problem. These types of more complex or
more comprehensive calls take longer for a Customer Service
Representative to complete than calls that will be handled by
automation. Additionally, a large percentage of callers with tax law
questions currently are not provided live assistance at the time of
their call. Their questions are transcribed by a clerk screener,
referred electronically to Compliance personnel, and generally answered
within 2 business days. We expect to provide live assistance to callers
with complex tax issues within the next few years. When implemented,
this additional service will impact the amount of time it takes an
assistor to answer the call.
Question. What assumptions did IRS use to develop its performance
goal for 2001?
Answer. The 60 percent goal listed in the fiscal year 2001
Congressional Justification was based on the experience of the fiscal
year 1999 filing season. The fiscal year 1999 Level of Service of 53.3
percent resulted from difficulties in providing experienced taxpayer
assistors to cover the expanded hours of service and technical problems
connected with the implementation of the Customer Service Intelligent
Call Router.
We have since revised our estimate for fiscal year 2000 to 65
percent based on our actual level of service as of March 11, 2000. As a
result of this improvement, we have increased our fiscal year 2001 goal
to 70 percent. This revision is dependent upon a call demand consistent
with experience thus far in fiscal year 2000, continued achievement of
current telephone performance, and increased staffing of 500 FTE
scheduled to be provided by the STABLE initiative.
Question. What level of service should IRS strive to provide and
how much would it cost? And
How many additional employees would IRS need to increase the toll-
free level of service to 75, 85, and 95 percent? What would be the
estimated cost for each of these increased service levels?
Answer. The improvements in level of service we are projecting for
fiscal year 2001 are based on a combination of ongoing managerial and
technological enhancements, coupled with FTE increases described in the
STABLE initiative. It is very difficult to segregate this improvement
between additional FTEs and other enhancements.
We also project that with an additional 875 FTE (875 + 500 FTE from
STABLE initiative), we could raise our level of service from 65 percent
to approximately 75 percent. This is assuming no significant change in
customer demand due to factors such as passage of new tax legislation,
increased notice issuance, or variance in taxpayers' filing patterns.
Telephone service is difficult to improve beyond a 70 to 75 percent
level of service with additional staff alone. Since ``customer
abandons'' and ``busy signals'' influence level of service in addition
to the number of calls answered, improving beyond 70 percent requires
both an increase in FTE and significant improvements in technology.
Therefore, projections beyond 75 percent level of service would be
unreliable. The appropriate level of service is one that would allow us
to provide world class customer service within a recognized number of
seconds to all customers who contact IRS for service.
IRS is requesting additional FTEs and plans to use information
technology investment funds to implement Phase I of a customer
communications modernization project in fiscal year 2001. Phase 1 of
that project, according to IRS, is to ensure that taxpayers questions
get answered correctly, either by enhanced automated systems or by
customer service representatives who have quick access to needed
information.'' Despite the additional FTEs and implementation of the
modernization project, IRS congressional justification shows that IRS
expects to answer the same number of telephone calls (118 million) in
fiscal year 2001 and 2000.
Question. Why is IRS not expecting an increase in the number of
telephone calls answered in fiscal year 2001 given the additional
resources expected that year?
Answer. We do not anticipate an increase in the number of telephone
calls answered in fiscal year 2001 for the following reasons:
--Additional resources we have requested will improve the level of
service and reduce the average speed of answer (this is a
variable number while service level is a percentage answered
within a specific criteria--30 seconds for example), both of
which will contribute to reducing the volume of call attempts
(demand.); and
--Technology improvements and customer access to the Internet
continue to drive demand down as customers research less
complex issues.
Question. What level of improvement can be expected as result of
the additional FTEs and the technology investments? Will those benefits
be offset by an expected increase in demand? If so, what is the
expected increase in demand?
Answer. The FTE increase requested for Toll-free under the STABLE
initiative is expected to yield an improvement of approximately 5
percent in Level of Service. The filing season 2001 development and
deployment activities will be limited to implementing communications
infrastructure improvements in our customer communication (call center)
operation and procuring a new tool for our large corporate tax
examiners. The customer communications improvements will facilitate
taxpayer access by offering improved service. This will include
improved call responsiveness by increasing the capacity for handling
incoming telephone calls, improved quality of responses by better
directing of calls to knowledgeable experts, and improved self-help
capabilities. These investments will also provide a platform for later
improvements. We do not expect the benefits to be offset by an
increased demand unless there are changes in the tax law, increased
notice issuance or variance in taxpayers' filing patterns.
Question. When is Phase I of the customer communications project
expected to be operational?
Answer. Phase I of the modernization project is scheduled for
implementation by January 1, 2001.
Two of the IRS' performance indicators relate to the accuracy of
information provided to taxpayers through the toll-free telephone
assistance program. According to IRS, the first measure, relating to
accuracy of tax law information, declined from 96.1 percent in fiscal
year 1997 to 74.1 percent in fiscal year 1999, but is expected to
increase to 84 percent in fiscal year 2001. The second measure,
relating to the accuracy of account information, also declined between
fiscal year 1997 (91.1 percent) and fiscal year 1999 (81.7 percent).
Unlike the tax law accuracy rate, however, the account accuracy rate is
expected to continue to decline to 63 percent in fiscal year 2000 and
remain at that level for fiscal year 2001.
Question. What are the reasons for the declines in accuracy rates
between 1997 and 1999?
Answer. The primary reason for the declines in accuracy rates is
that we changed the way we measure Tax Law Telephone Accuracy in fiscal
year 1999. From 1990 through 1998, we measured Tax Law Accuracy with
the Integrated Test Call Survey System (ITCSS). With ITCSS, we measured
quality using scripted test questions. The two major weaknesses to
ITCSS were:
--IRS could not create test questions to cover every type of taxpayer
question; and
--Over time, sites were often able to identify the test questions.
To eliminate these problems, we switched from using test questions
to monitoring live taxpayer Tax Law Telephone calls. In October 1997,
we centralized and standardized our quality review with the
implementation of the Centralized Quality Review Site (CQRS). Sites are
now evaluated on the accuracy of actual calls they receive from
taxpayers, rather than on test calls. We believe that our current
review methodology provides a more accurate assessment of the quality
of Tax Law Telephone calls than we received with ITCSS.
Question. What has IRS done, or does IRS plan to do, to increase
the accuracy of tax law information provided to taxpayers?
Answer. IRS has taken, or will take, the following actions to
increase the accuracy of the tax law information provided to taxpayers.
--IRS has made a commitment to provide world-class customer service
training to its employees to provide them with the skills
needed to perform their jobs. A training staff was established
to coordinate a variety of initiatives such as:
--conducting training needs assessments in conjunction with field
operations and Customer Service;
--designing and developing refresher (Continuing Professional
Education) courses;
--conducting focus-group interviews regarding the delivery of
refresher training; and
--implementing a modularized approach to training that provides
targeted, timely, and effective training.
--Beginning in June 1999, the IRS converted to the nationwide
standardization and centralization of the review process, the
Centralized Quality Review System (CQRS), which is a more
comprehensive quality review system with more stringent
guidelines than the previous review system-Integrated Test Call
Survey System. The CQRS reviews taxpayer inquiries in their
entirety and no longer allows for local discretion.
--Local quality monitoring requirements have been doubled at several
sites and the defects most often made are now identified and
addressed continuously.
As a result of the CQRS, accuracy rates dropped significantly and
we had little basis on which to build accurate projections as to what
might happen in fiscal year 2001. The ``no change'' forecast was a very
conservative assumption--one that we will revise as soon as the filing
season data is analyzed.
Question. Why does IRS expect such a significant decline in the
account accuracy rate in fiscal year 2000, and why is no improvement
expected in 2001?
Answer. Beginning in June 1999, the IRS converted to the nationwide
standardization and centralization of the review process, the
Centralized Quality Review System (CQRS), which is a more comprehensive
quality review system with more stringent guidelines than the previous
review system-Integrated Test Call Survey System. The CQRS reviews
taxpayer inquiries in their entirety and no longer allows for local
discretion.
In addition, local quality monitoring requirements have been
doubled at several sites and the defects most often made are now
identified and addressed continuously.
As a result of the CQRS, accuracy rates dropped significantly and
we had little basis on which to build accurate projections as to what
might happen in fiscal year 2001. The ``no change'' forecast was a very
conservative assumption--one that we will revise as soon as the filing
season data is analyzed.
Question. What does IRS plan to do to reverse the expected decline?
Answer. We are committed to improving the Account Quality Rate in
fiscal year 2001. At the time we were setting performance targets for
fiscal year 2000 and fiscal year 2001 we had just introduced a new
performance measuring system for account quality--the Centralized
Quality Review System's (CQRS). CQRS is a comprehensive quality review
system with centralized remote monitoring of actual taxpayer inquiries
in their entirety and no longer allows for local discretion. Accuracy
rates dropped significantly under the new system, and we had little
basis on which to build accurate projections as to what might happen in
fiscal year 2001. The ``no change'' forecast was a very conservative
assumption--one that we are taking steps to improve at every one of our
call sites. For example, a modified Accounts Customer Service Guide has
been developed and distributed to Customer Service Representatives
(CSR) at one site. The guide will be made available on Servicewide
Electronic Research Program (SERP). Daily CQRS error data is now shared
with employees at several sites. A memorandum was distributed at
another site detailing the most frequently occurring errors. The list
of errors included omissions of history items and failure to warn of
enforcement action. The errors attributed to these two issues have
decreased as a result of this initiative. Local quality monitoring
requirements have been doubled at several sites. Top defects are now
identified continuously. Section Chiefs are doing ``group monitoring''
in conjunction with a front-line manager and a reviewer from the
Quality Assurance staff. With assistance from the Customer Service
Field Operation Deputy Commissioners, we will determine the extent that
our initiatives actually improve quality. The Deputies are asked to
comment on this issue as part of their monthly Operational Reviews.
This topic was also included in site reviews that have been conducted
at several sites.
Other actions that have been taken to improve account quality
include:
--The Accounts Customer Service Guide developed by Ogden is now being
tested in Baltimore, Pittsburgh, and Atlanta. It is also now
posted on SERP. The sites have been encouraged to start using
the guide now.
--Training has been provided on the use of the Quality Review
Database to isolate the root causes of the most frequently
occurring account errors. This information is then used to
target corrective actions, such as managerial monitoring,
employee feedback and coaching, and targeted training.
--There is a Customer Service training group that is working with
Strategic Human Resources to develop Customer Service training
material that is organized into modules by application. This
will make it easier to train specifically on accounts
applications on short notice.
Monitoring of responses to taxpayers is now occurring in the call
centers. Directors have been provided with access numbers that enable
them to monitor taxpayer calls in Customer Service Centers within their
jurisdiction 24 hours a day, 7 days a week, from the office, or from
home.
Another IRS indicator related to its toll-free telephone service is
``adherence to scheduled hours.'' IRS defines that measure as the
``percent of work periods where scheduled hours are delivered/met.''
According to IRS' congressional justification, the toll-free sites are
expected to improve adherence to scheduled hours from 24.7 percent in
fiscal year 1999 to 40 percent in fiscal years 2000 and 2001.
Question. How are scheduled hours determined?
Answer. Scheduled hours are determined by taking into account the
following factors:
--Call demand projected from historical results;
--Call volume allocations by site;
--Staff availability based on skills and training;
--Staff tours of duty;
--Site hours of operation;
--Hours/days where demand is highest; and
--Budgeted resource availability.
Scheduled hours are determined by the number of staff that can be
funded with the right training level for the calls that are expected
based on historical demand. Sites are funded at an agreed level, based
on the budget, to answer a specific workload or volume of calls. Tours
of duty and hours of operation are factors that are part of the
equation with growth in FTE targeted to hours/days where demand for
assistance exceeds supply.
Question. Why are the toll-free sites having difficulty meeting
expected schedules? What actions did IRS take to improve schedule
adherence? What other actions does IRS plan to improve adherence?
Answer. Due to a number of issues, scheduling and projecting
adherence is complex.
--Early in the year many sites lacked historic ``shrinkage''
factors--that is, the number of phone employees who are not
available for phone work for reasons such as unscheduled leave,
breaks, lunch, meeting and read time or for discussions with
managers. As a result, the number of employees needed each
half-hour was sometimes over or underestimated. Trying to
schedule multiple, overlapping shifts with the accompanying
breaks and lunches exacerbated this problem. Good data were
also not available for call demand during late night/early
morning hours and on weekends, and in some cases, these shifts
were not staffed appropriately.
--Adherence to schedule was defined very narrowly--95-110 percent of
scheduled staffing. In some cases a difference of one or two
employees in a half-hour would mean success or failure.
--Further complexity resulted from our need to share resources across
all Customer Service functions in order to meet peak demand and
still deliver balanced programs. For example, an increase in
``paper'' inventories means decisions must be made about
reducing staffing on phone programs to respond to the customers
who write to us.
As the year has progressed, Customer Service has been very diligent
in monitoring adherence. A ``snapshot'' is taken at each call site
every half-hour to assess whether required staffing is met. Significant
improvement and consistency have been achieved. The sites have
realigned tours of duty including breaks, lunches and off-line
activities in order to conform to schedule. We continue to refine the
scheduling process to ensure that they are realistic and achievable. We
have implemented schedule modifications to move staffing into busier
times of day when sites have more employees on board and where demand
is higher. We have also broadened the definition of ``meeting
adherence'' so that minor deviations no longer results in a self-
defined failure. Additional changes in tours of duty, overtime and
directing new hires to specific understaffed half-hours will continue
to improve adherence.
Question. Do customer service organizations in the private sector
have a similar measure? If so, what percentage of adherence to schedule
do the top performing organizations consider acceptable?
Answer. Telephone service operations in the private sector do have
a similar measure, often using quarter hour increments while IRS
currently uses \1/2\ hour increments. It is our understanding that top
performing organizations only consider 100 percent adherence to
schedule to be acceptable.
Question. What would it take to increase schedule adherence from 40
percent to 55 percent and how would that increase improve the overall
level of service for taxpayers?
Answer. Schedule adherence is within a range. From 90 percent to
110 percent of schedule is considered acceptable when calculating
achievement. Through April 1, approximately 40 percent of the \1/2\
hour increments were within that range and an additional 36 percent of
the \1/2\ hour increments exceeded the 110 percent ``cap''. Call
centers must place staff on tours of duty that contribute to having the
right number of people with the right skills on the phone at the time
the customer calls, thus delivering their staffing requirement. Care
must be exercised to avoid over-, and under-delivery. Call centers must
also continue to ensure that staffs adhere to their individual work
schedules.
Another important IRS measure is employee satisfaction. Currently,
IRS is only able to report employee satisfaction for its overall
Customer Service function; it is unable to report separate employee
satisfaction numbers for the various program areas within Customer
Service, including the toll-free program. According to IRS, employee
satisfaction in the customer Service function is expected to increase
from 55 percent in fiscal year 1999 to 60.5 in fiscal year 2001.
Question. What actions did IRS take to improve employee
satisfaction and what other actions are planned?
Answer. The IRS is developing employee satisfaction improvement
strategies at the operational and strategic levels. At the operational
level, all managers within the IRS are required to use their workgroup
survey results in working with local NTEU representatives and employees
to create employee satisfaction improvement action plans relevant to
their individual workgroups. This process involves everyone working
issues ``close to home.'' All managers have employee satisfaction-
related actions included in their performance management plans. At the
strategic level, the IRS and NTEU senior leaders are using Servicewide
survey results to plan strategies with a broad impact on employee
satisfaction. These leaders are implementing strategies in four areas:
management effectiveness, communication as it relates to empowerment/
involvement, training, and reprisal.
Question. What is IRS' ultimate goal for employee satisfaction and
when does IRS expect to achieve it?
Answer. The IRS views its employee satisfaction efforts as an
ongoing improvement process, and IRS management and NTEU expect all
managers to strive for incremental improvements each year. Although the
IRS does not have a numeric ``end'' goal for employee satisfaction, we
have developed standards derived from normative data collected from the
private and public sectors. The standards were calculated using the top
10 percent of the scores from organizations with similar
characteristics to the IRS. For a few employee satisfaction indexes,
the IRS already scores higher than the standards (e.g., Immediate
Manager Effectiveness); however, for other indexes (e.g., Upper
Management Effectiveness), the IRS is below the standards. The IRS is
encouraging all managers to consider these standards when developing
employee satisfaction action plans for their workgroups. Statisticians
internal to the IRS and contractors have determined that the strongest
predictors of employee satisfaction are the Management Effectiveness
and Empowerment/Involvement indexes. These two indexes are two of the
four areas targeted by senior leaders for improvement this year. The
IRS has been working with a contractor to study the linkages between
the three categories of IRS measures: Employee Satisfaction, Customer
Satisfaction, and Business Results. Once these correlations have been
established, the IRS will use this information to establish a process
for determining realistic goals.
Question. Why is IRS unable to measure employee satisfaction for
each of the program areas within Customer Service? Given this measure
limitation how can the survey results be used to design improvements in
a particular program area?
Answer. The IRS measures employee satisfaction by organizational
unit; the data is provided down to the smallest managerial unit within
the organization. This is done so that every set of data has an
``owner'' or a responsible official who will use the data according to
their level of authority to make organizational improvements.
The Survey 99 employee satisfaction ``scores'' were provided to
each manager at the branch level and above within Customer Service and
every other organization of the IRS. These scores were used by these
managers as an indicator of how their employees within their direct
``chain of command'' rated that organizational unit in employee
satisfaction. Because these managers received scores that were directly
relevant to their specific area of responsibility, they were able to
develop goals and actions specifically designed to improve employee
satisfaction within that area. In other words, scores below the level
of Servicewide Customer Service were available to managers; however,
the scores were calculated on management organizational units (branch,
division, district, region, etc.) instead of program lines (e.g., Toll
Free, Walk-In, Automated Collection System).
The management chain of command and program activities are not
often parallel--meaning that a branch chief does not often supervise
only one activity. A branch chief frequently supervises Walk-In, Toll
Free, and/or other activities making it difficult to separate data
among program activities. For the SURVEY2000 cycle, the IRS is
attempting to collect data in such a way that it is possible to
calculate employee satisfaction scores for the program activities in
Customer Service. However, the IRS will continue to provide branch
level managers and above employee satisfaction scores based on survey
data from all employees within their area of responsibility.
The tax code is complex and IRS has in recent years been accused of
applying disproportionate enforcement efforts to small individual
taxpayers whose returns involve relatively simple aspects of the law.
Some contend that IRS has been less vigorous in enforcing complex
provisions of the tax law involving large businesses and wealthy
individuals because, in such cases, IRS is likely to encounter a more
sophisticated legal defense and lose the case on appeals.
Question. What are the three most serious compliance problems
associated with income tax returns filed by individuals? What are the
three most serious compliance problems associated with income tax
returns filed by businesses? Please provide some detail on the nature
of those problems.
Answer. There is no ready consensus in IRS as to the three most
serious compliance problems for individuals and for businesses.
Nevertheless, for the purpose of this question, we will discuss, for
tax returns filed by individuals: (1) underreporting of business
income; (2) failure to file required tax returns; and (3) improper
claims related to ``family tax benefits.'' For businesses
(corporations), we will discuss (4) abusive tax shelters; (5) transfer
pricing; and (6) the research tax credit.
(1) For individual taxpayers, underreporting of business income
(including informal supplier income) is the largest single category of
the income tax gap, accounting for an estimated $29.2 billion in
underreported income taxes in 1992, the most recent year for which
published data are available. Non-farm sole proprietors voluntarily
report only 56 cents of every dollar of their net business income
compared to 93 cents of every dollar for business and nonbusiness
individuals combined. The principal cause of high noncompliance among
non-farm proprietors is the presence of income not subject to
withholding or covered by information reporting. Business income
received by individuals from flow-through entities (partnerships and
trusts) is covered by information reporting requirements. However, the
complexity and rapid growth in the number of such entities poses a
particularly serious challenge to IRS. Partnership and trust filings
have grown rapidly since 1995 while corporation filings have declined.
Tax shelter promoters are marketing the service of establishing trusts
for the purpose of improperly reducing taxpayers' income tax and estate
tax liabilities.
(2) Failure to file required tax returns undermines the United
States' system of voluntary compliance. IRS identifies potential
individual income tax nonfilers by using third party data and
historical filing information. For tax year 1996, IRS identified
approximately 7 million individuals who had not filed returns but who
appeared to have a legal obligation to file with a potential tax
assessment of more than $200. Moreover, there were millions of other
individuals who may not have been legally required to file but may have
been eligible for refunds or credits. Many of these taxpayers may lose
their right to refunds and self-employed taxpayers may forfeit Social
Security Administration (SSA) credits if returns are not filed within
certain prescribed time intervals.
(3) Current family tax benefit issues include: filing status,
exemptions for dependents, the child and dependent care credit, the
earned income tax credit, the child tax credit, education credits, and
adoption credits. The increasing number of Family Tax Benefits has
resulted in different and sometimes conflicting rules that taxpayers
find confusing and compliance has suffered as a result. The Earned
Income Tax Credit and the duplicate use of Social Security Numbers for
dependent exemptions and Child Tax Credit (claimed on multiple returns)
are two of the most well known examples of this problem. The
qualifications for benefits related to an individual and the
relationship of the individual to the taxpayer often depend on
information that IRS has limited ability to obtain without contacting
the taxpayer.
(4) Secretary Summers has said that the rapid growth of abusive
corporate tax shelters may be ``the most serious compliance issue
threatening the American tax system today.'' Abusive corporate tax
shelters are transactions that have no economic substance; their only
purpose is to reduce corporations' tax liabilities. Such transactions
are appearing in an astonishing variety of forms. We believe that they
account at least in part for the widening gap between corporate book
income and taxable income and for the decline in corporate tax receipts
during a year of excellent corporate profits.
(5) The transfer-pricing problem is that commonly controlled
corporations can manipulate prices charged between parents and
subsidiaries to reduce the taxable income of one or the other and
thereby reduce U.S. tax liabilities. For example, a foreign parent of a
U.S. subsidiary may charge its subsidiary artificially high prices for
raw materials supplied by the parent. This would reduce the taxable
income of the U.S. subsidiary (a ``foreign-controlled corporation'')
below what it would be if the subsidiary purchased its raw materials at
``arm's length'' prices. The increased globalization of the United
States economy has resulted in a rapid increase in the number of such
transactions.
(6) Section 41 of the Internal Revenue Code allows a credit for an
increase in qualified research expenses. Issues involving this credit
arise in almost every industry. A recent review found over $9 billion
of research credit claims under examination. The development of these
cases during examination is complicated by the fact that the issues
often arise in the context of a refund, overpayment or offset
situation, leaving insufficient time for thorough development of the
issues. Because the cases require the understanding of complex
scientific or industry-specific issues, IRS is required to devote
extensive resources to the development of the cases to determine
whether all requirements of section 41 are met.
Question. What procedures and systems does IRS use to identify
these compliance problems?
Answer. (1) For individuals, the severity of the problem of
unreported business income has been a consistent result of IRS's
Taxpayer Compliance Measurement Program (TCMP) studies. The flow-
through entity aspect of this problem has been recently identified in
the strategic assessment process for the new Small Business/Self
Employed Division of IRS.
(2) The size of the problem of nonfiling of required tax returns
also was established by IRS's 1988 TCMP study. During fiscal year 1993
through fiscal year 1995, a multifunctional national nonfiler strategy
was conducted using Collection's open inventory. Those activities and
subsequent analysis verified that nonfiling remains a serious problem.
Moreover, IRS's renewed emphasis on customer service raises the
importance of nonfilers since many of them are passing up refunds and
credits to which they are entitled.
(3) The family tax benefit issues were identified in part because
we are finding that a large number of children are claimed on more than
one tax return for various benefits. Also, the growing complexity of
tax law in this area is cause for concern that compliance will suffer
as a result.
(4), (5), (6) For corporations, the three problems were identified
by IRS' National Office Examination personnel. Their information is
based on regular discussions with examiners in the field.
Question. Does IRS have specific compliance initiatives directed at
those problems? If yes, please provide information on the nature of the
initiatives and the amount of resources devoted to them. If no, why
not?
Answer. (1) Underreporting of business income: IRS is restructuring
itself to provide assistance to taxpayers to understand and meet their
tax obligations. The Small Business/Self-Employed Division (SBSE) will
have responsibility for providing such assistance to individuals who
operate businesses. The Commissioner of this new Division will be
Joseph Kehoe, who has extensive experience leading and improving
service organizations in both the private and public sectors. To
improve the quality of our enforcement programs for business
individuals, IRS has developed its Market Segment Specialization
Program (MSSP). A goal of the MSSP is to issue Audit Technique Guides
(ATGs) that allow revenue agents and tax auditors better to understand
the total business environment in selected market segments and become
more efficient in their case evaluations. A continuing problem for
enforcement in this area is that verifying a small business income
often requires the use of audit techniques that may be regarded as
overly intrusive, especially when the taxpayer's income statement is
found to be reasonably accurate.
IRS is now formulating a strategy for dealing with the rapid growth
of partnerships and trusts. One of the elements of the strategy will be
improved use of the information reports filed by partnerships and
trusts. A large fraction of those reports are filed electronically, and
IRS needs to make more effective use of them. Many of the reports are
filed on paper; additional resources are needed to transcribe them so
that they can be used to direct our outreach and assistance programs as
well as our enforcement programs.
(2) To address the problem of failure to file required tax returns,
IRS has adopted a Service-wide National Nonfiler Strategy. The
objectives of the strategy are to improve filing compliance and to
provide better service to nonfilers who are due refunds or credits. The
strategy includes initiatives in several areas with specific actions to
take place over the next 2 years. For example, the Service will develop
and implement communication, education and outreach programs to reach
specific types of nonfilers. Emphasis will be placed, for example, on
taxpayers that are at risk of losing refunds and SSA credits. The
strategy envisions cooperation between IRS and other Federal agencies
and State agencies to promote filing compliance. Other initiatives
include designing and implementing a nonfiler management information
system, improving traditional compliance techniques, exploring
legislative opportunities, and studying the feasibility of contracting
out certain activities related to nonfilers.
(3) Family tax benefit issues: For duplicated use of SSNs IRS has
for several years been able to identify dependents or EITC-qualifying
children claimed on more than one tax return. ``Soft'' notices to the
taxpayers involved have been successful in causing some of the
taxpayers to file amended returns to correct the duplication or to
discontinue the duplication in subsequent years. The Congressionally
authorized EITC Compliance Initiative and special appropriation ($144
million with 2,083 FTE in fiscal year 2000) have allowed IRS to address
some of these issues as they apply to EITC and peripherally as they
relate to associated issues (i.e. dependent exemptions). A substantial
effort was made this year to visit high-volume EITC return preparers to
discuss the need for increased emphasis on the taxpayer's eligibility
to claim an EITC benefit and related benefits. About 72,000 labor hours
went into these activities.
IRS is currently testing a system that accesses historical IRS
databases and information from the Federal Case Register of Child
Support Enforcement Orders and from Social Security records. This
system allows IRS to identify returns, as they are submitted, that
appear to have inappropriate claims for tax benefits. The focus is to
use information about individuals (typically children) and historical
information about the relationship of the individuals to previously
filed tax returns. The ready availability of this information allows
IRS to take actions to educate taxpayers and tax return preparers, as
well as better to identify tax returns requiring enforcement action.
Should this initial test prove successful, IRS may be able to expand
the system to capture additional information received from taxpayers,
such as an indicator that a dependent is totally and permanently
disabled or the type of Individual Retirement Arrangement (IRA) for
which a deduction is being taken. (The latter item would assist IRS
with another impending problem: with the aging of the ``Baby Boom''
generation, growing withdrawals of funds from IRA accounts will require
IRS to know, at the time of the withdrawals, the type of IRA
contributions particular taxpayers deducted over the years and the
taxpayers' ages to determine the taxability of the funds being
withdrawn.) Just as Income Reporting and Matching improved the
reporting of income, it can be expected that as the IRS uses data in a
more sophisticated manner to determine the eligibility of a taxpayer to
claim family related and individual benefits, there will be improved
compliance in this important area of tax administration.
(4) The Department of the Treasury has undertaken several
initiatives to deal with abusive corporate tax shelters. These include
new regulations that are now in effect, administrative reforms, and
proposed legislation. The administrative reforms include the
establishment of the Office of Tax Shelter Analysis in the Large and
Mid-Size Business (LMSB) Division. This office is responsible for
planning, coordinating and providing assistance to our agents who are
working tax shelter issues. The office also has a staff to coordinate
closely with IRS Chief Counsel, receiving and distributing information
as needed. IRS will be establishing a Tax Shelter Hotline, which will
include a telephone number and e-mail address to provide an easy way
for concerned taxpayers and practitioners to provide information on tax
shelter promotions. Fifteen FTEs will be allocated to this office. We
do not have detailed information on the resources being used in the
field to work abusive tax shelter issues.
(5) The IRS strategy for improving compliance in the transfer
pricing area has been to shift the focus from after-the-fact audit and
litigation of transfer pricing disputes to encouragement of up-front
taxpayer compliance and advance resolution of transfer pricing issues.
For example, under the provisions of Sec. 6662(e), IRS has moved to
ensure that taxpayers apply the arm's length standard at the time they
file their original return and have contemporaneous documentation
establishing such compliance. Another initiative involves the
International Field Assistance Specialization Program (IFASP), whose
staff includes three transfer-pricing specialists who provide transfer
pricing expertise and assistance regarding technical issue
identification and case development throughout the country. A third
important IRS compliance initiative directed at the transfer pricing
problem is the Advanced Pricing Agreement (APA) program. Under the APA
program, IRS and the taxpayer agree in advance on the appropriate
pricing methods to be used by the taxpayer for transactions covered by
the APA. An APA may protect against both Sec. 482 adjustments and Sec.
6662(e) penalties. These and other specific IRS transfer pricing
compliance initiatives are described in detail in IRS Publication 3218
(4-1999), Report on the Application and Administration of Section 482,
April 21, 1999. Rough estimates from the IRS Assistant Commissioner
(International) function indicate that approximately 65 percent of its
international programs field compliance efforts, or about $30 million
annually, are devoted to transfer pricing issues.
(6) IRS initiatives to cope with the research credit compliance
problem include a new program to employ outside experts to deal with
credits claimed for development of internal-use software. These experts
have been employed mainly through the Federally Funded Research and
Development Center sponsored by the Department of the Treasury. The
experts are working with examiners in resolving research credit claims.
We are also in the process of hiring experts to deal with research
credits claimed by aerospace and motor vehicle firms. The cost of the
experts has been at least $1.5 million per year, but this has not been
enough to cover all of the cases that need this kind of resource.
For pharmaceutical industry research credit claims, we have
established a committee including IRS personnel (from Examination,
District Counsel, Appeals, and Chief Counsel) and industry
representatives from the largest pharmaceutical industry association.
The goal of the committee is to find common ground to resolve research
credit issues. For all industries, research credit cases are to be
included in the Prefiling Initiative. Under this program, large
business taxpayers may request examination and resolution of specific
issues relating to tax returns expected to be filed in September
through December of 2000.
Question. What has IRS done to track better its enforcement efforts
and results involving different categories of taxpayers (e.g., less
affluent taxpayers versus more affluent taxpayers and large
businesses)?
Answer. We have been centrally compiling the results of our
enforcement efforts since 1992 in the Enforcement Revenue Information
System (ERIS). This system captures important information about all
enforcement cases at many stages of the enforcement process,
consolidating information from the existing information systems for the
various enforcement functions. In most cases, the data can be
aggregated by specific type of taxpayer. The database generates regular
reports, and it can also support specific queries.
According to IRS, the additional workload from RRA 98 contributed
to a decrease in enforcement presence, audit coverage, and case
closures in front-line compliance programs.
Question. Please explain in detail the specific workload increases
that contributed to these various decreases.
Answer. The Taxpayer Protection and Rights section of the
Restructuring and Reform Act of 1998 (RRA 98) alone contains over 25
provisions affording additional protections to taxpayers. In addition
to increased time to train employees in the requirements and
ramifications of the RRA 98 provisions and the time to make the
substantial alterations in IRS procedures dealing with the audit,
taxpayer appeals, and other enforcement processes, the additional
protections and new procedures have increased the workload and the time
it takes to complete case processing.
Substantial changes to the collection process increase the time to
process collection cases. These changes range from requiring
supervisory approval for certain collection actions, the review of
jeopardy and termination levy actions by IRS Counsel to procedural
changes to the Offer in Compromise program, expanded availability of
Installment Agreements and extensions of time for taxpayers to provide
additional information regarding their offers.
Since the passage of RRA 98, the IRS has received 67,372 innocent
spouse (provision 3201) requests that affect approximately 35,459
taxpayers. As of March 6, 2000, there were 51,276 cases in inventory
(affecting approximately 26,987 taxpayers) and the current volume is
approximately 2,800 cases received each month. The average staff time
required to resolve a request for tax relief through the innocent
spouse provision ranges from 5 to more than 20 hours, depending on the
complexity of the fact patterns in different cases. The IRS has
incorporated new audit procedures to determine in each initial
examination with the taxpayer whether there are innocent spouse issues
that need to be addressed and implemented taxpayer education
initiatives (including an ``Innocent Spouse'' questionnaire on the IRS
Internet web page, ``The Daily Digital'').
Some of the other workload increases are as follows:
--Provision 3417, Third Party Notices, adds an estimate of 30 minutes
per case for Examination, Collection, Customer Service, and Tax
Exempt/Government Entities.
--Provision 3705 requires that the IRS provide Spanish language
taxpayer assistance and the option to taxpayers of speaking to
a live assistor. Both of these requirements increase workload
for Toll-Free.
--Provision 3462 resulted in modification to the Offer in Compromise
program and increased the time necessary to process cases in
the Automated Collection System (ACS) and Field Collection.
--Notice activity and processing for innocent spouse (provision 3201)
and due process in collection actions (pre-levy notices)
[provision 3401] increased workload for Submission Processing.
The IRS budget request includes about $1.9 billion and 22,900 FTEs
for the examination activity. That activity includes not only IRS'
audit functions but also its taxpayer education and appeals functions.
Question. How much of the $1.9 billion and 22,900 FTEs is for
audit, taxpayer education, and appeals?
Answer. The ``examination'' budget activity consists of $1.6
billion and 19,723 FTE for ``audit'' (examination), $20.8 million and
223 FTE for taxpayer education, and $173.4 million and 2,063 FTE for
appeals. The additional $100 million and 891 FTE is made up of
approximately $40 million and 467 FTE for International and $60 million
and 424 FTE for Compliance Research.
During a January 2000 conference on IRS modernization, some
concerns were raised about decreases in staffing for the Appeals
function at a time when workload was increasing. Mention was made, for
example, of the impact of the innocent spouse and collection due
process provisions on Appeals' workload.
Question. Please provide information on Appeals actual staffing
levels and caseload for fiscal years 1998, and 1999; its expected
staffing level and caseload for fiscal year 2000; and its budgeted
staffing level caseload for fiscal year 2001?
Answer. Appeals provides taxpayers and taxpayer representatives
with a channel for impartial case settlement prior to cases being
docketed in tax court.
----------------------------------------------------------------------------------------------------------------
Fiscal years
---------------------------------------------------------------
1998 1999 2000 2001
----------------------------------------------------------------------------------------------------------------
FTEs............................................ 2,087 2,144 2,063 2,035
Closed Cases.................................... 71,918 61,507 59,000 \1\ 57,000
----------------------------------------------------------------------------------------------------------------
\1\ Appeals does not control its inventory since all cases originate elsewhere in the IRS. With the major
changes in IRS, RRA 98 and the pending Compliance supplemental, it is extremely difficult to predict workload.
Question. How, specifically, have the innocent spouse and
collection due process provisions affected appeals' workload so far,
and what are the IRS' expectations for the future?
Answer. Concerning the innocent spouse program, Appeals has always
had these types of cases in inventory; however, with RRA 98 more cases
have come to Appeals. In fiscal year 1999 we closed approximately 200
innocent spouse cases, and in fiscal year 2000, through February, we
have closed more than 200 cases already. Current inventory is
approximately 650 cases. Considering the backlog of cases pending
initial decision on claims filed and the Examination initiatives to
resolve these cases, it is difficult to predict Appeals future
workload. However, at a minimum, we expect our workload to increase by
1,000 cases for fiscal year 2000 and fiscal year 2001.
The collection due process provision has had a significant impact.
In fiscal year 1999, we received approximately 5,300 collection cases.
For fiscal year 2000 we expect the receipts to increase to 7,400, and
in fiscal year 2001 to increase to 20,000.
Question. Are there other provisions in RRA 98 or any
administrative changes that have had or are expected to have a
significant impact on appeals' workload, either positively or
negatively, in 2000/or 2001?
Answer. The other areas we expect to have a significant impact are
Early Referral and Mediation, Arbitration, Offers in Compromise, and
Tax Exempt Bonds. RRA 98 modified the procedure for Tax Exempt Bonds,
which allows issuers to appeal an adverse determination. Appeals' is
currently in the process of developing training classes to prepare the
Appeals Officers for the Tax-Exempt Bond cases. The impact on Appeals
will be more in fiscal year 2001 and the out years.
The impact of RRA 98 on IRS' Collection function has been
extensive. For example, Title III of the Act focuses on provisions to
help ensure that taxpayers have adequate protections while dealing with
IRS about their tax matters. IRS has stated that it is meeting the
implementation requirements of the law. IRS also talks about the
Collection function being committed to working its inventory base on
``taxpayer-oriented priorities''.
Question. What are these taxpayer oriented priorities?
Answer. Collection's work has been reprioritized to emphasize
service to taxpayers that have been proactive in attempting to resolve
their problems. This means that Collection staff resources are directed
toward:
--Taxpayers that ``walk-in'' to an IRS office and wish to discuss
their tax liabilities. These ``walk-in'' contacts are usually
the result of computer-produced correspondence regarding an
unpaid tax bill or the non-filing of a tax return.
--Investigating and bringing to resolution Offers-in-Compromise that
have been submitted by taxpayers that seek to resolve their tax
liabilities by paying less than the full amount owed.
--Supporting Customer Service to deal with work overflows, especially
during the filing season, when taxpayers visit or phone with
tax questions.
These taxpayer-oriented priorities come before work on other
assigned collection accounts. The other assigned collection accounts
consist of Taxpayer Delinquent Accounts, for which a tax liability has
been assessed and unpaid, and of Taxpayer Delinquency Investigations,
for which there is reason to believe that a tax return was due to be
filed but was not received.
Question. Are the priorities fair and equitable to taxpayers who
pay their taxes when they are due or might they be seen as ``coddling''
delinquent taxpayers?
Answer. We have focused our efforts to serve taxpayers that have
contacted us. These efforts leave fewer resources to devote to
delinquent accounts for which taxpayers have made no effort to resolve
their liabilities. Some of this unassigned work consists of relatively
high priority cases, including some employers who withhold income and
Social Security taxes from their employees but fail to pay it over to
the Treasury. This can be seen to be unfair both to those taxpayers who
have timely filed all returns and paid all taxes due and to those who
seek us out to resolve their liabilities. Unfortunately, if we expended
our resources first on those taxpayers that were not seeking to
voluntarily resolve their liabilities, there would not be sufficient
resources to properly serve those who have come to us. These taxpayers
would then justifiably believe that they were being treated unfairly.
In order to stretch our available resources over more accounts, we
have expanded the authority of various Service functions to enter into
installment agreements with little or no verification of the taxpayer's
financial condition and reduced the investigation required prior to
declaring certain types of accounts to be ``Currently Not
Collectible.'' Despite these efforts, the number of cases that cannot
be assigned for active field investigation continues to grow. Our
efforts to direct staffing toward the priorities listed above are
partially responsible for the decline in enforcement activity against
uncooperative taxpayers. Although some might perceive this as
``coddling'' delinquent taxpayers, the Collection staff resources
currently available do not permit us to properly work some relatively
high priority matters.
In its fiscal year 2001 budget request, IRS talks about
streamlining the Offer-in Compromise program and decreasing the need
for verification of financial information.
Question. From a fairness and equity perspective, why is IRS making
it easier for delinquent taxpayers to ``walk away'' (or to pay much
less than the actual amount owed) from their tax debt? Shouldn't the
standard in terms of justification be more stringent rather than less?
What are the risks in terms of revenue and fairness?
Answer. As part of our overall reengineering plan for the
collection process we are incorporating the use of all collection
alternatives into appropriate situations. Offer-in Compromise is one of
the alternative approaches to ensure that all taxpayers have some
option for making payment on their delinquencies. We anticipate that
this expanded use of the offer program will increase the overall
dollars collected by providing taxpayers whose liability may have
previously been reported as uncollectible with a means of resolving
their account.
Information from the IRS' Collection Division indicates that many
front-line employees have been reluctant to take all necessary actions
needed to close cases because of fear of reprisal stemming from section
1203 of RRA 98. Under that section, IRS employees are subject to
termination for misconduct in their dealings with taxpayers.
Question. What is IRS' strategy for ensuring that front-line
employees follow enforcement guidelines and procedures needed to
properly close cases?
Answer. A number of actions have been taken to ensure that front-
line employees follow enforcement guidelines and procedures to properly
close cases:
--There have been several national video teleconferences, including
one with Commissioner Rossotti, in which the proper use of
enforcement actions was discussed.
--Internal Revenue Manual have been rewritten to clarify enforcement
procedures after RRA 98.
--A conference of all Collection division chiefs from the 33 district
offices was conducted. The proper use of enforcement actions
was a major topic during the conference.
--A meeting of all Collection field group managers was conducted for
the first time. The Commissioner, the Chief Operations Officer
and the Assistant Commissioner (Collection) were present at
that meeting. The managers of the front line revenue officers
were advised that one of their major concerns should be the
evaluation of case activity to verify that enforcement actions
are taken when appropriate and that if such actions are not
being taken when appropriate, employee non-performance should
be documented.
--The Collection Quality Measurement System, a post-closure case
review process, has been revised to include the review of
revenue officer judgments made during case processing. This
includes judgments regarding the use of enforcement tools for
appropriateness and timeliness.
Some additional actions are underway:
--A new course covering the asset seizure process is being developed
for revenue officers. This should clarify a number of areas
where uncertainties remain as a result of RRA 98 changes.
--The Internal Revenue Manual Seizure and Sale Handbook is being
revised to incorporate additional instruction and guidance on
appropriate use of seizure as a collection tool.
The proper use of enforcement has been an issue due to the major
change in direction that now requires all alternatives to enforcement
first be considered. This change in direction is partly based on policy
change and partly on the new law. In the past, the mere failure of the
taxpayer to act to resolve their liability was sufficient justification
for enforcement action and failure to take immediate enforcement action
in those cases was a reason for a negative employee evaluation. Now
there are questions at the front line as to how intensive and
exhaustive our attempts to secure voluntary taxpayer cooperation should
be prior to enforcement. Since judgment must be used to deal with the
range of potential delinquent taxpayer actions, situations, and
attitudes, the guidelines must allow the flexibility to deal with the
taxpayer in an appropriate manner. This leaves us with guidelines that
are open to interpretation based on the facts of the individual case at
hand and there can be differing judgments among individual front-line
employees based on those facts.
Question. What has IRS done and what is it planning to do to help
employees better understand section 1203 and to allay any unjustified
fears stemming from that section?
Answer. The Service has taken a number of steps to deal with
employee fears regarding section 1203. There have been:
--A national video teleconference in which Commissioner Rossotti
directly addressed the issue and emphasized that it required a
willful act on the part of the employee to be found in
violation.
--Formal Section 1203 training has been given to all employees.
--At the recent meeting of all Collection revenue officer group
managers, Counsel discussed section 1203 with the front line
managers and provided guidance for them that should be shared
with their employees.
Since very little time has passed since the most recent efforts to
allay fears about section 1203, it is not felt that additional actions
should be taken until we determine the effects of the information
shared at the Collection group managers meeting.
Section 1203 has raised issues other than unjustified fears based
on a misunderstanding of the provision and its potential ramifications.
One major issue has been the large number of procedural changes that
make many formerly routine actions now a potential section 1203
violation. Front-line employees are still in a period of adjustment.
Practices that had become ingrained after decades of use have had to be
abandoned or modified; many employees may be overly cautious while they
get comfortable with the new procedures. Another major issue is the
concern about an unjustified claim by a taxpayer or taxpayer
representative that a section 1203 violation has taken place. To date,
the vast majority of claimed section 1203 violations that have been
investigated have been closed with no finding against the employee.
However, there have been instances where an employee has incurred
substantial legal expense and/or undergone considerable mental anguish
during the course of the investigation before being found innocent of
any wrongdoing. Stories that circulate about such incidents naturally
put a chill on some potential enforcement actions where there is
concern that a section 1203 violation, even if unjustified, may be
claimed. There are no penalties for alleging a section 1203 violation
that has no basis in fact and such an allegation may be used merely as
a tactic to delay collection action.
Section 1205 of Title 1 of RRA 98 requires IRS to establish a
training programs to ensure that IRS employees are trained in such area
as taxpayer protections. IRS' fiscal year 2001 budget request also
states that IRS shall maintain a training program to ensure all IRS
employees are trained in taxpayer rights, dealing courteously with
taxpayers and cross-cultural relations.
Question. What is the status of IRS' collections training? What are
the projected costs for the RRA 98 training?
Answer. All collection employees with public contact received
training in conflict management by September 30, 1999 as required by
Section 1205. A typical experienced front-line employee in Customer
Service could expect to receive 84 hours of training, including 24
hours mandatory training, 40 hours continuing skills enhancement
training, and 20 hours of training related to their work assignments.
The cost to develop and deliver the Section 1205 training is estimated
to be $81,000 in fiscal year 1999, $32,000 in fiscal year 2000, and
$40,000 in fiscal year 2001. These costs include the salaries of course
developers and instructors, and other costs such as materials and
supplies.
Question. How will IRS determine the impact, or effectiveness, of
this training?
Answer. We will assess the effectiveness of the training by
analyzing the customer satisfaction and employee satisfaction
components of the balanced measures.
IRS' plan for fiscal year 2001 includes the installation of 30
additional Q-Matic systems at walk-in sits, bringing the total number
of such systems nationwide to 106. IRS says that those systems ``ensure
that taxpayer spend the shortest amount of time possible waiting to
receive service.'' However, there is no information in IRS' budget
request on taxpayer wait times at walk-in-sites.
Question. How much of the $722 million and 10,785 FTEs being
requested for IRS' Collection activity is being allocated to walk-in
activities and how much is being allocated to field collection
activities?
Answer. The President's Budget for fiscal year 2001 includes $80
million and 1,473 FTE for the walk-in activity. The remaining $642
million and 9,312 FTE are allocated to field collection activities.
Question. How much of the amount allocated to walk-in activities
will be used to fund the proposed installation of 30 additional Q-Matic
systems at walk-in sites?
Answer. Approximately $1.5 million is included in the Information
Systems budget activity to enhance current Q-Matic infrastructure
(network) and to purchase the new Q-Matic systems.
Question. How long, on average, did taxpayers have to wait to
receive assistance at IRS' walk-in sites in fiscal year 1999? How did
those wait times vary, if at all, between sites that had a Q-Matic
system and sites that did not? How did those wait times compare to IRS'
goal?
Answer. In our Q-Matic sites, the average wait time varies from 2
to 7 minutes. We do not have data available to gauge average wait time
in offices without Q-Matic. Those offices measure and report how often
taxpayers must wait beyond the established wait time goal of 15 minutes
(30 minutes for return preparation). Generally, they report goals are
met 97 percent of the time.
As of part of the STABLE initiative, IRS is requesting an
additional 233 FTEs for its fiscal year 2001 walk-in activities. IRS
says that the staffing increase will allow IRS to increase ``level of
service''.
Question. What is the detailed breakout of these FTE's between
headquarters and field locations? How many of these FTE's will actually
be used to provide additional walk-in assistance at field locations?
Answer. Since all of the FTEs will be front-line non-supervisory
customer service positions, all of the FTEs will be in field locations
to supplement the current Walk-In staff. The exact location of these
FTEs will be determined during the Plan Development process wherein
FTEs will be provided to those field locations exhibiting the greatest
need.
Question. How many of the 233 FTEs are intended to replace FTEs
provided in the past by detailees from other activities, thus not
resulting in any overall increase in the number of FTEs devoted to the
walk-in program?
Answer. 200 of the 233 FTEs are intended to replace FTEs detailed
from other activities.
Question. How does IRS measure the level of its walk-in service?
How much of an increase in level of service does IRS expect in fiscal
year 2001 compared to the level attained in fiscal year 1999 and the
level expected in fiscal year 2000? And,
What level of walk-in service should IRS ultimately strive to
attain? How many FTEs beyond the 233 being requested would IRS need to
achieve that level of service? Does IRS expect to be able to provide
that level of support as a result of any staffing changes associated
with its reorganization?
Answer. IRS does not measure level of service for Walk-In offices.
Each taxpayer coming into the office and waiting for an available
employee is served. One measure of customer satisfaction for walk-in
(rather than level of service--a telephone measure) is wait time. As
previously stated, our current wait time goal is 15 minutes or less (30
minutes or less for return preparation). The additional FTE requested
will reduce the number of employees detailed to walk-in from other
areas. This will enable us to use permanent walk-in employees to
provide service faster, more completely and with greater accuracy.
Trained, experienced walk-in employees can serve more taxpayers better
than the same number of detailed employees. This will also enable those
detailed employees to carry on with their regular job duties, enhancing
their effectiveness and morale in their own organization.
IRS' budget request list four performance measures related to its
walk-in program customers satisfaction, walk-in quality, total walk-in
contacts, and employee satisfaction.
Question. To measure customer satisfaction, IRS surveys all walk-in
customers for one week every fifth week. How useful will these results
be in measuring customer satisfaction if IRS is only surveying
customers every fifth week? Why doesn't IRS randomly survey taxpayers
every week during the filing season, which is the time when walk-in
sites are most busy?
Answer. The Office of Program Evaluation and Risk Analysis, Pacific
Consulting Group, Customer Service and the Statistics of Income
Division developed the weekly schedule for survey administration based
on a methodology that would allow the vendor to achieve the desired
response rate and a statistically valid sample. The initial start week
was selected at random with the month of March 1998 and marks the first
week of survey implementation. Beginning with the first week, the
schedule of rotating every fifth week was developed.
Question. IRS says that it will be measuring walk-in quality ``in
terms of accuracy and professionalism.'' Please explain how those
characteristics will be measured and what IRS' performance goals are in
those areas.
Answer. Accuracy and professionalism will be measured through the
walk-in Quality Review Visitation program. Reviewers will anonymously
visit walk-in posts of duty (PODs), ask a question, respond to
assistor's questions using a prepared (memorized) fact sheet, and
complete a Quality Review Visitation Checksheet to document the
contact. PODs are selected according to a sampling formula provided by
the Statistics of Income division to obtain a precision margin of no
less than 5 percent at the national level. Reviewers rate each contact
by answering 13 questions ``yes'' or ``no''. The responses to these
questions will measure the accuracy of the answer given and the
professionalism of the employee. Since fiscal year 2000 is the first
year these visitations will occur, no performance goals have been set.
The results of the fiscal year 2000 reviews will serve as a baseline to
set goals for improvement for fiscal year 2001.
Question. IRS uses the Resources Management Information System
(RMIS) to track the number of taxpayers visiting walk-in sites. How
reliable is RMIS; how accurately does RMIS data reflect the actual
number of taxpayers visiting walk-in sites?
Answer. The RMIS system is accurate in collecting and providing
data. However, the data that is input into RMIS is captured and input
manually. As with any manual system, if there are errors in the
original input, there will be errors in the resulting report. As a
result, we review the initial reports to identify the errors we can.
Those errors are then perfected and the report corrected.
Question. Although IRS reports an employee satisfaction measure for
its walk-in program, the value being reported is a composite value that
covers all of IRS' Customer Service activities, including toll-free
telephone service. Why is IRS unable to separately measure employee
satisfaction for the walk-in program?
Answer. The walk-in function is distributed among the 33 districts
and reports organizationally in each office to Collection. At the same
time, employees from other functions migrate to walk-in during peak
times to supplement full-time employees. In 1999, an Employee
Satisfaction score was calculated for all organizational levels branch
and above, and walk-in constituted only a small portion of these
branches.
For 2000, we have developed the capability to identify workgroups
whose focus primarily is walk-in service. We will be able to aggregate
this data across offices to generate a Special Report for Servicewide
Walk-In. In addition, a new survey item asks respondents to identify
their function and this will provide a further check on the
aggregation. Finally, the survey instructions ask respondents to fill
in the manager code for their manager-of-record, thereby eliminating
detailees from the aggregation whose full-time function is other than
walk-in.
Question. IRS currently has no measure for the timeliness of its
walk-in service. Is timeliness an important indicator of the quality of
walk-in service? If yes, what is IRS doing to measure it? If no, why
not?
Answer. Timeliness of walk-in service is currently measured as
customer wait time. Serving customers in a timely manner is one
indicator of the quality of walk-in service. It is one of the factors
captured in the Walk-In Quality Review Visitation program data. The Q-
Matic system also captures time-related data that will be more
significant when Q-Matic is fully rolled out to all targeted offices.
Of IRS' $1.584 billion request for information systems, $40 million
is for investments to enhance and develop systems.
Question. Please identify the specific systems to be enhanced and
developed, the business requirements being addressed by these
enhancement/development efforts, the dollar amount being requested for
each system, whether there is a business case for each effort, and each
effort's expected return on investment.
Answer. IRS prioritized the 15 original fiscal year 2001 business
line investment projects (Tier B) using a model from MITRE Corporation,
prioritizing by benefits to the three aspects of our Balanced Measures
approach: Customer Satisfaction; Employee Satisfaction; and Business
Results/Productivity. The result was a scoring of each investment
relative to the other investments for each measure. The business units
and IS estimated high-level project costs required to deliver the
investment. The individual project cost estimates ranged from $.5M to
$14.8M and currently total over $60M.
Since the original assessment several new potential initiatives
have arisen. In addition, some of the delivery requirements and cost
estimates for these proposed business line investments may change in
line with fiscal year 2000 budget execution decisions. Once the
streamlined business cases (including expected returns on investment),
project management plans and design reviews have been approved, the
final determination will be made of which to include in the requested
$40M Tier B funding allocation. This is scheduled for completion in
June 2000. Those projects that do not get funded in fiscal year 2001
will continue to be evaluated for potential implementation in
subsequent years.
Following are the 17 potential investments (including two
additional projects which have been defined since the initial case
screening was completed) in the Tier B category:
Integrated Case Processing NT--$3.35M
ICPnt will dramatically improve taxpayer relations, employee
satisfaction, and increase productivity for the more than 25,000
Customer Service and Taxpayer Advocate employees. By providing more IRS
customer service employees with a single work station that can access
all legacy systems, taxpayers receive more complete and quicker
answers. In addition, the case management database provided by ICPnt is
able to identify prior taxpayer case activity.
Employee Plans/Exempt Organization Determination System--$2.75M
Processing of determination requests, contacts with requestors and
deposits of fees are not efficiently managed by the 15-year-old
decentralized systems in use. Redesign of the system will improve the
efficiency and effectiveness of IRS responses and actions.
Business e-file Program--$1.53M
Not all forms and schedules for business filers are available for
electronic filing. This effort will support the Service's goal of
significantly increasing the number of electronically filed returns by
allowing businesses and preparers to file additional types of business
forms, schedules and statements electronically. This funding will
enable the electronic filing of at least one class of business tax
returns, possibly Form 1120.
Chief Counsel CASE Management Information System (CASE-MIS)--$2M
The CASE initiative enables Counsel employees to accomplish their
tasks in the most cost effective and efficient manner. CASE-MIS is the
most critical component of CASE. It includes a number of custom
applications for the Counsel organization. Organizational modernization
will render obsolete many business rules in the fully automated Chief
Counsel CASE-MIS environment. Updating the system (e.g., databases,
reports, and forms) to incorporate the policies and procedures for the
new business units will save costly manual work and maintain Counsel's
ability to deal timely with the needs of the Courts, taxpayers and IRS.
Near Term Electronic Filing & Electronic Fraud Detection--$14.8M
Not all forms and schedules for 1040 filers are available for
electronic filing. In addition, taxpayers cannot submit multiple copies
of schedules (e.g., Schedule C) nor submit comments or supporting
information. Making these additional forms and schedules available for
electronic filing supports the Service's goal of significantly
expanding this capability to more individual filers. Paperless
electronic filing will be possible through use of Personal
Identification Number (PIN)-based electronic signatures. Because error
rates are much lower for electronic returns than for paper returns this
initiative will also result in less rework, requiring fewer contacts
with the taxpayer and fewer delays. With increased volumes in
electronic filing, the Electronic Fraud Detection System and the Tax
Return Database will require additional analysis and system capacity.
Notice Improvement Projects--$3.8M
Current notices to taxpayers are not easily understood and do not
use the latest technology to support graphic print capabilities. This
initiative will provide support for redesigning and printing taxpayer
notices.
Audit Site Work Center Secure Access--$10.5M
During an audit the revenue agent, officer and manager need access
to research material, customer accounts, administrative services, and
audit support tools from remote sites (e.g., taxpayer's business
location). They must do this without disclosing privileged taxpayer
information or compromising government security. This initiative
provides security measures to ensure sensitive taxpayer information
will be protected properly. It supports secure remote communications
systems and infrastructure to enable the revenue agent and officer to
be as informed and responsive to taxpayers as possible.
Taxpayer Advocate Service Management Information System Redesign--$1.7M
Redesign and consolidation of multiple stand-alone systems will
enhance the Taxpayer Advocate's ability to identify problems and
recommend changes to business processes and systems that are causing
repeated problems for taxpayers.
Queuing Management System--$1.7M
To improve the efficiency of IRS response to taxpayers walking into
IRS service sites, this investment deploys an automated management tool
to about 125 Walk-In sites. The system is already available at selected
major sites.
Commissioner's Complaint System--$.7M
Four stand-alone IRS systems and the Treasury Inspector General for
Tax Administration (TIGTA) database are used today to assure that
taxpayer and employee non-taxpayer account related complaints are
addressed. Aggregating this data into one database will enhance the
complaint processing executive's ability to monitor progress, to look
for patterns across the different complaint types and to suggest
systemic improvements to eliminate causes of complaints.
Integrated Collection System Secure Dial In--$4.16M
By expanding access to tax data, research and communications tools
to Revenue Officers working in remote sites, IRS will resolve
taxpayers' issues and questions more quickly.
Chief Counsel Web Authoring & Electronic Document Redaction System--$1M
The Office of Chief Counsel issues legal opinions to taxpayers at
their request on their tax liabilities. These documents are subject to
public release under the Freedom of Information Act (FOIA) but only
after taxpayer identifying information has been deleted. Once this
information is deleted, the documents are considered ``redacted,'' made
ready for publication. This project is required: (1) to better support
the processes currently in place to comply with specific provisions of
RRA 98 mandating the release of certain documents on the Internet; (2)
to provide an overall document drafting environment that better
supports the authorship of any document whose ultimate purpose is the
analysis or explanation of law, and whose probable destination is the
Internet; and (3) to significantly improve the final work product that
is ultimately disseminated by Counsel to all taxpayers by means of the
Internet. The eRedact project improves the current processes in place
so as to raise the level of assurance that confidential taxpayer
information (or other critically important privileged information) is
never inappropriately disclosed through the release of such documents
on the Internet.
World Class Customer Service Training--$3.23M
Improving training for customer service representatives is
important to meeting our customer service improvement goals. The
investment will fund a proof of concept for providing training through
state of the art computer based training (CBT) technologies.
Field Assistance Mobile Van Units--$.5M
Taxpayers in remote locations have difficulty accessing IRS walk-in
services. Mobile vans equipped with laptop computers, cell phones, fax
machines and telecommunications and encryption support will expand
walk-in services to remote locations.
Performance Management System--$2.67M
Not all IRS managers and executives have performance measurement
data consistently available to analyze in a timely or user friendly
manner. Converting the current Executive Management Support Systems to
the best web-based technology will expand access to this data to all
management levels and increase managers' analytical capability.
Appeals Centralized Database System (ACDS)--Electronic Case
Processing--$4.73M
Because cases and case information from Examination, Collection,
Tax Exempt and Government Entities Division (TE/GE) and Counsel are
currently received in Appeals in hard copy, processed and entered into
ACDS manually, taxpayers are not receiving Appeals attention in the
shortest possible time frames. Receiving cases, case information and
issue data electronically will reduce the time for Appeals to respond
to taxpayers. NOTE: This initiative was not defined during the initial
project evaluation/assessment process.
Electronic Tax Law Assistance--$1.5M
This initiative increases IRS' capacity to respond to taxpayers'
growing requests for tax law assistance via the internet. NOTE: This
initiative was not defined during the initial project evaluation/
assessment process.
Question. Since these new systems are directly related to IRS'
organizational modernization, why is IRS' request via the Information
Systems appropriation rather than ITIA, where Congress has legislated
specific controls over the use of systems modernization funding?
Answer. The business line (Tier B) investments are not related to
IRS' Organization Modernization or to enterprises-level systems model
projects funded through the Information Technology Investment Account
(ITIA). As new business operating divisions stand up, their near-term
needs for Information Technology support are increasing. Business line
investments (Tier B) modify or enhance existing systems, provide
limited change in functionality, or provide a new system to support a
limited implementation, and are often needed regardless of the changing
organization structure.
The ITIA funds the Business Systems Modernization Program. Related
projects create or enable major business process change, provide
significant new technical functionality in support of business change
or form an integral component of the Modernization architecture. These
projects are generally long-term and service-wide in nature.
The Information Systems appropriation is funding the business line
(Tier B) investments which modify or enhance existing systems, or
provide a new system to support a more limited implementation to a
specific business unit (e.g., Tax Exempt and Government Entities
Division (TE/GE) or Large and Mid-Size Business Division (LMSB)) which
will not be receiving support from the ITIA modernization initiatives.
These systems generally provide limited change in functionality or
provide a bridge between the current and Modernization architecture.
According to IRS, the fiscal year 2000 budget included $250.4
million for Year 2000 efforts, of which $214.6 million is being
reallocated to operations and maintenance for fiscal year 2001 ``to
fund essential IRS technology, continuing the work begun under the Year
2000 program for the Integrated Submission and Remittance Processing
System and Service Center Mainframe Consolidation, and achieving goals
of Organizational and Business Systems Modernization.''
Question. Please provide the specific dollar amounts allocated to
each of those areas.
Answer. The specific dollar amounts allocated for the Integrated
Submission and Remittance Processing System is $22.1 million, Service
Center Mainframe Consolidation is $81.6 million and the balance of
$110.9 million is for Organizational and Business Systems
Modernization.
Within the $214.6 million funding level mentioned above, there are
$16.5 million in labor related costs. This includes a small amount of
training, travel and space/housing costs related to labor.
Question. When does IRS anticipate completing the Service Center
Mainframe Consolidation project?
Answer. The Service Center Mainframe Consolidation Project will
consolidate the last Service Center (Philadelphia Service Center) in
December 2000. All sites will be consolidated prior to the filing
season that begins in January 2001. Consolidation activities such as
equipment removal, physical reconciliation against delivery orders and
inventory, equipment maintenance and system enhancement will continue
after this date. The IRS will conduct a broad post-implementation
review covering hardware, software, staffing and management issues.
During this time, production sites will identify lessons learned and
the nature of improvements required for further action.
In February 1998, GAO recommended, among other things, that IRS'
Chief Information Officer (CIO) be given budgetary and organizational
authority over all IRS systems development, research and development,
and maintenance activities (GAO/AIMD/GGC-98-54, Feb. 24, 1998). In its
current Information System budget request, IRS states that, in fiscal
year 1999, it restructured the Information Systems (IS) organization
and began the process of including regional and service center IS
operations under the CIO. IRS also states that during fiscal year 2000,
IRS is continuing to realign IS operations under the CIO.
Question. When will the realignment be completed? Will the
realignment give the CIO authority and budgetary control over all IS
development and acquisition, including Research and Development? If
not, what will be excluded and why?
Answer. IRS continues to move closer to the Commissioner's vision
of an IS-shared service support structure with centralized management
of IS resources. Groups of non-IS employees performing key IS work such
as systems development, systems operations, network management,
telecommunications and desktop support will continue to be transitioned
into IS through December 2000. The new structure centralizes IS
management of Computing Centers, Telecommunication units, Desktop
operations, Enterprise Services, Enterprise Technology Engineering and
Infrastructure Projects under IS directors at IRS Headquarters.
Delegation Order No. 261, ``Authority to Govern all Areas Related
to Information Resources and Technology Management,'' and Policy
Statement P-1-229, ``Management and Control of Automated Data
Processing (ADP) Property,'' signed by the Commissioner on November 12,
1999, gives the Chief Information Officer authority and control over
all IS development and acquisition of ADP property in the IRS.
IS has responsibility for activities to develop, deploy, operate
and maintain most IRS applications systems. At this time, a number of
memoranda of understanding have been signed, or are in process, that
document the transition of IS functions from other organizations. Also,
the CIO organization has begun discussions on centralization of IS
functions within other organizations (e.g., Criminal Investigation,
Procurement Compliance Research) not currently reporting to IS. For
example, with respect to Compliance Research function, analysis is
currently underway to determine which IS-related components should be
realigned and which components are related to business based data
analysis functions and should remain in Compliance Research. While the
majority of IS resources have been centralized under the Office of CIO,
the expected completion date for the centralization of non-IS
information technology resources is December 2000. Part of the Phase
III modernization includes ``standing up'' the new IS structure and
completing the transition to the newly designed organization over the
next several months.
The goal of creating such investment account is to ensure that
agencies request full funding in advance for the entire cost of a
capital project so that the full costs are known at the time decisions
are made to provide resources. In establishing these accounts, the
Office of Management and Budget requires that (1) the capital assets
support the agency's mission and (2) the assets have demonstrated a
projected return on investment.
Question. Why is IRS asking for an appropriation of $119 million in
fiscal year 2001 and an advance appropriation of $375 million for
fiscal year 2002, when it has $438 million remaining in ITIA from the
fiscal year 1998 and 1999 appropriation acts?
Answer. Planned Business Systems Modernization expenditures will
require $119 million funding in fiscal year 2001 in addition to the
funds remaining from prior fiscal years. The advance appropriation of
$375 million ensures the continuity of projects approved at various
milestone decision points, since delay of certain projects
(particularly those modernizing IRS' infrastructure) would negatively
impact the entire modernization effort. Recently, the Congressional
Appropriations Committees approved release of $148.4 million from ITIA
to the IRS, leaving $289.6 million in the fiscal year 1998 and fiscal
year 1999 ITIA. IRS is now assessing the impact of the approved release
on current plans in terms of the remaining availability in fiscal year
1998 and fiscal year 1999 appropriations. These plans involve
additional requests for release of funds before September 30 to support
the Integrated Financial Systems (post Milestone 3 system design),
planning and development for projects at various milestone decision
points and for ongoing program management and architectural engineering
activities.
Question. Of the $438 million remaining in ITIA, about $230 million
is set to expire on September 30, 2000. Given that the modernization
program has been delayed and its scope scaled back, does IRS still need
the entire $230 million between now and September 30, 2000? If so, why,
and what is IRS' plan to address the expiration of these funds?
Answer. IRS is assessing the impact of the response from the House
Subcommittee on Treasury, Postal Service, and General Government
approving the release of $148.4 million in ITIA funds from the fiscal
year 1998 availability. We plan to request additional release of funds
before September 30 to support the Integrated Financial Systems (post
Milestone 3 system design), planning and development for projects at
various milestone decision points and for ongoing program management
and architectural engineering activities.
Question. What investment does IRS plan to make with the $119
million and $375 million? Please provide a list of the specific systems
IRS plans to invest in; how each will support the agency's mission;
whether each system investment is supported by a business case, and
each system's expected return on investment?
Answer. IRS requires the $119 million and the $375 million as a
continuous funding source to support the known portfolio and the
projects to come from the vision and strategy phase.
Vision and Strategy (Tax Administration)
--Reengineering of business processes (Accept Filing, Provide Account
Assistance, Correct Non-Filing and Underreporting and Collect
Unpaid or Overdue Balance)
Vision and Strategy (Internal Management)
--Development and deployment of the Integrated Financial Systems and
the Integrated Personnel System
Development and deployment
--Fiscal year 2002 Release for Customer Communications, Customer
Account Data Engine (CADE), Security and Technology
Infrastructure Releases (STIR) and Enterprise Systems
Management (ESM)
--Fiscal year 2002 Release builds on fiscal year 2001 Release to
improve the taxpayer's level of access to Customer Service
toll-free telephone systems
--CADE will incrementally replace the Master Files and the Integrated
Data Retrieval System (IDRS) with new technology to provide IRS
with the capability to service taxpayers in a manner similar to
that provided by commercial-sector financial service
organizations
--STIR delivers in incremental releases the common integrated
technical infrastructure to support and enable the delivery of
modernized business systems
--ESM will deliver inventory and asset management, systems and
network management, problem resolution help desk support and
performance metrics to support service level agreements
Planning, development and deployment
--Telecommunications Enterprise Strategic Program (TESP) will plan
the strategic direction of the IRS' telecommunications program
and build a business case for redesigning and rebuilding the
telecommunications infrastructure to support the target
modernized environment
--CRM Exam (1120) will provide a commercial-off-the-shelf solution to
provide the majority of the tax computation functionality that
is now inadequate
Planning and development
--Solutions Development Laboratory (SDL), Virtual Development
Environment (VDE) and Enterprise Integration and Test
Environment (EITE)
--Projects will create the necessary development and test environment
for modernized applications and solutions.
Funding will also be required for ongoing program management to
include Enterprise Life Cycle (ELC) maintenance and support from the
Federally Funded Research and Development Center (FFRDC) Contract for
independent verification and validation services, support to the
enterprise architecture and modernization blueprint and business
integration.
All business systems projects will be supported by a business case.
The Customer Communications business case was presented, along with
other Milestone 3 deliverables, at the May 22, 2000 Core Business
Systems Executive Steering Committee meeting. The project was able to
meet the criteria for exiting Milestone 3 and received approval to
proceed to Milestone 4. Infrastructure projects will also be supported
by business cases but without cost benefit information. Infrastructure
projects are necessary because they help the agency meet standards or
regulations, such as security, privacy and disclosure, or they provide
some of the means for other projects to produce business benefits.
Question. How does IRS know what its fiscal year 2001 and later
investments and associated costs are when the organizational
restructuring, business process reengineering, system modernization
architecture, and system development life cycle--all of which will
guide the modernization--have not yet been completed or implemented?
Answer. IRS is aware of requirements for the fiscal year 2001 and
later investments related to the known portfolio, based on the
strategic business projects from the Business Systems Planning process
and the ``in-process'' initiatives with required infrastructure and
ongoing program management. IRS has slowed certain projects while
accelerating program management, including completion of the enterprise
architecture and deployment of the Enterprise Life Cycle (ELC). We have
made substantial progress towards strengthening our program management
capabilities. We are now working with contractors to obtain reliable
cost and schedule estimates, and are confident in defining investments
because we are so far along in those activities that are guiding
modernization. However, there are certain unknowns at this point, such
as the cost for the follow-on activity from business process
reengineering; early estimates will be replaced by more reliable cost
and schedule estimates as the activity moves to the milestone decision.
In addition the IRS has tasked Booz-Allen & Hamilton, the
organizational modernization contractor, to assist the IRS in the
vision and strategy phase, focusing on organizational design, location
and business processes. This business decision has resulted in
additional cost; we have worked with the contractor to obtain reliable
cost and schedule estimates.
According to IRS, one of the projects to be funded from the
information technology investment account is a commercial-off-the-shelf
product to make certain complex tax computations. This, on the surface,
appears to be an improvement to a legacy system. In addition, the
congressional justification indicates that IRS used information
technology investment account funds in fiscal year 1999 to procure
automation hardware and software for the Taxpayer Advocate's Office and
to procure additional automation equipment for customer service sites.
(Note: IRS would like to clarify that the statement regarding the
procurement of automation hardware and software for the Taxpayer
Advocate's Office and additional automation equipment for customer
service sites was inadvertently placed in the CJ under the ITIA
category. The funding was actually from the ISY appropriation. IRS
regrets any confusion.)
Question. What criteria or decision making tool does IRS use to
determine whether its information systems projects should be funded
from the information systems appropriation or from ITIA?
Answer. The ITIA funds the Business Systems Modernization Program;
related projects create or enable major business process change,
provide significant new technical functionality in support of business
change or form an integral component of the Modernization architecture.
These projects are generally long-term in nature.
The Information Systems appropriation is funding the business line
(Tier B) investments which modify or enhance existing systems, or
provide a new system to support a more limited implementation to a
specific business unit (e.g., Tax Exempt and Government Entities
Division (TE/GE) or Large and Mid-Size Business Division (LMSB)) which
will not be receiving support from the ITIA modernization initiatives.
These systems generally provide limited change in functionality or
provide a bridge between the current and Modernization architecture.
When IRS submitted its initial expenditure plan in 1999, it
requested funds to run its modernization initiatives through October
1999, at which time IRS planned to submit another expenditure plan. Due
to delays in preparing the plan, IRS, in December 1999, submitted a
request for $33 million to provide ``stopgap'' funding until the second
expenditure plan was submitted for congressional approval. In a
December 22, 1999, letter to IRS approving the $33 million request, the
Chairman of the Senate Appropriations Subcommittee on Treasury and
General Government directed IRS to, among other things, expedite
completion of its modernization systems architecture and implementation
of its Enterprise Life Cycle.
Question. As of March 1, 2000, how much had IRS obligated from
ITIA? Please provide a list of specific accomplishments that have
results from these obligations.
Answer. IRS has obligated $55.7 million from ITIA to support
planning and initial architecture activities. IRS installed a base of
program management capabilities; funded support of improvements to the
governance structure which resulted in the establishment of Sub
Executive Steering Committees responsible for strategic planning and
oversight of major projects. We funded the PRIME Program Management
Office to include executive management, communication, quality
assurance, program level configuration management, finance and
administration, contracting and procurement, process management, and
project directors. Funding supported Enterprise Life Cycle (ELC)
deployment and training.
IRS tasked the PRIME to begin establishing architectural
approaches, principles and major projects for modernized systems
development to clearly define how modernized systems will be designed,
how they will fit together, what products will be used, and how/where
those products will be applied. We tasked the PRIME to begin focusing
on business integration goals, e.g., managing integration issues,
partnering with integrated project teams, business operating divisions
and business process owners, analyzing and assessing solutions based on
best practices and maintaining the Blueprint for the business domains
of change.
The Business Systems Planning process was installed, allowing IRS
initially to identify five strategic projects that will deliver
substantial taxpayer benefit in the next 3 to 5 years. Integrated
project teams were formed to support the strategic projects, the near-
term projects and infrastructure. IRS began design of an integrated
technology infrastructure to support both the new and existing Business
Systems Modernization projects. We also began refining the existing
infrastructure projects to align with emerging priorities of the
Program, and identified the need for a number of additional
infrastructure projects to support those priorities.
Question. Has IRS used any of these funds to purchase equipment? If
so, what was purchased and for what activities?
Answer. Of the obligated funds, $1.5 million for the Virtual
Development Environment (VDE) project covered hardware purchases using
ITIA funding. Funding purchased the development environment to support
the Customer Communications project. VDE provides a software
development environment enabling geographically distributed projects
and developers access to standardized tools, information and services.
Customer Communications, in fiscal year 2001, will deliver solutions
that improve the taxpayer's level of access to Customer Service toll-
free telephone systems through hardware and software upgrades,
increased telecommunications bandwidth and call-handling capacity, the
development of new business processes, and the introduction of new
automated services.
In December 1998, IRS hired its PRIME contractor to ``partner''
with IRS in modernizing its systems. Since then, IRS has issued
multiple task orders to begin work. In addition to the PRIME, IRS has
other support contractors to assist with its modernization. GAO has
reported in the past that IRS has not had a good track record in
managing contractors (GAO/AIMD-96-140, Aug. 26, 1996). IRS has stated
its intention to build the capability to effectively manage contractors
before its starts acquiring modernized systems.
Question. When does IRS expect to have verifiable information
technology acquisition management capabilities defined and implemented?
Until then, how will IRS effectively manage the PRIME and other
contractors?
Answer. One of our major deficiencies has been the lack of
performance-based contracting, therefore IRS is restructuring the PRIME
task orders to reflect clarified roles and responsibilities between the
PRIME and IRS. These revised task orders will be reorganized to
parallel the major program offices in order to allow for enhanced
monitoring and accountability; the standard Statement of Work will
require the acquisition teams to more clearly articulate their
requirements, to specify deliverables and to more effectively outline
acceptance criteria. Improvement of the acquisition management process
and products resulting from this restructuring will evolve to
performance-based contracting of ITIA-funded projects. In addition, IRS
is completing the establishment of the Business Systems Modernization
Office (BSMO) and focusing its management resources on implementing
expanded procedures to track the progress of projects through earned
value management, enforcing the Enterprise Life Cycle (ELC) and
developing a central project management data system. As this effort to
strengthen the program has proceeded, IRS has slowed most project level
activity. IRS continues to manage the contract in a responsible manner.
Question. What steps has IRS taken to ensure that it has an
adequate number of experienced personnel in place to provide
acquisition and contract management?
Answer. The Business Systems Modernization Office (BSMO) is
responsible for overseeing acquisitions for the Business Systems
Modernization Program. BSMO has filled positions with individuals from
within the Business Operating Divisions and Information Systems to
ensure the right skill sets are available both managerially and
technically. External hires have brought additional managerial and
technical skills to augment the qualified resources already in place.
We will continually assess and identify additional needed skill sets
and we are building flexibility into the organization by realigning the
BSMO to the Enterprise Life Cycle (ELC). Roles and will be established
to allow BSMO to further identify needed skills in accordance with the
ELC and to prepare to staff according to project and program needs.
BSMO is working closely with IRS Contracting Officers assigned to the
PRIME contract and Contracting Officer Technical Representatives
directly support the Program Directors for BSM projects. BSMO is also
working with subject matter experts from MITRE Corporation, the
Jefferson Consulting Group and the Software Engineering Institute.
Question. Please provide information on the organization and FTEs
devoted to overseeing acquisitions for this year and next.
Answer. Sixty-six (66) FTE are currently overseeing acquisitions
related to the Business Systems Modernization Program in the Business
Systems Modernization Office (BSMO) with planned growth to 75 FTE.
BSMO is currently staffed with personnel from Business Operations
and Information Systems organizations supporting the Program through
program management, which includes project planning, program control,
quality control and budget; program coordination and integration, which
includes process management, process integration and communication; and
architectural engineering. In addition, Program Directors are important
components of BSMO and are responsible for management oversight of Tax
Administration (Vision and Strategy), Infrastructure, Near Term
Release, Customer Account Data Engine (CADE) and Internal Management
projects.
In June 1999, GAO reported that IRS' $35 million initial
expenditure plan was the first in a series of incremental plans that
IRS planned to prepare over the life of the modernization and as such,
specified modernization initiatives through October 31, 1999 (GAO/AIM/
GGD-99-206, June 15, 1999). GAO also reported that, if implemented
properly, the plan represented an appropriate first step toward
successful modernization. However, GAO did express concern that the
modernization roles and responsibilities of IRS, the PRIME contractor,
and other support contractors had not yet been adequately defined.
Accordingly, GAO recommended that IRS, in future expenditure plans,
explain the nature and functioning of IRS' ``partnership'' with its
contractors, including the respective roles and responsibilities of IRS
and its contractors.
Question. Has IRS defined the nature and functioning of its
``partnership'' with the PRIME and other modernization contractors? If
so, please describe. In providing your response, please explain each
party's roles and responsibilities, including how IRS maintains an
arm's length relationship in managing and controlling the contractors
(including negotiating task orders and contracts), ensures that the
interest of the government is adequately protected, and holds
contractors accountable when they do not perform according to the task
orders or contracts.
Answer. IRS and PRIME have recognized the lack of a well grounded
partnering process. This risk, if unmanaged, would result in continued
confusion over who is responsible for specific deliverables, roles,
responsibilities and accountabilities. The risk has been identified and
is being managed by the Business Systems Modernization Office (BSMO).
Our risk mitigation plan currently reflects joint IRS/PRIME activities
towards the establishment of shared operating disciplines between the
two organizations to be completed in June 2000.
It is important to note the partnership concept was never intended
to influence the way IRS is managing and controlling the PRIME
contract. IRS is currently maintaining and will continue to maintain a
formal government/contractor relationship in terms of managing the
contract, including all negotiations, to ensure that the interest of
the government is protected.
Also, the IRS is restructuring the PRIME task orders to reflect
clarified roles and responsibilities between the PRIME and IRS. These
revised task orders will be reorganized to parallel the major
initiative Program Offices in the BSMO. This will allow for enhanced
monitoring and accountability. As part of this effort, a standard
Statement of Work will be promulgated. This standard will require the
acquisition teams to more clearly articulate their requirements, to
specify deliverables and to more effectively outline acceptance
criteria. Improvement of the acquisition management process and
products resulting from this restructuring will evolve to performance-
based contracting of ITIA-funded projects.
IRS has had the PRIME contract in place for over 14 months. To fund
modernization initiatives during this time, Congress has authorized IRS
to obligate $68 million from ITIA. IRS has also used selected IS
appropriations to fund modernization support contractors and IRS
personnel.
Question. Since the PRIME contract was awarded, how much has been
obligated and expended on modernization? Specifically, how much ITIA
and IS appropriation funds have been obligated and expended on the
PRIME contractor, other IRS support contractors (e.g., MITRE), and IRS
staff dedicated to managing and overseeing modernization activities?
Answer. PRIME: ITIA obligations are $53.5 million and expenditures
are $8.3 million; IS obligations are $10.4 million and expenditures are
$10.4 million. MITRE: ITIA obligations are $1.4 million and
expenditures are $1.3 million; IS obligations are $14.3 million and
expenditures are $9.7 million. ISC: ITIA obligations are $.836 million
and expenditures are zero; no IS obligations. IRS staff: 66 FTE ($3.9
million).
Question. What benefit and progress does IRS have to show for the
modernization funds invested thus far? In your response, please address
whether program office management structures and processes are
completely in place and the office fully staffed and operational, if
the Enterprise Life Cycle has been implemented and staff trained to use
it, and whether the system modernization architecture and sequencing
plan have been completed. In addition, what specific modernized systems
does IRS plan to implement for the 2001 filing season?
Answer. The benefits and value realized to date include:
establishment of a comprehensive business systems planning function to
perform business process and reengineering analyses critical to
facilitating the definition and prioritization of the IT investment
portfolio; development, implementation, and pilot of program, project,
and system life cycle management processes; completion of the
conceptual framework for providing effective oversight of modernization
program and projects; initiation of in-process milestone reviews of all
near-term projects to determine their readiness to proceed with the
next scheduled life cycle milestone activities; and reassessment of the
delivery schedule and functionality of the near-term projects and
reduction in the scope of some strategic projects to ensure that
required infrastructure is aligned so that infrastructure deliverables
are in place in time to support required functionality (security,
corporate access to databases, etc.).
The Business Systems Modernization Office (BSMO) will be fully
established as an integral component in the governance of the Business
Systems Modernization Program during fiscal year 2000. BSMO is
currently staffed with personnel from Business Operations and
Information Systems organizations supporting the Program through
program management; program coordination and integration; and
architectural engineering. Program Directors are responsible for
management oversight of Tax Administration (Vision and Strategy),
Infrastructure, Near Term Release, Customer Account Data Engine (CADE)
and Internal Management projects. We continue to pursue realignments of
personnel and publish competitive announcements to fill remaining
vacancies.
Management processes, however, are not completely in place. We have
recently completed a mapping of roles and responsibilities to the
Enterprise Life Cycle (ELC) and identified significant gaps and
overlaps, which we have corrected by realigning the IRS and PRIME
program management offices with major ELC processes. The effect of this
realignment will be to clarify the boundaries and the interfaces among
and between the IRS and PRIME program management offices for major ELC
activities.
The ELC is being implemented and deployed to the project teams, and
we are now completing ELC deployment to BSMO personnel and key BSM
program stakeholders. The Deployment Plan also calls for a completed
BSMO Charter and Transformation Plan, with validated and integrated
processes and procedures by July 7, 2000. The Plan will produce role-
based training for each role and individual as a result of skills and
needs assessments. While training, coaching and other initiatives will
be ongoing throughout the year, the Deployment Plan will first
prioritize roles/training classes to ensure that the right classes are
developed and delivered as needed. We will perform a Baseline
Performance Assessment against our Metrics Program in the fourth
quarter to identify gaps and deficiencies, and prepare a Process
Improvement Plan to resolve those gaps and deficiencies.
Over the last month, the Service has made significant progress in
the development of the Enterprise Architecture. Detailed product
definitions have been deployed, timelines have been built, and work has
commenced to populate those products. To be useful, the Enterprise
Architecture must be flexible and informed by current business
strategies, priorities, and technology opportunities. The Service will
deliver regular ``point in time views'' of the architecture. Blueprint
2000 will be the first of these documents and will be delivered no
later than September 30, 2000. Included within Blueprint 2000 are those
products necessary to define the near-term sequence of modernization
and transition initiatives.
IRS plans to implement the Customer Communications project next
spring, which will enhance the Customer Service automated call
distributors (ACDs), install new centrally located voice response units
to provide standard applications platform for telephone applications,
develop a new automated tax refund software application, delivering
both English and Spanish-language services, and add Automated
Collection System (ACS) taxpayer calls to the list of telephone
products using the Intelligent Call Routing capability.
We understand that IRS is still working to establish a fully
functioning program management office for its modernization effort.
Question. What has accounted for the delays in establishing a fully
functioning program management office?
Answer. Members of the Core Business Systems Executive Steering
Committee initiated many discussions with key representatives of the
Business Systems Modernization Office (BSMO) and the PRIME regarding
the content and approach of the projects composing the Business Systems
Modernization program. These discussions concentrated on current
stakeholder requirements, filing season schedules, capacity, and
program risks. In turn, these discussions generated a full assessment
of the BSMO program and projects. We learned that there was
insufficient capacity to do the work envisioned in the time allotted,
program level processes and procedures were not yet mature enough to
effectively control and manage the program, risks and risk mitigation
steps had not been fully identified, and there was a danger in allowing
the projects to continue moving ahead of the program.
As we implement a solution to prevent this from recurring, and
establish goals and processes to ensure future successes, we are also
revising and refining Program Office management structures and
processes. As the first activity in the ELC Deployment Plan, we have
recently completed a mapping of roles and responsibilities to the ELC
and identified significant gaps and overlaps, which we have corrected
by realigning the IRS and PRIME program management offices with major
ELC processes. The effect of this realignment will be to clarify the
boundaries and the interfaces amongst and between the IRS and PRIME
program management offices for major activities.
Question. What assurance does Congress have that IRS has spent the
funds on modernization wisely if IRS does not yet have a fully
functioning program office 14 months after hiring the PRIME contractor?
Answer. First, it is important to note that although there was a
recent change in management direction, the work produced still provides
a base from which to move forward and the related funds were well
spent. The Enterprise Life Cycle (ELC) products completed or in process
at the time of the revised strategy are being assessed as part of the
milestone readiness reviews. Rescoping the projects while accelerating
program activities will ensure that projects will not pass a milestone
decision until all documents are in place and approved. Stronger, more
mature program management will be ensured with processes being put in
place to track progress through earned value management, enforcement of
the ELC, a central project management function and a risk mitigation
program.
When IRS submitted its initial expenditure plan in 1999, it
requested funds to run its modernization initiatives through October
1999, at which time IRS planned to submit another expenditure plan. Due
to delays in preparing the plan, IRS, in December 1999, submitted a
request for $33 million to provide ``stopgap'' funding until the second
expenditure plan was submitted for congressional approval. In a
December 22, 1999, letter to IRS approving the $33 million request, the
Chairman of the Senate Appropriations Subcommittee on Treasury and
General Government directed IRS to, among other things, expedite
completion of its modernization systems architecture and implementation
of its Enterprise Life Cycle.
Question. What portion of the initiatives set forth in the initial
expenditure plan were fully satisfied on time and within budget? For
each not satisfied, explain the magnitude and the nature of the
shortfall and the reason(s) for the shortfall.
Answer. At a high level, in the category of building management
capability, we planned to spend $12 million and actually spent $15
million. The 25 percent variance was a direct result of funding the
PRIME Program Management Office for 6 months rather than the three
originally planned. In Supporting Business Goals, we planned to spend
$16 million and actually spent $12 million. In general, project start
up was slower than expected due to slippages in Business Systems
Planning activity and delays in staffing teams. In Developing Enabling
Infrastructure, we planned to spend $7 million and actually spent $8
million. While there were schedule slippages in the start up of
infrastructure project activity, the cost variance mentioned was due to
initiation of additional contractor activities required to bring
projects in compliance with the lifecycle.
The initial expenditure plan reflected the start of the Business
Systems Modernization planning phase. While the IRS has made
substantial progress against the benefits and deliverables communicated
in the plan, it is critical to note that the IRS has reassessed and
revised the strategy for the program, recognizing the need to slow down
project level activities while strengthening the program level
activities. Lessons learned during this reassessment period are
resulting in stronger and more disciplined program management
practices.
This reassessment means, however, that the targets set for
deliverables in the initial expenditure plan are being revisited. The
Business Systems Modernization Office (BSMO) has initiated a program-
wide milestone readiness review to determine the readiness of each
project to proceed to Milestone 3 (system design). The major objectives
of the review are to identify the gaps between Enterprise Life Cycle
(ELC) work products and delivered work products, ELC required reviews
and completed reviews, and delivered business cases and OMB Exhibit
300B instructions. A team of IRS, MITRE and CSC personnel will prepare
a report of each project's readiness and recommended next steps. The
report for the first milestone review for STIR, CC and e-Services was
completed March 2000. Other reviews are being scheduled as part of
ongoing project/program monitoring procedures.
Question. What progress has IRS made in completing the architecture
and implementing its Enterprise Life Cycle? When precisely does IRS
plan to have them completed? Does IRS envision moving forward with any
of its projects before these two initiatives are completed? If so,
please explain the risk of proceeding without their completion and how
these risks are being effectively mitigated?
Answer. Over the last month, the Service has made significant
progress towards the development of the Enterprise Architecture.
Detailed product definitions have been deployed, timelines have been
built, and work has commenced to populate those products. To be useful,
the Enterprise Architecture must be flexible and informed by current
business strategies, priorities, and technology opportunities. The
Service will deliver regular ``point in time views'' of the
architecture. Blueprint 2000 will be the first of these documents and
will be delivered no later than September 30, 2000. Included within
Blueprint 2000 are those products necessary to define the near-term
sequence of modernization and transition initiatives.
The Service has made significant progress towards the development
and deployment of the Enterprise Life Cycle (ELC). Specifically, we
have completed the Business Case Procedure, which provides detailed
``how to'' instructions on preparing business cases for all five ELC
milestones, and integrated those instructions with the activities and
work products that project teams will be performing/producing. We will
complete the rest of the Investment Decision Management (IDM)
procedures and the Review and Acceptance process for inclusion in the
Process Access Library (PAL) by July 2000.
The ELC is being implemented and deployed to the project teams, and
we are now completing ELC deployment to Business Systems Modernization
Office (BSMO) personnel and key Business Systems Modernization program
stakeholders. The Deployment Plan also calls for a completed BSMO
Charter and Transformation Plan, with validated and integrated
processes and procedures by July 7, 2000. The Plan will produce role-
based training for each role and individual as a result of skills
assessments and needs assessments. While training, coaching and other
initiatives will be ongoing throughout the year, the Deployment Plan
will first prioritize roles/training classes to ensure that the right
classes are developed and delivered as needed. We will perform a
Baseline Performance Assessment against our Metrics Program in the
fourth quarter to identify gaps and deficiencies, and prepare a Process
Improvement Plan to resolve those gaps and deficiencies.
IRS is moving forward with the fiscal year 2001 Release. To avoid
any development not in compliance with the latest IRS Blueprint, the
fiscal year 2001 Release is limited to the first release of Customer
Communications, which is consistent with the architectural principles
of Blueprint 1997.
IRS will move forward with projects that are more infrastructure
oriented and will not be significantly affected by the areas that will
undergo revision in Blueprint 2000. The major differences between the
Modernization Blueprint published in 1997 and Blueprint 2000 will be in
the Business Process, Organization and Location areas. Also, Blueprint
2000 will comply with the definitions in the ELC. Projects that are
primarily technology or infrastructure foundations will continue. These
include the Customer Account Data Engine, the Security and Technology
Infrastructure Release and some components of Customer Communications.
Question. What is delaying IRS from submitting its second
expenditure plan? Given that the $33 million provided in December 1999
was supposed to fund the modernization through February 2000, how does
IRS plan to fund the program past this timeframe?
Answer. The second expenditure plan requesting the release of
$176.3 million was delivered to Congress on March 10, 2000. This plan
reflects spending requirements beginning April 1, 2000. Except for $6.3
million planned for the Customer Communications Aspect upgrades, the
$33 million provided in December 1999 is entirely committed.
In January 2000, IRS began reassessing its modernization program
management structures and approaches. In addition, IRS has rotated and
re-assigned key personnel.
Question. What was the cause of this reassessment? What were the
results of IRS' reassessment? What changed as a result? What delays
will this portend for the modernization initiatives underway? What is
the status of the modernization program, including the initiatives
funded thus far? What is the strategy and associated timeline for
moving ahead, and when can we expect to see the next expenditure plan?
Answer. Members of the Core Business Systems Executive Steering
Committee, over the past several months, initiated many discussions
with key representatives of the Business Systems Modernization Office
(BSMO) and the PRIME regarding the content and approach of the projects
composing the Business Systems Modernization Program. These discussions
concentrated on current stakeholder requirements, filing season
schedules, capacity, and program risks. During these discussions,
shortfalls in our approach were identified and the lessons learned
documented. These discussions, together with the lessons learned and
recent directives from oversight bodies, resulted in a revised program
strategy and redirection of some efforts.
We learned that there was insufficient capacity to do the work
envisioned in the time allotted. Neither were program level processes
and procedures mature enough yet to control and manage the program
effectively. Nor had risks and risk mitigation steps been fully
identified, although there was danger in allowing the projects to
continue moving ahead of the program.
Therefore, IRS is implementing a near-term strategy to address
lessons learned and oversight guidance. The strategy is to deliver
near-term customer service improvements during the 2001 filing season,
accelerate the establishment of the BSMO, assess the current status of
the entire program, enforce Enterprise Life Cycle (ELC) requirements
program-wide, update the Blueprint, improve coordination with the new
IRS business organizations and revise the PRIME task orders. Specific
program management changes include:
--perform a program-wide milestone readiness review to determine the
readiness of each project to proceed to Milestone 3 (system
design); identify gaps between ELC work products and delivered
work products, ELC required reviews and completed reviews, and
delivered business cases and OMB Exhibit 300B instructions;
--enforce the ELC milestone standards, rescheduling the strategic
business systems projects (except for Customer Account Data
Engine (CADE)) back to pre-Milestone 2 (concept definition) and
focus on the BSMO enforcing a stricter ELC process that demands
all artifacts at each decision milestone;
--construct Blueprint 2000 and align with new business organizations,
incorporating into Blueprint 2000 the needs of the new business
organizations for Filing Season 2001 and Filing Season 2002 and
employ the latest, most efficient technical solutions to the
portfolio of projects under consideration; and
--revise the PRIME task orders to reflect clarified roles and
responsibilities between the PRIME and the IRS and improve the
acquisition management process and products to evolve to
performance-based contracting of ITIA-funded projects.
As we are revising the PRIME task orders, we are limiting spending
to only the PRIME Program Management Office, the Customer Communication
project for fiscal year 2001 and architecture-related activities. IRS
has just received approval from the Subcommittee on Treasury, Postal
Service, and General Government for the release of $148.4 million in
ITIA funding against the fiscal year 1998 availability. These funds
will be applied to the definitized task orders as directed by the
Subcommittee in its approval letter. Before September 30, 2000, IRS
plans to request additional releases of ITIA funding to support post-
Milestone 3 activity for the Integrated Financial Systems and for other
Business Systems Modernization projects reaching various milestone
decision points, for architectural engineering and for ongoing program
management.
Question. In light of the reassessment, what changes has IRS made
to strengthen its readiness and capability to modernize?
Answer. The IRS will to continue to make progress towards the
Business Systems Modernization, as directed by Congress, by focusing on
completing planning efforts for Phase I of Business Systems
Modernization, completing the deployment of the Enterprise Life Cycle
(ELC), completing the architectural blueprint efforts including the
publication of Blueprint 2000, beginning development and deployment
activities focused around filing season 2001, and completing the
procurement, integration and deployment of a new examination tax
calculating tool.
One of the core activities to strengthen our readiness and
capability to modernize will be the maintenance and update of the
action plan which resulted from the program-wide milestone readiness
review. This review determined the readiness of each project to proceed
to Milestone 3 (system design); identified gaps between ELC work
products and delivered work products, ELC required reviews and
completed reviews, and delivered business cases and OMB Exhibit 300B
instructions. In addition, the enforcement of the ELC milestone
standards, rescheduling the strategic business systems projects back to
Milestone 2 concept definition (except for Customer Account Data Engine
(CADE)) and focus on the Business Systems Modernization Office (BSMO)
enforcing a stricter ELC process that demands all artifacts at each
decision milestone will add additional rigor and discipline to our
Modernization Program. The construction of the Blueprint 2000 and its
alignment with new business organizations, incorporating the needs of
the new business organizations for filing season 2001 and filing season
2002 and employing the latest, most efficient technical solutions to
the portfolio of projects under consideration, will provide a cohesive,
over-arching vision of how the new processes can serve their customers.
Last, but of no less importance to the Program, the revision of the
PRIME task orders to reflect clarified roles and responsibilities
between the PRIME and the IRS will improve and add more structure to
the acquisition management process and products to evolve to
performance-based contracting of ITIA-funded projects.
In IRS' fiscal year 2001 request ($119 million) and fiscal year
2002 advance request ($375 million) for ITIA funds, IRS is proposing
new legislative conditions that it must meet in order to obtain
congressional approval to obligate these funds from the account. These
conditions differ from those in the fiscal year 1998 and 1999
appropriation acts. Under the existing conditions, for example, IRS'
expenditure plan request has to, among other things, implement the
Modernization Blueprint and comply with applicable federal acquisition
regulations. Under IRS' proposal, this and other conditions would be
eliminated. Instead, IRS would have to submit an expenditure plan to
Congress that, among other things, meets the Office of Management and
Budget's capital planning and investment control requirements.
Question. Please describe the conditions that would be eliminated
and those that would be added.
Answer. The appropriation review language eliminates the following
conditions that are present in the language for the fiscal year 1998
and fiscal year 1999 appropriations: Provide a plan for expenditure
that 1) implements the IRS Modernization Blueprint submitted to
Congress on May 15, 1997; 2) meets the requirements of the May 15,
1997, IRS SLC (Systems Life Cycle) program; and 3) complies with
acquisition rules, requirements, guidelines, and systems acquisition
management practices of the Federal Government.
The appropriation review language also clarifies two original
conditions: (1) the condition on meeting the OMB Information Systems
Investment Guidelines established in the fiscal year 1998 budget has
been clarified by the focus on the OMB Circular A-11, Part 3; and (2)
the condition on submitting a plan for approval by IRS Investment
Review Board (IRB), Office of Management and Budget (OMB), IRS
Management Board and for review by GAO, has been reworded to reflect
review and approval by Treasury and OMB and review by GAO.
No additional conditions have been incorporated in the language.
Question. What is IRS' rationale and justification for these new
conditions? Is IRS encountering problems meeting the existing
conditions? If adopted, would the new conditions apply to the
previously appropriated ITIA funds? If yes, why?
Answer. Part of IRS' rationale for the new conditions is that the
two major focus areas of those conditions, implementation of the
Modernization Blueprint and the Enterprise Life Cycle (ELC), will be
completed and repeatable processes, thereby obviating the need for
specific reference in the language for the fiscal year 2001 request or
future requests. The revisions made to the conditions are not based on
problems in meeting the existing conditions. On the contrary, given
IRS' revised strategy of accelerating program activities while slowing
project activities, IRS is confident that it will be able to
demonstrate to oversight bodies that we have mature, disciplined
practices in place to enforce the ELC and ensure strict adherence to
the Modernization Blueprint.
In addition, adoption of the requested language will help to
streamline the process for requesting release of ITIA funding, allowing
BSMO to manage the contracts more effectively. Finally, incorporating
the OMB Circular A-11, Part 3, into the language serves to subsume some
of the existing criteria while ensuring that investment decisions are
tied to the latest standards and guidance on IT investments.
The original conditions will apply to all ITIA spending plans
submitted to Congress, requesting release of funding appropriated in
fiscal year 1998 and fiscal year 1999. IRS' budget request for fiscal
year 2001 includes $145 million for the fourth year of a 5-year Earned
Income Tax Credit (EITC) compliance initiative, which is funded outside
the discretionary spending caps. The initiative was begun in response
to an IRS study, released in April 1997, which showed that of $17.2
billion in EITC claimed by taxpayers for tax year 1994, $4.4 billion
(or about 26 percent) was over-claimed. In fiscal year 1999, about
2,400 FTEs were devoted to the EITC initiative, and IRS estimates that
about 2,100 FTEs will be expended in both fiscal years 2000 and 2001.
According to IRS, the initiative includes expanded customer service,
strengthened enforcement, and enhanced research.
Question. Of the 2,400 FTEs in 1999, how many were devoted to (1)
customer service, (2) enforcement, and (3) research? Please provide a
similar breakdown for the estimated 2,100 FTEs in fiscal years 2000 and
2001.
Answer. In fiscal year 1999 resources devoted to these areas were
as follows:
Customer Service.................................................. 1,368
Enforcement....................................................... 666
Research.......................................................... 28
Other............................................................. 323
______
Total..................................................... 2,385
Note: other FTE includes Chief Communication and Liaison, Submission
Processing, Taxpayer Advocate, Walk-In, Taxpayer Education, Counsel,
Appeals, Information Systems, and Electronic Tax Administration.
The estimated FTEs earmarked in fiscal years 2000 and 2001 are as
---------------------------------------------------------------------------
follows:
Customer Service.................................................. 1,107
Enforcement....................................................... 651
Research.......................................................... 33
Other............................................................. 289
______
Total..................................................... 2,083
Note: other FTE includes Chief Communication and Liaison, Submission
Processing, Taxpayer Advocate, Walk-In, Taxpayer Education, Counsel,
Appeals, Information Systems, and Electronic Tax Administration.
Question. What will happen to these FTEs once the initiative is
over and the related outside-the-caps funding ends?
Answer. None of these employees will lose their jobs. We will
maintain an EITC compliance program-either from operating level
resources or a separate appropriation-after the outside-the-caps
authority ends.
Congress is being asked to continue funding this initiative even
though congressional justification for fiscal year 2001 contains no
information on any results realized over the past 3 years.
Question. Please provide, with as much specificity as possible,
information on the results of this compliance initiative to date. We
are specifically interested in such things as the amount of improper
EITC payments that were identified and stopped as a result of IRS'
efforts and any quantifiable evidence of improved compliance as a
result of this initiative.
Answer. The compliance initiative has allowed the IRS to improve
awareness of the EITC eligibility process by enhancing local marketing
and promotional efforts through IRS district offices. We have partnered
with tax professionals to ensure they are aware of new tax law changes
and due diligence guidelines through mailouts, internet bulletins, and
publications, such as the 2000 EITC Tax Professional Kit and CD-ROM. In
addition, the IRS has conducted 9,000 ``face-to-face'' educational and
outreach visitations with practitioners that prepare high volumes of
EITC returns.
In fiscal year 1998, the first year of the EITC compliance
initiative, a total of $977 million was protected and collected through
the EITC initiative. (Protected revenue refers to refund dollars
prevented from being issued prior to the start of examining an EITC
claim for refund, and includes both EITC amounts and changes in other
tax liabilities) This was accomplished through issuing over 600,000
math error notices and opening over 800,000 cases for examination. In
fiscal year 1999, the second year of the EITC initiative, a total of
$1.1 billion in revenue was protected and collected through the EITC
initiative. This was accomplished through completing nearly 600,000
examinations and opening nearly 300,000 returns claiming EITC for
examination. We also issued over 400,000 math error notices.
Question. Why did the congressional justification not include any
such specifics?
Answer. Although the congressional justification did not include
specifics on the amount of improper amount of EITC payments that were
identified and stopped as a result of IRS efforts in the
accomplishments of the Earned Income Tax Credit (EITC) Compliance
Initiative, IRS does report this information on a quarterly basis in
the IRS Tracking EARNED INCOME TAX CREDIT APPROPRIATION report. The
report is provided each quarter to the Chairs of the Senate and House
Appropriations Committees.
The congressional justification says that IRS intends to ``measure
the effects of Servicewide programs on compliance levels for the EITC-
eligible populations.'' IRS has said that it is going to use its study
of tax year 1997 EITC returns as a baseline compliance measure.
Question. When does IRS expect to have the baseline data? Why is
IRS not using the results of the tax year 1994 study cited above as its
baseline?
Answer. The IRS is in the process of perfecting the 1997 study
data. When these data has been fully developed and analyzed, a report
will be issued.
Prior to 1998, the Criminal Investigations Division had primary
responsibility for conducting EITC compliance studies. When funding for
the EITC compliance initiative began in fiscal year 1998,
responsibility for the EITC compliance studies was assigned to the
Assistant Commissioner for Research, which traditionally conducts
compliance research for the Service. With the shift in responsibility
to Research, there were changes to the methodology that was used in the
TY 1994 studies. The change in methodology makes it difficult to
interpret and compare the differences between the TY 1994 study and
subsequent studies.
Question. When does IRS expect to have data to compare to the
baseline to show the overall effect of this initiative on EITC
compliance? Why, in the third year of a $100 million plus initiative
doesn't IRS have such information?
Answer. Examinations on tax year 1999 returns have recently begun.
The fiscal year 1998 study was conducted by auditing tax year 1997
returns filed in 1998. The audits were completed in 1999. The results
are currently being reviewed and analyzed for inclusion in a report on
EITC Baseline Compliance.
The chart on page SD-3 of IRS' congressional justification shows a
proposed increase of 2,528 full-time equivalent positions for fiscal
year 2001. All of that increase is in the ``policy/program professional
staff'' category.
Question. Normally, with an increase in professional staff, you
would expect to see some increase in support staff, such as clerks and
secretaries, but the chart shows no increase in those areas. Why?
Answer. These 2,528 positions will be spread to IRS field offices
throughout the nation. The staffing increase will be assigned primarily
to front-line positions in direct support of each program. Many of the
positions are permanent professional employees with specialized skills
in such areas as tax exempt bond examinations or securing payments from
delinquent taxpayers. These field offices, for the most part, have
support staff in place. It is anticipated that the small increase in
any individual office will not require significant additional support
staff.
IRS says that its workforce has decreased by more than 16 percent
since 1992, while handling significant workload increases due to tax
law changes and customer demand. On the other hand, IRS acknowledges an
increasing reliance on contractor support and expertise.
Question. What has been the level of contractor support in FTEs for
1998, 1999, and 2000? What is the projected level of support for 2001?
In providing this information, please distinguish between information
technology-related contractor support and contractor support that is
not information technology related.
Answer. Information concerning the level of contractor support in
FTE for fiscal years 1998, 1999 and 2000 is not available. In general,
the Service does not mandate numbers of FTEs that contractors must use
to perform work required under a contractual arrangement. This
methodology in contract management has resulted from several changes in
Federal contracting regulatory and policy guidance. These changes
include the preference for performance-based changes in Federal
contracting regulatory and policy guidance, and increased emphasis on
acquiring commercial items and adopting commercial practices. One of
the basic principles of performance-based concepts is to describe the
work to be performed in terms of ``what'' is the required output or
desired outcome rather than ``how'' the work is to be performed or
specifying the level-of-effort to be applied. The commercial item's
acquisition methodology does not include the old requirements for
voluminous and detailed cost and pricing data to address every aspect
of the contractors' proposals, which often included the number of
personnel to be used to satisfy the requirements. Again, the overall
emphasis in these cases is on ``results'' rather than detailed
descriptions of ``how to.'' Consequently, the information requested is
not available because it has not been specifically collected or
tracked.
The amounts approved for fiscal year 1998, fiscal year 1999, and
fiscal year 2000 and requested for fiscal year 2001 for operational
support contracts are as follows:
[In millions of dollars]
1998.............................................................. 128.7
1999.............................................................. 157.2
2000.............................................................. 209.5
2001.............................................................. 271.2
The amounts spent for operational support contracts (OSC),
Information Systems (ISY) and Information Technology Investment Account
(ITIA) funded information-technology related contracts are as follows:
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal year OSC ISY ITIA
----------------------------------------------------------------------------------------------------------------
1998............................................................ 128.7 \1\ 311.8 ..............
1999............................................................ 157.2 \1\ 454.4 25.8
2000............................................................ 209.5 \1\ 331.6 \2\ 268.4
2001............................................................ 271.2 \1\ 284.7 \3\ 312.0
----------------------------------------------------------------------------------------------------------------
\1\ Fiscal year 1998 from month 15 actual; fiscal year 1999 from month 16 actual; fiscal year 2000 from current
financial plan; fiscal year 2001 from ISB Congressional Justification.
\2\ $29.9M already spent in fiscal year 2000. Will spend an additional $12.2M against released money in fiscal
year 2000. Will spend additional $226.3M against next ITIA releases in fiscal year 2000. The total anticipated
expenditure for fiscal year 2000 is $268.4M. The $226.3M assumes release of $176M in April and a follow-on
request in July.
\3\ The $312M assumes $119M appropriation request is approved by Congress.
Question. How does this level of support offset the reported
reduction in IRS's workforce (i.e., to what extent has contractor staff
replaced IRS staff)?
Answer. Contractor support for IS projects has, over the long term,
replaced some IS personnel. After the IRS experienced a sustained
reduction of FTEs starting in 1996, the IRS increased the number of
contractors for Information Technology projects, to fill in the work of
maintaining existing systems and operations. Contracting also allows
the IRS to acquire needed state-of-the art expertise for short-term or
transitional efforts.
Other than Information Systems, much of the work in the Operational
Supports Contracts is for new work for which we did not have staff or
expertise (such as ETA Advertising) or increased workload (Beckley
Accounting Support).
The level of contractor support does not offset the reported
reduction in IRS' workforce. Part of the reason for the decline in the
IRS workforce is because funding was reduced for FTEs in essential
functional areas to pay for the services provided by contractors.
In July 22, 1999, testimony before the Subcommittee on Oversight of
the House committee on Ways and Means, the Commissioner, among other
things, discussed IRS' implementation of certain provisions of RRA 98,
including the provision related to third party notices. That provision
required that IRS give notice to taxpayers whenever it might be
contacting a third party, such as a bank, about the taxpayers
situation. The Commissioner noted that the notice IRS prepared to
satisfy that provision ``was sent to many more taxpayers than needed''
and ``were poorly written, causing undue concern to many taxpayers. On
February 14, 2000, IRS announced that it was replacing the problem
notice with 15 new, more clearly worded, letters and notices that were
designed for specific situations facing taxpayers.
Question. Did the development of a poorly written notice and the
decision to send it to many more taxpayers than needed reflect a
failure of IRS to follow established procedures, a weakness in those
procedures, or a combination of both?
Answer. The implementation of RRA 98 section 3417 proved to be a
major challenge for learning to properly and accurately apply new and
complex statutory provisions to very sensitive taxpayer situations. The
learning process required that we identify the specific situations
where third parties could be contacted in order to understand the
overall impact of the legislation. In negotiating this difficult
learning curve we had to address a continuing stream of legal and
policy issues.
One issue involved the development of a letter that was intended to
provide all taxpayers with the advance notice required by the statute.
To ensure that all appropriate taxpayers received the notice,
procedures were established to send the letter out whenever there was a
possibility of a third party contact. This blanket approach assured our
compliance with the law during the initial implementation period, while
we negotiated the learning process described above.
Fortunately, a great deal of progress has been made since the
initial implementation. New letters have been developed and implemented
and guidance and training materials have been provided to all
employees. We are continuing to work through the legal issues and will
be publishing draft regulations shortly which will help to clarify the
requirements of the legislation.
Question. What controls were in place then to ensure that notices
were clear and properly directed? What was the Taxpayer Advocate's role
in the notice preparation and/or review process? What was the role of
the IRS executive known as the Notice Gatekeeper?
Answer. The following procedures were in place for new or revised
notices/letters:
--The notice owner develops or revises their letter/notice. Employees
in the Taxpayer Correspondence Branch do not normally own
notices/letters.
--The notice owner coordinates the notice/letter with all pertinent
stakeholders (i.e. Chief Counsel and affected operations
units). If a new notice/letter is created, the notice owner
obtains a number for the notice/letter.
--The notice owner sends to the Taxpayer Correspondence Branch the
final version of the notice/letter along with a Form 1767 and
Notice Gatekeeper Form.
--The Notice Gatekeeper reviews the Gatekeeper form for various
reasons, one being the impact on telephone operations. The
Correspondence Clarity analyst reviews the notice/letter for
clarity, makes recommended changes, and coordinates those
changes with the notice/letter owner.
--After the notice owner and Correspondence Clarity analyst agree on
the changes, they sign the notice/letter. Then the notice owner
takes notice/letter to the appropriate area to produce and
issue the notice.
The notice/letter owner has responsibility for ensuring that
notices and letters are properly directed.
The Taxpayer Advocate Service was not included in the initial
implementation process; however that office was included in the
subsequent implementation.
The Notice Gatekeeper responsibilities include:
--Review of the notices/letters to determine the effect of the
notices/letters on telephone operations;
--Review and approval of notices/letters for expedited review, which
is the same as a limited review of notices/letters. If issues
arise that are not resolved between the notice owner and the
clarity analyst, the Notice Gatekeeper and an appropriate
representative from the owner's area will make the final
decision. If more than one functional area is involved, the
Notice Gatekeeper will call a meeting of the Correspondence
Council (directors or designees from all functional areas that
are affected by the notices) to resolve the issue.
--After the owner's concurrence, the Notice Gatekeeper has the final
approval signature.
The Notice Gatekeeper has numerous other responsibilities; however,
they do not directly apply to the development or revision of notices/
letters.
Question. How, if at all, have the controls, including the roles of
the Taxpayer Advocate and the Notice Gatekeeper, been revised since
then?
Answer. The Notice Gatekeeper established an integrated project
team to manage all ongoing notice projects. This team brings cross
functional parties together to evaluate the projects and handle
significant issues. In addition, a Notice Governance Council at the
Assistant Commissioner level was established to provide oversight to
the integrated project team. This high-level body provides guidance to
and acts as a sounding board for the team. The Taxpayer Advocate's
Office has representation on both councils.
A separate unit has also been established within the Taxpayer
Advocate Service to better focus on proactive, burden reduction
oversight issues. This organization is not, as yet, involved in the
notice review process.
IRS has four pilot sites dedicated to looking behind the results of
customer satisfaction surveys. These four sites are to determine the
best way to integrate survey data into how IRS does business on a daily
basis.
Question. How were those four sites chosen?
Answer. The IRS considered two primary factors when selecting the
four field offices that would pilot the use of customer satisfaction
survey data:
--Did the office have sufficient survey data to begin identifying
underlying causes of taxpayer dissatisfaction?
--Did the office have sufficient staff and resources available to
dedicate to a 9-month project on customer satisfaction?
Volunteers for the pilot projects were also solicited. If sites
that volunteered met the two criteria listed above, they were
considered potential pilot sites. Using this information, sites were
selected from across the country to better represent the different
customers served by the IRS. The final site selections were made by
senior IRS leadership.
The four pilot sites are:
--North Central District (working to improve service to Examination
customers)
--Ohio District (working to improve service to Employee Plan and Tax
Exempt Organization Determination Request customers)
--Southwest District (working to improve service to Collection
customers)
--Kansas City Service Center (working to improve service to Service
Center Examination customers)
Question. How will the survey results be used to improve walk-in
and telephone service?
Answer. Later this year, IRS will examine the results of the walk-
in and telephone service surveys to make recommendations regarding ways
to improve service to taxpayers.
Throughout its congressional justification, IRS list customer
satisfaction measures for the following activities: Automated
Collection Systems, Toll-free Telephone Assistance, Service Center
Examination, Appeals, Walk-in, Exempt Organizations Determinations and
Examinations, and Employee plans Determinations and Examinations. In
each case, IRS' goal for fiscal year 2001 is the same as its plan for
fiscal year 2000.
Question. Why would IRS not be anticipating improved levels of
satisfaction in those areas?
Answer. Fiscal year 1999 was the first year that Customer
Satisfaction was used as a balanced measure by the IRS. Because of the
newness of this measure and the uncertainty of how actions may impact
future results, it was difficult to project future year goals. In
setting goals for fiscal year 2000 and fiscal year 2001, organizations
set targets that reflected either slight increases or a rollover from
the fiscal year 1999 results. The IRS needs additional experience using
this measure, including time to conduct more in-depth analysis of the
correlation between individual elements within each survey and the
overall satisfaction score, in order to more confidently project future
year results. Using fiscal year 2000 customer satisfaction results and
more detailed analysis of fiscal year 1999 results, organizations will
be expected to review and modify, as appropriate, the fiscal year 2001
goals when the final performance plan for fiscal year 2001 is submitted
as part of the fiscal year 2002 Congressional Justification.
In an April 1999 report on IRS' customer service management
strategy, GAO found that prioritizing many suggested short-term
improvements initiatives would be a necessary first step in managing
the improvements (GAO/GGD-99-98, Apr 30, 1999).
Question. Please provide an update on the status of efforts to
implement 157 short-term customer improvement initiatives-identified in
January 1999 at the conclusion of a priority-setting process? And
How will IRS determine the costs of implementing these initiatives
and what improvements have resulted?
Answer. The implementation of near-term customer service
improvement initiatives has been and continues to be a high priority
for the IRS. To oversee and ensure the successful implementation of
these initiatives, the Service established the Taxpayer Treatment and
Service Improvements Program Office in the spring of 1998. To date,
many of the initial short-term customer service improvement initiatives
(emanating from the President's National Partnership for Reinventing
Government [NPR] and other prominent sources) have been implemented
with several more significant initiatives scheduled for implementation
this year. Examples of current accomplishments are depicted in the
table below and shown respectively within the Service's three goals.
------------------------------------------------------------------------
Productivity through a
Service to each Service to all quality work environment
------------------------------------------------------------------------
Improved telephone Implemented penalty Provided enhanced
service reform by notifying electronic research
7x24 coverage first time filers of capabilities for customer
Call routing waived penalties and service reps
implementation providing Developed and implemented
Enhanced electronic information on customer service training
filing and payment prevention Elevated grade levels of
941 Tele-File Expanded Low Income Customer Service
(Small Businesses Taxpayer Clinics positions
filing by phone) Implemented pilots/tests
Credit Card to address issues
Payments for identified in Customer
balances due Satisfaction Surveys
Expanded Walk-in
hours; evenings and
Saturdays
Improved Power of
Attorney processing
Enhanced education
communication with
small businesses and
small business
organizations
Conducted local and
national Problem
Solving Days
Increased
accessibility to and
simplification of
alternative payment
methods
------------------------------------------------------------------------
Customer service improvements scheduled for implementation by 1/1/
2001 include centralizing the audit reconsideration process, continuing
the expansion of small business outreach, increasing the oral abatement
authority of front-line tax assistors, providing multi-lingual walk-in
service via contracted telephone translation support, and expanding
business hours of audits.
The Service has implemented, and continues to implement, the noted
projects primarily within its base budget. Although funding of $40
million (and 500 FTE) was provided in fiscal year 2000 for several of
the Reform and Restructuring Act of 1998 (RRA 98) provisions, most of
these customer service improvements and the many RRA 98 provisions
received no additional funding. While the Service has not specifically
tracked the cost of implementing each initiative, it is apparent
through the realignment of resources, that there has been a tradeoff
within the IRS. The ramifications of such tradeoffs have yet to be
determined. However, it is clear that with the implementation of the
identified initiatives the IRS has and continues to significantly
reduce taxpayer burden while serving the nation's taxpayers in a more
effective, efficient, and convenient manner.
Attached is an excerpt from the Commissioner's 2000 publication of
``Modernizing America's Tax Agency.'' The material conveys additional
information on completed customer service initiatives and RRA 98
provisions.
One improvement initiative was to have an intensive agency-wide
special training program to introduce employees to the new customer
service approach.
Question. Has agency-wide customer service training been completed?
What were the results of employee assessments of the quality and
usefulness of the course?
Answer. Course 8530, entitled ``IRS Balanced Measurement System:
Customer Satisfaction Strategies,'' was created to support the
Service's focus on providing top-quality customer service to taxpayers,
and the requirements described in the IRS Restructuring and Reform Act
of 1998. The course is being delivered to over 60,000 front-line IRS
employees with direct taxpayer contact. The course first rolled-out to
the field in July 1999, starting in the Examination function. To date,
training has been delivered to the following functions: Examination,
Customer Service, Collection, Submission Processing, and Appeals. Over
61,400 front-line employees have received course 8530 training. The
development and implementation of a version of course 8530 for the
Taxpayer Advocate function is the last course 8530 training initiative,
and should be completed in the near future.
Course 8530 has been rated very highly by trainee assessments. The
course format is interactive and readily encourages student
participation, which many employees felt added to the overall quality
of the course material. Employee feedback also indicated that the
function-specific design of each version of course 8530 improved the
usefulness of the course.
Question. What was the cost to deliver this training? Please
indicate what elements are included in your basis for calculating the
cost (e.g., materials, salaries for course managers, instructors).
Answer. To date, the cost incurred to develop and deliver Customer
Satisfaction Strategies training is $3.5 million. This includes $1.4
million in contract costs for the design and development of customized
training for five separate operating functions having taxpayer
interaction (Examination, Collection, Customer Service, Submission
Processing, and Appeals) and the costs of training materials, pilot
classes, and Train-the-Trainer sessions. The balance of $2.1 million
represents the costs of field delivery, including travel expenses, and
the rental of off-site space.
Question. Do you plan to assess whether the training course had an
impact on the quality of customer service provided? Why or why not?
Answer. We expect to see the impact of this and other training in
improved results in the customer satisfaction and employee satisfaction
portions of the balanced measures. IRS managers are provided training
on how to use balanced measures in a new course, ``IRS Balances
Measurement Approach to Leadership.'' Balanced Measurement of
Performance is one of the five ``levers of change'' IRS is using in its
effort to change the agency's culture to support the new mission that
gives equal weight to customer service and compliance. The balanced
measures are designed to link directly to IRS' three strategic goals of
service to each taxpayer, service to all taxpayers, and productivity
through a quality work environment.
A critical aspect of establishing an appropriate balanced
measurement system is establishing the measures based on what IRS needs
and wants to measure in order to achieve its strategic goals and
mission, rather than simply what is most easily measured. This balanced
measurement system must define quantities that are relevant to each
strategic goal and that indicate progress on all three goals.
Also critical to the measurement systems is following the guiding
principle that measures must be aligned at all levels of the
organization, from the top to front-line employees. This binds the
organization around a common goal, rather than creating conflict and
mistrust. IRS has made progress in developing and implementing balances
measures, but given the magnitude of this challenge it admittedly has
encountered problems. At this operational level, IRS is measuring
customer satisfaction, employee satisfaction and business results.
Question. What would constitute a balance between these sometimes
competing goals? How will IRS know when the measures are in balance?
Answer. The elements of the Balanced Measurement System--Customer
Satisfaction, Employee Satisfaction, and Business Results--each
represent an important aspect for assessing progress toward the
organization's goals. Any activity involving balanced measures, such as
setting goals, assessing progress, and evaluating results, must
consider all three elements. While there is no formula to determine
equilibrium among the measures, the impact of the actions taken by the
IRS will be reflected in the measurement results and will help shape
future plans and strategies for improving overall performance.
In any given year, the mix of improvement programs and strategies
proposed is likely to cover all three elements--customer satisfaction,
employee satisfaction, and business results. The purpose of the IRS'
balanced measurement approach is to ensure that each element is given
due consideration. Working within a framework of limited resources, the
senior management team must address some of the most pressing and
critical issues by prioritizing and then selecting a mix of strategies
and programs aimed at achieving overall progress toward the mission and
strategic goals of the IRS.
The second IRS strategic goal is service to all taxpayers, with
objectives to increase fairness to all and increase overall compliance.
IRS must apply the law with integrity and fairness to all, so taxpayers
who do not comply are not allowed to place a burden on those who do
comply. This aspect of IRS service is important both to protect
revenues flowing to the Treasury and as a matter of fundamental
fairness.
Question. Please explain the linkage between the goal of ``service
to all''--increasing fairness to all and increasing overall
compliance--and the quality and quantity measures being used for that
strategic goal.
Answer. The IRS is developing both strategic and operational
balanced measures tied to its strategic goals. The strategic measures
will be used to assess the organization's overall performance in
delivering on the mission and strategic goals. The strategic measure of
``service to all'' will be a measure of voluntary compliance that the
IRS is working on developing but which is currently not in place. This
measure will allow the IRS to assess the impact of its programs and
services on the overall level of compliance by taxpayer segments.
The operational measures will be used the assess the effective
execution of particular components of the organization (e.g., the
compliance program in Wage & Investment, the customer assistance
program in Small Business/Self Employed.) The Operational Measures of
``service to all'' are measures of the quantity of cases/events and the
quality of those cases/events.
--The quantity measures provide information about the volume and mix
of work products and services provided by IRS operating units.
This information will assist the organization in assessing and
making future decisions about the levels of compliance and
customer assistance activities necessary across taxpayer
segments in order to assist taxpayers in meeting their tax
responsibilities and to also address compliance issues when
appropriate.
--The quality measures provide information about how well IRS
operating units developed and delivered their products and
services. The quality measures help the organization ensure
fairness to all by regularly assessing such factors as whether
IRS personnel devoted an appropriate amount of time to a
matter, properly analyzed the issues presented, developed the
facts regarding those issues, correctly applied the law to the
facts, and complied with statutory, regulatory and IRS
procedures, including timeliness, adequacy of notifications and
required contacts with taxpayers.
The third IRS strategic goal is to increase productivity by
providing a quality work environment for its employees. IRS must not
only provide top quality service to taxpayers, but it must do so
efficiently, using the fewest possible resources.
Question. Please explain why IRS anticipates that a single
measure--employee satisfaction--will measure progress toward
``increasing productivity through a quality work environment.''
Answer. The development and implementation of the balanced
measurement system at the IRS is an incremental process. The initial
focus of the measures effort has been on the development of operational
measures. The operational measure of ``Productivity through a Quality
Work Environment'' is employee satisfaction by business unit. This
information will assist each business unit at the IRS in assessing how
well it is doing in providing a work environment that enables employee
productivity through quality leadership, adequate training, and
effective support services.
At the strategic level, the IRS is using an overall servicewide
employee satisfaction score and plans to begin the development of a
measure of productivity in fiscal year 2001 that will help assess the
organization's progress in using its resources with increasing
effectiveness over time. Preliminary thinking is that the productivity
measure will be an aggregate indicator of the services the IRS is
producing compared to the resources used. There are complexities that
will need to be addressed in developing this measure, however, such as
determining a means to account for the mix of work performed and such
factors as varying levels of complexity and difficulty across product
and service lines.
Balanced measures are indicators of organizational performance and
a guide to Improve performance. Using them for this purpose requires
IRS employees to ``get behind the numbers'' to understand what is
really happening.
Question. How well are IRS managers trained to ``get behind the
numbers,'' and how successful have they been in developing action plans
to address balanced measures results?
Answer. By the end of fiscal year 2000, the majority of managers
will have completed a 3-day course (Balanced Measures Approach to
Leadership) designed to help them understand how to incorporate the
Balanced Measurement System into their day-to-day management
activities. As part of this course, managers have been provided with
and trained to use a tool called the ``Balance Checking Matrix''
designed to facilitate ``getting behind the numbers'' and ensuring that
each Balanced Measure area is considered in solving problems and
determining courses of action. The Matrix also helps identify any
Balanced Measure area where additional steps may be necessary in order
to reduce possible negative impacts of a selected strategy or program.
The IRS completed its first Business (Operations) plan under the
Balanced Measurement framework for fiscal year 2000 and specific
actions were identified at all levels of the organization (e.g.,
National Office, Region, District, Division, Branch, Group) in each
area of balanced measures utilizing feedback from customer surveys,
employee surveys and business results data. A review of progress
against these plans is now underway as part of the IRS' mid-year
Business Review. Information obtained from these reviews will be used
to identify methods for improving the development of future action
plans in alignment with the Balanced Measures.
______
Questions Submitted by Senator Byron L. Dorgan
Question. We have all read over the recent reports regarding the
ongoing GAO study of the IRS, and other challenges the IRS is
encountering in implementing the Restructuring and Reform Act. This
year's request asks for an increase of $769 million over fiscal year
2000, much of which is directed to Processing/Management, Enforcement,
and Technology. Additionally, the request is looking to add over 2,500
FTE in order to implement the necessary reforms.
Can you describe for us some of the recent successes in reforming
the IRS and also let us know which areas in the process still concern
you?
Answer. IRS has achieved some worthy successes in several essential
areas:
--Electronic Tax Administration is making excellent strides towards
reducing the burden associated with electronic tax preparation
and filing.
--More people are able to file totally paperless returns in 2000
because the IRS expanded its Practitioner PIN Pilot to
include about 18,000 tax preparers.
--Eleven (11) million postcards containing e-file customer service
numbers (ECN) were mailed to taxpayers who used a computer
to prepare their own return last year.
--More electronic payment options (credit card and ACH debit
payment) have been made available to taxpayers this year.
--Marketing--ETA has launched a brand new marketing campaign this year
entitled ``30 million Americans Use IRS e-file.'' It is a fully
integrated campaign with new TV, radio and print advertising.
--Internet--Millions of taxpayers have discovered that the IRS home
page on the World Wide Web is an excellent and convenient
source for tax forms and tax information.
--Additional forms and schedules are now on the IRS home page. Some
of these include Schedule J--Farm Income Averaging; Form
8271 Investor Reporting of Tax Shelter Registration Number;
Form 8582-CR--Passive Activity Credit Limitations; Form
6781--Gains and Losses from Section 1256 Contracts and
Straddles.
We have also included the following information on the IRS website:
--Innocent Spouse information: To educate and inform taxpayers of
their rights under the new RRA 98 innocent spouse provisions
and help them to make correct and accurate claims;
--Installment Agreements: This IRS site has an interactive calculator
that helps a person figure the monthly payment, and then prints
out an installment agreement form for the taxpayer to file;
--Web Site Alerts: Alerts taxpayers and practitioners about problems
that could effect them;
Other Web Site links have been established and include but are not
limited to: Web Site Small Business Corner; Expanded Web Site Tax
Professional Corner; Web-based Customer Service; Notice information on
the Web; Expanded Web Site Orders; CD-ROMS, etc.
--Media--The IRS ``Local News Net'' supplements the Web site's
Digital Dispatch (there are over 70,000 Digital Dispatch
subscribers) by providing localized, targeted and immediate
information for tax practitioners. It is a system capable of
reliable and efficient delivery of information to the tax
professional community across the nation.
--Forms by Fax: Taxpayers can receive more than 150 frequently used
tax forms 7 days a week, 24-hours-a-day from IRS TaxFax;
--Recorded Tax Information with 148 topics available 24-hours-a-day
using a touch-tone phone;
--Automated Refund Information was accessed by 34 million taxpayers
in fiscal year 1999; through March 11, 2000 the number
stands at over 14 million.
--Problem Solving Days continue to be a great success story on the
problem resolution front. Last year, nearly 32,000 people took
advantage of the program. According to the National Taxpayer
Advocate's 1999 Annual Report to Congress, the IRS handled over
57,000 cases during the first 2 years of the program.
--The Citizen Advocacy Panels achieved several major successes during
the first year of operation. In addition to the South Florida
panel, three additional Citizen Advocacy Panels were
established in the Brooklyn, Pacific-Northwest and Midwest
Districts. Included in the accomplishments of the past year,
the Pacific-Northwest panel worked with their local district's
small business lab to develop software that analyzes questions
posed to the IRS through the Service's Web-site, the ``Digital
Daily''. The result should be improved categories of responses-
more closely meeting the needs of taxpayers.
The GAO states that in 1996 (the most recent year for which there
are complete records), there were as many as 12 million suspicious
returns with under reported taxes amounting to $15 billion. The IRS
pursued only a portion of these, and ultimately wrote off over $10
billion.
Question. What drives the decision to determine which cases the IRS
will pursue?
Answer. The IRS receives over 1 billion information return
documents annually. With Tax Year 1997 returns, which are currently
being screened for the Underreporter Program, initial screening
identified 13 million cases with potential discrepancies. Initially
screened cases are then subject to further analysis to ensure that IRS
applies its resources using risk-based analysis. The President's Budget
does request additional resources to dedicate to this process in 2001.
Question. How can the IRS do a better job of performing its dual
missions; enforcing compliance and at the same time providing
professional and informed customer service?
Answer. The basis for our fiscal year 2001 budget request provides
the best way for the IRS to meet the legitimate service expectations of
the vast majority of compliant taxpayers who voluntarily pay their
taxes and, at the same time, enforce compliance, which strengthens the
fairness of the whole tax system. By investing in reengineering IRS'
business practices and technology together with limited staffing
increases, as proposed in the STABLE initiative, we will be able to
perform all aspects of the IRS mission more effectively and
efficiently.
The additional staffing is only modestly more than present level
and would still be less than the IRS staffing level of 1997. This is
possible because our basic strategy to meet increased workload and
service demands depends on reengineering business practices and
technology. Freeing up positions through business systems investments
is a critical requirement. By investing in technology and improved
business practices, the fiscal year 2001 budget request avoids the
traditional staffing increases that would otherwise be required. The
investment in modernization is critical for this strategy to work.
Question. Overall, how would you rate the restructuring process. Is
the IRS about where it should be at this point?
Answer. The restructuring process is on track and achieving the
construction of the new IRS. An integral part of the overall IRS
Modernization program is the establishment and implementation of
balanced performance measures that support and reinforce achievement of
the IRS' mission and overall strategic goals. We have designed,
approved and implemented the new IRS Balanced Measures approach to
leadership including a focus on three key elements: Employee
Satisfaction (the employee's view of and satisfaction with their job),
Customer Satisfaction (the customer's view of service provided) and
Business Results (the accomplishment of business goals). Training for
all employees is underway and near completion. All Executives, Top and
Mid-level managers, Bargaining Unit employees and NTEU officials are
receiving this training.
Balanced measures implementation is just one of the five levers of
change being implemented to establish the new IRS. For example, IRS is
currently Revamping its Business Practices, establishing Four Operating
Divisions to focus on specific customer segments, and developing new
Management Roles with Clear Responsibility and acquiring New
Technology. These five levers of change including Balance Measures will
help IRS achieve its three strategic goals, driven by its five guiding
principles and founded upon the IRS' Mission Statement.
One of the key initiatives for the IRS in the fiscal year 2001 is
the Staffing Tax Administration for Balance and Equity, or STABLE
initiative. A portion of this request was to be funded through a
proposed supplemental in fiscal year 2000 of the $40 million and 301
FTE. The STABLE request for fiscal year 2001 is an additional $144
million.
Question. Assuming Congress will not fund your supplemental request
for fiscal year 2000, can you briefly describe for us the priorities in
the funding of STABLE in fiscal year 2001?
Answer. In the President's Budget the IRS requested $224 million
and 2,835 FTE for the STABLE initiative over a 2-year period which
includes a fiscal year 2000 supplemental. This approach was taken to
allow the IRS to advance hire and begin training earlier the new
personnel that this initiative supports. Doing so would allow the new
hires to be engaged in performing their jobs at a full level as early
as possible. The IRS still believes that this is the most rational and
sensible approach. If we were not to get the fiscal year 2000
supplemental, the entire initiative would have to be implemented in
fiscal year 2001.
The Service has since reevaluated its needs for STABLE for fiscal
year 2001 using the assumption that Congress might not fund the
supplemental in fiscal year 2000. That recosting identifies needs of
$213.2 million and 2,501 FTE in fiscal year 2001. The amounts
identified in the fiscal year 2001 Congressional Justification for
STABLE are higher because they assumed that 301 FTE, from the
supplemental, would already have been in place on October 1, 2000.
The first priority for these FTE will be to enhance compliance
activities. In that vein, $198.8 million and 2,305 FTE will be devoted
to new hires for the Automated Collection System, Examination,
Submission Processing and the Underreporter Program for Information
Returns, Examination, Field Collection, and the Tax Exempt Program. The
IRS has detailed approximately 800 persons from Examination and
Collection to Customer Service to meet filing season workload peaks in
the Walk-In and Toll-Free Telephone programs. To allow some of these
detailed compliance personnel to return to their compliance functions,
we would also hire 400 staff in the Walk-In and Toll-Free Programs.
Finally, the remainder of the funds, $14.4 million and 196 FTE
would be applied to additional increases to the Walk-In and Toll Free
Telephone Service programs and the Underreporter Program. These
increases would allow the IRS to reach the 70 percent level of
telephone service and offer extended hours and Walk-In assistance in
non-traditional locations during the filing season. In addition, FTEs
would be devoted to an interagency effort to reconcile payroll tax data
with employee/employer contributions to the Social Security Trust Fund.
results of the fiscal year 1999 financial statement audit by gao
This past February GAO testified before the House subcommittee on
Government Management, Information and Technology concerning the
results of their fiscal year 1999 Financial Statement Audit of the IRS.
They indicated that the IRS has made progress in addressing issues
which were raised in the fiscal year 1998 audit. However, GAO stated
that there are still pervasive material weaknesses in areas like
automated financial management, accounting procedures, record keeping,
and internal controls. GAO agrees that many of the problems facing the
IRS will require a substantial and continuous commitment of resources,
time, and expertise to correct. These issues may require long-term
solutions. GAO indicates that some of the operational and financial
management issues can be dealt with in the short-term.
Question. Are you in agreement with GAO's conclusions?
Answer. We agree with the GAO that there are material weaknesses.
IRS identified these material weaknesses and included them in our
annual Federal Managers Financial Integrity Act (FMFIA) Report to the
Department of Treasury. The GAO validated these findings through their
audit process. IRS has also self-certified noncompliance with the
Federal Financial Management Improvement Act (FFMIA) requirements.
Accordingly, IRS developed a Remediation Plan to bring the IRS into
compliance [Remediation Plan attached].
Question. What short and long term goals have you established to
satisfy the requirements of the financial audit program?
Answer. We have undertaken many short-term initiatives to remedy
the material weaknesses, including:
--Reconciled our fund balance with the Treasury;
--Substantially cleared our Suspense Account of old items;
--Addressed security issues regarding override authorities by
disabling the override capability in the accounting system to
override appropriation-level spending controls;
--Developed subsidiary ledgers for GAO testing purposes; and
--Developed an ad hoc ``work around'' process to sustain the
valuation of our assets. We began this effort in fiscal year
1999 by arriving at a satisfactory balance for our fiscal year
1999 financial statements.
The long-term solution is a replacement for the current
administrative and revenue accounting systems. IRS will only be able to
achieve compliance with FFMIA through modernization of both the
administrative and revenue accounting systems. The ability to integrate
both systems will enable true cost accounting and performance reporting
as required by the Federal Accounting Standards Advisory Board
Statement #4. It is critical that adequate funding be provided for
these initiatives.
tax shelter regulations
Question. I have read with some interest recent reports concerning
The Treasury Secretary's effort to close down some of the tax shelters
which are used by corporations to avoid paying billions of dollars a
year in taxes. He was quoted in the Washington Post as saying that this
is the ``most serious compliance issue facing the American tax system
today''. Also, in a meeting last month, the Secretary stated his
concerns about these shelters further undermining the voluntary
compliance with the tax system by customers. I realize that many of the
regulations under consideration are still being formulated; however,
other pieces of the package are well on their way to being enacted.
Can you generally describe how this issue might impact operations
at the IRS?
Answer. This issue will impact operations at the IRS by impelling
us to devote resources to the detection, investigation, and elimination
of abusive tax shelters, whose sole raison d'etre is the avoidance of
taxes. We have already established an office of ``Corporate Tax
Shelters'' at the National Office under the Large and Mid-Size Business
(LMSB) function to deal exclusively with this problem. We are expending
resources to combat this problem by taking aggressive measures,
including the issuance of summonses, where necessary, to identify
taxpayers engaged in this form of enterprise. IRS will also initiate
compliance action against companies identified as promoters of abusive
tax shelters. In addition, we have established a ``hot'' line in the
National Office, staffed by one of our senior analysts, to answer
questions from the public regarding tax shelters. We hope to increase
compliance in this area by a combination of taxpayer awareness and
enforcement coverage.
Question. What, if any, resources in your budget request are
directly focused on addressing these concerns about corporate tax
shelters?
Answer. No additional funds have been requested in the fiscal year
2001 budget specifically for the tax shelter program. However, the IRS
will make efforts to internally redirect resources to this area. In
addition to applying existing staffing resources, we will work
internally to increase our travel and enforcement expenses budget in
the shelter area. The increased enforcement expense efforts would
include hiring outside experts in such areas as asset valuation and
actuarial projections.
money laundering strategy
Question. A new initiative in this year's budget request is the
Money Laundering Strategy. The Administration is requesting $15 million
and 42 FTE (7 of which are attributed to the IRS) for an organization
which will be centrally located under the Department of the Treasury.
Your agency plays one of the key roles in this initiative
How will your agency's investigations regarding money laundering
and currency reporting violations be impacted by this initiative?
Answer. As a result of the National Money Laundering Strategy, IRS
Criminal Investigation (CI) will join other federal agencies, as well
as state and local law enforcement agencies in a concerted effort to
combat money laundering, through multi-agency task forces. One key
action item that the strategy calls for is the designation of High-Risk
Money Laundering and Related Financial Crime Areas (HIFCAs). The
designation of a HIFCA is intended to concentrate law enforcement
efforts at the federal, state, and local level on combating money
laundering in high-intensity money laundering zones, whether based on
drug trafficking or other crimes. It should be noted that while CI has
participated in joint investigations in the past, HIFCA differs from
previous efforts in that it is a more organized way of concentrating
the resources of all federal, state, and local law enforcement agencies
as well as regulatory agencies. The Strategy also calls for increased
cooperation among the various agencies by sharing their intelligence
databases.
CI is an integral member of the HIFCA Interagency Working Group.
The Working Group recommended the first four HIFCA designations, which
were subsequently approved by the Treasury and Justice Departments. CI
will be an active participant in each of the HIFCAs and will utilize
the seven FTEs requested in this initiative in support of the Strategy
and the HIFCAs. The FTEs will be allocated as intelligence analysts,
special agents, and/or supervisory personnel who will provide
investigative and intelligence support to the HIFCAs. Part of the funds
requested in this initiative will be used for the training of new
personnel, additional computers and other equipment needs.
The Strategy also calls for enhancing the flow of Suspicious
Activity Reports (SAR) and other Bank Secrecy Act (BSA) information to
the banking and regulatory communities. Under the authority of the Bank
Secrecy Act, Treasury promulgated regulations relative to reporting
requirements. These regulations require reports such as a Currency
Transaction Report (CTR); a Currency Transaction Report by a Casino
(CTRC); a Report of International Transportation of Currency or
Monetary Instruments (CMIR); and a Report of Foreign Bank and Financial
Account (FBAR). These reports are required for transactions in excess
of $10,000. The BSA requires the filing of these financial reports with
the IRS Detroit Computing Center (DCC).
Beginning in 1996, banks and other financial institutions were
required by federal regulators to report suspicious financial
transactions to the Financial Crimes Enforcement Network (FinCEN) by
filing SARs. The processing of the SAR forms is also performed by the
IRS DCC.
To enhance the use of BSA information, current multi-agency SAR
review teams located in most of the districts will be expanded and
incorporated into the HIFCAs. CI will also increase its current role in
joint agency SAR review teams located outside of HIFCA locations by
committing additional resources to these teams. The results of the SAR
review teams and the utilization of SARs for law enforcement purposes
will be recorded and accumulated by FinCEN.
With the anticipated expansion of SAR regulations to include
casinos, broker dealers, and money service business in the future, it
is essential that alternative opportunities be explored to enhance
electronic filing of SARs. A large number of the SARs are filed in
paper format. In order to develop the technology to move toward the
electronic filing of SARs, it will be necessary for IRS DCC to expend
the resources requested in this initiative to evaluate alternative
interfaces, and to evaluate the impact and the benefits to the
financial institutions that will use electronic filing.
I noted in the National Money Laundering Strategy for 2000 that
your organization will be enhancing the resources you devote to
conducting Bank Secrecy Act examinations of money service businesses
(MSBs) and casinos. According to the Strategy, you will be meeting with
Treasury in August to review your program.
Question. Are you currently focusing attention and agency assets in
examinations of MSBs and casinos?
Answer. Yes. Per the Strategy Act, the lead on Action Item 2.2.4 is
the Assistant Commissioner for Examination. The Secretary of the
Treasury delegated IRS Examination regulatory authority for civil
compliance with the Bank Secrecy Act (BSA) on Money Service Businesses
(MSBs) and casinos. There are three aspects to the Examination Anti-
Money Laundering (AML) program-identify, educate, and enforce. Field
examiners are responsible for identifying financial institutions that
come under the new MSB definition, educating those financial
institutions on BSA reporting and record keeping requirements and
conducting compliance examinations to ensure that the financial
institutions are in compliance with all provisions of the BSA.
Examiners must also ensure that each casino has developed and
implemented a written program designed to assure and monitor compliance
with BSA requirements.
Question. Do you have an outline of what your recommendations and
requirements will be to adequately meet the goals of the Money
Laundering Strategy?
Answer. IRS Examination and the Financial Crimes Enforcement
Network (FinCEN) have a joint task force studying these issues in
preparing for the August 2000 meeting with Treasury. Among the
potential requirements being reviewed are additional training, laptop
computers, specialized computer training for Anti-Money Laundering
(AML) field examiners, a national structuring database, and staffing to
identify and educate Money Service Businesses (MSBs) on the new MSB
registration and suspicious activity reporting (SAR) regulations. The
task force will also be considering the use of full-time coordinators
and examiners in the AML program.
Question. Will the 7 FTE that you are allocated in this proposal be
enough to properly execute the Strategy?
Answer. The $3.1 million and 7 FTE, which are allocated to the IRS,
allow us to begin implementation of the Strategy. We will evaluate any
need for future resources as we implement the Strategy.
electronic tax administration
Question. The IRS Restructuring and Reform Act of 1998 (RRA)
requires an ambitious schedule in electronic tax filing. The Act
requires that 80 percent of all filings be done through electronic
means by 2007. To ensure this end you are again requesting funds for
Electronic Tax Administration.
Is the 2007 goal still realistic?
Answer. As required by the IRS Restructuring and Reform Act of
1998, the IRS has developed a Strategic Plan for Electronic Tax
Administration (ETA) to help us make significant progress toward:
--the overriding goal of 80 percent of all tax and information
returns being filed electronically by 2007, and
--the interim goal that, to the extent practicable, all returns
prepared electronically should be filed electronically by 2003.
We realize that these are formidable goals and reaching the interim
goal for 2003 in particular will be extremely difficult.
Included in the ETA Strategic Plan are IRS' official projections of
electronically filed returns developed by the professional forecasters
under the Assistant Commissioner (Research and Statistics of Income).
These projections indicate that between 55.5-64.3 million returns will
be received electronically in 2007, or 40-46.4 percent of all
individual income tax returns, which would fall short of the 80 percent
goal. However, it is important to note that these projections represent
baseline extrapolations of current trends, existing marketing
approaches, enacted legislation, and confirmed (or reasonably certain)
IRS program changes. They do not reflect the full impact of all of the
initiatives contained in the Strategic Plan. At this time, the IRS does
not have sufficient information to make reasonable projections for many
of the future initiatives. As the IRS gains more experience with the
impact of the enhancements reflected in the Strategic Plan, increases
to the current projections are expected.
Question. Does the IRS currently have adequate systems in place to
accommodate a significant growth in E-filed returns?
Answer. IRS' legacy systems are not suited for the e-business
challenges that lie ahead. Consequently, within the framework of the
Modernization Blueprint the IRS is taking the necessary steps to ensure
that the computing infrastructure for Electronic Tax Administration can
handle the expected demands of the future. Not only does the IRS expect
a significant increase in the number of Electronic Return Originators
(EROs) and in the volume of returns that they transmit electronically,
but it also envisions developing many new products and services which
will enable individual taxpayers and businesses to transact and
communicate directly with the IRS. Toward that end, last year the IRS
awarded a PRIME contract to Computer Sciences Corporation and a team of
leading technology and consulting firms to be major partners in
managing the modernization of IRS' core business and technology systems
with near-term focus on improved phone service and electronic filing
options.
Question. What is your present capacity?
Answer. Our systems can currently support approximately 50 million
electronic filers--more than enough capacity for near-term e-file
growth projections.
Question. The RRA authorizes the IRS to pay appropriate incentives
to encourage E-filing.
Do you believe the IRS should be paying these incentives?
Answer. The IRS supports providing tax credits to individual
taxpayers who file electronically, as well as providing support to tax
practitioners who offer e-file products and services to the public.
The IRS supports the President's fiscal year 2001 Budget that would
provide individual taxpayers with a temporary, refundable tax credit
for the electronic filing of tax returns. The credit would be for tax
years 2002 through 2006 and would be $10 for each electronically filed
return other than TeleFile returns for which the credit would be $5.
The IRS previously assessed the benefit of providing cash
incentives to practitioners. In the fiscal year 1998 Appropriations
Bill, Congress authorized the IRS to pay up to $3. for each return
filed electronically when the Commissioner of the IRS determines that
it is in the best interest of the government to make such a payment. In
September 1997, the IRS released a draft Request for Information (RFI)
to explore the industry's interest in the cash incentive initiative as
well as other arrangements. In response to the RFI, private industry
responded that the IRS should invest first in correcting systemic
deficiencies, introducing new products and services, and engaging in
aggressive national marketing before engaging in direct cash subsidies
to the private sector.
The IRS believes that tax practitioners authorized to
electronically file tax returns to the IRS (EROs) must be recognized,
supported and motivated as ETA product and service distributors. Much
as the private sector employs store front operations (whether
independent, franchise or corporate owned), the IRS depends upon tax
practitioners to promote electronic filing and payment to taxpayers. In
support of this vital channel and based on their input, ETA will seek
to support EROs by expanding the marketing support available including
national advertising and promotional kits; implementing a program of
product and service incentives, rewards and special recognition
depending upon an ERO's success in marketing ETA products and services;
developing an ERO Web site; and establishing an ETA accounts management
program.
Question. What is the IRS requesting to provide these incentives?
Answer. The IRS is requesting $3 million in fiscal year 2001 to
expand its marketing efforts to communicate the benefits of IRS e-file
to both taxpayers and practitioners. The IRS plans to advertise in the
television, radio and print media; continue the launch of a business
marketing campaign; and conduct the necessary marketing research to
ensure that ETA products and services meet our customers' needs.
Previously, Congress approved IRS' fiscal year 2000 Budget which
included $2.5 million to provide support and non-cash incentives to
practitioners. No additional funding for incentives is being requested
for fiscal year 2001.
training
Question. In your opening statement you stress the importance of
providing training to your personnel in light of the changes mandated
by the IRS Reform and Restructuring Act of 1998. You claim you provided
2 million hours of training in fiscal year 1999 to your employees. You
also stated that ``training and management are immediate challenges and
in fiscal year 2000 we will continue a high level of training.''
I share your concern about the need for correct, disciplined and
quality training for IRS employees--especially those on the frontlines
providing tax assistance to your customers. Specifically, I am
concerned about this because I recently have heard from IRS employees
in my state who have informed me that they have not received quality
training, that the training they have received is often inaccurate and
that they have been provided out-dated materials when they have been
trained.
How much of your fiscal year 2001 budget request is dedicated
solely to quality training for IRS employees. Also, how much of your
resources in this current year are being directed to training?
Answer. All of our training is designed using the Training
Development Quality Assurance System (TDQAS) to ensure delivery of a
quality product. This system uses a life cycle of assessment of the
training need, design of a training product, development, delivery, and
then evaluation of the training. During the evaluation stage,
information collected from trainee and instructor evaluations is
reviewed and comments are incorporated in revised materials in an
effort to improve the quality of our training products. The training
budget totals $106 million in fiscal year 2000 and $109 million in
fiscal year 2001 for modernization-related and sustainment training.
The fiscal year 2001 amount does not include additional funds for
training new employees under the STABLE initiative.
Question. How many employees will you have trained by the end of
this fiscal year?
Answer. Every employee will receive some type of training during
fiscal year 2001; depending on their work assignments and career
progression, some employees will attend more than one training class
during the year. We expect to provide approximately 10 million hours of
training to our employees in fiscal year 2001.
Question. In what specific areas are you training your employees?
Answer. Employees will attend technical training and Continuing
Professional Education (CPE) depending on their work assignments.
Employees also receive training in preventing unauthorized access to
tax information and preventing sexual harassment (UNAX). Leadership
training is provided to managers at all levels of the organization.
Examples of typical training by key occupations follows:
The typical frontline Revenue Officer (RO) can expect to attend
training amounting to the following number of hours:
Fiscal year 2000: a range of 120 to 134 hours, depending on work
assignments. This represents 40 hours of CPE, 6 hours of Electronic
Research, 16 hours Automated Trust Fund Recovery, and 72 hours of RO
Unit 4 for certain ROs.
Fiscal year 2001: a range of 100 to 120 hours, depending on work
assignments. This represents 40 hours of CPE, 8 hours of Electronic
Asset Locator Training, 4 hours of Fraud Referral Training, 32 hours of
Seizure Training and an undetermined number of hours for training
related to the technical requirements in the Small Business/Self
Employed Business Unit.
The typical frontline Revenue Agent can expect to attend training
amounting to the following number of hours.
Fiscal year 2000--approximately 205 hours. Training will consist of
80 hours CPE (optional and mandatory topics such as Electronic Research
and Third Party Contact) and other specialty and mandatory training,
e.g. Tax Equity and Fiscal Responsibility Act of 1992 (TEFRA), Reports
Generating software, UNAX, sexual harassment.
Fiscal year 2001--approximately 188 hours. Training will consist of
80 hours CPE (mandatory and optional topics), plus courses of varying
length dealing with new procedures in the business unit and various
mandatory training such as tax law changes, UNAX and sexual harassment.
In fiscal year 2001, it is anticipated that 1,200 Revenue Agent
recruits will be hired in April 2001. The new hires will receive Phase
I and II basic training, totaling 21.4 weeks of training including
classroom and On-the-Job-Training (OJT). New hires typically do not
attend CPE.
The typical front-line employee in Submission Processing Centers
can expect to receive 40 to 45 hours of training, depending on work
assignments, during fiscal year 2000 and 2001. With the transition to
eight centers processing individual returns and two centers processing
business returns is completed, a typical front-line employee could
expect to receive an additional 50 to 60 hours of training based on
work assignments.
IRS is planning an extensive training effort in conjunction with
the reorganization effort. This training is referred to as
``modernization-related training.'' IRS also delivers other types of
training, referred to as ``sustainment training,'' as part of its day-
to-day operations.
taxmobile
Question. I indicated in my opening statement that the taxmobile
providing tax assistance to citizens in rural North Dakota has been
warmly received. In questions for the record last year I asked if the
IRS was looking into the option of providing and expanding the use of
taxmobiles (or mobile tax units). You indicated that you were
conducting two mobile unit demonstration projects in the Georgia and
Pacific Northwest Districts and that you planned to ``analyze the
results of these projects after the (1999) filing season ends.''
Can you tell us the results of your analysis, or provide us with
those results for the record?
Answer. The Georgia District used five vans for their taxmobile
project entitled We're On Wheels (W.O.W). The service was initially
available the first 2 weeks in February. After a very positive customer
response, it was extended to cover the week of March 22, 1999. Thirty-
two sites were visited. All sites were at least 40 miles from an
established IRS office. Service was available from 4:00 p.m. until 8:00
p.m. A total of 1,843 taxpayers were assisted. The cost of the program
was $36,000 in training and travel, and $6,300 for the van rental,
flyers, posters and sign printing. The Georgia District's project
received Vice President Gore's NPR Hammer Award.
The Pacific Northwest District used a 30-foot mobile home for their
project. The service was available from January 25 through April 15,
1999. A second unit was placed in service from March 22 until April 15,
1999. A total of forty rural and semi-rural communities were served.
Both sites had extended hours of operation on April 15, 1999. A total
of 4,871 customers were assisted. The cost of the program was $28,131
for the vehicle lease, transportation expenses, lodging and meals.
Several other districts including North Dakota, Los Angeles,
Central California and Michigan have implemented taxmobile projects in
fiscal year 2000.
information technology investment account (itia)
Question. Your budget requests new appropriations of $119 million
(and an advance appropriation for fiscal year 2002 of $375 million) to
continue the ITIA program. This fund continues the important initial
phase of modernizing the IRS' business systems and ITIA has been
generally supported by the Congress. We approved earlier requests for
funds from the account and to date $68 million has been released.
Recently we received a much larger request to release an additional
$176.322 million. This request is currently under review.
I am concerned about your fiscal year 2001 request for new funds to
add to the ITIA account. Last October your staff envisioned that you
would be requesting nearly $265 million from the ITIA account, yet your
requests for this fiscal year are significantly lower than that level.
In your spending plan for the $176 million you state that ``this
difference reflects a significant change in management direction. . . .
while simultaneously slowing many of the individual project
activities.''
Given the constraints this subcommittee is likely to face because
of an expected low allocation, how can we justify adding a large level
of funds to the ITIA account when--by your own admission--your spending
plan calls for slowing many of the projected activities in ITIA?
Answer. The management decision to slow project activity while
accelerating program activities ensures IRS has disciplined, mature
program management processes in place. The request reflects funding for
this priority as well as appropriate funding for continued tax
administration projects. In alignment with oversight guidance, we are
focusing resources on deploying and enforcing the Enterprise Life Cycle
(ELC), updating and publishing the Blueprint, realigning the IRS and
PRIME program management offices with major ELC processes to clarify
boundaries and interfaces, et cetera.
IRS will require the continued funding level to support development
costs, to include expected hardware and software purchases. Current
plans show several projects scheduled for Milestone 3 (system design)
decisions either at the end of fiscal year 2000 or early in fiscal year
2001. In addition, continuous funding is critical to ensure deployment
of the infrastructure to support business systems and ongoing program
management.
Question. Can you realistically expect to responsibly obligate and
manage $119 million for ITIA in fiscal year 2001--assuming Congress
approves your pending request?
Answer. We expect to responsibly obligate and manage the $119
million in fiscal year 2001, and also the $211 million in fiscal year
1999 funds, for a total of $330 million. Current plans indicate that
the funds appropriated in fiscal year 1999 with the fiscal year 2001
appropriation, if approved, will be required to support project
development, infrastructure and ongoing program management. IRS will
have in place disciplined, mature processes to ensure the wise
expenditure of funds in a responsible manner.
one-stop tax shop
Question. During our discussion at last year's hearing, you
discussed ways you were reaching out to enhance service in less urban
areas. For instance, you mentioned that you had been in Utah and had
established a cooperative ``one-stop'' tax shop site with that State's
tax agency and other parties. Also, in my opening statement I discussed
the success we are witnessing in North Dakota with the taxmobile.
What was the experience with the ``one-stop'' shop in Utah? Is this
another example of a partnership between the IRS and the customer upon
which you want to expand? Are you budgeting for expansions of this type
of partnership or do you have other examples?
Answer. When it first opened, the Utah site only offered the
distribution of forms and responses to tax questions. This office has
subsequently expanded to become a full service office. In fiscal year
1999, the Utah tax site served 8,525 customers. This office is one of
several in which the IRS and state taxing bodies cooperate to the
benefit of the public. For example, there is an IRS office in the
Illinois Department of Revenue building in Springfield, IL. Some state
tax authority employees are co-located in IRS offices as well. Also,
some districts such as Georgia have state tax employees participating
in the mobile van projects. Currently, there is no funding in the
Customer Service budget for expansion of these projects.
tax exempt organizations
Question. Last year we discussed my concerns about the status of
tax-exempt organizations. You indicated that you planned to provide
additional resources to enhance enforcement and compliance of these
organizations with the tax laws. You said during the hearing that IRS
has the responsibility of regulating about $5 trillion in tax exempt
sector assets but because ``it is not really a revenue generating
function, (it) tends to be a little bit buried underneath the big
structure.'' But you also said that you hoped to further reorganize
your key districts to check on compliance- in addition to having the
districts grant tax-exempt status.
Can you report to us on how the reorganization is proceeding? What
resources have you directed to this effort?
Answer. The Tax Exempt and Government Entities Division, which was
designed specifically to meet the unique needs of the tax-exempt
sector,commenced operations on December 5, 1999. The Division was the
first of the four major operating divisions in the modernized IRS to
begin operations. The mission of the Tax Exempt and Government Entities
Division (TE/GE) is ``To provide Tax Exempt and Government Entities
customers top quality service by helping them understand and comply
with applicable tax laws and to protect the public interest by applying
the tax law with integrity and fairness to all.'' Six geographic area
offices responsible for exempt organizations examination programs have
replaced the former key district office structure. Program and
management direction for examination activities in these six areas has
been centralized in Dallas to ensure equity and fairness to all exempt
organizations.
The resources available to TE/GE in fiscal year 2000 are 2,102 FTE
and $156,600,000. For the first time in several years, the IRS budget
dedicated to the regulation of the tax-exempt community has improved.
For example, we are beginning the process of hiring field agents in the
exempt organizations examination program. Assuming that this budget
climate continues, TE/GE will be in a better position to meet its
responsibilities. A portion of the fiscal year 2001 STABLE initiative
is to increase oversight of the tax-exempt bond sector by adding 68 FTE
and $12,054,000 to TE/GE.
Question. Is there an increased focus on reviewing and revoking the
tax-exempt status of these organizations?
Answer. We believe the creation of the TE/GE Division, one of only
four operating divisions within IRS, will increase focus within the
Internal Revenue Service on ensuring compliance by tax-exempt entities.
TE/GE will pursue compliance through both voluntary programs and the
examination program. The primary focus is on promoting voluntary
compliance by making available:
--``Personalized'' Customer Service through a toll-free telephone
line dedicated to serving TE/GE customers available from 7:30
A.M. until 9:30 P.M.;
--The Determination Letter Program which affords the IRS the
opportunity for an up-front review of an organization's
compliance as it begins to operate;
--Customer Education and Outreach services to create and provide more
educational materials and increase outreach efforts to help
exempt organizations voluntarily comply with the tax laws; and
--Voluntary Compliance initiatives which will encourage organizations
that have not been in full compliance to come to the IRS to
resolve their problems.
We believe these initiatives, combined with other changes, for
example, the new disclosure requirements, which are making information
about exempt organizations more widely available to the public, are key
aspects in promoting voluntary compliance.
The TE/GE Examination Program for exempt organizations is also a
vital component of our overall approach to ensuring compliance with the
Internal Revenue Code. The examination program is a necessary
counterbalance to voluntary programs, creating an incentive for
organizations to self-regulate. While we do not intend to greatly
increase the number of examinations of exempt organizations, we would
note that for the first time in several years, the current budget
allows us to hire field revenue agents to work in the examination
program.
Our examination efforts focus on promoting compliance by resolving
problems and promoting future compliance. This is generally not done by
revocation, but by less draconian means such as those envisioned by
Congress in passing section 4958 ``intermediate sanctions'' excise tax
on excess benefit transactions. As a result of our focus on future
compliance, revocation of exempt status is a step that we take in only
the most abusive situations.
subcommittee RECESS
Senator Campbell. Thank you, and this hearing is recessed.
[Whereupon, at 10:43 a.m., Thursday, March 23, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2001
----------
THURSDAY, MARCH 30, 2000
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:03 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell, Kyl, and Dorgan.
DEPARTMENT OF THE TREASURY
STATEMENT OF JAMES E. JOHNSON, UNDER SECRETARY OF
TREASURY (ENFORCEMENT)
OPENING STATEMENT OF SENATOR BEN NIGHTHORSE CAMPBELL
Senator Campbell. Good morning. The committee will be in
session. We will go ahead and start. Senator Dorgan is on the
way.
This is the second hearing of the Treasury and General
Government Appropriations Subcommittee on the fiscal year 2001
budget request. Today, we will be concentrating on the Treasury
Department's law enforcement agencies. Appearing before us is
the Under Secretary for Enforcement, Jim Johnson. He is
ultimately responsible for the actions and budgets of the
Treasury law enforcement agencies. Joining Mr. Johnson on panel
one will be the Commissioner of the Customs Service, Ray Kelly;
the Director of the Secret Service, Brian Stafford; and the
Director of the Bureau of Alcohol, Tobacco and Firearms,
Bradley Buckles. This is Mr. Buckles' first time before our
subcommittee and I certainly welcome him.
Later, we will spend some time talking with Ralph Basham,
Director of the Federal Law Enforcement Training Center, and
William Baity, the Deputy Director for the Financial Crimes
Enforcement Network.
Before we get started, however, I would like to thank all
of our witnesses for their participation in Tuesday's
technology display. A number of our colleagues in the Senate
came by. I was happy to see them there and certainly it gave
people from the different agencies a chance to share some
ideas. We have gotten a lot of positive feedback from our
colleagues that attended the display.
As you are aware, the budget resolution is making its way
through Congress. While it remains to be seen what the final
result will be, I think it is safe to say there probably will
not be enough money to fund all of the $2.5 billion, that is
billion with a ``b'', more than requested by the President for
agencies under the jurisdiction of the subcommittee. Having
said that, however, this morning, we will be talking about how
much more Treasury law enforcement agencies need to simply
continue doing what they are currently doing as well as some of
the expanded and new initiatives requested for fiscal year
2001.
For example, the Bureau of Alcohol, Tobacco and Firearms
needs $93 million more than last year just to maintain current
operations, plus they have requested a total of $105 million
for initiatives, including $41.3 million for expansion of the
Integrated Violence Reduction Strategy. All of these, I
believe, are very important initiatives.
The Customs Service needs $193 million more just to break
even and is requesting $41 million more for new and expanded
programs, and that does not include the $210 million necessary
to fund the Automated Commercial Environment, or ACE, program.
The Secret Service needs an additional $95 million just to
stay in business and wants $55 million more to be able to
handle their increased workload. Although they have a smaller
overall budget, FinCEN and FLETC still need about $13 million
more between them to continue current operations.
This morning, we will be looking at how the Treasury law
enforcement agencies conduct their business, how they would
like to expand it if sufficient funding is available. Much of
what they would like to do certainly is laudable and I think
they know that they have friends on this committee and we have
always tried to do our best for our law enforcement agencies
and we will continue to do so.
With that, I am happy to see my colleague and friend,
Senator Dorgan, is here. Did you have an opening statement,
Senator Dorgan?
STATEMENT OF SENATOR BYRON L. DORGAN
Senator Dorgan. Mr. Chairman, just very briefly, I
apologize for being a couple minutes late. First of all, let me
welcome the agencies that are here. As you probably have
indicated, the folks who have come this morning representing
agencies represent about 40 percent of all Federal law
enforcement. I have had an opportunity to visit with all of
them. The work they do and their agencies do is very important
to this country.
I met yesterday afternoon with the head of the Customs
agency and I wanted to mention, we talked a bit about the issue
of increased terrorism and the difficulty policing our borders.
We witnessed at the turn of this past year the apprehension of
a terrorist who was coming through a port of entry in
Washington State. We were fortunate to apprehend that
particular terrorist, or alleged terrorist, but had that
terrorist thought through this a bit, there are other places to
go through the border with a lot less inspection than a border
in the State of Washington.
I brought a cone. In North Dakota, we have a lot of border
crossings and this represents----
Senator Campbell. That is it?
Senator Dorgan. This is it. Especially at night, folks
coming across the border from Canada, we have videotape of
folks who will get out of their car, move the cone, drive
through, and the really polite ones will move the cone back.
Senator Campbell. They could use that as a megaphone to
announce their intentions and nobody would hear it.
Senator Dorgan. That is right. But the point is this. With
increased potential for terrorists who want to move into this
country, we need to be concerned about all of our borders and
ports of entry. I am not suggesting that we have an armada of
people at remote ports in every circumstance, but we must be
concerned about the staffing and what is happening in some of
the more remote ports up in the North Dakota, Montana, Idaho
area. So I am anxious to hear some of the testimony today.
I wanted to make that point because, once again, we are
talking about resources. I notice the administration has
requested some significant additional resources in some of
these areas and I support that. There is this big debate about
enforcement of various things. Well, you can talk about
enforcement all day long, but you have got to have the
resources and this Congress must be, in my judgment, ready to
provide the resources for enforcement in a range of areas if it
is going to be criticizing certain policies.
Prepared statement
Mr. Chairman, with that, I will submit my entire statement
for the record and look forward to hearing the witnesses.
[The statement follows:]
Prepared Statement of Senator Byron L. Dorgan
Thank you, Mr. Chairman.
I want to join you in welcoming our witnesses here today.
Collectively the people before us this morning represent approximately
40 percent of all of Federal law enforcement. The women and men working
for the agencies represented today perform a multitude of tasks--the
vast majority of which are rarely reflected upon by the American
taxpayer.
They daily protect our borders, enforce our trade laws, collect
revenue, prevent terrorist attacks, protect our currency, guard our
leaders, stem money laundering and other financial crimes, try to
prevent the sale of weapons to those who should not have them, and
provide the technical muscle in many of our Federal investigative
efforts.
These are activities which I am confident would be strongly
supported by the American taxpayers if they only had a greater
awareness of what these men and women do each daily for them. They
would agree that the tasks performed by these dedicated Federal
employees are important and should be adequately funded.
Mr. Chairman, you have correctly noted that it is unlikely--given
the constraints which will be placed upon the Appropriations Committee
by the Budget Resolution--that we will receive an allocation sufficient
to maintain current operations for these agencies, much less fund the
requested initiatives. I think this is wrong and I really question what
are our priorities. If the average taxpayer were asked if she wanted
the border guarded to prevent terrorist attacks or a tax cut amounting
to pennies a day--I wager that she'd want to protect our border. Sadly,
I fear this budget resolution may prevent us from doing that.
If I may, I want to show the audience and the Subcommittee the sole
nighttime defense of our Northern Border. This is what prevents
terrorists, drug smugglers, illegal aliens and the like from entering
the United States from Canada at many ports of entry across the North.
Fortunately, the terrorist who attempted to enter the U.S. last
December in Washington state did so at a fully staffed port of entry
during the day. We might not have been so lucky had he tried to enter
our country at night at the port of entry at Neche or Maida, North
Dakota. In my state of North Dakota alone, out of 22 ports of entry, 15
close at night and are guarded only by these cones. We must rely on
these cones--and peoples' sense of responsible citizenship--to protect
our border.
I am not suggesting that we need to construct a wall or place
Federal law enforcement personnel every 10 yards across our Northern
Border, but I use this as an example of our priorities. The budget sent
to us by the President does not come close to meeting the needs faced
by each and every one of the agencies here today. The budget resolution
we will soon start debating will further erode our ability to meet
these many needs.
Mr. Chairman, I look forward to working with you and the full
Committee to do the best that we can to meet these many needs. I
welcome our witnesses and will have questions for each of them.
Thank you.
Senator Campbell. In fact, of all the subcommittees, it is
my understanding that the President's budget has the largest
increased request, of something like 20 percent, through this
subcommittee, which may help us when we have to do battle to
try and make sure we have our fair share of the spending.
Let us go ahead and start with the panel as listed, with
the Honorable James Johnson starting first, followed by Ray
Kelly and then Brad Buckles and Brian Stafford last. Go ahead.
Statement of james e. johnson
Mr. Johnson. Thank you, Mr. Chairman, Senator Dorgan. I am
pleased to have the opportunity to testify before you today on
the fiscal year 2001 budget request for the Treasury
Department's law enforcement bureaus and offices.
As you have indicated, testifying with me today on this
first panel are Raymond Kelly, the Commissioner of the U.S.
Customs Service, Brian Stafford, the Director of the U.S.
Secret Service, and Bradley Buckles, the Director of the Bureau
of Alcohol, Tobacco and Firearms. On the second panel, we will
be joined by Ralph Basham, the Director of FLETC, and Bill
Baity, the Deputy Director of FinCEN, who will be testifying in
the absence of Jim Sloan, who had a loss in his family and our
hearts are with him now.
Directors Buckles and Stafford are appearing before you for
the first time in their current positions; I want to take just
a moment to commend each of them for their outstanding long-
term performance in their careers, and their tremendous
contributions to the ATF and the Secret Service, respectively.
Over the years, the Treasury Department has benefited
tremendously from their insight and intellect on countless
occasions. We are especially pleased with their appointments.
Mr. Chairman, so that each of the bureaus can have ample
opportunity to present their statements and respond to your
concerns, I will summarize and ask that my full testimony be
included in the record of these proceedings.
Senator Campbell. Without objection, it will be.
Mr. Johnson. As to the Departmental budget, our request
reflects the funding that we believe is necessary to most
effectively carry out the important law enforcement mission
areas for which we are responsible, and which so directly
impact the lives of the citizens we serve.
For example, if enacted, this budget would provide the U.S.
Customs Service with 273 additional full-time equivalent
positions, including 120 FTE for counter-narcotics work. The
U.S. Secret Service would be enhanced by 193 additional full-
time equivalent agents to carry out its dual mission of
protection and investigation. And ATF would benefit from more
than 500 full-time equivalent personnel--that is agents,
inspectors, and other staff with an emphasis on substantially
enhancing our firearms enforcement efforts.
Overall, the President's budget proposal would add roughly
1,200 FTE to Treasury enforcement above the fiscal year 2000
total enacted level. This represents the largest increase in
Treasury law enforcement staffing in over a decade, and
reflects Secretary Summers' highest enforcement priorities--
counter-narcotics enforcement, counter-money laundering
activity, protection of our nation's leaders, firearms
enforcement, and enhanced automation for the Customs Service.
Funding is not the only element of strong law enforcement.
Equally important are clear policies and a means for setting
priorities. The Treasury Department seeks to provide support,
oversight, and policy guidance to enhance the performance of
our enforcement personnel and to facilitate an even stronger
and more coordinated enforcement presence. That presence must
also reflect the changing demographics of our population. Our
need to recruit and retain the best qualified and most diverse
workforce will gain even greater salience if the proposed
budget is enacted.
Our recruitment and retention objectives have been aided by
the decision of the Office of Personnel Management to grant
Schedule B excepted hiring authority to the ATF and to the
Customs Service. There are still certain issues that we are
working out with respect to executive orders for that
authority, but we hope to work those out within the
Administration in the near term.
We have also been granted 20 Senior Executive Service
positions by OPM for our enforcement bureaus, partially filling
a longstanding and critical need to provide benefits more
aligned with the high-level skills and expertise that we
require of our personnel. While we still have challenges in
this area, this number, 20, represents a 15 percent increase
over previous levels.
Another component in ensuring a high-caliber workforce is
the ability to deliver the highest quality of training
available. The Federal Law Enforcement Training Center is key
to this goal. The expansion in recent years in the number of
employees hired by the 73 law enforcement agencies that
participate in FLETC has tested FLETC's ability to meet all
training requests. Moreover, advanced training to keep law
enforcement officers abreast of the latest trends in fighting
crime cannot be compromised. Under the leadership of Director
Basham, I believe we are meeting these challenges.
In closing, I want to express my appreciation for the
outstanding support of Treasury's law enforcement programs by
the chairman, by the ranking member, by the entire
subcommittee, and the staff. This was brought to bear, the
support was brought in very concrete terms and also
symbolically, in the presentation on Tuesday, which I know
would not have happened without the support of you, Mr.
Chairman, and your staff. It enabled us to show in very
concrete terms the good work that Treasury law enforcement does
as a unit and separately.
Prepared statement
Our law enforcement bureaus have grown, they are better
equipped, and they have become more professional as a result of
your oversight and support. I look forward to answering any
questions that you might have. Thank you.
Senator Campbell. Thank you. We will continue on with the
panel and then we will have some questions.
[The statement follows:]
Prepared Statement of James E. Johnson
Mr. Chairman, Senator Dorgan, and Members of the Subcommittee, I am
pleased to be here today on behalf of Secretary Summers to introduce
the fiscal year 2001 budget request for the Treasury Department's law
enforcement bureaus and offices. Testifying with me today are the heads
of each Treasury law enforcement bureau: Raymond W. Kelly, Commissioner
of the United States Customs Service (USCS); Brian L. Stafford,
Director of the United States Secret Service (USSS); Bradley A.
Buckles, Director of the Bureau of Alcohol, Tobacco and Firearms (ATF);
W. Ralph Basham, Director of the Federal Law Enforcement Training
Center (FLETC); and William F. Baity, Deputy Director of the Financial
Crimes Enforcement Network (FinCEN). FinCEN Director James Sloan
suffered a loss in his family and will not be able to join us today.
At the outset of my testimony, I want to thank the Members of this
Subcommittee for their strong and continuing support for Treasury law
enforcement. I welcome this opportunity to discuss with you the
Treasury Department's accomplishments and plans in the important law
enforcement mission areas for which we are responsible. I would like to
focus on what we regard as the most significant challenges we are
facing and how Treasury law enforcement is responding to them, covering
our activities over the last year, our plans for the remainder of the
current fiscal year, and our budget proposals for fiscal year 2001.
While we continue to face fiscal challenges, the fiscal year 2000
appropriation provides our Treasury bureaus with strong support for
carrying forward increasingly complex and challenging missions. We
appreciate the support you showed for Treasury's enforcement programs
in the appropriations for fiscal year 2000. I am pleased to report that
the President's fiscal year 2001 budget proposes a $4.2 billion program
level for Treasury enforcement. If enacted, this budget will provide
the ATF with an overall increase of more than 500 full-time equivalent
agents, inspectors and other staff, and will substantially enhance our
firearms enforcement efforts. This budget will provide the U.S. Secret
Service with 193 additional full-time equivalent agents over the fiscal
year 2000 appropriated level to enable the United States Secret Service
to carry out its dual mission of protection and investigation. The
President's budget also provides the U.S. Customs Service with 273
additional full-time equivalent positions, including 120 for agents to
conduct drug smuggling and money laundering investigations. Overall,
the President's fiscal year 2001 budget proposal would add roughly
1,200 full-time equivalent positions to Treasury enforcement above the
fiscal year 2000 total enacted level. It represents the largest
increase in Treasury law enforcement staffing in over a decade.
departmental oversight
Funding is not the only element of strong law enforcement. It is
also important that law enforcement agencies have clear policies and a
means for setting priorities. We at the Treasury Department seek to
provide support, oversight, and policy guidance to enhance the
performance of our enforcement bureaus and to provide strong leadership
in the enforcement community.
Over the past year, we have continued to focus on accomplishing the
Department's enforcement goals and our bureaus' individual goals. We
have relied on the expertise of our professional staff and also on the
talent and experience of bureau personnel to work on challenging
issues.
Hiring.--Our need to recruit the best qualified and diverse
workforce will gain even greater salience if the proposed budget is
enacted. We have undertaken two key initiatives in this area.
(1) Schedule B--Late last year, in response to our appeal, the
Office of Personnel Management (OPM) granted the ATF and the Customs
Service Schedule B excepted hiring authority. This authority is
somewhat similar to that currently used by the Secret Service, the
Federal Bureau of Investigation, and the Drug Enforcement
Administration for criminal investigator recruitment and selection.
Some of the benefits of this authority are greater flexibility in
targeting recruitment to meet skill requirements and diversity goals,
the capability to focus on the large number of intangible skill sets
and personal characteristics required, and the ability to find and hire
quickly the best candidates for their jobs.
(2) Diversity conference--Last fall, the Office of Enforcement,
joined by Management, discussed with each of the bureaus their
recruiting and hiring practices, focusing on diversity. We learned that
each of the bureaus' recruitment programs had many commendable aspects,
but concluded that all could benefit from hearing about the experiences
of the other bureaus. Since that time, we have brought together the
Equal Employment Opportunity managers from across the bureaus for a
series of meetings which will culminate in a diversity conference, to
be held next month, which will focus on best practices to recruit and
hire a diverse workforce. The conference will also have a training
module focusing on best practices for ensuring that, once recruited,
minority employees have fair opportunities to advance through the
organization over the course of their careers.
Retention.--Retention of employees who have years of experience and
in whom we have invested long hours of training is critical. In that
regard, the Department has made progress toward meeting the challenges
of improving our capacity to develop and retain high-caliber employees.
Specifically, we have worked to address workforce retention and
workload balancing issues within the Secret Service. My office
established an Interagency Working Group on U.S. Secret Service
Workforce Retention and Workload Balancing, which included
representatives from Enforcement, Treasury's Office of Management, OMB,
and the Secret Service. The analysis revealed that Secret Service
agents have experienced an extreme increase in the amount of travel and
working hours in the last few years due to the increase in the number
of protectees and the enhanced level of protection necessary. In fiscal
year 2001, the Secret Service will experience a further workload
increase when the change of administrations occurs. To begin to
alleviate these problems, Treasury's fiscal year 2001 budget proposal
includes a significant increase in staffing for the Secret Service.
Senior Executive Service (SES) allocations.--As the Subcommittee is
aware, Treasury bureaus have had a critical need for SES positions.
Last month, as a result of decisions within the OPM, we allocated 20
additional SES positions to our enforcement bureaus. The lion's share
of those positions went to the Customs Service, which, as you know,
still faces significant challenges in this area. This is an issue that
the Department will continue to work with our bureaus to address.
Demonstration pay project.--In January, ATF implemented its pay
demonstration pilot for scientific and technical positions. The
demonstration project--developed by a team comprised of personnel from
the Office of Enforcement, the Office of Management and the ATF--
emphasizes flexibility in approaches to recruitment, and establishes a
pay-for-performance system designed to provide incentives to compete
with state and local government and the private sector. To date, 223
out of a possible 260 ATF employees have chosen to participate in the
program, and the period for choosing to participate has not yet closed.
We thank the Subcommittee for this authority as we look forward to
making this capacity permanent.
Retirement.--Schedule B authority, increasing SES allocations, and
the pay demonstration project are particularly critical in light of the
Department's report on retirement and the proposed budget. In response
to Congressional direction, the Department, through a contract with the
Office of Personnel Management, analyzed the large numbers of criminal
investigator retirements that have occurred and will likely continue to
occur in the next several fiscal years. Submitted to Congress last
fall, the report included the findings and the implications for
workforce planning, as well as related information about the recruiting
market and selection problems that will affect Treasury's ability to
hire criminal investigators and maintain staffing levels. Specifically,
the report included an analysis of retirement and attrition patterns
from the last 5 years, and the age and years of service of Treasury's
criminal investigators. Based on this analysis, it was estimated that
the Department would need approximately 2,662 new hires for its
criminal investigator workforce between fiscal years 1998 and 2003 in
order to maintain Treasury's 1998 fiscal year-end strength of 10,261
criminal investigators. This means that, before we can take advantage
of the increases contemplated in the President's budget, we must hire
an average of approximately 600 additional investigators each year for
fiscal years 1999 through 2003.
Training.--Another aspect of our goal to recruit and retain a high
quality workforce is assuring that Treasury law enforcement officers
receive the highest quality of training available. The Federal Law
Enforcement Training Center (FLETC) is key to this goal. The expansion
in recent years in the number of employees hired by the 73 law
enforcement agencies that participate in FLETC has stressed FLETC's
ability to meet all the requests for training. Although FLETC continues
to be able to provide all the basic training needed, currently by using
a temporary facility in Charleston, South Carolina, increases in bureau
hiring require coordinated increases in funding for FLETC.
To address some of the strain from increased demand for training,
we have also been exploring ways to use the latest technology to
provide alternative means of delivering training courses. Recognizing
that the FLETC facilities cannot accommodate all of the requests for
training that are likely to arise in the future, we are searching for
ways to use the Internet and video conferencing to provide needed
training.
Likewise, the need for advanced training to keep law enforcement
officers abreast of the latest trends in fighting crime is critical. We
have been working closely with FLETC to explore ways to enhance
training to address high-tech crime. One example of this approach is
Computer Investigative Specialist (CIS) 2000 training. This course,
which includes agents from the Secret Service, Customs, the Internal
Revenue Service Criminal Investigations Division, and ATF, uses state-
of-the-art training and equipment to teach agents how to deal with the
latest computer and encryption technology that they may encounter in
conducting an investigation. The CIS 2000 agents have achieved many
notable successes in their investigations of counterfeiting, money
laundering and various types of fraud as a result of this course.
Through our Implementation Working Group, the Office of Enforcement
also continues to monitor FLETC's progress in implementing
organizational assessments of FLETC that my predecessor had done. Great
strides have been made in addressing some of the problems that had
developed at FLETC, and we hope to be able to conclude the
Implementation Working Group's work later this year. The next meeting
of the Committee will be held in Artesia, New Mexico this spring.
Our budget request for fiscal year 2001 contains important
initiatives for the Federal Law Enforcement Training Center (FLETC). We
are seeking $6,969,000 for FLETC's mandatory workload. This funding
will be used to address entry level training for additional agents and
inspectors for ATF and additional agents for the Secret Service. This
is the first major hiring initiative for Treasury law enforcement
bureaus in many years. FLETC is a key component of Treasury's effort to
meet this build-up. Funding also is included for new construction and
renovation of older existing structures at FLETC to continue the
planned upgrade of facilities crucial to the training of the vast
majority of the federal government's law enforcement personnel.
Office of Professional Responsibility.--One of the key functions of
the Office of the Under Secretary (Enforcement), is to provide
oversight to the Treasury law enforcement bureaus. Over the past few
years, our efforts have been enhanced owing to the establishment of the
Office of Professional Responsibility (OPR), which Congress directed.
OPR completed a number of significant projects in 1999 and 2000,
including the reviews of Customs' Office of Internal Affairs, ICDE
funding needs, operations at ATF's Tracing Center, and the
aforementioned Secret Service workforce review. A number of significant
reviews are also underway, such as a prioritization of international
training conducted by the bureaus, overseeing a year-long gathering of
statistics on encounters with law enforcement to ensure ethnic and
minority groups are not being unfairly targeted, and a review of ATF's
role in the National Instant Check System (NICS).
money laundering and financial crimes
Preventing abuse of our financial institutions to conceal tax
evasion and the movement of money generated by criminal activities is a
high priority. It is a problem that cuts across a broad spectrum of
criminal activities, from violent crimes such as narcotics trafficking
to white-collar crimes such as credit card fraud. This is a matter of
great concern for the Treasury Department in our role as guardian of
the integrity of the U.S. financial system and its financial
institutions.
Current Activities and Priorities for Fiscal Year 2001
Treasury's law enforcement bureaus and offices play a key role in
our fight against financial crime. The Customs Service, the Secret
Service, IRS-CID, and ATF all investigate money laundering stemming
from the specified unlawful activities within their jurisdictions.
Additionally, the Financial Crimes Enforcement Network (FinCEN) is
charged with administering the Bank Secrecy Act, which prescribes
transaction reporting and record-keeping requirements for financial
institutions designed to insulate those institutions from money
laundering, and to provide a paper trail for investigators. Just last
August, FinCEN issued a final rule requiring all money services
businesses to register with Treasury. FinCEN recently issued the final
rule requiring a subset of these businesses--money remitters and money
order and traveler's check issuers, sellers and redeemers--to file
suspicious activity reports. FinCEN serves as the central point for
collection and analysis of Bank Secrecy Act data and provides case
support to law enforcement investigations.
Over the last year we have undertaken or strengthened several
initiatives aimed at addressing systemic vulnerabilities in our
financial system.
National Money Laundering Strategy.--In September 1999, in
consultation with the Department of Justice, the Department of State,
the federal financial supervisory agencies, and state and local law
enforcement, Treasury published the first National Money Laundering
Strategy. The Strategy for the first time articulates a coherent,
broad-based attack against the pernicious effects of criminals hiding
the proceeds of their crimes.
Since the 1999 Strategy was released, a tremendous amount of
progress has been made toward implementing it. Over a dozen interagency
groups were formed to ensure progress on priority action items. Less
than 6 months after the release of the 1999 Strategy, Treasury and
Justice in early March released the 2000 Strategy. The 2000 Strategy
announced a number of high intensity financial crime areas (HIFCAs),
and described the results of a number of policy reviews. Substantial
progress occurred in a number of areas, including a review of whether
formal guidance should be given to financial institutions about how to
meet their obligations to report suspicious transactions, the
aforementioned issuance of suspicious activity reporting rules for so-
called money services businesses, a review of rules and practices
currently in place to protect the privacy of U.S. persons by limiting
access and controlling the use of information collected pursuant to the
Bank Secrecy Act, developing a formal process to administer a grant
program to support state and local efforts to combat money laundering,
and encouraging countries around the world to join in the global fight
against this problem.
Particular progress was made this year in the multi-faceted attack
on the Black Market Peso Exchange (BMPE) system of money laundering.
The Treasury-led BMPE working group helped to produce improvements in
investigative techniques used by law enforcement, awareness among the
business community, and a multilateral working group of experts from
affected governments throughout the hemisphere. In addition, Treasury
continued its prominent role in the Financial Action Task Force (FATF),
which is defining ``non-cooperative jurisdictions'' in order to
identify and ultimately orchestrate counter-measures against them. The
Department also issued a formal advisory encouraging the Government of
Antigua and Barbuda to take constructive steps to address serious
vulnerabilities in its system of anti-money laundering control. In the
future, we expect to be in a position to meet the statutory deadline of
February 1 for the annual strategy.
Identity Theft Summit.--Each year American businesses and citizens
lose more that $3 billion to credit card fraud. One of the key means by
which this fraud occurs is identity theft. On May 4, 1999, President
Clinton announced that the Treasury Department would convene a national
summit on the subject of identity theft and work with the private
sector to help prevent the occurrence of this crime. This summit is
part of a larger identity theft initiative that includes case referral,
a public education partnership, and sentencing enhancements, which will
implement the new legislation that provides the U.S. Secret Service
with authority to investigate identity theft violations. The summit,
which took place on March 15 and 16, 2000, engaged 250 senior
executives from the public and private sectors in a substantive
dialogue that we expect will lead to better communication and
cooperation on identity theft crimes.
Financial Fraud.--During 1999 the U.S. Secret Service made almost
4,500 arrests for financial crime offenses. The Secret Service also
coordinated 28 task forces involving 54 law enforcement agencies
throughout the United States. These task forces focused primarily on
fraud schemes intended to victimize individuals, banks, credit card
issuers, and other financial institutions.
In fiscal year 2001, preventing abuse of our financial system to
facilitate criminal activities remains a high priority for Treasury
enforcement agencies. Our budget request for fiscal year 2001 supports
Treasury's role in implementing that strategy. We are emphasizing (i)
technical assistance to financial institutions as well as law
enforcement agencies; (ii) enhanced collection and analysis of data
that can help us to identify and pinpoint financial crimes; (iii)
interdiction of outbound currency; (iv) giving our bureaus the
resources to allow them to undertake lengthy investigations of complex
illegal transactions; (v) specialized training for our agents; and (vi)
partnership grants to state and local governments to leverage the
resources they can bring to bear on this problem.
firearms violence
Over the last 2 years, few events have so caught the attention of
the American public, and indeed the worldwide audience, as the spate of
senseless shootings in public places. In our schools, in our places of
work, and on our streets, criminal violence and the easy availability
of firearms to criminals have wrought havoc and caused Americans in all
walks of life to feel unsafe. Over the last year, both the President
and the Congress have responded to these concerns. Treasury,
specifically the ATF, with the support of this Committee, has been at
the center of this comprehensive response.
The most important development of the past year has been our work
with the Department of Justice to provide support for burgeoning
collaborative federal, state, and local intensive firearms crime
investigation and prosecution plans throughout the country. Between
1993 and 1998, violent crime with firearms fell 37 percent and gun-
related homicides declined 36 percent. Firearms prosecutions are
increasing. Department of Justice information shows that in 1999
federal prosecutors brought 5,500 firearms cases in the federal courts,
700 more cases than in 1992. Looking ahead, our primary focus continues
to be on building firearms enforcement capacity, and providing the
tools that enable federal, state, and local law enforcement to use
their resources in a strategic manner that will have the most impact on
armed crime reduction.
Current Activities and Priorities for Fiscal Year 2001
Integrated Violence Reduction Strategy.--Last fiscal year, the
Treasury Department and the Justice Department were directed by the
President to provide an integrated violence reduction strategy to
further reduce gun violence. The joint Treasury-Justice strategy will
be released soon. It will call for more enforcement resources to combat
armed violence as requested of Congress in the Administration's fiscal
year 2001 budget request and ATF's fiscal year 2001 appropriations
request, in order to maximize the impact of current laws on the
reduction of gun violence. The strategy will also highlight legislative
proposals discussed by the President to further reduce youth violence
and improve public safety. Enforcement resources requested will be used
to support and enforce current statutory authorities.
The strategy proposes funding for 300 new agent positions, 200
inspector positions and 100 other personnel for ATF to support local
intensive prosecution projects like Project Ceasefire in Boston and
Project Exile in Richmond, as well as for the Youth Crime Gun
Interdiction Initiative, regulatory, and gun show enforcement
activities (discussed below). These local strategic projects encompass
investigations of armed criminals and illegal traffickers, and
inspections of firearms dealers that are the sources of firearms to
criminals, as well as those illegally attempting to acquire or
illegally possessing firearms.
Consistent with our budget request, the strategy will also call for
an expanded effort to support state and local law enforcement agency
capability to trace recovered firearms to determine their illegal
sources and to speed up trace responses to state and local law
enforcement agencies ($9.9 million), and to establish ballistics
imaging capability to identify shooters and traffickers where the
firearm itself is not recovered ($23.4 million). Our view is that all
state and local enforcement agencies with a gun crime problem should
have these capabilities, and be able to draw on ATF's information and
analysis, expertise, and investigative experience. Expanded and shared
information about the illegal gun market will enable more strategic use
of federal, state, and local investigative and criminal justice
resources.
Commerce in Firearms in the United States.--Treasury strongly
supports ATF's efforts to base its firearms inspection program on
indicators of criminal access to firearms. In February, ATF released
the first annual report on Commerce in Firearms in the United States,
providing an array of information concerning the firearms industry and
ATF's regulatory inspection program. The 2000 report informs Congress,
law enforcement officials, and the public on the activities of ATF
inspectors, and how ATF regulatory resources are focused in order to
maximize their effectiveness in reducing firearms trafficking and
abuse. The report shows the types of activities and inspection strategy
for which we are requesting new inspectors and other personnel for ATF.
A fair and focused inspection program will reduce the need for more
costly criminal investigations and benefits public safety.
Youth Crime Gun Interdiction Initiative (YCGII).--There is a
continuing need to focus attention and resources specifically on
reducing youth violence and preventing the illegal supply of firearms
to juveniles and youth. A fundamental need is for investigators to find
out how guns are illegally acquired by young people. In the past year,
ATF and local police committed to establishing comprehensive crime gun
tracing and youth gun violence reduction efforts with law enforcement
agencies in eleven new cities, bringing the total number of cities
participating in YCGII to 38 in its third year. In February 1999,
Treasury and ATF issued the second year Youth Crime Gun Interdiction
Initiative Trace Analysis report, analyzing over 76,000 crime gun
traces from 27 cities. The report provides local law enforcement
agencies with information about the number of firearms recovered in
their jurisdictions, top crime guns in each city, and their geographic
sources, in order to assist local law enforcement agencies with
development of effective law enforcement strategies against youth
violence. ATF also released the YCGII Performance Report, a survey of
over 640 trafficking investigations nationwide involving juveniles and
youth engaged in gun crime, demonstrating ATF's enforcement efforts to
stop youth and juvenile access to guns through straw purchasers and
other illegal channels. We endorse ATF's plan to expand YCGII to 75
cities, and propose to add 12 new cities in fiscal year 2001 to work
toward this goal by bringing the fiscal year 2001 participating cities
to 50.
Gun Show Report.--In February 1999, Treasury in coordination with
the Department of Justice, released a report on gun shows, Gun Shows:
Brady Checks and Crime Gun Traces. The report was prepared in response
to a directive from the President that the Secretary of the Treasury
and the Attorney General provide him with recommendations to address
the gun show loophole, that is, the sale or exchange of firearms at gun
shows without background checks or tracing records for those acquiring
the firearm. The report led to legislation proposing that all
transactions at gun shows include background checks and tracing records
to prevent access to guns by prohibited persons and to allow law
enforcement officials to trace firearms when they are recovered by law
enforcement officials. Both licensed and unlicensed gun sellers at gun
shows are sources of guns to criminals and other prohibited persons;
where there is evidence of criminal activity, enforcement attention is
required.
counter-narcotics
Reducing the supply of dangerous drugs entering the United States
continues to be another of our high priorities. It is also our most
difficult challenge. We are confronted by well-financed criminal
organizations that adapt quickly to every advance we make in the
detection of illegal drugs. Moreover, interdiction is only one piece of
a comprehensive drug control strategy that includes eradication of drug
production abroad, sanctions against drug kingpins, investigation and
disruption of trafficking activities within the United States,
treatment of drug users, and, as mentioned above, combating money
launderers.
Current Activities and Priorities for Fiscal Year 2001
Border Coordination Initiative.--We continue to work to strengthen
our coordination with other border enforcement agencies to assure that
taxpayers get the most effective use of federal resources available for
drug interdiction. In September 1998, Treasury and Justice initiated
the Border Coordination Initiative (BCI), an innovative system for
controlling the Southwest Border. BCI is a strategic plan for Customs
and the INS to maintain a seamless, comprehensive, integrated border
management system that increases interdiction of illegal drugs, illegal
aliens, and other contraband while simultaneously facilitating legal
migration and trade. Customs and the INS have set new standards for
innovation, interagency cooperation, and operational effectiveness,
with locally developed innovations leading to improved coordination and
more efficient border operations. As a result of BCI, more than 120
tons of cocaine, marijuana, and heroin were seized by Customs and the
INS along the southwest border in 1999--an increase of more than 20
percent over the previous year.
For fiscal year 2001, the budget proposes several important
initiatives to strengthen the enforcement and interdiction capabilities
of the U.S. Customs Service, our main player in the counter-narcotics
fight. Commissioner Kelly can address these programs in greater detail,
but summarized briefly they include:
--a $25 million request and 107 FTEs to aid Customs' investigations
into the criminal organizations that smuggle narcotics into our
country and distribute them in our communities;
--a $10 million request to enhance Customs' ability to detect illegal
outbound currency movements; and
-- a request of approximately $20 million in enforcement
infrastructure improvements, including a P-3 FLIR upgrade,
aircraft flight safety enhancements, surveillance equipment of
helicopters, and an upgrade of the air interdiction center
radar.
Together, these initiatives would help Customs improve on record-
setting seizure statistics, while allowing it to better respond to the
various smuggling routes and methods employed by narcotics traffickers.
Intelligence Architecture Review.--Enforcement represented the
Department in the inter-agency intelligence architecture review. The
review, which also involved ONDCP, the Justice Department, CIA, and
other agencies, led to a report, released last month, that contained a
series of important action items to improve intelligence collection,
dissemination, and use.
Narcotics Kingpin Act.--On December 3, the President signed the
Intelligence Authorization Act for fiscal year 2000, which contains the
Foreign Narcotics Kingpin Designation Act (the Act). The Act
establishes a global sanctions program targeting significant foreign
narcotics traffickers and their organizations modeled along the lines
of the President's IEEPA-based program targeting Colombian narcotics
cartels. The Act requires the Office of Foreign Assets Control (OFAC)
to identify significant foreign narcotics traffickers and closely
associated entities and individuals throughout the world and impose
financial and trade prohibitions, as well as asset blocking, against
them.
As a result of the significant workload increase driven by OFAC's
responsibilities under the Act, the Department has included a request
for $2.1 million and 20 FTE in the fiscal year 2000 supplemental
request submitted to Congress in February. This would provide resources
for OFAC to implement a global sanctions program targeting significant
foreign narcotics traffickers and their organizations, as mandated by
the Act. In addition, the fiscal year 2001 budget includes a request
for $2.9 million and 11 FTE for OFAC to improve information gathering
capabilities with respect to terrorist funding and narcotics
trafficking and raise the quality of service to the public in the
performance of OFAC's licensing function. OFAC currently has on-site
staff gathering specialized information in Bogota, Colombia, on drug
traffickers. Similar information gathering capability is needed in
Dubai, United Arab Emirates to investigate terrorist funding, and in
Panama and Bangkok to investigate drug traffickers. Sanctions programs
are administered largely by licensing and the licensing function is
OFAC's primary contact point with the public.
trade enforcement and facilitation
The United States is the world's largest exporting and importing
country, and the volume of both exports and imports is growing rapidly.
Over the 5 year period 1994 to 1999, the dollar value of exports
increased by over a third (about 36 percent). During the same period
the dollar value of imports increased by more than half (about 51
percent). These increases translate rather directly into increased
workload for the Customs Service.
Our trade with other nations is vital to our economic strength and
our standard of living, and we want to do everything we can to assure
that the movement of trade across our borders is as frictionless as
possible. At the same time, however, we recognize our responsibility to
assure Congress and the American public that laws enacted to protect
public health and safety, as well as other interests, are being
effectively enforced at the border.
Current Activities and Priorities for Fiscal Year 2001
Improved Performance Measurement and Targeting of Violations.--The
Customs Service has continued to improve the accuracy and specificity
of its compliance measurement system. In 1999 Customs submitted its
fourth annual report to Congress on the results of compliance
measurement. Compliance measurement is not only a tool for targeting
Customs' enforcement activities. It also enables us to account to the
Congress and the American people on how effectively Customs' trade
enforcement resources are being used.
By illuminating where the problems are, compliance measurement also
improves Customs' ability to implement a national risk management
program that allows more efficient use of resources and more effective
detection of violations.
Automation.--Customs' struggle to modernize its automated
commercial system is well known to this Subcommittee, and is a problem
of a kind that is not unique to Customs. We believe that we have made
substantial progress in the last year in responding to problems
identified by the General Accounting Office in the development of
Customs' new Automated Commercial Environment (ACE).
As we work to develop a new automated commercial system, we are
paying close attention to the reliability of the current system, the
Automated Commercial System (ACS). The ACS is Customs' current
mechanism for allowing importers, carriers, and others to transmit
required information electronically, and enabling Customs to process
and store the information electronically. ACS greatly accelerates
transactions between the trade community and Customs, allows quicker
release of goods, reduces the number of instances in which shipments of
goods must be held by Customs owing to the absence of required paper
documents, reduces filing errors, and improves law enforcement at the
border by making possible electronic analysis of information for risk
assessment purposes.
However, the ACS was created in the early 1980s, and was developed
with programming language that is now obsolete. The program is
proprietary to Customs and not supported by any software vendor.
Moreover, at the time ACS was created, the urgency of moving as rapidly
as possible from a paper environment to an automated environment
resulted in inadequate documentation of ACS programming. Customs is
effectively prevented from modernizing its business practices--
including changes authorized by the Customs Modernization Act of 1993--
because of the difficulty and cost of modifying the obsolete and
poorly-documented programming language on which ACS runs. Among the
obsolescent features of ACS: (i) it is transaction based, that is, it
treats the release of each shipment as a separate, taxable transaction,
requiring the filing of an individual entry (tax return); and (ii) it
is service-port oriented, requiring that entries be filed at the port
at which goods are released from Customs custody.
A little over a year ago, the ACS began to experience periodic
failures, or ``brownouts''. Although these did not last long, they were
sufficient to remind us of the absolute necessity of maintaining a
reliable automated commercial system for Customs. Consequently, we have
given very high priority to upgrading the capacity and reliability of
the ACS. We expect to spend up to $79 million in the current fiscal
year, and we are requesting $123 million in fiscal year 2001, to assure
that the American public can rely on its government for effective and
efficient enforcement of our trade laws.
But we recognize that the trade community would like us to do more
than simply assure the reliability of the current automated system.
Each year the Customs Service must deal with the challenge of assuring
that millions of freight containers and carriers entering the U.S. are
in compliance with several hundred laws. In order for Customs to be
effective at this job without becoming a serious impediment to
commerce, it must become a more efficient collector and intelligent
user of information.
This is difficult to do with the ACS because, as I noted, it
effectively locks Customs into obsolete business practices. Because it
is difficult to modify ACS's software, Customs cannot even implement
procedural reforms that were authorized in the 1993 Customs
Modernization Act, let alone new procedures that have become possible
since then.
The Automated Commercial Environment, or ACE, is the proposed new
Customs automated commercial system. It would operate on modern
software and the programming would be fully documented to facilitate
subsequent programming changes. ACE would allow periodic filing of
consolidated entries to cover multiple transactions, and it would allow
filing from any location, and not only the port at which the goods are
entered. ACE also includes equipment enhancements to increase
reliability and upgrade connectivity among Customs offices around the
country and between Customs and the trade community. For example, ACE
would be accessible to the trade through the Internet, while ACS is
accessible only over dedicated lines.
In our budget for fiscal year 2001, we are requesting $210 million
for ACE development. We estimate the cost of ACE development over the
next 4 years to be around $1.25 billion. This is a relatively costly
initiative. The recently completed cost-benefit analysis for conversion
from ACS to ACE shows that modernizing Customs' trade data processing
system will provide significant benefits to both the federal government
and the trade community. We continue to believe that the proposed fee
appropriately captures some of the benefits private businesses will
receive from Customs modernization, and therefore, we have proposed to
offset the costs of ACE over the next several years by creating a user
fee to be collected from all parties that use Customs' automated
systems. The amount collected from each user would be based on its
volume of use.
We acknowledge that a similar user fee proposal last year was not
well received. We have made some changes to our proposal this year that
we believe go at least part of the way to meeting the objections of
last year. For example, we are not asking, as we did last year, for the
user fee to be collected a year in advance of appropriations for ACE.
The Administration is prepared, indeed eager, to work with Congress
and the trade community to enact this proposal and begin work on ACE as
soon as possible.
International Trade Data System.--An interagency group working
under Treasury leadership has finished the system design of a new
international trade data system (ITDS), called for by the Vice
President's National Program Re-invention project. The ITDS will offer
a single electronic window for collecting all data required in
connection with importing and exporting. When implemented, the new
system will substantially improve the effectiveness and efficiency of
government administration of laws that must be applied at the border,
and will greatly reduce red tape imposed on importers, exporters, and
carriers. Our budget proposal for fiscal year 2001 continues this
program at the current level of $5.4 million.
G7 Data Harmonization.--Completing harmonization of G7 customs data
requirements, as outlined by the Lyon, Denver, and Birmingham G7 summit
communiques, will continue to be a priority in 2000. Current disparity
in reporting requirements among G7 customs administrations imposes
heavy reporting and record-keeping burdens on traders, and inhibits
cooperation on law enforcement among governments.
Child Labor Enforcement.--Treasury established a private sector
advisory committee on child labor to help focus Customs' efforts to
enforce laws prohibiting the importation of goods produced by forced
labor. Customs' resources for enforcement efforts in the area of forced
child labor have been increased. Customs had baseline resources of $3
million and 4 full-time equivalent positions (FTE) in fiscal year 1999,
$5 million and 6 FTE in fiscal year 2000.
In fiscal year 2000, we are continuing to work aggressively to
assure that goods produced by forced child labor are not allowed to
enter the American market. Through the Child Labor Advisory Committee,
Treasury and Customs are developing a program of business outreach
aimed at fostering voluntary compliance with U.S. import restrictions
on products of forced or indentured child labor through adoption of
industry codes, best practices, and other methods. Customs will use
additional budget resources provided by this Subcommittee to open a
field office in South Asia dedicated to child labor enforcement, and
will deploy additional investigative staff overseas as needed.
Additionally, Customs investigators have conducted a number of
fact-finding missions to countries in Asia and Latin America where
child labor is believed to be prevalent in a number of industries.
Several visits have been made to South Asia, including India, Pakistan,
Nepal, Bangladesh, and Thailand. With the fiscal year 1999
appropriation, additional agents were assigned to Bangkok, Hong Kong,
and Montevideo. Additional agents will be assigned to the new South
Asia field office that is being established in fiscal year 2000.
The fiscal year 2001 President's Budget requests an additional $5
million and 9 FTE, for a program total of $10 million and 15 FTE, to
combat importation of goods made by forced child labor. The requested
increase in fiscal year 2001 will enable us to attain even broader
investigative coverage of overseas regions where child labor is
believed to be endemic. These carefully placed investigative resources
will enable Customs to acquire the detailed evidence that is required
under U.S. law for Customs to detain merchandise manufactured with
forced or indentured child labor.
The use of forced child labor to produce goods imported into the
United States is not merely a matter of unfair commercial competition.
Use of forced child labor perpetuates poverty and contributes to
instability abroad by denying children the opportunity to pursue
educational opportunities that could enable them to improve their
standards of living. In fiscal year 2001, we shall remain committed to
working with other governments, other U.S. government agencies, and
with knowledgeable private sector groups, to assure that the U.S.
market does not inadvertently become a means for supporting forced
child labor.
export enforcement
As events have demonstrated over the last few years, the United
States continues to be targeted by those who seek to acquire our most
advanced weapons and technology, often for purposes that directly or
indirectly threaten the security of the American people. For years, the
Customs Service has been an integral part of our response to that
threat, by monitoring exports of goods from the U.S. to identify goods
that embody sensitive technology.
Current Activities and Priorities for Fiscal Year 2001
Customs' ability to enforce effectively laws enacted by Congress to
prevent the export of munitions and sensitive technology has been
hampered by the difficulty of getting timely information about
shipments leaving the country. Too often information is inadequate,
inaccurate, or late. Two years ago the Treasury Department sponsored
negotiations among the Customs Service, the Commerce Department, and
representatives of exporters and carriers to work out the terms for use
of a modern, electronic export reporting system. As a result of the
agreement reached, use of the Automated Export System (AES) to file
export declarations electronically increased from about 2 percent of
export declarations filed in January of last year to around 25-30
percent in January of this year. Because the AES, unlike its
predecessor system, is accessible over the Internet, we expect use of
electronic export filing to continue to grow. Electronic filing is, of
course, convenient for exporters and carriers, but the government also
benefits. Having timely export information in an electronic format
greatly increases Customs' ability to monitor for export violations. In
fiscal year 2001 we shall continue to promote use of the AES, and to
look for other ways to improve the quality and timeliness of export
data.
counter-terrorism and protection
Current Activities and Priorities for Fiscal Year 2001
On May 22, 1998, the President signed Presidential Decision
Directive 62. This Directive created a new and more systematic approach
to fighting the terrorist threat and created criteria for identifying
events of national significance that may be vulnerable to terrorist
threats. At several events this year, including the World Energy
Conference in Houston, Texas and the highly successful NATO Summit here
in Washington, D.C., Treasury bureaus, including the Secret Service and
ATF were involved in providing security, and the Customs Service
provided air support. We estimate that approximately three or four
events of this nature will occur each year.
Additionally, Treasury leads an interagency working group in
conjunction with the Customs Service to address issues of weapons of
mass destruction (WMD). The focus of the group during 1999 and 2000 has
been to find ways to enhance our security and prevent WMD from entering
the United States. Recent incidents, such as the arrest of several
suspects at the end of 1999 in Washington and Vermont relating to the
attempt to smuggle explosives into the United States, highlight the
importance of heightened vigilance in this area.
arson
National Church Arson Task Force.--Treasury and Justice, along with
others, continue to coordinate a nationwide federal, state and local
law enforcement effort to identify and prosecute those who burn or
damage our houses of worship, to help rebuild those institutions, to
prevent additional fires, and to help heal community tensions resulting
from attacks on our houses of worship. Due in part to increased
vigilance, well-publicized arrests, and ongoing prevention efforts
under the President's three-pronged strategy, church arsons continued
on a downward trend during the past year.
In this statement I have been able to touch on only some of the
important programs of Treasury's enforcement bureaus. Each bureau head
will address our programs in greater detail. And, of course, I shall be
pleased to respond in writing to any questions you want to direct to me
about any of our programs.
In conclusion, Mr. Chairman, I would like to thank you, Senator
Dorgan, and the Members of this Subcommittee for your outstanding
support of Treasury's law enforcement programs over many years. Our law
enforcement bureaus have grown, they are better equipped, and they have
become more professional as a result of your oversight and support. The
benefits of this for the American public cannot be calculated. I would
like also to thank the staff of this Subcommittee for its
professionalism and patience over the last several years, as we
wrestled with the problems that inevitably accompany growth and a
rapidly-changing set of challenges. I do not want to miss this
opportunity to express my appreciation and gratitude.
U.S. Customs Service
STATEMENT OF RAYMOND W. KELLY, COMMISSIONER
summary statement
Senator Campbell. We will go ahead with Ray Kelly.
Mr. Kelly. Chairman Campbell, Senator Dorgan, it is a
privilege to appear before you today to discuss the Customs
Service's fiscal year 2001 budget request. Before I begin, I,
too, want to thank the members of the committee for supporting
Customs over this past year. Our trade and enforcement
successes would not have been possible without your counsel and
assistance.
Those successes included the arrest last December 14 of
suspected terrorist Ahmed Ressam at Port Angeles in the State
of Washington. Ressam attempted to enter the United States from
Canada carrying explosive material and timing devices. It was
sufficient to trigger bombs not unlike those at Oklahoma City
and the World Trade Center in New York City. While all of the
ramifications of Ressam's activities have yet to fully surface,
it is apparent that the vigilance of the Customs inspectors in
this case saved untold lives. America was able to celebrate the
close of one millennium and the beginning of the next without
incident. I cannot stress enough the commitment of our people
in making our last holiday season a safer, more secure one for
all Americans, and I do not doubt their readiness to answer the
call again.
But the truth is, there is a lot of ground to cover when
such an event occurs. We cannot be every place at every time.
The simple fact is, we need more manpower to carry out our
mission. In the meantime, we are prepared to take additional
measures to secure our borders.
After Port Angeles, Customs developed a four-tiered alert
plan for future security threats of that nature. We also
instituted around-the-clock staffing at all northern border
crossings formerly monitored by remote video cameras. The
threat of terrorism on America's doorstep has added yet a
further strain on resources already stretched thin by a
stunning growth in global trade.
To give you some examples, since 1990, trade entries or the
number of individual shipments of goods have jumped 132
percent, from 9.4 million to over 21 million entries per year.
Likewise, the number of air and sea passengers we process has
climbed 62 percent, from 52 million to 84 million people per
year. On top of this, we process a steady stream of nearly 400
million land passengers each year. Yet, the Customs Service has
increased the number of full-time staffing over the last 10
years by only 4.5 percent.
Despite our limited resources, Customs seized close to 1.5
million pounds of illegal narcotics in fiscal year 1999. That
is a 17.5 percent increase over the previous fiscal year. But
we are under no delusions. Declining wholesale prices of
narcotics tell us we need to do more to stem the unceasing flow
of illegal drugs into America. We also have a major new threat
before us in the form of Ecstasy, the synthetic drug that
Customs is now seizing in record numbers.
This year's budget request includes funding for the hiring
of 214 additional special agents. This increase will help us
ratchet up the investigative pressure on the drug cartels. It
will also help us counter higher attrition rates in our agent
workforce. In fiscal year 1999, we experienced a net loss of 87
agents and we are already down the same number of agents in
just the first half of fiscal year 2000. Of course, the drug
cartels are quick to adapt to any changes. When frustrated on
the ground, they turn to the seas and skies.
Customs' answer to this smuggling blitz is the Air and
Marine Interdiction Division, which is our fleet of boats and
planes deployed throughout the drug source, transit, and
arrival zones. Last year, we combined our air and marine units
under one command. Though greatly in need of upgrades, the Air
and Marine Division is today a vital asset in the nation's
counter-drug arsenal. In fact, the U.S. Customs Service
provides in excess of 90 percent of all detection and
monitoring flights in the source and transit zones for drugs.
In Colombia, we provide the vast majority of airborne
detection and monitoring and are the only agency carrying host
country riders. Our P-3 early warning aircraft are responsible
for the great majority of these flights. However, the radar
systems they carry are in dire need of upgrades. Without these
upgrades, we will soon find ourselves unable to service the
systems in the event of breakdowns.
New technology has more than proven its worth across the
spectrum of Customs' other enforcement activities. Fixed and
mobile truck x-ray systems and gamma imaging devices have
enabled us to find drugs in place we never could have found
them before. We also now have eight state-of-the-art body scan
machines installed at major airports around the country. The
body scan is offered as an alternative to physical inspections
to any traveler detained by Customs. I should add that this
technology has been complemented by a thorough revamping of our
personal search policies. These changes will help Customs
protect the rights of travelers while allowing us to accomplish
our mission.
Our automated system for processing freight is yet another
vital component in our ability to facilitate and enforce. Last
year, we processed a little over $1 trillion in trade. That
volume is expected to nearly double in the next 5 years alone.
To cope with this scenario, we have developed a comprehensive
strategy of risk management. Risk management allows us to zero
in on cargo and conveyances more likely to contain corrupted
goods and allow speedy processing of the vast majority of
shipments that comply with the law.
Risk management, however, depends in large part on the
construction of a new automated system, ACE, ``ae'' as we call
it. Customs has made huge strides in developing ACE. We
addressed all of the issues that have surfaced in GAO critiques
about our ability to build and operate the system and we
assembled a talented management team to carry out the job. The
remaining issue now is funding. Until ACE funding is obtained,
our first priority must be to seek resources to maintain our
current outdated system, or ACS, as we call it.
prepared statement
Mr. Chairman, the Customs Service is at an important
crossroads. How we respond now to the challenges I just laid
out will impact greatly on our mission for years to come. I
appreciate the opportunity to appear before you today. Your
support for our fiscal year 2001 budget request will further
enhance our ability to safeguard our nation's borders. Thank
you.
Senator Campbell. Thank you.
[The statement follows:]
Prepared Statement of Raymond W. Kelly
introduction
Good morning, Mr. Chairman and Members of the Subcommittee. It is a
privilege to appear before the Subcommittee today to present the
Customs fiscal year 2001 budget request, and share with you some of our
recent accomplishments and ongoing activities. Before I begin though, I
would like to personally thank the Chairman, Ranking Member, and other
Committee Members for the strong support you have continued to provide
to the U.S. Customs Service.
The Customs Service is an agency with a long and rich history, many
proud traditions, and an extraordinary record of achievement. We
recognize that our mission is not an easy one--standing as part of the
front line of defense at the Nation's borders--but we continue to find
ways to rise to the challenges that we face every day.
As you know, the United States faces a continuing threat of
domestic terrorism and increasingly sophisticated tactics by narcotics
smugglers to move their contraband across our borders. At the same
time, the increase in international trade and number of passengers
transiting through major ports of entry already strain our
capabilities. Our recent successes in intercepting terrorists on our
northern border and major drug seizures on the Southern/Southwestern
borders indicate how intelligence and technology, together with alert
and well-trained inspectors and agents can have a major impact in
deterring the threats we face. Our future success depends directly on
the continued, skilled deployment of training and technology to meet
the challenges we face.
In order to meet its mission, Customs has emphasized the following
core operational challenges:
automated commercial environment (ace)
Customs must modernize its commercial processing system in order to
meet the import demands of the new millennium. Effective and reliable
automated systems are critical to performing both Customs trade and
enforcement missions successfully.
Development and implementation of the Automated Commercial
Environment (ACE), a major component of our modernization program, will
provide significant benefits to Customs field operations personnel, the
importing community and, most importantly, the U.S. economy through:
--Uniform and streamlined cargo entry processes and just-in-time
reporting capabilities;
--More efficient and accurate revenue collection;
-- Enhanced targeting and analytical capabilities aimed at combating
violations of U.S. import and export trade laws, drug
smuggling, money laundering, and terrorism.
ACE will replace our current 16-year old system, the Automated
Commercial System (ACS). However, we have not kept pace with changing
technology and its is time to begin the process of modernizing our
systems.
While Customs has taken many preliminary steps towards
modernization, a significant amount of additional effort and funding is
needed to realize our main goals: to support business processes,
maximize the use of information technology, and meet the challenges of
an ever-changing global trade environment. Without a new automated
system, Customs will be placed in the precarious position of continuing
to rely on the outdated ACS beyond the year 2004 (when ACS will be 20
years old), subjecting both Customs and the trade community to risks of
degraded service, lost revenue collection, and possible disruptions.
training and development
Customs mission demands a training regime that is strong, focused,
and available to employees throughout their careers. Customs depends on
training to develop and maintain high levels of proficiency in its
mission-critical skills and to build professionalism and integrity in
the workforce. Training must be delivered with consistency across the
nation.
Customs has lacked strong, centralized management of training
programs in the past. To address this, Customs established a new Office
of Training and Development (OTD) and appointed a new Assistant
Commissioner of Training and Development to take the first steps to
correct our deficiencies and begin to lay the groundwork needed to meet
future challenges. OTD has taken a leadership role in setting training
priorities and establishing management processes that are aligned with
our mission.
As an important first step, OTD is developing a National Training
Plan (NTP) and tracking and reporting systems. Customs will have the
ability to invest training funds wisely and monitor the use of these
funds as well as gauge the return on investment. With the NTP, Customs
will make a connection to its strategic objectives, target training
areas of greatest need, and find the best and most cost-effective ways
to get training to Customs employees. We will establish national
priorities, develop training profiles for our mission-critical
occupations, and install rigorous training and tracking procedures.
Planning at the national level will allow us to explore partnerships
with all offices within Customs and other agencies and teaching
institutions, and will further serve to leverage scarce resources and
eliminate redundancies in Customs training.
Customs has also embarked on a path to strengthen the in-Service
Firearms and Tactical Training Program for its 13,000-armed officers.
This program is in need of constant improvement in quality and
efficiency, particularly as those armed Customs officers deal with
dangerous use of force events in the course of their jobs on a daily
basis. Improved and enhanced firearms training will not only protect
our officers, but also the travelling public we serve.
improved human resources management
As we continue to build a Customs workforce worthy of the highest
public trust, our focus remains on two critical areas: recruitment of
the best personnel and our commitment to integrity.
Under our new Quality Recruitment program, Customs is hiring the
most capable professionals. We have hired 155 new Inspectors and Canine
Enforcement Officers through this system over the last 6 months and
more are in the pipeline. Early indicators are that these men and women
are among our Nation's best and brightest. Quality Recruitment has been
extended beyond those occupations to Pilots and Aviation personnel. In
addition, testing and structured evaluation are also being developed
for use in choosing Supervisory Agents and Senior Inspectors. This will
strengthen our merit-based selection process and serve to ensure
consistency of quality in our supervisory ranks.
Given their sensitive law enforcement responsibilities, Customs
employees must be held to the highest standards of ethical and
professional conduct. ``Preserving Our Pride, A Guide to Good Conduct
and the Discipline Process,'' a handbook that reinforces our commitment
to integrity, has been distributed to every employee and provides the
standards of conduct expected, as well as employees' rights and
responsibilities.
Along with clearly communicating our expectations, we have
implemented systems to better capture allegations of misconduct,
impartially investigate those claims, track their progress, and deal
fairly and consistently with the investigative findings. We have also
established a system of cross-functional boards, composed of senior
managers trained in the review process, to adjudicate cases and
recommend action based on the merits of the evidence. Cases involving
serious allegations are handled swiftly and appropriately. Improvements
to our automated human resource systems continue and based on these
enhancements, we are now able to analyze and communicate important
information about conduct trends to our workforce. Employees at all
levels of the organization understand that they are accountable for
their actions and are held to the same standards.
While significant investments in Customs information technology and
personnel need to be made to continue to improve on our ability to meet
the challenging demands of the future, we are proud of the
accomplishments we have made in this area.
core mission activities
As Customs meets these new challenges, it must also remain vigilant
against the ever present threats of narcotics smuggling; money
laundering; unwarranted threats against American industry, such as
quota, marking, and intellectual property rights violations; and
threats against the health and safety of the American people.
On a typical day, Customs officers process 1.3 million passengers
and nearly 350,000 vehicles at ports and border crossings around the
country. They seize nearly 4,000 pounds of narcotics and about a
million dollars in ill-gotten proceeds.
Last year, in fact, Customs set another record for drug seizures,
17.5 percent over fiscal year 1998 seizures. That means nearly 1\1/2\
million pounds of illegal narcotics were kept off our Nation's streets.
Yet drug smuggling organizations continually modify their means of
smuggling in response to our interdiction efforts. We must constantly
adapt to their changing methods.
Customs enforcement actions also protect domestic industries from
unfair competition. They keep tainted and spoiled products from making
their way to consumers. They defend intellectual property rights and
deter the corrosive effects of economic fraud.
Narcotics Smuggling
Customs approach to fighting narcotics smuggling is multifaceted,
from traditional searches by our Inspectors and Canine Enforcement
teams, to partnerships with industry to prevent drugs from being
imported in their merchandise or conveyances, to air and marine
interdiction, to the work of our Special Agents in tracking the illegal
proceeds generated by drug sales.
The use of non-intrusive technology is also key to maintaining the
success of our narcotics interdiction efforts. Customs has in place a
5-year technology plan that calls for the deployment of NII technology
to blanket the Southern Tier and other high-risk locations.
Twenty-two systems have been deployed to date and more than 15
additional systems will come online in fiscal year 2000. NII technology
includes items such as Mobile Truck X-Rays, Rail Systems, Relocatable
Gamma Rays, and Higher Energy Fixed Site Truck X-Rays. All of this
equipment, as well as systems such as the Automated Targeting System
aimed at commercial shipments, act as a force multiplier in the search
for well-concealed contraband.
Customs is also proud of its work with participants in our Industry
Partnership Programs (IPP). In fiscal year 1999, these participants
provided information to Customs that resulted in 42 domestic seizures
totaling 8,428 pounds of narcotics. During the same period, Customs
efforts overseas, and IPP participants, assisted in 190 foreign
intercepts of 35,640 pounds of narcotics destined for the United States
from abroad.
Over the last 5 fiscal years (1995-1999) participants in these
programs have provided information to Customs which has resulted in
domestic seizures totaling over 64,000 pounds of narcotics. During the
same period, program participants helped intercept over 151,000 pounds
of narcotics destined for the United States from abroad.
Customs is working with the business community in a Business Anti-
Smuggling Coalition (BASC) throughout the United States, as well as
with local business communities throughout the Republic of Colombia.
This led to the creation of a Colombian BASC Program, with individual
BASC Chapters throughout the country. Other foreign countries where
BASC Chapters have been established by the private sector include Peru,
Costa Rica, Ecuador, and Venezuela.
BASC has been promoted to the World Customs Organization and will
be included into the ``WCO Business Partnership'' program, which
provides a way in which Customs administrations could work together
with trade associations to combat the international trade in illicit
drugs.
The mission of the Air and Marine Interdiction Division is to
protect the Nation's borders and the American people from the smuggling
of narcotics and other contraband with an integrated and coordinated
air and marine interdiction force. With a fleet of 114 aircraft and 88
vessels, this mission is carried out from our continental boundaries to
the skies over the coca fields in Colombia and Peru.
In cooperation with the U.S. Southern Command, Customs has a full-
time presence in the source country area of responsibility. Since 1991,
Customs has used its P?3 detection and monitoring and Citation II
interceptor/tracker aircraft to conduct air interdiction missions in
source zone countries. Customs P-3 aircraft account for 90 percent of
U.S. detection and monitoring assets in the source zone. As additional
P-3 aircraft come on line, we are committed to providing more
operational P-3 flight hours in support of these missions.
Customs also provides Citation tracker aircraft in the transit and
source zones. Two Citations are based in Mexico to support the
Government of Mexico drug interdiction program. Significant seizures
have resulted from that cooperative effort, particularly in Hermosillo,
an area just south of Arizona.
In the remainder of the transit zone, Customs aircraft, based at
our 20 air and marine branches and units, operate from the Bahamas to
the eastern Pacific. These efforts similarly make an invaluable
contribution to our international drug control strategy.
Another critical component of our drug interdiction effort is our
marine program. Smugglers are increasingly using both airdrops and
high-speed boats to move illegal drugs from South America through the
Caribbean and on to the United States. In response, Customs has
consolidated its marine assets with aviation operations to provide an
integrated strategic and tactical response to this threat.
Customs has a long tradition of interdicting airborne and marine
drug smugglers along the borders of the United States. Customs uses
similar airborne tactics to provide effective airspace security
operations. Specifically, in accordance with Presidential Decision
Directive 62, Customs has been instrumental in enhancing the Nation's
defense against the potential for unconventional terrorist activity.
Personal Search
Customs currently has 10 body scan x-rays in place at major
airports. These low power x-rays, which provide an image of the surface
of the body, offer a means to determine if a traveler has contraband
concealed under their clothing without physical contact. Travelers are
offered the option of a body scan in lieu of a ``patdown'' search.
We are currently seeking a contractor to provide a mobile x-ray
capability at nine major airports. This would allow Customs to x-ray
travelers that we suspect of carrying contraband internally much more
quickly. We currently have to transport these persons to a medical
facility, a process that can take a substantial amount of time.
The mobile x-ray units will be able to respond to our inspection
facilities at the airport within 10 minutes of being called. The x-ray
will be taken and read in 30 minutes; if the x-ray is negative the
traveler will then be free to depart the Customs area. I expect this
contract to be awarded before April 1.
Customs will also continue to seek and evaluate other non-intrusive
technologies that can assist us.
As the Committee is aware, allegations have been made that Customs
was targeting certain minorities for inspections, detention and
personal searches at border crossings. Further concerns were raised
that personal searches of individuals subject to searches under Customs
procedures were being carried out by employees who were not of the same
gender as the individuals being searched.
I have stated repeatedly that Customs will not tolerate race-based
and gender bias discriminatory treatment of the travelling public. I
reinforced this position in May 1999, when I stated to the House of
Representatives Committee on Ways and Means, Subcommittee on Oversight
that ``the complaints we have received about racial prejudice in
selecting passengers for searches are very disturbing. It is certainly
not Customs Service policy, and it will not be tolerated as Customs
Service practice--anywhere.''
As a result of your Committee's concerns and travelers' allegations
against Customs, the agency has taken a number of steps to address
these issues.
We appointed a Personal Search Review Commission (PSRC) in April
1999 to review the policies and procedures used by Customs to process
passengers at our major international airports including personal
search procedures. The PSRC has completed field visits to our
international airports. I expect its report in the next few weeks.
Customs also established the Passenger Data Analysis Team (PDAT) to
review and analyze personal search data. In addition, Customs has
improved the personal search data collection process by making specific
input of data mandatory. Additional data is now collected from
travelers subjected to a personal search. This data is reviewed weekly
by management to ensure its integrity.
In November 1999, the new Personal Search Handbook was issued and
training was provided to all Customs Inspectors. Over 8,000 Customs
Officers, including upper level management, supervisors, Canine
Enforcement Officers, and Inspectors have received this training. The
Personal Search handbook has now been distributed to all appropriate
personnel.
Customs is committed to its pursuit of narcotics smugglers while at
the same time protecting our employees and treating the traveling
public in a courteous and professional manner. I believe these new
policy changes will guard individual rights while ensuring Customs can
still meet its mission to intercept contraband at our Nation's borders.
Counter-Terrorism
Customs has established an in-house, multi-discipline Counter-
Terrorism Working Group to coordinate Counter-Terrorism issues, to
include training; task force participation; technology R&D;
intelligence dissemination and other Counter-Terrorism related matters.
We have provided training, in the areas of WMD and Antiterrorism/
Aviation Security, to Inspectors, Canine Enforcement Officers and
Special Agents designated with Counter-Terrorism responsibilities.
Additional training in Anti/Counter-Terrorism is being added to the
Basic Inspector course in fiscal year 2000 and Counter-Terrorism
training is being developed for Special Agents.
Actionable intelligence collection and dissemination continues to
be an important function of Customs Counter-Terrorism program. Special
Agents actively participate in FBI Joint Terrorism Task Forces
throughout the United States and provide expertise in the areas of
strategic and financial investigations. Special Agents and Intelligence
Research Specialists have been assigned to the FBI and the CIA to
coordinate Counter-Terrorism investigative and intelligence activities
that have a nexus to Customs violations.
Stolen Vehicles
Customs also works jointly with the National Insurance Crime Bureau
(NICB) and other law enforcement entities to detect stolen vehicles.
There are five locations where NICB Agents are working on site with
Customs Inspectors. Customs processes approximately 600,000 legally
exported vehicles annually. NICB claims that over 200,000 stolen
vehicles are exported from the United States each year as units or as
parts.
Customs uses an electronic system that conducts queries of Vehicle
Identification Numbers to the National Crime Information Center (NCIC),
NICB and other databases to detect stolen vehicles prior to
exportation. In addition, the NICB Vehicle Export Program, a stand-
alone online system, is being used by Inspectors to access vehicle
history and assist with Vehicle Identification Numbers at 10 ports.
During fiscal year 1999 Customs seized 1,343 outbound stolen
vehicles with an estimated value of more than $16.5 million.
Forced Child Labor
The investigation of allegations of goods manufactured or produced
with convict, forced or indentured labor, including forced or
indentured child labor, is among the most difficult responsibilities of
Customs. The investigations require special training, difficult
negotiations with Foreign governments, and highly specialized
intelligence. Special Agents who are part investigator and part
diplomat, supported by highly specialized Intelligence Research
Specialists. Special Agents must travel great distances and conduct
investigations under trying physical, and political circumstances.
Through Outreach Programs with foreign authorities, public advocacy
groups, and other U.S. agencies and organizations, Customs has
developed working relationships in an effort to identify products
manufactured or produced with some form of proscribed labor that are
imported into the United States. As an outcome of the greater scrutiny,
Customs has issued five Detention Orders which, to date, have resulted
in three detentions. Detention Orders delay the entry of goods into the
United States, until the importer provides Customs with proof that the
goods were not produced with forced labor. As the result of one of
these Detention Orders, Customs discovered the organized smuggling of
beedi cigarettes to avoid the Customs Duties and Federal Excise Tax on
tobacco products.
Tobacco Smuggling
International cigarette smuggling has grown to a multi-billion
dollar a year illegal enterprise linked to transnational organized
crime and international terrorism. Profits from cigarette smuggling
rival those of narcotic trafficking. The United States plays an
important role as a source and transshipment country. Additionally,
large sums of money related to cigarette smuggling flow through U.S.
financial institutions. Customs has taken steps to disrupt and
dismantle some of the smuggling networks in cooperation with foreign
law enforcement officials. Customs is studying the dramatic increase of
cigarette imports into the United States in the last two quarters of
1999. The increased scrutiny, directed at certain beedi cigarette
imports from India, revealed the previously unknown smuggling of beedi
cigarettes into the United States that has resulted in a loss of
Customs duties and Federal Excise Tax.
Intellectual Property Rights
The enforcement of our Intellectual Property Rights (IPR) continues
to be Customs priority. We recognize that IPR crime is a problem that
is global in proportion, adversely affecting domestic and international
business. The explosion of IPR crime is, in part, the result of
increased technological advances associated with computers and the
Internet. Due to our border search authority, Customs has unique
authority and qualifications in the fight against IPR crime. During the
last 3 fiscal years, Customs enforcement efforts have resulted in
record breaking IPR seizures and significant investigative activity.
Customs continues its concerted effort to detect and seize
infringing merchandise entering the United States and to investigate
those individuals and organizations involved in those illicit schemes.
This mission is accomplished through the cooperation of various
disciplines within Customs and with other domestic and foreign law
enforcement.
Customs, in coordination with the Department of Justice, has
developed and begun limited operation of the multi-agency National
Intellectual Property Rights Coordination Center. The Center will
coordinate U.S. Government law enforcement activities involving IPR
issues. The Center will integrate information and intelligence obtained
from both domestic and international law enforcement, as well as,
private industry pertaining to IPR crime. This information will be
disseminated for appropriate investigative and tactical use. The Center
will assist in the enhancement and further development of
investigative, intelligence and interdiction capabilities.
Textile Smuggling
Customs has increased its efforts in combating the smuggling and
illegal transshipment, to avoid quota restrictions, of textiles and
wearing apparel. Worldwide, many violators continue to participate in
the criminal transportation and importation of textiles and apparel
goods into the United States. The textile production verification team
is still the primary resource for Customs in identifying illegal
textile transshipment.
Many of Customs investigative field offices within the Office of
Investigations concentrate on the smuggling of textiles via in-bond
diversion. These offices have successfully infiltrated smuggling
organizations with the use of undercover operations. These undercover
operations have identified transnational criminal organizations that
have smuggled hundreds of containers of textiles and other merchandise
into the commerce of the United States. This activity has deprived the
United States Government of customs duties and has violated the trade
restrictions implemented through the quota and visa systems. Customs
will continue to attack this problem through the use of undercover
operations and other traditional investigative techniques.
Financial Investigations
Customs is a leader in the Federal government's efforts to combat
money laundering and it provides key support to the National Money
Laundering Strategy. In order to target the money launderers and the
systems they employ, Customs has been given a broad grant of authority
in the conduct of international financial crime and money laundering
investigations. This authority is primarily derived from the Bank
Secrecy Act (BSA) and the Money Laundering Control Acts of 1986 and
1988.
Customs has implemented an aggressive strategy to combat money
laundering, and now dedicates in excess of 400 agents worldwide to
money laundering investigations. Our approach involves interdiction
efforts by Customs Inspectors, criminal investigations by Customs
Special Agents, and in partnership with Treasury, FinCEN and others,
the design and implementation of innovative regulatory interventions,
such as the Geographic Targeting Order.
These efforts against money laundering are not limited to drug
related money laundering, but to the proceeds of all crime laundered in
a variety of ways. During fiscal years 1998 and 1999, money laundering
investigations conducted by Customs resulted in the arrest of over
2,100 violators and the seizure of more than $600 million.
In achieving this success, Customs relies on a variety of
enforcement tools to attack money launderers and the systems they use
to launder their criminal proceeds.
Asset Identification and Removal Groups
In response to the threat and challenge of identifying criminal
assets, Customs created Asset Identification and Removal Groups, or
AIRGs, to target the assets of criminal organizations as early as
possible. Currently, Customs has trained and equipped 21 AIRGs,
composed of Special Agents, Auditors, and Forensic Accountants.
Our AIRG team in South Florida traced the assets of a convicted
marijuana smuggler who, for nearly 15 years, hid his assets through a
myriad of nominee corporations, business dealings, and offshore bank
accounts. Despite his best efforts, the AIRG was able to trace the
profits of his drug trade. Last year, this convicted drug smuggler
forfeited $50 million to Customs, the largest single Customs and
Treasury Department monetary seizure. The Monroe County (Florida)
Sheriff's Office provided substantial assistance to the investigation
and based upon their contributions last year, Customs shared $25
million of the seized money with that department.
As part of Customs critical role within the Treasury led Black
Market Peso Exchange (BMPE) Working Group, these groups will be
augmented this year to focus on the BMPE. There will also be a
Suspicious Activity Review Unit within each group that will work to
disseminate intelligence gathered from Suspicious Activity Reports and
distribute the information to our field agents.
Money Laundering Coordination Center
The Customs Money Laundering Coordination Center, or MLCC, is now
operational and will soon provide 24-hour deconfliction support to all
Customs undercover financial investigations. By doing so, the MLCC acts
as a safety mechanism so that all Customs undercover actions are
tracked and coordinated in real time, thus ensuring that our numerous
money laundering investigations do not conflict with one another and
that undercover agents are not unknowingly pursuing the same target.
The MLCC also analyzes information provided by these operations in
order to more fully develop targets and expand investigations. We have
invited all Federal law enforcement agencies that are conducting
relevant investigations to participate in the MLCC.
As outlined in the National Money Laundering Strategy, the Money
Laundering Coordination Center is also the repository for all U.S.
Government information relating to Black Market Peso Exchange.
Information is gathered on money brokers, bank accounts, trade data and
other targets. The information is analyzed by Customs to identify any
targets, systems, and patterns that are then sent to our field offices
for further investigation.
``Non-Narcotic'' Money Laundering
The money laundering investigations conducted by Customs are not
limited to organizations that launder drug proceeds. Customs has
primary international jurisdiction involving violations of Title 18 USC
2314 which enables us to address money laundering outside of the
context of drug trafficking.
A number of initiatives are underway which are designed to target
non-narcotic money laundering. For instance, our Numerically Integrated
Profiling System (NIPS) has the ability to manipulate import/export and
BSA data to determine anomalies, trends, patterns and suspicious
activity.
Customs participates in Project Colt, which is a joint Canadian-
U.S. law enforcement initiative that targets telemarketers in Canada
who prey upon elderly U.S. citizens in a lottery and advance fee scam.
Since last June, Project Colt has seized and returned over $9 million
to U.S. and Canadian victims.
Customs also targets Prime Bank Note schemes and other investment
schemes. For example, Operation Risky Business, conducted by our
Tallahassee office focuses on a worldwide advance fee scheme that
targeted U.S. businessmen. The total loss to U.S. victims in this case
is in excess of $60 million. In Phoenix, Customs Agents developed an
initiative targeting Prime Bank Instrument frauds that utilized foreign
banks to launder and conceal funds from investors. Our agents have
seized over $24 million from violators in that case.
Bulk Cash Smuggling
Customs continues to seize large amounts of bulk outbound cash at
our airports, seaports, and land borders. Over the past 4 years, we
have seized in excess of $233 million in cash that violators had
attempted to smuggle out of the United States.
International criminal organizations routinely collect sizeable
amounts of cash derived from illegal activities and then attempt to
smuggle the cash in large shipments out of the United States. Customs
has discovered and seized bulk cash shipments in cars, boats, stereo
equipment, and in hidden compartments. The amounts of money can be
staggering. In Newark, New Jersey, Customs seized over $11 million in
truck transmissions. In Miami, we seized $9 million hidden in stereo
gear. Our agents, acting in conjunction with our undercover
investigations, routinely find money stash houses that have hundreds of
thousands of dollars bundled up and ready to be smuggled out of the
country.
Technology strengthens outbound inspection efforts, while
facilitating normal border traffic flow. Non-intrusive technology and
other equipment assist Customs Inspectors and Currency Canine
Enforcement Officers in the search of cargo and conveyances at
seaports, courier hubs, and on the Southern land border for undeclared
currency. In fiscal year 2000, Customs was appropriated $2 million to
purchase crucial additional equipment for our outbound interdiction
efforts. This funding will provide seven mobile x-ray vans, three tool
trucks, and three contraband detection kits. The equipment should in
effect pay for itself within the first full year of operation.
Foreign Drug Intelligence Collection
In August 1999, Customs signed a Memorandum of Understanding with
the Drug Enforcement Administration (DEA) granting Customs the
authority to collect counterdrug intelligence overseas in support of
the counterdrug mission of Customs. The requirement for Customs to be
given the authority to collect counterdrug intelligence overseas was
recognized by ONDCP in the White House Task Force on the Coordination
of Counterdrug Intelligence Centers and Activities. This interagency
task force carried out an exhaustive review of the national counterdrug
intelligence architecture in 1998.
In October 1999, Customs detailed a Special Agent and an
Intelligence Analyst to Mexico for 90 days. This initial phase was
largely exploratory and consisted of establishing contacts with DEA and
appropriate personnel within the Embassy in Mexico City to assess how
the Foreign Intelligence Collection (FIC) team could best accomplish
the mission of collecting tactical drug intelligence. The FIC team will
return to Mexico in mid-March for 30 days to conduct visits to Northern
Mexico DEA Offices in Juarez, Monterrey, Hermosillo, and Tijuana to
assess the availability of tactical intelligence. Customs is planning
to send another FIC team to Ecuador during the April timeframe.
Intelligence Collection and Analysis Teams/BCI
Through the Border Coordination Initiative (BCI), we have continued
our efforts to build a strong platform of cooperation with our
counterpart agencies, the Immigration and Naturalization Service (INS)
and the U.S. Border Patrol (USBP), along the Southwest Border.
We now have full participation in the Intelligence Collection and
Analysis Teams (ICATs) which were formed to create a seamless process
of gathering tactical intelligence which can be used by all the
participant agencies in their quest to interdict drugs, illegal aliens,
and other contraband.
International Affairs
Customs develops partnerships with other U.S. government agencies,
foreign governments, and private organizations for the purpose of
improving trade and enforcement practices worldwide.
Partnerships help to provide the funding that is needed to deliver
critical assistance to foreign governments trying to improve the
effectiveness of their border management agencies. Our most significant
projects are those funded by the Department of State and/or the Agency
for International Development. Some partnership arrangements, such as
the Americas Counter-Smuggling Initiative (ACSI), involve Customs
working jointly with foreign governments and the private sector toward
shared goals.
Efforts to improve international trade continue with cooperation
from other government agencies and international organizations--
specifically the Asia Pacific Economic Cooperation (APEC), World Trade
Organization (WTO), World Customs Organization (WCO), and the Caribbean
Customs Law Enforcement Council (CCLEC), to name a few. Customs works
closely with these organizations to reduce procedural trade barriers
and seek greater standardization, transparency, simplification and
automation of trade practices.
Additionally, the United States negotiates Customs Mutual
Assistance Agreements with foreign customs administrations. These
agreements provide a framework for mutual assistance to prevent and
investigate any offense against the customs laws of either country.
Customs also pursues its mission of protecting the borders of the
Nation through international efforts. In cooperation with the
Department of State and others, we attempt to strengthen the
infrastructure of foreign customs administrations and police agencies
so that there can be more effective barriers against narcotics and
other dangerous contraband, which might otherwise reach the United
States. More effective border control agencies in the nations with
which we trade also lead to better enforcement of the rules of
international trade; facilitation of that trade; and more stable and
prosperous political and economic situations.
During fiscal year 2000, Customs undertook an extensive program of
integrity and anti-corruption awareness training in several regions of
the world. This training is largely funded by the Department of State,
Bureau for International Narcotics and Law Enforcement Affairs. The
programs are being offered in Central America, Colombia, Haiti, South
Asia, China, Nigeria, and Bulgaria. We seek to exchange ideas and
information related to personnel practices, appropriate laws and
regulations, codes of conduct, internal affairs operations, integrity
awareness programs, etc., which will lead to more professional customs
and police agencies.
It is our hope that these cooperative engagements of foreign border
control organizations will result in significant initiatives in the
countries involved to increase the level of professionalism among
officers required to interdict dangerous contraband, enforce the rules
of trade, and increase the collections of customs revenue upon which
many of these nations heavily depend.
For almost a decade, Customs has provided technical assistance to
other Customs and law enforcement agencies in Eastern Europe and the
former Soviet Union to stem the flow of Weapons of Mass Destruction
(WMD) and their components. Using home-grown expertise and technical
expertise from the Department of Energy, Customs has developed and
implemented several programs to familiarize and train foreign law
enforcement officers on the knowledge, techniques and skills needed to
interdict and investigate the smuggling of chemical, biological, and
nuclear components and delivery systems.
Over the past 3 years, Customs implemented, with the Department of
Defense, Counterproliferation Training Program throughout Eastern
Europe and the newly Independent States of the former Soviet Union. The
program has three elements: training, equipment, and short-term
technical advisors. Training is mostly done overseas in the host
country, in their working environment. Most of the training is
accompanied by equipment. The equipment can be categorized as either
time tested low-tech items, such as hammers, drills and flashlights, or
newer high-tech items, which would include handheld radiation detection
systems, fiber optic scopes and density meters. One training course
known as RADACAD, short for Radiation Academy, is taught by Customs and
experts from the Department of Energy's Pacific Northwest National Lab
on the Hanford Nuclear Reservation in Washington State. RADACAD is the
only law enforcement training class that allows students to work with
special nuclear materials. The third elements of the program are short-
term technical advisors. These advisors are most instrumental in
implementing the training techniques and equipment delivered under the
program. In addition, they try to work with foreign law enforcement
agencies to develop better legal, managerial and physical border
security infrastructures.
We have already seen successes with this program. One example is a
situation where former students of the program seized special nuclear
materials. We believe that if we can familiarize foreign law
enforcement officials with the threat and how to contain it, we will
end up making the United States, and the world, a safer place to live.
recent accomplishments
Anti/Counter-Terrorism
The prevention of terrorist threats at our borders is a cornerstone
of Customs responsibilities. Our mission in combating international
terrorism is twofold: protect the American public from Weapons of Mass
Destruction (WMD) and other instruments of terror, and prevent
international terrorists from obtaining WMD materials and technologies,
arms, funds, and other material support from U.S. and foreign sources.
The importance of this mission was illustrated during the period of
``Heightened Alert'' over the 1999-2000 holiday season. In December
1999, Customs apprehended a suspected terrorist, Ahmed Ressam, in Port
Angeles, Washington. Ressam was transporting hazardous materials,
including timing devices and other bomb making components.
Customs subsequently articulated a new alert plan for any future
threats of this nature. The plan outlines four alert levels, each of
which carries a specific set of instructions for field managers to
implement once that alert is activated. These actions are designed to
ensure an appropriate response to the threat at hand while also
facilitating the movement of normal border traffic flows.
Internal Conspiracies
The drug smugglers that we combat continue to adapt to our counter
smuggling methods. One of their increasingly common techniques is the
use of ``internal conspiracies.'' Internal conspiracies rely on workers
within a company, industry, or port to introduce drugs into otherwise
legitimate cargo or conveyances. Customs ``Operation Overlord'' focused
its investigations on just such an internal conspiracy at Miami
International Airport in August 1999.
In cooperation with other law enforcement agencies, Customs was
able to uncover internal conspiracies at several major airlines and
ground service companies. The investigation culminated with the arrest
of more than 58 subjects, including three law enforcement officers.
During the course of our investigation we seized 691 pounds of cocaine
and 17 pounds of heroin. These seizures were in addition to the
``sham'' drugs that conspirators moved on behalf of undercover agents
during the course of the investigation.
In addition to highlighting the relative ease with which smugglers
can introduce drugs into the commercial aviation environment,
``Operation Overlord'' also highlighted serious deficiencies in overall
security at U.S. airports. Working with other law enforcement and
regulatory agencies, Customs is trying to use the lessons learned from
Operation Overlord to improve security at our airports.
Internet Activities
Customs mission also extends to the borderless world of cyberspace.
With the evolution of the Information Age and the growth of the
Internet, traditional enforcement methods are being bypassed by the
more sophisticated criminal elements. The cyberspace environment
provides criminals with a means to both coordinate and to conduct
criminal activity anonymously.
In addition, consumers increasingly order goods ``online'' from
foreign locations. Most of these items will arrive in the U.S. in small
packages and be processed by at least one of the 14 Customs
International Mail facilities or several courier hub locations. In
fiscal year 1999, the 220 personnel assigned to International Mail
locations alone cleared more than 1 billion flat parcels, a figure that
is sure to increase. The ease and volume with which people can order
Foreign items makes it easier to obtain goods prohibited from import
into the United States.
The most recent example of this is in the area of illegal
importation of prohibited pharmaceuticals. In 1999 Customs realized a
significant increase in pharmaceutical seizures: from 2,139 seizures in
1998 to 9,725 seizures in 1999. Most of these seizures are attributed
to the explosion of online pharmacies. An ever-increasing number of
these pharmacies are located abroad, outside the jurisdiction of U.S.
regulators and law enforcement officers. Many of these sites blatantly
advertise the sale of prescription drugs without the need of a
prescription. Among the most common drugs seized by Customs are valium,
codeine, anabolic steroids, rohypnol (the so-called ``date rape'' drug)
and fenfleuramine (fen-phen). Coping with this problem will require a
coordinated effort involving interdiction, investigation by the Customs
CyberSmuggling Center and cooperation with foreign governments.
Although foreign online pharmacies can be found on every continent,
Thailand has emerged as one of the most prolific source countries. In
June 1999, the Customs Attache in Bangkok initiated a special operation
with Thai law enforcement agencies to target suspect pharmaceutical
shipments to the U.S. During this operation, Thai authorities assisted
in the identification of over 4,500 shipments to the U.S. and developed
sufficient evidence to take enforcement action against the Thai
companies. Customs CyberSmuggling Center agents provided technical
assistance to the Thais. Search warrants were executed on 7 online
pharmacies. In all, 22 suspects were arrested and more than 2.5 million
pharmaceutical dosage units were seized. Records from one company
indicate that 80 percent of the orders were destined to the U.S. The
immediate impact of these raids was that exports of unlicensed
pharmaceuticals to the United States were non-existent a month
following the Thai enforcement action.
Child Pornography
Between November 1998 and September 1999, Customs child pornography
cases resulted in 436 convictions nationwide.
The amount of child pornography on the Internet, the numerous
incidents of enticement of children by adults for sexual purposes and
the alarming rise in child sex tourism has prompted Customs agents to
step up efforts to combat this menace.
The Customs CyberSmuggling Center works closely with the National
Center for Missing and Exploited children to process hundreds of child
pornography leads every week. Cooperation with foreign law enforcement
is vitally important due to the borderless nature of the Internet.
Internet investigations require investigators to move quickly to
capture evidence from Internet service providers necessary for
successful prosecution. The informal and timely exchange of information
between law enforcement officers around the world is a necessity.
This cooperation has led to many successes. For example, as a
result of a joint investigation with the German Federal police, the
CyberSmuggling Center has referred 24 cases to field offices since
October 1, 1999. Customs is currently involved in a joint child
pornography/money laundering investigation with several other countries
involving the distribution of child pornography. In addition, Customs
is working closely with foreign law enforcement in Europe, Central
America and Southeast Asia on child sex tourism investigations.
In the first quarter of fiscal year 2000, approximately 100
Internet based investigations developed by Customs CyberSmuggling
Center were referred to field offices along with hundreds of Internet
leads to our foreign counterparts. We sent 101 leads to Canada alone.
Customs strategic approach to combating cyber crimes also includes
outreach and training initiatives. In the area of outreach, we have an
aggressive public awareness program and spend a significant amount of
time informing the public of potential dangers, especially to children,
on the Internet. We are working to build a solid infrastructure to
combat the shift to high tech crimes by purchasing and utilizing state
of the art equipment and by bringing together the various expertise
required for Internet-based investigations. We are developing a
comprehensive training program for Customs agents and domestic law
enforcement personnel as well as our foreign counterparts to improve
these officers' skills in conducting Internet-based investigations.
fiscal year 2001 budget request
For fiscal year 2001, Customs proposes a total program level of
$2,368,207,000 and 17,544 Full Time Equivalents (FTE). Of this amount,
$11 million will be reimbursed from the Treasury Forfeiture Fund.
Excluding Treasury Forfeiture Fund proceeds in both fiscal year
2000 and fiscal year 2001, the fiscal year 2001 budget represents an
increase of 14.8 percent above the fiscal year 2000 enacted
discretionary level. In addition, the Administration has requested $210
million for ACE development to be offset by a proposed fee.
Drug Investigations Initiative--$25 million, 107 FTE
Over the last several years, the wholesale price of imported
illicit drugs, such as cocaine and heroin, have plummeted to record low
levels. This is particularly alarming since research has shown that
there is a direct correlation between consumption and price. Research
has also shown that effective high-level enforcement (that is,
enforcement above the ``street'' level) can raise prices, thereby
reducing consumption. In an effort to address this disturbing trend, it
is the intent of Customs to mount a comprehensive investigative effort
to enhance high level enforcement by identifying and dismantling major
drug smuggling organizations (DSOs).
Successful dismantling of DSOs requires that Customs agents target
the organization's operational cells (i.e., transportation,
distribution and money laundering) and disrupt the interrelationship
that exists between them. Customs does this by building an
``investigative bridge'' between border smuggling activity and the
organization's command and control hierarchy located at inland U.S.
cities. Special agents employ a variety of techniques to build the
investigative bridge, including controlled deliveries, undercover
operations, electronic and physical surveillance, and the cultivation
of sources of information. However, effective employment of these
techniques is labor-intensive and requires many investigative hours.
If funded, 214 additional agents would be hired and strategically
placed at both the border and inland command and control cities to
conduct long-term, complex cases that would focus on the most
significant DSOs. These investigative efforts will increase the return
in enforcement results to include increased asset seizures and higher
level arrests. If sustained, it is anticipated that these results will
eventually translate into an increase in the risk borne by drug
traffickers and force them to find alternative methods, raise their
prices or curtail their trafficking operations.
Narcotics Illicit Proceeds Strategy Initiative--$10 million, 49 FTE
The majority of undeclared currency leaving the U.S. involves
proceeds from narcotics trafficking activities. The ever-increasing
volume of cross-border traffic means that Customs should conduct more
examinations more effectively in order to keep up with the activities
of the Drug Smuggling Organizations. Due to the already extensive
demand placed on current personnel, outbound examinations are currently
being conducted on a very limited basis. In fiscal year 1999, Customs
seized more than $60.5 million in undeclared outbound currency, even
with the limited number of human resources conducting outbound
examinations. More than 71 percent of that currency was destined to
drug trafficking countries. If funding is approved, Customs ability to
seize illegal narcotics proceeds would increase substantially.
Forced Child Labor Initiative--$5 million, 9 FTE
Customs is spearheading an initiative to prevent the importation of
merchandise, manufactured or produced by Forced Child Labor, into the
United States. In furtherance of this initiative, Customs investigates
both historical and current allegations of Forced Child Labor through
the deployment of investigative teams to suspect foreign manufacturing
facilities, along with fostering better working relationships and
cooperation with foreign law enforcement agencies. Additionally,
Customs conducts intensive Outreach Programs and training for law
enforcement agencies, manufacturers, producers and other government
agencies in the countries that have been identified as having a
significant number of allegations regarding Forced Child Labor.
The funding will be used to: establish and staff two regional
offices in countries from which a significant number of allegations of
Forced Child Labor have originated; add an additional Special Agent
position to the SCR/Hong Kong; add an additional Special Agent position
at the Forced Child Labor Command Center and establish eight Special
Agent positions in domestic cities where the importation of a high
volume of goods, made by Forced Child Labor, has been identified.
The establishment of the additional regional offices and Special
Agent positions will result in an increase in pro-active investigations
along with the exclusion of goods, identified as having been made with
Forced Child Labor, from the United States.
PDD 62 (Major Events Security)--$12.8 million, 5 FTE
There is consensus among the national intelligence community of an
increasing airborne or maritime terrorist threat, capable of delivering
a conventional or unconventional (nuclear, biological or chemical)
attack on specific, high visibility, national events. The United States
Secret Service (USSS), which is charged with planning, designing and
implementing security at major national events, does not have the
aviation or marine resources necessary to defend against threats in
these environments.
In order to carry out the direction set forth in Presidential
Decision Directive (PDD) 62, the Customs Air and Marine Interdiction
Division (AMID) will dedicate air resources in support of the USSS to
enhance defenses against conventional and unconventional terrorist
attacks at designated national special security events. The proposed
concept is to provide dedicated Customs aviation resources in some of
the following: enforcement of temporary flight restricted areas (air
only), site and route surveys, surveillance, and tactical insertion/
extraction of USSS sniper/assault teams.
Customs proposes to establish a dedicated air branch to support the
USSS mission as outlined in PDD 62. The branch would consist of two AS-
350 helicopters, one King Air aircraft reassigned from a current AMID
location; availability of 3 Black Hawk helicopters on 72 hour notice;
funds for additional flight hours; facility lease costs; and additional
staff for this branch.
Enforcement Infrastructure--$19.8 million, 0 FTE
To operate safely and effectively, Customs air assets require
special communication, surveillance, and automated data processing
equipment to be installed on board or at ground support centers. Funds
will support replacement of deteriorating and obsolete safety
equipment, including infrared radar systems and surveillance equipment
aboard current aircraft and original mission equipment at Customs Air
and Marine Interdiction Coordination Center (AMICC). AMICC is the
Nation's only radar command center, responsible for the tactical
direction of Government law enforcement efforts aimed at intercepting
drug smugglers entering the United States.
Customs aircraft routinely and increasingly operate in airspace
without benefit of control tower assistance. Often, this uncontrolled
airspace overlies treacherous, mountainous terrain, requiring complex
and demanding flight procedures. To dramatically increase the margin of
safety for Customs aircraft and flight crews, funds will be provided to
install traffic collision avoidance systems, with integrated ground
proximity warning systems, into all Customs interdiction aircraft. The
installation of these systems on board Customs aircraft will diminish
Customs probability of suffering tragic accidents similar to those that
occurred in the recent past to DOD and Department of Commerce
personnel.
Automation Modernization--$338.4 million, 0 FTE
Customs must modernize its infrastructure and its commercial
processing system, the Automated Commercial System (ACS), if we are to
keep pace with the rapidly changing global economy and its rapidly
growing technological developments. These infrastructure upgrades will
also provide the necessary backbone to further our efforts in anti/
counter-terrorism, Internet enforcement, child pornography, and
narcotics interdiction activities, just to name a few. With a more
modern, efficient information technology infrastructure, our systems
will be more efficient and respond more quickly, thus enabling our
employees to work more effectively in meeting our mission critical
demands. Our modernization efforts will transform our technology
infrastructure and systems, and the processes by which we develop and
deliver technology to our customers.
This $338 million request consists of:
--$123 million for ACS life support--$67 million is in our base and
an additional $56 million is requested for hardware, software,
and data circuit upgrades required to minimize future ACS
system brownouts. ACS is 16 years old and runs on an
infrastructure just as old. Over the past year, ACS has
experienced numerous 19brown-outs' due to antiquated
infrastructure hardware and software. These 19brown-outs'
result in delayed trade processing and revenue collection.
--$210 million for ACE--$139 million for ACE software development and
$71 million for infrastructure. To prepare for the transition
from ACS to ACE, Customs has:
--LDeveloped a blueprint for ACE software development;
--LDeveloped an enterprise architecture;
--LEstablished process to move toward level 2 Capability Maturity
Model (CMM) software development;
--LEnlisted the support of an independent contractor, MITRE, to
partner with us in this effort;
--LEstablished the Customs Modernization Office and Governance
Process;
--LDeveloped an investment management process;
--LCompleted an acquisition strategy; and
--LCompleted acquisition plan and source selection plan.
--$5.4 million for ITDS--these funds continue the base operations of
the International Trade Data System (ITDS) which was
transferred to Customs from the Department.
user fees
Automation Modernization Fee
The Administration proposes to establish a fee to fund the
development of the new trade system, ACE. The appropriated request
includes $123 million to support the existing transaction-based system,
ACS. A legislative proposal has been transmitted that would allow the
Secretary to establish this fee.
The recently completed cost-benefit analysis for conversion from
ACS to ACE shows that modernizing Customs trade data processing system
will provide significant benefits to both the Federal Government and
private industry. The Administration believes the proposed fee
appropriately captures some of the benefits that will accrue to private
business from modernization, including a streamlined cargo entry
process, account-based transactions, and a paperless process. The
Administration believes that it is imperative to secure funding for
this critical program. The Administration looks forward to working with
the Congress on the fee to ensure that funding for this critical
project is made available in fiscal year 2001.
conclusion
This concludes my statement for the record. I appreciate the
opportunity to appear before you today. I particularly want to express
my appreciation to this Subcommittee for its support of Customs in the
past and your continued interest and consideration of our fiscal year
2001 request. Your continuing support is essential to Customs ability
to accomplish our mission to protect the Nation's borders and to reduce
the flow of drugs into the United States.
Again, thank you for your consideration of the U.S. Customs
Service. I hope we can continue to count on your support during your
deliberations of the fiscal year 2001 budget process.
Bureau of Alcohol, Tobacco and Firearms
STATEMENT OF BRADLEY A. BUCKLES, DIRECTOR
Senator Campbell.Mr. Buckles.
Mr. Buckles. Mr. Chairman, Senator Dorgan, thank you for
allowing me this opportunity to testify in support of ATF's
fiscal year 2001 budget request. It is a tremendous honor for
me to appear before the committee representing the outstanding
men and women of ATF and the important work that they perform.
With me today is the new Deputy Director of ATF, Patrick
Hynes, who brings to the position 28 years of experience as a
law enforcement investigator.
Before I go too far, I would like to thank you and your
staff for the opportunity we had earlier this week to
participate in the technology exhibition. As you probably
gathered, ATF is quite proud of what we have been doing with
your support with innovative technologies that have expanded
our capability and further enhanced our ability to assist our
partners.
justification of budget request
Thanks to the remarkable leadership of John Magaw, my
predecessor, and the vital support and guidance from this
committee, the ATF you see today is strong, focused, and ready
to perform. Our fiscal year 2001 budget seeks $755 million and
4,671 FTE. This is an ambitious budget. But when measured
against the devastating cost of violent crime and almost $13
billion in revenue we will collect, we believe it is a sound
investment.
The growth we seek in this budget is essential if ATF is to
adequately carry out our responsibilities under existing law.
The majority of our proposed growth is to expand two previously
funded and proven initiatives, the Integrated Violence
Reduction Strategy and the Youth Crime Gun Interdiction
Initiative. Both of these initiatives rely on concentrated
enforcement of existing Federal laws, the application of state-
of-the-art technology, and most importantly, teamwork with our
State and local partners in working for safer communities.
Operation Cease Fire in Boston and Project EXILE in
Richmond are but two examples where ATF along with Federal,
State, and local enforcement authorities have worked together
and produced tangible results in reducing violent crime. The
additional resources we seek will allow us to bring these
projects to additional cities around the country and to
strengthen projects that are currently ongoing. This work will
also be bolstered by another initiative in our budget that
seeks funding to upgrade and expand our ballistics technology
network.
Much of your focus today and in the coming months will no
doubt be in our firearms initiatives, but I would urge that you
continue your support for the other vital work we perform as
well. For example, another important initiative requests
additional personnel to collect and protect hundreds of
millions of dollars in new revenue from a recently enacted new
cigarette tax.
In the past, this committee has insisted that ATF become
fiscally sound before you would support growth. With your help
and former Director Magaw's leadership, we have corrected our
budget imbalances. We are now in a position to grow and achieve
the goals we all share towards a sound and safer America.
prepared statement
Thank you for this opportunity to address the committee and
I stand ready to answer any questions that you may have.
Senator Campbell. Thank you.
[The statement follows:]
Prepared Statement of Bradley A. Buckles
Thank you Mr. Chairman, Senator Dorgan, and members of the
Subcommittee. I welcome this opportunity to appear before the
Subcommittee and present to you ATF's goals for fiscal year 2001 and to
report on the results of your previous investments in ATF.
I am pleased to introduce Mr. Patrick D. Hynes the newly appointed
Deputy Director of ATF. Mr. Hynes brings with him 30 years of Federal
law enforcement experience, 28 years as a law enforcement officer with
ATF.
Also with me today are my other executive staff members:
Mr. William Earle, Assistant Director for Management and Chief
Financial Officer; Mr. Andrew Vita, Assistant Director for Field
Operations; and Mr. Jimmy Wooten, Assistant Director for Firearms,
Explosives and Arson; Mr. Arthur Libertucci, Assistant Director for
Alcohol and Tobacco; Mr. John Manfreda, Chief Counsel; Ms. Gale
Rossides, Assistant Director for Training and Professional Development;
Mr. Patrick Schambach, Assistant Director for Science and Technology
and Chief Information Officer; Mr. David Benton, Assistant Director for
Liaison and Public Information; Mr. Richard Hankinson, Assistant
Director for Inspections; Mr. Lewis Raden, Executive Assistant for
Legislative Affairs; Ms. Toby Bishop, Executive Assistant for Equal
Opportunity; and Mr. Wayne Miller, Chief, Strategic Planning Office.
While I have the privilege of recently being appointed ATF's fifth
Director, I would like to express my appreciation to my predecessor,
John Magaw, for working with this committee toward the common goal of
strengthening ATF's infrastructure, which was essential for ATF to
continue to function as a highly professional and effective law
enforcement organization. In my 26 years of service to the Bureau, I
have had the opportunity to witness our history, participate in the
formulation of our strategic vision and assist in moving the Bureau
forward into a new century.
I thank the committee for their continued support for a new
headquarters facility to safely house ATF's employees. The all too real
threat to their safety was once again uncovered this past year when an
individual chose to mail three explosive devices to two ATF facilities
and the White House. Fortunately, one of the devices prematurely
detonated inside a mail trailer and the remaining devices were safely
disarmed upon discovery. The individual responsible for these acts was
apprehended by ATF and local authorities, pled guilty, and has been
sentenced to life plus 270 years incarceration.
I would also like to thank the committee for the support provided
to my predecessor over the last several fiscal years. The foresight of
this committee and the strategic investments you have provided have
allowed the Bureau to strengthen its infrastructure to adequately
support all program activities. Through calculated investments in
investigative equipment, training and information technology, this
committee sought to revitalize and restore ATF to a balanced and stable
position. I am pleased to report to you that your investments have been
well and prudently spent. For the fifth consecutive year, the Office of
the Inspector General's independent contractor (PricewaterhouseCoopers
LLP) has issued ATF its highest audit opinion of ``unqualified,'' with
no material weaknesses. A copy of our Accountability Report will be
delivered to each of your offices in the next few weeks.
Given the committee's long investments in ATF, there are
accompanying expectations. Expectations that a well-equipped, well-
trained, and well-disciplined organization will be more effective.
Expectations that a fundamentally sound organization with proven
results is capable of more. Expectations that, having restored the
``core'' of an organization, you have positioned that same organization
to assume more and varied duties. This committee has a right to expect
a return. As a result of your investments, ATF is positioned to
deliver.
As ATF's Director, I am pleased to present to you a requested level
of resources that builds upon the foundation you have firmly
established. This level of resources focuses on the personnel and
technology needed to address the varied and critically important
responsibilities that have increased over the past decade. In keeping
with your guidance, we have made our house sound. An integral component
of the growth will be recruitment of personnel to accommodate the
program expansions you have entrusted to us. The recruitment of
additional personnel in fiscal year 2000 and fiscal year 2001 will help
ensure the achievement of our shared vision of working for a sound and
safe America through innovation and partnership.
fiscal year 2001 budget request
ATF's fiscal year 2001 Salary and Expense (S&E) request justifies
$755,903,000 in direct budget authority and 4,671 full-time equivalent
(FTE). Our request accommodates the realignment of the Violent Crime
Reduction Trust Fund (VCRTF) programs into our S&E appropriation base
and represents an increase of $151,330,000, or 25 percent over the
total fiscal year 2000 enacted level of $604,573,000.
The majority of this increase is for expansion of proven
investigative and regulatory strategies designed to maximize effective
enforcement of existing laws and regulations. An additional $25,834,000
is required for mandatory payroll costs and other inflation.
ATF has a unique combination of law enforcement and regulatory
responsibilities. As Director, I will continue to focus on our core
mission and vision of ``Working for a Sound and Safer America . . .
Through Innovation and Partnership.'' ATF has developed sound
programmatic initiatives, based on existing laws and regulations, to
respond to crime and violent acts that threaten public safety and
instill fear in all Americans. Our vision helps us chart the course to
best serve the public and achieve new levels of effectiveness and
teamwork. I would now like to highlight some of the programs that
support our efforts on behalf of the American public.
Integrated Violence Reduction Strategy (IVRS)
ATF is requesting $41,322,000 and 193 FTE for expansion of the
Integrated Violence Reduction Strategy (IVRS) and will focus on several
core components of firearms enforcement aimed at reducing the illegal
possession and use of firearms.
IVRS is a national enforcement strategy that integrates several
core concepts which are adapted and applied in varying formulas to
address the specific law enforcement needs of a community. For example,
Project Exile in Richmond, Virginia, and Project Ceasefire in Boston,
Massachusetts, are two different, yet equally successful examples of
IVRS. The core elements of IVRS include reducing the illegal supply of
firearms to criminals; specific enforcement projects directed at
criminals who use and possess firearms; and the identification and
prosecution of prohibited persons who attempt to acquire firearms. All
components of IVRS use state-of-the-art information processing to
assist ATF and our State, local and Federal law enforcement partners in
identifying those engaged in the criminal misuse and illegal
acquisition of firearms. ATF is committed to working with law
enforcement agencies and prosecutors to ensure the continued success of
IVRS. Our experience in the fight against armed violence has
demonstrated that an integrated approach is the right approach.
Prevention, intervention and prosecution cannot succeed as segregated
strategies. They must be combined to meet the challenge of effectively
in reducing the criminal use of firearms in America.
Project EXILE and Project Ceasefire have been effective programs
for addressing firearms violence in certain cities. However, the
requirements and resources of each locality need to be evaluated
individually. One of the purposes of the Integrated Violence Reduction
Strategy is to allow U.S. Attorneys and ATF managers to collectively
identify their unique crime problems and formulate appropriate actions
to address them. Through the Violent Crime Coordinator, Armed Violent
Criminal Apprehension (formerly Achilles) Programs, as well as through
the Firearms Trafficking Program, ATF investigates and facilitates the
prosecution of firearms violators. These programs are components of the
Integrated Violence Reduction Strategy.
In fiscal year 2000, the Federal Bureau of Investigation's (FBI)
National Instant Criminal Background Check System (NICS) is projecting
that over 86,000 firearms purchase denials will be forwarded for ATF to
evaluate and act upon. With the fiscal year 2001 budget request, ATF
will devote additional field resources to investigate prohibited
persons who attempt to purchase firearms, as well as conduct more in-
depth reviews of licensee records to ensure that they are conforming to
the requirements of the Brady Act. To date, ATF has made more than
13,000 investigative referrals for field review on potential criminal
violations involving domestic violence offenses or those who are
subject to a restraining order. Additionally, more than 7,000 potential
criminal violations involving violent felons or serious drug offenders
have been referred to the field for investigation.
ATF's objective is to maximize voluntary compliance in the firearms
industry through education, partnerships, and a compliance inspection
program that uses ATF's inspection resources to focus on licensees
having multiple crime gun traces and/or other indicators of potential
firearms trafficking. The National Licensing Center processes and
issues all ATF firearm licenses. Under ATF's current application
program, all original applications are sent to the field offices for
investigation prior to issuance. Renewal applications are sent to the
field offices upon request.
Youth Crime Gun Interdiction Initiative (YCGII)
In fiscal year 2001, we are requesting $19,078,000 and 113 FTE for
expansion of the YCGII Program. This very successful program
complements IVRS by using a multi-faceted approach to break the chain
of illegal gun supply to youths and juveniles and reduce youth
violence. ATF will continue to assist comprehensive crime gun tracing
in participating cities, provide rapid high volume crime gun tracing
and crime gun market analysis through the National Tracing Center
(NTC), and train ATF, State, and local law enforcement. ATF is
proposing to expand this program to an additional 12 cities in fiscal
year 2001, bringing the total of YCGII cities to 50. This reinforces
the Administration's commitment to expand to 75 cities within 4 years.
Expanded Crime Gun Tracing
ATF is requesting $9,990,000 and 10 FTE for Comprehensive Crime Gun
Tracing that will provide nationwide comprehensive tracing capability
as well as faster trace results. The National Tracing Center (NTC)
provides State and local agencies with information on crime guns to
support its law enforcement efforts. The NTC provides valuable
investigative leads to assist in solving crimes committed with
firearms, and identifies those persons responsible for supplying crime
guns to criminals. The NTC maintains the record of all crime guns
traced by ATF, firearms stolen from firearms dealers, and records of
multiple sales of handguns. The Firearms Tracing System (FTS) provides
data on firearms which is used by ATF investigators to identify illegal
firearms trafficking. The funds requested in the fiscal year 2001
budget will assist 250 State and local agencies in building tracing
capability, and will allow ATF to complete traces and respond to
requests more rapidly, making information available in real time for
criminal investigations.
The NTC is also the national repository for Out of Business Records
maintained on approximately 400 million frames of microfilm. These
records are retrievable by the Federal Firearms Dealer Identification
Number. An effort has commenced to index the firearms by serial number
to enhance the retrieval process. The NTC plans to digitally image the
out of business records and use an automated process to index the
serial numbers. Currently 10 percent of traces are successfully
completed through out of business records and 25 percent of all traces
utilize these records.
Ballistics Identification
ATF is also requesting $23,361,000 and 10 FTE for Expanded
Ballistics Identification. This national system will allow crimes
committed with the same firearm to be connected through ballistics
imaging. This information will be joined nationally through the
Department of Justice's Criminal Justice Information System, Wide Area
Network. On December 2, 1999, ATF and the FBI executed a memorandum of
understanding (MOU) that will take maximum advantage of each agency's
strengths and resources. The MOU established a single, jointly-
operated, ballistics identification program in which ATF will manage
the field deployment of ballistics imaging equipment supported by the
FBI's management of interagency networking operations. Under the MOU,
FBI's DRUGFIRE units will be replaced with ATF's IBIS or next
generation ``unified systems'' developed from the best features of both
IBIS and DRUGFIRE.
Tobacco Compliance
ATF is also seeking $5,521,000 and 44 FTE to implement the second
phase of the Taxpayer Relief Act of 1997, (Tobacco Compliance law).
Increased revenue will be derived from the additional taxes imposed on
tobacco products at the higher tax rates. As enacted, this law requires
two floor stocks tax increases; one that took effect January 1, 2000,
and the second, which is effective January 1, 2002. The enacted
legislation also requires a new permit system for importers of tobacco
products. The funding requested in fiscal year 2001 would provide the
necessary resources to implement the legislation as enacted.
National Laboratory
ATF is also seeking $6,026,000 for above standard costs vital to
the completion, move in, operation, and maintenance of our new National
Laboratory facility. The new facility will include a replacement
laboratory building for the existing National Laboratory. The new
National Laboratory's Alcohol and Tobacco Laboratory will support ATF's
industry regulation and product taxation functions. The Forensic
Science Laboratory will provide evidentiary analysis for ATF criminal
investigations as well as for other State, local and Federal law
enforcement agencies. The new Fire Research Laboratory is the only fire
research and forensic laboratory in the world dedicated to criminal
investigations. The Fire Research Laboratory will dramatically expand
ATF's ability to support fire investigators on specific cases as well
as improve fire science knowledge as it relates to fire investigations.
Clearly, a budget request that seeks to add 488 FTE and a 25
percent increase in funding in a single year is ambitious, and perhaps
to some, even presumptuous. It is however, I believe, the logical and
expected outcome of this committee's investments in ATF, and this
committee's efforts to position ATF to grow to meet the mandates put
before us.
Before I ask this committee to make this additional investment in
ATF, it is my duty and responsibility to demonstrate to you that your
prior investments have in fact yielded the expected outcomes.
fiscal year 1999 atf accomplishments
Year after year, ATF works to make America a safer place for its
citizens by fighting violent crime. ATF has been entrusted with the
enforcement of the Federal firearms and explosives laws, as well as the
regulation of legal commerce in the commodities produced by these
industries. This dual duty places ATF at the forefront of efforts to
reduce violent crime through both regulatory and enforcement
initiatives.
As a result of the activities listed below, ATF referred 5,131
criminal cases recommending 6,804 defendants for prosecution in fiscal
year 1999. This level of activity represents an increase of 1,041
additional criminal cases having been referred for prosecution over
fiscal year 1998 levels. Fiscal year 1999 is the second consecutive
year that the number of cases ATF has referred for prosecution has
increased. In fiscal year 1999, the increase was 25 percent over the
preceding year. Over this same time period, ATF special agent staffing
only increased by 6 percent.
firearms enforcement
Over the past 5 years, ATF has expanded its illegal market
disruption activity, particularly as it relates to guns being funneled
to juveniles and youths, while remaining focused on serious violent
offenders wherever State laws or policies are not as effective as the
Federal alternative. By deterring and incarcerating recidivists and
active shooters while also reducing the illegal supply of firearms, the
Bureau can have the greatest impact on reducing violent crime.
Brady Law
Between November 30, 1998, (the effective date of the National
Instant Criminal Background Check System) and February 2, 2000, ATF has
received over 104,000 reports of denied firearms purchase applications
from the FBI's NICS unit regarding persons identified as prohibited
from firearms possession. Nearly 25,000 of those denials have resulted
in referrals to ATF field offices for further investigation. As a
result of NICS referrals, ATF has made 100 arrests and submitted 437
case reports charging 465 defendants with violations of the Federal
firearms laws. Over 14,000 referrals are under evaluation for possible
investigation.
In an additional 4,976 instances, firearms were delivered to
persons identified by the FBI after the 3-day waiting period as
prohibited from possession. In each of these 4,976 cases, ATF conducted
an immediate investigation to determine if, in fact, the individual
receiving the firearm was legally prohibited from such receipt and
possession. Where it has been determined that an individual is legally
prohibited from possession, immediate actions have been undertaken to
secure the firearm from the individual and initiate prosecution where
warranted.
ATF published regulations implementing the permanent provisions of
the Brady Handgun Violence Prevention Act by requiring entities
licensed as Federal firearms importers, manufacturers, and dealers,
with some exceptions, to contact the NICS before transferring any
firearm to an unlicensed individual.
To date, ATF has made more than 13,000 investigative referrals to
our field offices on potential violations of domestic violence offenses
or of persons who are subject to a restraining order. Additionally,
more than 7,000 potential criminal violations involving either violent
felons or serious drug offenders have been referred to the field.
Regulation of the Commerce in Firearms
ATF's objective is to maximize voluntary compliance in the firearms
industry through education, partnerships, and a compliance inspection
program that focuses on licensees with trace indicators of potential
firearms trafficking. The National Licensing Center processes and
issues all ATF firearm licenses. Under ATF's current application
program, all original applications are sent to the field offices prior
to issuance.
As of February 1, 2000, there are 104,070 Federal firearms
licensees in this Nation, a substantial reduction from the nearly
288,000 licensees authorized to conduct commerce in firearms prior to
the passage of the Brady Law. In an effort to ensure that firearms
industry members fully understand the regulatory requirements of
maintaining their license, we conducted 155 seminars for licensees in
fiscal year 1999. ATF also inspected 11,053 licensees, resulting in the
detection of 3,860 violations of regulations, and 2,426 referrals to
ATF Special Agents and other Federal, State, and local law enforcement
agencies for the investigation of possible criminal conduct.
ATF's National Firearms Act Branch maintains the National Firearms
Registration and Transfer Record (NFRTR), which is the central registry
of NFA firearms, such as machineguns, short-barreled rifles, shotguns,
silencers, and destructive devices. In fiscal year 1999, the NFA Branch
processed 306,515 registrations of NFA firearms. ATF searches the NFRTR
in support of criminal investigations and regulatory enforcement
inspections. The NFA Branch is in the process of imaging and indexing
all NFA records back to 1934 to afford ATF the highest possible
accuracy of the NFRTR.
Our Firearms and Explosives Imports Branch (FEIB) is responsible
for processing all applications for permits to import firearms,
ammunition, and other defense articles into the United States, and for
maintaining the registry of commercial importers of such articles. In
fiscal year 1999, FEIB received 12,776 import permit applications, and
300 registration applications.
With the licensee population over 100,000, it is not currently
practical to perform a regular cycle of inspections of the entire
licensee population. Fortunately, the majority of dealers rarely have
their guns end up at a crime scene, and only a small percentage of the
population is involved in criminal activity. It is therefore logical to
select for inspection those dealers most likely to be a source of crime
guns--intentionally or not.
In October 1998, ATF implemented a ``focused'' inspection policy,
which requires field division personnel to select Federal firearms
licensees (FFLs) for inspection based on information developed by the
Crime Gun Analysis Branch of the NTC. This valuable information
provides indicators of potential firearms trafficking associated with
particular FFLs. These include such things as the number of crime guns
traced to an FFL in a 1-year timeframe, time to crime, number of
firearms reported stolen, and number of unsuccessful traces associated
with a particular FFL. ATF then selects FFLs for inspection who have a
high rate of the indicators associated with their businesses. In order
to achieve our goal of reducing violent crime by denying criminals
access to firearms, ATF needs to focus its limited inspector resources
toward inspecting these FFLs.
ATF published a final rule in the Federal Register to amend
regulations relating to the Federal excise tax imposed on manufacturers
of firearms and ammunition to clarify which parts and accessories are
to be included in the sale price when calculating the tax on firearms.
ATF published in the Federal Register a notice proposing to amend
the regulations to prescribe minimum height and depth requirements for
identifying marks placed on firearms by licensed importers and licensed
manufacturers. If adopted, the regulations will facilitate ATF's
ability to trace the origins of firearms used in crime.
National Ballistics Identification
In fiscal year 1999, nearly 168,000 projectiles and casings were
entered into the IBIS data bases nationwide (an 81 percent increase
over 1998) resulting in 1,150 matches of ballistic evidence between
multiple crime scenes (a 56 percent increase over 1998.) This
technology has cut the process of comparing and evaluating ballistic
evidence from days to minutes and has provided criminal investigative
leads which were previously unavailable to the law enforcement
community. ATF and the FBI entered into an agreement in May 1997 that
created the National Integrated Ballistics Information Network (NIBIN)
Board. The Board's goal is to unify Federal efforts to deploy
ballistics technology. The NIBIN Board determined that the best path to
creating a unified national ballistics network would be to use a single
ballistics imaging system. The NIBIN Board facilitated the execution of
a memorandum of understanding (MOU) between ATF and the FBI regarding
the NIBIN Program. Under the terms of the MOU, ATF will assume
responsibility for crime gun operations. These include hardware and
software development, installation, and maintenance; image database
management; training; quality assurance; and user protocols. The FBI
will assume responsibility for networking operations and the
development and deployment of ancillary databases for firearms
examiners.
In an effort to merge the programs and allow for the seamless
exchange of information, a decision was made to adopt the single IBIS
technology; therefore, ATF and the FBI executed the MOU spelling out
each agency's responsibilities under the NIBIN Program. This agreement
ensures sharing of information and increases the potential to identify
armed violent criminals.
Firearms Tracing
This past year was significant in many ways to the National Tracing
Center. The number of crime gun traces topped the 200,000 mark.
Additional cities became partners in the YCGII, which has the use of
crime gun information as its cornerstone. Some of these enhancements to
further improve upon the quality of this unique ATF service included:
improvements in response time through the new Firearms Tracing System
(FTS) platform; development of the ``Web Query'' for access to the FTS
by our agents and inspectors which provides our partners in law
enforcement the tools to improve their capabilities through the
Electronic Tracing Submission System (ETSS); working with the firearms
industry to improve firearms tracing through Access 2000; and lastly,
ATF's ``OnLine LEAD.'' This investigative tool uses all the information
in the NTC databases to assist our special agents in discerning and
investigating those who traffic illegally in firearms.
International Firearms Matters
In addition, ATF and its technology have been called upon to once
again support the United Nations' War Crimes Tribunals investigating
alleged death squads in Bosnia-Herzegovina. In December 1999, ATF sent
a team of experts to Bosnia to test-fire and recover ballistic evidence
from over 1,500 firearms seized from the Bosnian-Serb Army. These
weapons are suspected of being used in the 1995 atrocities in
Srebrenica and other areas of eastern Bosnia. ATF laboratories are
currently comparing the test fire evidence with over 3,000 pieces of
ballistic evidence recovered from primary and secondary gravesites. At
the request of the Tribunal, over 4,500 pieces of ballistic evidence
recovered from Bosnia are currently being compared and evaluated at the
ATF laboratories.
Elsewhere, ATF participation is essential in a variety of
international forums examining methods of combating illegal
transnational firearms trafficking. ATF provides expert technical
advice relating to the Federal firearms laws and the benefit of
practical experience associated with our criminal enforcement
responsibilities. U.S. foreign policy decision-makers rely on ATF's
involvement and input in formulating sound decisions, which ensure that
U.S. equities and concerns in this arena are protected.
arson and explosives enforcement
I would like to point out to the Committee that while ATF has had
very significant accomplishments in fighting firearms violence, ATF has
also had equally significant successes in addressing violent crime in
the areas of arson and explosives. For example, in fiscal year 1999,
ATF certified fire investigators responded to an estimated 2,200 fires
across the country. These highly trained special agents respond to
incidents at all times of the day and night to make the initial
determination of potential criminal acts warranting further
investigation. ATF inspectors carried a considerable workload in
helping to ensure the lawful use of explosives materials. They
completed more than 7,294 inspections of the 10,662 explosives
licensees. These inspections disclosed and resulted in correction of
more than 2,831 violations, 1,431 of which presented unsafe conditions.
There were also 182 criminal referrals made as a result of these
inspections.
Arson at Houses of Worship
In fiscal year 1999, ATF responded to all known fires and
explosions at houses of worship nationwide, 322 responses in all. Of
those incidents, 132 fires and 12 bombings were determined through
investigation to be caused by deliberate criminal conduct. I am proud
to report to the committee that ATF's efforts in the investigation of
fires at houses of worship have resulted in 35 percent of these cases
being solved, a solution rate more than double the national average for
the crime of arson.
National Response Teams
Our National Response Teams were activated a record 42 times in
fiscal year 1999 to investigate major fire and explosives incidents. In
55 percent of these activations, criminal conduct was determined to be
the cause of the incident. Our National Response Teams cleared 46
percent of these incidents within the fiscal year, a solution rate that
is 2\1/2\ times higher than the national average for the crime of
arson. Of the incidents that occurred in fiscal year 1999, 57 percent
have been cleared by arrest to date and we expect this percentage to
increase as investigations continue. Due to the complexity of arson
investigations, it often takes several years to complete the
investigation from the time of incident.
State and Local Support and Partnerships
ATF and the U.S. Fire Administration (USFA) are teaming together to
redesign and deploy a web-based system managed by the USFA, entitled
``Fire and Explosion Investigation Management System,'' that will
include information on fires and fire-related explosives incidents that
occur nationwide for use by the fire/explosion investigation community.
ATF partnered with the National Association of State Fire Marshals
and developed a discussion website for use strictly by individuals at
the Federal, State, and local levels who have the statutory authority
to investigate and prosecute fire and arson incidents. This website
facilitates communication between the investigators.
ATF finalized the development of InterFIRE, a virtual reality, CD-
ROM-based training tool that is intended to establish ``best
practices'' in fire investigation and bring fire investigators to a
``base level'' of knowledge. Distribution has begun.
Through its explosives and accelerant detection canine training
program ATF provides an investigative tool for use in explosives,
firearms, and fire investigations, National Response Team
investigations, public security, and the investigative needs of outside
agencies. ATF's canine training facility in Front Royal, Virginia, is
now open, and the kennels are in the final stages of construction.
Under a training arrangement with the U.S. Department of State, ATF
also trains explosives detection canines for foreign countries to be
used overseas in the war against terrorism, and to protect American
travelers abroad against terrorism. Through fiscal year 1999, ATF has
trained and certified 68 accelerant-detecting canines for State and
local agencies, and has trained and certified 190 explosives detection
canine teams for deployment in 10 countries worldwide. Additionally,
since 1998, ATF has trained 10 explosives detection canine teams for
other Federal, State, and local agencies including the FBI, the Central
Intelligence Agency, and the Internal Revenue Service.
In fiscal year 1999, ATF became aware of a need to develop an
explosives destruction and disposal training program for State and
local bomb technicians. This training program will be designed and
implemented to cover areas not currently addressed by any other agency
on a national scale. The first scheduled school is slated for March
2000.
In pursuit of the prevention of criminal misuse of explosives, ATF
is strengthening its cadre of explosives technologists, who possess
unique capabilities in explosives and bomb disposal. There are 18
technologists currently on board.
In fiscal year 1999, ATF produced a special video entitled ``A
Mother's Tears'' in response to demand from State and local police
departments and school systems for an explosives safety program for
juveniles. This video was given the ``Videographer's Award of
Distinction'' for instructional programming.
Counter Terrorism
I would like to point out that ATF's resources are at the core of
this country's response to terrorism. ATF's firearms, explosives, and
arson expertise directly addresses the principal tools of the ``would
be'' terrorist. ATF plays an important role in the Federal Government's
fight against terrorism and contributes to this fight through our day-
to-day investigative work. ATF's employees hone their investigative
skills in these areas on a daily basis and are uniquely qualified and
equipped to immediately respond to arson and explosives crimes which
may later be deemed acts of terrorism.
Explosives Study Group
``ATF's Explosives Study Group (ESG) is examining the tagging of
explosive materials for purposes of detection and identification; the
feasibility and practicability of rendering common chemicals used to
manufacture explosive materials inert; the feasibility and
practicability of imposing controls on certain precursor chemicals used
to manufacture explosives; State licensing requirements for the
purchase and use of commercial high explosives; and the possible use of
prevention (explosives detection) technologies'', as stated in Section
732 of the Antiterrorism and Effective Death Penalty Act of 1996, as
amended by the Omnibus Consolidated Appropriations Act for Fiscal Year
1997.
The ESG issued its first report on the Study (1997 Progress Report)
to Congress in March 1998. In November 1999, ATF's second Progress
Report on the Study of Marking, Rendering Inert, and Licensing of
Explosive Materials, was submitted to Congress.
In February 1998, the ESG completed its research into, and analysis
of, the Swiss identification tagging program, and reported in its
second Progress Report that the program does not provide an adequate
model for implementation in the U.S.
In early 1999, the ESG completed its analysis of the results of the
ATF-commissioned study entitled ``Study of Imposing Controls on, or
Rendering Inert, Fertilizer Chemicals Used to Manufacture Explosive
Materials,'' completed by the International Fertilizer Development
Center (IFDC) in March 1997. The ESG concurs with the IFDC's
conclusions concerning the current unfeasibility and potentially
devastating economic and agronomic effects of rendering ammonium
nitrate (AN) fertilizer inert.
The ESG has continued to communicate and work with other Federal
agencies such as the Federal Aviation Administration, the U.S. Customs
Service, the Department of Justice, and the Department of Energy. These
efforts are aimed at facilitating a coordinated effort to identify and
direct resources toward the most promising technologies, for both the
detection of additives and the detection of explosives and explosive
materials themselves, which may be used in a broad range of
environments.
revenue collection
ATF continues to honor its obligation to fairly and efficiently
collect over $12 billion in revenue in accordance with current laws.
Our efforts have achieved an extraordinarily high level of voluntary
compliance within the industries we regulate. In fiscal year 1999, ATF
collected the following revenue: $11,900,000,000 in alcohol and tobacco
excise taxes; $167 million in firearms excise taxes; and $105 million
in special occupational taxes; and $6 million in licensing and transfer
fees for a total exceeding $12,100 million.
Government Partnerships
ATF works with Federal, State, local and Foreign Governments in an
effort to effectively collect revenue and regulate the industries
subject to the Bureau's authority.
ATF redirected its approach to revenue collection through a program
to identify taxpayers that pose high risk to the revenue due using a
factoring system to rate taxpayers. In addition, a statistical sampling
process was established to identify taxpayers in order to validate the
criteria used. For these programs, new internal control documents were
developed to pinpoint high-risk activities and weaknesses for
inspection.
These evaluations were developed for the distilled spirits, wine,
malt beverage, tobacco products, and firearms manufacturing industries.
In fiscal year 1999, ATF opened 106 alcohol and tobacco diversion
investigations. Seizures of alcohol and tobacco monies and real
property totaled over $1,400,000. ATF was also one of the lead agencies
in a Federal investigation that resulted in a payment of $10 million to
the Treasury Asset Forfeiture Fund from a company wholly-owned by a
major U.S. cigarette manufacturer for its involvement in illegally
diverting cigarettes to Canada. Diversion investigations in fiscal year
1999 also resulted in 49 defendants being recommended for prosecution,
and several members of organized crime groups successfully prosecuted
for alcohol and tobacco related criminal activity.
ATF implemented the provisions of the Balanced Budget Act of 1997,
including issuing regulations restricting the importation of previously
exported tobacco products and cigarette papers and tubes.
ATF received nearly 68,000 alcohol beverage label applications in
fiscal year 1999 of which 15 percent were denied approval due to non-
compliance. On average, the turnaround time for an application from
time of receipt to completion of processing was 8 days.
Cooperative Efforts With Industry
In fiscal year 1999 representatives from the Treasury Department
and ATF met with industry members concerned about direct shipment
issues. Discussion focused on the accessibility of youth alcohol
purchases on the Internet, issues surrounding State law implications,
small winery market access, and interstate beverage alcohol shipments.
We also met with representatives from the alcohol beverage industry
to initiate dialogues about regulatory practices for alcohol and youth.
Other meetings were scheduled with State authorities, other Federal
agencies, public advocacy groups, and public health agencies.
ATF processed petitions and issued notices of proposed rulemaking
resulting in the establishment of five new viticultural areas:
Applegate Valley in Oregon, and Diamond Mountain, San Francisco Bay,
Chiles Valley District, and Yountville, in California.
Information Technology
As we enter the new millennium, ATF has worked diligently to keep
pace with an extraordinary amount of technological change. In December
1999, ATF broke ground for its new National Laboratory Center in
Beltsville, Maryland. The new National Laboratory Center will give ATF
the kind of facility it needs to support firearms, explosives, and fire
investigations, as well as conduct testing that insures the integrity
of regulated alcohol and tobacco products.
Also at the new facility is a one-of-a-kind fire research center
located along side the Forensic Science Laboratory and the Alcohol &
Tobacco Laboratory. The Fire Research Laboratory is a new addition to
ATF's technical expertise that will directly support fire
investigations and complement ATF's on-going fire investigation
initiatives such as the Interfire Fire Investigation Training CD-ROM,
the Certified Fire Investigation Programs, and the Accelerant Detection
Canine Programs. It is the first laboratory in the world solely
dedicated to supporting fire investigations and the resolution of fire
related crimes, and advancing the science of fire evidence analysis.
For the first time, investigators will have a resource that can help
them unravel the difficult problems associated with fire ignition and
spread. ATF has established a memorandum of understanding with the
National Institute of Standards and Technology (NIST) to join forces on
research into the measurement and prediction of fire and its effects,
to share training and technology, and to conduct joint research and
technical assistance tasks on matters of fire science.
ATF initiated a National Firearm Examiner Academy to help develop a
national cadre of forensic examiners to conduct firearms examinations.
Historically, this expertise has been developed through apprenticeship;
often taking over 2 years to develop the skills needed to do the job.
As a result, there is a significant shortage of skilled firearm
examiners in most State and local forensic laboratories. The pilot
course will be completed in April. The 13-week program fully trains the
students in the skills needed to productively begin case examinations.
The profession's Association of Firearms and Toolmark Examiners (AFTE)
endorses the training program and the Nation's crime laboratory
directors have expressed overwhelming support for the program.
The National Field Office Case Information System (N-FOCIS),
comprised of N-Force and N-Spect, developed specifically for the ATF
special agents and inspectors, respectively, assists ATF employees in
gathering, reporting, and accessing investigative and inspection data.
One major goal of N-FOCIS is to reduce the time special agents and
inspectors spend on administrative functions.
A simple, intuitive user interface, N-FOCIS employs a familiar file
structure to organize data into logical categories (e.g., events,
property, persons), and the ability to share case information in a
secure environment.
Training Activities
ATF provides our employees with high quality and innovative
training programs by assisting in their professional development, thus
improving organization performance and supporting our Strategic Plan.
In almost all technical training provided, there are either pre-tests
for admission or academic requirements for graduation. In addition,
``golden threads'' are now part of many programs. These are lessons on
ethics and integrity, customer service, teamwork, and accountability to
the American public. Training initiatives which enhance employee
development and performance include our New Professional Training
Program; Advanced Firearms Trafficking; Alcohol and Tobacco Diversion;
Advanced Explosives for Inspectors and Certified Explosives
Specialists; and other technical programs. Each of these training
programs seek to expand the base of employee knowledge and
understanding regarding ATF's roles, missions, and capabilities, and to
capitalize on the ever-increasing collaboration between agents and
inspectors in the field. ATF also provides training to thousands of
other Federal, State, local, and foreign law enforcement officers.
Training areas include arson investigation, explosive identification
and regulation, firearms trafficking, and post blast investigations.
On average, we conduct 12,728 training instances each year for ATF
personnel. In addition, ATF provides training to an average of over
42,000 State, local, and international law enforcement officers and
industry personnel annually.
In fiscal year 1999, ATF provided basic training to a record number
of 168 agents and 72 inspectors through the New Professional Training
program, which was updated to include comprehensive basic training to
all new agents and inspectors.
Last year ATF developed training protocols and organizational
development plans for ATF's Critical Incident Command System. We have
conducted field exercises and exposed all ATF field divisions to the
theory and principle of a standardized Critical Incident Management
System for ATF.
In fiscal year 1999, ATF has focused on leadership development
programs for all ATF supervisors and managers with an emphasis on core
competencies, ethics, integrity, and teamwork.
Management and Administrative Efforts
Over the past year, ATF implemented and administered a
comprehensive ethics program to ensure compliance with the Standards of
Conduct for Employees of the Executive Branch and supplemental
regulations. This program was put into place to raise ATF employees'
awareness of the Standards and to ensure consistency throughout the
organization. The Ethics Program administers the Bureau-wide financial
disclosure program, provides legal advice in various areas, and
provides extensive training to all ATF employees. In providing ethics
training, we are ensuring that all new employees are trained and that
ethics presentations are provided at mid- and senior level conferences,
and at various retirement seminars around the country. ATF has also
taken the initiative in setting up an Ethics website and providing
updated information weekly to ensure that the ATF workforce has current
changes to the rules of conduct. With our approach, ATF employees
recognize that ethics is a real and integral part of all that we do and
critical to carrying out our mission successfully.
In fiscal year 1999 ATF hired over 500 employees with a net
staffing increase of over 400. This accomplishment demonstrates that
while ATF's fiscal year 2001 Congressional request is ambitious, it is
also realistic. The past several years have enabled ATF to strengthen
its infrastructure to allow it to hire all of the personnel requested
in this request.
conclusion
As you can see, ATF continues to contribute to making America
sounder and safer though its efforts in very diverse jurisdictions in
Reducing Violent Crime, Collecting Revenue, and Protecting the Public.
Along with the men and women at ATF, I am prepared to rise to the
challenge of meeting all of our responsibilities under the laws that we
enforce. I would be pleased to answer any questions you may have and I
would like to express my sincere appreciation for the support that the
Committee has provided us. I look forward to working with the Committee
to further our mutual goals of safeguarding the public and reducing
violent crime.
U.S. Secret Service
STATEMENT OF BRIAN L. STAFFORD, DIRECTOR
Senator Campbell. We will finish with Director Stafford.
Mr. Stafford. Mr. Chairman, Senator Dorgan, I am also
pleased to be here today to be afforded the opportunity to
testify on the Secret Service's fiscal year 2001 budget
request. Seated behind me are the Deputy Director, Assistant
Directors, and Chief Counsel of the Secret Service. Today, I
will briefly outline our continuing commitment to Congress and
the American people to maintain the highest level of physical
protection possible for the President and others and our
commitment to protect the integrity of the nation's financial
infrastructure.
workforce retention and workload balance
The Secret Service's 2001 budget request continues to build
upon the efforts this committee has supported to address a
critical personnel shortage within the Secret Service in order
to satisfy mandatory workload increases. As you know, during
1999, the Department of the Treasury established the
Interagency Group on Secret Service Workforce Retention and
Workload Balancing. It recommended that, among other actions,
the size of the special agent workforce be increased.
protective program
Accomplishing our mandated dual protective and
investigative missions is labor intensive and the workload
continues to grow. In the area of national special security
events, the Secret Service is currently involved as the lead
agency in the planning, coordination, and implementation of
security measures for significant major events--the 2002 Winter
Olympics in Salt Lake City, OpSail 2000 in New York, and the
Republican and Democratic National Conventions. The amount of
work associated with preparing for these events cannot be
overstated.
The protective workload continues to expand this fiscal
year for the Secret Service with 17 full-time protectees, an
anticipated record number of visiting foreign heads of state,
and the Presidential campaign. The variety and destructive
magnitude of terrorist acts are on the rise and the nature of
terrorist activity has become more technologically
sophisticated.
investigative program
In addition to our protective mission, the Secret Service
is meeting the responsibilities of a very demanding criminal
investigation program. This country's banking and financial
infrastructure is under attack. Transnational criminal elements
have dramatically increased use of technological schemes to
counterfeit U.S. currency. If this activity goes unchecked, it
will have a harmful effect on the confidence in United States
currency, which is the currency of choice worldwide with more
than $450 billion in circulation.
Advancing technology has enabled an expanding criminal
element to conduct a variety of financial crimes. These
criminal schemes are challenging the Service's investigative
resources as never before. In the not-too-distant past, e-
commerce, online banking and securities trading, ATMs, debit
cards, and smart cards were considered ``future world''
concepts. Today, they are reality. By having electronic crime
special agents trained in every field office, the Secret
Service is taking a proactive position in identifying fraud as
it occurs throughout the Internet.
national threat assessment center
Mr. Chairman, we are all very well aware of the recent
tragic events that have unfolded in our nation's schools and
workplaces. I believe the appropriate response to these
tragedies is working together and combining the resources of
local, State, and Federal governments. The work of the Secret
Service's National Threat Assessment Center, which has grown
from our exceptional case study project, highlights our efforts
at preventing assassinations, and now this same methodology can
be useful to others in education and in local law enforcement.
Through the National Threat Assessment Center, we will continue
our partnership approach and share what we are learning. We
believe the ideas and approaches contained in the study can be
useful in investigating, assessing, and preventing cases of
targeted violence, to include school violence.
prepared statement
In conclusion, on behalf of the men and women of the Secret
Service, I want to thank the committee for their long history
of support and I am also ready to answer any questions you may
have.
Senator Campbell. Thank you.
[The statement follows:]
Prepared Statement of Brian L. Stafford
Mr. Chairman and members of the Subcommittee, I am pleased to be
here today, and to be afforded the opportunity to testify on the Secret
Service's fiscal year 2001 Budget Request.
With me today, Mr. Chairman, are Kevin T. Foley, Deputy Director;
Dana A. Brown, Assistant Director for Administration; C. Danny Spriggs,
Assistant Director for Protective Operations; Barbara S. Riggs,
Assistant Director for Protective Research; James E. Bauer, Assistant
Director for Investigations; Gordon S. Heddell, Assistant Director for
Inspection; Larry L. Cockell, Assistant Director for Training; H.
Terrence Samway, Assistant Director for Government Liaison and Public
Affairs; and John J. Kelleher, Chief Counsel.
fiscal year 2001 appropriation request
The Service's fiscal year 2001 funding request totals $830.5
million and 5,543 FTE positions, and includes funding from three
sources: the Salaries and Expenses appropriation; the Acquisition,
Construction, Improvements and Related Expenses appropriation; and
reimbursements from the Departmental Super Surplus Forfeiture Fund. The
total budget request for fiscal year 2001 is $70.1 million above the
level of funding that the Service is receiving this fiscal year.
With this funding, the Service expects to further advance the
attainment of its two mission goals: to maintain the highest level of
physical protection possible through the most effective use of human
resources, protective intelligence, risk assessment, and technology;
and to protect the integrity of the nation's financial systems through
aggressive criminal investigations and assessing trends and patterns to
identify preventive measures to counter systemic weaknesses.
salaries and expenses (s&e)
The Service's Salaries and Expenses appropriation request for
fiscal year 2001 totals $821,596,000 and 5,543 full-time equivalents
(FTE). This is an increase of $123,284,000 and 193 FTE over the fiscal
year 2000 appropriated level of $698,312,000 and 5,350 FTE, which
includes $21 million to be transferred from other accounts within the
Department of the Treasury. This request includes: $28,610,000 in
upward adjustments necessary to maintain current program performance
levels, $30,750,000 and 256 FTE to annualize the funding for fiscal
year 2000 program changes (including the $21 million transferred in
fiscal year 2000), $55,158,000 and 154 FTE to cover the cost of
mandatory workload increases, $36,266,000 in base funding that
previously came from other funding sources, and $3,500,000 and 10 FTE
for a program increase. These increases are offset by a reduction of
$10 million in non-recurring costs.
Salaries & Expenses Program Changes
The single program increase contained in the Service's fiscal year
2001 Budget is $3.5 million and 10 FTE for development and
implementation of an Air Security program. This program is mandated by
Presidential Decision Directive 62 (PDD-62). PDD-62 mandates the Secret
Service to create additional capabilities that ``achieve airspace
security'' for designated ``National Special Security Events (NSSE).''
This air security program utilizes air interdiction teams to detect,
identify, and assess any aircraft that violates, or attempts to
violate, an established Temporary Flight Restricted Area (TFR) airspace
above an NSSE.
The fiscal year 2001 Budget Request also continues, and builds
upon, the efforts already being made this fiscal year to address
mandatory workload increases. The Service is requesting an additional
$41.3 million and 125 FTE to further its Workforce Retention and
Workload Balancing efforts.
In 1999, the Department of the Treasury, Office of Enforcement,
established the Interagency Working Group on U.S. Secret Service
Workforce Retention and Workload Balancing. This working group, which
included representatives from Treasury Management and the Office of
Management and Budget, analyzed the underlying causes for the decreased
ability of the Secret Service to retain younger special agents, and the
degradation of quality-of-life brought about by increased mission
demands placed on the special agent workforce. The working group found
that the current workload is causing significant morale and retention
problems, and recommended that, among other actions, the size of the
special agent workforce be increased.
Accomplishing the Service's mandated dual protective/investigative
mission is a very labor-intensive effort, and the workload relative to
this mission is growing. The Service's protective mission continues to
expand and become exceedingly more difficult. The variety and
destructive magnitude of possible terrorist acts continue to expand,
and the nature of terrorist activity has become more technologically
sophisticated. Likewise, this country's banking and financial
infrastructure must be protected from a growing list of criminal
attacks. Transnational criminal activity has dramatically increased
utilization of sophisticated technological schemes to counterfeit U.S.
currency. If this activity continues unchecked, it will have a
deleterious effect on the worldwide confidence in U.S. currency.
For the Secret Service to effectively continue to meet this
increased workload, additional staffing will be required. With the
supplemental funding provided in fiscal year 2000 the Service is
already in the process of adding 227 FTE positions to its workforce.
This represents about one-third of the additional staffing identified
as required by the Interagency Working Group.
acquisition, construction, improvements, and related expenses (acire)
The Service's fiscal year 2001 request for its Acquisition,
Construction, Improvements, and Related Expenses (ACIRE) account is
$5,021,000; an increase of $98,000, which is needed to maintain current
program performance levels. There are no program initiatives budgeted
for this account. In addition, the Service's budget proposes that
$3,920,000 required to effect security changes at the Vice President's
official residence be reimbursed from the Departmental Super Surplus
Forfeiture Fund.
results act
Fiscal year 1999 was an extremely demanding, but highly productive
year for the U.S. Secret Service.
Our protective effort was unprecedented, with 5,723 protectee
travel stops by our 16 permanent protective details, and over 400
visiting foreign dignitaries. The total number of travel stops for all
protectees was 16.8 percent higher than previously estimated. Permanent
protectee travel was 13.9 percent higher, and travel for visiting
foreign dignitaries was 24 percent higher than estimated.
The level of recovered counterfeit money passed was held to $78 per
million dollars of genuine currency. This was significantly below the
$90 per million dollars of genuine currency in the performance plan,
and meant substantial savings for the American public.
The Service continues to focus its efforts to curb the
counterfeiting of U.S. currency in foreign countries. Last fiscal year,
a total of $1.4 million in recovered counterfeit currency was passed
overseas. This was significantly below the total of $5.0 million in the
performance plan.
protective program
The Secret Service provides security for the President, the Vice
President, and their families, as well as former Presidents,
Presidential and Vice Presidential candidates, visiting heads of state
and heads of government. This program also includes security for the
White House Complex, the Vice President's residence, the Treasury
Department, and 462 foreign missions within the Washington, D.C., area.
The Secret Service continues to meet past and present challenges of
identifying and neutralizing potential threats by individuals and
groups in a highly individualistic, mobile, and gun-prevalent society.
During fiscal year 1999, the President, Mrs. Clinton, and Vice
President Gore continued their extensive travel schedules. The
President made 33 foreign stops, the First Lady made 31 foreign stops,
and the Vice President made 7 foreign stops.
Also during fiscal year 1999, the Secret Service successfully
designed, planned, and implemented overall security for the visit of
Pope John Paul II, the 50th North Atlantic Treaty Organization Summit,
and the 54th United Nations General Assembly. The 50th North Atlantic
Treaty Organization Summit was designated as a National Special
Security Event.
In fiscal year 2000 the Secret Service will again face many
protective challenges. The mission requirements include the design,
planning, and implementation of overall security for three upcoming
National Special Security Events; the Operation Sail 2000/International
Naval Review to be held in July in New York City; the Democratic
National Convention in Los Angeles; and the Republican National
Convention in Philadelphia.
In preparation for the 2000 presidential campaign the Service
staffed and trained 8 candidate/nominee protective details during
fiscal year 1999, as well as trained over 2,300 Treasury Special Agents
in 27 cities to assist us during the campaign. These Treasury Special
Agents will serve as an integral part of each candidate's/nominee's
site security.
The Service continues to provide the highest level of protection
possible for all persons and facilities it is charged with protecting.
This protection is accomplished by integrating highly trained personnel
with state-of-the-art weapons and technology to react quickly and
decisively to eliminate, or minimize, attacks. However, the primary
goal of the Service is to prevent acts of violence. A key factor in
preventing attacks is to have prior knowledge or ``intelligence'' of
potential attackers, their motives, intentions, and capabilities.
Protective intelligence serves a critical role in the Secret
Service's protective mission. The Service's Intelligence Division
develops threat assessments in support of protectee visits to domestic
and foreign settings; provides warning indicators for specific and
generalized threat environments; maintains liaison with the mental
health, law enforcement, and intelligence communities; and conducts
investigative and operational studies necessary to evaluate potentially
dangerous groups or individuals that pose a threat to our protectees.
The Secret Service is represented on 23 Joint Terrorism Task Forces
throughout the United States. The Task Forces provide immediate access
to intelligence gathering and information sharing on individuals or
groups that may be planning or engaging in adverse activities directed
toward our protectees or other public officials. Recently, the Service
also initiated a Washington, D.C.-based Protective Detail Intelligence
Network that concentrates on sharing intelligence information with
other agencies with protective responsibilities.
With support from the National Institute of Justice and the Federal
Bureau of Prisons, the Secret Service recently completed a behavioral
research study that has caused us to refine and improve our approach to
threat assessment, protective intelligence, and the prevention of
assassination. As the Secret Service has shared these ideas with
members of the nation's criminal justice, law enforcement, mental
health, and behavioral sciences communities, we have received numerous
comments indicating that the findings of our study may be useful for
identifying and assessing other kinds of targeted violence, such as
that seen in recent school shootings, relationship violence
(``stalking''), and workplace violence.
As a product of our research, its acceptance, and the significant
number of requests for assistance that we have received, we established
the National Threat Assessment Center (NTAC) in the fall of 1998.
NTAC's mission is to provide leadership and assistance to law
enforcement in the area of threat assessment, and it will be the
subject of a more in-depth briefing toward the conclusion of my
statement.
Our technical security program continues to work with others on
measures to better ensure the safety of the President, and other
protectees, against weapons of mass destruction. The Service is
aggressively pursuing a comprehensive chemical/biological program in
order to detect, protect, and mitigate the effects of chemical or
biological toxins at fixed sites as well as at temporary locations
visited by our protectees.
Presently, the Secret Service is enhancing its chemical and
biological detection capabilities at the White House, conducting
awareness and training programs for field office personnel, and
actively monitoring the research and development activities of a
promising biological hazard detection system that is under development.
Additionally, we have developed highly trained teams to travel with
the President and Vice President in specially designed vehicles. Team
members receive emergency medical training and are capable of
administering medical assistance and performing decontamination while
transporting the victim to a hospital. This level of protection is
unique to the Secret Service, although several protective agencies
throughout the world are now evaluating our program for their use. The
Secret Service is staying abreast of this rapidly developing technology
to ensure that its protectees are afforded the most advanced protection
systems possible.
investigative program
In addition to our protective mission, the Secret Service is
meeting the responsibilities of a very demanding criminal investigation
program. The Service is responsible for domestic and international
investigations involving financial systems crimes to include bank
fraud; access device crimes; telemarketing crimes; telecommunications
crimes (cellular and hard wire); cyber crimes (attacks on critical
infrastructures; desktop publishing and network intrusions); automated
payment system and teller machine crimes; crimes involving government
entitlements; crimes involving identity takeovers; crimes involving
counterfeit and fictitious financial instruments, obligations and
securities; crimes involving counterfeit currency; criminal activity in
the area of money laundering as it relates to certain specified
unlawful activities; and the seizure and subsequent forfeiture of
assets used to facilitate certain criminal activities, as well as the
proceeds of those criminal activities.
As society rides the wave of advancing technology into the new
millennium, the challenges facing the law enforcement community grow
significantly. This advancing technology has enabled an expanding
criminal element to conduct a variety of financial crimes, which are
oftentimes extremely sophisticated in nature. These criminal schemes
are challenging the Service's investigative resources as never before.
Our organization is continually evolving to meet these challenges, with
an investigative strategy that incorporates successful methodologies of
the past with the new technologies of the present and future.
The Secret Service has been the law enforcement agency called upon
time and again to maintain the integrity of this country's financial
infrastructure. During the past 135 years we have observed an evolution
of financial instruments from paper currency and coins to today's
instruments of choice: credit and debit cards, checks, bonds, and
commercial securities and other financial obligations. As expected, we
have also witnessed the technological evolution of counterfeit crimes
from hand-drawn Federal Reserve Notes to today's common use of advanced
reprographics to counterfeit these financial instruments. In response
to these changes, the Secret Service has focused its expertise on
investigations of counterfeit and fictitious financial instruments. As
a result, we are internationally recognized as the foremost experts in
this field.
With each advance in technology, the Secret Service has been
prepared to answer the challenge. At no time in our history have the
challenges been greater than in the past 20 years. In the not too
distant past, E-Commerce, on-line banking and securities trading,
automated teller machines, debit cards, and smartcards were considered
``future world'' concepts. Today, these advancements are a reality.
These new customer friendly technologies facilitate commerce on an
international scale and have merged our financial infrastructure into a
seamless global financial system. The ability to conduct financial
transactions internationally is as easy as dialing a telephone or
connecting to the Internet. These technological advances, while
providing great benefits to the public at large, are also prime
economic targets for the criminal community.
Traditionally, society has considered ``white collar crime'' as a
non-violent, victimless crime. The reality is, white collar crime,
financial crime, or economic crime, whichever term you choose to use,
is perpetrated by the entire criminal element, from single individuals,
to loosely knit groups, to highly sophisticated and transnational
criminal enterprises. These financial crimes are oftentimes conducted
in conjunction with, or for the purpose of funding, more inherently
violent crimes such as drug trafficking, weapons trafficking, extortion
or, in some cases, terrorism.
Technological enhancements to wireless communications and the
improvements in transportation systems have created an environment in
which state and international borders become greater obstacles for law
enforcement agencies than for criminals. This, in conjunction with the
ease with which one can either counterfeit or fraudulently obtain false
identification and travel documents, further magnifies the challenges
posed to the entire law enforcement community.
Another area the Secret Service is addressing involves money
laundering through the use of advanced technology. As technology
continues to evolve, organized groups are using more sophisticated
means to hide the proceeds from their criminal activities. We have seen
an increase in the use of transaction cards such as debit, credit, and
more recently smartcards, to transfer illicit funds to disguise their
source and origin. Money laundering through the use of smartcards is a
concern to law enforcement. Smartcards provide the capability to make
anonymous peer-to-peer or card-to-card transfers of monetary value.
Further, the ability to move money across international borders via
chips containing value will also create a challenge for law
enforcement.
With smart cards, an individual has the ability to move hundreds of
thousands of dollars across borders with a device that is extremely
concealable. It is conceivable to visualize a major money launderer
taking advantage of such a payment system and carrying large sums of
money in or out of the United States via a smartcard. Once the border
is crossed with this smartcard, the money can be transferred to other
cards; thus creating a money-laundering scenario that is virtually
paperless.
For electronic commerce, the Secret Service has taken a proactive
approach with regard to the security of financial transactions. With
the investigative expertise gained through our interaction with the
financial industry, we have a clear understanding of the overall
infrastructure of the financial system. The Internet and the
telecommunications industry are among the fastest growing technologies
in the world, and they provide the backbone for the emerging
technologies in electronic commerce, financial transactions, and
banking.
The growth and evolution of the Internet has provided numerous
commercial and financial opportunities, specifically in the area of
electronic commerce. There is also growth occurring, on a global basis,
in the area of high-technology crime. As a primary investigative agency
of the Treasury Department tasked with the investigation of financial
crimes, we take our role seriously as the lead agency for ensuring the
safety of the banking and financial sector of the critical
infrastructures. The Secret Service has taken a dynamic approach to
training its agents and our counterparts from all levels of domestic
and international law enforcement on how to prevent and respond to
attacks against evolving electronic payment systems. Currently we are
responding to the need for training in network intrusion and
telecommunications compromise activity for Federal, State, and local
law enforcement, as well as private industry. Through state-of-the-art
computer-based training initiatives, high-technology investigative
training is being prepared with the goal of keeping law enforcement
current with effective investigative techniques that can be updated as
quickly as technology advances.
Title 18, United States Code, Section 1029, Fraud and related
activity in connection with access devices, was amended twice in 1994
and 1998 to include significant revisions related to compromises of the
telecommunications system. The Secret Service has taken a proactive
role in the investigation of telecommunications fraud and intrusion
activity and the education of industry representatives as to their
vulnerabilities. As such, the Secret Service is recognized as the
leader in the investigation of this specific type of access device
fraud, and it routinely provides training to law enforcement and
private industry personnel at all levels. In many instances,
telecommunications fraud is a part of other criminal enterprises such
as financial crimes, counterfeiting, money laundering, and narcotics
trafficking.
Pursuant to Title 18, United States Code, Section 1030, the Secret
Service is empowered to investigate fraud and related criminal
activities involving computers. The Service is focusing its
investigative efforts on the telecommunications and banking and
financial sectors of computer fraud investigations. This focus has
provided us with the ability to train and equip our field offices to
address specific high-technology investigations.
Financial crime investigations have become more dynamic and
international in scope. In response, the Secret Service created a
counterfeit financial documents database that is used to make forensic
connections between known and questioned counterfeit documents. This
database is used to determine common origins through link analysis
conducted by research specialists. The Secret Service provides
permanent representatives to INTERPOL in Lyon, France, and Washington,
D.C., and has the lead role in terms of expanding this database on a
global level using INTERPOL mainframe computers. Police agencies all
over the world are now able to track the source and proliferation of
counterfeit documents such as driver licenses, credit cards, and
checks.
As greater numbers of individuals use computers, and as the use of
the Internet continues to grow over 100 percent per annum, it is
anticipated that the criminal element will increasingly utilize these
tools. For this reason the Secret Service is emphasizing the expansion
of its Electronic Crimes Special Agent Program (ECSAP). This program is
an essential component for meeting the mandates of both the
investigative and protective missions of the Secret Service. The ECSAP
program consists of highly trained Special Agents qualified as experts
in the forensic examination of electronic evidence. These agents are
assigned to nearly all Secret Service field offices. The program has
expanded to include operational aspects such as technical guidance in
search warrant preparation and execution, and educational presentations
and technical advice to public and private sector organizations.
Special Agents assigned to this program are also trained to examine the
wide variety of electronic evidence seized in today's criminal
investigations, including telecommunications devices, electronic
organizers, scanners, and any other devices manufactured to intercept
or duplicate telecommunications services.
The Secret Service has set as its highest priority the
identification and suppression of counterfeit currency production and
distribution networks. Advances in reprographic technology mean large
quantities of counterfeit currency or other obligations can be produced
quickly and efficiently. Today's criminal needs relatively little
knowledge or specialized training to print counterfeit currency or
other obligations in a self-contained print shop. Utilizing equipment
ranging from inexpensive color copiers, scanners, computers and inkjet
printers, to small offset duplicators and/or large commercial presses,
a counterfeiter or criminal organization can flood a region with
counterfeit currency and be gone before law enforcement can react.
Last fiscal year foreign arrests for counterfeiting increased
significantly--from 421 in fiscal year 1998, to 593 in fiscal year
1999. Foreign seizures of counterfeit currency rose from $66 million in
fiscal year 1998, to $84 million in fiscal year 1999. Overseas
counterfeit printing plant suppressions also increased--from 29 in
fiscal year 1998, to 38 in fiscal year 1999.
To overcome the problems created with the reduction of barriers
between societies, the Secret Service continues to enhance its overseas
presence and liaison with foreign law enforcement. We are establishing
task forces and providing technical assistance to foreign counterparts
in cases of strategic importance.
Our investigative history has proven that the effective suppression
of counterfeiting operations requires an immediate response by the law
enforcement community in order to develop investigative leads generated
when a new counterfeit note is detected, or an arrest is made. The
Secret Service has long believed that the strategic placement of
overseas personnel promotes more aggressive law enforcement operations,
as agents are able to respond in a timely and consistent manner. The
Secret Service currently maintains 15 offices around the world, staffed
by 54 special agents and support staff. These strategically located
offices allow the Secret Service to extend its investigative reach and
present a coordinated response to transnational crime. If we are to
keep foreign-based crime away from our shores, our first line of
defense must be abroad. Given that reality, we must place our personnel
overseas to target foreign-based criminals and their activities before
they can reach the United States.
Based on the success of our counterfeit model, the Secret Service
has embarked on an ambitious overseas expansion to address our unique
dual mission of investigation and protection. Our experience has shown
that these two missions are not divergent--and are often complementary
in nature. With the globalization of economics, and world events, our
protectees are traveling abroad at unprecedented levels. The
relationships we have developed with foreign law enforcement, fostered
in the investigative arena, prove invaluable when soliciting their
assistance in providing a secure environment for our protectees abroad.
In geographical regions where Secret Service personnel are not
permanently assigned, the Task Force philosophy is employed to address
specific concerns. Personnel are temporarily assigned to immediately
address the problem and provide sufficient information to help assess
whether the problem is short or long term in nature; and if the
permanent placement of personnel is needed.
In 1999, the Secret Service undertook a project to publish
information about known counterfeit U.S. currency on the World Wide
Web. The Counterfeit Note Search Site that we established allows us to
track the reporting of counterfeit U.S. currency as it happens. By
collecting real-time data, we can make better-informed, timely
decisions on the allocation of resources and manpower. The immediacy of
the information provided allows our overseas offices to respond to
leads from foreign financial and law enforcement entities within their
districts in time to take advantage of investigative leads. It further
allows them to identify problem areas with information necessary to
assess more accurately the nature and scope of the problem.
Establishment of this site has also allowed us to expand and
develop our liaison activities with foreign financial and law
enforcement entities where such activities had not previously existed.
Also, in an effort to stay ahead of counterfeiters, the Secret
Service, in concert with others, continues to work to decrease the
vulnerability of the U.S. dollar to unauthorized reproduction. As a
member of the Advanced Counterfeit Deterrence Committee (ACD) and the
Currency Redesign Committee, we have had an active role in the
research, design, and introduction of the new currency.
In the search for technological solutions to the rise in computer-
generated counterfeiting and inkjet notes, the Secret Service has
joined forces with the Department of the Treasury, the Federal Reserve
System, and the Bureau of Engraving and Printing. Further, industries
associated with inkjet and other color printers, color copiers, digital
output cameras, imaging software, and Internet software are being asked
to participate in this effort, as are members of the foreign law
enforcement community.
When counterfeit notes first appear, they must be classified. The
Service has identified over 21,630 different counterfeit circulars,
with over 20,000 variations. To develop these circulars now requires
making manual comparisons to classify a new note. Through a contract
with an innovative computer engineering company, the Secret Service has
developed a system to classify and identify counterfeit notes using
pixels that are present in the Treasury seal. The system has been
tested, delivered, and is in the process of being implemented. This
automated system will enhance the accuracy and timeliness of
classification and circularization of counterfeit currency, which is
essential to successful investigation, suppression, and prosecution.
The Secret Service remains actively involved in developing
technology to support many of its forensic, investigative, and counter-
terrorism efforts. We are staying on the leading edge of forensic
technology with our robust research section that engages in exchanges
of information with laboratories in the United States and in several
foreign countries. Through close contacts with these other labs, our
scientists are able to share research and data in pursuit of
advancements in forensic technology. Current major efforts include
exploring advanced methods for the visualization of latent fingerprints
on difficult surfaces; creating covert tagging for identifying,
locating, and tracking marked targets; developing technology for the
standoff detection of explosives; and finding better methods for
determining how long writing inks have been on written documents.
The Service is also continuing to use its unique capabilities to
assist with investigations outside its core jurisdictions. In this
regard, we remain dedicated to investigations concerning missing and
exploited children, by providing forensic technology to Federal, State,
and local law enforcement. This past year, forensic assistance for the
National Center for Missing and Exploited Children (NCMEC) included
polygraph examinations, ink analysis, voiceprint comparisons, audio and
video enhancements, and fingerprint research and identification.
information technology
Like many federal agencies, the Secret Service has other
information technology priorities such as hiring and retaining a
skilled professional staff, protecting our critical cyber systems, and
developing the proper governance to effectively manage our information
technology systems. However, because of our protective and
investigative missions, the Secret Service is a target for hackers,
terrorists, and other disgruntled groups. Therefore, we are
particularly concerned with the ability to protect our critical
infrastructure and to maintain a secure information environment.
The Secret Service has one of the most mobile workforces in the
Federal Government. Our protective and investigative assignments
mandate that our employees are accessible at any hour of the day, and
available to travel worldwide. The Secret Service is in the process of
providing its entire special agent population with a durable laptop
platform to achieve this accessibility. We must provide our employees
with the tools to securely access our databases in this mobile
environment. Thus, information security is one of our top priorities.
workforce recruitment
The Secret Service continues with its aggressive recruitment
campaign to hire, in compliance with Presidential Decision Directive 63
and the International Crime Control Strategy, a diversified workforce.
These mandates require the Secret Service to vigorously recruit
undergraduate and graduate students with relevant computer-related
skills, qualified personnel for technical analysis, and to identify
applicants and employees with various language capabilities to
compliment our expanding role overseas.
To fulfill our mission requirements in the 21st century, the Secret
Service has raised its recruitment profile by advertising in major
publications and periodicals directed towards graduates with technical
and computer science experience. Recruitment posters have been
specifically designed for and mailed to over 15,000 colleges,
universities, and technical institutions. Advertisements for employment
have been placed in newspapers throughout the United States to include
USA Today, the Los Angeles Times, the Houston Chronicle, the Kansas
City Star, the Chicago Tribune, and the New York Times. The same
advertisements were placed in over 200 community and neighborhood
newspapers and in the National Associations of Colleges and Employers
publication. Recruitment inquiries also continue to increase by way of
the Service's and other Federal Government web sites. We have also
established a toll free telephone line to more efficiently recruit for
all positions.
training
The Secret Service's Office of Training continues to train at
unprecedented levels. We plan to train over 600 Special Agent trainees,
Uniformed Division recruits, and Special Officer trainees this fiscal
year. In addition, with the reorganization of the James J. Rowley
Training Center, the Secret Service plans to enhance its in-service
training program in the areas of protection, investigation, leadership,
and professionalism. This will be accomplished in concert with our
academic partners at Johns Hopkins University and Lawrence Livermore
National Laboratories.
Our partnership with Johns Hopkins will provide academic oversight
of our course contents and methodology. In addition, it will also
enhance our teaching skills and ensure that all of our training
instructors employ cutting-edge teaching methods.
Lawrence Livermore National Laboratories continues to provide
support and guidance to the Service's Security and Incident Modeling
Lab (SIMLAB). This technology, originally developed for military
commanders, allows the Secret Service to use an interactive computer
program to model protective event sites, and with this model to train
more efficiently, and analyze our protective procedures. We intend for
the Secret Service to become a focal point for this technology and to
offer its capabilities to other law enforcement agencies and
departments.
The Service recognizes that the appropriate utilization of
technology is essential to the success of its mission, especially as it
relates to technical security and information technology. In an effort
to train and retain its skilled technical professionals, the Service
has established technical training as a high priority. This commitment
has resulted in a high rate of retention of our technical staff during
the past year. However, the high cost of technical training that is
provided by outside contractors and vendors is a challenge to our
budget. The strong competition by the private sector requires federal
agencies to continue to invest in the training of its employees as a
means of retention.
Construction work on the new administration and classroom buildings
at the James J. Rowley Training Center has been completed. These state-
of-the-art buildings, which feature 14 classrooms, 2 computer
laboratories, a library, and the Security and Incident Modeling
Laboratory, will enhance the training experience for the Service, as
well as for Federal, State, and local law enforcement.
Also, our Offices of Training, Protective Operations, and
Protective Research recently initiated a proposal to establish an
institute at the James J. Rowley Training Center for the
standardization of protective detail training among all Federal, State,
and local agencies having protective responsibilities. This institute
will also serve as a threat assessment center and clearinghouse for
intelligence data being used by the national law enforcement community.
The National Threat Assessment Center and Multipurpose Building
continues to be the highest priority project for expansion of the James
J. Rowley Training Center. Such a facility will enable us to realize
our vision for the creation of a law enforcement university. The
auditorium/lecture hall will provide a setting for the National Threat
Assessment Center and allow us to host various federal, state and local
law enforcement agencies for the dissemination of threat information.
After years of exhaustive research on violence, the Secret Service is
positioned to share the methodology of threat assessment principles
with other law enforcement agencies and educators. This facility will
allow us to expand our knowledge beyond internal use for the purpose of
understanding domestic and school violence and increasing police
officer safety. A planned cafeteria will afford on-site food service
for a more efficient use of training time by the growing student,
instructor and outside agency population. Also, this structure will
offer additional capabilities and a relocation site that will comply
with the requirements of the Presidential Decision Directives for
Continuity of Operations.
The National Threat Assessment Center and Multipurpose Building is
also critical to the support of a student dormitory complex that will
allow us to train more effectively and efficiently and at a greatly
reduced cost. We will significantly reduce expenditures associated with
commercial food and board, not only with students and instructors but
also with employees on temporary assignment.
national threat assessment center
Traditionally, law enforcement has been reactive to violent
incidents. In the past, police were asked to respond after violence
occurred, and to catch the perpetrator and gather evidence for the
prosecutor. With the incidence of crimes involving targeted violence on
the rise, police agencies are being asked to be more pro-active, i.e.,
to investigate and intervene before violence occurs.
The Secret Service has been protecting our nation's leaders for
more than 90 years. An essential ingredient to protection is the art of
threat assessment, or protective intelligence. Threat assessment is the
process of gathering and assessing information about persons who have
the interest, motive, intention, and capability of mounting attacks
against a person or group of people. Gauging the potential threat to,
and vulnerability of, a targeted individual is a key to preventing
violence. Currently, there is little information or guidance available
for law enforcement about how to conduct these ``threat assessment''
investigations.
In 1992, the Secret Service began the Exceptional Case Study
Project. Since that time, we have examined the thinking and behavior of
all 83 persons known to have attacked, or come close to attacking, a
prominent public official or public figure in the U.S. in the last 50
years. We have reviewed all available records about each person and
have conducted interviews with more than 20 attackers and near-
attackers. The ECSP has been an operational study. We have tried to
examine assassination from the perspective of the attacker and from the
perspective of a law enforcement agency with protective
responsibilities. We have submitted a series of reports to the National
Institute of Justice and have written a guidebook about protective
intelligence and threat assessment for federal, state, and local law
enforcement officials with protective responsibilities.
The ECSP is the only recent major operational law enforcement study
of targeted violence (assassination and attempted assassination of
public officials and figures). The ideas and approaches contained in
the study have been noted as potentially useful in investigating and
assessing cases of targeted violence, to include domestic stalking,
workplace and school violence.
The New York Times reported on April 22, 1999: ``Specialists are
increasingly arguing that the developing field of threat assessment,
used by the Secret Service to track potential assassins, can be applied
to potentially violent students. As outlined in a Secret Service
handbook, such assessments involve looking for common patterns of
behavior and experience, including feelings of rejection.''
The Secret Service believes, and other law enforcement agencies
agree, that we should build on ECSP findings. Through NTAC, with
dedicated resources and time, the Secret Service will develop the
capacity to make a significant contribution to law enforcement's
efforts to investigate and prevent certain cases of targeted violence.
secret service headquarters consolidation
Finally, I am very pleased to note that after many years of hard
work, we relocated this past summer into our new headquarters
building--the United States Secret Service Memorial Building. This
Committee was very instrumental in this effort and we thank you.
Mr. Chairman, this concludes my statement. I would be pleased to
answer any questions that you or other members of the Subcommittee may
have.
Senator Campbell. We have several questions, and by the
way, if there are some questions we ask that you may not
believe is appropriate to answer in public for some security
reason or other, feel free to take the Fifth if you have to.
Special event security
Let me start with the question about some dedicated
airplanes. Maybe Commissioner Kelly or Under Secretary Johnson
can deal with this a little bit. But a total of $16.3 million
has been requested for both the Secret Service and the Customs
Service for a protective air security program. The bulk of that
is for a separate air branch for the Customs Service. Could you
explain that a little bit and tell me what that is going to
entail, because it obviously is not going to buy many
airplanes.
Mr. Kelly. Mr. Chairman, this is based on a directive from
the President, PDD-62, which gives the planning function to
Treasury and the Secret Service. It directs Treasury to provide
an air cap capability, if you will, which Customs is providing
it to Secret Service personnel. There are estimated to be six
to maybe eight major events a year that would require some sort
of air cover. We provided that in the 1996 Olympics, working
closely with the Secret Service. We provided it at the two
recent State of the Union events. We also (provided that
service), at the NATO conference that recently took place here.
Essentially; what this initiative would do is to fund the
location of a facility in the Washington, D.C. area so we can
more easily provide that cooperative arrangement and service to
the Secret Service to respond quickly to events where they are
needed and also to provide what I would call an air cap or air
cover.
Senator Campbell. Well, it is going to be dedicated
aircraft and crews, is that correct?
Mr. Kelly. It will be dedicated for a period of time. When
they are not doing this sort of work, they would be involved in
anti-drug work.
Senator Campbell. When there are no events, will their
normal job be other anti-drug work?
Mr. Kelly. Yes, sir.
Senator Campbell. The events themselves, do you know where
they are located very long ahead of time, a few months,
perhaps?
Mr. Kelly. No, we do not, but four out of the six major
events that we have used this capability for were in the
Washington, D.C. area.
Fiscal year 2001 budget
Senator Campbell. I see. Since I have your attention,
Commissioner Kelly, a February 2000 Washington Post article
stated that, according to your office, a Customs official said
the fiscal year 2001 budget pending before Congress boosts
agency spending by 3.9 percent, enough to cover only the rising
costs of agency operations, salaries, rents, and fuels. Yet the
official justification for Customs that was sent to Congress
contains a 22.4 percent increase if you include the $210
million for the ACE program that you mentioned. That is roughly
a 14.8 percent increase without it. How do you arrive at the
3.9 percent as was publicized in the Post and not the 14.8?
Mr. Kelly. I think there were questions of interpretation.
There was an issue as to what was included in our base, whether
or not forfeiture funds were included in the 2000 base, and
that is where some of the difference came about. And then there
was also an inclusion of the $210 million in the administration
estimate and that is funded by user fees. I think the
difference in those numbers really comes about as a result of
the type of question asked by the reporter who wrote that
article.
Senator Campbell. I see.
Mr. Kelly. I do not think there is a disagreement.
Senator Campbell. The forfeiture fund, the total amount of
money that is expected from the forfeiture fund, do you have a
ballpark figure?
Mr. Kelly. For this year?
Senator Campbell. Yes.
Mr. Kelly. I believe it is $64 million, but I do not have
it in front of me.
Gang resistance education and training program
Senator Campbell. Mr. Buckles, the fiscal year 2000 wrap-up
appropriations bill contained a provision which required all
Federal agencies to take a 0.38 percent reduction in
appropriated funds. Agencies were given pretty wide latitude to
decide which programs to cut and the ATF decided to take almost
$1.2 million from the grants to State and local law enforcement
agencies provided under the Gang Resistance Education and
Training program, called the GREAT program.
I have to tell you, there is a very strong interest in that
program and I know I have gotten feedback from our own cities.
Denver is an example, where some money went to that city. They
were very, very supportive of that program. Why did the ATF
decide to reduce the available money to those grants?
Mr. Buckles. Mr. Chairman, when we were faced with those
cuts, we had to look through all of our programs to find where
we could take some of that money without affecting our overall
operations. We also suffered cuts in, for example, buying new
vehicles. So we tried to sustain as much as we could within our
own budget without affecting operations that were required by
law.
When we went to the GREAT program, as you know, that is a
program we feel very strongly about, too, and have been very
supportive. We looked at that program and saw that with some of
the rescission, we would be able to get money from last year to
cover that rescission. So the ultimate loss to the program was
not that much. I believe we felt we had $600,000 or $700,000
that could be brought forward that was not expended from the
prior year.
Also, I worked with the GREAT national policy board on this
issue. We met in January and I explained to them what we were
doing and why we were doing it. It was the consensus of that
board that it should not have a major impact on any of the
GREAT operations.
Senator Campbell. Thanks for your answer. I just might tell
you that as one member of this committee, I am very interested
in that program because I think it has done a lot of good in
the communities, so hopefully you will keep that in mind when
you go through this year.
Workforce retention and workload balancing
Director Stafford, the fiscal year 2000 wrap-up
appropriations bills provided an additional $10 million
directly to the Secret Service and directly to the Department
of the Treasury to transfer an additional $21 million to the
Service for workforce retention and workload balancing, which
translates into, as I understand it, about 500 new employees.
That is a lot of people to hire in one year on top of the
replacement of normal attrition. What is the status of that
hiring initiative now?
Mr. Stafford. Mr. Chairman, as you are aware, when I became
Director, one of my first priorities was to address the quality
of life issue that we had in the Secret Service and to put some
balance back in our employees' lives. With your assistance, we
are going to be successful with that.
It is a pretty aggressive hiring program. We streamlined
our process. We reduced the amount of time it takes for us to
hire an employee by 40 percent.
Senator Campbell. Do you have a recruitment team?
Mr. Stafford. We do.
Senator Campbell. Do young people out of college go
directly into the Secret Service or something of that nature,
or do most of these folks come with prior police training, such
as from the police departments or something?
Mr. Stafford. We do have geographic recruitment teams. We
also are recruiting nationally. For the first time, we have put
advertisements in USA Today, which was quite expensive but it
got a lot of play, a lot more than we thought. We currently
have about 1,000 applicants in the pipeline and we feel very
confident that we will meet our hiring goals this year.
Senator Campbell. Well, given the diversity in America and
also the job of the Secret Service in traveling to a lot of
foreign countries, do you give any emphasis to bilingual
people, as an example?
Mr. Stafford. We do.
Senator Campbell. You do?
Mr. Stafford. We do seek recent college graduates with
extensive computer skills and with language capabilities which
are extremely important to us.
Senator Campbell. I thank you.
Senator Dorgan, did you have some questions for the panel?
Northern border security
Senator Dorgan. Mr. Chairman, thank you very much.
Let me ask Commissioner Kelly, you indicated that following
the attempt to come across the border in Washington by the
alleged terrorist you boosted substantial resources at the
northern border stations. We have 22 ports of entry in North
Dakota. Fifteen of them are closed at night, and for those 15,
as I indicated, here is what they put in the middle of the road
at those stations. Now, you put additional resources for a
period of time up at those border stations. What did you learn
from that? What are your long-term thoughts about increased
security and vigilance at those northern borders?
Mr. Kelly. I think we need more people and more resources,
both on the northern and southern borders. We have asked
Pricewaterhouse to develop a resource allocation model for us.
They have done that. I think it is a vehicle that will let
Treasury, and Congress, and OMB know what Customs needs to
adequately accomplish its mission. That model is now at
Treasury and OMB being examined.
But I think, clearly, we need additional resources on both
of our borders. What we did in response to the arrest is that
we redeployed people. 700 inspector equivalents were redeployed
from other locations to the northern border. But you are right,
it was on a temporary basis and we have now gone back to
operations as they were before December 14, with the exception
of remote video inspection ports. There are seven of them. We
are now manning those remote video ports 24 hours a day. We are
undergoing a study with INS on remote video to see if the
program can be strengthened. We want people who participate in
the program to be registered, and that is an issue that we are
discussing with INS. But other than that, we are back to
staffing the way we were prior to December 14.
Senator Dorgan. Can you provide for the subcommittee a
specific evaluation of the additional resources you think you
need to respond to these issues, specifically the northern
border issues?
Mr. Kelly. As I stated, I think the resource allocation
model will give us that information. It is port-specific, it
addresses all 301 of our ports of entry, and it has an overlay
attached to it. It is in essence driven by workload, workload
generators. I think it is the vehicle that we need to use to
move forward in this regard.
Enforcement of existing gun laws
Senator Dorgan. Director Buckles, we have this raging
debate, in fact, I was listening to it on the car radio this
morning coming in, by the NRA and others about the need to
enforce gun laws in this country. The point is, they say no
additional laws are needed, we just need to enforce current
laws. Can you give us a description of what has happened to
funding in your agency in the last 20 years?
Mr. Buckles. Well, if we go back 20 years, I do not know
about the exact funding levels, but I know I joined ATF in 1974
and the agency was roughly 4,000 employees at that time. At the
present time, we are, excluding temporaries and part-time
people, somewhere around 4,300. So over the course of those 25,
26 years, there has not been any net growth, or very little net
growth in the size of the Bureau.
Senator Dorgan. If one in a range of areas, both the
Federal and State and local governments, called for substantial
increased enforcement of existing laws, for example,
prosecution of those who are former convicted felons who
attempted to purchase guns and so on, I assume the entire
system needs substantial new resources.
Mr. Buckles. We certainly do, and this budget reflects a
step in that direction. I cannot travel around the country or
meet with the United States Attorneys who the first thing out
of their mouth will be, ``We need more ATF agents here in
Denver'' or wherever it might be. Everywhere I go, that is the
first thing I hear.
Senator Dorgan. I make the point that this is kind of a
test of will here. If, in fact, this is part of the debate, we
need better enforcement of existing laws, then we are going to
have to be willing to provide the resources to do that. I mean,
we cannot say, let us better enforce laws but we will not
provide the resources to allow that to happen.
Cooperation with cuba
Commissioner Kelly, I was in Havana, Cuba, last August on
an official trip and discussed with both our interest section
in Cuba as well as the Cuban government, the issues of
enforcement and cooperation with respect to the interdiction of
drugs. Can you give me a description of what your agency is
discovering vis-a-vis cooperation and communication with the
Cubans on this issue?
Mr. Kelly. There is some communication. Primarily that
communication as far as drug interdiction is concerned comes
through the Coast Guard, and the Coast Guard will relay
information to us. So we are communicating, but not directly.
Hiring enforcement personnel
Senator Dorgan. Mr. Johnson, can you give us kind of a
broad description of the challenges you face in hiring law
enforcement folks across the board here? I think Director
Stafford has described a bit of that, but what is your
impression? Are we in a circumstance where we have retention
capability and recruitment capability to provide the resources
we need?
Mr. Johnson. This budget does provide for a significant
increase in the number of law enforcement personnel for our
bureaus. This poses great challenges for us. As all of us know,
due to the surging economy, that the job market is tight. There
is tremendous competition for very qualified people even within
our own bureaus. We are in a position right now where our
bureaus are hiring and there is potential competition which we
hope would not redound to a net deficit for our bureaus.
That said, we have worked to deal with the issues of
bringing people on as quickly as possible. Obtaining schedule B
authority has been crucial to that effort. The absence of
Schedule B for the ATF and the Customs Service, I think, can
make their hiring process much more cumbersome at a time when
we need it to be as flexible and as efficient as possible. The
absence of an ongoing effort within the ATF for hiring--there
was a long period of time when they did not even have the
ability to bring people on board--meant that their
administrative function for bringing folks on board simply was
not at the level of effectiveness that we need right now.
So it is a challenge. We are trying to address that, one,
through Schedule B. We are holding a conference within the next
couple of weeks--it will be on April 6 and 7--to address the
issues of recruiting generally, then more specifically,
diversity within the recruiting process to make sure that we do
bring the sorts of skills and backgrounds on board that the
chairman referenced in his question to the Secret Service.
Personnel retention
Retention is a problem and this budget attempts to address
that. It is a problem in the Secret Service and Director
Stafford's priorities have been to bring on more people so we
can deal with the quality of life issues that can drive
personnel from the Secret Service to sometimes elsewhere in the
Treasury family, but also to outside of law enforcement.
We have also worked within the Office of Enforcement,
working particularly closely with ATF and also with management,
to develop essentially a pilot program, a demonstration pay
project, the authority for which came from this committee, so
that we can do a better job at retaining the very high quality
personnel, particularly in our laboratory areas, that we have
developed over time and that we stand the risk of losing.
So it is a problem. We are taking steps to address it and
we appreciate the committee's continued support as we move
forward in these areas.
Treasury law enforcement overtime
Senator Dorgan. Let me just ask briefly your use of
overtime in the agencies that are represented here. Overtime,
of course, is expensive, but the use of overtime in some
Federal agencies is very substantial. Can you give me a
description of the use of overtime in these agencies, the level
of overtime compensation?
Mr. Johnson. I believe there is a fairly high range. I know
within the Secret Service, as I recall, the number was around
80 hours of overtime per month, which is quite extraordinary.
Senator Dorgan. Eighty hours per month per agent?
Senator Campbell. Overtime?
Mr. Stafford. Overtime. In our protective divisions, it is
higher. It is 84 to 85 hours a month, on average. In our field
offices, it is a tad lower. It is about 78 hours. As you can
see, that is huge. It is too much. We need to reduce it. Our
goal was to reduce it to 1994 levels, which was in the mid-60s,
at least we could deal with that. Increased staffing is a step
in that direction, to try to reduce that.
Mr. Johnson. But overtime is also a significant issue for
the Customs Service, particularly when there was this
heightened state of alert on the northern border in connection
with the Y2K events. One of the ways that Commissioner Kelly
had to address this problem was by increasing staffing at the
locations and increasing the amount of overtime that people
were required to work. I do not know, Commissioner, if you want
to address that.
Overtime
Mr. Kelly. We have a substantial overtime budget, no
question about it. Our investigators get law enforcement
availability pay, but our inspectors, of which there are
approximately 8,000, probably average about $15,000 to $18,000
a year in overtime. So it is a significant expenditure for the
agency, but I think it is a reflection, also, of the fact that
we are, in my judgment, understaffed.
Additional ftes vs overtime
Senator Dorgan. Would it not be far less expensive to
simply provide for the additional FTEs and pay a regular rate
rather than overtime rates for, in your case in the Secret
Service, the equivalent of 2 extra weeks' of work in a month, I
assume at time-and-a-half, is that right?
Mr. Stafford. That is correct.
Senator Dorgan. Is that not an incredible waste of
resources, as opposed to simply increasing the FTEs to pay
regular salaries to folks working regular time?
Mr. Stafford. No, I agree. It is not only not efficient but
our people are tired and it is not safe.
Senator Campbell. I would think in many cases, you do not
have that option. When the President decides to go on a trip
for ten days, it is pretty hard to work an 8-hour day. When you
are on the plane with him, your hours are pretty much what he
determines and I would think that that is overtime, there is
just no option on a lot of it.
Senator Dorgan. I understand that, but in more routine
circumstances, my expectation is this overtime is not occurring
just with respect to travel. In Customs, perhaps, if you do not
have the resources and you are paying overtime instead to
extend the hours worked, it seems to me that is a pretty
inefficient way to cover the needs. I mean, I understand you
are not in a situation right now where any of you can describe
your increased FTE needs. That is given to you and you are
going to have to make do with what you have. But I am just
asking the question in terms of efficiency here, in terms of
how we spend our money. It seems to me that we are probably
looking at ways that could be much more effective.
Mr. Johnson. Senator Dorgan, I believe if you went to the
ATF as well, you would find similar circumstances. As the
Director's testimony has pointed out, their budget has not gone
up. Their staffing levels have not gone up tremendously in over
25 years. Yet, if you looked at the number of new pieces of
legislation and new responsibilities that have been added, you
are looking at an organization that has a very valuable
mission, a critical mission in dealing with the issues of
violence in our society. You will, time and time again when you
go out to the field, as I have, and speak to our personnel on
the ground, find that they are running from pillar to post to
cover it all. I think when we talk about lack of enforcement, I
think given their responsibilities and given their resources,
they are doing a very creditable job, but that comes at a cost,
and Director, perhaps you would like to describe that cost.
Mr. Buckles. In our case, we do not have the efficiency
issue because, for the most part, our agents are not being paid
additional scheduled overtime at time-and-a-half. As you know,
they receive a 25 percent basically straight time for
additional overtime that they are required to work.
The situation that our agents face when we are understaffed
is that they simply work as much as they have to work to get
the job done, and we face very difficult situations in offices
where agents are--where we fear burnout with agents because
they do not stop because the clock stops when they have a job
to do. So the additional personnel is not so much an efficiency
in our case as it is a situation for saving our people from
burnout.
Senator Dorgan. Let me just ask, I understand Senator Kyl
has a need to be at a hearing at 10:00 and I will not prolong
the questioning, but let me ask if we could perhaps get from
the Under Secretary a memorandum describing overtime in the
agencies that you are involved with and the cost of that
overtime and maybe some evaluation about what might be a
smarter and more effective way of using our resources, if you
feel that exists.
Mr. Johnson. We would definitely undertake to deliver that
to the committee. The only thing that I might add, just as we
listened to Director Buckles' testimony, is that even when
there are not monetary concerns there, I think we ought to be
providing an assessment of the toll on our personnel as a
result of the staffing issues, and we will endeavor to do that.
Senator Dorgan. That is a fair point and an important one,
and let me go back to this, especially ATF today. We keep
talking about the need to enforce gun laws. Well, if we are
going to do that, and I support that, let us provide the
resources. Let us provide the agents and the resources to do
this. I mean, let us do more than talk about it. Thank you all
very much.
Senator Campbell. In that assessment, you might also
include if you have any employee's comments, the ones that like
the overtime. You hear a lot about burnout, but I have talked
to employees that enjoy the extra income for the family.
Let me turn to Senator Kyl, who is on a short time frame.
He has more problems, I think, in his State with illegal
immigration and drug passage and so on than anybody in the
Senate.
Senator Kyl. Thank you, Mr. Chairman. Well, being on the
southwest border, we obviously have our share. With respect to
Customs, I would ask Director Kelly to convey to his personnel
on the front lines how much we all appreciate the effort and
the hard work that they do in a very difficult job. I am sure
that they do appreciate a little bit of the overtime, but on
the whole, they would probably rather have a pay raise, less
overtime, and more time with their families, I am sure.
I am going to get to a couple of questions relating to
that, but I also wanted to thank Director Stafford for the
Secret Service's willingness to detail people to the U.S.
Senate. My office has had the benefit of wonderful employees
from the Secret Service who have been a tremendous benefit to
me and I thank you for that.
Allocation of funds and personnel for southwest border
My questions primarily go right to the point that the
chairman alluded to and that is the lack of resources on the
Southwest border. I am concerned about the refusal of the
Treasury Department, Mr. Johnson, to disburse money that we
obligated from Treasury's asset forfeiture fund--the Kyl
amendment from last year, $25 million, the purpose of which was
to alleviate this very personnel problem that we are talking
about for new agents and inspectors and some equipment. It
could have gone a long way toward beginning to ease some of the
problems that we have on the Southwest border.
My first question is, why was the money not disbursed?
Secondly, when will it be disbursed? Then we will go from
there.
Mr. Johnson. Senator, I hope I have good news. Answering
the second question first, last night, I was able to sign off
on the authorization for the expenditure of the $25 million
that had been allocated in the asset forfeiture fund.
The reason for the length of time is that considerable care
had to be taken in putting together the package that was
consistent with the President's budget as well as consistent
with certain priorities that had been identified in the Customs
budget, particularly with respect to the counter-narcotics
initiative that is set forth in that budget. There are
substantial numbers of personnel that have been added in that
counter-narcotics proposal and I believe that Commissioner
Kelly can describe that in greater detail. So we tried to
maintain that program, but we also wanted to address the very
critical need that you identified in your allocation. So we
believe that has been taken care of.
Allocation of funds association with the kyl amendment
Senator Kyl. Well, it has been taken care of to the extent
that, I guess in the fourth quarter of this year, you will
finally begin to expend money that was intended to be expended
totally in this year. Was there any doubt in the way that we
put this amendment together about what our intentions were?
Mr. Johnson. No, sir. The language of the amendment was
clear, as were a number of other allocations for the asset
forfeiture fund. One of the challenges that we faced in putting
together the allocation and finally releasing the funds was
that there had been an allocation of some $178 million for a
fund that had $142 million in funds to meet that overall
allocation. There was far more will than wallet, sir, and what
we tried to do is to match those critical needs, and there are
certain things that still have not been funded. There has been
a request for automobiles for our agents which is important to
all of our bureaus and we have still had to defer those
expenditures. Hopefully, we will be able to meet those, as
well.
Senator Kyl. How much of the money, of the $25 million,
will be spent in fiscal year 2000, do you know?
Mr. Johnson. The expenditures are split over fiscal year
2000 and 2001, and I can give you the precise figures in just a
second.
Senator Kyl. Is it roughly $13.7 million this year and
$11.3 million next year?
Mr. Johnson. That is correct, sir.
Senator Kyl. Thanks. It is my understanding that the
recommendation was not from Customs but from you, and you just
indicated there were two reasons, to be consistent with the
President's budget, which, of course, reflects his priorities,
and secondly, some needs for counter-narcotics. But the
recommendation that the money be deferred over a 2-year period
was your recommendation, was it not?
Mr. Johnson. Sir, this was a process that involved a fair
amount of discussion between Treasury and Customs and a
discussion ultimately of a variety of proposals, some of which
came forward from Customs, and at the end of the day, I was the
one that chopped on the proposal that goes forward. So at the
end of the day, I was the decision maker, yes, but it was a
process that we were engaged in with the Customs Service.
Senator Kyl. I understand, but just so the record is clear,
did Customs recommend or did you recommend that the money be
spent over a 2-year period?
Mr. Johnson. I would say, sir, that I decided that the
money would be spent over 2 years. There were a number of
proposals that were entertained during this process, and at the
end of the day, I was the decision maker on that.
Resource allocation model
Senator Kyl. The resource allocation study, Commissioner
Kelly, is that the study that Pricewaterhouse--was it
Pricewaterhouse that did the basic work on that?
Mr. Kelly. Yes, sir.
Senator Kyl. Is that study complete now, ready to go?
Mr. Kelly. Yes, it is.
Senator Kyl. So we can all see what kind of needs are
illustrated in there?
Mr. Kelly. We have sent it forward to Treasury and OMB is
also examining it.
Senator Kyl. And I presume the committee can get a copy of
that?
Mr. Kelly. Yes, sir.
Senator Kyl. I would just ask this question. Would that
study, in your opinion, provide us with the template of needs
for Customs in terms of both personnel and facilities and
equipment over the next few years?
Mr. Kelly. Well, it focused on personnel for the most part.
There is, under the auspices of this committee, an
infrastructure study that is going forward that looks at the
infrastructure needs on both of our borders and that should be
finalized in June. But we have some preliminary findings in
that regard which we are certainly able to share.
Senator Kyl. So if the committee were to understand exactly
what you think you need, that study would provide, at least
with respect to personnel, a very good guide as to what we
should try to fund, if we agree with the study, obviously, to
reflect the needs of Customs, is that right?
Mr. Kelly. Yes, sir.
Senator Kyl. I just recommend, Mr. Chairman, that we
immediately obtain the study. Senator Dorgan referred to it. He
made some excellent points with respect to overtime and so on,
the need for more personnel. I understand the study does call
for more personnel. We are going to have to understand what
additional expenditures that may require us to ask for as a
subcommittee and that is not going to be easy to obtain, but
better to know now, right at the beginning of our process this
year, and make as large a request as we can to comply with the
resource study. I am certain we are not going to get everything
we ask for, but at least we can put in motion a process so that
over time we can begin to satisfy the needs of the Customs
Service.
And then, secondly, a question relating to the recurring
costs that relate to the hiring of new people. Maybe, Mr.
Johnson, this is for you. What will be the request for handling
the recurring costs next year and the year after?
Mr. Johnson. In connection with?
Senator Kyl. With the new hires.
Mr. Johnson. As a result of the study, sir?
Senator Kyl. No, as a result of the $25 million over the
2000-2001.
Mr. Johnson. I do not have those precise figures. We can
provide that.
Senator Kyl. You will need to get those to us because we
will need to fold those into our figures for the future----
Mr. Johnson. Absolutely.
Senator Kyl [continuing]. So that we know more than just
one year out what we are going to have to budget for.
Mr. Johnson. We will do that.
Senator Kyl. There will be recurring costs in the year 2001
for the expenditures we make in 2000, right?
Mr. Johnson. Right, but we believe that the way we have
laid out the expenditures, that should cover the----
Senator Kyl. In 2001?
Mr. Johnson [continuing]. The costs in 2001.
customs' Infrastructure study
Senator Kyl. All right. In any event, Mr. Chairman, I think
looking at that resource allocation study should provide us a
real road map of where we need to go. I also understand that
with respect to the Southwest border specifically, you have
another study coming out in June that will be more precise as
to that, or is that the----
Mr. Kelly. That is the infrastructure study that I referred
to, yes, sir.
Senator Kyl. Suffice to say, we have--in fact, I was
kidding my friend, Spencer Abraham, who tears out his hair
whenever there gets to be a 2-minute delay in crossing the
border from Canada into Michigan. You know, they are busy up
there and 2-minutes is a long time to wait. And I have told him
that if we could get our delay on the southwest border down to
20 minutes, we would be doing dances, and I am sure your folks
would consider it a great success.
We have a huge amount of trade coming up from Mexico, and
the bottom line is, if you do not get in queue by about 2:00 in
the afternoon, you are going to spend the night at the big
truck facility on the south side of the border waiting to get
in, and we are supposed to be for free trade and facilitating
trade and supporting agriculture, Senator Dorgan. We need to
understand that one of the choke points is the inspection, the
border crossing stations that we have, simply because we do not
have enough lanes and enough personnel to handle all of that
traffic. We have got to do better. Thank you very much.
Senator Campbell. I have been in your State a number of
times and I noted with interest there are a lot of places where
there is no wait. They just come across.
Senator Kyl. That is the other issue.
Senator Campbell. That is the other issue, right.
With that, I have no further questions. I appreciate you
being here and thank you for attending.
Our next panel also has the Under Secretary on it. Did you
have anything further to say on that panel, Mr. Under
Secretary?
Mr. Johnson. No, sir.
Senator Campbell. We will go on with Mr. Ralph Basham, the
Director of FLETC, and Mr. William Baity, the Deputy Director
of the FinCEN.
If we could have our seats, gentlemen, we will start in
that order, the Under Secretary does not have a statement.
Mr. Johnson. That is correct, sir.
Federal Law Enforcement Training Center
STATEMENT OF W. RALPH BASHAM, DIRECTOR
Senator Campbell. We will just go ahead and start with
Ralph Basham and go to Mr. Baity right after that.
Mr. Basham. Mr. Chairman and members of the subcommittee, I
am pleased to be here today to report on the current operations
and performance of the Federal Law Enforcement Training Center
and to support our appropriations request for 2001.
Under the leadership of the Secretary of the Treasury,
Lawrence H. Summers, Under Secretary for Enforcement James E.
Johnson and his staff, the FLETC has received strong support
and active assistance for carrying out its responsibilities. We
are indeed fortunate to have these two individuals playing a
leadership role as the FLETC enters into the 21st century.
I also want to thank this committee for the support it has
provided the Center. The committee has been extremely
supportive and most generous in its funding of consolidated
training.
The Center provides two essential levels of training for
Federal law enforcement organizations from all three branches
of government. Entry-level training to the Federal service is
conducted for police officers and criminal investigators and a
full range of advanced training programs are conducted for
journey-level personnel in areas such as marine, law
enforcement, anti-terrorism, financial and computer crimes, and
weapons of mass destruction.
Additionally, the Center provides facilities and services
to participating organizations to permit them to conduct
agency-specific basic training and advanced training programs.
Over the years, the Center has also been called upon to conduct
training for State, local, and international law enforcement
officers. Today, more than 200 separate programs are available
at our sites at Glynco, Georgia, and Artesia, New Mexico, as
well as a temporary training site in Charleston, South
Carolina.
Our fiscal year 2001 request contains three important
initiatives. With regard to our salaries and expense account,
we are seeking an increase of approximately $7 million and 26
FTE in our mandatory workload. This funding will be used to
address entry-level training for additional agents and
inspectors for the Bureau of Alcohol, Tobacco and Firearms and
additional agents for the United States Secret Service.
Our other two principal initiatives relate to our
construction account request. One initiative is for major
renovation of existing structures at Glynco. The Center
acquired the Glynco site in 1975 and many of the structures
were built in the 1950s and 1960s and reflect serious
infrastructure problems that cannot be sustained further
through regular cyclical maintenance only. These renovations
involve asbestos abatement, leaking roofs, safety code
measures, and major mechanical systems work. We believe this
funding request for renovations proposed over the next several
years must be undertaken in order to protect the government's
investment of nearly a quarter of a billion dollars in the
Glynco physical plant.
The second construction account initiative of immediate
importance is the new facility construction. The approximately
$11 million requested in the Treasury Asset Forfeiture funding
will permit the Center to construct a new dormitory in Glynco
and a firearms range and office structure in Artesia. This
proposal is part of our 5-year plan to expand capacity at both
sites to accommodate the U.S. Border Patrol training now
conducted in part at Charleston and other participating agency
training requirements. This request is for the second year of
the plan, and if approved, will keep the Center on track for
closing the temporary site in Charleston by 2004.
In that connection, I would like to mention that the Center
is exploring all options available within our resource
capabilities in Artesia, as well as Glynco, to determine how
projected Border Patrol and other agency training can best be
undertaken in a manner consistent with the purposes for which
this Congress created the consolidated training concept. We
will keep this committee apprised of the results of our review.
prepared statement
In closing, Mr. Chairman and members of the committee, I
want to thank you for your support of the Federal Law
Enforcement Training Center's important mission. Thank you very
much.
Senator Campbell. Thank you.
[The statement follows:]
Prepared Statement of W. Ralph Basham
Mr. Chairman, Senator Dorgan, and Members of the Subcommittee, I am
pleased to be here today to report on the current operations and
performance of the Federal Law Enforcement Training Center (FLETC) and
to support our appropriations request for fiscal year 2001. Before
starting with my testimony, I would like to take this opportunity to
introduce the members of my staff who have accompanied me today.
The Center has experienced tremendous growth since its
establishment in 1970, when a handful of agencies partnered together
and established the Consolidated Federal Law Enforcement Training
Center. With the addition of the CIA's OIG this year there are now 73
participating agencies training at the Center. We expect further growth
as more agencies recognize the many benefits of consolidated training.
The Department of the Treasury has been the lead agency for the
United States Government in providing the administrative oversight and
day-to-day direction for the FLETC since its creation. Under the
leadership of Secretary of the Treasury, Lawrence H. Summers, and Under
Secretary for Enforcement, James E. Johnson, the FLETC has received
strong support and active assistance for carrying out its
responsibilities. We are indeed fortunate to have these two individuals
serving in key leadership roles as the FLETC enters into the 21st
century. I also want to thank this Committee for the support it has
provided to the FLETC. Throughout the Center's 30 years of service to
Federal law enforcement, this Committee has been extremely supportive
and most generous in its funding of consolidated training. We extend
our appreciation and look forward to working with you in the coming
years.
The Administration and Congress can be proud of the quality of
training being provided at the FLETC and the savings realized through
consolidation. The consolidated concept for law enforcement training at
the FLETC is 30 years old and continues to be the most efficient and
economical means for delivering this essential service to the law
enforcement community and the nation.
Today, I am prepared to discuss several initiatives in the
President's fiscal year 2001 budget. The Center's fiscal year 2001
request is for a Salaries & Expenses (S&E) appropriation of $93,483,000
and 607 FTE, an increase of $9,456,000 and 35 FTE above the fiscal year
2000 level. Our request for the Acquisition, Construction, Improvements
& Related Expense (ACI&RE) appropriation is for $17,331,000, a decrease
of $3,844,000 below the fiscal year 2000 appropriation. Further, the
FLETC is requesting that $14,267,000 be provided from the Treasury's
Asset Forfeiture Fund to support the expansion of facilities at the
Glynco, Georgia and Artesia, New Mexico centers. The funding and FTE
requested will support three important initiatives, New Training
Building Support ($1,606,000 and 2 FTE); New construction ($11,767,000
from the Treasury's Asset Forfeiture Fund to construct a dormitory at
Glynco and an outdoor firearms range with steel targeting system and a
firearms office building at Artesia); and Major facility renovations
($4,436,000--includes $2,500,000 from the Asset Forfeiture Fund and
$1,936,000 from the FLETC's ACI&RE account).
Together, the total S&E and ACI&RE requests, including monies from
the Treasury's Asset Forfeiture Fund, represent an increase of
$19,879,000 over fiscal year 2000's enacted appropriation. Coupled with
an estimated $35,890,000 in funds to be reimbursed to the Center for
training related services by our participating agencies, the total
budget for fiscal year 2001 is $160,971,000.
Before providing this Committee with an overview of Center
operations and discussing each of the initiatives in more detail, I
would like to take a moment to address progress being made in complying
with the requirements of the Government Performance and Results Act
(GPRA). As you know, the GPRA requires agencies to publish annual
performance plans that are tied to their strategic plans. Performance
plans are to include measurable goals which agencies are required to
report on after the year is completed. These performance plans are now
an integral part of the budget documents sent to you each year.
There are a total of six performance measures to report on in our
budget request for this year. The performance measures used for the Law
Enforcement Training activity in fiscal year 1999 included: (1) results
of the student quality of training survey, (2) student-weeks trained:
Federal Basic, (3) variable unit cost per basic student-week of
training funded, and (4) number of personnel input forums conducted.
The performance measures for the Plant Operations activity included:
(1) student quality of services survey and (2) initiation of a
comprehensive development plan.
The student quality of services survey and student quality of
training survey performance measures are outcome measures. The student
quality of training survey and the student quality of services survey
are based on a percentage of students who answer satisfactory or better
to the questions presented in the survey. Both were computed using
evaluations completed by students attending Center programs. The
student-weeks trained outcome is based on whether the Center conducts
100 percent of the basic training requested by its participating
agencies. The variable unit cost per basic student-week of training
funded is also an efficiency measure and is based on training dollars
divided by funded student-weeks of training. Finally, the plan called
for the FLETC to conduct four personnel input forums per year.
I am pleased to report that the Center's overall performance
against established target goals was very good. The most critical
performance measure in our plan, the student quality of training survey
measure, was 99 percent. This exceeded the Center's performance plan
target goal of 80 percent. The Center conducted 100 percent of the
student-weeks of basic training requested. The FLETC's training costs
were above the cost figure established for the variable unit cost per
basic student-week of training. This was due to a failure of projected
training levels to materialize, primarily with the Border Patrol. The
plan projected a per week cost of $146 and the actual was $165, an
additional cost of $19 per week or 13 percent increase. The cost per
student-week of training measure should come back in line in fiscal
year 2000. In the Plant Operations activity, performance measures were
either met or exceeded.
As stated in the Center's testimony last year, the FLETC is
currently revising its strategic plan and performance measures in an
effort to more accurately reflect our performance indicators and to
better align them with the Center's mission. The draft will be provided
to this Committee and our other stakeholders for review and comment
when it is completed.
overview of operations
Now Mr. Chairman, if I may, I would like to provide the Committee
with a brief overview of the operations of the Federal Law Enforcement
Training Center.
The Center has experienced tremendous growth over the last 30
years. With few exceptions, the FLETC conducts basic and advanced
training for the vast majority of the Federal government's law
enforcement personnel. We also provide training for state, local and
international law enforcement personnel in specialized areas and
support the training provided by our participating agencies that is
specific to their needs. Currently, 73 Federal agencies participate in
more than 200 different training programs at the Center.
There are entry level programs in basic law enforcement for police
officers and criminal investigators along with advanced training
programs in areas such as marine law enforcement, anti-terrorism,
financial and computer fraud, and white-collar crime. Training is
conducted at the headquarters training center in Glynco, Georgia, our
satellite training center in Artesia, New Mexico, or a temporary
training facility in Charleston, South Carolina.
The temporary training site in Charleston was established in fiscal
year 1996 to accommodate an unprecedented increase in the demand for
basic training by our participating agencies, particularly, Immigration
and Naturalization Service (INS) and United States Border Patrol
(USBP). The workload increase is the direct result of Administration
and Congressional initiatives to control illegal immigration along the
United States borders.
In addition to the training conducted on-site at one of the
FLETC's residential facilities, some advanced training, particularly
that for state, local and international law enforcement, is exported to
regional sites to make it more convenient and/or affordable for our
customers. At a time when the FLETC residential sites have been
stretched to capacity limits to meet increased Federal training
requirements, the use of export sites for other types of training has
proved highly successful.
Over the years, the FLETC has acquired a reputation as an
organization with a ``can do'' attitude that provides high quality,
cost efficient training and state-of-the-art programs and facilities. I
have come to realize and have seen first-hand the many advantages of
consolidated training for Federal law enforcement personnel, not the
least of which is an enormous cost savings to the Government.
Consolidated training avoids the duplication of overhead costs that
would be incurred by the operation of multiple agencies training sites.
Consolidation also ensures consistent high quality training and fosters
interagency cooperation and camaraderie in Federal law enforcement.
Quality, standardized, cost-effective training in state-of-the-art
facilities, interagency cooperation, and networking are indisputable
positive results of consolidation. However, the concept of consolidated
training is fragile and must be constantly nourished and supported, if
it is to remain viable.
workload
In fiscal year 1998, the FLETC workload reached a new historical
high. In fiscal year 1999, the workload decreased over the previous
year due in large part to the INS and Border Patrol's training
projections falling below original estimates. With new pay incentives
and hiring procedures now being employed by Border Patrol, they
anticipate their projections will be more accurate in the near future.
Overall, the FLETC expects the participating agencies to continue to
have high training workload requirements both at the entry and advanced
training level.
During fiscal year 1999, the Center graduated 25,168 students,
representing 97,855 student-weeks of training. This total included
16,297 students who were trained at Glynco, GA; 3,776 students trained
at Artesia, NM; 611 students trained at the temporary training site in
Charleston, SC; and 4,484 students trained in export programs. There
were 9,005 basic students; 11,708 advanced students; 3,860 state and
local students, and 595 international students trained providing for an
average resident student population (ARSP) of 1,882.
The April 1999 participating agency workload projections, upon
which our fiscal year 2001 budget requests are based, indicate that
during fiscal year 2000, the Center will train 34,168 students
representing 168,847 student-weeks of training. This total includes
23,095 students to be trained at Glynco; 3,662 students at Artesia;
1,870 students at the temporary site in Charleston; and 5,541 students
in export programs. A total of 14,473 basic students; 13,739 advanced
students; 4,130 state and local students; and 1,826 international
students are projected for a total ARSP of 3,247. Again due to
reductions in projected Border Patrol and INS training, the likelihood
exists that anticipated training levels will not be entirely reached in
fiscal year 2000.
The agency projections indicate that during fiscal year 2001 the
FLETC will train a total of 35,444 students representing 180,871
student-weeks of training. This total includes 24,524 students at
Glynco; 3,896 students at Artesia; 1,200 students at Charleston; and
5,824 students in export programs. A total of 17,082 basic students;
12,111 advanced students; 4,419 state and local students; and 1,832
international students are projected for a total ARSP of 3,478. The
fiscal year 2001 request will provide funding for 79 percent of the
projected basic training workload requirements. We believe this will be
sufficient to pay for the training that will actually materialize.
The Center has experienced sustained growth in the training
demanded by its participating agencies over the past 30 years. We have
been able to accommodate many of these increased training demands by
being innovative and undertaking extraordinary measures.
To accommodate training during fiscal year 1985 and again in fiscal
year 1989, the Center had to temporarily expand its capacity for
housing, dining, classroom, office space, storage, and special training
facilities by using temporary buildings and contracted or licensed
temporary facilities. Further, the Center has not always had sufficient
dormitories to accommodate all of our students in on-Center housing and
has used contractual arrangements with local motels. While necessary,
many of the temporary measures taken to meet these training demands
were costly, and they were disruptive to the Center's operations and
efficiencies.
Beginning in 1996, the Center again had to resort to using a
temporary accommodation to meet the extraordinary training needs of one
of our participating agencies, the Border Patrol. As I mentioned
earlier, a temporary training site was established in Charleston, South
Carolina during 1996 because our existing FLETC facilities did not have
sufficient sustained capacity to accommodate all of the training being
requested. This site is an FLETC-Border Patrol collaborative effort,
but facility operations are being funded through the Border Patrol's
appropriations. Plans now call for Charleston to be closed by the
fiscal year 2004 time frame, once the training requirements for the new
Border Patrol hires are completed and/or new facilities become
available to accommodate the training at FLETC's permanent locations.
This is the third time since fiscal year 1985 that FLETC has taken
extraordinary measures to positively respond to the projected training
demands of the participating agencies. More importantly, it is the
second time in the last decade that a temporary training facility has
been established for a lengthy period of time.
Opening temporary training sites is a time-consuming and expensive
process. Capital improvements often must be made to bring a site up to
minimum specifications for law enforcement training purposes and,
unlike capital improvements made at Glynco or Artesia, there is no
permanent return to the government on that investment. Temporary site
utilization affects cost efficiencies in the training provided and
creates quality of life and overall training experience issues for
trainees.
The FLETC currently is exploring all of its resource options to
determine how all Border Patrol training, as well as other
participating organizations training, can be conducted in an efficient
manner consistent with the purpose for which Congress created the
consolidated training concept. We will keep this Committee apprised of
our activities.
In addition to relying on a temporary training site to accommodate
increased workload, the fiscal year 1999 projections made it necessary
to implement a dual-shift experimental schedule at Glynco. Two
overlapping shifts were established. One that ran from 7:00 a.m. to
4:00 p.m. and the other ran from 9:00 a.m. to 6:00 p.m. The overlap in
the dual-shift schedule provided some additional facility capacity
because the extended workday allowed for expanded use of the special
training facilities, such as firearms and drivers training.
Implementation of the dual-shift schedule required numerous
adjustments in the FLETC's food, janitorial, transportation services,
and role player contracts resulting in unprogrammed increases in
operating expenses. Since January 2000, the dual shift schedule has
been suspended due to workload reductions, primarily in Border Patrol
training. However, the experience gained in this scheduling experiment
established that the FLETC could undertake shift scheduling if
warranted within certain cost parameters.
facilities master plan/construction
Now, Mr. Chairman, I would like to brief you and the Committee
members on progress being made in expanding the FLETC's facilities. The
Master Plan, presented to Congress in June 1989, provided a basis for
the efficient and orderly development of the Center's land and
facilities resources to meet projected needs through year 1998. It was
a comprehensive blueprint and orderly guide for expansion of the
Center's capacities to meet the projected training workload.
Over the years, the original Master Plan was updated to refine
earlier estimates and incorporate changes necessary to meet the
evolving training needs of our customers.
In fiscal year 1999, due to the Border Patrol and INS extended
buildup plan, the Master Plan was changed to a 5 year plan that would
increase capacity sufficiently at the permanent FLETC facilities to
allow for the closure of the Charleston site. As priorities change, the
FLETC continuously reviews and updates this plan. This fiscal year is
the second year for funding requested under the 5 year plan. Other
adjustments may be made as circumstances warrant in future reviews.
Since 1989, Congress has appropriated $126,585,000 for new
construction. Of this amount $86,579,000 was for Glynco projects;
$39,456,000 was for Artesia projects; and $550,000 for satellite
locations previously in the FLETC physical plant inventory. In
addition, funds also have been allocated from other sources such as the
Treasury Asset Forfeiture Fund, for new construction activities. I am
pleased to report that we have obligated approximately $116 million
through September 30, 1999. By the end of this fiscal year we expect
nearly all remaining funds to be fully obligated. Since the beginning
of fiscal year 1999 we have been partnering with the General Services
Administration (GSA) on the assignment of construction projects and
that is proving to work exceedingly well thus far.
At Artesia, major projects that have been completed include: a 73
bed dormitory; rehabilitation of the cafeteria/student center complex
and main classroom building; construction of a physical training
complex; interim driver/firearms ranges; a road and sidewalk network;
permanent firearms ranges; and a driver/firearms administrative
support/classroom building. At Glynco, completed projects include: two
dormitories; an administrative office building; a redesigned main
entrance that includes a security and registration facility for
students and visitors; an expansion of the indoor firearms range
complex; consolidation/expansion of the physical techniques facility;
an expansion of the cafeteria; construction of two 25 point outdoor
firearms ranges; an addition to the Steed classroom building (two
state-of-the-art classroom wings); and an expansion of our driver
training complex (the addition of a control tower, defensive driving
and highway response ranges).
In addition to those projects already completed, construction is
underway on a new dormitory, a classroom building, and additional
firearms ranges at Glynco and a new dormitory and a physical training
expansion at Artesia. These projects are expected to be completed in
2000 and 2001. Construction funding for two permanent firearms ranges
in Artesia for which we received funding in fiscal year 2000 already
have been designed and competitively awarded. A chilled water system
expansion at Glynco provided for in the fiscal year 2000 appropriation
should be awarded early this spring.
The Center's fiscal year 2001 ACI&RE request is in the amount of
$17,331,000, a $3,844,000 decrease from the fiscal year 2000 enacted
level. Primarily this decrease reflect the different in construction
between fiscal year 2000 and 2001. Additionally, the Center request
$14,267,000 be provided from the Treasury's Asset Forfeiture Fund. This
includes $11,767,000 for new construction and $2,500,000 for
renovations of existing facilities. Projects that would be funded
include: $7,590,000 for a new dormitory at Glynco and $1,784,000 for a
outdoor firearms range with a steel targeting system and $2,393,000 for
a firearm office building in Artesia.
The construction initiatives outlined support goal two in FLETC's
strategic plan that is to develop, operate, and maintain state-of-the-
art facilities and systems responsive to interagency training needs.
Funding is required if the Center is to meet the training needs of our
customers and to protect the government's investment in facilities.
Failure to fund these initiatives will result in the continued reliance
on the more costly method of establishing and maintaining temporary
training facilities to meet on-going training requirements. Also, an
inadequate capacity in FLETC's sites endangers the concept of
consolidated training and can lead agencies-particularly larger
organizations-to consider alternative locations to meeting their
training requirements.
The Center continues to coordinate closely with its participating
agencies so that the design features of each training construction
project will meet current and future needs. This close consultation
sometimes prolongs the period it takes to design and construct
facilities; however, the time and effort are well spent because this
ensures that the funds are more efficiently and wisely used.
Mr. Chairman, I want to thank you and members of the Subcommittee
particularly for the solid support given the Center in its facility
expansion plans. We are pleased and grateful that Congress has seen fit
to appropriate the funds necessary to expand our facilities to better
equip the Center to perform its mission responsibilities.
Now, if I may Mr. Chairman, I would like to take this opportunity
to briefly discuss our funding request for the mandatory basic training
workload increase and the remaining initiatives in the FLETC's fiscal
year 2001 budget request that I referred to earlier in my testimony.
mandatory basic training workload increase
In our fiscal year 2001 request the Center is seeking an increase
of $6,969,000 and 26 FTE to support the direct costs of basic training.
This funding will provide mandatory training to support new initiatives
for additional agents and inspectors for the Bureau of Alcohol, Tobacco
and Firearms (ATF) and additional agents for the U.S. Secret Service
(USSS). Together with funding already included in our base and what is
expected to be available in the Congressionally authorized 3-year carry
over fund, the FLETC expects to meet all of the requirements for basic
training in fiscal year 2001.
This budget request is in accordance with the OMB/Treasury/FLETC
policy established in fiscal year 1987 that requires funding of the
direct costs of new Federal hire training other than room, board and
travel. The participating agencies do not request funding for these
costs in their budget submissions and solely rely upon the FLETC to
provide this funding in our appropriation.
new training building support
As I mentioned earlier in my testimony, the Center is requesting
$1,606,000 and 2 FTE for new training building support. The requested
funding and FTE are necessary to support the operation and maintenance
of new facilities that will be online or will be coming online at both
Glynco and Artesia by fiscal year 2001. At Glynco, these include a
classroom building, a chilled water system expansion and firearms
ranges. In Artesia this includes a dormitory, a laundry expansion, a
security building, and expansion of the physical training building. The
FLETC's request provides the necessary resources and personnel to
support operation of the new facilities including utilities, service
contracts (janitorial/grounds maintenance), and minor construction and
maintenance. This funding is essential to protect the Government's
investment in these facilities and this initiative supports both Goals
1 and 2 in the FLETC's strategic plan.
renovations
Finally, I note that we are requesting funds this year for the
first time for major renovation work at the Glynco center. As you may
recall, the FLETC acquired the Glynco site in 1975 from the Navy. Many
of the structures built by the Navy in the 1950s and 1960s were adapted
for use in law enforcement training. Additionally, we built several
facilities in the late 1970s. Buildings that are now 30 plus years old
are beginning to reflect serious infrastructure problems that cannot be
upgraded in the normal maintenance cycle for which Congress annually
has provided appropriations. The problems that must be addressed
include asbestos abatement, flat, leaking roofs that must be completely
replaced, upgrading of safety code measures and the over hauling of
mechanical and air handling features in buildings exposed to long
periods of tropical like weather conditions. The renovations will
correct deficiencies, provide for energy efficiencies and return these
structures to an acceptable standard of use.
The Glynco Center now has over 250 structures to maintain and a
nearly quarter billion dollar physical plant. We believe these
renovations and future out-year renovation work should be undertaken to
protect the government's substantial investment at Glynco. Toward that
end our request in fiscal year 2001 is for $4,436,000 ($1,936,000 from
direct appropriations and $2,500,000 from Treasury's Asset Forfeiture.
closing
Mr. Chairman, I am committed to the mission of the Center to
provide high quality law enforcement training at the lowest possible
cost. Substantial savings are being realized through the operation of
the Center as a consolidated training facility. I look forward to your
continued support as the FLETC strives to remain a partnership
committed to excellence.
I am available to answer any questions you may have concerning this
appropriation request.
Financial Crimes Enforcement Network
STATEMENT OF WILLIAM F. BAITY, DEPUTY DIRECTOR
Senator Campbell. Mr. Baity.
Mr. Baity. Good morning, Mr. Chairman, Senator Dorgan.
Thank you for the opportunity to discuss FinCEN's 2001 budget
request. I have a brief statement and, of course, would ask
that the written remarks of Director Sloan be included in the
record.
Senator Campbell. It will be included.
Mr. Baity. As mentioned, I am testifying in place of our
Director, Jim Sloan, who is unable to be here today due to a
family emergency. Mr. Sloan asked that I convey his regrets to
the committee, but also convey from our Director as well as all
the men and women of FinCEN how grateful we are for the support
and counsel we have received from this committee during the
first 10 years of our development.
Today, there is an even greater focus on money laundering
than there was when we were created in 1990. Just 2 weeks ago,
the Treasury and Justice Departments released the Second
National Money Laundering Strategy. This heightened focus is
why our request of approximately $34.6 million is necessary to
enable FinCEN to meet the expectations of law enforcement,
regulators, the financial community, and the American public in
our fight against financial crimes.
To carry out our mission, FinCEN uses various methods of
analysis and delivery of information to law enforcement. Our
main objective is to add value to the information we receive
from financial institutions and deliver it in the most
effective way possible to Federal, State, and local law
enforcement. Currently, we support about 150 Federal agencies
as well as State and local law enforcement in all 50 States.
stabilize existing programs
To continue this support, we must maintain programs such as
Gateway, our Secure Outreach, data mining, and our study of the
magnitude of money laundering. Indeed, these programs have
become key to FinCEN's goal of leveraging resources to more
efficiently and effectively analyze and deliver information to
our customers. Therefore, our budget asks that these programs
be incorporated into our base.
maintain core programs
FinCEN must also continue to strengthen its core missions
and activities. Direct case support is at the very heart of the
FinCEN mission. Through the use of advanced technology and
numerous data sources, FinCEN links information to assist law
enforcement in forming a more complete picture of a financial
investigation. The analysis of such information has become much
more complex and more time consuming over the last few years.
In light of these challenges, we are asking that the analyst
positions approved in our fiscal year 2000 budget be annualized
in fiscal year 2001 in order to improve both the quality and
timeliness of FinCEN's case support.
In addition, the ability to identify trends and patterns
associated with money laundering adds an important strategic
dimension. The positions for strategic analysis initially
funded in the 2000 budget allow FinCEN to provide proactive
analytical support to many multi-agency task forces.
But before we can deliver meaningful data and analysis to
law enforcement, we have to collect useful information from the
financial institutions. Currently, more than 220,000 financial
service providers from the largest money center banks to
currency exchange businesses scattered throughout this nation
are subject to some particular aspects of the rules of the Bank
Secrecy Act. The information reported by these businesses
preserve a financial trail for investigators to follow as they
track criminals and their assets. It, too, is a foundation in
FinCEN's work.
money services businesses
This year, FinCEN embarks on a new regulatory agenda,
registration of financial service providers known as money
service businesses, or MSBs, as we call them. We are working to
implement an extensive public awareness campaign and develop
the necessary forms and data systems. Treasury's Public
Education Office, along with the IRS Detroit Computing Center
and its Examination Division are working in conjunction with us
to carry out this process.
The outreach associated with the MSB registration will
ultimately provide the framework for these industries to report
suspicious activity. In moving toward this goal, FinCEN in
conjunction with the Department recently announced the final
rule requiring MSBs to begin reporting suspicious activity in
January of 2002. The funding we are requesting for 2001 will
allow us to continue the implementation of this critical aspect
of our regulatory program.
FinCEN is also working to extend suspicious activity
reporting beyond banks and MSBs to other financial institutions
vulnerable to money laundering, such as casinos and the
securities industry.
Another important role of FinCEN and its regulatory process
is to ensure that financial institutions adhere to the
reporting requirements that provide this critical information.
This work is carried out with the assistance of the Federal
financial regulators and the IRS Examination Division. To
accomplish this goal, again, we seek to annualize staffing
initially approved in fiscal year 2000.
All of these areas I discussed have an even greater
importance given the recent release of the Second National
Money Laundering Strategy. The $2.9 million requested in the
Department's budget request will give FinCEN the resources it
needs to carry out its responsibilities under the strategy,
requirements which dovetail with our ongoing activities.
To meet these increased obligations, FinCEN under Director
Sloan's leadership has undergone a restructuring designed to
better integrate our law enforcement and our regulatory support
programs. It has been a well-timed effort. FinCEN's management
structure and the integration of the activities that I have
described today are, in fact, coming together at a time when
our nation's anti-money laundering efforts have coalesced into
a comprehensive money laundering strategy.
prepared statement
In closing, I would point out it is clear in this strategy
and in the increasing demands of our law enforcement partners
that FinCEN is being looked to as one of the nation's key
centers of money laundering expertise. Again, thank you for
your support, and we would be happy to answer any questions.
Senator Campbell. Thank you.
[The statement follows:]
Prepared Statement of James F. Sloan, Director
Mr. Chairman, Senator Dorgan, and members of the Subcommittee, I
welcome this opportunity to discuss with you the fiscal year 2001
appropriation request of $34.694 million for the Financial Crimes
Enforcement Network--FinCEN.
I have been Director of FinCEN for almost a year now, and while my
many years with the Secret Service gave me a great deal of knowledge
and insight into financial analysis and investigation, this past year
has given me an even greater appreciation for the complexity of the
issues surrounding financial crime. Most important, I am very proud to
be the Director of this organization--a small cadre of less than 200
men and women--whose diverse range of talents and skills support
hundreds of law enforcement and regulatory agencies. I have learned
just how broadly these talents and skills must stretch to support
FinCEN's many customers.
As you know, the primary functions of FinCEN are to provide support
to law enforcement efforts that counter money laundering and other
financial crimes, and to maintain an effective regulatory program for
that purpose. Our request includes funding to continue our efforts to
provide investigative analysis to our law enforcement customers, as
well as the continuation of our regulatory and international functions.
This request also includes $2.275 million for the implementation of a
regulatory program never undertaken before--the registration of
financial service providers called Money Services Businesses or MSBs.
The outreach associated with the registration process will ultimately
lead to implementation of a requirement for this industry to report
suspicious activity. I'll address this new initiative in more detail
later.
Since its inception 10 years ago, FinCEN has been comprised of
several components that have served many varied constituencies very
well. The management challenge for FinCEN is to blend all of our
resources into a unified system for effectively collecting and
delivering information to law enforcement. Today, I will describe how
we are positioning FinCEN to meet these increasing demands to collect
and deliver information to our partners--even as our country's anti-
money laundering efforts expand.
efficient delivery of ``value added'' information
FinCEN uses various methods for analyzing and delivering
information to law enforcement. Our main objective is to add value to
the information we collect from financial institutions under the Bank
Secrecy Act (BSA) and deliver it in the most effective way possible to
investigators. The systems we use involve sophisticated technology, and
all are tailored to meet the needs of our customers. We service about
150 federal agencies and state and local law enforcement investigators
in all 50 states.
Stabilize Existing Programs
In order to maintain these systems which have become central to our
law enforcement customers, we are reiterating our request from last
year to stabilize programs by transferring them from the Violent Crime
Reduction Trust Fund to our salaries and expenses appropriation. Each
program that is described below is critical to ensuring that the
information--with value added--reaches its users in the most efficient
way. This transfer involves $1.75 million and FTE. The programs are
outlined below:
Data Mining Program.--As the Committee is aware, one of the
principal ways in which FinCEN is able to add value to law
enforcement's investigative efforts is through the application of
advanced analytical tools. Data mining is quickly proving to be perhaps
the most useful of these tools. By applying highly sophisticated,
customized software, FinCEN will eventually be able to ``mine''
literally billions of data segments on subjects, property, bank
accounts, and financial transactions to uncover potential criminal
relationships that would otherwise be virtually impossible to detect
with standard link analysis. Once these suspect relationships have been
established, FinCEN's analysts can then help unravel the complex
labyrinth a criminal group has constructed to disguise their illegal
activities.
To further our efforts in this area, FinCEN has been working with
data mining experts to design software that is tailored to meet the
specialized needs of law enforcement. Data mining is not a static, off-
the-shelf technique but instead requires the testing of complex sets of
algorithms to determine which will most creatively search and combine
random pieces of data to reveal hidden links to criminals and their
money laundering schemes.
FinCEN's efforts, to date, have focused on the evaluation of
several data mining techniques by applying them to a specific database,
such as the one that holds Suspicious Activity Reports, in a given
regional area. These pilot endeavors have already provided law
enforcement with valuable investigative information.
The next step will require the development of a BSA data warehouse.
A data warehouse is a construct of information systems that provides
users with historical and current information that is hard to access or
present in traditional operational data stores. Data warehousing is
critical to our organization's ability to perform effective information
processing such as data mining. The data warehouse FinCEN will be
building this year will store various kinds of BSA information--in a
specially formatted manner to enable the application of large scale,
more complex data mining to occur while ensuring that privacy concerns
about appropriate use of the data receive maximum consideration.
Funding is critical to ensuring that this cutting edge integration of
the various data sets can be developed and that our data mining program
can progress towards the promising potential it has already
demonstrated.
Gateway Program.--In addition to developing new state-of-the-art
techniques such as data mining, FinCEN has continued to build upon its
important mission to efficiently deliver information through programs
such as the Gateway System. Through this system, state and local law
enforcement agencies, working with designated state coordinators who
are trained on FinCEN-designed software, have direct electronic access
to over 100 million reports filed under the BSA. Delivered through a
secure and carefully monitored system, this information provides
invaluable assistance for investigators since it is not readily
available from any other source. The system is audited by FinCEN's
managers, both with record reviews and on-site visits, to ensure that
all inquiries are connected to actual or potential criminal violations.
(A record is kept every time access is made to the BSA data through
Gateway. The record identifies who queried a particular record and when
it occurred. This record is the part of the audit trail that enables
FinCEN to trace every query back to written justification for use of
the system.) In fiscal year 1999, Gateway processed 84,727 queries,
from our state and local law enforcement partners around the country.
This is an increase of 18 percent over the past year.
The Gateway System has a unique feature--an ``alert'' mechanism
that automatically signals FinCEN that two agencies have an interest in
the same subject. In this way, FinCEN can not only assist state and
local law enforcement in coordinating their investigations among
themselves, but also with federal agencies. The number of ``alerts''
issued in fiscal year 1999 rose to 1,580, a 10 percent increase over
fiscal year 1998.
Secure Outreach Program.--While ensuring our state and local law
enforcement partners are provided with effective tools to assist in
their work, FinCEN also has been working, over the past 2 years, to
develop a secure communications system, which reduces the time it takes
to package and deliver its analytical products to Treasury law
enforcement bureaus. Through the application of sophisticated
encryption and the Internet, the Secure Outreach Web System has the
potential to provide real time means of sharing information quickly and
securely. At present, all Treasury bureaus have the capability of
communicating securely among themselves through a secure e-mail system
and, in the very near future, the system will provide them with the
capability of exchanging sensitive case information.
In addition, the Secure Outreach System provides the capability to
access the Money Laundering Coordination Center (MLCC), a FinCEN-
designed database developed for the U.S. Customs Service. The funding
requested in fiscal year 2001 will provide FinCEN with the ability to
expand the Secure Outreach System to include: direct access to the
databases at the Internal Revenue Services' Detroit Computing Center
(DCC) which houses the BSA data (currently this information is
downloaded from DCC); direct access to the Gateway system; and expanded
access to other FinCEN databases.
Magnitude of Money Laundering.--The programs that I have just
described are key to FinCEN's goal of leveraging its resources to more
efficiently and effectively deliver information to its customers. But,
as we have stressed in our previous budgets and strategic plans, it is
difficult to truly gauge the effectiveness of our nation's battle
against financial crime until we find a way to estimate the magnitude
of money laundering. This effort, over the past 2 years, has not been
an easy one. FinCEN began looking at the problem on both a national and
international level. We are moving forward with our own national study.
The funding FinCEN received in fiscal year 2000 is supporting the
exploration and development of the methodology. We are working with law
enforcement, regulatory and financial professionals and intend to draw
upon the expertise of national research organizations and academic
institutions. The fiscal year 2001 request will provide FinCEN with the
resources to continue funding the primary research contract to be
awarded by June of this year.
Maintain Core Programs
In order to meet the growing demand by law enforcement for the
value-added information that FinCEN provides, we also see a need to
increase funding in core delivery programs. These programs are outlined
below:
Traditional Case Support.--FinCEN provides the law enforcement
community with direct case support, formulating reports based on the
data collected under the Bank Secrecy Act (BSA), along with law
enforcement and public record information. The reports link together
associates, bank accounts, property records and other information to
assist law enforcement in forming a more complete financial
investigation. FinCEN has provided this analysis since its creation 10
years ago and is at the very core of our support to law enforcement.
The analysis of the information--FinCEN's ability to add value--has
grown more complex and time consuming over the last few years. The
structure of criminal organizations is more intricate and their
financial transactions more difficult to follow. In light of these
challenges, we are asking that the analysts positions approved in
fiscal year 2000 be annualized into fiscal year 2001 in order to
improve the timeliness of FinCEN's case support. In addition, the
resources will improve responsiveness to grand jury investigations,
provide a full-time emergency response team, and increase the number of
personnel available to provide in-depth analysis on more complex cases.
Enhance SARS and other BSA Database Analysis.--While providing
value-added case support to law enforcement lies at the heart of our
efforts, FinCEN also provides strategic information in support of law
enforcement initiatives. Our focus in this regard is to identify
trends, patterns, and issues associated with money laundering and other
financial crimes. This requires the framing of macro level money
laundering issues while serving as a catalyst for research, analysis,
and dissemination of information on money laundering trends and
systems. Examples of the products generated through our strategic
analysis include in-depth assessments of particular areas or issues
based on indicators extracted from BSA data and other sources. Segments
analyzed could include: (1) geographic; (2) threat vulnerability; (3)
industry analysis such as electronic funds transfer systems; and (4)
analysis of particular money laundering methods.
The positions funded for this area in the fiscal year 2000 budget
are allowing FinCEN to meet the expanding requirements for strategic
analysis to support multi-agency task forces, providing feedback to the
regulatory and banking communities, and expanding proactive research.
effective collection of information
I began my testimony by discussing how FinCEN delivers information
because I wanted to focus on our primary goal--supporting law
enforcement's investigative efforts. But obviously before we can
deliver the best information possible, we have to collect the most
useful data we can from the financial institutions--that is at the
heart of FinCEN's regulatory mission. And unifying the collection and
delivery of information, as I said before, is critical to our success.
As the subcommittee is aware, FinCEN administers the BSA, which
requires financial institutions to keep records and file reports on
certain transactions. Under the BSA, financial institutions must report
to the Treasury all currency transactions above $10,000. In addition,
depository institutions are required to report suspicious transactions
on a Suspicious Activity Report (SAR).
More than 220,000 financial service providers--from the largest
money center banks to the scattered currency exchange businesses along
the Southwest border, with hundreds of variations in between--are
subject to the BSA rules. This information collection preserves a
financial trail for investigators to follow as they track criminals and
their assets. The BSA reports are the foundation of FinCEN's analysis
and information delivery systems.
Expanding the Collection of BSA Information
Suspicious activity reporting, mentioned above, is central to anti-
money laundering policy, both in the United States and abroad.
Officials at financial institutions are in the best position to
determine what transactions appear to lack commercial justification or
otherwise cannot be explained as falling within the usual methods of
legitimate commerce. Under those circumstances, only relying on
currency transaction reporting, although very valuable, is neither
adequate nor cost effective for either the institutions involved or the
government.
For these reasons, much of FinCEN's regulatory effort has been
focused on this issue in recent years. Depository institutions have
reported suspicious activity to FinCEN since 1996 with more than
375,000 reports filed since the inception of the system. Specifically,
these institutions must report financial activity which they know,
suspect or have reason to suspect involve funds derived from serious
criminal activity or for which there is no apparent lawful purpose.
This information has proven to be vital to money laundering
investigations and other financial crimes.
While banks have been the first group of financial institutions
subject to SAR reporting, FinCEN is in the process of extending similar
regulatory requirements to other institutions vulnerable to money
laundering, including money services businesses; casinos; and brokers
and dealers of securities.
As stated in the National Money Laundering Strategy issued last
year, money launderers will move their operations to institutions where
they believe they will more easily be able to successfully evade
enforcement and regulatory efforts. For example, casinos are vulnerable
to manipulation by money launderers and tax evaders due to the fast-
paced and cash intensive nature of the games and because casinos
provide their customers with a wide array of financial services.
In fact, financial services available at casinos are similar and,
in some cases, identical to those generally provided by banks and other
depository institutions. These services can include customer deposit or
credit accounts, facilities for transmitting and receiving funds
transfers directly from other institutions, and check cashing and
currency exchange services. And if banks are mandated certain
requirements under the BSA, then it can only make sense to impose
similar requirements on other industries which offer the same kinds of
services--not only ``leveling the playing field'' within the financial
services arena, but most important, making it equally as difficult for
launderers to hide their money using these industries.
This program will result in a mandatory workload increase requiring
additional resources ($.226 million and 1 FTE). This expansion of SAR
filings will require FinCEN to coordinate outreach efforts with these
industries on a national level, provide guidance to them, and
coordinate with the regulatory oversight agencies.
Increase in Existing Requirements
An important part of FinCEN's information collection mission is to
ensure that financial institutions are adhering to the reporting
requirements that provide the information that is critical to law
enforcement investigations. With the assistance of the federal
financial regulators and the IRS Examination Division, FinCEN
investigates violations of the recordkeeping and reporting requirements
of the BSA. These agencies refer to FinCEN specific cases involving
potential violations of the BSA by financial institutions subject to
their supervision. FinCEN determines if the violations warrant monetary
penalties after a very complex review process.
In order to meet these expanding requirements, increased staffing
was approved in fiscal year 2000, and we are asking that it be
annualized in fiscal year 2001. These positions will not only allow
FinCEN to maintain case processing time at reasonable and manageable
levels but also provide greater guidance and training to regulators on
BSA requirements.
A New Requirement--MSB Registration
In addition to ensuring that we continue to meet the existing BSA
requirements, FinCEN also began a new process under the BSA, in August
1999: the requirement to register Money Services Businesses which
includes money transmitters, issuers, redeemers and sellers of money
orders and traveler's checks, check cashers and currency retail
exchanges.
The requirement to register MSBs was part of the Money Laundering
Suppression Act of 1994. In setting the requirement, Congress found
that such businesses are largely unregulated at the federal level.
Also, evidence gathered from several enforcement actions revealed that
some of these businesses are susceptible to money laundering on a very
large scale.
Extensive discussions were held with the MSB industry, as well as
with the law enforcement community to craft a final rule that strikes
an appropriate balance between law enforcement needs for accurate
information about the owners and locations of MSBs, and the concern
that small businesses be spared unnecessary and intrusive regulation.
The final rule provides a significant period for implementation of
registration to permit government outreach through an on-going working
relationship with the industry. During the spring of 1999, Treasury
established the MSB working group to review the resource requirements
necessary to implement the national MSB registration program. Using
funding provided in fiscal year 1999 and carried forward into fiscal
year 2000 from the Treasury Forfeiture Super Surplus Fund, FinCEN will
implement an extensive public awareness campaign, develop necessary
forms, other public information documentation, and develop data system
requirements. These activities will be accomplished in conjunction with
Treasury's Public Education Office, and IRS's Detroit Computer Center
and Examination Division, among others.
The fiscal year 2001 request of $2.275 million will provide funding
to contract with the IRS or other regulatory partners to ensure that
sufficient and continuing resources are available to conduct regulatory
oversight associated with this program, including activities such as
forms distribution, customer interface to respond to public inquiries,
compliance examination and reviews, and data processing support. This
request also allows our service provider to hire approximately 81
additional personnel, which equates to 10 FTE in fiscal year 2001 since
these positions will be hired late in the fourth quarter. As part of
this process, we also will begin the outreach and education
requirements associated with suspicious activity reporting for this
industry. These regulatory oversight activities are essential to
ensuring compliance with national registration and other BSA
requirements.
Information Collection From FIUs
Not only is FinCEN viewed as an invaluable resource on money
laundering in this country, but we have also been an active player in
encouraging other governments around the world to develop and implement
effective anti-money laundering controls. The promotion of
international cooperation remains an essential part of our networking
efforts.
Foremost among these efforts is the continued development of an
international network of Financial Intelligence Units (FIUs). FinCEN is
working to derive increasing benefit in support of domestic law
enforcement investigations from the growth of FIUs. These now number
48--an impressive increase from the handful which existed just 6 years
ago.
FinCEN is relying on its counterparts in the broader global network
of FIUs to provide information in support of federal investigations.
This is information that might only be obtained with difficulty, or not
at all, through other channels. FinCEN reciprocally provides its
counterparts with anti-money laundering information they need to
conduct their own national investigations.
FinCEN also works on an interagency basis to help implement
national money laundering initiatives and policies. These include:
participating in multilateral organizations such as the Financial
Action Task Force (FATF) and its regional spin-offs in the Caribbean
and Asia; working with Interpol, the United Nations and the various
international financial institutions to reinforce the need for
international cooperation; providing training and technical assistance
to countries our government has determined can best benefit from such
assistance.
the national money laundering strategy
As you know, the Treasury and Justice Departments released the
first National Money Laundering Strategy in September 1999. This
strategy, mandated by the Money Laundering and Financial Crimes
Strategy Act of 1998, sets forth an ambitious agenda of actions
designed to advance four broad goals: strengthening domestic law
enforcement; enhancing steps taken by financial institutions to prevent
and detect money laundering; partnering with state and local
authorities; and bolstering this country's efforts to have strong money
laundering standards adopted, and adhered to worldwide. Thus, FinCEN's
responsibilities will significantly increase over the next year in
order to achieve these goals outlined.
The $2.9 million requested in the Department of the Treasury's
appropriation will afford FinCEN with the resources needed to begin to
provide the level of effort for strategic analysis for targeted high
risk areas; specialized investigative support to the High Intensity
Financial Crime Areas (HIFCAs) and to numerous multi-agency
investigative efforts; a comprehensive regulatory effort for non-bank
financial institutions such MSBs; and an accelerated technological
effort to enhance our analytical capabilities and, at the same time,
expand our ability to efficiently and effectively deliver information
to law enforcement.
This strategy reflects a national commitment to a coordinated,
effective fight against money laundering. FinCEN's role is a critical
component in the implementation of the strategy's multiple goals.
restructuring fincen
When I opened this discussion, I mentioned that for many years
FinCEN has been comprised of several components that have served many
varied constituencies very well. However, when I came to FinCEN last
year, it was evident to me that the existing structure was not
adequately coordinating the efforts of each element of FinCEN into the
integrated collection and delivery system I've been discussing today.
FinCEN needed to be better focused on how each program area
contributed to those missions in conjunction with the entire
organization. Not only was this necessary in order to achieve a more
harmonized goal, it was also obvious that the allocation of very
limited resources could not sustain an organization that was often
going in several important, but sometimes different directions.
After consulting with Treasury, law enforcement organizations,
regulators, the regulated industries, and our employees, I undertook a
restructuring of FinCEN, which I believe, will better coordinate,
integrate, and deliver our products to the law enforcement community,
while at the same time enabling us to be more responsive to the
regulated community. We began the initial phase of that effort last
fall with the implementation of a new senior management structure
intended to integrate all FinCEN activities and have just completed
additional steps last month. We are already seeing the benefits of
these changes in improved analysis and support to our customers.
conclusion
In closing, the new management structure and the integration
process of FinCEN's activities which I have been describing today, are
coming together at a time when our nation's anti-money laundering
efforts have coalesced into the comprehensive money laundering strategy
mentioned earlier in this testimony. It is clear in the Strategy and in
the increasing demands of our law enforcement customers that FinCEN is
being looked to as one of our nation's key centers of money laundering
expertise.
I am confident that the FinCEN organization has reached a level of
sophistication that will enable it to meet the expectations of law
enforcement, the financial community and the Congress in fulfilling the
responsibilities assigned to us. The programs outlined in our budget
request are designed to achieve this objective by using the unique
strengths of our programs in cost effective and innovative ways. We
look forward to the continued support of this subcommittee, which has
been one of our most valued partners since our inception.
Senator Campbell. Do you have some questions you would like
to start out with?
Money laundering
Senator Dorgan. I apologize. I had to take a phone call, so
I am sorry I missed part of your presentation, but let me ask
on the issue of money laundering, it was interesting the other
day at the demonstration here in this building to see some of
the very sophisticated counterfeiting approaches that are being
used. I guess counterfeiting is a different issue, but money
laundering on the one side, counterfeiting on the other, are we
seeing increased problems in these areas and are the increases
substantial increases?
Mr. Baity. If I could speak to the money laundering
problem, first of all, I think we need to keep in mind that the
classic definition of money laundering is the movement of
illegally gotten proceeds, and while we recognize the dilemma
and the expansiveness of narcotics and the money associated
with that, we have to keep in mind that illegal gains are
generated from all sorts of criminal activity.
What we attempt to focus on in terms of the anti-money
laundering programs that we seek to put in place is to address
all of those concerns, whether they be money laundering derived
from fraud, bribery or from corruption. We are seeking to have
the financial institutions put in place the kind of mechanisms
that make it difficult to place these illegal gains into the
financial system.
Senator Dorgan. Let me just talk about counterfeiting just
for a moment. I was looking at the bills the other day and I
was quite struck by them.
Mr. Johnson. I am happy to address that. In the
counterfeiting area, one of the things that we have seen in the
last couple of years is an increase in the amount of
counterfeiting that is actually being done by computer, by
inkjet. Technology is a wonderful thing, but it is often value-
neutral and many criminals are using the greater technology
that is available and increasingly sophisticated reprographic
technology to generate what we refer to as P-notes, inkjet
notes. There has been an increase in that area.
But because of the protections that have been embedded into
the new notes, the new 100s, 50s, 20s, and we are going to be
rolling out the 5s and the 10s soon, we are able to identify
without too much difficulty the counterfeit currency that is
produced.
Fletc's interactive video training
Senator Dorgan. Mr. Johnson, I think you were in the room
the other day when I stopped by and looked at the interactive
video training device that FLETC has, were you not?
Mr. Johnson. That is right.
Senator Dorgan. It is really remarkable what you are doing
in integrating new technology in training and I commend you for
that. It was an interesting demonstration.
Mr. Basham. Thank you.
Export training programs
Senator Dorgan. I note that the number of students trained
in export programs is increasing. Can you describe what
accounts for the need to have so many students trained away
from the existing facilities that you have?
Mr. Basham. Yes, sir. Part of the problem is we have a
great demand to provide and deliver training to State and local
agencies. We do not have the capacity at neither our Glynco nor
Artesia sites to bring those individuals to training at those
sites. We found it to be much more efficient if we can deliver
the training in the local areas, which keeps them from having
to travel outside the area and take them away from operational
needs.
But you may be aware of the STAR program, the rural
training program that we conduct every year for State and local
training, but we just do not have the capacity at our current
sites to be able to bring officers to those sites. What we have
found, again, to be successful is train-the-trainer programs,
where we actually go out to the local community, train
individuals, and then they go beyond that and train their
personnel. It is a much more effective way of delivering
training.
Regularity
Senator Dorgan. Just one additional question. We have a
legal framework within which especially financial institutions
must report and work with FinCEN. Let me ask, outside of that
legal framework, do you find that the financial institutions in
this country are generally cooperative, easy to work with,
interested in helping you complete your task?
Mr. Baity. I think the short answer, Senator, is that they
have been very helpful. In fact, in terms of our regulatory
agenda, as we go forward, they have been active partners. Of
course, our goal is to have the reporting and recordkeeping
provide the most useful information to law enforcement while
balancing that against the burden on the financial
institutions. The institutions have historically been and
continue to be very helpful.
As we go forward with the MSBs, many of these types of
institutions traditionally have not been regulated by the
Federal Government, and in many cases by any governmental
institution. It is critical that their input be part of the
regulatory dialogue as we go forward, and we have attempted to
do that in our rulemaking process. And they have come forward
and participated in this dialogue, from casinos to the money
services businesses to others such as broker-dealers.
Charleston site closure
Senator Campbell. Let me ask a couple questions. Mr.
Basham, let me ask you a couple of things about FLETC. The site
in South Carolina was supposed to be a temporary site. With the
FLETC 5-year master plan well into the development stage, do
you think that the temporary site is going to be closed in
2002-2004.
Mr. Basham. Mr. Chairman, I am fairly confident with the
support that this committee has provided to FLETC that we are
going to be closing that site no later than fiscal year 2004
and we are well on track to putting the facilities in place,
both in Artesia and in Glynco, to accommodate Border Patrol
training at FLETC.
Senator Campbell. Was that site a former military base?
Mr. Basham. The Glynco base was a former----
Senator Campbell. No, Charleston.
Mr. Basham. Charleston, yes, it was a naval base.
U.S. border patrol training projections
Senator Campbell. Each year, FLETC struggles to determine
Border Patrol's anticipated number of trainees. Would you tell
the subcommittee what the actual number of Border Patrol
trainees you expect and what you are doing to get a more
accurate handle on the numbers?
Mr. Basham. The Border Patrol has very aggressively
attempted to meet Congress's requirements to staff up.
Unfortunately, they are facing the same problems other agencies
are facing in that they are competing for the same resources
out there and they are very aggressively this year trying to
raise their numbers. Unfortunately, they have not been able to
meet the projections that they had originally given us. They
will fall far short----
Impact of failure to meet projections
Senator Campbell. When they make a projection, then you
have to obviously increase your manpower, your instructors and
so on if you expect a larger number of people. What impact does
it have, when they do not reach their projection? What impact
does it have on FLETC?
Mr. Basham. Well, first of all, the cost per student
trained goes up because the costs are spread across less
students. But the more severe impact is that unless we are
given enough notice, leadway time, then those training slots go
unused. We are working very closely with INS and the Border
Patrol to come up with a better formula of filling those slots
on the schedule so that we do not lose training opportunities.
So those two are the two issues that we deal with when the
projections are not fulfilled.
Training site scheduling
Senator Campbell. How do you divide the training between
Glynco, Georgia, and Charleston?
Mr. Basham. We have agreed on approximately a 60/40 split,
meaning Charleston would get 60 percent, 40 percent going to
Glynco, in order to maintain the efficiencies of both of those
sites. However, at this point, it is very difficult to
determine just what the Border Patrol is going to require
through the remainder of this year and next year in terms of
training starts. However, they are split about 60/40, depending
on the number of classes the Border Patrol is requesting.
Senator Campbell. Thank you. I was also very impressed
yesterday with that display of counterfeit money, as Senator
Dorgan was. I will tell you, that stuff looked so realistic, I
am not an expert on it, but I defy any 18-year-old working in a
7-Eleven to tell the real thing from one of those $100 bills. I
know you mentioned the difficulty with the new computer age of
being able to duplicate money. It is my understanding, though,
that the paper is supplied by only one supplier in the United
States and that is controlled, monitored, and so on, is that
correct, or do you know that?
Mr. Johnson. I will try that one.
Senator Campbell. All right, Mr. Johnson?
Mr. Johnson. I believe there is one manufacturer that
supplies the paper that is used to manufacture----
Senator Campbell. Even feeling the real ones and the phony
ones, I cannot tell the difference. If we are controlling the
paper and we cannot very well control the printing process
because of all these computers, would it not seem logical to
address more of our attention towards the materials being used,
like the ink and the paper, rather than the increased
articulateness of the engravers that are making the counterfeit
plates?
Mr. Johnson. The strategy in making the currency more
difficult to counterfeit involved putting in security devices
within the paper itself as well as within the ink, and the
Treasury Department embarked on a campaign last year and,
actually the year before, to educate everyone about their
currency, and from time to time you will see people holding up
new $20 bills. What you will see if you hold it up is that to
the right of the central portrait is a watermark that is
embedded into the paper.
Senator Campbell. Does that come when the paper comes or is
that put in by Treasury after they get the paper?
Mr. Johnson. I am not exactly sure when it goes into the
process. Some of the numerals on the ink actually have color-
shifting ink, which is very difficult to reproduce with an
inkjet printer that you would produce a P-note on. And there
are other security devices, including security threads that are
actually embedded in the notes and the different colored
threads that are also in the notes.
Casino gaming
Senator Campbell. One last question, perhaps Mr. Johnson or
Mr. Baity can answer it, I was just thinking about the money
services business, the MSBs, how they are proceeding. In 1988,
we passed IGRA, the Indian Gaming Regulatory Act, as you
remember. Now Indian casinos are really expanding, as you might
know. Is there an impact or is there some connection or overlap
or some process by which you work with Indian casinos, too, in
the money laundering issue?
Mr. Baity. Actually, when we addressed the issue of casino
gaming, a large part of our outreach and consultation has been
with the Native American Indian Gaming Association and its
particular members. They were active participants in the
regulatory process. We held five public hearings on our
proposed regulation for suspicious reporting for casinos. They
attended three of the five public hearings and submitted
substantial and very helpful comments on our proposed rule. We
have met with them both at their conferences and at numerous
site locations to actually understand the impact of Native
American gaming.
What we have tried to do is level the playing field for
casinos across the board, and they have been very active in our
consultation process.
Senator Campbell. Thank you. Well, as you know, they have a
board, a regulatory board, too, and Senator Dorgan and I both
serve on the Indian Affairs Committee. They are sorely
underfunded, as you probably know, the number of people they
have to inspect a number of casinos. The workload is terrific
and we are trying to address that in a different committee.
Additional committee questions
I have several other questions, as other members do on the
committee that were not here today, that we will be submitting
in writing, so if you could get those answers back to us, I
would appreciate it. We will keep the record open for a 14-day
period to get those comments back, if we can.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted to the Under Secretary of Treasury (Enforcement)
Questions Submitted by Senator Ben Nighthorse Campbell
ballistics imaging
Question. I understand that the Treasury and Justice Departments
finally came to an agreement with regard to their competing ballistics
imaging systems. As a result, ATF will be responsible for replacing the
existing DOJ DRUGFIRE equipment with their IBIS system.
What criteria has been established to determine whether scarce
resources will be used to replace existing DRUGFIRE systems or to
provide IBIS equipment to new locations?
Answer. The NIBIN Team has developed the following plan for
establishing a truly National Integrated Ballistics Information
Network.
nibin field restructuring
Development of Architectural Design and Deployment Schedule.
Phase I
Obtain the following information regarding current DRUGFIRE LANs
from the FBI: Up-to-date hit/usage statistics; Age and maintenance
history of LAN systems; Other agency/community considerations.
Phase II
The NIBIN Team will analyze the following data to identify the
first 10 IBIS/''Unified System'' LAN deployments to replace DRUGFIRE
Systems: FBI DRUGFIRE data; Area firearms-related crime rate; Proximity
to existing IBIS LANs; Agencies commitment histories; Community impact;
External factors.
The NIBIN Team will conclude this process by developing a list of
the first 10 IBIS/''Unified System'' LAN (by area, not specific site)
deployments in priority order.
--This first schedule of deployments will be provided to the NIBIN
Board for notification of partner agencies.
Phase III
Beginning with the first area of priority, the NIBIN Team will
invite partner agencies and any other entities deemed appropriate to
offer input in the development of the new structure/configuration of
the LAN.
The NIBIN Team will advise effected partner agencies of LAN
configuration, execute standard MOUs, and schedule actual system
deployment and training.
Phase IV
6 months after deployment and training have been completed, the
NIBIN Team, Crime Gun Operations Section, will schedule a meeting with
representatives of the field division and partner agencies for the
purpose of ensuring that:
--All systems are completely operational.
--Systems are being used efficiently.
--Personnel have received adequate training.
--Goods/services contracted for were received.
--Any other related issues are addressed.
The proposed process for developing a new field architecture and
schedule of deployment is dependent upon several assumptions:
--Actual deployments are contingent upon availability of funds.
--Deployments would be made by LAN priority. Piecemeal deployments
should be last case scenario.
--Emphasis placed on the doing the job right the first time.
Question. What is the timing of each of the four phases of the
restructuring plan?
Answer. Phase 1 is complete, Phase 2 is presently being completed;
Phase 3 will begin once the NIBIN Board announces the first area for
deployment; and Phase 4 will begin 6 months after the systems are
installed.
Question. How many requests does ATF have on file from law
enforcement agencies who would like to participate in the program?
Answer. At this time, ATF has 20 requests on file from law
enforcement agencies who would like to participate in this program.
During the roll out for this program, those agencies meeting our
criteria will be included.
firearms
Question. There is an Administration gun bill pending before the
Judiciary Committee which I assume would mean more responsibility and
more staff for ATF. The President's fiscal year 2001 budget requested
increased funding for gun-related activities at ATF.
What is the ATF staffing requirement for the pending gun
legislation?
Answer. ATF is in the process of formulating resource requirements
for the pending gun legislation in the Senate, as well as evaluating
proposed gun legislation before the House.
Question. Are any of those resource requirements addressed by the
ATF fiscal year 2001 budget request?
Answer. No, the President's fiscal year 2001 budget request is
based solely on current law. Resources required for pending gun
legislation would be in addition to the President's fiscal year 2001
budget request.
A total of $16,300,000 has been requested for both the Secret
Service and the Customs Service for a protective air security program.
The bulk of that is for a separate air branch for the Customs Service.
Question. How is air security currently provided? How long does it
take the Customs Service to get the necessary aircraft to the location?
Answer. Currently, the Customs Service utilizes assigned aircraft
and personnel to conduct airspace security operations.
Customs airborne interdiction tactics have been modified to perform
airspace security jointly with the Secret Service.
The approximate transit time for aircraft to be in position and
operational is 3 to 4 days. However, this varies depending upon where
the event is located and where the support aircraft are stationed.
Question. How many annual events require air security? Where are
these events located? How much lead-time is the Customs Service
normally given for these events?
Answer. Since PDD 62 has been issued (May 1998), the average number
of annual events requiring air security has been 3 to 5 events per
year.
Three of the four events have been located in Washington, D.C. One
event was located in Seattle, Washington. However, a designated event
could occur anywhere in the United States. Historically, the majority
of the events have taken placed in the Washington, D.C., area.
To date, Customs has been given several months of advanced notice
for each event. However, determining who will pay for Customs costs to
conduct these missions traditionally is made at the last minute since
neither Customs nor the U.S. Secret Service has been provided any new
funding for these purposes.
u.s. customs service, office of investigations/air and marine
interdiction division president's decision directive 62.
Question. Why is a separate and dedicated staff necessary? Why
should that site be in the D.C. area given the fact that events can be
anywhere? Why should they be segregated from other Customs Service
resources?
Answer. PDD 62 places an additional mandate on the Customs Service.
This mandate requires Customs to support National Special Security
Events with airspace security personnel and resources.
Providing this airspace security capability requires a large
commitment on the part of the Service. For example, the Service
utilized assets and personnel from 4 Southwest border branches to
support the World Trade Organization meeting hosted by Seattle,
Washington, in December 1999. As a result, Customs suffered an
estimated 12 percent degradation in its counter-drug capability during
the event.
To minimize this type of impact, the President's budget requests
additional personnel and equipment for Customs to support these events.
When not conducting PDD 62 training and operations, the personnel and
assets will be conducting Customs law enforcement missions.
The site for the Customs air facility has not been determined. The
D.C. area is being surveyed because the majority (3 out of 4) of the
PDD 62 events has occurred in this area. In addition, the close
proximity of the Secret Service's training academy in Beltsville,
Maryland, with the proposed Customs air facility would facilitate the
joint training requirements.
Although the D.C. area is being surveyed for the above reasons, the
most critical element of the budget request is additional personnel and
resources to accomplish this new mission.
Question. What will these dedicated aircraft and crews be doing
when there are no events?
Answer. The Branch proposed for the D.C. area will be a Customs Air
Branch. The branch will be established primarily to support the
training and operational requirements of the Secret Service under the
PDD 62.
In addition to the PDD 62 operations and training, the branch will
provide aviation support to Customs and other Federal agencies in the
Washington, D.C., and Baltimore areas.
Question. What was the initial Customs request for additional
inspectors for the ports of entry around the country? Why did Treasury
reduce that request to just 98 additional inspectors total?
Answer. The initial request for Customs inspectors was for 287 FTE.
During each budget cycle tough funding decisions must be made. The
decision on the level of Customs staffing was made with Customs,
Treasury, and OMB at the table. After all of the competing initiatives
were considered, it was agreed that the level of funding would be as
proposed.
Question. Mr. Johnson, 3 years ago this subcommittee asked GAO to
conduct an audit of vehicle management by the Department and its
bureaus. The following year we provided $1 million to fund an automated
system for vehicle management because the cost and rate by which
vehicles needed to be replaced is a burden of over $30 million a year.
What is the status of the implementation of the program?
Answer. A baseline study to assess bureau systems and capabilities,
evaluate commercial and Government fleet management software products
in use, and provide recommendations on what a Departmental system
should contain has been completed. Four options were presented by the
contractor on how to develop the system. These were:
--Acquire and modify a commercial fleet management product;
--Acquire and modify a Government system already in use;
--Develop our own system in-house; and
--Develop a data warehouse to mine existing bureau systems.
The contractor's recommendation was the ``data warehouse'' approach
and we concur with their recommendation. This approach yields results
sooner, is modular in design and implementation and is the least
disruptive to current bureau operations, as the other three approaches
would all require replacing existing bureau systems.
Question. You have had 2 years to institute this program. What's
the delay?
Answer. To have a Departmental system that would provide the
desired information, it was necessary to conduct the baseline study and
determine the capabilities and limitations of the disparate bureau
systems. A contractor will program the file transfer routines necessary
to extract data from the various bureau systems. Customs Service will
provide the data dictionary and be the first bureau to have its data
brought into the Departmental system. After Customs is successfully
brought on board, we will proceed a bureau at a time.
Question. When can we expect to have this program in place? How
soon will it begin to yield some savings?
Answer. In fiscal year 1999 and fiscal year 2000, bureaus were
required to certify that vehicles being requested for procurement are
within the limit specified by their appropriations language and are
replacing vehicles meeting established replacement criteria. For fiscal
year 2001, we will refine the requirements for data format. This will
serve as an interim measure until we can use the vehicle management
system to review and analyze bureau budget requests for motor vehicle
procurements, beginning with the fiscal year 2002 cycle.
Question. With the FLETC 5-year master plan well into the
development stage, do you think that the temporary site for Immigration
and Naturalization Service (INS) and the United States Border Patrol
(USBP) training at Charleston, South Carolina, can be closed in fiscal
year 2004?
Answer. Recently, the Director of the Federal Law Enforcement
Training Center (FLETC) transmitted to the Congress a study that
addressed the issue of the closure of the Charleston, South Carolina as
a temporary facility for the United States Border Patrol (USBP)
training by fiscal year 2004. The results of the FLETC study support
the consolidation of all USBP training--Basic and Advanced--into
FLETC's Artesia, New Mexico training center by fiscal year 2004. The
study also calls for the realignment of certain INS training and Bureau
of Prisons training from the Artesia center to FLETC's Glynco, Georgia
site. These moves are estimated to save the government as much as $45
million in cost avoidance in currently planned new construction. There
also would be a cost avoidance saving of up to $8 million annually in
services and travel realized by this realignment. FLETC's Director has
briefed the Department of Justice and the USBP and he is working
closely with them to resolve any issues that may arise from the
implementation of the study. The Department of the Treasury endorses
FLETC's proposal as a cost effective and viable plan to meet the
Congress' direction in closing the Charleston site.
Question. FinCEN is rapidly approaching their 10th anniversary. As
the financial transaction data bank for law enforcement, has there been
an analysis done to see if FinCEN is efficient and whether or not law
enforcement agencies are utilizing the services?
Answer. Over the last few years, there have been a number of audits
completed--both external and internal--involving FinCEN's customer
satisfaction. The GAO and Treasury Inspector General have undertaken
surveys of law enforcement agencies regarding their satisfaction with
FinCEN's product and efficiency. In addition, FinCEN constantly queries
the law enforcement representatives assigned to FinCEN, soliciting
their views and suggestions on how to improve our work product. Every
case support product that FinCEN sends to the field (approximately
7,000 in 1999 for over 150 agencies/departments) also has a formal
FinCEN feedback form. Customer satisfaction with FinCEN's case support
has been positive.
______
Questions Submitted by Senator Byron L. Dorgan
law enforcement hiring and attrition
Question.The President's budget request seeks to hire a significant
number of personnel for the various law enforcement bureaus under your
jurisdiction. This is also a priority for Secretary Summers.
What difficulties is the Department facing in hiring and retaining
qualified law enforcement personnel across the Department?
Answer. Due to the difficult budget climate, as with other Federal
agencies, Treasury does find itself having troubles hiring the best-
qualified personnel, including law enforcement personnel. In addition,
the general competitive service guidelines for recruitment, selection,
and hiring of criminal investigators do not provide enough flexibility
to satisfy both diversity and unique skill requirements. The
competitive service systems requires open competition and can involve
total processing times of up to 62 weeks. Barriers also exist within
the selection process under the competitive service that impede
obtaining candidates with the most desirable profile for a position's
unique requirements.
Question. Are you finding that agencies are competing for the same
``pool'' of perspective employees?
Answer. Treasury law enforcement bureaus hire new criminal
investigators using a mix of competitive and excepted (Schedule A or B)
hiring authority. In the competitive process there is a general
``pool'' of perspective employees that the bureaus may, in some cases,
compete for. When the Schedule A or B hiring authority is used, this
allows a more discreet group of employees, with specific needs for a
specific bureau, to be identified and recruited.
Question. Are there specific incentives or other means (such as
signing bonuses) at your disposal that you have--or need--to enhance
your recruitment of qualified personnel?
Answer. Currently there are various recruitment and retention
incentives available for use by Treasury. However, the Department
weighs the use of these tools in the environment of budgetary
availability.
money laundering strategy
Question. The National Money Laundering Strategy for 2000 is very
ambitious. On top of the base anti-money laundering budgets for the
various agencies, you have asked for a new, centralized account of $15
million to focus on the strategy's priority action items. Can you
effectively and responsibly do everything you need to do to combat this
critical problem with $15 million?
Answer. The Treasury bureaus have been pursuing efforts to combat
money laundering for years--since the United States first criminalized
money laundering. As those first statutes have been expanded and as our
understanding of the threat posed by this crime has grown, additional
resources have been devoted to these efforts. Even in the absence of a
national strategy, Treasury bureaus would have continued to fulfill
their responsibilities in this regard. What we are seeking in our 2001
budget request of $15 million is funding to support key Strategy
initiatives including the provision of grants to state and local
enforcement agencies. We are attempting to address the threat of money
laundering through a comprehensive, integrated and systematic approach.
This modest amount is needed to give this new approach a chance of
success so that we can confront money laundering, here and abroad,
through law enforcement as well as banking supervision and with
government policies and public-private partnerships.
Question. Instead of creating a centralized account, would it not
make more sense to apportion the funds directly to the implementing
agencies such as FinCEN and the other bureaus?
Answer. Our national strategy is a bold, new step in addressing the
threat of money laundering. It envisions a comprehensive response that
involves efforts by an array of public and private stakeholders in our
financial system. We believe that the appropriate level to coordinate,
facilitate and direct this ambitious undertaking lies with Treasury
Departmental Offices. That is why the Treasury representative on the
Strategy Steering Committee is the Deputy Secretary. By making this a
centralized account, we feel we are ensuring the appropriate level of
control along with the necessary flexibility that attends this
departmental perspective.
customs staffing
Question. What was the Customs Service's original request to
Treasury for additional inspectors for inclusion in the fiscal year
2001 budget?
Answer. The initial request for Customs inspectors was for 287 FTE.
Question. Why was the request reduced to only 98 additional
inspectors? Can you tell us who made that decision?
Answer. During each budget cycle tough funding decisions must be
made. The decision on the level of Customs staffing was made with
Customs, Treasury, and OMB at the table. After all of the competing
initiatives were considered, it was agreed that the level of funding
would be as proposed.
customs resource allocation
Question. I understand that the Treasury Department is reviewing
the Customs Service's Resource Allocation Model. When can we in the
Congress expect to receive this document?
Answer. The Department will complete its review of the model in the
near future at which point the model will be presented to the Congress.
gs-11 journeyman levels (customs, ins parity)
Question. Why did the Treasury Department reduce the Customs
Service request for upgrading journeyman GS-9 inspectors to GS-11? The
Immigration and Naturalization Service made a similar request for OMB
which was ultimately granted.
Answer. The detailed package that would provide justification for
requesting the upgrade was not completed in time for this budget cycle.
However, we continue to work with Customs to ensure that a quality
package will be provided to OMB as we deem necessary to ensure
comparable pay for comparable work.
Question. The functional knowledge and training required for both
Customs and INS inspectors is essentially the same, is it not?
Answer. Customs and INS inspectors are trained at separate
academies at the Federal Law Enforcement Training Center. During the
INS training a 2-hour block is set aside for a Customs instructor to
share the functions of a Customs inspector with the INS students. A
similar amount of time is allowed for an INS instructor to share their
functions with the Customs students.
______
Questions Submitted to the U.S. Customs Service
Questions Submitted by Senator Ben Nighthorse Campbell
Question. I have to say that we work hard to make sure that your
base functions are funded. It makes our job very difficult when your
budget is augmented with ``emergency'' funding because even though we
don't have to pay for it up front there are always out-year costs.
Because you are not getting the out-year base funding to accommodate
these costs, our already tough job is tougher. For example, Congress
provided $269 million in counter-drug emergency funding in fiscal year
1999. The out-year costs for these funds are coming due in fiscal year
2001 for a total of $23.331 million.
Mr. Kelly, is this the total annualization of all costs associated
with the fiscal year 1999 emergency appropriation?
Answer. The President's budget includes sufficient funding to
annualize operations in fiscal year 2001. However, once these
initiatives are fully operational, there may be additional
annualization costs in fiscal year 2002.
Question. Did you seek additional funds in your budget at that time
to cover these costs without having to sacrifice your base funding
needs?
Answer. If the base is fully funded in fiscal year 2001, Customs
will be able to maintain current activities.
Question. Were all the costs for the supplemental covered, or did
you have to cut items in your base funding to pay for them. If so, what
did you cut?
Answer. If the base is fully funded in fiscal year 2001, Customs
will be able to maintain current activities.
Question. Mr. Kelly, can you tell this subcommittee what your top
five priorities are, in the order of importance?
Answer. These are my funding priorities in order of importance:
--Full funding for all of Customs base needs including adjustments;
--Maintenance of Automated Commercial System/Development of Automated
Commercial Environment;
--Drug Investigation Initiative/Narcotics Illicit Proceeds;
--Operations and Maintenance Enforcement Infrastructure Initiative;
--PDD-62; and
--Forced Child Labor Initiative.
Question. Mr. Kelly, funding for ACE is the $210 million question
for this subcommittee, one which we do not take lightly.
What is the Customs Service doing to help get the ACE user fee
proposal enacted?
Answer. Customs has focused on developing a solid strategic
approach and plan to initiate and manage the modernization program.
Customs developed a sound cost estimate that incorporated appropriate
risk analysis in the development of a Cost Benefit Analysis (CBA) that
has been independently validated by the MITRE Corporation and KPMG. It
is imperative to secure funding for this critical program in fiscal
year 2001. The Administration believes the proposed fee appropriately
captures some of the benefits that will accrue to private sector from
modernization, including a streamlined cargo entry process, account-
based transactions, and a paperless process.
Question. As Commissioner of Customs, what are you going to do
about this fee, knowing that this subcommittee doesn't have these kinds
of resources?
Answer. If the legislative authority to set such a fee is enacted
and the Secretary of the Treasury establishes the fee, Customs will
collect the fee in order to offset the requested appropriation of funds
for Customs modernization.
Question. What is your strategy to get this issue resolved?
Answer. The Administration believes that it is imperative to secure
funding for this critical program and looks forward to working with the
Congress to ensure that funding is made available in fiscal year 2001.
Question. What is the Customs Service doing within its own budget
to show its commitment to the ACE project?
Answer. We have identified $3 million to maintain and operate the
National Customs Automation Prototype through fiscal year 2000 and we
continue to work with the Department to identify funding to cover the
remaining fiscal year 2000 shortfalls. Customs has identified $7
million for continued MITRE support and has potentially identified up
to $5 million for ACS Life Support. However, there still remains a
shortfall of $5 million for the modernization program office and $12
million for ACS Life Support. Customs is working with the Department on
a near term proposal to fund these shortfalls. Reprogramming of funds
for modernization is not without consequences to Customs current
operations; Customs first priority is to maintain and identify funding
for the critical life support of our current commercial system, the
Automated Commercial System (ACS).
Question. Two years ago, the funding level for the current system,
ACS, was $32 million. Last year we boosted the funding to a total of
$67 million. This year you're requesting $123 million. Yet, in June of
last year, it was my understanding that there was a $17 million
shortfall in the ACS program.
What are you doing to address this shortfall?
Answer. As I stated above, Customs is actively working with
Treasury to identify a funding source for the $17 million requirement
needed in fiscal year 2000 to sustain the critical life support of our
current system, the Automated Commercial System (ACS). Customs has
potentially identified $5 million from prior year balances for ACS Life
Support, and we are working with the Department to identify the
remaining $12 million.
Question. Is the $17 million the total amount needed for the ACS
shortfall?
Answer. Yes, $17 million is the requirement in fiscal year 2000 for
ACS Life Support. Customs has potentially identified $5 million from
prior year balances for ACS Life Support, and we are working with the
Department to identify the remaining $12 million.
Question. Counterfeit Native arts and crafts continue to dilute the
domestic U.S. market for legitimate arts and crafts. In 1999, the
Customs Service testified that a June 1997 ``cargo selectivity criteria
operation'' against importers identified as dealing in imitation Native
American jewelry had failed to identify any significant violations.
Can you provide information on the geographical areas, ports of
entry, and related information on this operation?
Answer. For this operation, which ran for 2 months, we targeted
jewelry from Taiwan, which had been identified as a source country by
the Indian Arts and Crafts Association (IACA). The IACA also provided
us with the names of some importers who were alleged to be bringing in
Native American style items which lacked country of origin marking. We
compared their list with our official importer files, determined the
types of goods they were importing and ascertained the names of their
foreign suppliers. Another source provided names of a few foreign
firms, which had been dealing in imitation Native American items in the
past. We checked these exporters in our system to ascertain their
domestic customers. This information was used to target the specific
importers, their suppliers, and the types of goods in which they dealt.
A total of 118 unique manufacturer/product and importer/product
combinations were targeted. All targeting was done on a ``national''
basis--every port of entry was placed on alert. Importations of goods
subject to the alert came through 12 different ports of entry across
the country. A total of 265 shipments ``hit'' against our criteria
during the operation, but only 8 of these violated our marking laws in
any way. Thus, even with a narrowly focused operation that targeted
highly suspected parties, their country of origin marking compliance
rate was nearly 97 percent.
Question. Does the U.S. have any way of detecting these goods when
they are exported from their country of origin?
Answer. One of the problems facing Customs in this area is that
there are no specific tariff breakouts for Native American style items,
so we must look at all items of a particular type (such as jewelry,
earthenware, blankets, etc.). We must thus narrow the field in some
other way in order to attempt to be effective without unduly impeding
legitimate trade. That is why we focused our efforts against Taiwan and
against firms alleged to be violating these provisions of law.
Question. To show you the audacity and creativity of foreign
producers of counterfeit goods, a town in the Philippines has
reportedly changed its legal name to ``Zuni,'' and makers of
counterfeit goods proceed to label their ``Native goods'' with the
label ``Made in Zuni,'' leading the purchaser to believe that the goods
are made by artisans of the Zuni Pueblo of Indians in New Mexico.
Does the Customs Service have solid information even on countries
of origin for these goods?
Answer. This story has all the earmarks of a similar tale that has
been told in Customs for nearly 50 years. It was alleged in the early
1950s, when Japanese merchandise was cheap and of poor quality, that a
Japanese town had changed its name to ``Usa,'' and that goods
originating in this town were being marked in all capital letters
``MADE IN USA.'' We have not previously heard of any goods being marked
``Made in Zuni,'' but any such goods would not pass muster with Customs
for country of origin marking purposes. We would require any such goods
to be marked ``Made in the Philippines'', as ``Zuni'' is not the
recognized name of any foreign country.
An Internet search of Philippine maps failed to yield any location
named ``Zuni.''
Question. The Customs employees union, the National Treasury
Employees Union, has been visiting the Congressional budget and
appropriations committees to request increased money for inspectional
staffing on the Northern and Southern borders.
Has the Customs Service been doing the same?
Answer. Customs has been working with Treasury and OMB to develop a
budget submission addressing needs for staffing on the Northern border.
The resource allocation model that you rely upon to determine where
staff should be placed will not provide any additional funding for that
staffing. Most likely the resource allocation model will demonstrate
that Customs lacks inspectors in many areas of the country.
Question. What are your plans to get the money for those additional
positions?
Answer. The Resource Allocation Model is one tool available to
determine and, if required, to justify resource requests. The primary
drivers of the model are workload, desired results, activity time, and
increased enforcement threat. The results of the model have been sent
to the Department of the Treasury and to the Office of Management and
Budget for review. Pending results of these reviews, no final
determination for gaining additional funding has been made.
______
Questions Submitted by Senator Byron L. Dorgan
northern border resources
Question. As a result of the attempted terrorist incursions from
Canada late last year, you enhanced the Customs presence all along the
Northern Border for a period of time--even in remote areas. What
lessons did Customs learn about the need for additional resources on
the Northern Border?
Answer. In December 1999, 26 Inspectors were temporarily deployed
to remote and sparsely staffed Northern Border locations in support of
the initial heightened alert operation. As this operation progressed
into January, this initiative was intensified. Between December 17,
1999, and February 18, 2000, a total of 213 Inspectors from non-border
locations were temporarily reassigned (TDY) to northern border
locations to further support this heightened alert initiative. During
this period, Customs also bolstered regular daily staffing levels at
both northern and southern border locations by assigning over 700
additional Inspectors to duty on overtime each day.
Customs has approximately 150 special agents that support northern
border investigations and port response. During the December state of
heightened alert approximately 60 special agents were detailed to
support northern border ports of entry. Increased work hours were
implemented for 24X7 coverage and annual leave was cancelled.
This operation was logistically difficult to implement because many
of the locations staffed by Customs are remote, one-man locations where
housing facilities and infrastructure are not easily secured.
Furthermore, in order to maintain effective 2 officer coverage at all
northern border locations, 24 hours per day, 7 days per week, Customs
expended a significant amount of overtime. Assigned officers were
placed on 7 day per week work schedules and were required to work
mandatory overtime. Some remote locations instituted 12-hour
alternating shifts. This was physically and mentally exhausting for
officers who were temporarily reassigned to the northern border. This
effort had a similar impact on the ports of entry that provided TDY
personnel to bolster northern border locations (San Francisco, Los
Angeles, Miami, Houston, and Boston).
During the aforementioned operation, the Air and Marine
Interdiction Division (AMID) provided support to numerous Customs
offices located along the northern border. Based on the escalating need
for Northern Border operations, AMID has begun a preliminary assessment
of the benefit of establishing permanent units along the Northern
Border.
In an effort to better coordinate and respond to these types of
threats in the future, Customs has instituted a standard and formalized
communication system, and a 4-level alert system has been defined to
assist managers in responding in a uniform manner to these types of
heightened alert situations. Additionally, Customs realizes that these
long-term, sustained heightened alert efforts are very taxing on
personnel assigned along the Northern Border. Customs, Treasury and OMB
are working to identify the resources needed by Customs, as well as
other Treasury bureaus and Justice law enforcement agencies, to fight
the terrorist threat.
Question. What are Customs existing needs for the Northern Border
and counter terrorism operations?
Answer. The U.S. Customs Service is currently working with the
Department of Treasury and OMB to develop a budget submission
addressing this issue.
Question. Customs has been conducting a Northern Border
Infrastructure study. When can we expect to have that report delivered
to Congress? Will this study also discuss the need for additional
inspectors as well as improved ports of entry?
Answer. The Northern Border Infrastructure study will be completed
and sent to Congress after Customs has completed consultations with the
Treasury Department and within the executive branch.
Question. How could we improve the collection, analysis and
dissemination of intelligence information along the Northern Border?
Answer. There are currently 26 Joint Terrorism Task Forces located
in major cities throughout the United States with the mission to deter,
defeat and vigorously respond to terrorist acts in the U.S. The Customs
Service has 13 Special Agents assigned to the task forces to provide
investigative expertise in the areas of illegal exports, Customs border
enforcement, the smuggling of weapons of mass destruction, arms and
money laundering. Customs participation in the JTTFs also provides a
mechanism by which actionable terrorist related intelligence affecting
our nations borders can be disseminated in real-time to appropriate
Customs port and border personnel for enforcement action. Additional
Customs Special Agent positions to staff the remaining and anticipated
JTTF's would greatly enhance Customs ability to disseminate terrorist
related intelligence.
Additionally, Customs has improved the collection, analysis and
dissemination of intelligence pertaining to violations of laws enforced
by Customs through the creation of Intelligence Collection and Analysis
Teams (ICATs). The ICATs' sole mission is to collect, exploit and
disseminate actionable intelligence within the port area for both
interdictive and investigative action. The ICAT concept, which brings
to bear the expertise of agents, inspectors, analysts and other law
enforcement personnel, has resulted in increased actionable
intelligence production and sharing. ICAT teams exist along the
northern border in Chicago, Illinois; Rouses Point, New York; Buffalo,
New York; and Detroit, Michigan. Enhancements to these existing ICATs
and the creation of an ICAT in Blaine, Washington, would further
improve the collection, analysis and dissemination of intelligence
along the northern border.
Question. How can we improve officer safety along the Northern
Border?
Answer. The Northern Border Infrastructure study will address this
question. When the study is completed, it will be forwarded to the
Congress.
Question. What is the Remote Video Inspection Program? How many
ports use it? Is it still a good idea?
Answer. The Remote Video Inspection System (RVIS) is a program that
uses audio/video technology to allow travelers to enter the U.S. at
small, remote ports of entry outside the ports' normal hours of
operation. Frequent crossers in these remote locations have the
opportunity to apply and be approved by both Customs and Immigration.
The system, as originally implemented, would accommodate non-enrolled
travelers. Upon arrival at the port, they are processed by an inspector
at a 24-hour location and either admitted to the U.S. or directed to
report to a staffed location for further inspection.
The system is currently in place at seven (7) locations.
Conceptually, this is a good program. It provides expanded service to
communities where the workload does not warrant the commitment of
additional resources. Security at these locations has improved as there
are now multiple cameras in place that allow monitoring of activity at
the port after normal working hours, a capability that did not
previously exist. We now believe that, until security at the ports can
be further improved, all travelers should be required to deal with an
inspector in person. We have, therefore, assigned inspectors to each of
the RVIS ports on a 24-hour basis to process arrivals.
Question. Is the U.S. placing increased restrictions on border
crossings from Canada?
Answer. No, there are no new or increased restrictions on travel
from Canada to the U.S. During the heightened alert, the number and
intensity of inspections of vehicles arriving from Canada were
increased. At RVIS locations we have stationed inspectors to process
travelers who arrive outside normal business hours so there has been no
interruption of service to those communities.
columbian supplemental
Question. Shortly, the full Appropriations Committee is likely to
approve the Administration's Supplemental request for $68 million to
upgrade the radar on 4 existing P-3 AEW aircraft. Did Customs request
of the Administration other items for the Colombia Supplemental that
ultimately were not included in the Administration's submission to
Congress?
If so, what items that you sought were directly related to drug
interdiction mission in Colombia and the region?
Answer. Although the Customs Service did request additional items
as part of its submission to OMB, Customs strongly supports the final
Colombia Supplemental request. Funding of the items sought by Customs,
along with other items sought in the Supplemental, is sufficient to
provide a credible and effective assistance package for Colombia. In
additional to the $68M for the P-3 AEW radar upgrades, Customs original
submission to OMB included the following items directly related to the
drug interdiction mission in Colombia and the region.
P-3 hangar facility ($21M).--Due to space constraints, Corpus
Christi is incapable of accommodating more than 10 Customs P-3
aircraft. Additional funding is needed to begin construction on the new
P-3 hangar facility at NAS Jacksonville, Florida. This facility will be
utilized to accommodate the recently appropriated P-3 aircraft that
will provide the majority of detection and monitoring support for
Colombia.
Source zone tracker support ($3M).--Because of national priorities
and funding constraints, DOD has not provided the number of aircraft
needed to satisfy the requirement for tracker aircraft in northern
Colombia. Customs has satisfied this requirement. Funding appropriated
in the 1999 Emergency Supplemental will only be able to sustain the
program through the end of fiscal year 2000.
APG-66 radar upgrades ($7M).--The Customs Citation aircraft based
out of Aruba in support of Colombia use the APG-66 radar from the
USAF's F-16/Fighting Falcon Program. In fiscal year 2000, the USAF will
have completed its upgrade of the APG-66 to the APG-66V 2 variant.
Consequently, they will no longer support the APG-66. Further, selected
parts will soon become unavailable making repairs on the existing APG-
66 radars very difficult.
Customs currently provides about 90 percent of our P-3 operational
hours to supporting source and transit zone operations and maintains an
alert fleet of C-550 Citation aircraft to respond to air targets
departing from and returning to Colombia. The U.S. Customs Service is
the primary agency carrying Host Nation Controllers in Colombia.
Customs continues to provide special interceptor training to Colombia
which has greatly improved the overall effectiveness of Colombian
interdiction assets.The Department of Defense has the lead role for
detection and monitoring for all counternarcotics operations in the
transit and source zones. U. S. Southern Command has designated Joint
Interagency Task Force-East (JIATF-E), as the controlling facility for
U.S. agencies involved in air and marine interdiction in its area of
responsibility. Joint Interagency Task Force-East determines which
assets are best suited to meet program objectives. They also coordinate
on the integration and execution of tasking of those assets on
interdiction missions.
Over the past 2 years, Customs has provided approximately 90
percent of its P-3 operational flight hours to JIATF-East tasked
missions. JIATF-East allocated 33 percent of those hours to source zone
missions in 1998 and 35 percent in 1999. In fact, in fiscal year 1999,
Customs aircraft provided 100 percent of U.S. Government detection and
monitoring support to the source zone. As additional P-3 aircraft come
on line, we are committed to providing more operational P-3 flight
hours in support of JIATF-East missions.
Another critical area not previously addressed to the
Administration is the issue of pilot recruitment and retention. To
remedy the pilot shortage situation, we must recruit and retain highly
skilled professional pilots to fly the aircraft in support of Colombia
and the National Drug Control Strategy. The issue of compensation is
the primary competitive issue, which draws pilots from Customs to the
airlines. While recognizing that we will never compete dollar-for-
dollar, with the high end of the airline pay scale, we must take steps
to reduce this disparity.
air security initiative
Question. Why not use an existing air branch rather than creating a
new one? Would it be more cost-effective to fly in personnel ``as
needed'' rather than establish a new branch?
Answer. The Customs PDD 62 airspace security training and
operational requirements are too much for one branch to manage without
sacrificing our core mission (drug interdiction). For example, the
recent World Trade Organization in Seattle required Customs aviation
resources and personnel from four air branches.
Therefore, in order to carry out the direction set forth in PDD 62
with minimal disruption to interdiction missions and operations,
Customs proposes to establish an Aviation Branch in the Washington,
D.C. metro area.
This area has been identified as a practical location because three
of the four PDD 62 events have occurred in Washington, D.C. This trend
is forecasted to continue for future events.
In addition, the Secret Service training facility is located in
Beltsville, Maryland. Its proximity to the proposed Customs Air Branch
would facilitate the joint (Secret Service and Customs) PDD 62 training
requirements.
The most cost-effective solution is to establish a Customs air
support branch in the Washington D.C. area.
The PDD 62 Customs current cost considerations include the
following: airspace security training, expense of moving aviation
resources and personnel to event sites, and the loss of available
aviation resources to the Customs core mission (interdiction along the
borders of the United States).
Question. It has been suggested that PDD 62 ``requires'' that the
new branch be located within a specific radius of Washington, D.C. Is
this true, and if so, why? If the PDD does not specify the branch's
location, who will make the decision where to locate the new air
branch?
Answer. There has been no decision on the location of this
facility. A decision on a basing location will be made after Customs
completes site surveys of potential airfields. A location near the
Washington, D.C. area makes sense for a number of reasons:
It would lessen the amount of flight time by Customs aircraft and
reduce travel costs for support personnel.
Three of the four PDD 62 events supported by Customs air assets
occurred in the Washington, D.C. area. This trend is forecasted to be
similar for future events.
The mission requires strict standardized operating procedures
(SOP's) and extensive training. By locating the Customs air support
personnel and assets near the D.C. area, it would be closer to the
Secret Service's training facility in Beltsville, Maryland. The close
proximity of these two facilities and personnel would enhance joint
training, procedural development and mission familiarity between
operators.
Question. How closely are your two agencies working to ensure that
duties and responsibilities are being appropriately shared and that
there will be a seamless operation of the program?
Answer. The Customs Service and Secret Service are currently
developing an MOU that defines agency roles and responsibilities.
Both agencies have identified headquarters level personnel as
agency representatives for PDD 62 airspace security responsibilities.
These representatives communicate with each other on a routine basis.
The Customs Service, in consultation with Secret Service, has
developed a joint training course specifically designed for airspace
security operations. This 5-day course is scheduled for 6 times a year.
To date, the Customs Service and the Secret Service, jointly, have
conducted four PDD 62 airspace security missions. Prior to the issuance
of PDD 62, Customs worked closely with Secret Service in conducting
airspace security operations over the 1996 Summer Olympics in Atlanta,
Georgia, and the 1997 Summit of Eight event in Denver, Colorado.
Question. What will personnel be doing once the events ends? Will
they support the Customs mission or will there be follow-on training
and support to Secret Service? Once an event ends, who retains control
over personnel?
Answer. The branch proposed for the Washington, D.C. area would be
a Customs Air Branch. The branch will be established primarily to
support the training and operational requirements of USSS under the PDD
62. In addition to the PDD 62 events and training, the branch will
provide counter-drug aviation support to Customs and other Federal
agencies in the Washington, D.C. and Baltimore areas.
The U.S. Customs Service will retain control over its aircraft and
personnel.
regional offices for forced child labor
Question. Funds started to be added in fiscal year 1999 to increase
personnel at embassies around the world to investigate and combat
forced child labor. This year the budget request includes $5 million/9
FTE for the child labor initiative.
Customs has received funds in the past few years to establish
regional offices for forced child labor. What is the status of the
establishment of these offices and how have the funds been used?
Answer. The $3 million received in fiscal year 1999 to increase
foreign staffing was used to add two Special Agent positions in
Bangkok, Thailand, and one in Montevideo, Uruguay. The funding also
allowed Customs to reestablish a Special Agent position in the Hong
Kong office. Additionally in fiscal year 1999, the Forced Child Labor
Command Center was established. Currently there are two Special Agents
and one Intelligence Research Specialist assigned to the Center. The
selection of the second Intelligence Research Specialist is pending.
The $2 million received in fiscal year 2000, will be used to
establish a regional office in New Delhi, India, and increase staffing
in the Panama office. We are working with the Department of State to
obtain final approval for that office. Selection of personnel for that
office is in progress. The Special Agent in Panama is expected to
report in March or April.
Question. How would the $5 million and 9 FTE in this year's budget
request be used to further combat forced child labor?
Answer. Customs investigates both historical and current
allegations of Forced Child Labor through the deployment of
investigative teams to suspect foreign manufacturing facilities, and by
fostering better working relationships and cooperation with foreign law
enforcement agencies. Additionally, Customs conducts intensive Outreach
Programs and training for law enforcement agencies, manufacturers,
producers and other government agencies in the countries that have been
identified as having a significant number of allegations regarding
Forced Child Labor.
The $5 million in fiscal year 2001 will be used to: (1) establish
and staff two regional offices in countries from which a significant
number of allegations of Forced Child Labor have originated; (2) add an
additional Special Agent position to the Senior Customs Representative
in Hong Kong; (3) add an additional Special Agent position at the
Forced Child Labor Command Center and; (4) establish eight Special
Agent positions in domestic cities were the importation of a high
volume of goods made by Forced Child Labor has been identified.
The establishment of the additional regional offices and Special
Agent positions will result in an increase in pro-active
investigations, along with the exclusion of goods identified as having
been made with Forced Child Labor from the United States.
______
Questions Submitted by Senator Susan M. Collins
Question. Commissioner Kelly, I understand that you face enormous
challenges in carrying out the various missions of the U.S. Customs
Service. I would like to focus today on your agency's maritime
surveillance and enforcement support missions.
Could you elaborate further on those missions and describe what
types of aircraft you are currently using to carry them out.
Answer. Customs operates 6 C-12 Beechcraft aircraft, obtained from
DOD surplus stock, as Maritime Patrol aircraft in the transit and
arrival zones. Equipped with 360-degree surface search radar, these
aircraft are capable of intercepting and surveilling smuggling vessels
in the transit and arrival zones. Slow airspeeds and extensive fuel
endurance enable these aircraft to remain overhead and coordinate
intercepts by USCS and USCG vessels.
Customs operates a fleet of 12 Enforcement Support Aircraft
consisting of 5 B-200 and 7 C-12 aircraft as long-range, multipurpose
platforms to transport personnel and equipment in support of
interdiction and enforcement operations. Missions include the
relocation or evacuation of tactical personnel, assets, prisoners, and
evidence. This aircraft has been used to train host nation pilots in
interdiction tactics, in support of the counterdrug interdiction
efforts of our partner nations.
Question. Are maritime surveillance and enforcement support
important missions of the U.S. Customs service?
Answer. The maritime interdiction mission is extremely important
because the most recent Interagency Assessment of cocaine movement
indicates that more than 85 percent of the cocaine movement is by
vessel.
The enforcement support mission is also important because it
augments interdiction and enforcement operations. Missions include the
relocation or evacuation of tactical personnel, assets, prisoners, and
evidence. These aircraft have also been used to train host nation
pilots in interdiction tactics in support of the counterdrug
interdiction efforts of our partner nations.
Question. It's my understanding that the maritime surveillance and
enforcement support capabilities of the U.S. Customs Service needs
substantial upgrading. More specifically, I understand that the C-12
aircraft that are currently part of the Customs fleet need to be
replaced.
Is that in fact the case and, if so, why has the Administration
failed to ask for funds to replace the C-12 in its fiscal year 2001
budget?
Answer. In October 1999, the Air and Marine Interdiction Programs
consolidated into the Air and Marine Interdiction Division to improve
the coordination of interdiction resources. The integration process
included modernization of air and marine resources.
Customs released a request for information (RFI) in December 1998
to evaluate viable replacement aircraft. Replacement should begin in
fiscal year 2001 to ensure operational effectiveness.
The Administration has not yet made a determination on the
appropriate replacement cycle.
Question. What is the average age of the aircraft that Customs is
using to meet maritime surveillance and enforcement support missions
and what is their expected service life?
Answer. The average age of the Customs C-12 fleet is 25 years with
approximately 12,000 flight hours per airframe. The C-12 manufacturer
(Beechcraft) recommends the inspection and possible replacement of
several major components at approximately 15,000 flight hours. Customs
estimates that the first airframe will require this inspection in 2004.
Extending their service life beyond this time will result in increased
maintenance time and expense. This will adversely impact operational
readiness.
Question. Can you briefly describe the supportability costs
associated with the aircraft currently in the Customs inventory?
Answer. The supportability costs per flight hour are $2,562.00 for
the maritime C-12M and $2,430.00 for the enforcement support C-12C. As
the Customs C-12 fleet ages, maintenance costs will increase. The C-12
manufacturer (Beechcraft) recommends the inspection and possible
replacement of several major components at approximately 15,000 flight
hours. Customs estimates that the first airframe will require this
inspection in 2004.
Question. How much funding is needed over the next 4 years to
adequately meet the maritime surveillance and enforcement support
missions?
Answer. This information will be forwarded to the Committee once
the Modernization Plan is reviewed and approved within the
Administration.
Question. I understand that U.S. Customs needs a high-wing, fully-
operable, rear-ramp aircraft that would provide the capability to make
quick changes to meet multiple missions at low operational and
acquisition costs.
If Congress should make funds available, could the Customs Service
issue a request for proposal (RFP) in a timely manner?
Answer. Customs released a request for information (RFI) in
December 1998 to evaluate viable replacement aircraft. Once the
Modernization Plan is reviewed and approved within the Administration,
an appropriate RFP could be completed expeditiously.
Question. What role do the tethered aerostats play in the Customs
air interdiction program?
Answer. The Tethered Aerostat System (TARS) is vital to the success
of the Customs air interdiction program. Customs considers the TARS to
be the last line of defense against aviation smugglers. It provides
low-level coverage with altitude, speed, heading, identifier Friend and
Foe capability, and marine tracking capability in and near the arrival
zone of our nation's air borders. Based on that information, Customs
aircraft respond to suspect aircraft attempting to cross U.S. borders.
The effectiveness of this approach is reflected by the landing short
activity detected by the TARS system. The numerous seizures from the
U.S./Mexico Hermosillo operation are also an indication of the TARS
effectiveness and value in the overall interdiction effort.
Question. Under Customs Service management of the Tethered Aerostat
Radar Systems (TARS) what was the average availability? What is the
average availability of the TARS under Air Force management for the
last 5 years?
Answer. Under U.S. Customs Service management of the TARS, system
availability averaged 63.5 percent, from 1988-1991. Over the past 5
years, under Air Force management, the TARS has had 52.3 percent
availability.
Question. Was Customs consulted prior to the Bahamas aerostat sites
being closed? If so, what was Customs position on the closure?
Answer. Customs was not consulted prior to the decommissioning of
the Bahamian aerostats.
Question. Does Customs have evidence of renewed drug trafficking
activity in areas previously covered by the Bahamas aerostats? If so,
in what quantities and when did the activity begin?
Answer. Since the deactivation of the Bahamian aerostats and the
other ground-based Detection and Monitoring platforms, there has been a
marked increase in air smuggling activity in Cuba, Puerto Rico, Haiti,
and the Bahamas. There has been a resurgence of the smuggling methods
employed during the 1970's and 1980's by general aviation aircraft and
private maritime vessels in Cuba, the Bahamas, Puerto Rico, Haiti and
South Florida.
Question. Was Customs consulted on Air Force plans to close the
three Gulf Aerostat sites? If so, what was Customs position on the
planned closure?
Answer. Customs was not involved in the initial decision to
decommission the Gulf aerostats but instead was included only after the
decision process was well along. Customs did not agree with the
proposed decommissioning of the Gulf Aerostats. The Tethered Aerostat
Radar System (TARS) is the last line of defense against aviation
smugglers. Without TARS, radar coverage along the southern border of
the United States and Puerto Rico would be severely diminished.
Therefore, Customs supports the continued deployment and maintenance of
all TARS assets.
Question. When Customs managed the TARS program, was radar data
provided to NORAD and other federal agencies?
Answer. Yes. The USCS shared TARS data with the Southwest and
Southeast Air Defense Sectors. At a later date, the Caribbean Radar
Operations Center (CARIBROC) was opened and the data was shared with
them. The rationale was to provide the radar data to NORAD facilities
in support of their air sovereignty mission in addition to DOD's
overall responsibilities as lead agency for counternarcotic detection
and monitoring.
Question. What is the impact of protracted radar voids due to
systems out of commission on Customs interdiction efforts? What back-up
capability exists and at what costs?
Answer. Prolonged radar outages effectively eliminate coverage in
the extended southern border region. Valuable intelligence on suspect
aircraft short landings and interdiction support to foreign operations
would be lost in the extended region previously covered by the TARS.
The legal requirement to establish probable cause and NEXUS for
aircraft entering U.S. airspace from foreign would be extremely
difficult to ascertain. Conventional ground-based radar would not begin
to detect low-level tracks in a close enough proximity to the border
making it difficult to confirm the exact origin of flight.
U.S. Customs has already increased P3 AEW and Citation flights to
compensate for the loss of aerostat coverage. We know that our missions
in the source and transit zones are vital to the National Drug Control
Strategy; however, if the TARS continues to deteriorate we may be
forced to redeploy P-3 assets to ensure coverage of our southern
border.
______
Questions submitted to the Bureau of Alcohol, Tobacco and Firearms
Questions Submitted by Senator Ben Nighthorse Campbell
customer service standards
Question. ATF developed customer service goals, which includes 22
specific standards. However, the agency has historically failed to meet
most of these standards 90 percent or more of the time. So, rather than
concentrate upon meeting the goals, I am told that ATF has reduced the
standards from 22 to 5.
What are the 22 standards?
Answer. See below.
National Laboratory Center, Nonbeverage Products Section Nonbeverage
Drawback Formula Approvals
1. We will approve, disapprove or identify deficiencies of
submissions within ten (10) working days. Unusually complex products
may require additional time, but these account for less than 10 percent
of submissions.
2. We will respond to your telephone requests for information and
assistance by the end of the following business day.
3. We will hold in the strictest confidence all information you
provide us about your product formulas and manufacturing processes.
4. We will apply the same criteria to the evaluation of formula
submissions from all our customers.
National Laboratory Center, Nonbeverage Products Section Specially
Denatured Alcohol Formula Approvals
5. We will approve, disapprove or identify deficiencies of
submissions within 10 working days.
6. We will hold in the strictest confidence all information you
provide us about your product formulas and manufacturing processes.
7. We will apply the same criteria to the evaluation of formula
submissions from all our customers.
National Tracing Center Firearms Traces
8. ``Urgent'' traces will be completed within 24 hours.
9. If your urgent trace cannot be completed within the established
time frame, the NTC will contact you daily until it is completed.
10. ``Routine'' traces will be completed within 3 weeks.
Product Compliance Branch Label Approvals
11. We will be courteous. All our employees will treat you with
respect.
12. We will be professional.
13. We will be confidential. Your proprietary information will be
protected at all times.
14. You can expect us to approve or reject your formal label
application within 9 calendar days of receipt.
15. You can expect us to comment on proposed (informal) labels
within 15 calendar days.
16. You can expect us to respond to your correspondence within 21
calendar days.
Firearms and Explosives Imports Branch Firearms Import Approvals
17. You have the right to expect professional, prompt, and
courteous service when you need our assistance in helping you complete
your importation forms.
18. A correct ATF Form 6 will be processed in 4 to 6 weeks from
date of receipt.
19. If we are unable to process your application because of
incomplete or inaccurate information, we will return your application
for correction within 10 working days.
20. Questions concerning the status of your importation application
can be answered by calling us directly. If the Specialist or Examiner
assigned to your application is not available at the time of your call,
we will respond to you by close of business the next working day.
21. We will respond to your written correspondence within 21
calendar days of receipt.
22. Should we need additional time to research your question(s)
[beyond 21 days], we will notify you by phone or in writing and provide
you with an approximate response date.
Question. Of those 22, which eight standards were met?
Answer. To the extent these standards relate to our employees
acting in a professional, courteous, confidential and prompt manner, we
are meeting our customer service goals. In fiscal year 1999, seven of
the quantitative standards were met at an acceptable level:
1. Our Laboratory held in the strictest confidence all information
customers provided us about formulas and manufacturing processes 100
percent of the time.
2. Laboratory standards for applying uniform criteria in evaluating
all product formula submissions were met 100 percent of the time.
3. National Tracing Center standards for routine firearms trace
requests were met 90 percent of the time.
4. Product Compliance Branch standards for approving beverage
alcohol labels were met 74 percent of the time.
5. Our Product Compliance Branch has kept proprietary information
protected 100 percent of the time.
6. Firearms Imports Branch standards for approving import permit
applications were met 88 percent of the time.
7. Firearms Imports Branch standards for responding to written
requests for assistance were met 90 percent of the time.
Question. Which standards are going to be eliminated or
consolidated? What will be the remaining five standards?
Answer. No published standard will be eliminated. Those published
standards that are actually standard ATF business practices will no
longer be included in the annual report on customer service
accomplishments because the expectation is that they will be met 100
percent of the time. They apply to all offices in ATF.
Those standards for which no tracking mechanism exists or for which
no data has been collected will be re-examined to determine whether
they are valid standards addressing the needs and concerns of the
customers being served.
The published standards relating to product sample approval or
application approval will continue to be reported on while the
remainder are being reviewed. They are:
1. Laboratory standard for approving, disapproving, or identifying
deficiencies of non-beverage drawback formula submissions within 10
working days.
2. Laboratory standard for approving, disapproving, or identifying
deficiencies of specially denatured alcohol formula submissions within
10 working days.
3. National Tracing Center completion of ``routine'' traces within
3 weeks.
4. Product Compliance Branch approving or disapproving of label
applications within 9 calendar days of receipt.
5. Firearms and Explosives Imports Branch processing of a correct
ATF Form 6 within 4 weeks of receipt.
Question. What input, if any, have you had with regulated industry
on the development of these standards?
Answer. These 22 initial standards were developed with the input of
``customers'' of the respective ATF offices via surveys and
consultations. Any review and refinement of these standards or
development of new customer service standards for other offices in ATF
will likewise include customer input. We are developing a standard
process which will require customer input as a key element of standards
development.
import permit
Question. I have been informed that it can take 6 weeks to process
an import permit. This is surprising, considering the lightning pace of
commerce in the global marketplace.
Does this put our importers and businesses at a distinct
disadvantage?
Answer. ATF acts as expeditiously as possible on all applications
to import, and has set processing standards to improve service to the
taxpayer, our customer. Generally, Form 6 applications currently are
processed in 45 to 60 days, a realistic standard given current staffing
and technological constraints. Delays in meeting these standards do
occur on occasion and they are dealt with on a case by case basis.
Often the delay is attributable to incomplete or missing information on
the application, and every best effort is made to quickly resolve any
complaint about this level of service. Customer service is stressed as
a high priority, as is the importance of delivering high quality
service, which is emphasized by managers to employees.
We are indeed concerned that the current time frames will place
importers and businessmen in the United States at a competitive
disadvantage compared with those from other countries in the world
marketplace. However, we must closely examine each import permit
application to ensure that no proscribed firearms or implements of war
enter the United States; these determinations are often difficult. When
we are informed that a permit application must be processed quickly in
order to facilitate an overseas purchase, we do expedite the processing
to the maximum extent consistent with our quality review procedures. We
are also undertaking several technological and personnel-related
enhancements to improve our processing time.
Question. What plans do you have to improve technology and increase
staffing in order to reduce the processing time to, say, 1 week? Would
electronic filing be feasible?
Answer. ATF is studying several options to improve our use of
technology in this area. These options include the use of high quality
scanners to reduce data entry time, the use of imaging technology to
improve our filing and reporting capabilities, modifying our Imports
database to increase its effectiveness in tracking and monitoring
workload, and implementing an electronic filing system. In fact, ATF
and the Department of the Treasury's Financial Management Service (FMS)
are now developing a Memorandum of Understanding concerning electronic
filing. FMS has agreed to build and fund an electronic government
system, and ATF has been selected as the first agency to pilot this
system. FMS will first build a financial transaction system, and, after
testing, will then build on applications in other operational areas
such as Import permit applications.
ATF is also increasing the staffing of the Firearms and Explosives
Imports Branch to further reduce import application processing times.
Additional examiners are now being hired to reduce the time taken in
the initial review of the Form 6 Import Permit application, and a new
Customer Service representative will be available to respond to any
problems experienced by our customers. We also plan to hire data entry
clerks before the end of this fiscal year to speed up the process of
getting the application information into our Imports database; this
will further reduce the burden on the application examiners.
Question. How much money is being expended to improve service to
the public and the industry in general by improving technology,
increasing staffing, and improving staff training?
Answer. Direct salary costs for the new employees will total in
excess of $160,000 per year. We estimate that purchasing and
implementing scanning technology for initial data entry will cost
$550,000, a system to image and index records will cost approximately
$250,000, and modifying our Imports database will result in an
expenditure of an additional $550,000. We do not expect to incur any
significant costs to implement electronic forms processing under our
Memorandum of Understanding with FMS. On the job and classroom training
for the new employees as well as refresher training for experienced
employees will be coordinated with our Office of Training and
Professional Development; since this type of specialized training is
more appropriately done within the agency, we do not expect to incur
substantial expense.
licensing center
Question. The licensing center at ATF experienced a series of
problems earlier this year that were possibly related to Y2K.
Have those technical difficulties been resolved?
Answer. Yes.
Question. Is the technology and staffing at the licensing center
adequate to process licensing requests and renewals in a timely
fashion?
Answer. Yes. Both the technology and staffing at the National
Licensing Center (NLC) are adequate to process firearms and explosives
licensing requests in a timely fashion. Notably, the NLC has
implemented a new Windows based oracle application and a state-of-the-
art Xerox DocuPrint printing system that is easier to use and maintain.
explosives
Question. Explosives manufacturers have requested that ATF
voluntarily disseminate information on regulation variances granted to
various manufacturers, but that ATF has denied that request.
What types of variances does ATF grant to explosives manufacturers?
Answer. Under 27 CFR 55.22, ATF may issue variances to the
regulations at 27 CFR Part 55 when: (1) Good cause is shown for the use
of the alternate method or procedure; (2) the alternate method or
procedure is substantially equivalent to the specifically prescribed
method or procedure; and (3) the alternate method or procedure will not
be contrary to any provision of law and will not result in an increase
in cost to the Government or hinder the effective administration of
this part.
ATF considers any proposal for a variance under this standard. For
example, ATF has issued variances relating to alternate construction of
magazines, recordkeeping procedures, temporary storage and proper
locking of magazines.
Question. Would information on these variances be helpful to the
entire industry?
Answer. It is impossible for us to determine whether all industry
members would benefit from receiving information on variances issued by
ATF. However, since each variance is evaluated on a case-by-case basis
considering the specific circumstances at a particular location, it is
questionable whether this information would provide any real benefit.
Question. Why was this request denied?
Answer. While some types of variances are granted fairly regularly,
all variance requests must be evaluated on a case-by-case basis.
Variances are considered to be exceptions rather than generally
accepted procedures. Publication of approved variances may convey the
impression that alternate methods are automatically approved and
universally accepted. This could lead to companies utilizing what
appears to be an acceptable method in circumstances that may cause a
public safety hazard, and in which ATF would not approve the variance.
Moreover, publication of all variances would demand significant
additional funding and labor.
field operations
Question. In 1998 ATF field operations were restructured to merge
law enforcement and compliance operations. I am told that this has
resulted in law enforcement agents in the field being supervised by
non-law enforcement of compliance personnel.
What impact has this restructure had on law enforcement operations?
Answer. ATF's Field Division Director position is reserved for
special agents. No law enforcement operation is directly supervised by
non-law enforcement personnel. The restructuring was designed to unify
field personnel and to enable ATF to effectively plan and use ATF's
limited resources to conduct enforcement operations. The restructuring
also enhanced the flow of information between law enforcement and
regulatory enforcement personnel. The restructuring created clearer
lines of command and accountability under common leadership.
The field restructuring has been very successful. Given ATF's
diverse responsibilities, the need for a more flexible and integrated
work force that interacts and communicates effectively within itself as
well as with its regulated industries is imperative. ATF's field
restructuring has helped achieve this result.
Question. Are any other Federal law enforcement agencies organized
this way?
Answer. We cannot account for the complete management structure for
the other Federal agencies. However, prior to our restructuring, ATF
managers met with officials from other agencies that have similar
criminal enforcement and regulatory missions. Based on our multi-
faceted mission and the unique abilities of ATF personnel, the
restructuring of our field organization enhances our ability to
administer the laws for which the Congress has made us responsible.
youth crime gun interdiction initiative
Question. There are currently 38 Youth Crime Gun Interdiction
Initiative of YCGII cities and 211 employees have been dedicated to
that effort. That's about 5\1/2\ employees for each city. You are
asking for an additional 113 employees and 12 new cities which would
result in 9\1/2\ employees for each city.
How many ATF employees would be assigned to each of the 50 cities?
Will any of the funding requested in fiscal year 2001 be used to staff
existing cities? If so, how much?
Answer. Overall support per city would be 6 special agent
positions, 2 inspector and 2 support positions. All of the current 38
cities have the required number of special agent positions. The
$19,078,000 request is comprised of 108 positions (36 special agent, 12
inspector and 6 support personnel FTE) for the 12 new cities at an
estimated requirement of $12,139,000. The balance of the request of
$7,047,000 supports the inspector and support personnel required for
the current 38 cities. The number of positions averaged per city also
takes into consideration the workload created by trafficking
investigations on the originating end of such schemes, which many times
can be interstate in nature; the agent and other support required for
the field division the YCGII city is located in; and the support
required to continue viable analysis of crime gun information for those
localities. Each area is unique.
Question. When and how would those 12 additional cities be
selected?
Answer. Final selection will be made after Congress has taken
action on the President's Budget. Potential YCGII cities are identified
from those cities with a significant population base, from medium size
cities up to major metropolitan areas. ATF then looks at relevant crime
rates, employing The U.S. Department of Justice, Federal Bureau of
Investigation's publication Crime in the United States Uniform Crimes
Report as a source document for data on reported crimes involving youth
and juveniles. Of the crimes reported, murder, robbery, assault and
weapons violations are used in a statistical table ranking the cities
by crime rate.
Final selection of candidate cities is determined by reviewing and
ranking these violent crime statistics, but also taking into
consideration significant commitments by the local communities to work
with Federal law enforcement to reduce youth violence, and the
existence of ATF field offices nearby for proper support.
comprehensive crime gun tracing
Question. Funding has been requested for 10 more full-time
employees under the Comprehensive Crime Gun Tracing initiative to
address the increased workload at the National Tracing Center in West
Virginia.
Exactly what would these 10 new employees be doing?
Answer. The 10 FTE's are required to support the additional
workload resulting from Electronic Trace Submission System (ETSS)
expansion in YCGII cities and comprehensive tracing to 250 cities. The
FTE will also provide computer and training support to State and local
law enforcement for comprehensive tracing capability in the 250 cities.
tobacco compliance
Question. Congress provided funding last year for the ATF tobacco
compliance initiative which would continue as part of base operations.
Additional funding is being requested in fiscal year 2001.
What are the components of the tobacco compliance initiative?
Answer. There are two integrated components to ATF's tobacco
compliance initiative, which was developed in response to the tobacco
compliance requirements of the Balanced Budget Act of 1997.
The first component consists of qualification and compliance
activities, and was launched in fiscal year 2000. This component
involves background investigations relating to applications for permits
by importers of tobacco products and by manufacturers of roll-your-own
tobacco. This component also involves the collection of floor stocks
taxes.
The second component of this initiative consists of investigations
of unlawful diversion of tobacco products and trafficking in contraband
cigarettes. This component involves the expansion of our efforts in
these areas in fiscal year 2001 from the points of domestic manufacture
or importation through distribution channels to wholesalers and
eventually retailers. This initiative includes investigations of
operations at foreign trade zones, customs bonded warehouses, and
tobacco export warehouses.
Question. How are the resources being split among those components?
Answer. In fiscal year 2001, we anticipate a shift in the
distribution of resources to support the initiative's diversion
component. It is anticipated that approximately 75 percent of the
resources in the fiscal year 2001 Tobacco Compliance initiative will be
devoted to the diversion component. This is expected to result from
referrals of information obtained from investigations of applicants
under the qualification and compliance component. The remaining 25
percent will be required to sustain the qualification and compliance
programs.
Question. What is the status of the cigarette gray market? Is it
expanding?
Answer. Based upon information provided by the U.S. Customs Service
for importations of foreign-produced cigarettes and ATF's data on
cigarettes manufactured in the U.S., we estimate that three (3) percent
of all cigarettes sold in the U.S. are gray market cigarettes. We are
continuing to see gray market cigarettes in the domestic market. The
majority of these cigarettes were imported before January 1, 2000;
however, in light of the restrictions on relanding cigarettes under the
Balanced Budget Act of 1997, this market is now slowly being displaced
with gray market cigarettes produced overseas by affiliates of our
major manufacturers.
We think it is too early to tell yet whether the gray market is
expanding. The reason for this is that gray market importers were
allowed to stockpile cigarettes before January 1, 2000 and these
cigarettes have not worked their way completely through the system.
The fiscal year 2000 Senate report contained a provision directing
ATF to report by September 30 of this year detailing the number of
employees dedicated to handling the new tobacco compliance law, the
number of complaints received, the number of investigations initiated,
and the number of cases referred for prosecution.
Question. I know the report isn't due for 5 months, but do you have
any preliminary information about these enforcement statistics?
Answer. The Senate report accompanying the fiscal year 2000
appropriations contained a provision directing ATF to report to
Congress by September 30 of the year 2000 the number of employees
dedicated to handling the new tobacco compliance law, the number of
complaints received, the number of investigations initiated, and the
number of cases referred for prosecution. The numbers are as follows:
Number of Employees Utilized...................................... 9.3
Number of Complaints Received..................................... 85
Number of Investigations Initiated (includes floor stocks,
applications and gray market investigations).................. 326
Number of cases referred for prosecution.......................... 7
federal firearms licensees
Question. The fiscal year 2000 Senate report contained language
instructing ATF to make identifying and addressing security
recommendations for Federal firearms licensees a priority at the next
firearms industry discussion group that convenes.
What is the status of this directive? Has ATF been working with
industry on safety and security issues?
Answer. ATF is currently working on two training videos with the
International Association of Chiefs of Police (IACP) and the Bureau of
Justice Assistance (BJA) to develop videos for Federal firearms
licensees (FFLs) and law enforcement agencies. The first video deals
mainly with conducting firearms trafficking investigations and tracing
crime guns. The second video deals with FFL security issues such as:
keeping firearms out of the hands of criminals, improving business
security, improving employee safety and reducing liability, and
shipping problems and reporting thefts and losses of firearms.
In addition, ATF holds regular meetings with the National Shooting
Sports Foundation (NSSF) to discuss industry trends and potential
problems. The meetings often involve discussions on best business
practices that licensees may use to reduce the potential theft of their
firearms. The NSSF and ATF are also currently developing a seminar that
will include anti-theft information for the industry.
Finally, ATF has published and distributes to FFLs, local law
enforcement, and other interested parties ATF P 3317.2, Safety and
Security Information for Federal Firearms Licensees (03/98).
school bomb detection/threat awareness training
Question. The fiscal year 2000 Senate report also contained a
provision directing ATF to work with the Department of Education and
Justice to make explosives detection training available to school
districts. As you will recall, this was in the wake of Columbine High
School bombings.
What is the status of your discussions with Education and Justice?
Answer. ATF has been involved in high level meetings with
representatives of both Justice and Education to establish a framework
for this program. In these meetings, it has been agreed that ATF will
develop training programs and products and Justice and Education will
assist with the delivery of the products.
Question. Has ATF begun any training classes?
Answer. ATF has historically provided similar training to school
districts in prior years and has continued to do so this year. We have
used training materials and products developed in previous years for
other applications, but have begun this fiscal year to develop a
training program to meet the specific needs of school districts and
school security personnel. In the first quarter of fiscal year 2000,
ATF provided training to 422 school personnel on bomb threat management
techniques.
alcoholic beverage labeling
Question. Last year ATF issued regulation on health-related
labeling of alcoholic beverages. This created quite a firestorm of
opposition because of the negative consequences of alcohol misuse.
Recently ATF announced its decision to hold five public hearings across
the country on this subject. Concern has been expressed that this is a
waste of taxpayer money when ATF could simply revise or withdraw the
regulations altogether.
Why did ATF decide to hold these hearings?
Answer. ATF has issued a Noticed of Proposed Rulemaking relating to
health-related statements appearing on alcohol beverages. The issue of
health-related statements on containers of alcohol beverages is a
matter of interest to a broad spectrum of the American public. Prior to
developing the notice of proposed rulemaking, ATF was contacted by
various public advocacy groups, Federal health officials, and members
of Congress regarding our policy on health claims and health-related
statements. Additionally, various segments of the alcohol industry have
expressed their belief that this topic deserves a full public hearing.
In view of the significance of this issue and the diversity of opinions
on it, we believe it is appropriate to take every necessary measure to
assure that we hear and understand the views of all interested parties,
including those who are not represented by industry associations. We
believe that the upcoming hearings will assist us in making an informed
and balanced decision on a policy for health-related statements on
alcohol beverage labels.
Question. What steps are being taken to ensure a fair and balanced
hearing in each location?
Answer. On February 28, 2000, ATF published in the Federal Register
a notice announcing the dates and locations of public hearings that we
are holding concerning health claims and other health-related
statements in the labeling and advertising of alcohol beverages. While
five hearings were originally scheduled, the number of hearings has
been reduced to two, due to the small number of persons requesting to
testify. The first hearing occurred on April 25, 2000 in Washington,
D.C. The hearings are intended to ensure that all interested persons
are provided an opportunity to be heard and will also provide ATF with
the opportunity to ask questions of the witnesses where necessary to
ensure a complete and accurate record. The February 28, 2000 notice of
hearings advised that persons desiring to make oral comments at the
hearings were to submit a letter, on or before April 7, 2000, notifying
ATF of their intent to comment. A press release was issued
simultaneously with the notice notifying all interested parties of the
forthcoming hearings. A follow-up press release on the same topic was
issued on March 31, 2000. To date, those who have expressed an interest
in presenting oral comments at the hearings include a member of
Congress, physicians, psychologists, a scientist, a researcher,
advocacy groups, consumer groups, industry trade organizations, and
individual members of the industry.
Question. The last hearing is scheduled in mid-August in Texas. How
soon after the conclusion of that hearing do you expect to publish your
findings?
Answer. In view of the reduced number of hearings, as explained in
the answer to the previous question, the last hearing is now scheduled
for late May in San Francisco. The last day for submission of written
comments in this rulemaking proceeding is June 30, 2000. We anticipate
publication of a final rule in the Federal Register in mid-to-late
January 2001.
______
Questions Submitted by Senator Byron L. Dorgan
school bomb detection/threat awareness training
Question. The fiscal year 2000 Senate report carried language
directing ATF to coordinate with Education and Justice to make
explosive detection training available on request for school districts
nationwide through existing safe schools programs.
What is the status of your coordination with the Departments of
Education and Justice on school bomb detection/threat awareness
training?
Answer. ATF has had several high-level meetings with
representatives of both the Department of Education (DOE) and the
Department of Justice (DOJ) on this issue. A basic operating framework
has been developed for implementing a school bomb detection/threat
awareness training program. Under this framework, ATF will have primary
responsibility for the development of a training program and materials.
Once the programs are developed, DOE and DOJ will provide assistance as
necessary with the distribution and delivery of the training product.
Question. Have any school districts yet availed themselves of ATF's
expertise in this area?
Answer. There have been a number of schools and school districts
that have requested ATF's assistance in developing bomb threat
management plans and procedures. A number of school districts have also
made requests for ATF to train employees charged with implementing
those plans. These requests are not limited to this fiscal year; ATF
has received similar requests in prior years as well. While we have not
previously tracked the number of these requests, we have begun to do so
this FY. Through the first quarter of fiscal year 2000, ATF, using
existing bomb threat management training materials, has provided
training assistance to 422 school personnel in 21 different school
districts.
Question. How are you publicizing this training, if at all?
Answer. ATF participated with the Department of Education in a
seminar held for public safety and physical security personnel from
several of the larger school districts around the country. At this
seminar, ATF previewed several of the training products we are
currently developing for delivery as part of this program. DOE has also
provided assistance in advising school districts of the availability of
these training products.
national instant criminal background checks (nics)
Question. How many gun purchase denials have been made after NICS
checks were performed and how many have been referred for investigation
which meet ATF's follow-up criteria?
Answer. The FBI's NICS system began operation in November of 1998.
As of April 5, 2000 ATF has received 119,754 denials from the FBI and
of those, 31,798 have met the follow-up criteria and have been referred
for investigation.
Question. Have the problems regarding NICS referrals been worked
out with the FBI?
Answer. Problems with the referral process have not been of any
long-standing nature, and the FBI has been very willing to help
throughout. For example, protocols for the format for electronic files
have been worked out. At this time, the FBI is transferring the denials
they refer to ATF via download to a tape that is then sent to ATF and
uploaded into a NICS Referral database. On or about April 25, the FBI
is scheduled to start submitting the referrals via electronic transfer
through an interface to the ATF database.
youth crime gun interdiction initiative (tcgii)
Question. Does ATF know what the next 12 cities will be? If not,
what specific criteria does ATF use to select cities for YCGII
designation?
Answer. No, pending Congressional action, final selection of cities
has not been made. Potential YCGII cities are identified from those
cities with a significant population base, from medium size cities up
to major metropolitan areas. ATF then reviews relevant crime rates,
employing the U.S. Department of Justice, Federal Bureau of
Investigation's publication Crime in the United States Uniform Crimes
Report as a source document for data on reported crimes involving youth
and juveniles. Of the crimes reported, murder, robbery, assault, and
weapons violations are used in a statistical table ranking the cities
by crime rate.
Final selection of candidate cities is determined by reviewing and
ranking these violent crime statistics, but also taking into
consideration significant commitments by the local communities to work
with Federal law enforcement to reduce youth violence, and the
existence of ATF field offices nearby for proper support. Prior to any
final selection, ATF field management meets with potential candidates
in their respective areas to assess the feasibility of the local
department's involvement.
Question. How many FTE are currently devoted to YCGII?
Answer. Congressional action has provided 198 special agent, 5
inspector and 8 support personnel FTEs devoted to the YCGII program.
Question. How much of your budget is devoted for existing YCGII's
versus the new cities?
Answer. The resources requested in the fiscal year 2001 President's
Budget include 72 special agent positions (36 FTE), 24 inspector
positions (12 FTE), and 12 support positions (6 FTE) to support the 12
new cities. The 74 inspector positions (37 FTE) and 44 support
positions (22 FTE) are to staff the current 38 YCGII cities.
Question. If you were not to receive your full budget request for
the new YCGII cities, would you cut the number of new cities or reduce
across the board the amount each city would receive?
Answer. Comprehensive tracing would be provided to all
participating cities, however law enforcement personnel would only be
provided to support select cities.
______
Questions Submitted to the U.S. Secret Service
Questions Submitted by Senator Ben Nighthorse Campbell
workforce retention and workload balancing
Question. The fiscal year 2000 wrap-up appropriations bill provided
a total of $31 million to the Service for workforce retention and
workload balancing. The fiscal year 2001 budget requests $41 million on
top of that for an additional 250 employees.
Assuming that we have sufficient resources to fund that request, do
you believe you would be able to fill those additional positions within
the fiscal year?
Answer. Yes, assuming the funding is made available, we are very
confident that we will be able to fill all of the additional positions
requested in the fiscal year 2001 Budget.
The Service has taken many actions to ensure that it can achieve
its hiring goals. First, by streamlining applicant processing to have
some steps run concurrently instead of consecutively, and by reducing
the allotted time for specific process phases, we have reduced the
average hiring process completion time for special agents by over 40
percent. Second, to facilitate the expeditious processing of applicants
we established a Recruitment and Hiring Coordinating Center, and
staffed it with seven full-time employees. Third, we implemented a
campaign to enlist the assistance and commitment of all our employees
for recruiting, and distributed an Employee Recruiter Handbook to
assist them. Finally, we began a national-level advertising campaign,
to include advertising in high-profile publications such as USA Today,
and established a toll-free number 1-888-813-USSS (8777) to assist
potential employees in starting the application process.
Question. Would these additional resources fully address the
overtime and workload issues facing the Service? In other words, do you
envision requesting even more staff in fiscal year 2002?
Answer. The additional staffing provided with both the fiscal year
2000 and fiscal year 2001 budgets will meet approximately 70 percent of
what we, and the inter-agency working group studying this situation,
believe is required to adequately address the Service's workforce
retention and workload balancing issues. It is therefore envisioned
that additional staffing will be a part of the fiscal year 2002 budget.
Question. When do you expect to see a reduction in the amount of
overtime as a result of this hiring initiative?
Answer. The impact on overtime of newly hired agents will not be
realized until these new agents have completed training and returned to
their field assignments. We do not expect a substantial change in
average overtime until next fiscal year when all the agents hired in
fiscal year 2000 have completed their training.
Question. Will all of these new special agents be allocated to the
field rather than headquarters?
Answer. Most of the 484 additional positions budgeted for fiscal
year 2000 and fiscal year 2001 will be assigned to the Service's field
offices.
Question. Will any of the protective details be enhanced as a
result of this staffing increase?
Answer. Given the level of overtime presently being worked by
individuals on protective details, some of the additional positions
will be allocated there as well.
workforce retention and workload balancing study
Question. It is my understanding that the Service initiated a
workforce retention and workload balancing study.
What were some of the main recommendations of this study to
increase the quality of life for special agents?
Answer. During 1999, the Department of the Treasury, Office of
Enforcement, established the Interagency Working Group on U. S. Secret
Service Workforce Retention and Workload Balancing. This working group,
which also included representatives from Treasury Management and the
Office of Management and Budget, analyzed the underlying causes for the
decreased ability of the Secret Service to retain younger special
agents, and the degradation of quality of life brought about by
increased mission demands placed on the special agent workforce. The
study group made several recommendations relative to workforce
retention and workload balancing, with the recommendation for increased
staffing having the greatest potential for improving the quality of
life for special agents. It recommended that the Service increase the
size of its workforce by 682 special agents.
The study group concluded that increasing staffing by this amount
would address a number of key issues relative to quality of life for
the Service's special agents. First, it would reduce the rotational
protective assignments (ROTA) for field agents to 25 percent. This
significantly decreases the amount of time, under usual circumstances,
during the year that field agents can expect to be subject to receiving
protective assignments. These protective assignments involve a
significant amount of time away from home and family. Second, it is
expected to reduce the level of overtime per month to 62 hours, rather
than the current 78 hours. Finally, it will redress the imbalance
between protective and investigative activities that has developed over
the past several years.
max out
Question. The fiscal year 2000 bill contained a 1-year provision
which exempts the Secret Service from certain provisions of overtime
regulations. In particular, overtime would be measured on annual salary
rather than pay-period salary.
What is the status of implementation of this provision?
Answer. On January 21, 2000, the Department of the Treasury sent a
request to the Department of Agriculture, National Finance Center
(NFC), to make the necessary programming changes to the payroll system.
On April 4, 2000, NFC advised the Department of the Treasury that there
are significant obstacles to overcome in making these changes. The
Secret Service is currently working with the Department of the Treasury
and the NFC to find a way to overcome these obstacles and implement the
provision.
Question. What is the Secret Service position on continuation of
this provision?
Answer. Because of the way the protective mission must be
accomplished, there will continue to be situations where individuals
will be required to work levels of overtime that will indicate the need
for payment of compensation beyond the bi-weekly cap. The Department of
the Treasury supports the goals of the section 118 provision as was
incorporated in the fiscal year 2000 Appropriations Bill, and the
broader proposals incorporated in proposed OMB legislation (H.R. 1770).
national special security events
Question. Under the provisions of Presidential directive PDD 62,
the Secret Service is the lead agency for security at large events such
as the United Nations meetings and the State of the Union speech.
Please explain the Secret Service's responsibilities under PDD 62.
Answer. The Secret Service is the lead federal agency responsible
for security design, planning and implementation at designated National
Special Security Events.
Question. What other types of large events would fall under PDD 62?
Answer. PPD 62 only applies to those events designated by the
Secretary of the Treasury and the Attorney General as National Special
Security Events. Examples of such events include Presidential
Nominating Conventions, Presidential Inaugurations, Presidential
Summits, State of the Union Addresses and the Olympics.
Question. At the hearing you mentioned OpSail 2000 in New York City
this summer. What exactly is OpSail 2000? Do you anticipate that it
will be designated as a National Special Security Event under PDD 62?
How many foreign heads-of-state/government to you expect to attend this
event?
Answer. OpSail is an international naval review, which is scheduled
for July 3-9, 2000, in New York Harbor. This event has been declared a
National Special Security Event.
Approximately 30-40 thousand vessels are expected to gather in New
York Harbor, to include both modern and ancient warships. The
President, foreign heads-of-state/government and other prominent
individuals are expected to attend. The President has invited 23
foreign heads-of-state/government to attend this event; however, to
date the Service does not have any information regarding how many will
attend.
Question. There were no additional funds requested in the fiscal
year 2001 budget for any PDD 62 events. Will the Service have to absorb
the costs associated with these events, or request supplemental
funding? How have these events been funded in the past?
Answer. It is very difficult to budget for events based solely on
their potential for designation. For example, in fiscal year 2001 the
only known event that is likely to be designated is the Presidential
Inauguration. Funding for this has been requested as part of the
Service's fiscal year 2001 budget for providing protection for the
campaign. At the time our fiscal year 2001 budget was being formulated,
and continuing today, the appropriate means for funding the Service's
new responsibilities under Presidential Decision Directive (PDD) 62
were and remain under discussion.
Because of the extreme uncertainty as to how many events will be
designated as National Special Security Events, and as to when that
designation will be made, the usual annual budget process may not
easily accommodate the necessary financial planning for these events.
It has been suggested that a source of funding, not tied directly to
the annual appropriation, is the most effective means for meeting the
resource requirements for security design, planning and implementation
for major events designated as National Special Security Events in
accordance with PDD 62.
In the past, the Secret Service has received additional funds from
a Department of the Treasury Counter-terrorism Fund. In the absence of
a separate funding mechanism, the Secret Service is not in a financial
position to absorb such expenses.
2002 salt lake city winter olympics
Question. As a follow-on to that question, there are fiscal year
2001 costs associated with the Salt Lake City Olympics in 2002. I am
told that other Federal agencies, such as the FBI and FEMA, requested
funding in the fiscal year 2001 budget. I didn't see anything in the
Secret Service request, which is surprising given the fact that you
will be the lead agency for security.
What are the anticipated fiscal year 2001 costs for the Salt Lake
City Olympics?
Answer. The Service currently estimates that it will require $9.0
million to meet its responsibilities relative to security design,
planning and implementation for the 2002 Winter Olympic Games.
Question. Why wasn't additional funding requested in fiscal year
2001 for preparation for that event?
Answer. At the time our fiscal year 2001 budget was being
formulated, and continuing today, the appropriate means for funding the
Service's new responsibilities under Presidential Decision Directive
(PDD) 62 were and remain under discussion. Estimates as to the amount
of additional funding the Service will need in fiscal year 2001 for
preparing for the 2002 Winter Olympics were developed; however,
decisions as to how to budget for this funding were not.
Establishing the mechanism for financing events designated as
National Special Security Events in accordance with PDD 62, the 2002
Winter Olympics being one such event, is currently under discussion.
This is why no funding request to cover the fiscal year 2001 costs
relative to preparing for the 2002 Winter Olympics was placed in the
fiscal year 2001 budget.
Because of the extreme uncertainty as to how many events will be
designated as National Special Security Events, and as to when that
designation will be made, the usual annual budget process may not
easily accommodate the necessary financial planning for these events.
It has been suggested that a source of funding, not tied directly to
the annual appropriation, is the most effective means for meeting the
resource requirements for security design, planning and implementation
for major events designated as National Special Security Events in
accordance with PDD 62.
In the fiscal year 2001 budget, the Department of the Treasury has
a request for $25.0 million for a Counter-terrorism Fund. It is
currently anticipated that this fund will be used to cover the
Service's resource needs under PDD 62 in fiscal year 2001 for the 2002
Winter Olympics.
national center for missing and exploited children
Question. The fiscal year 2000 wrap-up appropriations bill
contained a provision that required all Federal agencies to take a .38
percent reduction in appropriated funds. The Secret Service decided to
reduce the amounts provided for operations of the Rowley Training
Center and for assistance to the National Center for Missing and
Exploited Children.
Why did the Service decide to reduce assistance to NCMEC?
Answer. Given the critical need for the Service to immediately
address its workforce retention and workload balancing issues, and
considering that $21.0 million in supplemental funding was provided in
the same bill to do this, it seemed appropriate to shield the Service's
Salaries and Expenses appropriation from any reductions mandated by the
.38 percent rescission. Instead, the Service chose to take the
rescission from funds appropriated to its Acquisition, Construction,
Improvements, and Related Expenses account, and appropriated funds
being transferred from the Violent Crime Reduction Trust Fund (VCRTF).
Of the $4.2 million to be transferred from the VCRTF, $2.0 million is
budgeted for 20 FTE and support costs to provide forensic assistance to
other Federal, State and local law enforcement investigating cases
involving missing and exploited children. The remaining $2.2 million is
budgeted for grants to the National Center for Missing and Exploited
Children. The rescission applied to this funding, amounting to
$630,000, was taken from the $2.0 million budgeted for the Service. The
NCMEC will receive all of the $2.2 million in grant funding originally
appropriated.
Question. What impact will this have on grants to State and local
law enforcement?
Answer. None of the funding the Service receives for its missing
and exploited children program is available for making grants to State
and local law enforcement.
Question. What impact will it have on forensic assistance that the
Service provides?
Answer. No significant impact is expected relative to the level of
forensic assistance that the Service will be able to provide to
Federal, State and local law enforcement investigating cases involving
missing and exploited children.
biological detector technology report
Question. The fiscal year 2000 wrap-up appropriations bill also
contained a provision directing the Secret Service to report on the
possible benefits of biological detector technology. Chemical and/or
biological threats are a continuing concern for this Subcommittee.
What is the status of that report?
Answer. The report is complete and has been delivered to the
Department of the Treasury, Office of the Under Secretary for
Enforcement.
Question. Will it include a review of the technologies being
developed by private as well as government scientists?
Answer. The report includes a discussion of technologies being
developed by both private and federal government entities.
uniformed division pay
Question. I understand that the DC Metropolitan Police Department
has raised its pay rates. I am told that this has resulted in a
discrepancy between the rate of pay for Metropolitan Police officers
and the Secret Service Uniformed Division officers.
Has the Secret Service submitted a request to the Treasury
Department and to OMB for a comparable pay raise for Uniformed Division
officers?
Answer. Yes. The Secret Service has submitted a new pay proposal to
the Department of the Treasury, and is working with the department to
address this discrepancy.
cyber-crime
Question. This subcommittee is well aware that criminal activity
involving telecommunications and computer-related schemes continues to
increase each year at an alarming rate. Cyber-crime is rapidly becoming
part of our vocabulary.
What is the Secret Service's current involvement in cyber-crime
investigations?
Answer. In 1986, subsequent to a revision of Title 18, USC, the
Secret Service was provided authorization to investigate fraud and
related criminal activities involving computers. Title 18 USC, Section
1030 continues to evolve, as computer networks become more complex. The
Secret Service strives to provide investigative focus on the
telecommunications, banking and finance sectors in computer fraud
investigations. That focus has proved to be an asset in the
effectiveness of Secret Service investigations and the ability to train
and equip field offices to address specific high-tech investigations.
Along with the investigative expertise gained through interaction
with the financial industry, the Secret Service has a clear
understanding of the overall infrastructure of the financial system.
The Internet and the telecommunications industry, with the fastest
growing technologies in the world, provide the backbone for the
emerging technologies in electronic commerce, financial transactions,
and banking.
The Secret Service has taken proactive positions in identifying
fraud as it occurs throughout the Internet and the telecommunications
industry. The growth and evolution of the Internet has provided
numerous commercial and financial opportunities, particularly in the
areas of electronic commerce. With the exponential growth of the
national information infrastructure, the same type of growth can be
expected and is occurring in the area of global high-tech crime. For
the past 10 years, the Secret Service has taken on these types of cases
by targeting international organized hacking activity, new schemes
designed to compromise electronic systems, and organized groups whose
criminal activity is aimed at particular segments of the financial
industry.
The Secret Service has established itself as the primary point of
contact for network intrusion activity that threatens any bureau within
the Treasury Department, and any of the computer systems utilized on
the White House complex. All members of the Service's Electronic Crimes
Special Agent Program (ECSAP) have received extensive training
regarding the system architecture for these networks and are prepared
to respond to any intrusion activity. The Service will continue to take
on this responsibility to address threats to these networks as they
arise.
As the market penetration for computer equipment in the hands of
the general public increases every day, and as the Internet continues
to grow at more than 100 percent per year, it has to be anticipated
that the criminal element will utilize it. The Secret Service has
placed an emphasis on the dynamic growth of the ECSAP as an essential
component of its investigative and protective missions. ECSAP agents,
highly trained special agents qualified as experts in the forensic
examination of electronic evidence, are assigned to nearly all Secret
Service field offices. The program has expanded to include operational
aspects such as technical guidance in search warrant preparation and
execution, educational presentations, and technical advice to public
and private sector organizations. Agents assigned to this program are
also trained to examine the variety of electronic evidence seized in
today's criminal investigations, to include: telecommunications
devices, electronic organizers, scanners, and any other device
manufactured to intercept or duplicate telecommunications services.
Question. Did the Service make any funding requests for cyber-crime
investigations for fiscal year 2001?
Answer. The Service requested an additional 39 positions and $4.5
million for cyber-crime investigations in its fiscal year 2001 Budget
Submission to the Department of the Treasury.
______
Questions Submitted by Senator Byron L. Dorgan
exceptional case study
Question. ``60 Minutes II'' recently aired a program on the Secret
Service's exceptional case study in which agents and psychologists
interview assassins and potential assassins to determine if there are
similar traits and habits which can aid agents in attempting to predict
and thwart future attacks. This study has been a success and is being
expanded--at Director Stafford's behest--to interviewing students who
have attacked fellow students in similar manners at schools across the
country (i.e. Columbine).
What do you hope to learn from broadening your exceptional case
study to interviewing students and other young people?
Answer. In the School Safety Study, the Secret Service's National
Threat Assessment Center (NTAC) is using the approach developed in the
Exceptional Case Study Project--the examination of pre-attack behaviors
of assassins and near-assassins. The Secret Service developed
operational information about the motives, planning, behaviors, and
communications of attackers and near-attackers, and incorporated it
into its protective and investigative programs.
NTAC's work to examine the thinking and behavior of school shooters
parallels the Exceptional Case Study Project in its protective and
preventative focus. In the School Safety Study, over 25 files were
reviewed and eight individual perpetrators have been interviewed. The
Service is developing information that will aid law enforcement and
other professionals with protective and preventative responsibilities
for school-based violence. The goal of the Service is to gather and
analyze accurate information about the motives, thinking, planning,
pre-attack behaviors, and communications of school shooters. Plans are
being made to develop a threat assessment guide, and teaching and
training materials (including videos) that can be used by school
officials, law enforcement professionals, and others to identify,
assess, and manage young persons possibly posing a risk of targeted
school violence.
Question. Do you believe there are lessons which can be learned
from this program which can be shared with your sister law enforcement
agencies? For instance, have you shared your study with ATF so that
they could perhaps incorporate your lessons in ATF's Integrated
Violence Reduction Strategy (IVRS)?
Answer. There is great interest within the law enforcement
community about the prevention of targeted school shootings; however,
the law enforcement community lacks the knowledge and experience to
develop and implement effective threat assessment protocols and
programs.
The Secret Service's goal in the School Safety initiative is to
gather, analyze, and disseminate accurate and operationally useful
information, which can help law enforcement and other professionals
prevent school shootings. The Secret Service plans to follow the model
used with the Exceptional Case Study Project to develop and distribute
a range of information. As a result of this study, the Secret Service
developed a threat assessment guide for law enforcement professionals,
a video teaching the threat assessment process, and several
professional publications that were distributed to federal, state, and
local law enforcement organizations and other interested professionals.
In addition, the Secret Service provided several training presentations
and seminars concerning the Exceptional Case Study Project and the
threat assessment process.
The Secret Service has shared the dynamics of the School Safety
initiative and its overall goals with the Bureau of Alcohol, Tobacco
and Firearms (ATF). The National Threat Assessment Center is planning
to develop similar products for the School Safety initiative. These
products include a threat assessment guide, a training video, and other
publications designed for law enforcement and other professionals with
school shooting prevention responsibilities.
Question. What resources have you directed towards expanding this
study? Do you envision a need for additional resources?
Answer. The Secret Service is attempting to pursue several goals in
support of the School Safety initiative in fiscal year 2000 with
current resources. These fiscal year 2000 goals include interviewing
school shooters; gathering and coding investigative case records;
providing threat assessment seminars and study group meetings;
developing training videos; and publishing school safety guides.
In fiscal year 2001, the Secret Service plans to continue the
support of the School Safety initiative by providing additional
training seminars and presentations to local and state law enforcement
and other professionals; gathering additional data analysis; and
continuing to develop professional publications.
The Secret Service will continue to pursue the expansion of the
School Safety initiative to fully develop the National Threat
Assessment Center's potential, but additional funding will be needed to
do this.
national special security events (nsses)
Question. Who determines when an event becomes an NSSE?
Answer. The Counter-terrorism and Security Group (CSG), part of the
National Security Council, votes on events brought before the group for
consideration. If an event is recommended for designation by the CSG,
the request is forwarded to the Secretary of the Treasury and the
Attorney General requesting designation. Mutual concurrence by the
Secretary of the Treasury and the Attorney General is required for an
event to be designated.
Question. Is the Secret Service anticipating any NSSEs during this
year? If so, how many and where will they be located?
Answer. For fiscal year 2000, the following events have been
designated, or the Service anticipates that they will be designated, as
National Special Security Events.
--Operation Sail (OpSail)--(designated) New York City
--Democratic Convention--Los Angeles, California
--Republican Convention--Philadelphia, Pennsylvania
--State of the Union--(designated) Washington, DC
--United Nations General Assembly--New York City
Question. I've heard some talk of OpSail 2000 in New York City this
summer. What can you tell me about this event? Do you anticipate it
will be designated a NSSE? How many foreign leaders are anticipated to
attend?
Answer. OpSail is an international naval review, which is scheduled
for July 3-9, 2000, in New York Harbor. This event has been designated
as a National Special Security Event.
Approximately 30-40 thousand vessels are expected to gather in New
York Harbor, to include both modern and ancient warships. The
President, foreign heads-of-state/government and other prominent
individuals are expected to attend. The President has invited 23
foreign heads-of-state/government to attend this event; however, to
date the Service does not have any information regarding how many will
attend.
Question. Has the 2002 Winter Olympics in Salt Lake City been
designated a NSSE? If so, why has the Secret Service not requested
funds for this event in the budget?
Answer. The 2002 Winter Olympics has been designated a National
Special Security Event.
At the time our fiscal year 2001 budget was being formulated, and
continuing today, the appropriate means for funding the Service's new
responsibilities under Presidential Decision Directive (PDD) 62 were
and remain under discussion. Estimates as to the amount of additional
funding the Service will need in fiscal year 2001 for preparing for the
2002 Winter Olympics were developed; however, decisions as to how to
budget for this funding were not.
Establishing the mechanism for financing events designated as
National Special Security Events in accordance with PDD 62--the 2002
Winter Olympics being one such event--is currently under discussion.
This is why no funding request to cover the fiscal year 2001 costs
relative to preparing for the 2002 Winter Olympics was placed in the
fiscal year 2001 budget.
Because of the extreme uncertainty as to how many events will be
designated as National Special Security Events, and as to when that
designation will be made, the usual annual budget process may not
easily accommodate the necessary financial planning for these events.
It has been suggested that a source of funding, not tied directly to
the annual appropriation, is the most effective means for meeting the
resource requirements for security design, planning and implementation
for major events designated as National Special Security Events in
accordance with PDD 62. In the fiscal year 2001 budget the Department
of the Treasury has requested $25.0 million for a Counter-terrorism
Fund. It is currently anticipated that this fund will be used to cover
the Service's resource needs under PDD 62 in fiscal year 2001 for the
2002 Winter Olympics.
air security initiative
Question. Why not use an existing air branch rather than creating a
new one? Would it be more cost-effective to fly in personnel ``as
needed'' rather than establish a new branch?
Answer. To use resources dedicated to another mission presents a
problem. The Service needs constant availability and control over the
deployment of resources when they are necessary. Secret Service
personnel assigned to the air security mission will be used to
supplement the Service's core protective mission in Washington, D.C.,
when they are not operational or in training.
Question. It has been suggested that Presidential Decision
Directive (PDD) 62 ``requires'' that the new branch be located within a
specific radius of Washington, D.C. Is this true and if so, why? If the
PDD does not specify the branch's location, who will make the decision
where to locate the new air branch?
Answer. PDD 62 does not require that the new branch for air
security be located within the Washington, D.C. metropolitan area. The
Secretary of Treasury, in conjunction with the Attorney General, will
make the decision as to the location of the new air branch.
Question. How closely are your two agencies working to ensure that
duties and responsibilities are being appropriately shared and that
there will be a seamless operation of the program?
Answer. The Secret Service and the Customs Service have had in the
past, and continue to have, a good working relationship. Regular and
rigorous joint training promotes teamwork and operational efficiency,
while resolving issues related to tactics, and command and control. A
continuous dialog occurs regarding operational support, training and
cost-sharing.
Question. What will personnel be doing once the event ends? Will
they support the Customs mission or will there be follow-on training
and support to Secret Service? Once an event ends, who retains control
over personnel?
Answer. When not being used to support an event, each agency will
retain control over its own personnel. Secret Service personnel
assigned to the air security mission, when not operational or in
training, will be used to supplement the Service's core protective
mission in Washington, D.C.
______
Questions Submitted to the Federal Law Enforcement Training Center
Questions Submitted by Senator Ben Nighthorse Campbell
Question. Does the Border Patrol request an increase in the
training of new hires in their fiscal year 2001 budget?
Answer. The Border Patrol is projecting training 2,300 basic
students in fiscal year 2001, of which 435 have been requested in the
President's request for fiscal year 2001.
Question. You stated that the fiscal year 2001 request will provide
funding for 79 percent of the projected basic training workload
requirements. What are your plans if each of the agencies staff up to
full capacity?
Answer. With all three current sites Glynco, Artesia, and
Charleston, SC FLETC has sufficient capacity to provide the workload
being projected, but if all the participating agencies execute 100
percent of their projected workload FLETC will have a shortfall in the
funding to cover the direct cost of the training. FLETC would then be
required to bill back to the agencies the direct cost for the
additional 21 percent of basic training, defer or cancel training until
next fiscal year, seek a supplemental appropriation, or reprogram funds
to the extent they may be available. A problem that FLETC also may face
is a shortfall in the number of instructors needed to provide 100
percent of the training. The only recourse FLETC has is to ask the
agencies to provide additional detailed instructors to conduct the
training or cancel the training due to lack of required instructor
staffing.
Question. Provide the subcommittee with the cost associated with
training at Glynco in comparison with the cost for training at the
Charleston facility, including housing cost.
Answer. The Charleston operation is supported by FLETC, but the
funding for overhead, housing, and meal costs are paid from the INS
appropriation. The FLETC does not have access to those costs. However,
FLETC reimburses INS for the tuition cost of $1,707.58 per student for
each student trained at Charleston. This is consistent with FLETC's
responsibility to absorb the direct cost of all basic training in our
appropriation regardless of the location of the training. FLETC's
Glynco costs for a Border Patrol student are as follows:
------------------------------------------------------------------------
Per day Total
------------------------------------------------------------------------
Tuition................................. .............. $1,707.58
Lodging................................. $10.61 1,411.13
Meals................................... 10.53 1,400.49
Misc. (Overhead)........................ 14.05 1,868.65
-------------------------------
Total Per Student................. .............. 6,387.85
------------------------------------------------------------------------
The Border Patrol Basic program is 133 days in length.
Question. ATF and Secret Service are predicting a tremendous
increase in their 2001 budget request of the number of agents needing
training at the FLETC. Without having the 5 year plan completed, will
FLETC be able to handle this increased workload?
Answer. Based on the current capacity at both Glynco and Artesia
and by using the Charleston facility for Border Patrol, at least
through fiscal year 2001, the FLETC expects to be able to provide the
increased training for these two agencies, as well as the projected
basic and most advanced training of the other participating agencies.
Question. Is all new construction for Glynco and Artesia on target?
Answer. Funds have been obligated and contracts awarded for
construction of a new dormitory, firearms ranges, a chilled water
system expansion, and a classroom building at Glynco and a new
dormitory and two firearms ranges at Artesia as part of the 5-year plan
previously funded by Congress. Completion of the new dormitory at
Glynco may be delayed a few months because the original contractor was
unable to meet the construction schedule and a new contractor has taken
over the project.
Question. Explain how the new firearms ranges being constructed at
Glynco and Artesia will be used? Will they be used for basic training,
advanced training or both? Will this meet current and future needs?
Answer. The first priority is to use the new firearms ranges to
support basic training and then, when available, they will be used to
support advanced training needs. These ranges, combined with proposed
future construction of another firearms range and a firearms office
building in Artesia and a firearms multi-purpose building, non-lethal
shoot houses and a combat skeet range in Glynco, will meet the current
and future requirements now identified to us by our agencies.
Question. When will these ranges be completed?
Answer. The completion dates on the firearms ranges now under
design and construction are as follows:
Four 24 person ranges at Glynco will be completed by April, 2000.
Two additional 24 person ranges at Glynco are expected to be
completed by December, 2000.
Two 24 person ranges at Artesia are planned to be completed by
October, 2001.
Question. I understand that the Glynco facility needs to undergo
some major renovations with an estimated cost of $47 million within a
10-year timeframe. You have requested $4,400,000 for renovations in
2001. Do you have a prioritized list of these projects?
Answer. The follow is a prioritized list of the facilities and the
projected renovation costs:
----------------------------------------------------------------------------------------------------------------
Building Estimated
Facility name number Year built renovation cost
----------------------------------------------------------------------------------------------------------------
DC Residence Hall................................................ 95 1974 $5,000,000
New Mexico Residence Hall........................................ 96 1974 5,000,000
Administration Building.......................................... 94 1974 3,500,000
Van Buren Office Building........................................ 68 1958 2,700,000
Maryland Residence Hall.......................................... 63 1967 3,600,000
Monroe Office Building........................................... 66 1955 3,600,000
Steed Classroom Building......................................... 262B 1978 6,000,000
Classroom Building............................................... 65 1955 3,600,000
Jackson Office Building.......................................... 67 1958 3,600,000
Jefferson Office Building........................................ 64 1955 3,600,000
Harrison Office Building......................................... 69 1969 3,600,000
Tyler Office Building............................................ 70 1969 3,600,000
----------------------------------------------
Total...................................................... ........... .............. 47,400,000
----------------------------------------------------------------------------------------------------------------
______
Questions Submitted to the Financial Crimes Enforcement Network
Questions Submitted by Senator Ben Nighthorse Campbell
money services businesses (msbs)
Question. What are the steps used to register the Money Services
Businesses?
Answer. In August, 1999, FinCEN announced the registration of Money
Services Businesses which includes money transmitters, issuers,
redeemers and sellers of money orders and traveler's checks, check
cashers and currency retail exchanges. This final rule provides a
significant period of implementation of registration to permit
government outreach through an on-going working relationship with the
industry. These activities will be accomplished in conjunction with
Treasury's Public Education Office, and IRS's Detroit Computing Center
and Examination Division, among others. Also, FinCEN staff has met with
the largest MSB service providers over the last s6months, and has met
recently with a number of smaller, regional service providers.
In addition, a guidance document is currently being finalized. The
forms to be used for both registration and SAR reporting are in draft
form and will be finalized in the near future. The Detroit Computing
Center is working with FinCEN on a statement of work for the design of
the database that will house the registration information, and work
will follow on an MSB-SAR database.
Lastly, plans are underway for setting up the MSB program office
within FinCEN's Office of Compliance and Regulatory Enforcement.
Question. You have requested $2.3 million to contract with the
Internal Revenue Service (IRS) or other regulatory partners to conduct
regulatory oversight associated with the MSB national registration.
Explain how this partnering process will work in registering the MSBs.
What are the projections for the fiscal year 2002 requirements for this
new venture?
Answer. The successful implementation of the MSB rules--both
registration and suspicious activity reporting--is dependent on the
continued support from the Internal Revenue Service. As you know, the
IRS has a long standing and vital role in the fight against money
laundering through various components--Criminal Investigation Division;
the Examination Division; and the Detroit Computing Center. The MSB
requirements make the importance of these already critical functions
even greater. Without the funding, the registration program would be
severely compromised. If the request were approved, FinCEN, in
partnership with the IRS, would use the $2.275 million to coordinate
forms distribution; customer interface to respond to public inquiries;
compliance examination and review; and data processing support. This
request also would allow for the hiring of 81 positions to carryout the
examination and customer service requirements.
In addition, as part of this implementation process and with the
support and assistance of IRS, we will begin the outreach and education
associated with suspicious activity reporting.
Question. Funding was available in fiscal year 1999 and 2000 for
FinCEN to implement an extensive public awareness campaign for the
registration of the MSBs. Has this been accomplished?
Answer. Working through the Department's Office of Public
Education, a solicitation for this massive contract has been published
and is currently open. We expect to have final offers from potential
contractors by the end of April. The next step will be to evaluate
these offers and chose a contractor. The schedule for this evaluation
and selection process has been established, and we expect to have a
contractor on board in early summer. The contractor will then
immediately begin working on the first task order, which was issued
along with the solicitation. That work order asks for a blue print from
the contractor for the entire project to identify and educate MSBs
about both the registration rule and the new SAR rule.
We also have held meetings with each of the major MSB service
providers (Thomas Cook, Western Union, Traveler's Express, Money Gram,
American Express, Citicorp, Dollar Financial Group, ACE Check Cashing)
as part of its ongoing outreach efforts. These outreach meetings have
concentrated on getting assistance from the industry in identifying
suspicious activity. Within the next few months, we expect to publish
the first guidance document that can be utilized by the industry to
help them meet the requirements of suspicious activity reporting.
Question. With the registration of MSBs proceeding, what impact
will that have on anti-money laundering efforts associated with the
casino and securities industries?
Answer. In order to close off all avenues to money launderers,
FinCEN has been looking beyond banks to other financial service
providers that are vulnerable to money laundering. Over the next few
years, FinCEN will simultaneously devise and implement regulatory
programs for money services businesses, casinos, and the securities
industry. The program currently underway for the MSBs will require a
great deal of outreach and education that will take place over the next
2 years in order to have MSBs register and then report suspicious
activity.
In addition, the final casino rule on suspicious activity reporting
will be announced this summer with the proposed rule for the securities
industry to come later in the year. All of these regulatory efforts are
necessary in closing off each and every avenue used by money
launderers.
national money laundering strategy
Question. What role will FinCEN play in the implementation of the
National Money Laundering Strategy?
Answer. FinCEN's workload will expand over the next year in order
to achieve the goals outlined in the National Strategy. In fact, the
Strategy's goals actually reflect many of the core responsibilities
that FinCEN is already undertaking. The $2.9 million requested in the
Department's appropriation will afford FinCEN with the resources needed
to strengthen and enhance these efforts. Specifically, the funding will
enable FinCEN to begin to provide analytical support to the High
Intensity Financial Crime Areas (HIFCAs) and other multi-agency
investigative efforts; continue to identify and target major money
laundering schemes; expand its regulatory effort for non-bank financial
institutions; and accelerate technological efforts to enhance our
analytical capabilities.
______
Questions Submitted by Senator Byron L. Dorgan
scope of money laundering
Question. Obviously drug trafficking generates proceeds which have
to be laundered through the financial system. I understand you have
undertaken a study of the magnitude of money laundering. What is the
magnitude of the money laundering problem we face today? What other
areas of criminal activity will you be examining to determine the
extent of the laundering problem?
Answer. FinCEN has been working to produce an analytically sound
model that can be used to estimate the extent of the money laundering
problem. We know that money laundering stems from certain categories of
criminal activity that generate substantial proceeds that need to be
laundered. While drug trafficking is the principal source of illicit
proceeds, other troublesome areas include: fraud (against consumers,
financial institutions, the Government, and others); bribery and
corruption; sale of stolen goods; smuggling; illegal gambling;
prostitution and pornography; and illegal trafficking in arms. Other
important predicate crimes to money laundering are: illegal trafficking
in persons; funds to support acts of terrorism; murder for hire and
kidnapping; criminal infringement of intellectual property rights; and
counterfeiting of monetary instruments.
Estimating the magnitude of money laundering is a complex
undertaking, principally due to the clandestine type of activity and
the technological complexity of financial crimes. FinCEN is in the
middle of a procurement process which seeks innovative methodologies
for approaching this difficult problem. Because we have not yet
received proposals from the consulting firms that will be competing for
this contract, it is premature at this point to outline for you the
most efficacious approach to be followed.
However, we expect to award the Magnitude of Money Laundering
contract in June 2000. At that time, we would be pleased to thoroughly
and promptly brief your staff on the analytical plan of action which we
choose and to provide periodic updates on progress as the study
unfolds.
suspicious activity reporting (sar) funds
Question. How important to your agency is the $2,275 million you
have requested to contract with the IRS and educate the public about
the requirements associated with Suspicious Activity Reporting?
Answer. This funding is essential for the successful implementation
of the MSB rules--both registration and suspicious activity reporting.
If approved, the request of $2,275 will provide funding to contract
with the IRS to ensure that sufficient and continuing resources are
available to conduct regulatory oversight associated with the MSB
program, including activities such as forms distribution, customer
interface to respond to public inquiries, compliance examination and
reviews, and data processing support. This request also provides the
funding to contract with IRS to hire approximately 81 additional
personnel, which equates to 10 FTE in fiscal year 2001 (hiring will
begin late in the fourth quarter). In addition, FinCEN will also begin
the outreach and education requirements associated with suspicious
activity reporting for this industry. These regulatory oversight
activities are essential to ensuring compliance with national
registration and other BSA requirements.
subcommittee recess
Senator Campbell. With that, if there is no further
testimony, this subcommittee is recessed. Thank you.
[Whereupon, at 10:31 a.m., Tuesday, March 30, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2001
----------
TUESDAY, APRIL 4, 2000
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:33 p.m., in room SD-138, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell and Dorgan.
DEPARTMENT OF THE TREASURY
Office of the Secretary
STATEMENT OF HON. LAWRENCE H. SUMMERS, SECRETARY
ACCOMPANIED BY LISA G. ROSS, ACTING ASSISTANT SECRETARY FOR MANAGEMENT
AND CHIEF FINANCIAL OFFICER
OPENING STATEMENT OF SENATOR BEN NIGHTHORSE CAMPBELL
Senator Campbell. Good afternoon. The committee will be in
order. Senator Dorgan is on the way, but Mr. Summers, we can go
ahead and start.
This is the third hearing of the Treasury and General
Government Subcommittee on fiscal year 2001 budget request. I
am pleased to welcome the Secretary of the Treasury, Larry
Summers, here today. This will be Mr. Summers' first appearance
before this subcommittee as Secretary. The last time he
testified he was Deputy Secretary and we were talking about the
appropriate access and inappropriate access to taxpayers'
personal files with the Internal Revenue Service. I understand
a good deal of that has been corrected and I am sure that all
taxpayers would appreciate that.
The President's fiscal year 2001 budget request for the
Treasury Department is very ambitious. There are major
increases envisioned for many parts of the Department. For
example, an additional 18 percent is being requested for
Departmental offices. I am sure the Secretary will want to talk
about those requests.
The Bureau of Alcohol, Tobacco and Firearms is expecting a
25 percent increase. The Customs Service wants an additional
14.8, and if we include the $210 million for the development of
the Automated Commercial Environment computer system, or ACE,
as it is called, it will be 22.4 percent. The Internal Revenue
Service is looking for a 9 percent increase, including $119
million more for their information technology investment
account, and the Secret Service is hoping for a 20 percent
increase.
In addition, funding for three new Treasury accounts has
been requested, which includes $15 million to implement the
money laundering strategy, $30 million to expand access to
financial services, and $25 million for a counterterrorism
fund.
This subcommittee will not be able, given the present
allocation, to fund all of the requests. This morning, we hope
to hear what the Secretary considers to be his highest
priorities for fiscal year 2001. Although we have already heard
from the IRS Commissioner, Mr. Rossotti, and the Treasury law
enforcement agencies, I expect we will touch on some of those
requests, too.
I have some questions that we will get to after the
Secretary testifies, but I will make it easy on you and will
not ask you any questions at all concerning Nasdaq's
performance today.
With that, Mr. Secretary, go ahead and proceed.
Statement of Lawrence H. Summers
Mr. Summers. Thank you very much, Mr. Chairman. It is good
to appear once again before this committee. I might just say
that given that we in the government and sometimes in the
Congress are sometimes criticized for being behind the curve, I
look back to the hearing that you had on the issue of browsing
and snooping at the IRS, and in light of the headlines that we
are seeing all over the place today, that hearing looks to have
been rather prescient and I think we can all take satisfaction
from the steps that have been put in place to deter any kind of
inappropriate access to individual tax records or any kind of
inappropriate snooping or browsing by IRS employees.
Mr. Chairman, I am glad to have this opportunity to discuss
with you and members of the committee the Treasury's fiscal
year 2001 budget request and to seek to continue the
cooperative spirit that we have achieved together.
Our budget totals $14.25 billion. In my statement, I want
to focus on five important areas of priority. First, continuing
to modernize the IRS. The IRS and Commissioner Rossotti in his
new mission statement have pledged to work towards providing
America's taxpayers top quality service by helping them
understand and meet their tax responsibilities and by applying
the tax law with integrity and fairness to all.
Commissioner Rossotti, with his background in management
and information technology, has brought a management focus and
a new technology focus to the IRS. This year's budget seeks to
build on the progress of the last several years, and in
particular to make it possible to effectively implement the
RRA, the IRS Reform Act legislation of 1998, by providing an
adequate base for continued revenue operations.
Under this budget, for the first time in a number of years,
the trend downwards in IRS staffing would be reversed,
something that in my judgment is crucial if we are to maintain
the integrity of our tax system based on voluntary compliance.
The budget also provides support for a far-reaching change, an
organizational modernization following what has become common
practice in the private sector by moving to an organization
based not on geographic lines but on functional lines, as well
as providing for continued funding of information technology
modernization, which is an investment in lower budgets and
greater tax compliance in the future.
The second priority embodied in our budget is increased
capacity to fight drugs, violence, and other crimes. We include
here a number of initiatives. First, we are requesting
increased support to reduce the trafficking and smuggling of
illicit drugs. This includes a request for aircraft and updated
interdiction and surveillance, increased use of non-intrusive
inspection equipment, and additional personnel to support
Customs' counter-drug initiative.
Second, we are seeking increased support to combat
financial crime. This has been a particular priority for me as
Secretary because I believe that tackling money laundering
provides the most effective way of going after the underlying
crimes. Our approach is laid out fully in the Year 2000
National Money Laundering Strategy unveiled in the last several
weeks. We seek a modest increase in appropriation to support
enforcement in zones designated as high-risk financial crime
areas.
Third, protecting our nation's leaders becomes ever more
important with the dramatic rise in global terrorism and a
significant increase in the number of protectees. We are
requesting some 250 new positions at the Secret Service. Mr.
Chairman, I might say that I see in my own travels how
important this is with the average overtime of Secret Service
agents in the field now in some cases exceeding 80 hours a
month and giving rise to real attrition problems, which in turn
create the need for more overtime. To break that cycle, I think
it is crucial that we provide for new positions.
Fourth, reducing firearms violence. Mr. Chairman, we have
all been very much affected by recent incidents pointing up the
level of armed crime in our country. There is room for, and I
certainly do not propose to join it today, much debate about
what the right policies in response are. But I believe that
there is a widespread consensus on the importance of successful
enforcement of the laws that we have on the books now, and that
is why the President's budget provides funding for 300 new
agents, 200 new inspectors, and 150 new support staff at the
Bureau of Alcohol, Tobacco and Firearms.
A third area of priority is the modernization of our trade
systems. Since the Customs Modernization Act was passed in
1993, imports into our country have grown by more than half.
Frankly, the existing technology cannot cope with this rise in
volume. Our request has two main elements. First, to maintain
the existing technology system, the ACS, and minimize outages
or brownouts that can pose continuing problems to the work of
Customs.
And second, and in my judgment absolutely necessary and
imperative is work on the development of the Automated
Commercial Environment, ACE, system that will eventually
replace ACS. We have learned from our experience with the IRS
about the overriding need for private sector discipline, of
clear establishment of blueprints, of appropriate contracting
procedures in order to assure that public information
technology money is well spent, and we are applying what we
have learned. We do believe that the proposed fee contained in
this year's budget appropriately captures a portion of the
benefits that will accrue to private sector businesses from
modernization.
Fourth, enhancing financial management within the
Department. Here, we have made important progress over the last
year with the successful introduction of the new development of
the new $5 and $10 bills and the introduction of the $1 coin.
We have seen the Bureau of Public Debt carry out a new mission
of buying back public debt as well as issuing public debt. And
the FMS, the Financial Management Service, continues to provide
core services. It is important to secure continued funding for
these programs.
Let me also mention one other initiative contained in this
budget and that is the President's first account proposal that
aims to bank the unbanked. It is important that, working
through the financial sector, we seek to remedy a situation
where more than 10 percent of Americans do not have a bank
account and often pay more than $15,000 over their lives for
the most basic check cashing and bill paying services.
The fifth and final priority reflected in this budget, Mr.
Chairman, is continued support for the Department's offices.
These include necessary resources for domestic finance,
overseeing implementation of last year's historic Financial
Modernization Act, maintaining core infrastructure technology,
and restoring the main Treasury Building and annex.
Let me if I could, Mr. Chairman, mention one problem that I
think over time we will have to address, and that is the
problem of comparable salaries. I look, if I might, at my own
field of economics. The Federal Reserve now pays approximately
60 percent more to a new Ph.D. economist coming out of school.
Academic salaries are roughly comparable to those of the
Federal Reserve, and salaries in the private sector are very
substantially greater. While Treasury offers enormously
rewarding opportunities and we have very, very good people,
over time, that 60 percent pay gap has to take a toll, and I
use the field of economics as an example because I am most
familiar with it, but this is an issue that is a more general
issue in the Department's offices.
Prepared statement
Let me conclude on a personal note. Since becoming Treasury
Secretary last year and in the 7 years before that I worked at
the Treasury Department, I have been deeply impressed by the
intelligence, professionalism, and dedication of my colleagues.
I am sure this committee shares that confidence and I ask you
to seriously consider and approve a budget request that will
enable us to carry forward our vital missions with ever
increasing effectiveness. Thank you, Mr. Chairman.
[The statement follows:]
Prepared Statement of Lawrence H. Summers
Mr. Chairman, Mr. Dorgan, Members of this Committee, I appreciate
this opportunity to discuss Treasury's fiscal year 2001 budget request
and to seek to continue to work in the cooperative spirit that we and
Members of the Committee have achieved. I would like to take this
opportunity to thank this Committee for its impressive and productive
work over the years.
As you know, Treasury plays a crucial role in the core functions
of government, including tax administration, revenue collection, law
enforcement, financial management, tax policy, banking policy and
international and domestic economic policy.
We propose a budget that will enable Treasury to continue to
provide the American public with the customer service and program
reliability it expects and deserves.
Our budget request totals $14.245 billion for all operations.
After taking into account two offsets--a $210 million fee on Customs'
automated commercial system for the Automated Commercial Environment
(ACE) and $42.5 million from the use of the estimated potential balance
from the Treasury Forfeiture Fund--our appropriation level would be
$13.992 billion.
We have provided the Committee with a detailed breakdown of
Treasury's fiscal year 2001 budget request. Let me today highlight five
important areas of focus.
--First, supporting continued IRS modernization.
--Second, strengthening our ability to fight drugs, violence and
crime.
--Third, modernizing our trade systems.
--Fourth, enhancing our financial management.
--And fifth, supporting management operations.
continuing to modernize the irs
In its new mission statement, the IRS has pledged to focus on two
core priorities: ``Provide America's taxpayers top quality service by
helping them understand and meet their tax responsibilities, and apply
the tax law with integrity and fairness to all.''
As the modernization and reorganization at the IRS has proceeded,
some have framed debates on IRS priorities around a trade-off between
enforcement and customer service. This argument is no different from
believing that businesses face a trade-off between quality and cost.
We have heard similar false choices posed through the years. To
have effective tax administration, there must be both compliance and
high-quality customer service. A trade off is neither necessary nor
desirable.
Under the leadership of Commissioner Rossotti, the IRS has already
made impressive progress towards meeting both these goals. But there is
more to accomplish.
In particular, we need resources to focus on three areas:
Continued support for organizational modernization
Until recently, IRS was organized along geographic lines. At the
direction of Commissioner Rossotti, the IRS is reorganizing along
customer lines. This enables the IRS to provide better service to
groups of taxpayers with similar needs. This reorganization also
enables the agency to become more effective and focused. For example,
it will improve the agency's ability to clamp down on abuse of the tax
code, including combating the growth of abusive corporate tax shelters.
The reorganization also involves building a modern management
structure to enable the IRS to serve its customers better. This will
involve significant re-training of staff because many are being asked
to take on redefined roles. Fiscal year 2001 provides the second year
of major funding for the IRS reorganization. We strongly believe this
restructuring effort is putting the agency on the right track. It is
imperative that we support the employees and leadership at the IRS so
they can complete this monumental task of reorganizing the IRS for the
first time in almost 50 years.
Continued support for computer modernization
The IRS is embarking on a plan to replace its antiquated computer
system to bring it into the new century. The IRS core data systems are
fundamentally deficient. The Master File system, on which all taxpayer
accounts reside, is based on outdated 1960s technology. Modernizing the
agency's technology will enable it to deliver on its pledge to provide
better customer service for all and is absolutely necessary for the
agency to make the improvements that the public needs.
In our fiscal year 2001 budget, we are asking for another deposit
into the Information Technology Investment account (ITIA) to keep this
program on track. The Committee has shown its support for this program
in past years by making the needed deposits, and we ask that you
continue to support this critical program.
Stabilizing the IRS
The IRS is on the road toward modernizing its organizational
structure and computer systems. For several reasons, we feel the time
is now right to reverse the decline in staff that has occurred at the
agency over the last 5 years. First, no one anticipated the resources
required to implement the very important provisions of the
Restructuring and Reform Act. Second, recent articles have highlighted
the decline in enforcement activity over the last few years--a trend
Commissioner Rossotti and I are particularly concerned about.
We feel the time is right to permit a modest expansion in IRS
resources to ensure the integrity of the tax system, which depends
heavily on maintaining voluntary compliance, and to provide the service
the American taxpayers deserve. Our request provides 2,800 new
positions, an increase of 2.9 percent over the next 2 fiscal years.
strengthening our ability to fight drugs, violence, and other crimes
Our second focus today is on improving our capacity to fight drugs,
violence and other crimes.
As this Committee knows, Treasury oversees six law enforcement
bureaus: Customs, the Secret Service, the Bureau of Alcohol, Tobacco
and Firearms, the IRS, FinCEN, and the Federal Law Enforcement Training
Center. Each of these has critical and extensive responsibilities.
Our fiscal year 2001 budget request enables Treasury agencies to
continue to play a full role in the crucial anti-crime initiatives in
which this Administration is engaged.
Mr. Chairman, last year you and others expressed concerns about the
disparity of treatment between Treasury law enforcement and our Justice
counterparts. This year's budget provides Treasury law enforcement with
an 18 percent increase over the fiscal year 2000 budget. It recognizes
the special law enforcement role that Treasury plays in the
Administration's anti-crime strategy.
The proposals would result in the largest increase in Treasury law
enforcement funding in more than a decade. Let me focus briefly on four
key areas of this request.
Reducing Trafficking, Smuggling and Use of Illicit Drugs
Our request supports the Administration's counter-narcotics
strategy by providing Treasury with resources critical to reducing the
trafficking, smuggling, and use of illicit drugs across our borders.
The budget request supports Custom's responsibility to facilitate
legitimate trade, while interdicting contraband through the use of
enhanced technology and equipment. Customs remains committed to
improving the efficiency and effectiveness of its drug interdiction.
Specifically, the budget request supports:
--Aircraft with upgraded interdiction and surveillance equipment.
--Non-intrusive inspection equipment for expanding interdiction
efforts along the southwest border;
--And additional personnel and investigative equipment to support
Customs Counter-drug Initiative. This will include new
positions to implement the Foreign Narcotics Kingpin
Designation Act and improve information-gathering capabilities
on terrorist funding and narcotics trafficking. Our fiscal year
2001 request builds upon last year's supplemental request.
Combating financial crimes and money laundering
Our budget request also supports Treasury's central role in the
implementation of the Administration's National Money Laundering
Strategy. Deputy Secretary Eizenstat and Deputy Attorney General Holder
unveiled the 2000 Strategy this week. The Strategy is aimed at
combating dirty money and, in doing so, giving us additional weapons to
fight the underlying crimes.
Money laundering has a number of intolerable effects on the U.S.
economy and on American society. It enables the criminal to invest the
proceeds in the perpetuation of the underlying crime, many of which are
violent and spread drug addiction in our communities. It taints the
U.S. financial system and damages the reputation of those involved. And
it undermines U.S. government programs to support democracy and
economic development around the world.
Our request will enable us to support initiatives in zones
designated as high-risk financial crime areas (HIFCA). The budget also
supports Customs, IRS, and the Financial Crimes Enforcement Network
(FinCEN) by providing them with resources to strengthen the fight
against money laundering. It will also enable these agencies to respond
to additional information gathered from the expanded reporting
requirements for non-bank financial institutions.
Protecting Our Nation's Leaders
Few agencies are required to work under such pressure or meet such
rapidly expanding demands as the Secret Service. The dramatic rise in
global terrorism and a significant increase in the number of protectees
have intensified the Secret Service's critical responsibility of
protecting our nation's leaders.
We must address the increased workload of the Secret Service and
the resultant decline in working conditions in order to retain members
of this highly trained workforce and ensure their safety and the safety
of their protectees. We are requesting 250 new positions in addition to
the new positions in the fiscal year 2000 appropriation.
The increased hiring by the Secret Service and ATF will result in a
significant increase in the workload at the Federal Law Enforcement
Training Center (FLETC). This budget provides funding to address this
increase and continues implementation of FLETC's 5-year Master Plan.
Reducing firearms violence
Mr. Chairman, we have all been deeply affected by a number of
recent incidents that have focused attention on the level of armed
crime in this country. There is a great deal of debate about the
correct level of policy response. But, it is fair to say that there is
now widespread agreement about the need to enforce existing laws to the
fullest extent possible.
Our request will help us to build on existing efforts that fall
within our firearms enforcement strategy, including the Integrated
Violence Reduction Strategy (IVRS), the Youth Crime Gun Interdiction
Initiative (YCGII), nationwide crime gun tracing, and the National
Integrated Ballistics Information Network (NIBIN).
These and other efforts, strongly supported by President Clinton,
Vice-President Gore and this Committee, have contributed to the sharp
reduction in firearms violence in the last few years. With strong
inter-agency support from the Department of Justice, our initiatives
have also resulted in a clear rise in the number of firearm
prosecutions, an increase of more than 12 percent between 1992 and
1999. But we can address more violations of firearms law. And we must
reduce firearms violence further.
Our request strengthens our ability to achieve this national
priority in four ways:
--First, providing funding for 300 new agents, 200 new inspectors and
151 new support staff at the Bureau of Alcohol, Tobacco and
Firearms so that the agency can continue its crucial work of
collaborating with state and local law enforcement agencies to
reduce illegal acquisition, possession, misuse, and trafficking
of firearms.
--Second, increasing the number of cities under the Youth Crime Gun
Interdiction Initiative enforcement program by 12, bringing the
total to 50.
--Third, strengthening the crime gun tracing system for law
enforcement agencies nationwide, including equipment and
training support for 250 state and local law enforcement
agencies.
--And fourth, bolstering the Treasury and Justice Department's
unified effort to provide automated ballistics imaging
technology to Federal, State, and local law enforcement
agencies.
In addition, Treasury has asked for funding to meet several other
critical challenges. These include enforcement of laws against forced
child labor, support for Secret Service and Customs efforts on counter-
terrorism, and airspace security in support of special national events.
The budget provides funding for these important responsibilities.
modernizing our trade systems
Our third focus is on modernizing our trade systems. Like the IRS,
Customs has experienced a significant increase in demand on its trade
system, and the system is not able keep pace. Since the Customs
Modernization Act was passed in 1993, the number of merchandise lines
on customs formal entries has more than doubled. The Customs Service is
required to cope with this sharp rise in trade with substantially the
same outdated technology it had when the Act was passed. Given the
critical role of Customs in handling enormous volumes of goods and in
combating drug and other types of trafficking, it is important that be
equipped with the best tools to fulfill these goals.
As I have indicated, Customs is not alone in having to work with
antiquated technology. We have learned a great deal from the experience
of the IRS and are applying these lessons to Customs. These lessons
include forging a clear and well-defined partnership with the private
sector; adopting a systems life cycle discipline; and using an
enterprise-wide blueprint and architecture to guide the integration of
systems as they are developed.
Our request has two main elements:
--Additional resources to maintain the existing trade system, the
Automated Commercial System, (ACS). The system is prone to
outages or ``brownouts,'' and it is important that we do what
is necessary to minimize such disruptions.
--Begin work on a new system, the Automated Commercial Environment
(ACE), which will eventually replace the ACS. This replacement
is critical and will require a multi-million dollar investment
over several years. We propose to establish a fee to fund the
development of ACE, and that the fee would appropriately
capture some of the benefits that will accrue to private
business from modernization. These include a streamlined cargo
entry process, account-based transactions, and a paperless
process. It is imperative to secure funding for this critical
program. The Administration looks forward to working with
Congress on the fee to ensure that funding is available in
fiscal year 2001, and through the life of the program.
enhancing financial management
My fourth focus is on financial management. We have made important
progress this year with respect to the nation's money. We have overseen
the development of the new $5 and $10 bills that will start circulating
in May. And we have seen what has so far been a very successful
introduction of the new dollar coin.
At Treasury we believe it is essential to achieve the highest
standards of financial management. The two bureaus of the Fiscal
Service--the Financial Management Service (FMS) and the Bureau of the
Public Debt (BPD)--provide core services in the areas of government
payments, collections, government-wide accounting and reporting,
collection of delinquent debt, and Federal Government financing.
These are vital functions that enable Congress and the American
public to have confidence in the ability of the U.S. government to keep
a detailed and accurate account of public finances and to manage its
finances professionally. This year, the Bureau of Public Debt carried
out a new mission of buying back debt as a complement to its more
traditional mission of issuing debt.
Owing to the excellent stewardship of the fiscal bureaus--including
redirection of base resources and reinvestment of productivity savings
for investment in state-of-the-art electronic commerce technologies--
the budget proposals for the FMS and BPD are comparable to last year's
requests.
Let me briefly in this context mention the budget request for the
President's ``First Accounts'' initiative that aims to ``Bank the
Unbanked.'' To help fulfill the goals of this initiative, we will use
Treasury's financial expertise to encourage low-income families who do
not receive Federal benefits to open bank accounts.
Between 10 and 20 percent of our population lacks access to bank
accounts and can pay up to $15,000 over a lifetime for routine
transactions such as cashing a check or paying a bill. This is
something that we have started to address through the EFT and ETA
programs for those who receive Federal benefit payments. We believe it
is important to work with the private sector to extend this opportunity
to those who do not benefit from Federal payments.
maintaining management operations
Our final area of priority is maintaining support for management
operations. Departmental Offices provides the programmatic oversight
and technical support essential to the Secretary's leadership role in
law enforcement, revenue collection, international and domestic
economic and tax policy, and financial management. The budget supports
these functions with:
--Increases for core infrastructure operations, including technology
upgrades that support Treasury's leadership role on economic
issues.
--Essential resources required in Domestic Finance to oversee
implementation of the recently enacted Financial Modernization
Act, the most sweeping change in the regulation and management
of financial institutions since the 1930s.
--Continued funding for the multi-year program to repair and restore
the historic Main Treasury Building and Annex begun in December
1998.
In addition, our request supports four major projects: the Human
Resources Information System; Integrated Treasury Network, Critical
Infrastructure Protection, including the banking and finance sector;
and the Public Key Infrastructure pilots.
The budget also strengthens the audit and investigative efforts of
the Office of Inspector General and enhances the capacity of the
Treasury Inspector General for Tax Administration to conduct mandated
and discretionary reviews of IRS operations.
community adjustment and investment program
I would also like to report on the progress of the Community
Adjustment and Investment Program or the CAIP, which is the domestic
window of the North American Development Bank, but receives its own
appropriation entirely independent from NAD Bank funding. The CAIP has
been particularly effective in helping to create and sustain jobs in
communities experiencing temporary job dislocation attributable to
changing trade patterns related to NAFTA. To date, CAIP financing has
helped to create and sustain over 7,000 jobs by facilitating more than
$225 million in loans, loan guarantees and grants to businesses,
workers, and communities. I urge you to support this year's funding
request for the CAIP.
conclusion
Mr. Chairman, let me conclude on a personal note. Since becoming
Treasury Secretary last year, and in the 7 years that I have worked in
this department, I have been deeply impressed by the intelligence,
professionalism and dedication of the people with whom I have worked. I
am sure this Committee shares my confidence in the uses that are being
made of taxpayer funds. In that spirit, I ask that you approve our
fiscal year 2001 budget request to support the work of the Treasury
Department in fulfilling its wide range of responsibilities in serving
the American people. Thank you very much.
Senator Campbell. Thank you. Before I ask questions, I
would like to yield to Senator Dorgan, do you have an opening
statement.
statement of senator Byron L. Dorgan
Senator Dorgan. Mr. Chairman, just briefly. Secretary
Summers, thank you very much for joining us.
This budget request asks for some significant new resources
for the functions that you are involved in and I know that you
are talking about the continued reform of the Internal Revenue
Service, strengthening the ability to fight drugs and crime,
enhancing financial reporting and resource accountability, and
also investing in community development and economic growth.
These are all important areas.
I had mentioned at a previous hearing that this is going to
be an interesting year. We have so many people here on Capitol
Hill who are focused on the gun issue; such as a circumstance
where a young child brings a gun to school and kills another
young child in first grade. People's initial reaction will be,
well, we must enforce gun laws. Well, enforcing gun laws
requires the resources to do that and this budget requests
resources to enforce gun laws. I think it is a perfectly
appropriate thing to do and an appropriate request and I hope
Congress will respond to it in an appropriate way.
Regarding the Customs computer trade modernization issue,
frankly, I think it is unlikely for the Congress to agree to
the Administration's proposed user fees, but no matter how we
come out on that issue, we have to upgrade that system. The
Customs Service system is really melting down on us and we need
to provide the resources to find a way to address that. I know
my colleague from Colorado has been working with many,
including myself, to find a way to resolve those issues.
I have a number of questions I want to ask you, but let me
just ask that my full statement be put in the record.
Let me also say, Secretary Summers, we have had the
opportunity in past years to have your predecessor visit with
us and I think that Congress owes you a debt of gratitude for
your public service. I am pleased that you have decided to
continue that service as Secretary of the Treasury. As you
described in your opening statement, we have a great many
challenges ahead of us, but if we work together, we can respond
to them in an appropriate way.
Of all the many functions you are involved with, almost
half of the law enforcement activities of the Federal
Government fall under your jurisdiction. Most of these
activities are very, very important and we must do right by
them in terms of providing the appropriate resources.
I would like to mention one final point. Before coming to
Congress, I was an estate tax administrator. I have always felt
it is important to put the word ``service'' back in the
Internal Revenue Service and extend a helping hand to the
American taxpayers to comply with tax laws. One of the
proposals this year is for Internal Revenue Service systems
modernization while strengthening customer service and
compliance. I think that is very important.
Prepared statement
So I am going to ask you later about abusive tax shelters
that I think are very troublesome and whether we have the
resources to address those. I am going to ask you a number of
things, but first, let me thank the chairman. I was delayed
with a couple of meetings in the Capitol, but I am pleased to
be here and will ask my questions following Senator Campbell's
questions.
[The statement follows:]
Prepared Statement of Senator Byron L. Dorgan
Thank you, Mr. Chairman. I am pleased that Secretary Summers is
able to join us today. In the months since he assumed the helm of the
Treasury Department, he has maintained the steady hand of his
predecessor, former Secretary Rubin.
Mr. Secretary, you are here today to explain the final budget
request for the Clinton Administration. In many respects, this is an
aggressive and robust request. You seek a net appropriation of $13.9
billion--an increase of more than $1.5 billion over the current year's
appropriated level.
As iterated in the Department's budget documents, some of your key
priorities are supporting continued reform of the IRS, strengthening
our ability to fight drugs and crime, enhancing financial reporting and
resource accountability and investing in community development and
economic growth. These are all goals which I strongly support.
Specifically, you request nearly $120 million for continued
investment in the IRS' systems modernization and $144 million to hire
over 1600 FTE (Full Time Equivalents) to strengthen customer service
and compliance. These are needs which must be met.
Your budget proposes an additional $106 million to add over 700 new
positions to the Bureau of Alcohol, Tobacco and Firearms to enhance
compliance with existing firearms laws, expand the Youth Crime Gun
Interdiction Initiative, and improve ballistics imaging and gun tracing
efforts. If we are to effectively enforce existing gun laws, these
funds are the minimum needed to meet that challenge.
Your budget proposes to spend $123 million to maintain the Customs
Service's existing commercial trade computer tracking system while also
seeking an additional $210 million in new users fees for a
significantly upgraded commercial computer system. While I have my
doubts about the efficacy of yet another user fee, this upgraded
Automated Commercial Environment (or ACE) is desperately needed as our
trade with other nations continues to grow.
The budget also seeks $15 million for a new money laundering
initiative, $25 million for a Counter-terrorism Contingency Fund, $16.3
million for a new, joint Secret Service-Customs Service Air Security
Initiative, and $5 million to enforce child labor laws--in general, a
host of innovative new initiatives. Each of these programs,
individually and jointly, are worthwhile and a strong case can be made
for them all.
But, I must be honest with you Mr. Secretary, I doubt that we will
have sufficient resources to meet all of these requests--as well as
those for other agencies also funded by this subcommittee. While we may
be moving away from increasingly irrelevant budget caps and entering an
era of alleged budget ``surpluses,'' there are a number of our
colleagues who would direct these surpluses to steep and--in my view--
unwise and unsound tax cuts.
Today we are debating a budget resolution that would effectively
tie this subcommittee's hands and prevent us from even maintaining
current level of funding for these critical law enforcement and other
initiatives. The levels in the pending budget resolution will do great
harm to much that all of us today want and need to accomplish. But as
we focus today on the rather more mundane aspects of funding the many
necessary programs within the purview of this subcommittee and your
Department, I would urge you to work with us on this subcommittee as we
develop a bill in the coming months. Share with us your priorities and
assist us so that we can craft a bill which meets the needs of the
Department and, more importantly, the American people.
I look forward to working with you to meet that goal and I look
forward to your testimony today.
Thank you, Mr. Chairman.
Senator Campbell. Thank you for appearing, Mr. Secretary.
You mentioned the five important areas. Did you mention them in
the order of your funding priorities, with the first one being
the top or do you have a priority order of those?
Mr. Summers. I think they are all absolutely critical
orders. I mentioned the IRS first because it is the largest
component of the Treasury budget, but these are each very
separate programs that meet critical needs and I would not want
to be in the position of trying to say whether our country had
a greater stake in an effective tax administration system or an
effective law enforcement with respect to drugs. Both seem to
be absolutely imperative.
Senator Campbell. Well, I understand, but the reason I ask
is because we have not passed a budget resolution yet, and as
you know, the President's request was very good for this
committee, about a 20 percent increase. I have my doubts that
we are going to have that much money to spend when the budget
resolution is passed. I think in the past, this committee has
done our very best to supply the funds we could to your
Department, but we do not know how much money we are going to
spend yet--you probably know that--and will not maybe until
next week sometime.
I want to also thank you, although you were not here, the
different law enforcement agencies under Treasury did a very,
very nice display here in the Dirksen about a week ago and a
number of our colleagues came over and looked at it. We saw a
lot of the weapons that you deal with, some of the high-tech
paraphernalia that has been developed to fight in the drug war.
I was particularly impressed with almost $1 million of
counterfeit money that was stacked up on one table. I mean,
only an expert would know the difference. In fact, I was so
impressed, I got to thinking, I wonder if we could borrow some
of that for this committee to bail us out, but somebody along
the line would probably spot it that is better at seeing
counterfeit money than me.
You also mentioned the difficulty of retaining people, and
I know that is a concern of every Federal agency now, including
the Army, as you know. With a vibrant economy, things are going
good out in what I call the real world. It is harder to get
people to serve. I know that. If it was in the power of this
committee's jurisdiction to raise that pay, I would, but that
is, of course, something the authorizing committee has to deal
with, but I certainly commiserate with you.
Wireless communications
Let me ask you two or three other questions. This
subcommittee has funded the wireless communications effort for
the Department of the Treasury for several years. This year,
you are requesting $55 million for this program. How much
longer do you plan to request those funds and what are we going
to see for the investment of that $55 million?
Mr. Summers. Perhaps I could ask my colleague, Lisa Ross,
who is the President's nominee to be our Assistant Secretary of
Management and who has been very closely involved in our
information technology efforts to answer your question.
Senator Campbell. That is fine. Ms. Ross, would you like to
comment on that?
Ms. Ross. Yes. The $55 million requested this year is the
first major request for a multi-year effort. As you know, the
spectrum will shut down on December 31, 2004 and we are
basically looking at a 3- to 4-year program to convert from
analog to the new spectrum. This $55 million will start the
program to affect this change over the coming 4 years. It also
includes some capital investments to start to replace some of
the equipment that will be compatible in the long term with the
spectrum change that we need to make. So I would consider this
the first major year of what will be the 3- to 4-year effort.
Senator Campbell. Do you expect to ask for that amount for
the next 4 years?
Ms. Ross. Yes, we will be requesting resources over several
years, as we roll out this legislated mandate, and
specifically, will be requesting additional amounts in fiscal
year 2002. We are in the process of reviewing those estimates
now.
Public key infrastructure
Senator Campbell. Okay. Mr. Secretary, you are requesting
$7 million for public key infrastructure. What is the need for
that program and what do you expect to achieve with that
funding request?
Mr. Summers. As we have communications both within the
Department, with other agencies, and with increasingly
internationally with respect to sensitive financial issues, it
is increasingly important that those communications be secure.
What public key infrastructure does is provide for the
necessary kinds of encryption for secure financial
communication. Of the $7 million, $5 million would promote
public key infrastructure for certain bank and financial
institution regulation pilot projects and $2 million would fund
Treasury's share of the cost of the Federal bridge
certification authority, which would govern the use of
certification authorities, a holder of the key with respect to
public infrastructure and ensure that we had technical
interoperability, the ability to communicate between different
government agencies.
I might just say that I think that given concerns about
privacy, given the kinds of issues we discussed earlier in
connection with the IRS, that I think having a satisfactory set
of encryption technologies for communications and other kinds
of records that need to be kept secure is of great importance.
Counterterrorism
Senator Campbell. I thank you. The President's budget also
requests $25 million for a counterterrorism fund within the
Treasury Department. There is already an account similar to
this for the Justice Department. I am sure you are aware of
that. The difference, as I understand it, is the Treasury fund
can be used only after an official emergency designation has
been made, and I assume that is an emergency designation made
by the President.
Tell us a little bit about that fund, the purpose of it,
and if you ever had that type of fund before, how much money
was appropriated before, how long did that funding last, and
who is responsible for determining whether the money is
disbursed from the fund?
Ms. Ross. You are right in that the fund is being set up to
cover national security events, and in the past, Treasury did
have, a counterterrorism fund, but in the fiscal year 2000
budget, they did not have one. We used that fund in the past to
fund those national security events and cover the additional
costs that Secret Service, Customs, or ATF would incur as a
direct result of those events.
The $25 million is to provide reimbursement for those costs
of projects specially designated as emergency.
Senator Campbell. Yes, if you would get back to us and
elaborate on what qualifies as a national security event. Does
that mean like world trade seminars, for instance, or----
Ms. Ross. Yes. World trade last year, NATO was covered,
mostly through supplemental funds, so we are trying to avoid
having to do that again with the contingency planning that this
fund provides.
Senator Campbell. The riots we had at the WTO, things of
that nature, it would cover?
Ms. Ross. Exactly.
Senator Campbell. Would that also cover things like the
Olympic games, security for them, because I know in the past,
we have had some requests for----
Ms. Ross. Yes. In the 2001 budget, we actually do not have
any funds in there for the Olympics. If we were not to get any
additional funds, we would probably look to the
counterterrorism fund to fund some of those needs.
Senator Campbell. And who is responsible for dispersing the
money or determining how it should be dispersed?
Ms. Ross. Again, I believe those have to be events that are
specifically designated by the President.
To answer your question about past funding it was $15
million in the split over 2 years, so this is somewhat of an
increase but represents the pace at which we have been seeing
these events being designated as national security events.
National money laundering strategy
Senator Campbell. Thank you. Mr. Secretary, why is the
money laundering initiative funded in the Department office's
account rather than the financial crimes enforcement account?
Mr. Summers. Because the objective of the initiative is to
provide for greater coherence of the efforts within the
different bureaus towards pursuing a set of specific objectives
that were laid out in the National Money Laundering Strategy.
For the first time, rather than have a set of dispersed law
enforcement strategies following a Congressional mandate,
Attorney General Reno and I have put out a National Money
Laundering Strategy that identifies a set of priorities and
have looked, for example, for FinCEN and Customs to be working
more closely together.
Of the initiatives in the National Money Laundering
Strategy and in that $15 million fund, six of the full-time
equivalents would be in the Department offices to facilitate
the coordination and the additional ones would be allocated to
the bureaus to carry out their new roles in association with
the Money Laundering Strategy.
Senator Campbell. I see. Speaking of money laundering, what
was the criteria used in designating the first high-risk money
laundering and related financial crimes areas referred to as
HIFCA?
Mr. Summers. They were areas--the methodology there bore
some resemblance to the approach that--let me see if I am going
to be able to answer that without reading the sheet of paper
that has just been handed to me, and then we can see whether I
got it right or not----
Senator Campbell. That is all right. I have to refer to
notes, too.
Mr. Summers. The basic approach was similar to that which
has been used with respect to areas that are particularly
serious in terms of the need for drug enforcement, and an
interagency group was set up to evaluate which are the areas in
which the problems are most serious and target those areas as
the areas where they are most serious. That working group made
the recommendations to a steering committee and then the
Attorney General and I made the formal designations. We would
expect that, over time, other geographic areas will be
considered for designation as HIFCAs.
Senator Campbell. This Money Laundering Strategy request
includes 42 new FTEs, as I understand, are going to cover
issues from three different offices, the Office of Enforcement,
Domestic Finance, and Tax Policy, is that right? If the program
covers all three offices, why is the Office of Enforcement the
only division getting the FTEs?
National money laundering strategy
Mr. Summers. The 42 refers to the six in our Office of
Enforcement and the 36 in our bureaus that I referenced. The
Office of Enforcement has major responsibilities for the
oversight of what is going on in the Customs, what is going on
in FinCEN, what is going on at the Secret Service, and what is
going on at the IRS, all of which have important financial
crime responsibilities. So for coordinating law enforcement
responsibilities, that is something that is taking place within
the Office of Enforcement.
It is our judgment that the incremental responsibilities
within our tax area, for example, around tax havens and around
the regulatory issues that are covered within our domestic
finance area were things that, given the need to constrain a
budget, that we felt very strongly could be handled with
existing personnel. I am sure the relevant under and assistant
secretaries would be very pleased to have additional staffing
to take on those responsibilities if there was a desire to
launch an initiative in that area, but our feeling was that
that part of the work could be done in those areas.
Senator Campbell. Thank you. Let me yield to Senator Dorgan
so we can trade off on the questions a little bit here.
Air Security/Initiative/National special security events
Senator Dorgan. Mr. Chairman, thank you very much.
Mr. Secretary, this is an easy question. Have you read the
``Style'' section of the Post this morning?
Mr. Summers. I confess not.
Senator Dorgan. There is an interesting story in the
``Style'' section of the Post entitled ``Anarchy, Anyone?'' and
it talks about the protests looming this month with respect to
the meeting of the IMF. I asked the question, it is an
interesting story, but I asked the question because in the
budget submission, there is an initiative, the Air Security
Initiative, with which you are familiar, and I am curious what
will determine when an event becomes a national special
security event. For example, would the meetings later this
month of the IMF, do you think, trigger such a designation?
Mr. Summers. I would not anticipate at this point that the
IMF World Bank meetings, for which I assure you that the
relevant agencies are making appropriate preparations, would be
something that would trigger that special status where the Air
Security Initiative would become involved. This is a National
Security Council initiative to support events involving really
very major and non-repeatable kinds of security threats. The
NATO exercise in Washington, the WTO meeting, the Olympics in
2002 would be examples of the types of events that are
contemplated as requiring air support.
Senator Dorgan. Seattle in December?
Mr. Summers. Seattle in December, yes, probably.
Senator Dorgan. Mr. Secretary, I do not mean to make light
of this at all. I asked the question because I think this
obviously is going to become an issue and I wanted to know
whether it related to the specific request here.
Tax shelters
Let me ask a couple of questions about tax shelters,
especially the abusive tax shelters. My understanding is that
while we have had a robust and growing economy with record-
breaking sustained economic growth, large corporate income tax
receipts last year were down, which would seem to me to be at
odds with what one would expect in a booming economy. One would
expect corporate profits to be up, and therefore corporate tax
receipts from the largest corporations to be up.
I assume at least part of the answer to that is the ever-
increasing and more abusive tax shelters. You have spoken on it
some. It relates, I think to why you need more resources at the
IRS, something which I think is important and which I support
strongly. Can you describe to us these more sophisticated, not
in great detail, but the more sophisticated threat that comes
from abusive tax shelters, and do you think that part of the
reduction in corporate income taxes has come from that kind of
enterprise?
Mr. Summers. Senator Dorgan, I do suspect that corporate
shelters have contributed to the erosion of the tax base. There
are many factors in corporate revenue trends--accelerated
depreciation with high investment, stock options, many
factors--so I think it is difficult to quantify on that basis.
But I think it is suggestive that those tax shelters which have
come to our attention more or less by coincidence that we have
closed down would have cost approximately $80 billion in
revenues over the next 10 years and we have every reason to
believe that what we see and are able to catch is the tip of an
iceberg. So this is a quantitatively large problem.
The essence of a corporate tax shelter is not a business
tax incentive about which people can reasonably differ. It is a
transaction, and to use one of the lawyers' terms, is devoid of
economic substance, that involves no real change in ownership
or employment arrangements but involves a contrivance, such as
in one famous example, the sale and then the lease back of a
Swiss city hall for a period of a few hours that produced
several hundred million dollars in tax savings for those who
were involved, or the recharacterization of financial flows on
an artificial basis.
Our judgment after quite extensive contacts with
practitioners is that these kinds of transactions are being
more aggressively marketed than in the past, often with
confidentiality agreements, often with those who market them
paid on a contingency fee basis, and often with legal contracts
that say that in the event it is audited, the whole thing
dissolves and goes back to the normal situation.
Tax shelters
I think the approach that is most effective, and it is one
we are seeking to work with the tax writing committees on, is
an approach that is based first on better service to taxpayers
by assuring, as Commissioner Rossotti's reforms will, that
taxpayers have someone involved with them who knows about their
industry and knows about their business and can tell what is
real and what is not, and then, second, involves an approach
based on disclosure, because as we have seen in so many
contexts, some light is the best disinfectant, and that asks
for those who are pursuing transactions that have many of the
elements of a tax shelter to disclose those transactions so it
is clear that they have been pursued and that a judgment can be
made as to whether they are legal or whether they are not
legal.
I think we also need to look in the penalty and ethical
code areas, particularly with those who are involved in the
marketing of these shelters. Certainly, the capacity of the IRS
to vigorously enforce in this area, which is an area where over
time tens of billions of dollars are at stake, depends upon the
adequacy of its resources and that is why a budget request that
reverses what has become a medium-term trend towards declining
staffing seems to us to be so very important.
Transfer pricing, Return-free filing, and overtime
Senator Dorgan. Mr. Secretary, thank you for that. Let me
also mention, I will not ask you a question about it, but I
will mention my continued interest in the transfer pricing
issue and what I think is substantial abuse in the area of
transfer pricing to avoid payment of taxes in this country by
the largest corporations. Messrs. Pak and Zdanowicz, two
professors from Florida, have done a lot of, I think, very
interesting work in this area. I think they are more accurate
than the Internal Revenue Service in the estimate of loss. I
think the loss is in the tens of billions of dollars a year,
and I will continue in my mettlesome ways to try to write
little things in pieces of legislation that urges and
stimulates and encourages and pushes the agency to continue
working in this area.
I know you and I disagree about Federal legislation on
transfer pricing, but I do want to tell you that my interest in
that has not abated, nor do I think I am wrong. You are welcome
to respond to that.
Let me also just mention that an area that I am really
interested in working with you on, that we have discussed, is
the issue of finding ways to save money and save taxpayers time
and headaches with respect to return-free filing. More than 30
countries actually allow people to comply with their income tax
responsibility without filing an income tax form. They do that
through a rough justice form of having withholding become the
actual tax liability.
I am about to introduce legislation that will do that in
this country and that I think will allow up to 70 million
people to comply with their income tax responsibility without
having to file an annual tax return, which I think would be
good for the IRS, less paper, good for the Treasury Department,
less processing costs, certainly good for the taxpayers in this
country. So I am anxious to continue to work with the agency
and the Internal Revenue Service as you review all of these
issues and hope that we can perhaps make some progress on that.
And then, finally, let me ask the question about overtime
that Senator Campbell alluded to. I think it is very important
for us to try to evaluate whether this is a good use of the
taxpayers' money. I know you do not authorize and use overtime
because you want to, you do it because you have to. I
understand that. And yet, I think Congress ought to understand
that overtime compensation is the most expensive compensation
that we use and we probably ought to, when we look at the
overtime usage in some of these agencies, which can be up to 2
weeks of overtime in 1 month. That is very substantial. We
maybe ought to take a look at increasing the full-time
equivalent positions as a more honest approach to meet the
workload.
It is an area that I am kind of interested in, and I know
that the chairman asked a question about it. What is it costing
us and what are we getting for it? How could we better address
that and make a more effective use of the taxpayers' money?
So I have given you a kind of a load there, Mr. Secretary.
Feel free to respond to any of it.
Mr. Summers. Senator Dorgan, I will try to respond quickly.
On overtime, I share your sentiments. This is an issue in many
places. The place where I feel it most pressingly within the
Treasury Department is, frankly, with the Secret Service, where
the mission is one where fatigue is a particularly precarious
thing and that is why we are seeking extra full-time
equivalents. There is the additional dynamic that excessive
overtime tends to lead to attrition, which leads to more
overtime, and we have got to find a way to break out of that
cycle.
With respect to return-free filing, I have enjoyed our
discussions on this in the past and it is something we are
certainly prepared to look at and work with you. My impression
is that one of the committees will be having a hearing on this
issue sometime in the next little while.
With respect to transfer pricing, Senator Dorgan, I do not
think we do have precisely the same view on the near-term
revenue potential of the issue, but I do think there is common
ground and the recognition that as we all talk about the
process of managing global integration and having it work for
people, which is one of the themes that the President has
stressed over the last year, that one part of that has to be
making sure that global integration does not benefit mobile
large entities at the expense of those who have less mobility.
One of the important areas that has to be examined in that
regard is the whole area of tax rules on cross-border
transactions, and certainly that calls for making sure that we
have transfer pricing rules that do not allow what are real
profits to entirely escape taxation. I think over time, as we
think about a new global economy and a 21st century approach,
that will be a set of issues that will have to be examined with
increasing care.
Senator Dorgan. Mr. Secretary, thank you very much, and let
me again say that I am heartened by your stewardship at
Treasury. These are interesting times, and in many ways we are
blessed with an economy that is so strong and has so many
boundaries. But at the same time, there are a lot of
interesting challenges. I have not asked about derivatives and
hedge funds and other things, but I am glad you are there and I
think that your stewardship at Treasury can give Congress some
confidence on a number of these challenges.
Mr. Summers. Thank you very much.
Secret Service hiring
Senator Campbell. Mr. Secretary, speaking of overtime and
retention, we were told by several of the agencies that the
jobs are getting tougher on the quality of life for all of
them. When the Secret Service testified the other day, they
talked about the difficulty they were having and, in fact, are
trying to hire a total of 359 agents in the next 2 years.
As a result, last year, we provided $10 million by direct
appropriation to the Service and the Department was directed to
transfer an additional $21 million, which was done. Since those
funds have been transferred, do you think the Service will be
able to obligate all of it before September 30? This is the
Secret Service I am talking about.
Mr. Summers. I will give you a better answer if I turn
around.
Senator Campbell. Turn around.
Mr. Summers. Yes, I am assured. There seems to be a
unanimous view behind me.
Senator Campbell. I think I got the same answer the other
day from the gentleman that just gave you that answer.
Mr. Summers. I will check that that is the case, and if for
any reason there is any sense in which that is not the case, I
will be sure to come back to you, Mr. Chairman.
Senator Campbell. I wish you well. I know, as Senator
Dorgan knows, it is difficult to get people to serve when they
have to put in so much time and the quality of their own family
deteriorates because of it.
GREAT program
There is a program I am particularly interested in, and I
asked the ATF about it the other day. It pertains to a program
called the GREAT program. Are you familiar with that?
Mr. Summers. Yes.
Senator Campbell. I happen to think it has a real
relationship to teen behavior and I noted with some regret that
the funding for the program was reduced as the ATF contribution
to the 38 percent rescission that we required here in Congress.
We provided $13 million for grants to State and local law
enforcement to participate in that program, $3 million more
than was even requested by the administration. That was reduced
by a little over $1 million, about $1,120,000. Do you know why
that account was particularly picked for reduction?
Mr. Summers. Let me say, Mr. Chairman, we are very much
committed to the GREAT program and I share your view that this
kind of prevention effort is one of the most important things
the ATF can do with respect to firearms violence. What I was
told was that you had a situation where there were some
available carryover funds from previous years. You had a
certain sized implementation capacity, and in light of the
implementation capacity, it was possible to make this reduction
in new funding without sacrificing what would have been the
effectiveness of the program and that it did not reflect any
kind of priority judgment about the GREAT program. It simply
reflected the administrative feasibilities of the situation,
and on that basis, we made the decision and, frankly, it was
made with a little bit of regret because we did not want to do
anything that even symbolically would suggest that the GREAT
program was other than something that was very important to us.
Senator Campbell. Well, as you go through this year, if you
have to make some rescissions, I think I can speak for most of
the committee members that the GREAT program is an important
program for young people.
Mr. Summers. Message received.
Customs Service funding request
Senator Campbell. The administration has also proposed a
Colombia drug supplemental. There have been a wide variety of
numbers floating around, and I have two different numbers. The
administration proposed $68 million for radar upgrades for
Customs airplanes, but I have heard Customs is seeking $395
million for the same thing. Can you give the committee some
insight on what the real request is?
Mr. Summers. The real request is that that is contained in
the President's supplemental request.
Senator Campbell. 68?
Mr. Summers. $68 million.
Senator Campbell. Okay. What offsets is the Department
willing to provide in order to increase it, or are you going to
stick with that $68 million, do you think?
Mr. Summers. The $68 million is the administration's
request.
Senator Campbell. There was a recent Washington Post
article that said that the President's budget requested a 3.9
percent increase for the Customs Service over fiscal year 2000.
There was a second article that added that the increase was 4.6
percent. Yet judging from the Department's justification
information we are receiving from the Department, Customs is
really looking at a 22.4 percent increase if all the requested
funding is included. Could you clarify that?
Mr. Summers. As always with budget figures, there are a
range of ways of calculating them. The 22 percent figure that
you cited, Mr. Chairman, includes, as for many purposes would
be appropriate, all of the initiatives, including the fee-
funded budget authority for the ACE system. Without the ACE
system, the budget request would be 11.5 percent. The much
lower 3.8 and 4.6 percent figures that you cited refer to the
budget allotment to the base operations of Customs, excluding
any new initiatives at all.
Taxpayers' advocate office
Senator Campbell. Let me just ask maybe a last question or
two. You talked about the poor old taxpayer a little bit. How
is the Taxpayers' Advocate Office integrated into the
Department? Has making it an independent reporting entity
assisted the IRS?
Mr. Summers. I think Taxpayer Advocate has made a--with the
annual reports and reflecting the appropriate degree of
independence that Congress prescribed, I think has made a
useful contribution, yes.
Senator Campbell. Has it focused more on the taxpayer or on
the internal workings of the IRS?
Mr. Summers. I think it has focused most on the aspects of
the workings of the IRS and the tax law that impact directly on
taxpayers and that create burdens and complexities and
difficulties for taxpayers, issues such as the alternative
minimum tax, and I think their report, along with many other
factors, was one of the things that led to the decision that
the alternative minimum tax issue is something that would be
included in the President's budget.
Senator Campbell. I think Mr. Rossotti is doing a fine job.
He was in the other day, and I am continually pleasantly
surprised at the productivity of his office.
Senator Dorgan, I had no further questions. Did you? I may
have one or two I want to submit to you in writing.
Mr. Summers. Sure.
Customs study
Senator Dorgan. Mr. Chairman, just one or two additional
questions.
The Commissioner of Customs has described to us a study
they have done that I believe Treasury now has relating to
their resource needs. Will Congress have access to that at some
point when Treasury has been able to review it? The reason I
ask the question is I think both from the perspective of the
southern border and also those of us from the northern border,
the issues of resources are very important issues with respect
to Customs.
Mr. Summers. There are a number of issues that, as I
understand it, need to be reviewed both within Treasury and
OMB, but certainly when the study has been fully reviewed, we
would anticipate that it would be available to Congress.
Senator Dorgan. Senator Campbell just asked whether we
needed to increase the number of orange cones that we put in
the middle of the road that separates the U.S. from Canada.
When we are dealing with terrorists, searching all the cars in
these busy ports, there are these little orange cones that are
put up at 10 o'clock in the evening on these roads that come
into North Dakota and Montana and so on. The folks that want to
come in just remove the cone, and then if they are really
polite, they will drive through and put the cone back and then
keep going. If they are thoughtless, they will just leave the
cone off to the side of the road. But we raise those questions
because, this is a national issue. Terrorism is an important
and growing issue and we need to certainly have the resources
available to respond to it.
The Mint, as I understand it, is self-funded. I am curious
however, of your impression of the success of the Sacajawea
dollar, the gold dollar. That went out with a lot of fanfare. I
assume you were involved in planning some of that. What is your
impression of that?
Mr. Summers. I would say that, and I can give you a more
detailed answer in writing, but my impression is that the
demand so far has rather exceeded our projections of demand and
I think that a lot has happened since the last time the nation
tried to introduce a dollar coin in the late 1970s. As a
consequence, I think there is some receptivity to a dollar
coin, which is, as I say, finding more circulation than was
expected. I think the combination of the different color that
is associated with this coin and the different tactile feel
that makes it easy to distinguish in your pocket from a quarter
has also helped raise demand for the coin.
While I know there have been some concerns around the
distribution, I think those are issues that are being
addressed. I think that the people at the Mint can feel some
satisfaction that it is the lack of supply in the face of
demand that has caused the concern this time around, rather
than the accumulation of large inventories.
I will just, for the benefit of my friends with cameras,
take the opportunity of your question to hold up one of these
new coins.
Senator Dorgan. Mr. Summers, you have a great staff.
Senator Campbell. I might tell my colleague that I was
invited to the first striking of those coins out in Denver. We
were out there about a month ago now. You also participated in
something in North Dakota, too. I had a chance to talk to
somebody from the Numismatic Association and they thought this
was just going to be a marvelous coin for the collectors. I do
not know how many they are going to mint. I guess that will be
determined by the Federal Reserve Board. But it was a very
interesting experience for me. They used an old machine that
had been in use for 160 years or something of that nature in
Denver to strike that coin.
Senator Dorgan. So the Secretary's initial impression is
that this is gaining some acceptance?
Dollar coin
Mr. Summers. Yes, I think that is right. I am able to
report that the Mint estimates that they will produce and ship
approximately $1 billion golden in fiscal year 2000, and the
advertising campaign has had some real efficacy and I think it
is expected that--it obviously depends on how much TV people
watch, but it is apparently expected that the vast majority of
the target audience will see more than 15 advertisements
addressing this. The Mint has had a number of partners, perhaps
most notably at Wal-Mart. That has helped to introduce this
coin into circulation. So I would say we are very pleased with
the results of our----
Senator Campbell. Say that again about Wal-Mart? I was
writing some notes. What was your comment about Wal-Mart
distributing coins?
Mr. Summers. The Mint, as part of the distribution
mechanism for the new coin, the Mint entered into a partnership
with Wal-Mart for the distribution of some 94 million coins
during the month of February. Wal-Mart obviously paid for all
the coins and provided a kind of advertising through talking
about the fact that it was using the coins and that then has
driven, as these have come into circulation, increased demand,
and in particular increased demand from the banking industry,
to the point where the concerns, and they have been real
concerns and we have tried to address them, have not been of
nobody wanting the coins but of people wanting the coins and
having difficulty getting them. I think that portends--I do not
mean to minimize those problems, but that portends a favorable
introduction for the dollar coin.
Senator Dorgan. I do not want to go further on this, but as
you know, there was some criticism by small banks and also
small merchants asking why a large merchant was given some
preference here. We should not be savoring a large merchant
over small businesses in endeavors such as this. While the
damage has been done in this case, we must ensure that it does
not happen again. When we visited with the Mint about that,
they indicated that they had a schedule to move coins
immediately into the banking system.
But I must say that I have not seen a gold coin out there
yet, and part of it is because I do not shop much and when I
shop, I never get change. But I, frankly--have you gotten a
gold coin while you are out shopping?
Senator Campbell. No. No, I have not.
Senator Dorgan. I want this to succeed, obviously, for a
lot of reasons, and I hope they are moving out expeditiously
all across the country.
Senator Campbell. The only thing I can figure out is I shop
at Wal-Mart, too, and they have a wonderful refund policy.
Maybe when the people that get these coins find out they are
plated and not real gold, they will be taking them back.
Additional committee questions
I have no further questions. Did you?
Senator Dorgan. I have none. Thank you, Mr. Secretary.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Ben Nighthorse Campbell
Question. Treasury has taken on the task of trying to help low-
income American families find affordable ways to bank.
What steps have you taken to secure affordable services to the non-
bank population?
Answer. In implementing the Debt Collection Improvement Act of
1996, Treasury began the Electronic Funds Transfer 1999 (EFT'99) effort
to increase access to low-cost banking services for federal benefits
recipients who may not have banking relationships. Under EFT 1999,
Treasury, after broad public round tables with consumers and financial
institutions, designed the Electronic Transfer Account (ETA) for people
who receive federal benefits and do not have a bank account. The ETA,
introduced in July 1999, is entirely voluntary for banks to offer and
federal check recipients to enroll. It is an affordable transaction
account for lower-income federal benefits recipients, at a price that
is economically viable for financial institutions to offer. To date,
over 400 financial institutions with over 2,500 locations have
committed to offer the ETA thus far, with most institutions rolling out
the ETA during 2000.
In order to enroll in an ETA, however, you must be a federal
benefits recipient. The First Accounts initiative is designed to reach
low-income people without bank accounts, but who are not eligible for
ETAs because they do not receive federal benefits.
A related EFT'99 initiative, a pilot project run jointly by
Treasury and the US Postal Service, has placed ATMs in post offices in
low-income communities in Baltimore, Maryland and Tallahassee, Florida.
These ATMs allow residents of these neighborhoods to access their bank
accounts inexpensively in safe, secure and convenient locations. A
component of the First Accounts initiative would build on the
experiences of this pilot by helping financial institutions to increase
the availability of electronic banking points in communities such as
these that lack access to banking services.
Treasury also recently announced its involvement in National
Partners for Financial Empowerment (NPFE). NPFE is a new forum for
private sector organizations and companies to come together with
federal participation to encourage Americans to save for their future
and to take control of their personal finances. As a member of this
forum, Treasury will work with other NPFE organizations to encourage
families--especially those with low incomes--to make informed choices
for common financial transactions, including home mortgages, retirement
savings options, consumer credit and basic banking services.
Question. How will you convince the low-income population that they
can afford to use this service if you are able to secure it?
Answer. Convincing the unbanked population to take advantage of
low-cost banking services involves educating these consumers about such
services, and designing those services in a way that is useful for the
target population. As explained in the question and answer below,
Treasury will work to educate low-income families--especially those
without a banking relationship--about the benefits of participating in
the financial services mainstream.
In designing First Accounts, Treasury will conduct new research on
the financial services needs and preferences of the unbanked
population. As part of EFT'99, Treasury commissioned research to
analytically test the demand for different proposed features of the
ETA. Treasury also completed new research on alternative financial
services providers, such as check cashers and money transmitters, that
reveals much about the demand for financial services among the unbanked
population in the cities studied.
Treasury also plans to ``pre-pilot'' new products to gauge demand
for different First Accounts product designs. This fall, Treasury's
CDFI Fund will include an incentive for banks to provide innovative
services to the unbanked by clarifying how its Bank Enterprise Award
Program can be used to support the provision of new low-cost accounts.
The demand for these accounts, among both consumers and financial
institutions, will help Treasury to expand the availability of products
that make sense for the unbanked and are economically viable for banks
to offer.
Question. Do you have a plan on how to get this information out to
low-income families and to make them aware that there is an alternative
to the expensive way they are presently banking?
Answer. As part of the First Accounts initiative, Treasury would
educate lower-income Americans about the benefits of having a bank
account, managing household finances, and building assets. This
educational effort would build on Treasury's experiences as a member of
National Partners for Financial Empowerment, and its public education
and outreach effort for EFT'99.
To explain the benefits of EFT and ETAs, Treasury launched a
nationwide public education campaign that attempts to reach the
millions of people that do not use direct deposit, and in particular
those without bank accounts. That effort includes a wide variety of
some 10 million printed materials, a guide to providing basic financial
education in a range of local settings, a community outreach initiative
involving national and local partnerships with organizations across the
country, public relations activities and a public service advertising
campaign that has included outdoor billboards, print, transit, and
radio and television spots. As of the end of 1999, Treasury estimates
that it has reached 1.1 million people face to face through the EFT'99
community outreach program alone. Treasury would seek to develop a
similar education and outreach effort to implement the First Accounts
initiative.
Question. I have to say that I am pleased by the Treasury
Department's commitment to address the ACE funding issues that have
been in the paper recently. Did the Customs Service seek emergency
funding to run the ACE program during the Department's consideration of
unmet funding needs?
Answer. There was no formal proposal from the Customs Service for
ACE emergency funding within the context of unmet funding needs.
Commissioner Rossotti has been working toward his vision of a
modernized IRS, one which (1) has the computer capabilities to actually
function and (2) is structured to provide individualized assistance to
specific groups of taxpayers.
Question. Do you support Commissioner Rossotti's vision?
Answer. The Department's original consideration of Charles Rossotti
for Commissioner of IRS was precisely because of his management vision
and his vast experience improving the performance of large, complex
organizations. The Department supports this vision by working very
closely with the Commissioner as he has implemented the new
organization and begun the process of modernizing information systems.
Along with his openness with key stakeholders (including the Department
and the Administration) he has also used this organizational and
systems modernization effort to empower the IRS employees, who also
have participated in every aspect of the process.
Question. What do you think is the most important aspect of that
vision?
Answer. The foundation for this lies in the new organizational
structure which focuses on specific groups of taxpayers. This aspect
makes it a powerful way for IRS to manage its resources and measure its
progress. In the past, the IRS was structured and managed according to
function with no one taxpayer being served by a single IRS office.
In the new organization, division managers will have full
responsibility for all the function areas that serve their taxpayer
groups. Each manager can decide how to allocate the resources based on
a better understanding of the needs of that specific taxpayer group.
Managers will use a balanced performance management system and market
analysis to determine the best resource mix. For instance, a division
manager may find that increased education and information up front will
decrease the need for collection or enforcement action after the taxes
are filed. Another division manager may find that mistakes in
processing filed returns are causing delays and processing needs to be
improved. Another division may discover an easier way to handle
collections so that accounts do not age to the point of requiring
drastic action.
This structure is consistent with most private sector financial
industry organizations. Many of these organizations have proven to give
outstanding and timely customer service. They were forced to make these
customer-focused organizational changes in response to market forces.
Those same market forces are affecting the IRS and the time is right to
make this organizational change, which paves the way for future
technological modernization.
IRS is about midway through the organizational restructuring. It is
critical that we see this program through to completion, sometime in
fiscal year 2002.
Question. What do you think is the most difficult component to
achieve?
Answer. Given the magnitude of change at the IRS, there are many
difficult challenges ahead. Immediate challenges for the IRS are the
Business Systems Modernization effort, which has been compared to
overhauling a 747 in mid-flight and the effort to improve post-filing
(examination, collection, enforcement) efforts. While these changes are
being made, IRS must maintain high levels of service to taxpayers.
Business Systems Modernization involves the design and
implementation of a number of different systems at the same time.
Proper sequencing and attention to system interdependencies will be
needed if this modernization is to be useful to the organization.
The implementation of the Reform and Restructuring Act (RRA) and
the recent decline in audit coverage has exposed the difficulties IRS
has with maintaining post-filing activities. Only by focusing on the
specific challenges each taxpayer group represents can improve current
post-filing activities to decrease taxpayer burden and avoid the aging
of uncollected accounts. This effort will take some time as each
division manager begins to assess his or her organization and analyze
the taxpayers served by it. IRS has already begun the effort, due to
not only the guidance of the RRA, but from the thoughtful contributions
of the Citizen Advocacy Panels and suggestions generated from Problem
Solving Days.
These challenges highlight the enormity of change occurring at the
IRS. As stated earlier, the Department is confident that the IRS has
pulled together a top-notch management team to face these challenges
and we are working closely with them to monitor their progress.
The IRS Management Board was created to help the IRS make
appropriate decisions about its computer modernization program. From
all accounts, that Board has been successful. Now the IRS Oversight
Board is moving forward.
Question. Will there be any overlap between the two Boards?
Answer. The IRS Oversight Board has responsibilities that create
the potential for some administrative overlap with the IRS Management
Board, as well as the potential for duplicative reporting requirements
for the IRS. Treasury created the IRS Management Board in 1995, later
permanently established by an Executive Order, to provide on-going
oversight of the IRS modernization program. As the modernization
program began to stabilize, and in keeping with a broader mission set
forth in the Executive Order, the board evolved into a more general
management forum, reviewing both major operations and modernization
programs, including filing season readiness. The board is chaired by
the Deputy Secretary and includes representatives from Treasury, IRS,
OMB and the National Partnership for Reinventing Government.
Commissioner Rossotti's leadership at the IRS over the past 2\1/2\
years has contributed enormous stability and support to this process.
His leadership, partnered with the board's guidance and support, has
positioned the IRS to move ahead on plans to modernize all aspects of
the agency.
Question. If so, what steps will you take to coordinate efforts?
Answer. As the IRS Oversight Board becomes operational and develops
an active agenda, I anticipate a changing role for the IRS Management
Board. The IRS Oversight Board will likely focus on many of the issues
currently addressed by the IRS Management Board. I do see a continuing
role in the near term for a group like the IRS Management Board, within
the context of the Department's general oversight responsibilities. he
IRS has benefited greatly from regular interactions with senior
administration officials at IRS Management Board meetings. We will
likely continue those meetings in a smaller, less formal forum. In any
case, we will work closely with the Oversight Board to avoid
duplication and overlap wherever possible. Our goal is to ensure that
we have done everything possible from the Department's perspective to
enable the IRS Oversight Board to carry out its responsibilities.
______
Questions Submitted by Senator Byron L. Dorgan
dakota certified development corporation
Question. Last November, the Dakota Certified Development
Corporation--a small business lender in North Dakota--met with several
members of your staff here in Washington about a proposal that would
enable local and regional banks to meet Community Reinvestment Act
(CRA) requirement by investing in a fund to provide affordable housing
in rural communities with less than 15,000 people.
I understand that the DCDC has responded to requests for
information from the Office of the Comptroller of the Currency
(Community and Consumer Policy Division) and submitted all available
housing and income statistics.
Would you please look into this matter and find out when the Dakota
Certified Development Corporation can expect a decision from the
Department of the Treasury?
Answer. On November 4, 1999, the Office of the Comptroller of the
Currency (OCC) and the other federal bank regulatory agencies, which
interpret CRA on a joint basis, met with representatives of the Dakota
Certified Development Corporation (DCDC) to discuss the DCDC's inquiry
as to whether financial institutions that invest in the Dakota
Community Development Fund, LLC will receive positive CRA consideration
when their regulators evaluate the institution's Community Reinvestment
Act (CRA) performance. A number of interagency meetings and conference
calls were held subsequent to that meeting to discuss the issues raised
by the DCDC's inquiry. Those discussions culminated in a letter from
the OCC that was sent to the President of the DCDC on April 26, 2000.
The OCC apologizes for the delay in responding to the DCDC's request.
See attached letter.
Comptroller of the Currency,
Administrator of National Banks,
Washington, DC, April 26, 2000.
John A. Kramer,
President, Dakota Certified Development Corporation,
Fargo, North Dakota.
Dear Mr. Kramer: This is in response to your inquiry about whether
financial institutions that invest in the Dakota Community Development
Fund, LLC (DCDF) will receive positive consideration when their
regulators evaluate the institution's Community Reinvestment Act (CRA)
performance. The purpose of this letter is to provide consistent
guidance to our examiners, financial institutions, and the public; not
to endorse any specific project or product.
In order to provide broadly applicable guidance as described above,
this letter will focus on how an examiner will determine whether an
investment in the DCDF or similar program would receive favorable
consideration under the CRA regulation.
Background
The State of North Dakota has recognized the lack of rural housing
across the state as a crucial issue. The main obstacle to construction
of single family housing in rural areas of North Dakota, based on the
information you provided, is the difference between the appraised value
of housing and its actual construction cost. As a result of this
``gap'', financing of single-family housing is often unavailable to all
but the most affluent families. Lack of financing has often stopped the
construction and purchase of new housing in rural areas.
Your research into why multifamily housing is not being built in
North Dakota has identified three concerns of developers, which have
prevented them from developing and constructing multifamily housing in
communities of 8,000 or less:
--The amount of equity required for these projects, which in
metropolitan areas normally varies from 10 to 20 percent, is
somewhere in the 40 to 60 percent range in rural North Dakota.
--The appraised value of these projects does not equal the
construction cost.
--The market rents in communities of 8,000 do not provide the cash
flow to service the cost of the new facility.
The information you provided states that in response to the rural
housing shortage in economically viable communities in North Dakota,
the DCDF will be formed and will be capitalized by investments from
local and regional financial institutions. The mission or purpose of
the DCDF is: To promote development within the state of North Dakota;
to provide programs that are designed to facilitate the flow of lending
and investment capital into distressed communities, and to individuals
who have been unable to take fall advantage of the financial services
industry; to provide access to credit and investment capital as an
essential ingredient for creating and retaining jobs, developing
affordable housing, revitalizing neighborhoods and unleashing the
economic potential of small business.
The DCDF will be used as an economic development tool that will
focus initially on multifamily housing and then move into single family
development. The focus will be on affordable housing, but not
specifically housing for low- to moderate-income families, as there are
several programs offered in the state to fill this need. There may be
some blending of incomes in these developments, but no specific income
requirements will be set.
The program will be operated on the same concept as the SBA 504-
loan program. The lead lender will participate in 50 percent of the
project and receive the first mortgage. These first mortgage loans will
be done at market rates. The DCDF will in turn provide 40 percent of
the financing in a second mortgage position at treasury rates and the
development/owner will be required to provide 10 percent of the project
capital.
The DCDF will primarily be used in communities that have developed
redevelopment zones (renaissance zones). An application may be
submitted to the State of North Dakota to designate a portion of a city
as a renaissance zone if:
--The geographic area proposed for the renaissance zone is located
wholly within the boundaries of the city submitting the
application;
--The application includes a development plan;
--The proposed renaissance zone is not more than twenty square
blocks;
--The proposed renaissance zone has a contiguous boundary and all
blocks are contiguous;
--The proposed land usage includes both commercial and residential
property; and
--The application includes the proposed duration of renaissance zone
status, not to exceed 15 years.
Cities with designated renaissance zones are able to give property
and state tax exemptions for projects located in those zones.
Discussion
The CRA regulations establish the framework and criteria by which
the regulatory agencies assess an institution's record of helping to
meet the credit needs of its community. The regulations identify a
number of different evaluation methods for examiners to use, depending
on the business strategy and size of the institution under examination.
Regardless of the evaluation method used to evaluate a regulated
financial institution, an institution may receive positive
consideration for making ``qualified investments'' that help meet the
credit needs of the institution's assessment area(s) or a broader
statewide or regional area(s).
The regulations define a ``qualified investment'' as a ``lawful
investment, deposit, membership share or grant that has as its primary
purpose community development.'' ``Community development'' means
affordable housing (including multifamily rental housing) for low- or
moderate-income individuals; community services targeted to low- or
moderate-income individuals; activities that promote economic
development by financing businesses or farms that meet the size
eligibility standards of the Small Business Administration's
Development Company or Small Business Investment Company programs; or
activities that revitalize or stabilize low- or moderate-income
geographies.'' ``Low-income'' means ``an individual income that is less
than 50 percent of the area median income, or a median family income
that is less than 50 percent, in the case of a geography.'' ``Moderate-
income'' means ``an individual income that is at least 50 percent and
less than 80 percent of the area median income or median family income
that is at least 50 and less than 80 percent, in the case of a
geography.''
In determining whether investments in the DCDF are qualified
investments, examiners will look to see whether the DCDF or the
activity of the DCDF in which the bank's funds have been invested has
as its primary purpose community development. In making this
determination examiners will use one of two approaches. First, if a
majority of the dollars or beneficiaries of the activity are
identifiable to one or more of the enumerated community development
purposes, then the activity will be considered to possess the requisite
primary purpose. Alternatively, where the measurable portion of any
benefit bestowed or dollars applied to the community development
purpose is less than a majority of the entire activity's benefits or
dollar value, then the activity may still be considered to possess the
requisite primary purpose if (1) the express, bona fide intent of the
activity, as stated, for example in a prospectus, loan proposal, or
community action plan, is primarily one or more of the enumerated
community development purposes; (2) the activity is specifically
structured (given any relevant market or legal constraints or
performance context factors) to achieve the expressed community
development purpose; and (3) the activity accomplishes, or is
reasonably certain to accomplish, the community development purpose
involved. The fact that an activity provides indirect or short-term
benefits to low- or moderate-income persons does not make the activity
community development, nor does the mere presence of such indirect or
short-term benefits constitute a primary purpose of community
development. Financial institutions that want examiners to consider
certain activities under either approach should be prepared to
demonstrate the activities' qualifications.
Examiners will also look to see whether the activities of the DCDF
are part of a governmental plan to revitalize or stabilize a low- or
moderate-income area, or for other evidence of governmental support in
projects to revitalize or stabilize low- or moderate-income
geographies. Activities that directly revitalize or stabilize low- or
moderate-income geographies would receive favorable CRA consideration.
Investments in middle- or upper-income housing programs in distressed
areas may also be considered as qualified investments if these
investments are part of a governmental plan, or there is other evidence
of governmental support for revitalization or stabilization efforts,
and the activity would not significantly disadvantage or primarily have
the effect of displacing low- or moderate-income individuals and
communities.
Community development activities outside low- or moderate-income
areas that stabilize or revitalize particular low- or moderate-income
areas may also receive favorable CRA consideration if, for example,
these activities are part of a plan to revitalize or stabilize the low-
or moderate-income area.
The CRA regulation also allows examiners to account for conditions
in high cost areas. For example, examiners could take into
consideration the fact that activities address a credit shortage among
middle-income people or areas caused by the disproportionately high
cost of building, maintaining or acquiring a house when determining
whether an institution's loan to or investment in an organization that
funds affordable housing for middle-income people or areas, as well as
low- or moderate-income or areas, has as its primary purpose community
development. The flexibility of the regulation in this regard may be
particularly relevant in those areas of rural North Dakota where the
current cost of construction exceeds the appraised value of the home.
However, it is expected that once comparably priced housing is
constructed, the ``gap'' between the appraised value and the cost of
new construction will no longer exist. DCDF ``gap'' financing will then
no longer be necessary because conventional financing will be available
from financial institutions.
I trust this letter is responsive to your request. If you have
additional questions, please feel free to contact Malloy T. Harris, Jr.
on my staff at (202) 874-4851.
Sincerely,
Ralph E. Sharpe,
Deputy Comptroller, Community and Consumer Policy.
air security initiative/national special security events (nsses)
Question. Who determines when an event becomes a National Special
Security Event? Do you or does the President upon your recommendation?
Answer. The National Special Security Event (NSSE) designation
process is initiated by the interagency Counter-Terrorism and Security
Group (CSG). The CSG notifies the Secretary of the Treasury and the
Attorney General of events it believes should be designated a NSSE.
When the Secretary of the Treasury and the Attorney General agree, an
event is given the NSSE designation.
Question. Is it necessary to create a new air branch to meet the
needs of the air security initiative? Wouldn't it be more cost
effective to fly in personnel and helicopters ``as needed'' rather than
establish a new branch?
Answer. The Customs PDD 62 airspace security training and
operational requirements are too much for one branch to manage without
sacrificing our core mission (drug interdiction). For example, the
recent World Trade Organization in Seattle required Customs aviation
resources and personnel from four air branches.
Therefore, in order to carry out the direction set forth in PDD 62
with minimal disruption to interdiction missions and operations, the
President's budget proposes to establish an Aviation Branch in the
Washington, D.C., metro area.
This area has been identified as a practical location because three
of the four PDD 62 events have occurred in Washington, D.C. Over the
long term, it is anticipated that this trend is likely to continue for
future events.
In addition, the Secret Service training facility is located in
Beltsville, Maryland. Its proximity to the proposed Customs Air Branch
would facilitate the joint (Secret Service and Customs) PDD 62 training
requirements.
The most cost-effective solution is to establish a Customs air
support branch in the Washington, D.C., area.
The PDD 62 Customs current cost considerations include the
following: airspace security training, expense of moving aviation
resources and personnel to event sites, and the loss of available
aviation resources to the Customs core mission (interdiction along the
borders of the United States).
Question. Does Presidential Decision Directive 62 require that the
air branch be located within a specific radius of Washington D.C.? If
PDD 62 does not specify the branch's location, who will make the
decision where to locate the new air branch?
Answer. PDD 62 does not specify the location of the air branch.
There has been no decision on the location of this facility. A
decision on a basing location will be made after Customs completes site
surveys of potential airfields. A location near the Washington, D.C.,
area makes sense for a number of reasons:
--It would lessen the amount of flight time by Customs aircraft and
reduce travel costs for support personnel.
--Three of the four PDD 62 events supported by Customs air assets
occurred in the Washington, D.C., area. This trend is
forecasted to be similar for future events.
--By locating the Customs air support personnel and assets near the
D.C. area, it would be closer to the Secret Service's training
facility in Beltsville, Maryland. The close proximity of these
two facilities and personnel would enhance joint training,
procedural development and mission familiarity between
operators.
tax shelter regulations
Question. I have read with some interest recent reports concerning
your effort to close down some of the tax shelters which are used by
corporations to avoid paying billions of dollars a year in taxes. You
were quoted in the Washington Post as saying that is the ``most serious
compliance issue facing the American tax system today.'' Also, you
indicated in our earlier meeting your concerns about these shelters
further undermining the voluntary compliance with the tax system by
customers. I realize that many of the regulations you propose are still
being formulated, however, other pieces of the package are well on
their way to being enacted.
Can you generally describe the issue you are attempting to confront
and discuss what impact these shelters have on the revenues collected
by the Treasury?
Answer. The issue we are trying to confront with respect to
corporate tax shelters is one in which aggressive corporations have
entered into transactions that lack economic substance other than tax
avoidance. These abusive transactions often are marketed to multiple
corporate taxpayers as ``off-the-shelf'' products and can be contrasted
with normal tax planning by which taxpayers properly structure
legitimate business transactions to minimize their tax liability.
It is difficult to ascertain exactly how much revenue
is lost to these transactions. Indeed, part of the strategy of
implementing these transactions is to structure them to minimize the
likelihood of their discovery by the IRS. [Some have suggested that
these transactions may result in revenue losses of $10 billion
annually.] Moreover, we have concerns beyond the effect on Federal
revenues. Corporate tax shelters breed disrespect for the tax system--
both by the people who participate in the tax shelter market and by
others who perceive unfairness. A view that well-advised corporations
can and do avoid their legal tax liabilities by engaging in these tax-
engineered transactions may cause a ``race to the bottom.'' If
unabated, this will have long-term consequences far more important than
the revenue losses we are experiencing. Finally, significant
resources--both in the private sector and the Government--are currently
being wasted on this uneconomic activity. Private sector resources used
to create, implement and defend complex sheltering transactions are
better used in productive activities. Similarly, the Congress
(particularly the tax-writing committees and their staffs), the
Treasury, and the IRS must expend significant resources to address and
combat these transactions.
Question. What, if any, resources in your budget request are
directly focused on addressing these concerns about corporate tax
shelters?
Answer. No additional funds have been requested in the fiscal year
2001 budget specifically for the tax shelter program. However, the IRS
will make efforts to internally redirect resources to this area. In
addition to applying existing staffing resources, we will work
internally to increase our travel and enforcement expenses budget in
the shelter area. The increased enforcement expense efforts would
include hiring outside experts in such areas as asset valuation and
actuarial projections.
treasury agency financial audits
Question. It is my understanding that in the recent financial
audits of Treasury by the Inspector General your department received an
``qualified'' opinion.
Can you describe for us the basis for this assessment and what
actions you are taking in order to clear any discrepancies?
Answer. The Department received a qualified opinion on its fiscal
year 1999 financial statements due to the inability of the Internal
Revenue Service's administrative systems to produce timely, auditable
data to support the information reported in the financial statements.
Please be assured that corrective actions are underway to address these
problems so that we can report more favorable results in future years.
The Department is actively involved with the IRS on both short-term
efforts to improve financial reporting on its administrative accounts
for fiscal year 2000 and longer-term efforts to reconfigure and/or
replace outdated core financial and management systems over the next 2-
3 years. Based on the General Accounting Office (GAO) acknowledged
progress in 7 areas of IRS financial reporting for fiscal year 1999,
our intent is to ensure that these results are sustained and improved.
We have already turned our attention to the preparation of the fiscal
year 2000 financial statements.
Extensive meetings with the GAO audit team during the fiscal year
1999 process have brought into focus the key administrative areas with
financial reporting deficiencies. The Department continues to work with
the IRS team in the CFO's office to address these deficiencies, albeit
through improving labor intensive processes until permanent systems
solutions can be installed. Examples of such processes which were
successfully used for fiscal year 1999 and will be sustained going
forward include: reconciling fund balances with Treasury; shoring up
and promptly clearing suspense account entries; and, establishing an
acceptable property valuation figure. Until the systems solutions have
been installed, we believe perfecting the aforementioned processes can
overcome the financial reporting deficiencies in the administrative
accounts for the short-term. IRS has successfully done this on the tax
revenue side for the past 3 years, including another clean opinion on
the $1.9 trillion that IRS collected for fiscal year 1999.
Question. Are these discrepancies likely to arise in future audits?
Answer. The Department's major impediment to receiving an
unqualified opinion is the well-publicized situation at the IRS. IRS'
financial systems problems will take a long-term effort to correct;
accordingly, we do not think it is reasonable at this time to project
receiving an unqualified opinion before fiscal year 2002.
Departmental management fully recognizes the leadership role
Treasury must play in sound financial reporting and will continue to
support the IRS efforts to sustain the progress made during fiscal year
1999, strengthen the CFO structure and management team within the IRS,
and build the financial systems needed to improve both financial
reporting and, more importantly, management of IRS resources. To that
end, the Department is actively engaged with the IRS on the longer-term
systems solution that will have the precision and automated
capabilities to sustain the financial reporting gains of fiscal year
1999 and the next few years.
bureau of engraving and printing/added authority
Question. The Administration has proposed legislation to enable the
Bureau of Engraving and Printing (BEP) to produce currency, postage,
and other types of security documents on behalf of foreign governments
and States on a reimbursable basis. This legislation has yet to pass
the Congress.
What are the compelling arguments for Congress to enact this
legislation?
Answer. The Bureau of Engraving and Printing (BEP) has submitted a
proposed bill to the Congress that would authorize the production of
security products on behalf of foreign governments and the States on a
reimbursable basis. This legislation was recently introduced in the
House of Representatives as H.R. 4096, the ``Bureau of Engraving and
Printing Security Printing Amendments Act of 2000.'' This measure is
currently pending before the Committee on Banking and Financial
Services.
The BEP initiated this legislation because entities other than
Federal agencies often request our expertise in designing and producing
postage stamps, currency, and other kinds of security documents. For
instance, in February the government of Kuwait solicited our help in
printing ``revenue certificates.'' Unfortunately we were not able to
assist Kuwait due to current statutory limitations.
Enactment of the proposed legislation would serve four primary
purposes.
1. Allow the United States to assist foreign nations with the
design and production of security products and the development of
stable monetary systems to facilitate international commerce.
2. Expand and hone the skills of the BEP workforce through a
greater variety of specialty printing and engraving projects.
3. Allow the BEP to test--without cost to U.S. taxpayers--new
technologies and techniques and apply such experience in the
development and production of the next generation of U.S. currency.
4. Enable the BEP to create efficiencies by establishing more
consistent production schedules, which would marginally reduce the cost
of products provided to other federal agencies.
Question. How much extra business and revenue can the Bureau of
Engraving and Printing expect to earn if it were to take on these
additional duties?
Answer. The Bureau of Engraving and Printing does not expect to
achieve a significant increase in revenue, at least in the short term,
from the new printing authority that would result if this legislation
becomes law. The opportunity to leverage this expanded authority for
the benefit of its current customers has the greatest potential for
long-term value. Any expansion of BEP's product base will decrease
costs to all its customers through more effective use of available
equipment capacity and by spreading fixed cost over greater units of
output. Beyond the cost considerations, this expanded printing
authority would open the door to new technologies and skills that could
eventually be utilized in the manufacture of U.S. currency and stamps.
The knowledge and skill enrichment potential is expected to be of
greater long-term value than any additional revenue that may be
realized.
Subcommittee recess
Senator Campbell. Mr. Secretary, thank you very much for
appearing today.
Mr. Summers. Thank you very much.
Senator Campbell. The subcommittee is recessed.
[Whereupon, at 3:30 p.m., Tuesday, April 4, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2001
----------
THURSDAY, APRIL 6, 2000
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:33 a.m., in room SD-124, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell and Dorgan.
EXECUTIVE OFFICE OF THE PRESIDENT
Office of National Drug Control Policy
STATEMENT OF BARRY R. McCAFFREY, DIRECTOR
Senator Campbell. Good morning. The committee will be in
order. I would like to begin this morning by welcoming Barry
McCaffrey, the Director of the Office of National Drug Control
Policy, before the committee. Senator Dorgan, the ranking
member, notified us that he is in another hearing right nowbut
he will be along shortly.
We are here today to go over the fiscal year 2001 budget
request for the ONDCP. Although the ONDCP is responsible for
coordinating the anti-drug effort for the entire Federal
Government, we are here today to discuss their own fiscal year
2001 initiatives. Specifically, I have an interest in receiving
an update on the current trends in drug use and availability
and how the ONDCP's 2001 budget request addresses those issues.
I know that members of the committee are also interested in
discussing the media campaign which to date has received $565
million, over half a billion dollars, a large amount. What I
would like to ensure is that we are seeing over a half a
billion dollars in return for that investment.
Last year, the General told this committee--3 years ago,
not last year--that within 2 years, we would begin to see
behavioral changes in our youth attitudes toward drugs because
of this media campaign. Yet the 2000 drug strategy shows no
real change, as I can see, in the youth drug problem in the
country. I am very concerned by this, but we will get into this
as we move along in my question time.
My underlying concern with all these efforts is we
continually send money towards the problem without expecting a
strict short-term accountability. When we fund initiatives like
the media campaign, it is not as if we have plenty of resources
available to fund everything that is requested. We have to see
a clear return on that investment. The budget initiative is so
tight that we have to make conscious choices that make it even
more difficult and require even greater trade-offs. The
decision not to fund a program or to reduce its funding to
accommodate something like the media campaign are choices that
we have to make.
I would tell you that for this bill alone, the
administration request of 20 percent increase for fiscal year
2001 is considerable, yet that figure is somewhat realistic in
light of the budget resolution. The problem with this level is
that all of the agencies and their constituencies develop very
high expectations that we may not be able to fund. That is not
to say the requests are not warranted or are not needed, but we
have to operate within whatever budget level we are given and
we have not finished that budget resolution on the floor, as
the Director knows.
With that, go ahead, General McCaffrey, with your testimony
and I will ask some questions later. I am sure Senator Dorgan
will be here by then, too.
I might tell you that they have notified us that there are
votes starting at 10:30, so your complete testimony will be
included in the record. If you would like to abbreviate, that
is fine.
statement of barry r. mc caffrey
Mr. McCaffrey. Mr. Chairman, thank you for calling the
hearing. I know the time is limited and I will, with your
permission, try and get a lot of information on the table
quickly and then respond to your, Senator Dorgan's and others'
questions as they may appear.
We did put a lot of effort into the written statement,
along with the charts. I would ask them to be placed in the
record.
Senator Campbell. Without objection, they will be. We have
a copy of them here.
Mr. McCaffrey. I would also like to note with enormous
pride and gratitude the presence in the room of the people who
have shaped the National Drug Control Strategy, and indeed who
do the work.
Art Dean is here from the Community Anti-Drug Coalitions of
America, Dr. Linda Wolf Jones from Therapeutic Communities of
America, Kathleen Sheehan from the National Association of
State Alcohol and Drug Abuse Directors. A very important person
to our effort, from the Ad Council, Donna Feiner is here, Harry
Frasier from Fleishman Hillard, and David McConnaughey from
Ogilvy Mather, and as you know, those are the two principal
contractors who do all the work on our media campaign.
DARE is represented by Jim McGivny. Sarah Casen is here
from the National Council on Alcoholism and Drug Abuse,
Katherine Wingfield from the National Drug Prevention League.
Our right arm in this effort, the Partnership for a Drug-Free
America, Shawn Clarken and Gloria Steedman are both here, as
well as Judge Jeff Tauber from the National Association of Drug
Court Professionals, and Tom McDaniels, the Legal Action
Center.
I mention them because at the end of the day, it is
astonishing, the number of people who are actually involved in
this issue. When you start looking at two million people behind
bars and five million chronic addicts in America, and you look
at the support communities who actually do something with this
issue, these people behind us represent literally hundreds of
thousands of professionals.
I am going to run through some charts, Mr. Chairman. They
are available for you, but let me just note there are some key
documents that you and your staff have available to you. These
are the bulk of what you asked me to do. That is the 2000
Annual Report. This is the first year we have done one. It
absorbed enormous amounts of effort. Each year, I am supposed
to come down to you and other appropriation chairmen and
explain what we achieved in the preceding year, and I might
add, the Strategy which we began writing in 1996 essentially
now remains operative for 5 years unless changed by new
environmental circumstances.
You have also required me by law to do a 5-year budget
summary each year and to roll it forward. This is an enormously
important document. It is not yet good enough, but I would
suggest that in the years to come, this ought to be the center
of debate, not the coming budget execution year, but the out
years so that we can get a longer-term perspective on what we
are trying to achieve.
You have also required me by law to establish a system of
Performance Measures of Effectiveness. There are 12 target
outcomes. There are 86 intervening variables. This is moving in
the right direction, and I think, over time, will allow the
Congress to demand to see concrete data which tells you whether
or not our programs are working.
Finally, we do have a Counter-Drug Research and Development
Blueprint we put out each year now where we try and ensure that
we understand where we are spending our CTAC money and to what
impact. We also have a pretty good evaluation plan on that CTAC
program.
Another document you need to be aware of is the General
Counter-Drug Intelligence Plan, which again, by law, required
me to go determine, how do we pull together law enforcement and
foreign intelligence to better support this drug mission.
These charts that I am going to run through, I will just
use them sort of as brief talking summaries and not talk to
each point. I do need to start, of course, in each case with
the National Drug Control Strategy goals and to say that
everything we do, including the $496 million that you are
considering, which I might add, Mr. Chairman, is an eight
percent increase over last year, has to relate to those five
goals and 31 objectives, and then, presumably, must be measured
by one of the 86 variables of the Performance Measures of
Effectiveness.
Next chart. This is a matrix summary of what ONDCP's Fiscal
Year 2001 Budget Request are asking you to consider, the fiscal
year 2000 enacted level was $461 million, and now we are asking
for $496 million in fiscal year 2001. The Special Forfeiture
Fund, it is too bad we use that as a collective title for some
enormously important programs: the Drug-Free Communities Act,
which I am going to talk about in detail, the National Youth
Anti-Drug Media Campaign, General Counter-Drug Intelligence
Plan, $25 million criminal justice treatment demonstration, and
the National Drug Court Institute.
If I may make two points that I would welcome your own
questions on, one is salaries and expenses. Our whole budget
that we are looking at here is 2.6 percent of the national drug
effort, which is in nine different appropriations bills, which
over time has had this enormous, 52 percent increase in
prevention education funding, which has had a 32 percent
increase in drug treatment funding, and a one-third increase in
the research budget. We are at 2.6 percent of that effort. Our
salaries and expenses are a fraction of one percent, 0.01
percent of the whole effort.
I would ask you for full funding for salaries. We are now
almost manned up to full level and we have some really severe
demands on us and I would like to make sure that the next
administration gets a full-up operation.
I would also draw your attention to two other items. When
it comes to the media campaign, and I will talk to this at
greater length, I would respectfully request full funding at
$195 million of this program. We have had some significant and
dynamic changes. It is starting to pay off. I will talk to
those numbers. But the $10 million to get it up to $195 million
are crucial for the media buy. We had a 40 percent increase, as
an example, in the cost of Network TV advertising. I will talk
to the issue, but that $10 million is important.
Finally, the Drug-Free Communities Act, which is now really
hitting its stride--we have a splendid new person running it--
will be up to about 400 community coalitions by the end of this
coming year. There is a cap in there on administrative expenses
of three percent and I would ask you to consider raising that
cap to seven percent, without which I fear we are not going to
do our job in intelligently having that program move forward.
national youth anti-drug media campaign
The next chart. There are some subordinate charts, which
again I will just show you and then move on. The media campaign
is in many ways a crown jewel of what we are trying to achieve.
It is now one of the most sophisticated and intelligently
structured public health campaigns in American history. It is
out there. We are in year three. It is starting to definitely
affect youth attitudes. We are seeing adolescent drug use rates
in America go down after years of steady increase. There was a
13 percent reduction in last year alone in 12- to 17-year-old
drug exposure. We are seeing youth attitudes starting to
change.
We are getting increasingly good at our minority-ethnic
outreach efforts. We understand we have to talk to America
wherever they are. There are 102 different market strategies
around the country. We are in 11 languages other than English.
We are on six web pages, four of which are in languages other
than English--Spanish, Chinese, et cetera. We are now starting
to begin to get to the Native American population, the American
Eskimo population. I think this is really starting to bite in.
We are very proud of what we are doing.
We are also seeing, thankfully, some very civic response by
the media. The numbers are there to underscore the 108 percent
matching effort against the appropriated dollars and also a
significant $72 million chunk of in-kind response from American
media and business.
The next chart. This summarizes where we have gone on what
essentially is a two-for-one return on Federal investment
dollars, and that goes from January 1998 to June 2000
estimated. The chart speaks for itself, but the bottom line is,
we delivered more than $700 million of messages that were
science-based, that were vetted through a behavioral change
expert panel, and showed them to a target audience in the right
programming at the right time and in multiple languages.
Those are just some of the examples. The PDFA has got 10
years' worth of pretty good data. This is an example of what we
are talking about. We are starting to see--and by the way, all
these studies cluster together. They tend to be supportive of
the same observations. Young people are now saying things like,
kids who are really cool do not use drugs, and in my school,
marijuana users are not popular. We are seeing youth attitudes
shift. We think the program is clearly doing what it was
intended to achieve.
Next chart. I want to show you three videos. I also showed
the House Appropriations Committee some videos out of the Ad
Council. They have done some splendid work on trying to do a
media outreach campaign to create more community coalitions,
and at some point, your staffers may want to see that work. We
also have the Ogilvy Mather branding campaign, which I would
love to talk about when you have time. It is an incredibly good
concept to get more bang for our dollars.
Let me just show you an example of three of the new ads
that are going out in what we are calling a flighting concept,
so this is wrap-around advertising of a strategic platform
message. Go ahead and show the three videos.
Pretty powerful stuff, and again, what we are doing is we
have a message platform aimed at either young people or adults.
There are four message platforms for each group. And all this
material, again, is science-based and then vetted through the
behavioral change expert panel.
high intensity drug trafficking areas
The next topic I would just mention is the HIDTA program,
High-Intensity Drug Trafficking Areas, and we do have both
Johnny Hughes and Tom Carr here from the Washington-Baltimore
HIDTA. The program has gained incredibly in popularity. This
one has surprised me. Cops and prosecutors across the country
were forming task forces anyway. They understood they had to
bring this kind of material together. But this is somewhat of a
modest investment in law enforcement that has had, in my view,
order of magnitude payoffs.
I hear from law enforcement professionals around the
country that this is the best thing they have seen in 25 years
of law enforcement. It pays for the ability to integrate
intelligence, blue-on-blue deconfliction, to bring together
disparate communications systems. There is a huge payoff, and
for that reason, you notice at the bottom we have eight
requests to expand existing HIDTAs and six applications pending
for new HIDTAs.
I have a problem. I do need some flexibility to be allowed
to take the money you give me, analyze the results, and fund
programs in some sort of a management decision. An awful lot of
these funding amounts now are being specified in the
appropriations bill.
national criminal justice treatment demonstration
The next chart. The National Criminal Justice Treatment
Demonstration Project, $25 million. There is a complementary
program in the Department of Justice for $75 million. We had a
National Conference on Prisons and Drugs. We brought in 800
people from around the country, the Attorney General, Secretary
Donna Shalala, and I. We said, one of the major problems in
America is we have 2 million people behind bars. Eighty-five
percent of them probably have a chronic drug or alcohol
problem. So until we organize this community with the front end
of the system, the drugs courts--there are now more than 700
online or coming online--until we get prison-based drug
treatment and a reasonably drug-free prison environment, and
then, most crucially, until we have a follow-on program of
community supervision, drug testing, and drug treatment, we
will never break our way out of this.
So this money, this $25 million is for 15 community
demonstration projects to try and bring together the health
care professionals and the criminal justice community, and then
the Department of Justice would have $75 million, which will be
primarily focused on the criminal justice system.
drug-free communities
The next chart. The Drug-Free Communities Program is now
really starting to bite in. As you know, we are now out in 213
coalitions. We will be up to 408 communities by the end of the
year. We are in almost every State in the union. Senator
Dorgan, we are going to work with your State as we had only one
application. We will get out there and try to educate them on
how to package their thinking to take advantage of this
tremendous program.
It is paying off and please note that 15 are, for example,
in Native American communities. We have tried to make sure that
the money did not just go to big, established community
coalitions. I think it is going to have a huge impact over
time. I might add, more than a third of them went to rural
communities and small towns.
counter drug technology assessment center
The next chart. The Counter-Drug Technology Assessment
Center, we did not get all we wanted out of OMB, but the total
request stands at $20.4 million. The piece of it that deals
with the technology transfer has been enormously popular across
America with more than 1,000 items of equipment delivered in 2
years. Most police departments that ask get their top request;
we have greater than 96 percent satisfaction rate. This is
enormously popular. More money clearly could be used wisely in
this program, but the request stands at $3.7 million for that
technology transfer.
general counter drug intelligence plan
The next chart. The General Counter-Drug Intelligence Plan,
which I talked to, we have stood up already about a 30-person
secretariat. You have to bring together several communities,
many of which are internally well organized, CNC at the CIA for
example, but you have to end up not violating a thicket of
laws, all of which make sense, to protect American citizens
from U.S. foreign intelligence operations and to ensure that
the foreign intelligence operations are not blown in U.S.
courts. We are going to establish priorities. We are going to
improve the situation enormously for America's sheriffs, police
chiefs, Border Patrol sector commanders, and Customs SACs, to
make sure that the intelligence we have which is extremely
good, gets to the law enforcement professionals who need it to
carry out their operations, and I would ask you, sir, to
consider $3 million to help us get that thing up and running
this year. Thank you.
doping in sport
The next chart. Doping in sport, as a former Olympian
yourself, you know the importance of trying to protect not just
the Olympian athletes who are going to Sydney and Salt Lake
City but literally the millions of young people in America
today who have access to steroids and other performance-
enhancing drugs through the Internet. It is not just 16-year-
old athletes. We are talking to their trainers, their coaches,
and their team physicians.
The U.S. Olympic Committee has really done a superb job.
They are standing up their own independent drug testing agency,
and, of course, immediately it will impact on U.S. Olympic
athletes, but to some extent NCAA athletes and to those
professional athletes who want to stay eligible to compete in
the Olympic movement.
That money--we actually requested $3 million, we have on
the table $700,000--will go a long way to ensuring that we
create a drug-free environment for American athletic
competitors around the country.
The next chart. Colombia I know we are going to primarily
focus on the $496 million that your subcommittee has
responsibility for, but I would underscore, Mr. Chairman, we do
have in Congress a request for $1.6 billion for the so-called
Andean Ridge drug aid package, of which a significant amount--
about 85 percent of it goes to Colombia, the remainder to
Bolivia and Peru, which as you know have had these astonishing
successes in reducing drug production.
Poor Colombia is in an emergency. They have 40 million
people who largely have nothing to do with the drug trade. They
have an operative democracy. They grow coffee and flowers and
have intellectual property development. They are wonderful
people. They have a million internal refugees. A half-million
have fled the country. They have lost control of 40 percent of
the land area of their nation. They are now the dominant
producer of the cocaine and heroin that come into the United
States. Ninety percent of the cocaine in America originated in
or transited through Colombia, and some 70 percent of the
heroin seizures in the United States last year, by some
brilliant work principally by DEA and Customs, came out of
Colombia.
We have put together a package that is based on Colombian
strategic thinking. We believe that in the coming 2 to 5 years,
we can make an enormous impact to support U.S. national
interests. Illegal drugs kill 52,000 Americans a year, and we
think we owe it to our police chiefs and sheriffs to stand with
the Colombian democratic partner with what we think is a pretty
coherent broad range request.
On that note, Mr. Chairman, again, I thank you for the
opportunity to appear before your subcommittee and I look
froward to responding to your own interests.
Senator Campbell. Thank you, General.
[The statement follows:]
Prepared Statement of Barry R. McCaffrey
introduction
All of us in the Office of National Drug Control Policy thank the
Committee for the opportunity to testify today about the Office of
National Drug Control Policy's (ONDCP) fiscal year 2001 budget.
Chairman Campbell, Ranking Member Dorgan, distinguished members of the
subcommittee, your interest in all aspects of drug control policy and
your commitment to bipartisan support of a comprehensive response to
the nation's drug abuse problem are much appreciated. We welcome this
opportunity to review the fiscal year 2001 budget request for ONDCP. To
provide a framework for understanding this budget, this testimony will
provide an overview of the National Drug Control Strategy and an
analysis of current drug trends as reported in ONDCP's 2000 Annual
Report.
Though comprising only a small percentage of the $19.2 billion
federal drug control budget, the critical importance of ONDCP's $496.8
million budget request cannot be over emphasized. These funds enable
ONDCP to carry out successfully its unique dual mission of providing
drug policy guidance to the Executive Branch and managing its own
programmatic responsibilities. ONDCP achieves its policy mission by
advising the President on national and international drug control
policies and ensuring the effective coordination of drug programs
within Federal departments and agencies. In addition, ONDCP
accomplishes its programmatic mission by implementing, managing, and
evaluating four key programs to reduce drug use and its consequences in
America: the National Youth Anti-Drug Media Campaign, the Drug-Free
Communities Program, the High Intensity Drug Trafficking Area Program
(HIDTA), and the Counterdrug Technology Assessment Center (CTAC). This
budget will provide ONDCP with the resources necessary to ensure the
successful implementation of the National Drug Control Strategy, which
will have broad reaching, positive impacts on this nation and its
citizens.
ONDCP is proud of the growing partnership between the Executive and
Legislative branches on drug control issues. Mr. Chairman, over the
past year, all of us at ONDCP have been tremendously pleased with the
steady support your subcommittee has given our efforts to reduce drug
abuse and its consequences in America. The hearing you held on ONDCP's
National Youth Anti-Drug Media Campaign was an important occasion to
highlight our programs and accomplishments.
overview of the national drug control strategy
The Office of National Drug Control Policy Reauthorization Act of
1998 (Public Law 105-277) required the President to submit to Congress
a comprehensive, long-term strategy for reducing drug abuse and the
consequences of drug abuse in the United States by limiting the
availability of and reducing the demand for illegal drugs. The
operative five year strategy was submitted in February 1999. The five
goals and thirty-one supporting objectives first established in the
1996 National Drug Control Strategy that serve as the basis for a
coherent, long-term national effort remain the heart of the Strategy
and will guide federal drug control agencies over the five-year period.
The Strategy takes a long-term, holistic view of the nation's drug
problem and recognizes the devastating effect drug abuse has on the
nation's public health and safety. The Strategy maintains that no
single solution can suffice to deal with this multifaceted challenge.
The Strategy focuses on prevention, treatment, research, law
enforcement, protection of our borders, drug supply reduction, and
international cooperation. Through a balanced array of demand-reduction
and supply-reduction actions, the nation's goal is to achieve a 50
percent decrease in drug use and availability and at least a 25 percent
decrease in the consequences of drug abuse by 2007. If this goal is
achieved, just 3 percent of the household population aged twelve and
over would use illegal drugs. This level would be the lowest documented
drug-use rate in American history.
The Strategy's five goals are:
--Educate and enable America's youth to reject illegal drugs as well
as alcohol and tobacco.
--Increase the safety of America's citizens by substantially reducing
drug-related crime and violence.
--Reduce health and social costs to the public of illegal drug use.
--Shield America's air, land, and sea frontiers from the drug threat.
--Break foreign and domestic drug sources of supply.
The five goals organize thirty-one objectives that are narrowly
focused and stipulate the specific ways in which the goals will be
attained. Under the prevention goal (Goal 1), for example, nine
supporting objectives articulate the specific ways that illegal drug
use and underage consumption of alcohol and tobacco products will be
reduced. Programmatic initiatives are tied directly to one or more of
these objectives. The National Youth Anti-Drug Media Campaign, for
example, supports Goal 1, Objective 2--pursue a vigorous advertising
and public communications program. It also supports Goal 1, Objective
7--create partnerships with the media, entertainment industry, and
professional sports organizations.
Progress towards the Strategy's goals and objectives is gauged
through the supporting Performance Measurement of Effectiveness (PME)
system. The PME system fulfills congressional guidelines that the
Strategy contain measurable objectives and specific targets to
accomplish long-term quantifiable goals. The nucleus of the PME system
consists of twelve ``impact targets'' that define measurable results to
be achieved by the Strategy's five goals. There are five impact targets
for demand reduction, five for supply reduction, and two for reducing
the adverse health and criminal consequences associated with drug use
and trafficking. Eighty-seven additional targets further delineate mid-
(2002) and long-term (2007) targets for the Strategy's thirty-one
objectives. A number of these are stretch targets in that they require
progress above that attained in previous years. This system is in
accordance with recommendations from the National Academy of Public
Administration, the General Accounting Office, and other organizations
advocating good government practices. The overall performance system is
described in detail within a companion volume to this Strategy--
Performance Measures of Effectiveness: 2000 Report.
highlights of ondcp's 2000 annual report
Public Law 105-277 also requires the President to submit to
Congress an Annual Report on the progress in implementing the Strategy.
General reporting requirements for the Annual Report include:
--Assessment of federal success in achieving the National Drug
Control Strategy goals and objectives (using the Strategy's
Performance Measures of Effectiveness system). This analysis
includes an assessment of drug use and availability in the
United States as well as prevention, treatment, law
enforcement, interdiction, and international programs.
--Modifications during the preceding year of the National Drug
Control Strategy or national drug control performance
measurement system.
--An explanation of how the Administration's budget proposal is
intended to implement the National Drug Control Strategy and
how proposed funding levels will help do so.
--Measurable data from the annual performance measures.
--An assessment of private-sector initiatives and cooperative efforts
dealing with drug control among federal, state, and local
governments.
ONDCP has prepared the following documents in compliance with these
requirements:
--The National Drug Control Strategy Annual Report
--Drug Control Budget: Fiscal Year 2001
--Performance Measures of Effectiveness: Implementation and Findings
--Counterdrug Research and Development Blueprint Update
National Drug Use Rates are Steady at Half Peak Rate of 1979.--
Overall drug use rates remained steady in the 1990s. An estimated 13.6
million Americans (6.2 percent) twelve years of age and older were
current users of any illegal drug in 1998. This number is slightly less
than the 13.9 million estimate for 1997. Drug use reached peak levels
in 1979 when 14.1 percent of the population age twelve and over were
current users. Since 1996 the number of current users remained steady,
with statistically insignificant changes occurring each year.
1991-1995 Trend of Increasing Drug Use by Adolescents Has Been
Halted.--In 1998, 9.9 percent of youth age twelve to seventeen reported
current use of an illegal drug--a 13 percent decrease from 11.4 percent
in 1997. This decline was the first statistically significant drop in
four years. Teen attitudes toward drugs are improving--the percentage
of teens who strongly agreed with the statement, ``kids who are really
cool don't use drugs,'' increased from 35 percent in 1998 to 40 percent
in 1999.
[GRAPHIC] [TIFF OMITTED] T13AP06.001
The Consequences of Drug Abuse are Devastating.--Using a
methodology that incorporates deaths from other drug-related causes,
ONDCP estimates that in 1995 there were 52,624 drug-related deaths.
This figure includes 14,218 drug-induced deaths for that year, plus
mortalities from drug-related causes. In 1998, there were an estimated
542,544 drug-related emergency department episodes and 982,856
emergency department drug mentions in the coterminous United States.
These figures have remained relatively stable from 1997. Illegal drugs
accounted for an estimated $110 billion in expenses and lost revenue.
The Tragic Cycle of Drugs and Crime must be Broken.--While national
crime rates have declined dramatically, more than 1.6 million Americans
were arrested for drug-law violations in 1998--a decrease of one
percent from 1997. More than two-thirds of adult male arrestees and
half of juvenile male arrestees tested positive for at least one drug
in fifteen of thirty-five sites in 1998. 22 percent of inmates in state
prisons are incarcerated for drug-law violations; 60 percent of inmates
in federal prison are incarcerated for drug-law violations.
Illegal Drugs Impair Workplace Productivity.--Almost 75 percent of
current drug users aged 18-49 are employed full or part-time--more than
8 million workers. As national unemployment rates decreased, rates of
drug use among the unemployed have risen. In 1998, 18.2 percent of
unemployed adults aged eighteen or older were current illicit drug
users, compared to 13.8 percent in 1997. Drug use is estimated to cost
$14 billion a year in decreased productivity. In 1997, those who
reported current illegal drug use were more likely than those who
reported no drug use to have worked for three or more employers in the
past year (9.3 percent versus 4.3 percent), to have skipped one or more
days of work in the past month (12.9 percent versus 5 percent), or to
have voluntarily left an employer in the past year (24.8 percent versus
15.4 percent).
the supporting fiscal year 2001 federal drug control budget
In total, drug control funding recommended for fiscal year 2001 is
$19.2 billion, an increase of $760 million (+4.1 percent) over the
fiscal year 2000 level of $18.5 billion, which includes proposed
supplemental funding of $954 million to support Plan Colombia and drug
control activities in the Andean region. Also, the President's fiscal
year 2001 proposal includes an additional $318 million to support Plan
Colombia. Spending that supports drug education, prevention, and
treatment programs increases by $330.8 million (+5.6 percent) in fiscal
year 2001 over the fiscal year 2000 level. This budget represents an
increase in treatment dollars of 32 percent from fiscal year 1996 and
an increase in prevention dollars of 52 percent from fiscal year 1996.
Spending that supports drug law enforcement efforts increases by $773.7
million (+8.6 percent) in fiscal year 2001 over the fiscal year 2000
level. A summary of drug-control spending for fiscal year 1998 through
fiscal year 2001 is presented below.
[GRAPHIC] [TIFF OMITTED] T13AP06.002
Increases in fiscal year 2001.--The following major increases in
drug-control funding are included in the President's fiscal year 2001
budget request:
Youth Prevention
National Youth Anti-Drug Media Campaign: +$10 million.--These
additional resources bring ONDCP's Media Campaign to $195 million in
federal funds in fiscal year 2001, matched by private sector
contributions. ONDCP, in conjunction with other federal, state, local,
and private experts, is implementing a $2 billion public-private
partnership, multi-year national media campaign, including paid
advertisements. The campaign targets youth, their parents and other
influential adults on the consequences of illicit drug use. The anti-
drug media campaign is fully integrated nationwide, including
utilization of television, the Internet, radio, newspapers, and other
media outlets.
Safe and Drug-Free Schools Program: +$50 million.--These additional
resources include $40 million to expand the interagency Safe Schools/
Health Students initiative, which supports community-wide prevention
activities in conjunction with HHS and the Department of Justice. Also,
the budget includes $50 million to continue the School Coordinator
Initiative, started in fiscal year 1999. In fiscal year 2001, this
effort will support drug and violence prevention coordinators in over
1,300 middle schools across the country to ensure that local programs
are effective and link school-based prevention programs to community-
based efforts.
Criminal Justice Programs
Stop Drugs--Stop Crime: +$112 million.--In order to break the cycle
of drug use and its consequences, drug-abusing inmates in local, state
and federal correctional systems need access to drug treatment and
supervision. The President's fiscal year 2001 budget includes several
enhancements in support of this effort:
--OJP & ONDCP Support: +$100 million.--New funding is requested to
help states and localities implement new systems of drug
testing, treatment, and graduated sanctions for persons under
supervision of the criminal justice system, including
prisoners, parolees and probationers. This funding consists of
$75 million provided through the Office of Justice Programs
(OJP) and $25 million from ONDCP's Special Forfeiture Fund.
Also, OJP's support includes $25 million targeted to offenders
who are re-entering society.
--Drug Courts: +$10 million.--These additional resources will bring
total funding for the Drug Courts program to $50 million in
fiscal year 2001. This initiative provides alternatives to
incarceration through using the coercive power of the court to
force abstinence and alter behavior with a combination of
escalating sanctions, mandatory drug testing, treatment, and
strong aftercare programs.
--Residential Substance Abuse Treatment (RSAT) Program: +$2
million.--This funding will continue expansion of the RSAT
program. RSAT is a formula grant program that provides funds to
states for state and local correctional agencies to provide
intensive drug treatment to hardcore drug users before and
after they are released from prison.
Prison Construction: +$420 million (drug-related).--This
enhancement is a multi-year project that includes program increases for
partial site and planning of two penitentiaries and three medium
security facilities in fiscal year 2001. Funding is also requested in
fiscal year 2001 to complete the construction of ongoing projects,
including one penitentiary and five medium security facilities. The
Bureau of Prisons (BOP) is experiencing dramatic increases in the
number of inmates due to higher number of prosecutions, particularly
drug cases. This, as well as the recent sharp increase in immigration
cases, is the primary cause of current BOP inmate population growth.
Treatment
Targeted Capacity Expansion (TCE) Program: +$53.8 million.--This
additional funding will help the Substance Abuse and Mental Health
Services Administration (SAMHSA) expand the availability of drug
treatment in areas of existing or emerging treatment need. Further,
these new resources will enable SAMHSA to provide additional states
with State Incentive Grants. These grants aid in the coordination of
substance abuse prevention funding streams within a state.
Substance Abuse Block Grant Program: +$31.0 million ($22 million
drug-related).--This increase for SAMHSA's Substance Abuse Block Grant
will provide funding to states for treatment and prevention services.
This program is the backbone of federal efforts to reduce the gap
between those who are actively seeking substance abuse treatment and
the capacity of the public treatment system.
Treatment and Prevention Research: +$37.2 million.--The fiscal year
2001 budget includes new funding for research conducted by the National
Institutes of Health. Research is the lynchpin of efforts to educate
and enable America's youth to reject drugs and to decrease the health
and social cost of drugs to the American public. Funding supports
activities of the National Institute on Drug Abuse (NIDA). NIDA
programs include the National Drug Abuse Treatment Clinical Trials
Network, prevention research, medications and behavioral therapies, and
understanding and preventing relapse.
Community Anti-Drug Coalitions: +$5 million.--With this
enhancement, total funding for this ONDCP grant program will be $35
million in fiscal year 2001. This initiative provides resources to
groups to build and sustain effective community coalitions that help
prevent drug use by youth. Sustained and comprehensive prevention
efforts at the community level are required to deliver a constant anti-
drug message. These activities include the involvement of local leaders
in the areas of drug prevention, treatment, education, law enforcement,
government, faith, and business.
Law Enforcement and International Programs
Customs Enforcement Infrastructure Enhancements: +$112.5 million
(drug-related).--This funding will continue Customs efforts to shield
America's land, air, and sea frontiers from the drug threat and provide
new funding to enhance and modernize the Customs Air Program. Funds
will be used to purchase additional flight safety systems, as well as
upgrades to radar systems and computer capabilities.
Forward Operating Locations (FOLs)--DOD: +$77.9 million.--The drug
control budget for the Department of Defense includes these resources
in fiscal year 2001 for restructuring SOUTHCOM's theater counterdrug
architecture, which includes Military Construction funding for FOLs in
Ecuador, Aruba and Curacao. This will reinstate some of the counterdrug
support capabilities that had been resident in U.S. military bases in
Panama.
DEA Law Enforcement Support & Financial Management: +$65 million.--
This funding will expand several DEA activities, including
infrastructure support for the FIREBIRD system, Southwest Border and
money laundering operations, intelligence capabilities, and financial
management oversight functions. The principal component of this
initiative ($56 million) is for FIREBIRD. FIREBIRD is DEA's primary
office automation infrastructure, which provides essential computer
tools for agents and support staff.
Coast Guard's Campaign Steel Web Enhancements: +$43.8 million
(drug-related).--These additional resources will support the United
States Coast Guard's drug-interdiction efforts, primarily in the
transit zone region of the Caribbean and Eastern Pacific. In
particular, funding will be used to expand the implementation of the
Coast Guard's non-lethal use-of-force initiative that has proven
effective at disabling non-commercial maritime craft used to transport
illicit narcotics.
Southwest Border--INS: +$28.3 million (drug-related).--For the INS,
a $24.5 million ($163.3 million drug and non-drug) enhancement is
requested for the Border Patrol. This enhancement includes funding for
an additional 430 Border Patrol agent positions, $3.0 million (drug-
related) to continue deployment of the Border Patrol's Integrated
Surveillance Intelligence System (ISIS) program, and $7.5 million
(drug-related) for Border Patrol construction projects. In addition,
the INS request includes $3.8 million (drug-related) for additional
Immigration Inspector positions to staff three new ports along the
southern border.
Assistance to Colombia
The President's budget proposes $1.6 billion in fiscal year 2000
and fiscal year 2001 funding for counternarcotics efforts in the Andean
Region, primarily in Colombia. This builds on current funding for
Colombia of over $330 million and includes $1.3 billion in new funding.
An estimated 90 percent of the cocaine that enters the United States
originates in or passes through Colombia. Up to six metric tons of
heroin is produced annually in Colombia, and much of this total is
shipped to the United States. Colombian heroin comprises 65 percent of
the heroin seized today in the United States. Cultivation of coca, the
raw material for cocaine, has nearly tripled in Colombia since 1992. In
addition, Colombian traffickers and coca farmers have recently adopted
new cultivation and processing techniques, increasing the amount of
drugs processed from each acre of crop. Colombia now cultivates more
than half of the coca leaf grown in the world. If unchecked, the rapid
expansion of coca crops and cocaine production in Colombia threatens to
increase significantly the global supply of cocaine over the next
several years.
Efforts by the government of Colombia to attack the drug trade are
hampered by the fact that guerrillas and paramilitary groups control
Colombia's major drug-producing regions. In addition to these armed
groups, organized drug mafias continue to run international aspects of
Colombia's drug trade. The money produced by the drug trade enriches
these outlaw groups, which generate violence and corruption while
threatening Colombia's democratic institutions. These problems
contribute to the country's insecurity, which is compounded by the
worst economic recession Colombia has experienced in almost seventy
years.
The democratically elected government of Colombian President Andres
Pastrana devised a comprehensive, integrated strategy, called Plan
Colombia, to address Colombia's drug and interrelated social and
economic troubles. The Administration proposes $1.6 billion for
assistance, including an increase of $1.3 billion in support of Plan
Colombia--consisting of a fiscal year 2000 supplemental appropriation
of $954 million and new fiscal year 2001 funding of $318 million.
No single solution can cure all of Colombia's difficulties.
Consequently, the program is an integrated combination of funds for
Colombian counterdrug efforts and for other programs to help President
Pastrana strengthen democracy and promote prosperity. The proposal
would enhance alternative development; strengthen the justice system
and other democratic institutions; and provide counterdrug equipment,
training, and technical assistance to Colombian police and military
forces. The U.S. government is encouraging our allies, along with
various international institutions, to assist Colombia in implementing
President Pastrana's plan. The budget proposal provides additional
funding for counterdrug regional interdiction and alternative
development to shore up significant gains against drug production in
Peru and Bolivia and prevents traffickers from simply moving their
operations to avoid law enforcement.
[GRAPHIC] [TIFF OMITTED] T13AP06.003
ondcp's coordinating role
The Office of National Drug Control Policy's statutory
responsibilities are established in the following laws and executive
orders:
The Anti-Drug Abuse Act of 1988.--Requires ONDCP to set priorities,
implement a national strategy, and certify federal drug control
budgets.
The Violent Crime Control and Law Enforcement Act of 1994.--Extends
ONDCP's mission to assessing budgets and resources related to the
National Drug Control Strategy.
Executive Order No. 12880 (1993) and Executive Orders Nos. 12992
and 13023 (1996).--Assign ONDCP responsibility within the executive
branch of government for leading drug control policy and developing an
outcome-measurement system.
The Office of National Drug Control Policy Reauthorization Act of
1998.--Expands ONDCP's mandate and authority and sets forth additional
reporting requirements and expectations, including:
--Development of a long-term national drug strategy
--Implementation of a robust performance-measurement system
--Commitment to a five-year national drug control program budget
--Permanent authority granted to the High Intensity Drug Trafficking
Areas (HIDTA) program along with improvements in HIDTA
management
--Greater demand-reduction responsibilities given to the Counter-Drug
Technology Assessment Center (CTAC)
--Statutory authority for the President's Council on Counter-
Narcotics
--Increased reporting to Congress on drug control activities
--Reorganization of ONDCP to allow more effective national leadership
--Improved coordination among national drug control program agencies
--Establishment of a Parents Advisory Council on Drug Abuse.
ondcp's fiscal year 2001 budget request
ONDCP's fiscal year 2001 requested budget authority of $496.8
million represents an increase of $35.358 million (+7.7 percent) over
the fiscal year 2000 enacted budget. While this budget is critical to
the success of the National Drug Control Strategy, it represents only
2.6 percent of the total federal counterdrug funding. The budget
request reflects four program accounts: the Salaries and Expenses
program; the Counterdrug Technology Assessment Center; the Special
Forfeiture Fund; and the High Intensity Drug Trafficking Areas (HIDTA)
program. Your investment in this small agency of 154 dedicated
professionals is paying dividends to the American people as it fulfills
its mission of reducing drug use and its consequences.
Salaries and Expenses: $25.4 million.--ONDCP's budget provides
$25.4 million for salaries and expenses to support ONDCP's requested
155 Full Time Equivalents (FTEs)--125 full time employees and 30
detailees--an increase of $2.577 million over the fiscal year 2000
enacted budget. The funding for this programatic component is the key
item for all the other programs funded through the ONDCP budget.
Without a fully staffed and funded ONDCP, none of these other
initiatives can be carried out. Major expenses include:
--$12.267 million for compensation of 125 FTEs. This represents an
increase of $839,000 over the fiscal year 2000 enacted total of
$11.428 million, to support pay raises, within grade increases,
and 1 additional FTE within ONDCP.
--$2.294 million for rental payments to GSA.
--$6.041 million for guard services, professional services contracts,
maintenance services, and related costs. Included in this
amount is funding to support conferences and to fund the Drug
Policy Information Clearinghouse.
--$1.1 million for research to develop and asses drug policy;
identify and detail changing trends in the supply of and demand
for illegal drugs; monitor trends in drug use and identify
emerging drug problems; assess program effectiveness; and
improve data sources.
--$1.0 million for the National Alliance for Model State Drug Laws to
encourage states to adopt and implement laws, policies, and
regulations to reduce drug use and its adverse consequences.
--$786,000 for travel and transportation costs.
--$672,000 for communications, utilities, and miscellaneous costs.
This amount will fund telephone and telecommunications costs,
postage, and ADP equipment.
--$386,000 for equipment. This amount will provide a basic level for
the purchase of required office equipment (including
replacement equipment), such as Personal Computer Systems, ADP
equipment and secure communications equipment.
Special Forfeiture Fund: $259 million.--ONDCP's budget for the
Special Forfeiture Fund is $43.703 million more than the fiscal year
2000 enacted budget. This request funds the National Youth Anti-Drug
Media Campaign, the Drug-Free Communities Program, the National Drug
Court Institute, Counter-drug Intelligence Architecture, and a
Treatment Demonstration Project.
The National Youth Anti-Drug Media Campaign
In fiscal year 2001, ONDCP is requesting $195 million for the
National Youth Anti-Drug Media Campaign to support Goal 1 of the 1999
National Drug Control Strategy, which is to ``educate and enable
America's youth to reject illegal drugs as well as alcohol and
tobacco.'' ONDCP will continue the five-year initiative begun in fiscal
year 1998, and expanded in fiscal year 1999, that uses paid media
messages to change youth attitudes about drug use and its consequences.
Strategically targeted, high impact, paid media ads--at both the
national and local levels--are the most cost effective, quickest means
of changing drug use behavior through changes in adolescent perceptions
of the danger and social disapproval of drugs. Although public service
messages (PSAs) are part of this campaign, it is impossible to reach
the specific audiences at the times and with the frequencies that are
required to move drug use attitudes with PSAs alone.
The non-advertising component of the anti-drug campaign delivers
our messages through radio and television, print media, the Internet,
faith communities, health professionals, community coalitions, schools,
parents, coaches, and organized sports. The drug prevention campaign
also includes an entertainment industry component to ensure that drug
use is depicted accurately on television and in film and music.
Through strategic partnerships, the Campaign is increasing the
number of organizations and businesses through which accurate drug
messages reach their target audiences. These alliances are extending
Campaign messages to reach youth and parents in the communities where
they live and in places where they spend most of their time--including
schools, on line, at work and at play--helping build long-term
substance abuse prevention activities. Media and advertising
partnerships bring expertise to every aspect of the Campaign. All major
television networks donated airtime, special programming and production
of celebrity PSAs. Significant national partners playing critical roles
in the Campaign include the Partnership for a Drug Free America, The Ad
Council and the American Advertising Federation. Other Campaign
partners include organizations that have focused historically on young
people, parents and substance abuse issues, education, and other fields
with broad reach into target audiences. These include the Campaign's
newest entertainment industry partner, the Hollywood Reporter, Youth
Development partners such as YMCA of the United States of America and
National FFA Organization (formerly the Future Farmers of America), and
the Girl Scouts USA. Education partners helping to communicate anti-
drug messages include the National Middle School Association and the
National Association of Student Assistance Professionals, as well
partnerships with major news organizations such as the Annie E. Casey
School of Journalism for Children and Families, Chicago Tribune, USA
Today and New York Times.
The campaign developed Internet sites with industry leaders such as
America Online (AOL). Content is being developed for campaign-related
web sites. Freevibe.com helps youngsters make positive, well-informed,
life-style decisions. The Parents' Drug Resource Center--on AOL at
Keyword ``Drug Help?''--teaches parents about underage drug use,
connects them to drug-help resources, and offers expert advice on
child-rearing. Other Internet initiatives combine online banner ads
with educational mini-sites, online sponsorships, promotions and
interactive events. These activities, combined with a rich multimedia
advertising program, have created an unprecedented social marketing
effort on the Web. Highlights include:
--More than 10 million page views on the Media Campaign websites.
--Attained more than 168 million pro-bono Internet match impressions.
--Campaign's kid-oriented web site Freevibe.com received nearly 5
million ``hits'' and parent-oriented Parents' Drug Resource
Center located on America Online garnered more than 196,000
user entries in the first three months of operation.
During the past year, the campaign reached 90 percent of America's
youth at least four times a week through advertising; and communicated
advertising messages in eleven languages to youth and adults of various
ethnic groups. The Campaign represents the largest multicultural
advertising and communications effort ever undertaken by the Federal
government, with messages and delivery tailored to ethnic audiences. It
combines culturally competent and relevant messages designed by African
American, Hispanic, and Asian-owned companies, to ensure the
credibility of the messages and to enhance their impact.
The campaign's pervasive presence has also been manifested in
increased demand for anti-drug information. Since the national launch
of the campaign in July of 1998, inquiries received by the National
Clearinghouse for Alcohol and Drug Information (NCADI) have increased
dramatically. The number of inquiries received between July 1998 and
June 1999 increased by 159 percent over the corresponding 1997-1998
period. NCADI also responded to 102 percent more requests for
information and distributed more than sixteen million items between
July 1998 and June 1999. On peak days--which corresponded with specific
anti-drug campaign events (e.g. an article in Parade magazine, media
coverage of national launch, and media ``roadblocks'')--requests surged
by 367 percent over pre-Campaign levels. Per month Internet requests
for substance abuse information have increased tenfold since July 1998.
The Drug-Free Communities Program
In fiscal year 2001, ONDCP is requesting $35,000,000 to continue
and expand the Drug Free Communities Program (an increase of $5 million
over the fiscal year 2000 enacted budget). As part of the $35 million
budget, more than $32.5 million will be granted directly to 408
coalitions throughout the United States. As described in the
authorizing legislation--the Drug-Free Communities Act of 1997--all
funded coalitions must match their federal grant funds with other non-
federal sources of support, including both cash and in-kind
contributions. Grantees may receive a maximum amount of $100,000 for
years one and two, up to $75,000 for year three, and no more than
$50,000 for years four and five.
The Drug-Free Communities Program provides funds, knowledge, and
other resources to help local leaders prevent youthful drug problems,
including the underage use of alcohol, tobacco, and inhalants. This
program now supports 213 communities located in forty-five states,
Puerto Rico, and the U.S. Virgin Islands. Applicant communities must
match their grant awards with funding from non-federal sources.
Communities may re-apply for federal funds over an additional four
years, but after year two become eligible for decreasing levels of
federal support. This funding policy adheres to the Congressional
intent of supporting programs that are able to support themselves in
the future solely through local resources.
The Drug-Free Communities Program is complemented by a number of
private sector organizations and other public agencies, including the
National Association of State Alcohol and Drug Abuse Directors
(NASADAD), National Prevention Network, National Guard, Mothers Against
Drunk Driving (M.A.D.D.), AmeriCorps and National Inhalant Prevention
Coalition, that provide useful tools, occasional funding and frequent
communications among the communities and other useful resources. The
program is ably guided by the Advisory Commission on Drug-Free
Communities, an eleven member, presidentially-appointed expert group
representing many sectors and organizations across the United States.
The Community Anti-Drug Coalitions of America (CADCA) is a coalition
membership organization that provides a wide array of technical
support, program ideas, and advocacy to community coalitions around the
U.S.
National Drug Court Institute
In fiscal year 2001, ONDCP is requesting $1.0 million for the
National Drug Court Institute. These funds will continue the expansion
of the Institute's drug court training program for practitioners;
convene special advisory groups to develop curricula in new
disciplines; develop a national community probation initiative; and
expand and update the Institute's video instruction library.
Drug courts divert drug offenders out of jails or prisons and refer
them to community treatment. Drug courts seek to reduce drug use and
associated criminal behavior by retaining drug-involved offenders in
treatment. Defendants who complete the program either have their
charges dismissed (in a diversion or pre-sentence model) or probation
sentences reduced (in a post-sentence model). Title V of the Violent
Crime Control and Law Enforcement Act of 1994 (Public Law 103-322)
authorizes the Attorney General to make grants to state and local
governments to establish drug courts. In October 1999, 416 drug courts
were operating nationwide, including eighty-one juvenile, eleven
tribal, ten family, and seven combined drug courts. Two hundred and
seventy-nine were in planning stages, up from a dozen in 1994.
Drug courts have been an important step forward in diverting non-
violent offenders with drug problems into treatment and other community
resources, leaving the criminal justice system to address violent acts.
One hundred and seventy-five thousand people have entered drug courts
since their inception, and 122,000 graduated or remained active
participants. A review of thirty evaluations involving twenty-four drug
courts found that these facilities keep felony offenders in treatment
or other structured services at roughly double the retention rate of
community drug programs. Drug courts provide closer supervision than
other treatment programs and substantially reduce drug use and criminal
behavior among participants.
Counter Drug Intelligence Architecture
In fiscal year 2001, ONDCP is requesting $3 million for the
Counterdrug Intelligence Executive Secretariat. The Fiscal Year 1998
Treasury and Government Appropriations Act requires ONDCP to improve
counterdrug intelligence coordination and eliminate unnecessary
duplication. An interagency Task Force was formed in the fall of 1997
to review the United States Counterdrug Intelligence Centers and
Activities. The Task Force focused on ensuring drug intelligence
mission statements for the core components were clear, that appropriate
relationships and oversight were in place, and that information sharing
and dissemination mechanisms worked.
The Task Force concluded there was no all encompassing, national
counterdrug intelligence architecture. Instead, there were two loosely
associated systems, one for law enforcement and one for the foreign
counterdrug intelligence system; neither operates closely or
efficiently with the other. The Task Force proposed 89 specific
recommendations in the following areas: National Counterdrug
Intelligence Coordination; National Level Intelligence Centers;
Regional, State and Local issues; Information Systems Architecture;
Personnel and Training; and Foreign Counterdrug Intelligence
Coordination. Since the development of the Task Force report, the
interagency has worked to create an action plan, the General
Counterdrug Intelligence Plan (GCIP). This unclassified plan was
approved by the President, signed by eight Cabinet level officials, and
released publicly in February 2000. The cornerstone action initiative
of the GCIP establishes a senior interagency working group (The
Counterdrug Intelligence Coordinating Group) and its permanent support
staff (The Counterdrug Intelligence Executive Secretariat--CDX) which
will promote continuous improvement of the national drug intelligence
system. The $3.0M for fiscal year 2001 will allow initial stand up of
the CDX to include office space and equipment, limited travel, and
initiation or continuation of work to implement the 73 action items in
the GCIP, as well as new action items identified outside the GCIP.
National Criminal Justice Treatment Demonstration Project
In fiscal year 2001, ONDCP is requesting $25 million for the
National Criminal Justice Treatment Demonstration Project. Many states
and localities have replicated national evaluations of drug testing and
treatment for criminal offenders. What they request--and have
demonstrated they will use--is specific guidance on how to best
implement the most effective practices established by research and
experience. The Project will identify effective treatment elements from
nationally recognized program models and implement these in
demonstrations at the community level. Such demonstrations will involve
community collaboration and pooling of public safety and public health
resources.
The results of these state and local demonstrations will be used to
improve the dissemination of best practices, including the provision of
step-by-step implementation manuals. Evaluation results will be
disseminated regarding: collaborative mental health and substance abuse
approaches for juveniles and adults with co-occurring disorders; the
impact of family involvement, and the family as the unit of treatment;
rehabilitation programs that include comprehensive skills building, job
training directly linked to employment, and viable education programs;
and cognitive behavioral approaches for juveniles. The conduct of
national, regional, and state conferences and workshops will also be
considered as means to provide follow up assistance.
High Intensity Drug Trafficking Areas (HIDTA): $192 million.--In
fiscal year 2001, ONDCP is requesting $192 million for necessary
expenses of the HIDTA program, $729,000 more than the enacted fiscal
year 2000 budget. HIDTAs are designated regions with critical drug-
trafficking problems that harm other areas of the United States. The
ONDCP Director--in consultation with the Attorney General, Secretary of
Treasury, heads of drug-control agencies, and appropriate governors--
designates these locations. In addition to coordinating drug-control
efforts, HIDTAs assess regional drug threats, develop strategies to
address the threats, integrate initiatives, and provide federal
resources to implement initiatives. HIDTAs strengthen America's drug-
control efforts by forging partnerships among local, state, and federal
law-enforcement agencies; they facilitate cooperative investigations,
intelligence sharing, and joint operations against drug-trafficking
organizations. The Department of Defense gives priority support to
HIDTAs in the form of National Guard assistance, intelligence analysts,
and technical training.
Since January 1990, counties in the following 31 areas have been
designated as HIDTAs: Houston, Los Angeles, South Florida, New York,
and the Southwest Border, which includes South Texas, West Texas, New
Mexico, Arizona and Southern California (in 1990); Baltimore/
Washington, DC and Puerto Rico/U.S. Virgin Islands (in 1994); Atlanta,
Chicago, Philadelphia/Camden (in 1995); Gulf Coast (Alabama, Louisiana,
and Mississippi), Lake County (Indiana), the Midwest (Iowa, Kansas,
Missouri, Nebraska, North Dakota, and South Dakota), Northwest
(Washington), Rocky Mountains (Colorado, Utah, and Wyoming) (in 1996);
Northern California (San Francisco Bay Area) and Southeastern Michigan
(in 1997); Appalachia (Kentucky, Tennessee, and West Virginia), Central
Florida, Milwaukee, and North Texas (in 1998); and Central Valley
California, Hawaii, New England (Connecticut, Maine, Massachusetts, New
Hampshire, Rhode Island, and Vermont), Ohio, and Oregon (in 1999).
The HIDTA program advances the National Drug Control Strategy by
providing a coordination ``umbrella'' for agencies to combine anti-drug
efforts through an outcome-focused approach. The resulting synergy
eliminates unnecessary duplication of effort, maximizes resources, and
improves information sharing within and between regions. Intelligence
is coordinated at HIDTA Investigative Support Centers, which offer
technical, analytical, and strategic support to participating agencies
with access to agency databases and supplemental personnel. Currently,
949 local, 172 state, and 35 federal law-enforcement agencies and 86
other organizations participate in 462 HIDTA-funded initiatives.
Counterdrug Technology Assessment Center (CTAC): $20.4 million.--
The fiscal year 2001 budget request for the Counterdrug Technology
Assessment Center is $20.4 million, a decrease of $11,652,000 from the
fiscal year 2000 enacted budget. This request consists of three parts:
Research and Development (Technology) ($16 million), Technology
Transfer Program ($3.7 million), and United States Olympic Committee
Anti-Doping Program ($700,000). Today, scientists and engineers from
many disciplines are assisting the Office of National Drug Control
Policy in exploiting advances in science and technology to stem
substance abuse and stop the illicit drug trade. The Counterdrug
Technology Assessment Center (CTAC) technology development programs
support the goals and objectives of the National Drug Control Strategy.
The Blueprint Update released with the Annual Report provides a report
on progress achieved this year.
Research and Development.--The applied technology efforts that
comprise the CTAC R&D program address technology for demand reduction
in areas such as brain imaging technology, therapeutic medications
assessment and addiction treatment, and for supply reduction in areas
such as drug detection, communications, and surveillance. Technologies
are being developed to advance the capabilities of the medical,
academic, scientific and criminal justice communities as they cooperate
to solve the drug abuse problem.
Technology Transfer Program.--In 1998, Congress authorized a
Technology Transfer Program (TTP) for CTAC to provide successfully
developed technologies to State and local law enforcement agencies.
Congress continued the TTP program in 1999 and 2000. CTAC organizes its
technology program according to five categories or areas of work:
--Non-intrusive inspection,
--Tactical technology for federal agencies,
--Demand reduction,
--Technical assessments and operational test and evaluation of
emerging technology, and
--Transfer of federally developed technology directly to state and
local law enforcement organizations.
Support for Anti-Doping Programs.--This initiative expands current
support for National Commission on Sports and Substance Abuse to
identify problematic substances, masking agents, and gaps in current
testing procedures. This funding will be used to (1) support the United
States Olympic Committee's creation of an independent anti-doping
agency for the United States; (2) support anti-doping programs for the
Salt Lake Olympic games; and (3) support research on innovative
approaches for screening for doping and other performance enhancing
substances currently not detectable by urine tests will be
investigated. Systems, methods and protocols will be investigated that
will assist understanding and detecting the use of performance-
enhancing drugs such as anabolic and androgenic steroids by athletes
competing locally, nationally, and internationally. This funding will
advance the goals of the Strategy for counterdrug use in sports.
conclusion
The National Drug-Control Strategy responds to long-standing
congressional concerns over the adequacy of the federal response to the
drug problem. It provides detailed long-term plans for addressing
domestic and international trends in drug use, production, and
trafficking. This Strategy is national in scope and purpose. The
federal government cannot accomplish the ambitious objective of
reducing illegal drug use by 50 percent without the support of all
states and territories, the thousands of city, county, and local
governments threatened by illegal drugs and foreign governments, the
private sector, and society at large. This Strategy also recognizes
that it is only the federal government that can undertake international
drug-control efforts, consequently, it also promotes vigorous
international cooperation.
We look forward to working with all the members of this
subcommittee and, indeed, the entire Congress to ensure that the
federal response to the nation's drug problem is comprehensive,
appropriately resourced, and completely supportive of states, cities,
counties, communities, families, and all citizens who share our
commitment to confronting the cancer of drug abuse.
audience recognition
Senator Campbell. Before I ask you any questions, I have
several and I am sure Senator Dorgan does, too, I noticed in
the audience today a lot of young people. Would the people that
are in the audience under 20 years old stand up for me? I saw a
lot of them come in. Very good.
I want to tell you, I, as the chairman of this
subcommittee, am very glad you are here. I hope you are
listening to some of these numbers that the General has been
talking about because a lot of the efforts that he has
participated in and that this committee is trying to fund
really is going to be directed at your age group, as you
probably know. That is what we are really trying to make a big
impact on, is the reduction of the use of drugs by our young
people because we know that if we can convince young people who
are using them that they do not need them and they do not have
to have them, we do not have to worry so much about supply. If
we can stop the demand for them in the United States, the
supply will simply dry up.
So I just want to tell you that I am very happy you are
here and I hope that you can stay as long as you can for the
hearing today as we ask some questions. Thank you.
Before I ask some questions, Senator Dorgan did come in.
Did you have an opening statement, Senator, before I start?
Senator Dorgan. Mr. Chairman, why don't you proceed. I will
put my opening statement in the record and then I will ask the
General some questions.
Senator Campbell. That is fine.
[The statement follows:]
Prepared Statement of Senator Byron L. Dorgan
Thank you, Mr. Chairman. General McCaffery, I am pleased that you
are able to join us today and I welcome you to this subcommittee
hearing. I appreciate the opportunity to speak with you about the very
important issue of drug abuse in our society and I look forward to
hearing your testimony about the progress that has been made by your
office since your appearance before this committee last year.
Your fiscal year 2001 budget request calls for $496,800,000 in
funding. This request is an increase of $35,358,000 over the fiscal
year 2000 enacted budget. As you know, the competition for existing
dollars is tight and this committee needs to be vigilant in ensuring
that these dollars are being spent wisely.
As you are well aware, in excess of $182 billion has been expended
in efforts at combating illegal drug use in the past nine years. This
certainly demonstrates our commitment to stemming the flow of illegal
drugs and reducing drug use. In that light, I hope that you will focus
your testimony on showing this committee evidence that the sizable
investment made by the Federal Government in combating illegal drugs is
paying dividends and that the overall drug reduction strategy overseen
by your office is working.
I would like for you to discuss the individual programs that make
up our national drug control strategy.
Despite our efforts in combating the problem of drug abuse, the use
of certain individual drugs continues to rise. The increase in the use
of so called ``hard drugs'', such as heroin and cocaine, is
particularly disturbing. I want to explore with you how we can reverse
this trend
As part of your fiscal year 2001 budget, a request was made for
$195,000,000 for the third year of the planned five-year national media
campaign. Your efforts in developing this program to educate our
children as part of your overall strategy are to be applauded. I
realize that you have developed a five-year media program, however I
would like for you to discuss what success this program has achieved to
date, and how you measure success.
I also look forward to hearing your testimony about our efforts on
the international front, particularly our current relationships with
Colombia and Mexico. As I mentioned in last year's hearing, I still
have doubts about the certification of Mexico as a cooperating partner
in the efforts to stem the flow of illegal drugs coming across our
southwest border. I wonder whether there has been any significant
change in Mexico's cooperation with us on this front.
Finally, I would like for you to discuss the issue of drug
treatment and rehabilitation and how they fit into the overall national
strategy. As you are aware, a tremendous problem exists with repeat
drug offenders and the cycle of abuse and its associated crime. These
offenders are arrested, sent to jail, released and fall back into a
pattern of drug abuse. This cycle is repeated over and over again. In
many areas of the country, treatment is almost nonexistent and in other
areas, including Washington, D.C., the waiting list to receive
treatment is far too long.
I commend you on all of your efforts to address this extremely
difficult problem, and look forward to your testimony.
Thank you, Mr. Chairman.
doping in sport
Senator Campbell. I am going to just bounce around a little
bit here based on some of your testimony. As you know, you
mentioned I was a former Olympian and am still very active with
the Olympic Committee and have regular meetings with them, and
some concerning the use of drugs. I recognize the important
involvement you have had with the Olympic team. The last time I
met with Bill Hibble, who is the chairman of the USOC, he told
me they are going to have a big problem coming up that you
probably will not be involved in, but you ought to be aware of,
and that is what we call drugs in some countries they call
food, as you probably know.
Some of the Oriental countries, for instance, concentrated
substances from natural plants, they still determine to be food
and not drugs, whereas in this country, depending on how it is
processed, how it is used, and so on, we sometimes categorize
it as drugs. I do not know how that is going to play out in
future Olympic games, but I am sure that you are aware of it.
youth drug use rates
Let me also ask you a couple of questions about the media
campaign, about a number of things. I was looking over your
charts and listening to your testimony and trying at the same
time to read a little bit in the National Drug Control Strategy
booklet. You will have to explain this to me, because something
does not jive very well.
I think that your comment, that the attitudes of young
people are changing may very well be true, but I am not too
sure about the youths based on the charts. On page 14 of this
particular booklet, look at the average age of the first
marijuana use, in fact, since we have started this national
media campaign, it was level for a couple of years and now it
seems to be going back up. In 1997, the last year it shows
here, the average age at which somebody started using it was
17.1. It went up slightly there. It stayed level a couple of
years before that. The current use in the past month of
marijuana looks to be steady in the last three years, pretty
much steady.
On the next page, page 16 and 17 under the use of cocaine,
current cocaine use, pretty much steady. It was up a little in
1996, dropped a little in 1997, went back up in 1998. The next
chart down, it has gone up in 1995, 1996, and 1997. That is
first-time users of cocaine. And the bottom chart, the average
age for the first cocaine use, it dropped for the first couple
of years, 1996, 1997, and it has gone back up a little bit.
Am I seeing some disparity between what is in the book and
what you are telling us on the charts? I mean, I can understand
you saying that attitudes are changing, but I am not sure the
attitudes are translating into less use.
Mr. McCaffrey. Trying to make sense out of this is tough.
To some extent, there are six major annual federally funded
studies, so you have to know which study you are talking about.
Is it the Household Survey or Monitoring the Future? They
survey different populations. Let me tell you where I come out
on it.
What is unmistakable is we have a dynamic drug abuse
situation for America's youngsters, and that is the heart and
soul of it. If we can get kids from age 10 to 19 reasonably
drug-free, statistically they will never become 30 year old
HIV-positive chronic addicts.
When you take the youth population, there are new drugs
they are facing. This is no longer your daddy's drug
environment. They are looking at methamphetamines, MDMA, and
high-purity heroin. The use of inhalants has gone up. It is a
different drug environment.
The age of initiation is dropping, you are quite correct,
and that is scary. It is not college sophomores. We are talking
eighth graders.
Finally, I think the good news is what is unmistakable,
what is statistically significant for the first time in 5 years
is that drug use rates among 12- to 17-year-olds went down last
year by 13 percent, and it is even greater by----
Senator Campbell. Say that again, please.
Mr. McCaffrey. Last year, Donna Shalala and I released the
statistics. Adolescent drug use in America went down by 13
percent. Now, it is too early to get very optimistic.
Senator Campbell. That is all age groups, or youth age
groups?
Mr. McCaffrey. Age 12 to 17.
Senator Campbell. 12 to 17?
Mr. McCaffrey. That is the youth age group. We are looking
forward to next year's data. But now PDFA, PRIDE, I have four
studies that cluster around the same notion. After several
years of going up, it has leveled off. It is definitely moving
in the other direction. The challenge to you and I is, can we
say that for 5 years in a row?
Senator Campbell. Well, I know things do not happen
overnight, and I understand that, and I think that is why
Senator Dorgan and I have really been so supportive of the
media campaign where we have had to take money out of other
accounts. I recognize they are not going to change attitudes
overnight among young people when the draw is so strong and the
peer pressure is so strong.
Mr. McCaffrey. Mr. Chairman, there are other measures that
indicate whether that media campaign is being heard, believed
credible, and causing people to act. Some of them are almost
unarguable. You put an article in ``Parade'' magazine, you put
down a 1-800 number, and the calls will peak and go off the
chart. You start doing it in Spanish--there are 16 million of
us who speak Spanish at home at night--and people call into the
National Drug Clearinghouse and ask for a pamphlet, ``How to
Talk to Your Kids About Marijuana,'' in Spanish, and the mail-
outs have gone up dramatically.
Concerning coalition building, the Ad Council is here,
represented by Donna Feiner. We are seeing people attracted
into their community coalition by these ads.
Senator Campbell. Well, the underlying thesis of all
advertising, whether you are selling toothpaste or cars, is
that you can change behavior based on image and suggestion and
so on, so I certainly hope it is working.
hidta and ctac
Let me move on a little bit. I was happy to hear what I
view as somewhat, your increasing support of the HIDTAs. A few
years ago when they were started, I know there was a matter of
discussion whether they were going to be effective or not. I
know the one we have in Denver has been hugely effective in
that all the different agencies are involved in it. They swear
by it. They are also becoming community involved. As you
probably know, I think that the HIDTAs are good, where they are
working with anti-gang groups and things of that nature. So I
am glad to see that you are supportive of that.
Let me ask you about CTAC, which I am also a big supporter.
I have been to several of their demonstrations out in the field
where we have all kinds of different agencies come in, from
large agencies, small ones, and so on, where they learn how
they can avail themselves to some of this very sophisticated
equipment that they would never have the money to develop on
their own in the departments.
According to the information provided at last week's law
enforcement technology demonstration, CTAC, displayed a very
extensive technology display and many of our colleagues came
over to see that and I was gratified that they did come and see
it. But it appears that the program has experienced significant
growth since being initiated by Congress. Based on your numbers
during the 24-month period of fiscal year 1998 and 1999, there
were 662 requests. During the first six months of fiscal year
2000, there were 641 requests. So the requests are going up, no
question about it.
And yet you have a rather large reduction in your request
for funding, and I see it as about a 72 percent cut. If we cut
that account, how long are those funds going to last at these
increased requests?
Mr. McCaffrey. Senator, I think there is some budget
analyst gamesmanship going on here. There are two numbers I
look at to try and understand this. The $3.7 million, if you
look back over the last 4 years, each year, we actually request
more money than the last, but it is grossly below what Congress
enacts, which also goes up each year. I asked OMB for more than
the amount of money I have got on the table. I did not get it
and, of course, this is what they have to do by law, try to
balance the budget.
I think we obviously would stand intellectually behind a
much richer resourcing of this program. Law enforcement in
America is benefitting from this in very fundamental ways.
Senator Campbell. There is no question about it, the
display that was here the other day that I attended and Senator
Dorgan attended, I have to tell you, some of that stuff was
really kind of like Buck Rogers. I mean, I had no idea that
some of it was so sophisticated, and a lot of it is not related
to your office, but the amount of counterfeiting, things of
that nature that are going up is just phenomenal.
Let me talk about the recisison a little bit. You have the
flexibility to choose where some cuts are going to be, and in
the fiscal year 2000 budget, there was a reduction in your
budget. It allowed you the flexibility to determine where you
were going to cut. As I understand it, you chose to cut the
model State drug laws program and a technology program and a
HIDTA program, and yet from what I hear you saying, you are
very supportive of all three of those. Do you want to comment
on that?
drug courts
Mr. McCaffrey. It is one of these least palatable of all
decisions kind of operations, and also a factor of where do I
have money. Even some programs--model State Drug Laws, at $1
million, it is a tiny amount of money but it is a very
significant payoff over time to make sure that States get
access. That Model State Drug Law is a pilot document that is
about 4 feet high, so even that one is very important to us.
Senator, we just did an analysis on how we could minimize
damage to the drug Strategy, and that is the outcome. But I
clearly stand behind all those programs.
Senator Campbell. I appreciate that, because I think that
the majority of the committee members do, too.
One more, on the National Drug Court Institute, I attended
a drug court with you in Denver and was very gratified at the
effect that the drug courts are having, as you remember. There
was $2 million provided in the fiscal year 1999 appropriations
for the National Drug Court Institute. In fiscal year 2000, you
requested and Congress funded an additional $1 million. The
language included with the funding was modified at your request
to make it easier for ONDCP to transfer the funds. The funds
have not yet been given to the Drug Court Institute. Is there a
reason for that?
Mr. McCaffrey. Besides the normal mindless bureaucracy, I
do not know why. They are doing a splendid piece. Money will be
transferred via OJP. Let me go look into it.
Senator Campbell. All right. If you would look into that
and perhaps report back to the committee, I would appreciate
it.
Mr. McCaffrey. I will do that, because we cannot keep the
National Drug Court Institute going unless there is
documentation, training, and structure Judge Tauber has done a
brilliant job with a small staff of pulling this together, so
that money is a huge payoff.
Senator Campbell. I bet it is. Okay, thanks. I do not want
to monopolize the time. We are going to have a vote at about
10:30 or so. We have the choice of either recessing and
reconvening and making you stick around for a long time or
trying to finish up our questions before then, so I would like
to ask Senator Dorgan for his questions.
national youth anti-drug media companies
Senator Dorgan. Mr. Chairman, thank you very much.
General, I was delayed for a couple of minutes because of
another committee, so I will just put my statement in the
record. In the statement, I essentially agree with Chairman
Campbell. I think much of what we are doing here cannot be
measured in a week or a month or a year, especially with
respect to the media program that all of us are involved in. We
have committed a substantial amount of money to that at your
and the administration's request. I support that. I am glad we
have done it and I recognize fully that that is not something
that can be measured in the short term. You can try very hard
and should try to understand what are you getting for what you
are spending, but I think only after a rather lengthier term
will we be able to understand what we have accomplished with
this.
The reason I supported it going in is that I think it is
clear that those who understand how people react to television
advertising and the power of advertising on television and
radio and in newspapers, the power of it affects the way people
think and the way they make purchases and the way they respond
and behave and act. So I still remain hopeful that the early
signs are encouraging and I remain hopeful that this will have
a much more significant impact than even now we can hope to
expect. I guess we will know more about that in the next couple
of years, but I hope we can continue that program without break
and without interruption.
chronic drug use rates/treatment
I would like to talk to you just briefly about the issue of
addiction in the country. We are talking, first with television
programs, about trying to talk to kids in this country. Do not
do drugs, do not start drugs, here are the dangers and so on.
Let me talk to you just a bit about the people who already
are addicts in America. I want to lead to questions about the
Break the Cycle program and other related programs. Can you
tell me roughly how many addicts in this country are addicted
to hard drugs?
Mr. McCaffrey. Well, again, I have to show you which study
I am using----
Senator Dorgan. I understand, but----
Mr. McCaffrey. The quick answer is there are 5 million
Americans who are chronically addicted to illegal drugs. Most
of those are poly-drug abusers, so they would include alcohol,
5 million people.
Senator Dorgan. And exclude alcohol, if you will, for the
moment. Even the chairman and I on the floor of the Senate, in
an amendment last year had to distinguish between what we are
doing with respect to drugs and alcohol.
Mr. McCaffrey. Right.
Senator Dorgan. Nobody is more insistent on dealing with
the alcohol issue than I am. I have lost a couple of family
members----
Mr. McCaffrey. The answer is five million. There are
another 10 to 16 million----
Senator Dorgan. But that includes alcohol.
Mr. McCaffrey. Many of them are also using alcohol. There
is almost no heroin addict that does not use alcohol, too.
Senator Dorgan. So there are 5 million drug addicts in this
country?
Mr. McCaffrey. Chronic drug addicts.
Senator Dorgan. Chronic drug addicts.
Mr. McCaffrey. They consume two-thirds of all the drugs in
America and they are at the heart and soul of the misery that
is engendered by this problem.
Senator Dorgan. All right. Five million drug addicts
consume two-thirds of the drugs.
Mr. McCaffrey. Right.
Senator Dorgan. Do we have any data about the percentage of
those 5 million drug addicts who would like to shed their
addiction, who search year to year, month to month for ways to
shed this addiction?
Mr. McCaffrey. There is the key question, because you get
into the treatment coefficient, how many are amenable to
treatment and what forms of treatment are appropriate, and we
have some real experts in the room, Dr. Linda Wolf Jones, among
others. I just spent an afternoon with Dr. Mitch Rosenfeld of
the Phoenix House, who runs one of the biggest programs in the
country.
I do not know what the answer is. I do know some things for
sure. If I am in misery as an addict, and I am, and you arrest
me, or if I have a serious traffic accident and I end up in a
hospital emergency room, or I finally get humiliated because I
lost my children to the welfare system, at that point, I will
be receptive to effective drug treatment. If it is available
then, it is likely to do some good for the community and for
me. If it is not available then, you tell me to come back in 92
days, you can forget about it. That is the problem. It is both
timing and availability.
Senator Dorgan. Where I am going with my train of thought
here, and the question, is the importance of treatment
availability when it is needed, at the moment it is needed----
Mr. McCaffrey. Yes, sir.
Senator Dorgan [continuing]. Especially as it relates to
mandatory treatment in incarceration.
Mr. McCaffrey. Absolutely.
Senator Dorgan. One of my concerns is that we worry a lot
about the entire spectrum. We are talking about Colombia,
production and interdiction and all of these issues, and over
on this side of the spectrum we have got the issue of
treatment, and you have 5 million people addicted. I have seen
data about how many would like to shed their addiction but
cannot find treatment facilities because we are woefully short
of treatment facilities.
I wonder if I could just get on the record here, on the
treatment side of this issue, what kind of capability do we
have to provide treatment--and I am not talking about those who
are incarcerated, because I am going to ask you about those in
just a moment--what kind of capability do we have to fund
treatment centers? Are sufficient treatment centers available?
I am expecting the answer to that is no. How can we make them
available? What kind of resources would be necessary to make
sufficient treatment centers available to those that would like
to shed their addiction?
Mr. McCaffrey. They are pretty complex questions and I
would actually like to provide you a response in writing. It
seems to me we have 5 million chronic addicts. We think we have
a capability of a little over 2 million treatment spaces. It is
clearly not adequate. It is not adequate in Baltimore. It is
not adequate in rural communities.
You can go down to subsets of the problem. Heroin addicts
in America, there are probably 900,000-plus. Next week, I go to
the American Methadone Treatment Association meeting in San
Francisco and will underscore the fact there are 179,000 who
have access to methadone. This is the most widely studied and
effective therapeutic tool we have for chronic drug abuse, and
we have eight States that will not allow methadone. We have
structural inconsistencies. We have inadequate infrastructure.
We have inadequate regulation.
We are moving in the right direction. The Federal support,
for the first time in history, this year, Donna Shalala has on
the table $3,150,000,000 in drug treatment. It is up 32 percent
in the last 5 budget years. We are rewriting the regulations,
Dr. Wesley Clark and CSAT, to try and more effectively govern
buprenorphine and methadone and LAMM.
All these programs are moving ahead, the criminal justice
link to drug treatment. We are trying to, without question,
move on parity in health care insurance for mental health and
drug treatment insurance. We have to do that. Right now, if my
16-year-old boy is chronically addicted and I have Blue Cross-
Blue Shield, you, the taxpayer, are likely to pay for his drug
treatment after you arrest him. We have got a nonsensical
system here. There has to be a no wrong door access to the
medical system.
These are hard sells because drug addicts' behavior is so
disgusting, reprehensible, and frightening that the medical
community and many of us do not want to rationally face up to
as a public policy measure what to do about it.
Senator Dorgan. Let me just say that I hope you would work
with the experts and give me some quantitative analysis of the
amount of resources devoted to treatment capability and
opportunity relative to the need. If we had more resources
available, what kind of need would we fill that is now unfilled
with respect to treatment? If you would do that, I would
appreciate that, because I think it is very important as we
deal with this continuum that we be pushing very hard on
allowing those who are addicted--who desperately want to shed
this addiction--to understand that this country will provide
treatment opportunities for them.
drug treatment and the criminal justice system
Now, let me just quickly wrapup, because we do have time
constraints and I agree with the chairman, once we run over to
the floor and get involved in votes, we would keep you forever
here and I do not want to do that. My feeling is that we ought
not let people out of prison who have been incarcerated with a
drug problem and then leave the same incarceration facilities
with the same drug problem.
I visited Oak Hill detention center some while ago here in
the District of Columbia and met with these young kids, some of
them the toughest criminals you would ever want to meet. Those
with drug problems have been put through a program out there
that is very impressive. I mean, I came away from that just
thinking, what a terrific thing to do for these kids, to take
them and give them a chance to shed their addiction to drugs
and understand what it did to them and what it did to put them
there.
But I know that in many prisons around the country, many
facilities of incarceration, people get thrown in and they are
back on the streets and no one has done a damn thing about
their drug problem. That itself is almost criminal, because we
know what is going to happen when that person hits the street.
Another crime victim is waiting there for that person to commit
a crime.
So where are we with all of this and what do you recommend
to us so that we could find a way to force this to happen all
across the country? To ensure that people coming out of
incarceration who have had drug problems would be expected to
have had treatment for those problems in the incarceration
facilities?
Mr. McCaffrey. We have a lot of people who now understand
what you just said. That is the good news, to include here in
Congress. We had the national assembly, Attorney General Reno,
Secretary Shalala, and I brought in the 800 people from around
America who run the corrections and the treatment systems. We
brought in State legislators. The central part of the solution
is in State government. There are 900,000-plus prisoners at the
State prison level, 600,000 at county-city lockup, and 120,000
in the Federal system. The Federal Bureau of Prisons is doing
just fine. They are not completed, but all 42 Federal lockups
now have some form of drug treatment program.
Senator Dorgan. Mandatory for those who are addicted?
Mr. McCaffrey. I do not want to overstate the case. We say
drug treatment is in all the Federal prison systems. I do not
think we are there adequately, but that is the best of the lot.
The problem comes, what do you do about the half-million people
a year who are released from incarceration, most of whom have a
drug and alcohol problem? Is there a system there to track them
back into their community with drug testing, halfway houses, et
cetera, and the answer is no.
We are going to try to take the notion of reentry courts.
We have the drug court system on the front end, the non-
violent, probably non-felony offender, we mandate treatment and
have some coercive capability out of the judge. We see the back
end of it being done the same way, that you are released out of
max security, super max in California. Right now, you come out,
there is no legal constraint on your behavior at all. Then you
have gone back to your community and there is no drug treatment
program.
I do think we have made the intellectual arguments that are
required. We have a white paper out that I would be glad to
share with you. We have to work at this, though. This is a 10-
year challenge, I would argue, to build the kinds of
infrastructures to do what you are talking about.
conclusion
Senator Dorgan. Thank you very much, and I will not ask
further questions. I have a couple others I will send to you.
But let me also ask if you would send to me information about
the Federal system vis-a-vis the release of convicted felons
with drug problems and what you would recommend to make our
efforts here more ubiquitous and to have some feeling that at
least in the Federal system for which we are responsible, when
we are releasing someone who is incarcerated with a drug
problem, to ensure that person who is being released has gone
through a treatment program? What resources do we have to
devote to that? What kinds of approaches do we have to use to
accomplish that?
And let me finally say that I appreciate your work. I think
you are working in a very difficult area. I think you have
brought significant leadership to it. You have been involved in
some controversies and will be in the future, but that is
because you are working in a very controversial area, but
nonetheless a very important one for this country and I
appreciate your public service.
Senator Campbell. I second that, too, General. I think you
have found that this committee has done everything we can for
the ONDCP and will continue to do so.
I have no further questions, but I did want you, I and
Senator Dorgan maybe to learn something together here. We still
have some young people in the audience, a few of them left, I
notice, but we still have some there in their late teens. I
want to ask those people here in front of the General
something, since you are kind of the experts on what teenagers
do. If there is anybody back there among our young visitors who
read the editorial page of U.S. News and World Report, Parade
magazine, USA Weekend, or magazines, you may pick up the
magazines and read them, but do you read the editorial page?
Okay, no.
I mention that, General, because we have had some
discussion about credits and matches with television
commercials in lieu of buying ad space, and I noticed with
interest the one article by Daniel Forbes, and this was, I
guess it was on the Internet, but in any event, it talks about
the ONDCP. The office allowed six magazines, U.S. News and
World Report, some of them that I had mentioned, to submit
their editorial content to qualify as a substitute for
advertising pages owed to the Government under the single-year
advertising contracts. We have talked about this in other
media, with the television----
Mr. McCaffrey. Senator, the problem with Dan Forbes' work,
is that it is factually inaccurate.
Senator Campbell. Is it?
Mr. McCaffrey. Let me provide you a written response.
Senator Campbell. Okay.
Mr. McCaffrey. He is wrong on his facts. Dan Forbes is
writing for the Media Awareness Project, which is actually a
pro-drug legalization group under a pseudonym. I do not think
this fellow's journalism is balanced. In that case, it is
factually just not what the situation is.
Senator Campbell. So what you are saying is that the ONDCP
did not let them substitute editorial content.
Mr. McCaffrey. No. Editorials are out of the question.
Whether it is newspapers or magazines, it does not count for
pro bono match.
Senator Campbell. Well, I hope not, because I just have a
hunch that young people do not read those editorials.
Mr. McCaffrey. Right.
Senator Campbell. In fact, I do not read most of them.
[The information follows:]
With respect to factual inaccuracies in Mr. Forbes' articles,
attached is the agency's reply from ONDCP's Assistant Director of
Strategic Planning, Robert Housman, to Salon.com detailing the errors
in Mr. Forbes' characterizations of the matching component of the
Campaign as applied to magazines.
The errors in Mr. Forbes' reporting have already been recognized by
other widely respected media outlets. For example, the New York Times,
which relied on Mr. Forbes' earlier reporting that the Campaign was
somehow secret, has subsequently corrected the record at ONDCP's
request, and stated that the Campaign was not secret.
With respect to the question about the use of ``editorial content''
in magazines for matching credit, ONDCP does not allow ``editorials''
to qualify for match credit. Nor do we allow ``hard news'' stories to
qualify for match credit. However, magazines may submit already
published stories (content as opposed to editorials) that are ``on
message'' for Campaign match credit.
Executive Office of the President,
Office of National Drug Control Policy,
Washington, D.C., April 10, 2000.
Mr. David Talbotm,
Editor in Chief, 22 4th Street, 16th Floor,
San Francisco, CA.
Dear Mr. Talbot: The purpose of this letter is two-fold. First, I
write to once again ask Salon.com (``Salon'') to set the record
straight with respect to the errors in Salon's earlier reporting, which
were set out in my last letter to Mr. Gary Kamiya of Salon. Second, I
write to raise factual errors with respect to the latest article in
Salon, ``The Drug War Gravy Train.''
salon has an obligation to correct the record about openness
In my prior letter ONDCP provided you with extensive documentation
that proves that, contrary to the reporting of Mr. Forbes and Salon,
the Youth Campaign was in no way secret. In fact, well before Salon's
focus on the Youth Campaign, as we documented for you, the use of
content within the match element of the Youth Campaign had appeared on
the front page of the Los Angeles Times and on the pages of USA Today.
It was also the subject of opinion editorials by Director McCaffrey in
papers across the nation. We had also testified extensively about this
element of the Youth Campaign before the Congress. And, it was the
Congress that actively voted to require the match requirement of the
Youth Campaign and to allow for the use content.
As my earlier letter underscored, based on these facts the New York
Times Sunday Magazine, which relied on Salon's reporting in calling the
Youth Campaign secret, has had to subsequently correct the record.
Moreover, the New York Times' inaccurate comments about the Youth
Campaign were far more restrained than those that appeared in Salon.
We must, once again, formally call upon Salon to retract its
reporting that the Campaign was secret. As Salon seeks to establish a
niche as legitimate journalism on the Internet, it is imperative that
your readers have full confidence in the factual basis of your
reporting. Allowing such a clear error as this to go unanswered is not
only wrong, it will undermine Salon's long-term credibility. Certainly,
if the New York Times, one of the nation's most respected newspapers,
felt the obligation to correct the record, Salon, which actually
started this false allegation, should do so as well.
Salon has a particular obligation to correct errors of fact in
Salon's prior reporting because in his recent column Mr. Forbes writes
that ONDCP's relationship with television networks ``was revealed in
Salon earlier this year.'' This repeated error of fact, after we have
made this error clear to Salon, is completely unacceptable. As we
stated in our last letter Salon ``no more broke this story or uncovered
some trumped up secret than did any reader of the August 20, 1998 Los
Angeles Times or the November 2, 1998 USA Today.''
salon's continuing pattern of factual errors
In addition to the errors in Salon's prior reporting, your latest
article about the Youth Campaign continues to completely ignore the
facts. Each of the following factual errors are so clear that they too
require Salon to correct the record.
--In your latest article, Mr. Forbes writes that the Office of
National Drug Control Policy requested the Sporting News to
assign a specific reporter to write stories about drugs. This
is completely false. Through hearsay, Mr. Forbes attributes
this statement to the editor of the Sporting News, Mr. John
Rawlings. However, Mr. Forbes never spoke with Mr. Rawlings to
confirm this allegation. Had he taken this most basic reporting
step he would have found out that ONDCP did no such thing. I
have attached an email from Mr. Rawlings that provides for the
record that Mr. Forbes' reporting is false.
--Mr. Forbes directly quotes Mr. Rich Vietri, an employee of an ONDCP
contractor, in his article. His article gives the false
impression that Mr. Forbes interviewed Mr. Vietri in preparing
the article (e.g.: ``Vietri noted''; ``according to Vietri'';
``Vietri stated last year''; ``Vietri confirms''). In fact, Mr.
Vietri has never knowingly spoken with Mr. Forbes or any other
reporter about the program. Unless Mr. Forbes interviewed Mr.
Vietri under false pretenses, his technique is a deliberate
effort to mislead Salon's readers in order to give his
reporting credibility.
--Mr. Forbes' further argues ``that the U.S. government is using
taxpayer money to, in effect, reward publications whose
editorial content matches the government's views on drugs.''
This is also false. A particular magazine's editorial bent on
any given issue has no role in the Campaign's decision as to
whether to advertise in that magazine. Such decisions are based
upon the ability of any given magazine to effectively reach our
target audiences (youth and adult youth mentors). The specific
criteria for the purchase of ad space are guided by the
professional standards and practices of the advertising
business. Additionally, such advertising decisions are not made
by the government. They are made by advertising agencies that
are experts in the field, without government interference.
--Mr. Forbes refers to ONDCP as a ``law enforcement agency.'' This is
inaccurate. As a matter of fact, ONDCP is a policy coordinating
office. ONDCP has no operational law enforcement statutory
authority.
--Mr. Forbes reports that the magazine Seventeen has been credited
$70,000 by the Youth Campaign for published content. Here
again, Mr. Forbes is wrong. Seventeen has submitted content for
credit. However, as of this date, no decision has been made on
these submissions.
--Salon reports that ``. . . Family Circle snared the drug control
office's second-highest magazine buy: $1,425,000 last year.''
In fact, between June 1998 and July 1999, the Campaign has
bought only $526,138 in advertising from Family Circle. Salon's
reporting is off by roughly three-fold or approximately $1
million.
--Mr. Forbes' description of USA Weekend's efforts confuses a paid
insert or advertorial (which will clearly indicate ONDCP's
sponsorship) with editorial content submitted for match
purposes.
--In what he describes as ``an unusual example,'' Mr. Forbes writes
that USA Weekend ``submitted paragraphs culled from four
different articles in an attempt to cobble together enough
government-endorsed column inches to physically add up to one
full page.'' This is false. In fact, USA Weekend has only
submitted two full stories for possible match credit:
``Tackling Tough Topics with Kids,'' December 3, 1999, and
``Mackenzie Phillips: One Day at a Time,'' August 13, 1999.
--Mr. Forbes also writes that: ``When Congress appropriated nearly $1
billion for the anti-drug program in late 1997, it added the
stipulation that the drug-control office get all of its
advertising at a 50 percent discount.'' Again, he is wrong. The
statutory requirement is not a 50 percent discount on ads. The
requirement is that for every public dollar spent, we must get
an equal dollar's value of public service, which may or may not
be ads. In fact, we often buy ads at full market price and
receive other forms of public service, such as content, as the
public service match. Further, the use of content and other
outreach tools by the Campaign was specifically authorized by
the Congress. Moreover, the statutory ``match'' requirement was
established in 1998 as part of ONDCP's reauthorization not the
Campaign's 1997 appropriation.
That Salon would twice publish error-laced articles by Mr. Forbes
calls into question Salon's journalistic standards. In this latest
article Mr. Forbes' describes arrangements with six magazines; his
description of each contains substantial factual errors.
While no one is above imperfection, it is troubling that so many
important factual errors slipped unnoticed through Salon's editorial
process. Let me underscore, I have not raised for you judgement calls,
but only obvious errors-calling something reported on the front page of
the LA Times secret, misrepresenting public laws, attributing a
statement to a person without ever checking with the purported source,
and the like. Since these clear errors have now made it into your
publication, we must ask that you now without delay correct each of
these errors for your readership.
Thank you for your review of this situation. I look forward to your
reply.
Sincerely,
Robert Housman,
Assistant Director, Strategic Planning.
submitted questions
Senator Campbell. We have additional questions that will be
submitted in writing to be answered for inclusion in the
record.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Ben Nighthorse Campbell
ctac technology transfer
Question. Mr. McCaffrey, according to the information provided at
last week's law enforcement technology demonstration, at which CTAC
displayed technology used in the tech transfer program, it appears that
this program has experienced significant growth since being initiatied
by Congress. Based on your numbers, during the 24 month period in
fiscal year 1998 and fiscal year 1999, there were 662 requests. During
the first six months of fiscal year 2000 alone, however, there were 641
requests. By my calculations, the requests are running approximately
four times higher than previous years.
If this program is so effective and so popular, why did you propose
a 72 percent cut?
Answer. The President's budget request includes various trade-offs
that are necessary to accomplish the mission within the budget
ceilings. The ONDCP budget request for fiscal year 2001 submitted to
the Office of Management and Budget (OMB) included $20 million to
support the Technology Transfer Program. OMB set the ONDCP fiscal year
2001 Technology Transfer Program budget request at $3.7 million. This
amount is contained in the President's budget request.
Question. At this pace, how long will the fiscal year 2000 funds
last?
Answer. All fiscal year 2000 funds have been obligated and
allocated to equipment purchases, training, and program administration
costs. The pie chart shows the distribution of the $13,052,000: 84
percent of the funding has been allocated to purchase of equipment, 6.4
percent for training and support, 5 percent for program administration,
2.6 percent for promotion and outreach (workshops and leadership
meetings), and 2 percent for program evaluation (includes monitoring
60/180/270 day evaluations by recipients).
Between October 1, 1999 and March 13, 2000 the Technology Transfer
Program received 1,954 requests from 670 agencies, which has resulted
in deliveries of 593 items to 500 agencies.
Question. How much would it take to cover all of the fiscal year
2000 requests?
Answer. Approximately four regional one-day workshops are held each
year to acquaint state and local law enforcement agencies with those
technologies available through the Technology Transfer Program. To
ensure a continued timely response to the law enforcement organizations
seeking support, the planned number of one-day regional workshops for
fiscal year 2000 has been reduced. If workshops had continued at prior
year rates, requests would exceed 3-4 times those received in prior
years. This amount of requests would correspond to deliveries totaling
an estimated $26,000,000 during a single year.
Demand for Technologies.--Local police and sheriffs departments
comprise 89 percent (13,578 police and 3,088 sheriffs) of the over
18,000 state and local law enforcement agencies in the United States.
The smaller departments have limited budgets and competing priorities
making them the prime targets to receive technologies offered by the
program.
The figures below show percentage of deliveries achieved by
population size and agency type for fiscal year 1998--fiscal year 2000.
The program has delivered 80 percent of the total deliveries to
population centers less than 500,000.
Deliveries by Population
[Fiscal year 1998-2000] Percent
More than 1,000,000............................................... 12
500,000 to 1,000,000.............................................. 6
100,000 to 499,999................................................ 21
50,000 to 99,000.................................................. 15
Less than 50,000.................................................. 46
Deliveries by Agency Type
[Fiscal year 1998-2000] Percent
Police............................................................ 53
Sheriff........................................................... 26
Task Force........................................................ 10
High Patrol/State Police.......................................... 3
Public Safety..................................................... 4
Other............................................................. 4
staffing
Question. Mr. McCaffrey, as part of last year's conference report,
ONDCP was required to realign your staff from the Office of Legislative
Affairs, Office of Public Affairs or the Office of the Director. In
your November 1, 1999 response you only address two of the positions
realigned.
Can you provide an update on how you have complied with the
congressional directive?
Answer. In November 1997, ONDCP created the Financial Management
Office (FMO) to oversee all financial matters pertaining to the HIDTA,
CTAC, the Special Forfeiture Fund (now housing funds for the National
Youth Anti-Drug Media Campaign, the Drug-Free Communities Program, and
several smaller programs), the Salaries and Expenses Budget, and the
Gift Fund. Establishing the FMO clearly has benefited ONDCP in terms of
increasing the efficiency in which it manages the increasing funds
appropriated to ONDCP for the programs Congress has entrusted to it as
well as internal operations.
ONDCP's fiscal year 2000 request to the Congress for 2 additional
FTE for the FMO was a direct result of both the increased amount of
funds appropriated to ONDCP for its programs and the tremendously
positive impact the FMO had to date on ONDCP's financial management
processes.
Likewise, ONDCP's fiscal year 2000 request to the Congress for 2
additional FTE for the HIDTA Program Office was a direct result of the
increased amount of funds appropriated to HIDTA, the increased number
of designated HIDTAs, and the need to continue quality program
oversight.
Just prior to receipt of Conference Report 106-319, ONDCP
transferred one FTE from the Office of the Chief of Staff to the Office
of Demand Reduction (a second staff person for the Drug-Free
Communities Program) ; one FTE from the Office of the Director to the
Office of Supply Reduction; and one FTE from the Office of Legislative
Affairs to the Office of Demand Reduction (a staff person for the
National Youth Anti-Drug Media Campaign).
Subsequent to these FTE transfers to fill critical needs, ONDCP
still perceived a need to increase the number of personnel assigned to
the FMO and HIDTA program Office.
ONDCP did in fact increase the Offices of Financial Management and
HIDTA by two FTEs each. The four slots were achieved as follows:
--Legislative Affairs was reduced by one FTE (in addition to the FTE
referenced above);
--Public Affairs was reduced by one FTE;
--2 additional FTEs were realigned within the Bureau of State and
Local Affairs to increase HIDTA slots by two FTE. One position
was realigned from the Regions Office and the other, an
unfilled vacancy, was realigned from the Justice and Law
Enforcement Office to an upgraded HIDTA FTE.
ONDCP was able to enact an internal realignment within the Bureau
of State and Local Affairs, to focus more staff and attention on HIDTA,
where it is most needed. The ONDCP Director's immediate office consists
of only six staff members and it was not in the agency's overall
interests to reduce their numbers.
Question. Have all four of the FTE positions been realigned and
filled?
Answer. All four of the FTE positions have been realigned. Of the
two positions realigned to Financial Management, one FTE is filled and
a selection has been made for the other FTE. We anticipate the
candidate will report for duty mid-May. Both positions realigned to
HIDTA are filled.
Question. Were all four FTEs moved from the Office of Legislative
Affairs, the Office of Public Affairs, or the Office of the Director to
the HIDTA program (2 FTE) and the Office of Financial Management (2
FTE) as mandated by Congress?
Answer. In November 1997, ONDCP created the Financial Management
Office (FMO) to oversee all financial matters pertaining to the HIDTA,
CTAC, the Special Forfeiture Fund (now housing funds for the National
Youth Anti-Drug Media Campaign, the Drug-Free Communities Program, and
several smaller programs), the Salaries and Expenses Budget, and the
Gift Fund. Establishing the FMO clearly has benefited ONDCP in terms of
increasing the efficiency in which it manages the increasing funds
appropriated to ONDCP for the programs Congress has entrusted to it as
well as internal operations.
ONDCP's fiscal year 2000 request to the Congress for 2 additional
FTE for the FMO was a direct result of both the increased amount of
funds appropriated to ONDCP for its programs and the tremendously
positive impact the FMO had to date on ONDCP's financial management
processes.
Likewise, ONDCP's fiscal year 2000 request to the Congress for 2
additional FTE for the HIDTA Program Office was a direct result of the
increased amount of funds appropriated to HIDTA, the increased number
of designated HIDTAs, and the need to continue quality program
oversight.
Just prior to receipt of Conference Report 106-319, ONDCP
transferred one FTE from the Office of the Chief of Staff to the Office
of Demand Reduction (a second staff person for the Drug-Free
Communities Program); one FTE from the Office of the Director to the
Office of Supply Reduction; and one FTE from the Office of Legislative
Affairs to the Office of Demand Reduction (a staff person for the
National Youth Anti-Drug Media Campaign).
Subsequent to these FTE transfers to fill critical needs, ONDCP
still perceived a need to increase the number of personnel assigned to
the FMO and HIDTA program Office. ONDCP did in fact increase the
Offices of Financial Management and HIDTA by two FTEs each. The four
slots were achieved as follows:
--Legislative Affairs was reduced by one FTE (in addition to the FTE
referenced above);
--Public Affairs was reduced by one FTE;
--2 additional FTEs were realigned within the Bureau of State and
Local Affairs to increase HIDTA slots by two FTE. One position
was realigned from the Regions Office and the other, an
unfilled vacancy, was realigned from the Justice and Law
Enforcement Office to an upgraded HIDTA FTE.
ONDCP was able to enact an internal realignment within the Bureau
of State and Local Affairs, to focus more staff and attention on HIDTA,
where it is most needed. The ONDCP Director's immediate office consists
of only six staff members and it was not in the agency's overall
interests to reduce their numbers.
Question. What was the total number of FTEs for the Office of
Legislative Affairs prior to the shift and what is the total number of
FTEs now?
Answer. There were eight FTEs in the Office of Legislative Affairs
prior to the shift and now there are six.
Question. What was the total number of FTEs for the Office of
Public Affairs prior to the shift and what is the total number of FTEs
now?
Answer. There were six FTEs in the Office of Public Affairs prior
to the shift and now there are five.
Question. What was the number of FTEs for the Office of the
Director prior to the shift and what is the total number of FTEs now?
Answer. There were seven FTEs in the Office of the Director prior
to the shift and now there are six.
Question. What was the number of FTEs for the HIDTA prior to the
shift and what is the total number of FTEs now?
Answer. There were 4 FTEs in the HIDTA prior to the shift and now
there are six.
Question. What was the number of FTEs for the Office of Financial
Management prior to the shift and what is the total number of FTEs now?
Answer. There were five FTEs in the Office of Financial Management
prior to the shift and now there are seven.
evaluation of hidtas
Question. Mr. McCaffrey: Last year's conference report provided
funds for additional staff at ONDCP and the direction by the conference
to develop standards and evaluate the performance of the HIDTAS that
are currently in existance.
What is the status of this evaluation?
Answer. Last year, Congress directed that we take required
additional staff from existing ONDCP staff ceilings. Accordingly, ONDCP
hired two additional HIDTA staffers. Unfortunately, one of the new
hires has moved on, but active recruitment continues to fill that
position.
In fiscal year 2000, each HIDTA Executive Committee comprised of
federal, state and local law enforcement agencies, submitted a regional
drug threat assessment, a proposed strategy, initiatives and a budget
to ONDCP for approval. ONDCP reviewed each of those documents and
either approved them or requested modifications. The ONDCP review
ensures policy guidelines are followed by the HIDTAs and approves
funding for initiatives that support each HIDTA's unique strategy and
drug threat assessment. This process allows the local decision-makers
at each HIDTA flexibility to determine the initiatives needed to
address unique and changing drug threats.
In addition, each Executive Committee submitted an annual report
for ONDCP's consideration. ONDCP has in place three performance
measures, found in ONDCP's Performance Measures of Effectiveness Report
as well as three performance measures in ONDCP's fiscal year 2001
Annual Performance Plan required by the Government Performance and
Results Act of 1993 (GPRA). Last year, each HIDTA reported data for
those performance areas. ONDCP reported the performance of the HIDTAs
in the Performance Measures of Effectiveness Report and ONDCP's fiscal
year 1999 Performance Report. The first performance measure involves
the HIDTA Developmental Standards to gauge the level of each HIDTA's
achievement in 56 areas in order to increase the effectiveness and
efficiency of law enforcement efforts.
ONDCP utilizes the first performance measure, using the HIDTA
Developmental Standards and data reported by each HIDTA, to gauge and
improve the efficiency and effectiveness of law enforcement efforts at
each HIDTA. In fiscal year 1999, HIDTAs achieved the performance levels
set by ONDCP. This calendar year, the HIDTA Developmental Standards are
being adjusted to include the requirements of the President's General
Counterdrug Intelligence Plan. New milestones are being added to the
HIDTA standards to improve intelligence and information sharing that
will lead to an increase in the effectiveness and efficiency of law
enforcement efforts. ONDCP verifies results during on-site evaluations.
The HIDTA Program Office has developed a protocol for an internal
review program. We have implemented a robust audit/programmatic review
schedule of on-site evaluations. These evaluations will help ONDCP
verify HIDTA performance reports and assess performance in law
enforcement support functions such as intelligence and information
sharing.
Finally, the HIDTA Program Office coordinates budgetary and policy
decisions through the HIDTA Coordinating Committee, comprised of
officials from the Departments of Justice, Treasury and Health and
Human Services.
In managing the HIDTA Program, ONDCP adheres to the concerns and
guidance of Congress. ONDCP also utilizes a significant amount of
advise from local, state and federal law enforcement organizations at
the regional level as well as the headquarters offices of federal
departments. In doing this, ONDCP integrates several processes to
manage the HIDTA Program. The regional HIDTA offices monitor and
respond to unique and changing drug threats with customized initiatives
that focus on outcomes and the concerns of citizens. ONDCP coordinates
budget and policy decisions with federal partners through the HIDTA
Coordinating Committee.
Question. Will this evaluation be statistically based?
Answer. ONDCP requires HIDTA regional offices to provide annual
reports and performance data to ONDCP. ONDCP published that performance
data in the Performance Measures of Effectiveness Report and the fiscal
year 1999 GPRA Performance Report. ONDCP will continue to require
HIDTAs to provide statistical data in annual reports. ONDCP will report
results annually in ONDCP's Performance Measures of Effectiveness
Report and GPRA Performance Report.
Question. For that evaluation, how will you take into account the
unique nature of each specific HIDTA and the different programs they
use?
Answer. The effectiveness of each HIDTA can only be evaluated in
light of its own unique drug situation as documented in the regional
threat assessment, proposed strategy and desired goals. HIDTA Executive
Committees and ONDCP evaluate each proposed initiative using past
performance and future potential to effectively accomplish its
objectives. The funding requirements for each initiative are viewed in
relation to the initiative's past effectiveness and future objectives,
to assess the relative benefits of the financial resources to the
mission. In the past, those reviews have then been compared to
Congressionally mandated ``earmarks'' and directions for ``level
funding.''
Although no two HIDTAs have identical threats, strategies or
initiatives, they must adhere to the Goals and objectives of the
National Drug Control Strategy and ONDCP's programmatic and fiscal
policies/guidelines. ONDCP places emphasis on flexibility at the local
level, coordinated efforts, sharing resources and information, and
requires HIDTA Executive Committees to focus on outcomes and monitor
results.
______
Questions Submitted by Senator Jon Kyl
ondcp drug budget
Question. The President's fiscal year 2001 budget request for High
Intensity Drug Trafficking Areas (HIDTAs), is $192 million, which is
less than the ONDCP's requested $213.7 million. In a time when youth
drug usage is at an all-time high, and your office is beginning to make
progress in leveling-off youth usage, why did the administration cut
your drug budget request by over $21 million?
Answer. The President's budget request includes various trade-offs
that are necessary to accomplish the mission within the budget
ceilings. The ONDCP budget request for fiscal year 2001 submitted to
the Office of Management and Budget (OMB) included $213.7 million to
support the HIDTA program. OMB set the ONDCP fiscal year 2001 HIDTA
budget request at $192 million. This amount is contained in the
President's budget request.
Although drug use among youth remains unacceptably high, ONDCP is
proud to report that according to the Department of Health and Human
Services' Substance Abuse and Mental Health Services Administration
(SAMSHA) 1998 National Household Survey on Drug Abuse (NHSDA), 9.9
percent of youth aged twelve to seventeen reported current use of an
illegal drug in 1998--13 percent decrease from 11.4 percent in 1997.
This decline was the first statistically significant drop in four
years.
meth lab cleanups
Question. METH is a huge problem in my State of Arizona. Arizona
law enforcement is seizing a record number of METH labs--about one lab
per day. As you know, METH labs leave toxic waste behind that can cost
an average of $4,000 to clean-up.
Attorney General Reno recently sent a request to the Office of
Management and Budget (OMB) asking for $10 million in DOJ's budget to
``re-program'' so that DEA can continue to clean-up METH labs for the
rest of fiscal year 2000.
Are you supportive of this?
Answer. The Office of National Drug Control Policy is supportive of
re-programming $10 million from an appropriate Department of Justice
program so that the DEA can continue to clean up METH labs.
Through the first half of fiscal year 2000, DEA has continued to
provide state and local clandestine lab cleanup services on a first
come first served basis. These services have been provided through DEA
base funding and the use of residual COPS program funding which DEA has
carried over from previous years' appropriations. At this time, DEA has
completely exhausted its carryover COPS cleanup funding and is no
longer able to provide its cleanup services to state and local law
enforcement. This represents a funding shortfall of $10 million, which
can be replenished through a re-programming.
hidta/mistic
Question. I am very concerned about the problem of drugs in my
State. The drug trade has devastated Arizona, particulary its children.
Drug use among Arizona teenagers is among the highest in the United
States--one-third higher than the national average.
High intensity drug trafficking areas (HIDTAs) are a key to
stopping the spread of drugs. You have recognized the importance of
HIDTAs and I would like to thank you for your continued support of
Arizona's HIDTA.
As you are aware, members of Arizona's law enforcement community in
the central region of Arizona have submitted a proposal for the Metro
Intelligence Support and Technical Investigative Center (MISTIC), which
would house various HIDTA task forces. The co-location of task forces
in one intelligence support center will help with information sharing
and eliminate the duplication of investigative efforts.
Funding for MISTIC is important to giving law enforcement the
resources they need to fight drugs. Can I count on your continued
support for funding HIDTA activities, such as the proposed intelligence
support center in Central Arizona?
Answer. The HIDTA Program provides assistance to Federal, State and
local law enforcement entities operating in areas of the United States
that are most adversely affected by drug trafficking. Arizona is
especially impacted by intense drug trafficking activities across the
Southwest border. Nationally, the HIDTA Program has helped improve the
effectiveness and efficiency of drug control efforts by facilitating
cooperation between drug control organizations through resource and
information sharing, collocating and pooling resources, coordinating
and focusing efforts, and implementing joint initiatives.
ONDCP enthusiastically supports the HIDTA Program and successful
initiatives such as Arizona HIDTA's Metro Intelligence Support and
Technical Investigative Center (MISTIC) initiative. MISTIC provides
Maricopa County law enforcement agencies the ability to conduct long
term, complex investigations to target regional, national, and
international drug trafficking organizations that impact areas
throughout the United States.
The MISTIC center is currently occupied by 125 representatives from
the Phoenix Police Department, Drug Enforcement Administration, and
Joint Counter-Narcotics Task Force. The Arizona HIDTA Director informs
ONDCP that the current facility is overcrowded and the law enforcement
organizations propose to add to the MISTIC center an additional 225 to
275 people from the Federal Bureau of Investigation, Phoenix Financial
Task Force, Homicide Task Force, and a National Guard Intelligence
Unit. The expanded center would allow HIDTA task force units to focus
on the most significant regional and local drug trafficking, money
laundering and violent organizations.
ONDCP has increased HIDTA funds to the Southwest border and in
particular, Arizona. In fiscal year 1999, ONDCP received $24.47 million
in supplemental funds of which $3.5 million was earmarked for the
following: $1.5 million for Milwaukee; $0.75 million for Arizona; $0.75
million for New Mexico; and $0.5 million for Washington/Baltimore. Of
the remaining $20.97 million provided in discretionary funds: $5
million was used to support the Southwest Border Interdiction Strategy;
$5.92 million increased funds for minimally funded HIDTAs; $5.55
million was used to support the unmet needs of existing HIDTAs; $0.5
million was used for a National Methamphetamine Coordination Initiative
for the Southwest Border California Partnership; $3.8 million was used
to designate five new HIDTAs; and $0.2 million was used to add
additional counties to Arizona, Houston and North Texas HIDTAs.
HIDTA Executive Committees make funding decisions. MISTIC is one of
21 Southwest Border-Arizona HIDTA initiatives competing for limited
funds. The initiative was HIDTA funded over the past six years and is
looking for more money for a new building. For the past two years, the
Executive Committee provided baseline funding of $271,603. In fiscal
year 2000, the Executive Committee provided $650,000 additional (one
time) HIDTA funding for the initiative. The HIDTA Executive Committee
will make fiscal year 2001 funding decisions at its next monthly
meeting.
______
Questions Submitted by Senator Byron L. Dorgan
federal prison drug addiction treatment programs
Question. Since last year's discussion on this issue, are you aware
of any additional programs which are being utilized at either the
Federal or State level which increase the likelihood that addicted drug
offenders are getting the treatment necessary to ensure that they leave
prison drug free?
I am also interested in two additional programs which fall under
your organization, drug courts and the ``Break the Cycle'' program. The
``Break the Cycle'' program is a program of testing, assessment,
referral, treatment and rehabilitation of prison inmates. To date,
approximately 72,447 drug tests have been performed with over 6,652
treatment referrals having been made.
Answer. Bureau of Prisons has in place a program to treat all
eligible offenders before they are released. Its fully documented
curriculum is under revision based on recent research related to female
offenders, dually diagnosed offenders, and offenders with head trauma.
These revisions will foster entry into treatment and retention in
treatment for these populations.
The number of drug courts increased from 12 in 1994 to over 700 at
the present time. Drug courts actively monitor the defendant's access
to and participation in treatment. The interest in drug courts
continues to grow steadily--the number of applications received by the
Drug Courts Program Office has increased significantly since 1995.
The Break the Cycle (BTC) program sites increased to four (4) in
1999, with a new site in Tacoma, WA (three are adult sites and one for
juveniles). This program provides assessment and testing along with
treatment for the addicted criminal justice system (CJS) population.
BTC programs are based on sanctions for non-compliance and reward for
compliance with the treatment and judicial plan.
Question. Do you have any statistics which indicate the success of
this program?
Answer. Break the Cycle (BTC) in Birmingham Tested nearly 3,000
drug involved defendants on pretrial release, and has administering
more than 23,000 tests.
--Referred over 2,500 drug involved defendants to drug treatment.
--Over 90 percent remained in treatment for at least 90 days.
--Over 400 defendants entered an outpatient drug treatment program.
Over 60 percent remained in treatment for at least 90 days.
--About 120 defendants entered residential treatment, most within a
week of the placement decision. Over 60 percent of those who
entered remained in treatment at least 90 days.
--BTC increased the supervision of drug-using defendants released to
the community, but more supervision is needed. Nearly 90
percent of defendants who violated the BTC requirements
received a sanction, but sanctions were not certain, swift or
severe.
--Developed a new bond condition requiring a screening by the
``Treatment Alternatives for Safe Communities'' (TASC) of
felony defendants and expansion of pretrial services to assist
in release, supervision, and treatment of drug-involved
defendants.
--Developed review hearings for probationers and BTC clients awaiting
grand jury review.
--Used BTC to assist in reducing jail overcrowding through providing
the option of drug assessment and treatment plus pretrial
community supervision for jail inmates eligible for release.
--BTC was successful primarily in increasing the number of defendants
on pretrial release subjected to drug testing and referred to
treatment.
--Birmingham, BTC reduced the time needed for identifying drug users
from 6 months to 2 days on average. It also lengthened the time
in supervision and treatment for most drug users.
Question. What is the impact on this program on the Bureau of
Prisons?
The drug courts set up exclusively to handle drug cases with the
emphasis on getting treatment and rehabilitation for first time
offenders. Last year we had about 500 drug courts in operation. You
stated that your goal was to have 1,000 in operation by the end of your
tenure.
Answer. Break the Cycle program has no impact on the Bureau of
Prison (BOP) programs. BOP provides treatment to every inmate needing
the treatment before they are released from the Federal prison. BOP
after care services are similar to Break the Cycle programs.
Question. The drug courts are set up exclusively to handle drug
cases with the emphasis on getting treatment and rehabilitation for
first time offenders. Last year we had about 500 drug courts in
operation. You stated that your goal was to have 1,000 in operation by
the end of your tenure.
How close are we to attaining that goal?
Answer. We anticipate arriving at the goal of 1,000 drug courts by
the end of the year. Currently there are 749 drug courts (adult,
juvenile, family, and tribal) operating or in the planning stage in
over 400 jurisdictions in the United States today, up from the dozen
that existed in 1994. The interest in drug courts continues to grow
steadily--the number of applications received by the Drug Courts
Program Office has increased significantly since 1995.
Question. How does a drug court differ from the Standard Federal
District Court?
Answer. Drug Courts participants appear before the drug court judge
on a much more frequent basis than in trial courts. Drug Court
participants are required to appear for status hearing before the judge
on a weekly or bi-weekly basis. Participants may appear before the
judge more than 20 times during their participation in the drug court
program; however, these appearance are for approximately 10 minutes per
status hearing. Trial court defendants may only appear before the judge
three times--for initial plea, trial, and disposition.
Drug court status hearing are much more informal, and generally
much shorter than general trial court hearing. In drug court, a judge
will often converse directly with participants. In trial court, the
judge generally communicates with defendants through the defendant's
attorney, and generally only for the purposes of advising the defendant
of his/her rights.
Drug courts use short-term sanctions and incentives to respond to
participant progress or non-compliance. Non-drug court dockets use
probation revocation or imposition of suspended sentence to respond to
defendant non-compliance. For example, a drug court judge may sentence
a participant to 2-3 day jail stay for failure to appear or as a result
of positive drug test.
Drug court judges often motivate and encourage participants as they
progress through the program. Judges in traditional criminal court
proceedings generally do not praise defendants for staying clean, or
complying with other court orders.
Drug courts actively monitor the defendant's access and
participation in treatment. Drug court judges are able to respond
quickly to participant non-compliance because dedicated treatment
providers are available to respond to judicial orders. In traditional
trial courts, judges often rely on agencies such as probation to
coordinate referral to treatment services, resulting in long delays
before defendants receive any services or non-participation in service.
Question. With the rapid growth of drug courts around the country,
from approximately 12 three years ago, to approximately 500 today, has
the availability of long term treatment programs grown proportionally?
Answer. No. Drug courts often rely on special funding sources to
provide treatment services to program participants. A few drug courts
have been successful in accessing mainstream funding for substance
abuse treatment (e.g., through medicaid, HMO's, private insurance,
state/local assistance, and the CSAT (Substance Abuse Treatment Block
Grant Program). Almost all drug courts fund treatment services through
non-traditional sources, including criminal justice funding such as the
Bureau of Justice Assistance Byrne Grant Program, the Office of Justice
Programs Drug Court Grant Program, county commissions, state
legislatures, etc. If these non-traditional funding sources for
treatment were not available, drug courts would not be able to provide
adequate substance abuse treatment for program participants. Further,
if drug courts expand to handle all of the substance-abusing
population, the non-traditional funding sources would not be able to
meet the demand.
Question. Do you have any statistics which indicate the success of
this program?
Answer. The statistics listed below are provided by the Department
of Justice Drug Courts Program Office and the National Association of
Drug Court Professionals.
Adult Drug Courts
Drug courts are able to engage and retain felony offenders in
programmatic and treatment services. Only 21 percent of drug court
participants had been in prior substance abuse treatment, while 75
percent had been sentenced to jail or prison for drug-related offenses.
Drug courts are engaging and retaining felony offender in treatment
services for substantially longer periods (12-15 months compared with
much shorter and less intensive programs) and at higher rates (over 70
percent compared with 25 percent or lower) than other criminal justice-
ordered treatment programs.
Drug courts generate cost savings from reduced jail and prison use,
reduced criminality, and lower criminal justice system costs.
Outpatient drug treatment can cost approximately $2,000 to $4,000 per
year compared with approximately $25,000 to $31,000 to incarcerate a
person for one year. Drug courts free up other resources to focus on
offenders who present greater public safety risks.
Drug courts have substantially reduced recidivism rates for
participants (less than 10 percent compared with over 50 percent for
non drug-drug court defendants), with less than one percent of the
reported recidivism involving violent offenses.
All sectors of the justice system have noted ``cost avoidance''
results from reduced recidivism and additionally there are significant
social welfare benefits:
--Over 75 percent of participants become and remained employed.
--4,500 parents became current in child support payments.
--750+ drug-free babies were born.
--3,500 children were returned to the custody of their parents.
In Portland, Oregon, the STOP (Sanction-Treatment-Opportunity-
Progress) Drug Diversion Program was implemented in 1991. A recent
evaluation conducted in 1998 demonstrated:
--Clients who participated in the drug court had 61 percent fewer
subsequent arrests over a two-year period compared to those not
participating in a drug court.
--The evaluation estimated over $10 million in criminal justice
savings to taxpayers (victimization costs, public assistance,
and theft costs).
In addition to drug courts now in operation, reentry drug courts
for persons released from jail is a relatively new idea developing in
many jurisdictions. The potential to expand drug courts through reentry
courts is unlimited. Each year nearly 500,000 inmates are released from
state prison and returned to the community. Reentry courts present a
transition mechanism to monitor, supervise and rehabilitate offenders
from the onset of incarceration as they enter a community-based program
and are subsequently reintegrated back into society.
Juvenile Drug Courts
Findings indicate that retention for is about the same as for
adults (nearly 70 percent) and recidivism to drug use and crime are
markedly lower, especially among program graduates.
Participants from a juvenile drug court in Santa Clara County were
asked to identify what had the greatest impact on their ability to stay
drug-free. Their answers underscore the potent combination presented by
the criminal justice and treatment systems acting in concert. They
identified: constant monitoring and support by their probation officer;
having to face the judge and explain their behavior; urine testing;
positive reinforcement from the drug treatment team; expectations from
the court; not wanting to let staff down; and a sense of humor by the
drug treatment team.
Juvenile drug courts are still relatively young in their
development yet much remains to be learned. There is a positive impact
since the emergence of juvenile drug courts over the past several
years:
--Over 4,000 juvenile offenders have been enrolled in juvenile drug
court programs.
--75 percent of juvenile drug court participants have returned to
school full-time.
--94 percent of juvenile drug court participants have an improved
relationship with their family.
--75 percent of juvenile drug court participants have remained a
volunteer in the community after their participation in the
drug court program.
--75 percent of juvenile drug court participants have improved
academic performance.
--60 drug-free babies have been born to juvenile drug court
participants.
high intensity drug trafficking areas (hidtas)
Question. Under current law, HIDTA funds are approriated for one
year. I note in your budget submission that you are requesting that the
obligational authority be extended for appropriated funds in this
program to a multi-year authority.
Describe for us what advantage a multi-year authority would give
you in the disbursement of HIDTA grants?
Answer. Currently, the HIDTA Appropriation has one-year (annual)
obligation authority. The timing of the enactment of the
Appropriations, coupled with the HIDTA Program review process of the 31
HIDTA proposals and budgets (a four-month process with over 1,300
initiatives/budgets in fiscal year 2000) results in the funds not being
available to be transferred to the recipient agencies until the
beginning of January. The funds transferred to federal agencies, for
use by their field offices in support of the HIDTA Program, are further
delayed by their accounting and disbursement policies. The HIDTA
appropriation language directs ONDCP to transfer at least 51 percent of
the available funds to state and local agencies. Currently, ONDCP
transfers approximately 80 percent of the HIDTA Appropriation to state
and local agencies and the remaining 20 percent to federal agencies.
This distribution ratio is primarily due to the fact the federal
agencies have only nine months (at best) to effectively use their
available funds. The request to revise the HIDTA Appropriations
language to authorize multi-year obligating authority would allow the
federal agencies more effective and efficient use of their HIDTA funds.
Most Federal agencies participate in ongoing HIDTA initiatives that
continue from year to year. With the current Appropriation schedule and
delays necessitated by the HIDTA review process, most federal agencies
do not receive their HIDTA funding until the beginning of the second
quarter. This delay in the funding distribution often hampers and can
curtail Federal Agency participation in HIDTA initiatives, which can
severely inhibit major investigations, particularly labor and resource
intensive Title III court-ordered investigations (wire taps). Multi-
year funding authority would prevent disruption in investigative
activity due to funding limitations.
Question. Since 1990, counties in 31 areas have been designated as
HIDTAs. Your budget request for fiscal year 2001 provides support for
existing HIDTAs but does not include an increase that might entertain
new HIDTA designations.
How many requests for new HIDTA designations are waiting funding?
Answer. Currently, the HIDTA Program is considering six new areas
for HIDTA designation. If designated, each area will require a minimum
of $2.5 million to reach the funding level needed for a start-up HIDTA.
Initial approval of all of these candidates would require $15 million
of additional HIDTA funds.
Also, there are eleven existing HIDTAs that have requested
consideration for expansion based on an increased drug-related threat;
if approved, 69 additional counties would be added to designated
HIDTAs. Should all of the 69 counties proposed warrant designation, the
ONDCP estimates an additional $7 million would be needed, upon
approval.
Question. With nearly ten years of HIDTA funding behind us what
lessons are we learning in combating drug trafficking?
Answer. The HIDTA experience over the past ten years has taught us
that effective ``leveraging'' with the ONDCP-HIDTA dollars leads to the
development of effective and efficient regional and multi-
jurisdictional (Federal, State, and local) collocated and commingled
law enforcement efforts. Nationally, the HIDTA Program has helped
improve the effectiveness and efficiency of drug control efforts by
facilitating cooperation between drug control organizations through
resource and information sharing, collocating and pooling resources,
coordinating and focusing efforts, and implementing joint initiatives.
Cooperation
With nearly ten years of HIDTA funding behind us, the level of
cooperation and sharing information and resources among federal, state
and local law enforcement agencies has greatly improved, though we
still have a lot more to do in these areas.
The HIDTAs help fund collocated, commingled, multi-jurisdictional
law enforcement ``task force'' efforts that are specifically designed
and focused on major regional and national drug trafficking
organizations. HIDTA task forces cooperate and share both resources and
``real time'' intelligence information. HIDTAs' joint initiatives take
advantage of specialized technical equipment, training of personnel,
and provide case ``hand off'' procedures.
The HIDTA Program has significantly increased the collaborative and
collegial sharing of information between federal, state and local law
enforcement. It has accomplished this through development of multi-
agency and collocated/commingled task forces where none previously
existed. This has directly led to a more effective and efficient
utilization of law enforcement resources at the federal, state and
local levels.
HIDTA initiatives have also resulted in closer coordination of the
prosecutions of drug traffickers between United States Attorney Offices
and state and local prosecutors. Drug traffickers who previously evaded
prosecution because of threshold guidelines and/or lack of
prosecutorial resources are now being held accountable.
Planning
Effective law enforcement requires an overarching intelligence-
driven strategy. The HIDTA Program provides an intelligence-driven
strategy supported by customized initiatives that are monitored by
federal, state and local officials.
The HIDTAs provide meaningful reporting systems, which include the
development of a viable Baseline, Mid Year, and Year End threat
assessment process by each HIDTA. These are designed to provide a
complete and comprehensive dynamic overview of task force enforcement
and interdiction efforts.
A meaningful and capable HIDTA strategy follows the regional threat
assessment. The regional HIDTA strategies are designed to identify the
regional law enforcement ``plan'' which has been designed to adequately
address the unique regional threat. Each HIDTA strategy also includes
measurable objectives for the HIDTA.
The Annual Report follows at the end of the year and effectively
measures each HIDTA's impact against the identified drug threat. The
Annual Report also validates the HIDTA's overall strategy with
accomplishments that effectively impact drug trafficking in and
throughout the region.
Regional planning is enhanced through the HIDTA Executive
Committees, which are comprised of federal, state and local law
enforcement executive-level leaders. These committees have improved
relationships between law enforcement organizations and led to
solutions for law enforcement problems outside of the HIDTA Program.
Innovation
The HIDTA Program has funded initiatives that address national and
regional drug trafficking problems in innovative ways. An example is
the creation of Law Enforcement Coordination Centers (LECC) in
California, Arizona and New Mexico to plan and carry out sustained
intelligence driven interdiction operations along the US/Mexican border
such as ``Operation COBIJA.
Additionally, the HIDTA Program has provided additional funding for
the development of the National Clandestine Laboratory database at El
Paso Intelligence Center (EPIC). This is significant in that for the
first time there will be a central repository for clandestine
laboratory information, which can be directly accessed by state and
local law enforcement agencies.
Flexibility
Drug traffickers are able to react to law enforcement much faster
than law enforcement reacts to the traffickers. Law enforcement
continually shifts resources from one mode to the next and from one
locale to the next. The traffickers (and money launderers) rarely
abandon a particular strategy or locale, once it has been successful.
As long as law enforcement continues to uproot defenses and attempts to
follow the traffickers, the traffickers will always have a comfortable
void to revisit.
Drug trafficking varies from town to town, city to city, county to
county and state to state. Therefore, a good strategy must be tailored
to the particular locale and should not be a generic approach. No
single approach is the answer. The drug epidemic will only be ended
through long term, sustained attacks on all fronts. Demand reduction
and supply reduction are both essential elements of the long term
solution.
The National HIDTA Program can best be described as a true ``work
in progress.'' Continual program assessments and adjustments have been
made through the years in order for it to remain literally on the
``cutting edge'' in terms of overall effectiveness and impact.
Flexibility in policy guidance to allow decision making at the local
level is the best approach. Additional flexibility in funding would
likely enhance the effectiveness of the HIDTAs and the HIDTA Program.
Intelligence
The HIDTAs have Regional Intelligence/Investigative Support Centers
which provide ``real time'' operational and tactical intelligence
support by tracking, around-the-clock, all federal, state and local law
enforcement undercover regional operations. Additionally, on-site
analysts are available to immediately research numerous regional and
national law enforcement databases, thus enabling officers to conduct
enhanced investigations.
Viable intelligence systems with regional and national connectivity
greatly enhance success. The HIDTAs establish meaningful regional
intelligence support systems for law enforcement in the form of target
profiling, case support and post-seizure, Title III/PIN/Toll/and cross
case analysis. HIDTA intelligence efforts help ensure that limited law
enforcement resources are focused and utilized in the most efficient
and effective manner possible.
HIDTA-funded Regional Intelligence/Investigative Support Centers
bring together a myriad of databases from federal, state and local
agencies. This has not only significantly promoted the sharing of
intelligence information, but has likewise led to the enhancement of
officer safety through the establishment of event and case
deconfliction systems.
Law enforcement officers often operate in a very dangerous and
volatile environment. HIDTA deconfliction capabilities help ensure
officer/citizen safety. The Intelligence/Investigative Support Centers
enhance officer and citizen safety by tracking all ``critical events''
within a region and notifying various law enforcement undercover
operations when they are about to conflict with each other. Until the
advent of HIDTA, event deconfliction was non-existent in most areas of
the country.
Law enforcement at all levels needs to be information/intelligence
driven as opposed to informant driven. In general, law enforcement does
not maximize intelligence in the best possible ways. In HIDTA we are
doing a better job to make this happen, but we have a long way to go.
Technology
Law enforcement organizations frequently lack up-to-date technology
or do not understand how to use available technology to its fullest.
HIDTA is helping to rectify this situation by providing technology,
offering training, and developing information technology applications
specifically designed for law enforcement use.
Training
Law enforcement, at the state and local levels, does not receive
sufficient training in intelligence functions and drug investigations.
HIDTA is filling this void.
HIDTA funding provided to the National Methamphetamine Chemicals
Initiative has resulted in the training of prosecutors as well as
criminal and diversion investigators at the national level. This has
significantly enhanced the ability of prosecutors and investigators to
develop and prosecute cases against precursor chemical violators.
Additionally, this initiative has afforded an excellent national
information-sharing forum as well as promoted the Drug Endangered
Children Program.
HIDTA funding has resulted in the development of a national law
enforcement training program focused on law enforcement needs. The
HIDTA Assistance Center provides a cadre of instructors and training
classes to federal, state and local law enforcement officers. A
majority of this training is given in specific regions where the
officers are assigned and is provided at no cost to the various
departments.
Accountability
Law enforcement at all levels has difficulty in developing and
focusing on performance measures that hold them accountable for
achieving certain goals and objectives. The HIDTA Program has
implemented elements of the Government Performance Results Act (GPRA)
and ONDCP's Performance Measures of Effectiveness system. Each HIDTA is
required to document and report on an annual basis its successes and
failures in achieving specific performance measurements listed as goals
and objectives for the previous year. This has led to an extensive
self-evaluation on the overall effectiveness of HIDTA funded
initiatives by HIDTA Executive Committees and National HIDTA Program
managers.
Question. Can you briefly describe for us the mechanisms in place
to determine the effectiveness of each individual HIDTA? How often are
they evaluated?
Answer. In fiscal year 2000, Congress authorized funds for a
comprehensive audit of the HIDTA Program. This audit function will
include both a programmatic and fiscal review of each HIDTA. A review
team, led by the National HIDTA Program Director, is about to complete
a management review of the Southwest Border HIDTAs. Recommendations
from this review, on improving the coordination between the Southwest
Border HIDTAs, will be forthcoming in the near future. ONDCP plans to
review all 31 HIDTAs within the next 18 months. Additionally, it is our
policy that all HIDTAs will be reviewed once every 18 to 24 months.
These reviews are designed to identify potential management strengths
and weaknesses as well as favorable management techniques that can be
shared with other HIDTAs. These reviews additionally will enhance the
ability of the Director, ONDCP to assess the effectiveness and
efficiency of the individual HIDTAs in achieving their targeted goals
under the Government Performance Results Act (GPRA) and ONDCP's
Performance Measures of Effectiveness (PME) system.
In addition to the on-site HIDTA reviews, each year the National
HIDTA Program Office thoroughly reviews each HIDTA's Annual Report,
Threat Assessment, Strategy, Initiative and budget for compliance with
both programmatic and fiscal guidelines. The proposals must respond to
the required PME and GPRA targets and HIDTA funds must clearly benefit
the HIDTA Program. The HIDTA's Threat Assessment is reviewed in
relation to drug-related threats nationwide to assure that the threat
in the area warrants the level of proposed HIDTA involvement and
funding. The Strategy is evaluated for its potential to effectively and
efficiently address the drug-related concerns defined by the Threat
Assessment. Each proposed Initiative is evaluated in terms of its past
performance and future potential to effectively accomplish its
respective drug mission. The funding requirements for each Initiative
are viewed in relation to the Initiative's past effectiveness and
future objectives, to assess the relative benefits of the financial
resources to the mission. The on-site review process will verify
accomplishments/successes, as well as, investigate potential weaknesses
identified through these staff reviews.
Additionally, HIDTA Program Guidance emphasizes the requirement of
the individual HIDTA Executive Committees to establish an internal
self-review of programmatic and financial issues. As the participating
agencies are responsible for HIDTA funds and they themselves need to
evaluate an initiatives' impact and to ensure that the strategy is
addressing the threat, each HIDTA is provided with an internal system
of evaluation. Information/issues identified through these internal
reviews will also be emphasized during the on-site staff reviews.
Question. If the committee were to provide you with discretionary
funds for HIDTAs above your request, how would you allocate these
funds?
Answer. With a significant amount of discretionary funding, ONDCP
could exercise more flexibility in funding existing HIDTAs. Existing
HIDTAs could be reevaluated and the funding prioritized according to
drug threats, performance and operational requirements. ONDCP would
consider the following funding priorities:
--Provide additional funding to the newly designated HIDTAs. The
current funding level of new HIDTAs is well below the minimum
requirement ($2.5 million) for a start-up HIDTA. (The HIDTA
Program would require an additional $5.473 million to bring
each of the new fiscal year 1999 HIDTAs up to $2.5 million). As
new HIDTAs mature, they will require additional funding based
on the threat and the law enforcement operations they implement
to counter the threat. Mature existing HIDTAs receive, on
average, $7 million per year.
--Consider designating new HIDTA areas. (Currently, the HIDTA Program
has received formal requests from six areas seeking HIDTA
designation. Should all these areas warrant designation, an
additional $15.0 million would be required ($2.5 million per
HIDTA).
--Consider the expansion of existing HIDTAs. (Eleven HIDTAs have
requested expansion based on an increased drug-related threat;
if approved, 69 additional counties would be added to
designated HIDTAs. Should all of the 69 counties proposed
warrant designation, the ONDCP estimates an additional $7
million would be needed.)
--Provide additional funding to those existing HIDTAs with various
unmet needs due to shifting/increasing drug threats and
inflationary/cost of living induced budget erosion caused by
many years of level funding.
--Implementation of the recommendations of the General Counterdrug
Intelligence Plan within the HIDTA Program.
--Additional innovative/successful initiatives that are achieving
significant results towards goals and performance targets.
Additionally, ONDCP would hope that future HIDTA appropriations
allow the Director, ONDCP, through the National HIDTA Program Office,
to fund existing HIDTAs based on need and past accomplishments; rather
than mandating level funding.
Question. At this stage in the life of the HIDTA program (ten
years), would having some level of discretionary funding be advantagous
to responding to the changing drug threat confronting local, State, and
Federal law enforcement?
Answer. Yes, discretionary funding would allow the HIDTA Program to
react to changing drug patterns; provide funding to HIDTAs with
unexpected and/or unmet needs due to shifting/increasing drug threats
and inflationary/cost of living induced budget erosion caused by many
years of level funding; provide some performance based funding; and
when warranted, designate new HIDTA areas or expand existing HIDTAs.
counter-drug technology assessment center
Question. Your budget request for the technology transfer portion
of CTAC indicates that you are recommending a significant drop in the
funding of this program. After reading your description of the
overwhelming success of the tech transfer program, I am a little
puzzled. You stated that 631 State and local agencies have benefitted
from this effort. Further, you indicate that the ``technologies have
contributed to improved counter-drug operations''. Additionally, you
state that the ``results have been an increase in drug related arrests
with improvements in officer safety''.
Why are you recommending a reduction in what appears to be a
successful and popular program?
Answer. The President's budget request includes various trade-offs
that are necessary to accomplish the mission within budget ceilings.
The ONDCP budget request for fiscal year 2001 submitted to the Office
of Management and Budget included $20 million to support the Technology
Transfer Program. OMB set the ONDCP fiscal year 2001 Technology
Transfer Program budget request at $3.7 million. This amount is
contained in the President's budget request.
Question. How many requests for technology transfers are presently
awaiting fulfillment?
Answer. Between October 1, 1999 and March 13, 2000 the Technology
Transfer Program received 1,954 requests from 670 agencies. The
$13,052,000 appropriated in fiscal year 2000 can support deliveries of
593 items to 500 agencies. 170 agencies must wait until the next budget
cycle to have one of their top three requests fulfilled.
Approximately four regional one-day workshops are held each year to
acquaint state and local law enforcement agencies with those
technologies available through the Technology Transfer Program. To
ensure a continued timely response to the law enforcement organizations
seeking support, the planned number of one-day regional workshops for
fiscal year 2000 has been reduced. If workshops had continued at prior
year rates, requests would exceed 3-4 times those received in prior
years.
Question. How many requests were you able to fulfill last year? And
how many do you anticipate completing this year?
Answer. In fiscal year 1999, 667 deliveries were made to 352
agencies. The $13.052 million appropriated in fiscal year 2000 will
support 593 deliveries to 500 agencies.
Question. How important is the tech transfer program to advancing
the goals of the national drug control strategy?
Answer. The Technology Transfer Program supports Goal 2 of the
National Drug Control Strategy: increase the safety of America's
citizens by substantially reducing drug-related crime and violence. The
Technology Transfer Program seeks to improve capabilities of federal,
state and local law enforcement to achieve the outcome of reduced drug-
related crime. By transferring mature technologies from federally
sponsored research and development programs to state and local law
enforcement organizations, agencies from smaller jurisdictions that
otherwise would not be able to participate due to limited funds or lack
of technical expertise are able to benefit from these developments.
Local police and sheriffs departments comprise 89 percent (13,578
police and 3,088 sheriffs) of the over 18,000 state and local law
enforcement agencies in the United States. The smaller departments have
limited budgets and competing priorities making them the prime target
to receive technologies offered by the Technology Transfer Program. The
figures below show percentage of deliveries achieved by population size
and agency type for fiscal year 1998--fiscal year 2000. The program has
delivered 80 percent of the total deliveries to population centers of
less than 500,000.
Deliveries by Population
[Fiscal year 1998-2000] Percent
More than 1,000,000............................................... 12
500,000 to 1,000,000.............................................. 6
100,000 to 499,999................................................ 21
50,000 to 99,000.................................................. 15
Less than 50,000.................................................. 46
Deliveries by Agency Type
[Fiscal year 1998-2000] Percent
Police............................................................ 53
Sheriff........................................................... 26
Task Force........................................................ 10
High Patrol/State Police.......................................... 3
Public Safety..................................................... 4
Other............................................................. 4
drug-free communities program
Question. The Drug-Free Communities Act of 1997 authorizes funding
for the program through fiscal year 2002. Fiscal year 2001 funding is
authorized at $40 million, yet your request in this budget is only $35
million.
With your request of $35 million, can we expect that additional
communities will be eligible for the program?
Answer. Yes, we estimate that approximately 106 new community
coalitions would be funded if the amount of $35 million is appropriated
and $2.5 million is used for program administration, evaluation, and
training and technical assistance. This would bring the total number of
funded communities to approximately 408, assuming that all previously
funded projects reapply and that all new applications are funded at the
maximum allowable level of $100,000. The exact amounts will vary
slightly.
This estimated number of new community coalitions is based on a
funding formula stipulating that communities shall receive grant funds
in declining amounts in years three, four, and five of their awards.
Question. Do you have any statistics that show the success of this
initiative in the communities that have received grants under this
program?
Answer. The DFC Program has awarded grants to two groups of
communities so far. The first group of grantees began work on their
projects in October of 1998 and the second group in October of 1999.
The evaluation team is Caliber Associates, which works under contract
to the Office of Juvenile Justice and Delinquency Prevention. All
grantees make periodic progress reports and a core sample of fifteen
projects is studied intensively by the evaluation team.
Caliber Associates has completed Profile Reports on both the fiscal
year 1998 and fiscal year 1999 grantees. Measures on the 1998 grantees
indicate the following:
Objective: Increasing recruitment and involvement of key community
leaders and groups
Nearly three-quarters (74 percent) of the coalitions reported
increased membership.
Nearly two-thirds (65 percent) of the coalitions reported increased
youth membership.
Objective: Promoting the use of community indicator data to identify
local drug problems
All coalitions have conducted needs assessment studies to better
identify and quantify local drug problems and needs.
Objective: Assisting community groups and agencies to enhance their
prevention capabilities
96 percent of the coalitions have engaged in collaborative, data-
driven planning with other agencies.
94 percent have engaged in community mobilization activities and
formed new partnerships with other agencies.
Objective: Promoting dissemination of information about best practices
in drug abuse prevention
97 percent of the coalitions have provided training about research-
based prevention approaches.
64 percent have supported media campaigns and events to raise
awareness about risk factors and prevention.
Objective: Promoting adoption of ``promising'' and ``proven''
prevention programs
96 percent have provided counseling, education, and mentoring
services to youth and parents.
62 percent have adapted ``promising'' prevention curricula for
local use in educational settings.
Objective: Promoting brokering of resources to support prevention
programming
All coalitions received matching funds equal to or greater than
their DFC grant from other non-federal sources.
75 percent received matching funds from two or more other sources.
These are but a few of the early indicators supporting our goal of
reducing the use of illicit drugs, alcohol, and tobacco among youth. Of
special note is the increasing ability of communities to measure and
evaluate data relating to the many forms of drug use. As those measures
improve, the communities are also increasingly able to identify and
implement better evidence-based programs, interventions, and other
strategies that have greater potential to be successful in reducing one
of America's greatest public health challenges.
Question. What safeguards are in place to ensure that the
individual communities are in compliance with the program requirements
and that the money is being spent according to the provisions of the
Drug-Free Communities Act of 1997?
Answer. ONDCP has entered an Inter-Agency Agreement (IAA) with the
Office of Juvenile Justice and Delinquency Prevention (OJJDP) to
administer the day-to-day operations of the Drug-Free Communities
Program. The overall program administrator is at ONDCP, however, and he
has daily contact with the Special Emphasis Division of OJJDP as it
manages operations with the current group of 213 grantee communities.
There are five program managers within OJJDP and each is assigned one-
fifth of the grantees to monitor. The Office of the Comptroller staff,
who oversees the budgets of each individual grantee, supports them, in
turn.
The five program managers make 80-90 site visits to Drug-Free
Community projects during the year, review each 6-month progress
report, review each quarterly financial report, and engage in telephone
and e-mail monitoring activities. Whenever there are signs of trouble
at any site, program managers contact their supervisor for further
consultation. Frequently, a site visit is scheduled if the supervisor
believes it to be warranted on either programmatic or fiscal grounds.
The ONDCP administrator is notified whenever OJJDP supervisors think
there is reason to be concerned about a project. In the rare event of a
legal issue, the Dept. of Justice Office of Legal Counsel is brought
into the situation, which, in turn, contacts the ONDCP legal staff.
More typically, the OJJDP program managers make arrangements for
specific technical support, training, or other assistance when project
leaders run into difficult stumbling blocks. ONDCP and OJJDP have
agreed on a guiding operating principal to intervene quickly and
appropriately whenever there are signs of problems. Whenever a problem
is sufficiently severe that termination of a project is a potential
outcome, the matter is brought to the administrator of OJJDP and the
director of ONDCP for final decision.
youth anti-drug media campaign--effectiveness of network programming in
achieving campaign goals--performance/evaluation
Each phase of the media campaign has been evaluated to ensure that
the proper performance goals are met. However, the use of programming
content versus a ``hard match'' was not a part of the first phase.
There is a concern of evaluating the influence of straight advertising
when it is possibly assisted by programming content.
Question. Can you describe for the Subcommittee the outreach role
of ONDCP, and how this translates into appropriate messages that
achieve the aims of the Anti-Drug Media Campaign?
Answer. Long before Congress created the National Youth Anti-Drug
Media Campaign, ONDCP conducted outreach and responded to the news
media, entertainment industry, and youth and professional sports
organizations in an effort to generate accurate depiction and
presentation of information about youth drug use issues. Researchers,
writers, and producers have traditionally contacted ONDCP seeking
research or data, background information on issues or drug policies,
expert referral, and other kinds of technical assistance. The Federal
government spends more than $730 million dollars annually on illicit
drug prevention and treatment research per year.
While ONDCP has always provided expertise and technical assistance
whenever television writers and producers have needed it, those efforts
have been expanded to enable the Media Campaign to be more proactive.
--In appropriating funds for the Campaign, Congress recognized that
two key reasons for increased drug use among youth are: a
reduced perception of risk about using drugs, and a belief that
drug use was normal and acceptable behavior. To influence these
attitudes Congress directed that the National Youth Anti-Drug
Media Campaign deliver messages through the full-range of media
that influence young people including music, television,
movies, the Internet, as well as use of other techniques that
affect messages and images youth receive. Thus, the Campaign is
a comprehensive public health communication effort that
leverages the full range of communication vehicles and
strategies to reach young audiences. The National Institute on
Drug Abuse oversees the long-term evaluation of the Campaign,
through a contractual agreement with Westat and the Annenberg
School of Communications. This evaluation includes questions
for both youth and parents regarding their source of drug
information (such as television programming, Internet, music,
and other Media Campaign components).
--The Media Campaign's entertainment outreach goals are to:
--Encourage accurate depictions of drug use issues--including the
consequences of drug abuse--in programming, film and music
and the Internet that reaches teens and parents.
--Dispel myths and misconceptions about youth drug abuse, and where
appropriate incorporate strategic drug prevention concepts
into popular culture.
--De-normalize the image of drug use on TV, and in popular music
and film.
--Promote research-based strategies to reduce youth drug use, such
as parental communication and involvement with their
children, peer refusal skills, negative consequences, etc.
Entertainment media can provide accurate drug information
and modeling to youth, parents, caregivers, faith community
leaders, coaches, teachers, policymakers, and other
influencers of youth.
All of these efforts are completely voluntary. The ONDCP does not
coerce, request script review, or proselytize the entertainment media.
Doing so would undermine entertainment outreach. We believe that
informing and educating the entertainment industry's creative community
will result in more-informed and accurate portrayal about youth drug
use and drug issues. This approach has proved effective in a number of
other highly successful public health campaigns (seat belt use,
designated drivers, etc.).
Providing Technical Expertise
A key ONDCP strategy is to affect the creative process through a
series of briefings, roundtables, and workshops. These events provide a
cost-effective way to educate and inspire television writers, film
screenwriters, and executives to portray realistic substance abuse
consequences and to spur ideas for future storylines or scenes.
Sessions conducted last year included briefings in Hollywood for
network executives at ABC and Fox Television, and a roundtable for
executives who create children's programming. On April 11, 2000, ONDCP
hosted a roundtable in Los Angeles in partnership with the National
Campaign to Prevent Teen Pregnancy, highlighting the link between
substance abuse and teen pregnancy. Attendees included representatives
from MTV, VH1, NBC, ABC, HBO, Nickelodeon, and writers from several
prime time television shows.
Several more roundtables are scheduled for this year, including
separate sessions focusing on Children of Substance Abusers and Drug
Treatment, which ONDCP will be hosting in partnership with The
Hollywood Reporter, an entertainment trade publication that is widely
read in the entertainment community.
Our roundtables are complemented by other briefings and one on one
meetings that Director McCaffrey and other federal officials have had
with the creative community. ONDCP has met with a broad array of
entertainment industry organizations and their leaders including the
Writers Guild, Caucus of Producers, Writers and Directors, Screen
Actors Guild, Directors Guild, Producers Guild, Academy of Television
Arts and Sciences, and other organizations. Meetings were also held
with industry leaders in Hollywood including Barry Diller, Frank
Biondi, Richard Dreyfuss, Rob Reiner, Chuck Norris, and senior
executives of all the major networks. We have participated in
entertainment industry events and briefed executives from Hollywood
talent agencies, and publicity and management firms. And we've provided
information and subject matter experts to writers and producers of
individual shows, including Cosby, Chicago Hope, ER, and Beverly Hills
90210.
To support its outreach strategy, ONDCP identifies and provides
experts (from a wide range of Federal agencies: NIDA, SAMHSA, DOE) and
resources to writers who have contacted ONDCP with questions concerning
substance abuse. Such expertise is specifically tailored to meet the
needs of the television industry, particularly the time constraints
under which writers work. We also provide specialized materials;
mailings; handouts; and have begun to develop a web site designed for
this unique audience.
While ONDCP works directly with many entertainment industry
organizations, we have also retained expert support in Los Angeles to
work with the Campaign to assist in developing our core strategies, and
provide resources and expertise to creative executives in their own
community. Rogers & Associates and Mediascope, working with ONDCP, can
refer writers to experts in the field who can answer a specific
question or address a particular issues or provide specific
information.
Other Entertainment Outreach Activities Include:
Engaging celebrities who are positive role models in extending the
reach of campaign messages through participation in such activities as
personal appearances and on-line chats. Advertisers and marketers have
long used celebrities to make their messages more appealing. The
technique is particularly effective with young people, who frequently
try to emulate the looks, behavior, and attitude of their favorite
stars. An impressive range of celebrities has spoken publicly about
campaign themes and goals, including TV stars Eriq La Salle of NBC's
ER, Jenna Elfman of ABC's Dharma & Greg, and Lisa Nicole Carter of
Fox's Ally McBeal; musicians Lauryn Hill, and The Dixie Chicks; the
U.S. Women's World Cup champion soccer team; and Olympic Gold Medallist
Tara Lipinski. All have generously donated their services to the
American taxpayer--no fees have been or will be paid to celebrities to
take part in Media Campaign activities.
Developing public service messages in collaboration with major
media outlets. Seven networks have produced public service
announcements using celebrities from their most popular shows. These
messages have been reviewed by ONDCP to ensure they are supportive of
the Campaign's communication strategy.
Conducting content analysis and other research to determine how
entertainment media depict substance abuse issues. ONDCP has
commissioned two content analyses to date-one examining the depiction
of substance use in movies and music, the other looking at prime time
television. This research revealed widely varying levels of accuracy in
the portrayal of youth drug use issues. The findings help shape the
priorities of ONDCP's outreach.
Question. Last year you stated that approximately 84 percent of the
total invested by the Government was a ``hard match'' and that 16
percent was attributable to a ``soft match'', most of which was in
programming content. Is this a proper balance or should we be more or
less focused on programming content?
Answer. ONDCP does not influence or determine the balance, other
than limiting programming and other in-kind public service activity to
no more than 49 percent of the total public service match requirement
of each media outlet. ONDCP, through a process led by the Ad Council,
sets broad guidelines which give media vendors associated with the
Campaign broad flexibility to meet the mandated match as they see fit.
The only requirement is that more than half (51 percent) of the public
service match must be in the form of time or space (PSAs). The media
vendor decides the makeup of the remaining 49 percent, which can
include either additional public service time or space, or other PSA
in-kind contributions, including programming. This process achieves
several things:
--Increases actual PSA activity and ensures the Campaign does not
undermine existing PSA time.
--Generates greater private sector involvement with the Campaign and
provides a mix and range of PSA and communication activity.
--Benefits the Campaign by providing additional needed resources,
activities or products--e.g., website development, teaching
materials, posters, community events, etc.
--Allows ONDCP to include important youth and ethnic targeted media
outlets in the Campaign, which otherwise might be excluded.
Some media vendors, such as certain cable or ethnic media or
Channel One, have formats or limited inventory which preclude
them from meeting the match with all PSAs.
While there is no predetermined balance, both programming and
advertising play an integral part in meeting the Campaign's goals and
objectives. Programming delivers messages within a certain context,
using compelling plots by accepted characters making it an effective
tool to help the Media Campaign reach its objectives. ONDCP believes
accurate on-strategy programming can be even more effective than ads in
shaping behavior, building understanding about an issues and in
particular in establishing norms. Importantly, advertising is also
necessary to build awareness.
Question. Are you aware of any studies which might indicate which
method is better to achieve the goals we are attempting to reach? In
other words, is an ad which is repeated on several occasions the best
method? Or, would our goals be better served by spending more effort in
the network programming arena?
Answer. We are not aware of research that breaks out or identifies
the specific contribution or values of various media approaches to a
media campaign. There are a number of studies which support the value
of programming in the kind of comprehensive public health communication
campaigns that ONDCP is implementing. Advertising is the foundation of
the Campaign effort, however the Campaign is an integrated program that
includes a number of other vital elements that work together to achieve
the goals of the Campaign. ONDCP remains convinced that for the
National Youth Anti-Drug Media Campaign to be most effective,
scientifically accurate drug-prevention messages must be conveyed
through programming, as well as through advertising and other media
vehicles and strategies.
In the 1980s, public-health advocates began to harness television
programming to promote public-health issues. Since then, numerous
campaigns have sought to communicate prevention messages within
programming. There is widespread belief that TV viewers, particularly
children and teenagers, are strongly influenced by the attitudes and
behaviors they see on TV. An analysis conducted for the Kaiser Family
Foundation reports that numerous empirical studies have established a
relationship between media content and youths' knowledge, beliefs, and
attitudes.
Today, there are a number of national organizations working within
the existing structures of the entertainment industry, attempting to
shape TV programming. They include the Henry J. Kaiser Family
Foundation, the National Campaign to Prevent Teen Pregnancy, Mothers
Against Drunk Driving, the Population Communications Institute, the
American Lung Association, and the Media Campaign's own partner,
Mediascope. Their efforts are complemented by those of federal agencies
like ONDCP, NASA, Center for Substance Abuse Prevention, the National
Institutes of Health, the Centers for Disease Control and Prevention,
as well as all of the branches of our armed forces, who work to ensure
that entertainment portrays issues and situations realistically and
accurately. Both research and anecdotal evidence support this notion.
Examples include:
--Following an ER episode concerning end-of-life issues, Last Acts, a
coalition of health-oriented groups aimed at informing the
public about end-of-life issues, received more than 4,000 calls
for information.
--Martha Williamson, producer of Touched By An Angel, says she is
regularly contacted by viewers who say the show helped them
make a major life decision, such as quitting smoking. (The
American Prospect, 7//1/99)
--Research conducted at UCLA's Health and Media Research Center
suggests that up to 70 percent of people admit to relying on TV
for health information. News programs, talk shows, daytime soap
operas, sitcoms and prime time dramas are among the TV sources
cited. (LA Times, 12/13/99)
--A Kaiser Family Foundation study indicates 23 percent of teens say
they rely on television and movies for information about
pregnancy and birth control. (ibid). This study also revealed
that, awareness of morning-after contraception increased 17
percent (from 50 percent to 67 percent) among ER viewers in the
week after the show aired an episode focusing on it.
--The National Designated Driver Campaign. One of the best-documented
examples of a Media Campaign incorporating entertainment
programming is the National Designated Driver Campaign that was
launched in 1988. Dr. Jay A. Winsten, Ph.D., Associate Dean and
Director of Harvard School of Public Health's Center for Health
Communication, notes that the Campaign broke new ground when
television writers agreed to insert drunk driving prevention
messages in scripts of top-rated shows. Dr. Winsten describes
this campaign as ``the first successful effort to mobilize the
Hollywood creative community on such a scale, using dialogue in
prime time entertainment as a health promotion technology.''
This integrated public-health communications campaign had a
marked effect on alcohol-related traffic fatalities. Whereas in
the three years before the launch of the designated driver
campaign there had been 0 percent change in such fatalities, by
1992 (four years after the Campaign's launch), annual
fatalities had declined by 24 percent.\1\ Further evidence as
to the success of this program was note in a July 1999 article
in The American Prospect, as follows:
---------------------------------------------------------------------------
\1\ Winsten JA. Promoting Designated Drivers: The Harvard Alcohol
Project. American Journal of Preventive Medicine. 1994 May-Jun; 10(3
Suppl):11-14.
---------------------------------------------------------------------------
--67 percent of U.S. adults noted the appearance of designated
drivers on network TV just one year after the start of the
Campaign.
--Between 1989 and 1991, 8 percent more U.S. adults (29 percent vs.
37 percent) claimed to have served as a designated driver
at least once.
--In 1991, over one-half (52 percent) of young adults (under the
age of 30) reported that they had been a designated driver
at least once.
--1999 Healthstyles Survey. Centers for Disease Control and
Prevention analysis of this report reveals that almost half
(48 percent) of the people who report they watch soap
operas at least twice a week learned something about
diseases and how to prevent them from the daytime drama
story lines. More than one-third (34 percent) took some
action as a result. One in four (25 percent) told someone
about it, 13 percent suggested someone do something about
it, 7 percent visited a clinic or doctor, and 6 percent did
something to prevent the problem.\2\
---------------------------------------------------------------------------
\2\ The Healthstyles Survey is a proprietary database product
developed by Porter Novelli. Its sampling is based on seven U.S. Census
Bureau characteristics. The survey is used by organizations such as CDC
to shape public-health outreach efforts.
---------------------------------------------------------------------------
The Media Campaign's Communication Strategy Statement also
highlights programming's potential for communicating public-health
messages. Excerpts of the document follow:
--``Research has repeatedly shown that media programs work best in
conjunction with other community- and school-based anti-drug
programs, when consistent messages are conveyed through a
variety of channels and in several different contexts.'' (Flay
& Sobel, 1983; Macoby, 1990; Schilling & McAllister, 1990;
Sloboda & David, 1997)--P. 6.
--``Health information, including information about drug use issues,
is provided through all forms of media including news,
entertainment programming, and advertising. This information is
so pervasive that most people report the media as their primary
source of information about health issues.'' (Freimuth, Stein,
and Kean, 1989)--P. 7.
--The Media Campaign must ``harness a diverse media mix including
television, video, radio, print, and Internet and other forms
of new media to deliver both general and tailored messages.
Within the media mix, messages will be delivered through the
full range of media content, including paid and public service
advertising, news, public affairs, programming, and
entertainment programming.''--P. 9.
--``Effective message tailoring involves . . . working with
communications professionals who specialize in creating content
for particular audiences.''--P. 9.
Evaluations of ONDCP's Media Campaign confirm this research
--ONDCP September 1998 report to Congress--(Testing the Anti-Drug
Message in 12 American Cities: National Youth Anti-Drug Media
Campaign Phase I (Report No. 1)--found:
--Youth asserted that ``TV programming promotes drug use and
violence.''--P. ES-4.
--``Parents' perceptions of the cultural relevance and credibility
of anti-drug ads, much like youth's perceptions, focused
more on program content and presentation . . .''--P. ES-7.
--``The Internet, television shows, and song lyrics heard on radio
frequently condone the use of drugs. Youth are bombarded
with these messages on a daily basis. Mothers and fathers
frequently work long hours outside the home, leaving their
children free during the after-school hours to watch
television and be exposed to messages that glamorize drug
use. Youth, particularly high school students, are
subjected to ever-increasing sources of stress in their
daily lives. Future decisions about the design and
implementation of the Media Campaign should be made within
the context of these issues.''--P. ES-13.
--ONDCP June 1999 report to Congress--(Investing in our Nation's
Youth: National Youth Anti-Drug Media Campaign Phase II Final
Report)--found that:
--``There was a significant increase in the percentages of both
youth and teens who perceived that TV shows, news, and
movies were important sources of anti-drug information.''--
P. 5-2.
--The use of TV shows, news, and movies; outside billboards; and
posters on buses, bus stops and subways are effective ways
of reaching youth and teens with anti-drug messages.''--P.
5-3.
Question. Have the goals of the five-year Media Campaign strategy
changed?
Answer. The goals remain unchanged.
Question. Can you tell the committee what measure of success has
been achieved to date, as a result of the media campaign?
Answer.
Evaluation of Phases I and II Indicate Success of National Youth Anti-
Drug Media Campaign in Reaching America's Youth.
In January 1998, the Office of National Drug Control Policy (ONDCP)
undertook an historic initiative--the National Youth Anti-Drug Media
Campaign, which was then introduced in 12 American cities. In July
1999, the campaign was expanded to the national level. The overarching
goal driving this campaign is to educate and enable America's youth to
reject illegal drugs. ONDCP achieved its initial objectives in Phases I
and II: to increase awareness of anti-drug messages among youth and
adults--the critical first key step in changing attitudes and
ultimately behavior. This campaign is instrumental in ensuring that we
as a Nation achieve the stated goal of reducing youth use of illegal
drugs.
One of the unique aspects of this federally funded campaign is that
media outlets accepting the campaign ads must match ONDCP's purchases
with an equal value of public service time in the form of PSAs, story
lines, or other programs or activities related to youth drug use
prevention. To date, ONDCP has exceeded its pro bono match
requirements. More and more media outlets are coming on board.
In Phase I, not only were significant increases found for specific
ads among all target audiences-youth, teens, parents and other adult
influencers---but we also found that public service announcements were
not supplanted by the paid campaign. Media monitoring data gathered on
ads and PSAs airing in the target and comparison sites indicate that
the purchase of anti-drug ads did not affect the frequency with which
anti-drug or other social issue public service announcements aired.
The Phase II results confirm the success of the campaign in
reaching the target audiences. In Phase II, ONDCP aimed to reach 90
percent of the target audiences (youth, teens, and parents) with 4 to 7
anti-drug messages a week through paid ads. Phase II was evaluated
through national school-based surveys of more than 45,000 youth in
fourth through twelfth grades and a national telephone survey of about
8,500 parents. Phase II achieved its initial objective: to increase
awareness of anti-drug messages among youth and adults at the national
level. The paid ads resulted in significant increases in awareness
between baseline and follow-up, the first step in changing attitudes
and behavior. Increases in awareness of specific anti-drug ads were
statistically significant with differences of up to 14 percentage
points between baseline and follow-up. The evaluation indicates the ads
are influencing youth: There was a 12-percent increase in the
percentage of youth who agreed that the ads make them stay away from
drugs (an increase from 61 to 69 percent). Also, the percentage of
youth reporting they learned a lot about the dangers of drugs from
television commercials increased from 44 to 52 percent. In addition,
while not expected in Phase II, some attitudinal shifts occurred in the
intended direction, e.g., between baseline and follow-up, there were
statistically significant increases in the percentage of teens who said
they were scared of taking drugs as well as in the in the percentage of
teens who reported understanding the negative effects of marijuana use.
The National Youth Anti-Drug Media Campaign is the largest and most
comprehensive anti-drug media campaign ever undertaken by the Federal
Government. Phases I and II have been successful--the campaign is
meeting its goals. The campaign, which has entered Phase III, comprises
more than 80 different anti-drug messages in a variety of media, from
Internet banner ads to television ads to radio ads and book covers. Ads
are being developed in 11 languages other than English as part of our
strategy to reach the range of racial and ethnic groups in the United
States. In Phase III, ONDCP and its partners, such as the Partnership
for a Drug-Free America, will continue to work to sustain long-term
anti-drug attitudes. Collectively, we will ensure that drug use among
young people is reduced.
Question. While we have witnessed a confirmed increase in the use
of most illegal drugs in the past few years, what specific criteria are
being used to measure the success of this program?
Answer. The task of the evaluation is to determine whether observed
changes in drug use or drug attitudes can be attributed to the Media
Campaign specifically. A decrease in drug use rates would not be enough
by itself to conclude the Media Campaign was effective as it would not
identify the forces behind the change. In order to be able to make
reasonable claims that the Media Campaign was responsible for change,
the evaluation is designed to go well beyond analysis of trends from
existing data systems. The evaluation will combine analysis of trends
with analysis of exposure of youth and parents to the media campaign
and the association between exposure and outcomes. The evaluation is
designed to obtain sensitive measures of exposure to anti-drug
advertising. The measures are designed to assess changes in knowledge,
beliefs, attitudes, and behaviors brought about by the messages in the
Media Campaign ads. These measures are quite detailed so the questions
in the survey try to capture that specificity.
If evidence of favorable trends in existing time series can be
combined with evidence that large number of youth and parents recall
seeing the advertisements (and thus were exposed to the Media Campaign)
and that the youth and parents with higher levels of exposure had more
favorable beliefs, attitudes, and behaviors than those with lower
levels of exposure, then it will be possible to build a convincing case
that the Media Campaign has had an effect. To strengthen any evidence
of an effect, the evaluation includes a longitudinal component in which
the same youth and parents will be interviewed once per year over the
4-year period. These repeated interviews will allow measurement of some
aspects of adolescent development and will thereby allow a much better
sorting through of the causal processes than is possible with a cross-
sectional survey.
youth anti-drug media campaign--nuts and bolts of the programming
``match''
Question. Could you briefly describe for the Subcommittee how the
concept evolved to include the use of programming conent as a
``match?''
Answer. The concept of the match was first developed by ONDCP and
contractors in the spring of 1998, as a means of helping ONDCP address
two of seven Congressionally stipulated concerns in the fiscal year
1998 appropriation. These concerns included: (1) ensuring the Campaign
does not undermine existing anti-drug public service efforts, and (2)
ensuring private sector participation in the Campaign.
The pro bono match concept was initially used as a negotiating
strategy by Bates/Zenith, the Campaign's advertising and media buying
contractors. Bates/Zenith successfully implemented this program by
exceeding a dollar for dollar match. The match also allowed media
outlets, to use a variety of activities to fulfill match requirements
that would be helpful in achieving Media Campaign objectives, including
programming that conveyed scientifically-based messages about drug use
and its consequences. This flexibility also allowed ONDCP to use
important target audience media outlets (such as certain ethnic media,
cable networks, and Channel One) that would otherwise have been
precluded from participating in the media buy because their format or
limitations posed by the availability and inventory of PSAs.
Congress reviewed and judged the voluntary match program as a
success in fiscal year 1999 and subsequently mandated the match for
Phase III in appropriations language.
Question. Other than network programming what are some other
examples of ``soft matches?''
Answer. Below are some examples of non-PSA soft match efforts:
--Videos tagged with an anti-drug PSA, which are available for rental
and home sales;
--Activities that provide visibility for local coalitions such as
community affairs programming. An example is a local hero
program that recognizes individuals or organizations making
systemic changes in their communities regarding drug or alcohol
prevention;
--posting and maintaining banners on websites;
--development and maintenance of web sites;
--in-school programs;
--use of celebrities for message delivery in PSA's;
--teacher guides, posters and other in school materials;
--the CBS ``Cosby'' home video which is targeted to parents;
--Basketball clinics; community visits in tagged vans conducted by
professional sports teams;
--promotional events in malls.
Question. What factors are considered in making the determination
that a specific program meets the qualifications for a match? Is this
determination normally made after the program airs?
Answer. After TV programs have been broadcast, networks can elect
to submit them for consideration for the pro bono match credit to
satisfy part of their public service obligation under the Campaign. For
a program to qualify for the pro bono match, messages must support one
or more of the following concepts or program types which are integral
to the Campaign's strategic communications strategy. These concepts
were identified with the assistance of the Ad Council. They also serve
as the subject areas under which ONDCP allocates the pro bono match PSA
time slots it receives to non profit organizations with drug-related
messages.
--educate and support the development of good parenting practices;
--encourage greater parental and caregiver involvement in a child's
upbringing and effective drug-prevention strategies;
--provide early childhood development programs that strengthen the
parent-child relationship;
--provide opportunities for youth through programs and services in
school and after school, such as mentoring;
--foster high expectations and self esteem for youth;
--prevent drug abuse, including underage alcohol use;
--emphasize the nexus between drugs and crime and violence;
--emphasize the connection between substance use and AIDS;
--support other drug-related messages and campaigns as determined by
ONDCP.
The media vendor voluntarily submits the programming after it has
aired to the advertising contractor pro-bono match specialist. The
contractor match specialist would forward programs to the Strategic
Message Specialist (SMS). The SMS reviews the submission and advises
the contractor if it is on-strategy or off-strategy.
The determination is made after the program airs.
subcommittee recess
Senator Campbell. I appreciate you appearing here. There is
one last thing I would like to do. The tape that you showed us,
I could see it and Senator Dorgan could see it. Those young
people could not. It might interest them.
Mr. McCaffrey. Yes, sure.
Senator Campbell. As soon as we recess, would you replay
that so that the young people could see that?
Mr. McCaffrey. I certainly will.
Senator Campbell. I thought that was a very graphic
illustration, using a real life and death of a young man who
was fooling around with those drugs. Could you do that?
Mr. McCaffrey. Yes, sir, I will.
Senator Campbell. I would appreciate that very much.
With that, this hearing is recessed.
Mr. McCaffrey. Thank you, Mr. Chairman.
Senator Campbell. Thank you.
[Whereupon, at 10:29 a.m., Thursday, April 6, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
MATERIAL SUBMITTED SUBSEQUENT TO CONCLUSION OF HEARING
[Clerk's note.--The following agencies did not appear
before the subcommittee this year. Chairman Campbell requested
these agencies to submit testimony in support of their fiscal
year 2000 budget request.]
MERIT SYSTEMS PROTECTION BOARD
Prepared Statement of Ben L. Erdreich, Chairman
Chairman Campbell, Ranking Member Dorgan, and Members of the
Subcommittee: Thank you for the opportunity to submit this statement
for the record and--as the Subcommittee begins its consideration of the
fiscal year 2001 appropriations for the Merit Systems Protection Board
and other components of the Federal Government's civil service system--
to discuss our funding request.
overview of the request
Our request is for $31,446,000 in appropriated funds and a
limitation of $2,430,000 on reimbursements from the Civil Service
Retirement and Disability Trust Fund. This represents an increase of
$3,860,000 over our appropriation for fiscal year 2000, with no change
in the Trust Fund limitation.
In making this request, we are exercising our budget bypass
authority under 5 U.S.C. Sec. 1204(k) to ask that you provide
$2,589,000 more in appropriated funds than the amount requested in the
President's budget. We do so only because we believe that the requested
funding level is essential if MSPB is to continue to fulfill its
statutory obligations now and, at the same time, devote the necessary
resources to technology investments that will allow us to fulfill those
obligations in the future.
In the past seven years, the Board has responded to the increasing
pressures on our budget by reducing our staff, changing the way we
perform many of our functions, and turning more and more to technology
to achieve efficiencies and cost savings in our operations. What we
have done to date we have achieved despite the fact that our
appropriation has been below the amount of our request to OMB almost
every year, with rescissions cutting our funding even further in four
of those seven years. There is simply no more we can do. We are at the
point where we must maintain our currently authorized staffing level
and also complete the implementation of our integrated electronic case
filing and document management system. Not only do our reduced
financial and human resources demand this, but we also face a statutory
deadline of October 2003 for offering our customers the option of doing
business with us electronically, as mandated by the Government
Paperwork Elimination Act.
what we need to do--and what it will cost
Having recognized several years ago that our hope lay in using
information technology to achieve significant efficiencies in the
adjudicatory process, we began our planning for an integrated
electronic case filing and document management system. When completed,
the system will support electronic filing of appeals and other case-
related documents, electronic case files that can be accessed
immediately by Board employees, electronic legal research, automatic
generation of certain standard wording and documents used in decisions,
electronic distribution of decisions to the parties and others,
electronic storage of closed case records, and integration between the
document management system--used to create case documents--and the case
management system--used to record essential data about cases and to
produce statistical reports.
To understand what a revolution this system promises for the
Board's adjudicatory process, you must understand how the present
system works. An individual files an appeal, either on the MSPB Appeal
Form or in another written form, such as a letter. One of our employees
creates a paper case file in which she places the appeal and any
attachments. She then enters data from the appeal--name, address,
agency, action being appealed, date filed, etc.--into the case
management system. A written acknowledgment order is prepared and
mailed. As the case proceeds and documents are filed by the parties or
generated by the judge to whom the case is assigned, more paper is
added to the case file. Each transaction requires another manual data
entry in the case management system. When the judge completes the
adjudication of the case, she writes a decision, which is copied and
mailed to the parties. Data regarding the decision then is entered
manually into the case management system.
If a party petitions the 3-member Board to review the judge's
decision, the paper file is sent to headquarters, more data entries are
made in the case management system, and the whole labor- and paper-
intensive process continues at headquarters. When a case is closed,
either at the regional or headquarters level, it is then sent to a
records storage center, where we pay for its storage until it can be
disposed of in accordance with the NARA records schedule. If other
cases develop from the original case, such as a request for attorney
fees or a petition to enforce the Board's final order, the original
case file has to be retrieved from storage and returned to the
adjudicating office.
Imagine the process now under the integrated electronic case filing
and document management system. An appellant answers questions on-line
and transmits the appeal electronically to the appropriate MSPB office.
The electronic appeal starts a case file that will be made up of
electronic documents, and data needed for case-tracking and statistical
purposes flows to the case management system. An electronic
acknowledgment order appropriate to that case is generated, using data
recorded in the case management system, and is transmitted
electronically to the parties.
The judge to whom the case is assigned can access the electronic
case file anytime, anywhere--at work, at home, or on the road--and can
research issues presented in the case using the electronic legal
research system. When the judge is ready to issue her decision, she
creates an electronic document with the help of the document assembly
system and using data recorded in the case management system. The
decision is then transmitted electronically to the parties and others,
and data on the closing action flows to the case management system,
where it can be used to generate reports.
The electronic case file is stored in digital form and can be
retrieved at any time should it be needed again. If a petition for
review of the judge's decision is filed with the Board, headquarters
staff can immediately access the electronic case file and the data
recorded in the case management system, and the electronic processing
of the case continues at headquarters.
Of course, there will continue to be appellants--at least for the
foreseeable future--who cannot file electronically. For this reason,
scanning technology is a critical component of the integrated system.
Appeals and other case-related documents that are received on paper can
be scanned into an electronic file. From that point on, they can be
processed in the same way as cases that are filed electronically.
Under this system, costs for postage, paper, duplicating, and
records storage are reduced dramatically. More importantly, far less
employee time is expended on data entry, accessing case files, and
moving those files from one point to another.
The most important thing to remember about the system is that it is
an integrated system. It requires all of its components to work as
intended. To leave the system incomplete would be like assembling a car
with the chassis, engine, gears, brakes, and almost all the other
essential parts--but stopping before you put on the tires. You have an
impressive-looking machine, but it doesn't go anywhere.
The Board has followed a carefully thought out, step-by-step
process in implementing the integrated electronic case filing and
document management system. We studied electronic processing systems in
various legal environments, selected contractors with the necessary
expertise to help us develop and implement the system, examined various
off-the-shelf software for the components of the system, involved our
employees at every step of the project, and established pilot projects
to test the system components.
With most of last year devoted to testing the document management,
document assembly, and legal research systems, we are ready to
implement those systems this year. We will also begin testing and
implementation of the new case management system this year. Our plan
for 2001 calls for implementing the next phases of the system,
electronic filing, scanning of paper files into electronic form, and
electronic publishing and distribution. In order to do this, we need
the full $2,173,000 included in our fiscal year 2001 request to OMB.
Because the OMB passback--as reflected in the President's budget
request--allows only $673,000 of that amount, we must use our statutory
bypass authority to ask that you provide the other $1,500,000.
That amount accounts for more than half of our total bypass
request. As detailed in our budget justification, the remainder will
allow us to fund the other items denied by OMB--full funding of our
authorized 250 FTE ($389,000), rent increases and relocation expenses
($600,000), and inflationary increases in the costs of such basic items
as legal services, necessary travel, postage, and express mail services
($100,000).
We have intentionally operated with fewer than our authorized
number of FTE last year and this year. Rather than filling vacancies,
we have used contractors where special expertise was needed and
temporary services to meet short-term needs. While a portion of our
saved FTE funds went to pay for these services, the remainder was
redirected to the integrated electronic case filing and document
management system, which has been only partially funded. The fact that
we have operated with fewer than 250 employees, however, does not mean
that we no longer have work for 250 employees. We continue to need
funding for the full authorization of 250 FTE so that we can continue
to use contractors and temporaries where needed to supplement our full-
time permanent staff.
We are relocating our headquarters in downtown D.C. this year. Our
current headquarters space is no longer adequate for our needs,
particularly with our planned information technology improvements, and
necessary renovations to the building would force us to move to
temporary space even if we stayed there. We would face a rent increase
if we stayed, and the rent we have negotiated at the new location is
extremely competitive, especially when compared both to what GSA was
paying for it previously and what other agencies are paying in the same
area. We also will be paying increased rent under the renewed lease for
our Boston Field Office, reflecting the high rental costs in that area.
The lease for our Washington Regional Office is expiring, and we face
increased rent there whether we renew the lease or relocate the office.
Because current GSA policy requires moving agencies to bear their
relocation costs, we have no choice but to request the funding needed
to cover these costs.
As to the final item comprising our bypass request, inflationary
increases in the costs of goods and services used in our operations are
a fact of life. We cannot avoid them, and we cannot redirect funds to
cover them without damage to our other needs. Therefore, we ask you to
provide the modest amount included in our request to cover them.
what we have done so far
To put our needs for fiscal year 2001 in perspective, let me review
briefly what we have done so far to maintain our ability to fulfill the
Board's statutory mission despite reduced resources.
In compliance with the Administration's Reinventing Government
initiatives and workforce reductions mandated by Congress, MSPB has
reduced its staff by 23 percent since I came to the Board in July 1993.
We have made judicious use of buyouts and, when no more reductions
could be achieved by voluntary action, we conducted a RIF affecting
administrative positions at the Board's headquarters.
In 1998, we entered into a contract with USDA's Animal and Plant
Health Inspection Service for the provision of human resources
management (HRM) services, enabling us to reduce our HRM staff from 14
to 1. We continue to contract with USDA's National Finance Center for
accounting and payroll services. In certain areas where we need special
expertise, such as information technology and audits, we are using
contractors on a temporary basis rather than hiring full-time permanent
employees.
We have cut costs by closing one regional office and converting
five others to field offices, allowing us to redirect resources from
the administration of those offices to their adjudicatory functions. At
headquarters, we have reduced the number of offices, eliminating Senior
Executive Service and middle management positions.
We have relied increasingly on information technology in our
administrative and communications operations. Such administrative
processes as purchasing and recording time and attendance have been
automated, reducing considerably the employee time and paperwork
expended on those processes. We have launched a World Wide Web site
where Board decisions, a form for filing appeals, reports of the
Board's merit systems studies, annual reports and other publications,
and other useful information are immediately accessible 24 hours a day,
7 days a week. We have also established a 24-hour toll free telephone
number for our customers.
The Board's application of information technology has not been
limited to its administrative and communications operations. We also
have applied it to the adjudicatory process by conducting hearings in
an increasing number of cases by videoconference. This initiative not
only saves money for MSPB, but for the parties to the case as well.
Productivity is improved for all concerned because travel time to a
hearing location is eliminated.
Also in the adjudicatory area, we have expanded our efforts to
promote alternative dispute resolution (ADR). Successful ADR programs
can save money both for the Board and for the parties, as settled cases
take less time to complete, often avoid the expenses associated with a
hearing, and only infrequently result in further litigation.
We have continued the Board's successful ADR program at the initial
adjudicatory level, with the regional offices settling about half of
all appeals not dismissed. We initiated a program at Board headquarters
to attempt settlement at the second level of the adjudicatory process,
where a party files a petition for review (PFR) of the regional-level
decision with the 3-member Board. That program has now been made
permanent, with 27 percent of the PFRs selected for the program settled
in our most recent fiscal year.
We are increasingly focused on promoting ADR in personnel disputes
while they are still at the agency level--before an appeal is filed
with MSPB. Last year, we amended our procedural regulations to provide
an automatic 30-day extension of the time limit for filing an appeal
where the parties mutually agree in writing to submit to an ADR process
to try to resolve their dispute. We have also launched a training
program for agency personnel aimed at developing a cadre of
knowledgeable and skilled specialists who can intercept and resolve
personnel disputes before an appeal is filed with the Board.
Through these initiatives--and the extraordinary efforts of MSPB
employees--we have been able to maintain our record of timely and fair
adjudication of Federal employee appeals and other civil service
matters despite the loss of almost one-quarter of our staff. In fiscal
year 1999, the Board processed cases, on average, through two levels of
adjudication in just under 11 months.
We have reached the limit, however, of what we can do with our
current staff and systems. We have concentrated our staff cuts so far
in the area of administrative support services. If we are forced by
inadequate funding to make further cuts, there is nowhere else to go
but to the staff performing direct mission-related functions. Our
current information technology systems--put in place more than a decade
ago--are capable of only minimal improvements to our adjudicatory
process. Our best hope at this point is to extend the use of
information technology much further into the statutory program that
consumes most of our human and financial resources--adjudication.
mspb's role and factors influencing our workload
Congress has determined that certain serious personnel disputes in
the Federal workplace warrant resolution through adjudicatory
proceedings before the Board. The Board's adjudicatory workload,
therefore, is the result of appeal rights granted by Congress, actions
taken by agencies that implicate those rights, and the choices made by
Federal employees and other appellants to exercise those rights before
the Board. The Board has no control over any of these factors.
Unlike many components of the Federal Government, MSPB will never
come in direct contact with most American citizens. Our adjudication
function, however, is critical to the effective operation of Federal
agencies. Personnel disputes arise in every organization, public and
private, and systems must be put in place to resolve them so the
organization can get on with its business. Otherwise, productivity
suffers and the organization's cost of doing business goes up.
Although we cannot predict in any given year precisely what our
workload will be, we know from our historical trend data that our
caseload has remained steady--at about 10,000 cases per year--for the
past decade. The caseload has remained at this level despite a
significant reduction in the number of Federal employees. In fact,
downsizing itself can contribute to an increase in the Board's work, as
was the case with the Postal Service restructuring in the early 1990s--
which led to a peak workload of more than 13,000 cases in fiscal year
1995.
Congress has extended the Board's jurisdiction several times in the
21 years of our existence. While our first decade was marked primarily
by legislation that extended an existing right to appeal certain
personnel actions to additional groups of employees--such as excepted
service employees and Postal Service supervisors and managers--the
years since 1989 have been marked by laws that provide wholly new bases
for bringing a case to the Board. The Whistleblower Protection Act
(1989), the Uniformed Services Employment and Reemployment Rights Act
(1994), the Presidential and Executive Office Accountability Act
(1996), and the Veterans Employment Opportunities Act (1998) all extend
the Board's jurisdiction to new kinds of actions.
MSPB cases are increasingly complex. Many appellants are raising
not just an allegation of wrongful removal or suspension, but also
claims of disability, sex, race, and/or age discrimination, Family and
Medical Leave Act issues, claims of reprisal for whistleblowing, and
claims of violations of USERRA and other veterans' rights. More issues
raised means more time spent in the administrative process before the
Board--longer hearings are necessary, decisions must address multiple
claims, and review is more complicated.
In short, the Board has virtually no control over the intake side
of the workload equation. Our efforts, therefore, must be focused on
finding means to handle the incoming work more efficiently and at lower
cost. The alternative is an increasing backlog of cases--an alternative
that has negative repercussions throughout the Government as final
resolution of personnel disputes is deferred and productivity suffers.
conclusion
My 7-year term as Chairman of MSPB is coming to an end, and I will
be leaving the Board on March 2, 2000. In parting, I want to say that I
appreciate the courtesies you and your staff have extended to me and my
staff during my tenure and the support you have provided for our
essential statutory programs. I urge you to continue that support so
that MSPB can continue to perform its critical functions.
I recognize fully the budget pressures on the Subcommittee and the
competing needs that you must reconcile. But I firmly believe that in
my time at the Board, we have done the planning that will lead to a
21st century agency that not only maintains but improves upon its
enviable 20th century record of performance. With your support, MSPB
can use new technology to offer better service while costing the
taxpayers less.
Thank you for the opportunity to submit this statement for the
record. My successor and MSPB staff will be happy to provide you with
whatever additional information you require as you proceed with your
consideration of the fiscal year 2001 appropriations.
______
OFFICE OF PERSONNEL MANAGEMENT
Prepared Statement of Hon. Janice R. LaChance, Director
Mr. Chairman and Members of the Subcommittee: I am pleased to have
this opportunity to submit for the record a statement discussing the
appropriations request for the Office of Personnel Management for
fiscal year 2001.
Before reviewing the President's request for appropriations for
OPM, I would like to provide some context for that request by outlining
briefly the challenges we see facing us in the near term and the
priorities we have established to meet those challenges.
Clearly, at OPM, because of the government-wide nature of our Human
Resources Management (HRM) work, the challenges we confront have
implications beyond our agency. While maintaining our consistent
emphasis on the protection of merit system principles and Veterans
preference in Federal employment, we must position agencies to succeed
in the rapidly changing, highly competitive, and increasingly global
labor marketplace. We plan to work closely with agencies to help them
strategically align their human resources to support agency goals.
Winning the ``war for talent'' will require not only aggressively
competing for highly skilled new employees, but also retaining and
developing our current workforce. We intend to meet these challenges by
refining our existing policies, systems, and services, as well as
introducing a series of creative new initiatives.
We recognize that, despite some commonalities, agencies have
differing objectives, concerns, and needs, particularly in areas such
as staffing and compensation. Our goal is to ensure agencies' effective
use of existing options, while developing additional flexibilities to
address both government-wide and particular situations.
In addition, we will focus attention on the significance of
strategic human resources management. Our vision for agencies is simply
that they be able to get the right people with the right skills in the
right jobs at the right time. We will lead agencies as they analyze
their needs through workforce projections and skills gap assessments,
and practicing succession planning, and by being attentive to all
facets of effective workforce management, including the use of
effective labor-management strategies to empower workers and managers.
We also will emphasize that the responsibility for strategic human
resources management is not the exclusive province of HRM
professionals, but is most appropriately shared throughout the
organization by agency heads, executives, line managers, supervisors,
and employees. We will seek to assist agencies in developing their HRM
staff members, who then will be able to provide strategic assistance to
others throughout the agencies.
Of course, as we strive to provide HRM leadership government-wide
and support other agencies, we will be addressing our own internal
management challenges such as improving our financial management
systems and developing the infrastructure needed to participate in
critical government-wide information technology initiatives.
We have eight priorities for fiscal year 2001.
First, we will complete the development of a workforce planning
model and accompanying automated system. By providing agencies with the
tools to analyze their workforce needs, we will enable them to address
those needs through the creation of a succession planning strategy. Not
only will agencies be able to view data from various systems to
determine inconsistencies in diversity or assess occupational needs and
skill demands, they will also have the capacity to anticipate changes
in attrition, and make workforce projections.
Second, we will continue our work to make the Federal hiring
process simpler and more effective. As we complete work on our new
qualifications standards development process, we will move from a rigid
system which emphasized quantitative requirements, to a competency-
based model which focuses on the ``whole person.'' Beginning this
fiscal year and moving into fiscal year 2001, we will be integrating
the model into tools enabling managers to more effectively support
targeted recruitment, streamlined application procedures, and valid
assessments of employees for all occupations.
Third, to parallel the personnel flexibilities delegated to
agencies or established as part of an agency's statutory
reorganization, we will be expanding our oversight activity. Our
increased visibility in monitoring the use of these flexibilities and
our work in helping agencies to develop internal accountability systems
will encourage adherence to merit system principles and compliance with
veterans preference. Our vision includes not only getting the right
people in the right job at the right time, but also doing it in the
right way.
Fourth, critical to our effort to work more efficiently, both
within OPM and government-wide, is our more effective use of
information technology. We are modernizing our systems and processes,
not only to support the programs we administer, but also to better
serve needs of external users such as the Office of Management and
Budget, the General Accounting Office, and the Congress. Coupled with
the broader vision of a federal human resources data network, this
effort has the potential to significantly reduce the Government's human
resources operations costs by using modern technology to minimize our
dependence on hard-copy documents.
There are several significant components of this priority. For
example, we will continue to enhance the electronic transfer of data
from agencies to our redesigned central personnel data file, while
improving the accessibility of data, without sacrificing privacy
protections, for users via the internet.
In addition, our retirement systems modernization effort is central
to our pursuit of our long-term retirement-related customer service,
financial management, and business goals. By reengineering our business
processes, in consultation with our strategic delivery partners, we
will be able to reduce processing times for the Federal Employees'
Retirement System as we have for the Civil Service Retirement System.
Our most far-reaching technology-related initiative is our work on
the Federal cyber service program, which is designed to ensure an
adequate supply of highly skilled federal information systems security
specialists. We are contributing to this significant administration
effort by developing a plan for recruiting, developing, and retaining
staff for the Federal cyber service, to protect national computer data
and data exchanges, and to staff related hard-to-fill occupations.
Funding will be critical to ensuring that we are able to complete
our study of information technology occupations which is essential to
the work of the multi-agency effort to address the increasing threats
to the nation of cyberterrorism.
Fifth, our continuing support for agencies in their effort to
recruit, manage, and retain a diverse and highly-qualified workforce
will be evident in our work on a strategic compensation policy. In
working toward our long-term objective of developing a performance-
based pay and benefits system appropriate for the diverse missions,
structures, workforce, and technologies represented in the Federal
Government, we will continue our research and outreach to stakeholders
that we began in fiscal year 1999.
An important step in that effort will be changing the Government's
position classification system to provide flexibility in support of
recruitment, hiring, and management concerns that could not have been
foreseen 50 years ago when that system was established.
Another critical aspect of our compensation policy agenda is
maintaining our leadership position in the design and delivery of
employee benefit programs. In the Federal employees health benefits
program, we have not only implemented the patients' bill of rights, but
have also initiated efforts to reduce medical errors and enhance
patient safety. In addition, we have begun working to implement, no
later than the beginning of fiscal year 2001, a premium conversion
plan, enabling Federal employees to pay health benefits premiums with
pre-tax dollars.
Legislatively, we will develop a proposal to leverage the
Government's purchasing power by contracting directly for dental
benefits. Of course, we will continue to pursue vigorously the
enactment of a group long-term care insurance program.
Sixth, we will continue our efforts to support agencies in creating
model workplaces for their employees. Adopting a variety of family
friendly policies will help employees to strike an appropriate balance
between their personal and professional lives. By addressing such
topics as telecommuting, alternative work schedules, job sharing, and
elder and child care, we will foster higher morale and greater
productivity.
In addition, we will provide leadership to agencies in maximizing
the use of learning technologies to develop workers able to meet the
challenges of the 21st century. We will promote the integration of
training and technology by agencies and the use of innovations such as
the individual learning account to involve employees directly. These
efforts are critical to our vision of strategic human resources
management.
Of course, in our view, there can be no model workplace without an
array of collaborative labor-management programs. We will continue to
urge the development and growth of labor-management partnerships in the
Federal Government, and we will be researching what makes the best
partnerships work so well. As we identify specific strategies and
tactics that lead to good working relationships and bottom line
improvements, we will share them throughout the Federal community.
Seventh, we also recognize that without exceptional leaders with
the ability to design and implement strategies to maximize employee
potential and foster high ethical standards, the Government will be
unable to serve the American people effectively. We will seek to select
and develop executives and managers who can lead and motivate people,
who are results-driven, and who have a keen business sense about using
their resources, particularly their valuable human resources, to get
results for the taxpayers. This will be especially crucial in fiscal
year 2001, as we facilitate government-wide transition efforts
following the Presidential election.
Finally, we remain committed to continuing the improvement in all
of our financial management operations. Working cooperatively with the
office of the inspector general and the independent public accountant,
we have made significant progress in correcting previously identified
management control weaknesses. As a particularly important example, in
the past year, we achieved, for the first time, an unqualified audit
opinion for all three of our multi-billion dollar trust fund financial
statements. The additional resources we are seeking for this purpose
will enable us to build on that progress and to update or replace our
aged financial systems.
We are absolutely committed to removing any obstacles to obtaining
unqualified audit opinions on our revolving fund and salaries and
expense accounts and to resolving any remaining difficulties in the
five financial statement audits. The funding we seek in this budget is
crucial to our success.
Turning to our request for resources to support these priorities,
it is important to note that the total OPM budget request of $14.6
billion includes appropriations which are 99 percent mandatory and only
1 percent discretionary. The increase over fiscal year 2000 is $0.6
billion. The request for our three mandatory payment accounts is an
estimated $14.4 billion, while we are seeking a total of $213.7 million
for our two discretionary appropriation accounts containing general
funds and trust funds. Our administrative accounts will support 2,984
full-time equivalent (FTE) employees. That is the same level as fiscal
year 2000.
The request for basic operating expenses from general funds totals
$100.6 million, an increase of $10.3 million over fiscal year 2000.
That request will support 769 FTE's. It includes $7 million for the
Federal cyber service program. That represents an increase of $6.2
million over fiscal year 2000. As discussed earlier, the money will be
used to address the shortage of skilled information security
professionals in the Federal Government. OPM will continue to work with
agencies to recruit, develop, and retain an expert cadre of information
technology and computer security specialists, both by using existing
authorities and by coming up with new approaches to appeal to the dot
com generation.
A supplemental request for an additional $1 million to permit OPM
to expand and accelerate cyber service activities in fiscal year 2000
was transmitted in the President's budget. Thus far, the House
Committee on Appropriations has denied the request, without prejudice,
stating the belief that the request is more appropriately considered in
the fiscal year 2001 process.
Our basic request also includes an increase of $1.9 million to
support our work to improve our administrative financial systems in an
effort to eliminate material weaknesses and earn unqualified audit
opinions on all OPM accounts.
In addition, we are seeking an increase of $1 million for
agencywide information technology support. That increase is largely
offset by a decrease of $0.8 million in funding for modernization of
the central personnel data file.
Our final significant increase under our general fund request is
for $1.6 million for human resources initiatives. The five components
of that increase include $0.5 million for an expansion of OPM oversight
activities to ensure adherence to merit system principles, $0.4 million
to simplify hiring and assessment by developing a new qualifications
standards process, $0.3 million each for a workforce planning model and
improvements in the compensation rate-setting process, and $0.1 million
to implement strategic compensation system planning design and
improvements.
With regard to the administration of our retirement and insurance
programs, OPM is requesting transfers from the trust funds totaling
$102 million and supporting 1,328 full-time equivalents. Included in
that request is $10.5 million for the retirement systems modernization
project, to remain available until expended. That represents an
increase of $6.5 million for that project.
It is important to note here that a significant portion of the
funding for the Office of the Inspector General in OPM is derived from
trust fund transfers too. That office will outline its request in
greater detail, but I can say that the overall request totals $11.1
million and 112 FTE's. Of that total, $1.4 million would come from
general funds and $9.7 would represent transfers from trust funds.
Of course, OPM also provides a variety of services financed by
other agencies through our revolving fund. In addition to our
management of the investigations program and the professional
development and continuous learning for federal executives and
managers, OPM conducts testing of potential military inductees for the
Department of Defense. We also provide a range of services for agencies
including examining for vacancies, assessment services, automation of
staffing systems, and the selection and development of Presidential
management interns.
For fiscal year 2001, the budget includes an estimated $267.1
million in obligations and 677 FTE's for these ongoing programs.
The OPM budget request includes, as always, mandatory
appropriations to fund the Government's contributions to the Federal
employee life insurance and health benefits programs for annuitants.
This is because OPM serves as ``employing agency'' for these
individuals relative to these benefit programs.
Given the mandatory nature of these payments, we are requesting a
``such sums as may be necessary'' appropriation for each of these
accounts. We estimate that, for the 280,000 annuitants electing post-
retirement life insurance coverage and for whom we are responsible,
$35.0 million will be needed, while an appropriation of about $5.4
billion will be required to pay the Government's contribution toward
the cost of health benefits coverage for the 1.9 million annuitants who
participate in that program.
In addition, as mandated by the financing system established in
1969 by Public Law 91-93, liabilities resulting from changes since that
year which affect benefits, principally pay raises, must be amortized
over a 30-year period. We are requesting a ``such sums as may be
necessary'' payment for the civil service retirement and disability
fund for that purpose. We estimate the amount needed to be $8.9
billion.
Finally, the President's budget for fiscal year 2001 proposes a pay
increase for white-collar Federal employees of 3.7 percent, to be
distributed between an across-the-board raise and locality pay as
determined following discussion with employee organizations and other
interested parties. We have, once again, included in the general
provisions in the budget the appropriate legislative language to ensure
that blue-collar Federal employees remain parallel to their white-
collar colleagues in terms of the pay adjustments they receive.
Along with a pay raise that exceeds the recent wage growth in the
private sector, the administration has proposed to put more money in
the pockets of Federal employees in other ways. As mentioned earlier,
the President's budget provides a premium conversion plan that will
save money for Federal employees by allowing them to pay their share of
health benefits premiums with pre-tax dollars. In addition, the budget
contemplates a repeal of the higher retirement contributions required
of Federal employees by the Balanced Budget Act of 1997, as well as a
reversal of the action taken last year to delay into fiscal year 2001
the last paycheck of fiscal year 2000.
When the previously noted efforts to maintain an affordable health
benefits program and to establish a new long-term care insurance
program are factored in, this budget offers significant and well-
deserved rewards for Federal employees.
Thank you for the opportunity to discuss our request. I would be
pleased to provide the Subcommittee with any additional information you
require.
NONDEPARTMENTAL WITNESSES
[Clerk's note.--The following testimonies were received by
the Subcommittee on the Treasury and General Government for
inclusion in the record.
The subcommittee requested that public witnesses provide
written testimony because, given the Senate schedule and the
number of subcommittee hearings with Department witnesses,
there was not enough time to schedule separate hearings for
nondepartmental witnesses.]
Prepared Statement of Bernard H. Berne
I am a resident of Arlington, Virginia. I serve the Food and Drug
Administration (FDA) as a Medical Officer and as a reviewer of medical
device approval applications. I am submitting this statement as a
private individual.
I ask you to reject a proposal in President Clinton's fiscal year
2001 Budget that would make a total of $544,640,000 available to the
General Services Administration's (GSA's) Federal Buildings Fund
through four appropriations in the Treasury and General Government
Appropriations Act, 2001. GSA would use funds from the appropriations
to award contracts to design and construct an FDA consolidation at the
former White Oak Naval Surface Warfare Center in Montgomery County,
Maryland.
The President's Budget proposes that, of the above total,
$101,239,000 would be made available to GSA in fiscal year 2001. The
remainder would become available to GSA in fiscal years 2002, 2003, and
2004. The President's Budget does not provide the total cost of this
costly and unjustified project.
White Oak is a very poor site for this massive ``consolidated''
federal administrative and laboratory facility. Metrorail is three
miles away. Nearby highways and roads are congested.
An FDA facility at White Oak would increase the Washington
Metropolitan Area's traffic congestion, air pollution and urban sprawl.
Further, the new construction would require Congress to appropriate
additional funds to ``improve'' the highways and roads that serve the
White Oak area.
No legislation authorizes the requested appropriations. Because of
this, no Senate authorizing Committee is monitoring the need, cost and
location for this project.
The FDA Revitalization Act (Public Law 101-635; 21 U.S.C. 379(b)),
which amended Chapter VII of Federal Food, Drug, and Cosmetic Act by
adding a new Section 710 (21 U.S.C. 379(b)), only authorizes
appropriations that the Secretary of Health and Human Services (HHS)
can use to enter into contracts to design, construct, and operate a
consolidated FDA laboratory and administrative facility. Public Law
101-635 does not authorize any appropriations that GSA can use to enter
into any contracts of any kind. Public Law 101-635 clearly and
specifically restricts the role of GSA in the FDA consolidation to
``consultation'' with the Secretary of HHS.
Specifically, Section 101(d) of Public Law 101-635 authorizes
appropriations only to ``carry out this section''. ``This section''
(Section 710 of the Federal Food, Drug, and Cosmetic Act) states ``(a)
Authority.--The Secretary, in consultation with the Administrator of
the General Services Administration, shall enter into contracts for the
design, construction, and operation of a consolidated Food and Drug
Administration administrative and laboratory facility.'' ``This
section'' does not authorize GSA to take any actions. Congress cannot
appropriate any funds to GSA under the authorization in Public Law 101-
635.
Further, the FDA Revitalization Act authorizes appropriations for
only one FDA consolidated facility. Despite this, GSA has used funds
appropriated for an ``FDA Consolidation'' to design and construct three
separate FDA administrative and laboratory facilities in Beltsville,
College Park, and White Oak, Maryland.
GSA's actions have contradicted the intent and language of the FDA
Revitalization Act. GSA will not use the proposed appropriation to
consolidate all FDA headquarters facilities in a single location.
Therefore, the FDA Revitalization Act is irrelevant to the proposed
appropriation.
GSA often claims that the FDA Revitalization Act authorizes
appropriations to both the Secretary of HHS and to the Administrator of
GSA to design and construct the FDA consolidation. This self-serving
claim is incorrect.
According to Section 7 of the Public Buildings Act of 1959, as
amended, Congress can only legally appropriate funds to GSA to
construct any public building whose cost exceeds $1.5 million if the
GSA Administrator transmits a prospectus to Congress and if the Senate
Committee on Environment and Public Works (GSA's Senate authorizing
committee) passes a resolution that approves this prospectus. GSA has
never transmitted a prospectus to Congress that describes any part of
the FDA consolidation.
GSA has illegally used $55,000,000 appropriated in the Treasury,
Postal Services, and General Government Appropriations Act, 1996
(Public Law 104-52, 109 Stat. 482), to award contracts to construct a
so-called FDA ``consolidation'' in College Park, Prince George's
County, Maryland. GSA is further now illegally using $35,000,000
appropriated in the Treasury and General Government Appropriations Act,
2000 (Public Law 106-58, 113 Stat. 450) to award contracts to design
and construct another so-called ``FDA consolidation'' at White Oak in
Montgomery County, Maryland.
Provisions in both appropriations acts (Public Law 104-52 and
Public Law 106-58) specifically prohibited GSA from expending any funds
appropriated therein for the design and construction of any project for
which a prospectus, if required by the Public Buildings Act, had not
been approved. The Public Buildings Act requires a prospectus because,
(1) the FDA ``consolidations'' will cost more than $1.5 million, and,
(2) the FDA Revitalization Act does not authorize any appropriations
that GSA can use to award design or construction contracts.
GSA is therefore clearly misusing appropriated funds. Congress has
never enacted any legislation that has authorized GSA to construct the
College Park and White Oak FDA facilities.
Paragraph 7 of Senate Rule XVI requires that Committee reports on
general appropriations bills identify each provision ``which proposes
an item of appropriation which is not made to carry out the provisions
of an existing law, a treaty stipulation, or an act or resolution
previously passed by the Senate during that session.'' On June 24,
1999, your Committee issued Senate Report 106-87, which proposed an
appropriation of $35 million to GSA for the FDA consolidation.
Senate Report 106-87 did not comply with Senate Rule XVI. Your
Committee Report failed to identify the appropriation to GSA for the
FDA consolidation as one that was not being made to carry out the
provisions of a law or a Senate resolution. Your Report failed to state
that the appropriation lacked authorization.
Your Committee should not repeat the error that you made last year.
If you propose to appropriate any funds to GSA for the FDA
consolidation in the Treasury and General Government Appropriations
Act, 2001, your accompanying Committee Report must identify the
appropriation as one that lacks authorization.
Executive Order 12072, which President Clinton reaffirmed in
Executive Order 13006, requires all federal facilities and federal use
of space in urban areas to ``serve to strengthen the Nation's cities
and to make them attractive places to live and work'', and to
``encourage the development and redevelopment of cities''. When he
issued this Order, President Carter stated that the Order was intended
``to strengthen the backbone of our major cities and to build up jobs
and further investments there.'' (Public Papers of the Presidents:
Jimmy Carter, 1978, p. 1429).
White Oak is not in or adjacent to any city. An FDA consolidation
at White Oak would draw jobs and investments out of Washington, D.C.
The requested appropriation serves to further weaken this economically
troubled major city.
Section 12(c) of the Public Buildings Act states: ``The (GSA)
Administrator in carrying out his duties under this Act shall provide
for the construction and acquisition of public buildings equitably
throughout the United States with due regard to the comparative urgency
of the need for each particular building.''
Despite this requirement, GSA is requesting an appropriation to
construct a major federal facility in affluent Montgomery County,
Maryland. Unlike Maryland in general and Montgomery County in
particular, the District of Columbia is economically depressed. The
District has a far greater ``comparative urgency of need'' for the FDA
consolidation than does Montgomery County, Maryland.
Thus, GSA is violating Executive Orders 12072 and 13006, as well as
Section 12(c) of the Public Buildings Act, by proposing this
appropriation. Your Committee should not endorse these violations by
appropriating further funds for this project.
It is important for your Committee to recognize that no law directs
or requires GSA to consolidate FDA in Montgomery County. In 1992,
Congress appropriated funds to begin constructing an FDA consolidation
in Montgomery County, Maryland. However, in 1995, Public Law 104-19
rescinded all of these construction funds. Public Law 104-19 removed
any requirement for FDA to consolidate in Maryland.
The Treasury and General Government Appropriations Act, 2000
(Public Law 106-58) appropriated $35 million for an FDA consolidation
in Montgomery County. However, as noted above, Public Law 106-58
contains a provision that states (113 Stat. 451): ``Provided further,
That funds available to the General Services Administration shall not
be available for expenses in connection with any construction, repair,
alteration, or acquisition project for which a prospectus, if required
by the Public Buildings Act of 1959, as amended, has not been approved,
except that necessary funds may be expended for each project for
required expenses in connection with the development of a proposed
prospectus.''
No prospectus has ever been approved for this project. Since the
Public Buildings Act requires prospectus approval for all GSA
construction projects costing more than $1.5 million, GSA cannot
legally use the $35 million to construct anything at White Oak.
Therefore, the FDA consolidation can still occur in the District of
Columbia rather than in Montgomery County, Maryland.
In a letter dated January 5, 1999, Mr. William Hoffman, NEPA/404
Program Manager, U.S. Environmental Protection Agency (EPA), Region
III, informed GSA that GSA's Environmental Impact Statement (EIS) for
the White Oak project did not comply with EPA regulations. The letter
stated that GSA had not adequately compared an FDA consolidation at
White Oak with a consolidation at alternative locations on public and
private lands.
The federally-owned Southeast Federal Center and St. Elizabeth
Hospital sites in D.C. can accommodate the FDA consolidation. Congress
should not appropriate any funds for the FDA consolidation until GSA
evaluates these alternatives and until the Senate Committee on
Environment and Public Works approves a prospectus for the project and
certifies the project's need.
FDA does not need to consolidate at White Oak. The budget request
violates laws, executive orders, and EPA regulations.
______
Prepared Statement of the National Treasury Employees Union
Chairman Campbell, Ranking Member Dorgan, and distinguished Members
of the Subcommittee, my name is Colleen Kelley, and I am the National
President of the National Treasury Employees Union. The NTEU represents
more than 155,000 federal employees, including employees at the
Department of Treasury and several other federal agencies. I appreciate
this opportunity to present testimony to you today on behalf of these
dedicated men and women. The actions of this subcommittee directly
affect their lives and the livelihoods of every American.
Many Americans take for granted the outstanding work done by
Treasury Department employees and they fail to realize how this work
helps the world's premier democracy continue to flourish. I am hopeful
that Treasury Department employees can count on this subcommittee to
provide the staffing and resources necessary to help them carry out
their mission.
I would like to highlight some of NTEU's priorities and concerns
contained in the President's fiscal year 2001 budget request for the
Department of Treasury. Below is just a sampling of some of the most
important issues facing the Treasury Department workforce. I would
welcome the opportunity to provide additional views at a later date.
internal revenue service
Since 1993, staffing levels at the IRS have been reduced by 17,000
FTEs. Yet, during this period, IRS toll free phone services and web-
based services for taxpayers have improved, taxpayers can visit IRS
officials at more convenient locations during longer hours of
operation, and taxpayers have more options for filing their returns.
Meanwhile, it is projected that the IRS will collect $1.767 trillion in
revenues for fiscal year 2000, will receive 213.1 million returns, and
will issue over 93 million individual refunds.
I am pleased to report to you that IRS employees are taking very
seriously the new mandates imposed by Congress in the IRS Restructuring
and Reform Act. Our employees have made great strides in improving
customer service at the IRS while continuing to perform the necessary
functions of ensuring that the taxes that are due to the Treasury are
paid. Yet the 71 new taxpayer rights established in RRA 98 have created
new procedures in handling cases, which has led to some confusion among
IRS employees and has increased the time it takes to close current
cases. Additionally, Congress has made hundreds of changes to the tax
code in the past three years: in fact the Taxpayer Relief Act of 1997
alone made 801 tax law changes. Next, continued record economic growth
in this country has led to an increased number of tax returns and more
complexities in taxpayer and business filings. For example, IRS
Commissioner Charles Rossotti pointed out in testimony presented to the
Congress this year that since 1993, the number of individual tax
returns with over $100,000 in reported income, which are generally more
complex returns, has increased by 63 percent. These and other demands
being put on IRS employees have contributed to a significantly
increased workload at the IRS. Plain and simple the IRS workforce is
being asked to do considerably more work with fewer resources. And
while I applaud advances in the use of technology at the IRS, and I
commend this subcommittee's commitment to these improvements,
technology alone cannot possibly manage the increasing workload at the
IRS.
For this reason, I wish to express NTEU's strong support for
increased funding for staff training and for the new IRS initiative,
``Staffing Tax Administration for Balance and Equity'' (STABLE). With
regard to training, we at NTEU very much want the taxpayers to be
guaranteed the rights they are entitled to. We want the RRA 98
provisions to work for the taxpayers and for the IRS. And we want the
taxpayers to be able to take full advantage of the recent changes in
the tax code. Our employees are up to these challenges, but if
taxpayers and the IRS are to benefit from these changes, then we need
to dedicate more resources to training our employees about these
complex changes.
The STABLE initiative will support the hiring of approximately
2,800 new employees at the IRS. Specifically, the budget requests an
increase in funding for fiscal year 2001, which would allow for the
hiring of 2,534 new employees at the IRS beginning October 1, 2000. The
President has also requested a supplemental appropriation of $39.8
million to allow the IRS to hire 301 new staff in the current fiscal
year, so that they will be trained and ready for fiscal year 2001.
The number of revenue agents has declined by roughly seventeen
percent since 1995, and will decrease an additional four percent during
the current fiscal year. And as a result of RRA 98, many IRS
examination staff, revenue agents, compliance officers, auditors and
others have been detailed to help improve customer service, answer
taxpayers' questions, and provide walk-in assistance to the taxpayers.
I strongly believe that the IRS should continue to expand the hours of
service and convenience of the walk-in service, which in turn will lead
to reduced waiting times and improved quality of service for the
taxpayers. However, increased emphasis on customer service should not
come at the expense of collecting unpaid taxes and ensuring that
taxpayers are complying with our tax laws when it comes to reporting
the correct amount of income received.
In order to continue to make improvements in the level of customer
service while simultaneously processing a growing number of tax returns
and stabilizing collections and examinations of cases, we need to
reverse the severe cuts in IRS staffing levels, and approve the STABLE
request. The President's request for additional staffing is a modest
increase over current levels and if fully implemented would still mean
fewer IRS employees than the agency employed in 1997.
One final issue which this subcommittee should be aware of is that
IRS employees continue to work in fear of section 1203 of the RRA,
which lists ten infractions, known as the ten deadly sins, for which
IRS employees face mandatory dismissal. These infractions, which range
from IRS employees not paying their taxes on time, to harassing
taxpayers, to violating the civil rights of taxpayers, have always
subjected employees to discipline, including dismissal, and rightly so.
However, RRA's requirement for mandatory dismissal of employees who
violate these infractions, is having a chilling effect on collections
and morale at the IRS. I am hopeful that in the interests of allowing
the IRS to carry out its mission, this subcommittee will work with
NTEU, the IRS, and the authorizing committees to address this issue.
Since 1992, the IRS workforce has declined by more that 16 percent.
In the meantime, demands on IRS employees have increased significantly.
Without more resources for staff training and additional staffing at
the IRS, our entire tax system will be threatened.
u.s. customs service
The President's budget requests a funding level of $1.86 billion
for salaries and expenses and 17,544 FTEs for fiscal year 2001 for the
United States Customs Service. This represents an additional $160
million and 273 additional FTEs from last year's appropriations. NTEU
feels that this budget is woefully inadequate to meet the needs of this
country's oldest law enforcement agency.
The workload of the Customs Service employees has dramatically
increased every year including more commercial entries that must be
processed, more trucks that must be cleared and more passengers that
must be inspected at the 301 ports of entry. In 1999, Customs Service
employees seized 1.5 million pounds of illegal narcotics--200,000
pounds more than in 1998. Last year, Customs employees processed $1
trillion worth of trade. This number continues to grow annually, and
statistics show that over the last decade trade has increased by 132
percent. Yet in the last ten years, there have not been adequate
increases in staffing levels for inspectional personnel and import
specialists--the employees who process the legitimate trade and thwart
illegal imports.
In the immediate wake of the December arrest of suspected bomb
smuggler Ahmed Ressam in Port Angeles, WA, the Customs Service operated
in a status of heightened alert. More than 700 Customs inspectors were
transferred to the Northern Border from all over the country.
Obviously, this action was necessary to secure our border and to ensure
a safe holiday season for American citizens. But, now that the alert
status has ended, we are once again vulnerable to suspected bomb
carriers, drug smugglers and money launderers.
It is the view of NTEU that the Customs Service needs at least an
additional 900 Customs Service inspectors and canine enforcement
officers and an additional 75 import specialists to adequately perform
its mission. The President's budget calls for an increase of 98
inspectors and no additional import specialists.
Funding for the additional inspectors should be earmarked for that
purpose only. NTEU recommends deploying the new hires to our nation's
ports of entry along the busy Southwest land border where wait times
hinder trade facilitation and drug smuggling is at its peak, and in the
busy area ports on the Northern Border where ports are unmanned, while
the trafficking of ``B.C. Bud'' marijuana and the threat of
international terrorism has changed the landscape. In addition to the
busy land borders, NTEU recommends focusing attention on the bustling
seaports. The understaffed and overworked inspectors at the U.S.
seaports currently contend with corruption, theft and safety issues
that are a direct result of the lack of staffing. As one Southwest
Border Senator aptly phrased it: ``U.S. seaports are under siege by
smugglers, drug traffickers and other criminals, yet law enforcement
agencies that regulate them are understaffed and outgunned.''
It has become increasingly more difficult to recruit the best and
the brightest into the ranks of Customs Service employees including
inspectional personnel and import specialists. Import specialists have
yet to be recognized for their increased responsibility for determining
the classification, appraisal value and admissibility of products
coming into the United States. In response to the recent explosive
growth in trade, and the enactment of the Customs Modernization Act in
1994, the responsibilities and necessary technical abilities of
Customs' import specialists have increased tremendously, yet their
salary structure and position description have not reflected the GS-12
graded workload they must perform regularly. Customs conducted an a
pilot audit of import specialists' work that showed the higher graded
work that they perform, yet Customs has not provided the resources to
effect these upgrades. NTEU will continue to pressure legislators and
the agency to comply with the classification standards and provide GS-
12 journeyman levels for the Customs Service's import specialists.
President Clinton's budget proposes pay reform and position
upgrades for Border Patrol agents and INS inspectors. This funding
request of almost $70 million is aimed at recruiting and retaining
these employees by upgrading their salaries. I strongly request that
appropriators consider funding these upgrades for Customs inspectors as
well. There are many Customs officers who deserve recognition for the
increased workload, additional time away from their families and
exposure to physical dangers and emotional stress. Considering that
these men and women do not receive the benefit of law enforcement
officer retirement, they deserve to be treated as their fellow officers
of the INS and upgraded commensurate with their jobs and
responsibilities.
Last year, Congress acknowledged the shortage of staffing and
resources in its appropriations by earmarking $25 million for staffing
and other resources for the ports on the Southwest Border. Although the
funds have yet to be used for that purpose, the Agency recently decided
to spend the money over a two year cycle. We hope that this Congress
will again earmark funds for additional inspectors and equipment in
those areas around the country that are experiencing the most severe
shortages.
The Customs Service employees assigned to the Customhouse at the
Los Angeles Seaport (Terminal Island, CA) have endured years of
environmentally unsafe working conditions, including exposure to
particulate matter from the nearby petroleum coke facility, asbestos,
noxious fumes and other air pollutants. The current health and safety
conditions are absolutely intolerable, and I urge the appropriators to
ensure that the General Services Administration (GSA) permanently move
these employees as quickly and efficiently as possible. NTEU has worked
with Customs and Members of Congress on this permanent solution, but
immediate interim steps are also needed. Customs Service should be
provided the resources to move the remaining 242 employees to temporary
work sites pending the final permanent move.
NTEU believes that is it also important for Congress to focus its
attention on the failing computer system currently operated by the
Customs Service--the Automated Commercial System (ACS). The ACS is a 17
year old, outdated system that is subject to brown outs and freezes
that wreak havoc on trade facilitation and employees' ability to do
their jobs. Although a system upgrade is necessary for Customs to meet
its modernization efforts, NTEU would oppose funding a new system by
shifting funds away from the front line employees who currently
facilitate the volumes of trade growth and enforce our laws at the
borders.
federal employee pay
In this era of budget surpluses and record economic growth, now is
the time to once and for all close the pay gap between public and
private sector salaries. The pay gap between federal and private
sectors, as measured by the Bureau of Labor Statistics, is
approximately 30 percent. Although the Federal Employees Pay
Comparability Act was enacted to close the pay gap for federal
employees, no federal pay raise since FEPCA's enactment in 1990 has
provided the full amount called for under its formula.
President Clinton has requested a 3.7 percent pay increase for
civilian and military federal employees in fiscal year 2001. NTEU
believes that this falls far short of what our employees deserve, and
we hope that this subcommittee will take bolder steps to close the gap
between public and private sector workers. Federal employees are facing
rising health care costs, housing costs, child care expenses, and other
living expenses. Like those who work in the private sector, federal
employees should have an opportunity to enjoy the fruits of our
nation's economic prosperity.
child care
NTEU applauds this subcommittee's efforts last year to include in
the fiscal year 2000 Treasury Appropriations bill a provision that for
the first time permits federal agencies to subsidize child care
expenses for lower-graded employees. This is an important family-
friendly measure for federal employees. I would urge you to continue to
support this program and to carry over this provision in the fiscal
year 2001 bill.
I would like to thank the Subcommittee again for the opportunity
for our Union to present its views on the Treasury Department budget
for fiscal year 2001. As you continue your subcommittee's
deliberations, I hope you will give special consideration to the hard
work and dedicated service the men and women at the Treasury Department
provide our nation.
______
Prepared Statement of the Sierra Club
I am writing to present the comments of the New Columbia Chapter of
the Sierra Club regarding the consolidation of FDA laboratories and
administrative offices in Montgomery County as proposed in the General
Services Administration (GSA) 2001 budget appropriation. The New
Columbia Chapter of the Sierra Club opposes approval of this proposed
appropriation on the grounds that it makes bad economic and
environmental sense for the taxpayers of the Washington Region and
indeed for the nation as a whole. Furthermore, it is our understanding
that the GSA has not complied with existing statutes, regulations, or
executive orders in choosing a location for the consolidated facility.
The GSA continues to present misinformed or misleading information in
this regard to the congressional committees in which this project has
been considered.
bad policy
The Washington Region has the second worse traffic congestion in
the nation. In order to alleviate this problem and replace aging
infrastructure, the Congress has been asked to appropriate almost
unprecedented sums for highway construction and improvements in the
region. At the same time, the federal government is being asked to
contribute greatly to the revitalization of the nation's capital.
Therefore, does it make any sense for the federal government to place
over 6000 jobs beyond the already overburdened Beltway and over three
miles away from the nearest Metrorail station? Such a move would not
only destabilize the District's job base further, removing over 800
current jobs, but also increases the pressure on interstate and
suburban roads, increasing congestion and air pollution. There will
also be considerable environmental impact on the site itself, 32 acres
of the proposed site are forestland, and there are two streams and 8
tributaries on the property. The proposed project will also do nothing
to maximize the benefits from our nation's investment in Metro, nor
will it help the region come into clean air compliance.
Thus, the nation's taxpayers are being asked to not only subsidize
the growth of Montgomery County, one of the nation's richest suburbs,
but they are then being asked to pay for the roads and other costs that
this sort of growth necessitates such as the proposed Wilson Bridge and
Beltway expansion. Federal sprawl truly does cost us all. This project
alone will cost us more than $500,000,000 in development costs alone.
But what is galling about the proposed FDA consolidation in White
Oak, MD is that there is currently no approved prospectus for the
project and the GSA did not properly review alternative sites and
localities as required by the National Environmental Protection Act of
1969, as amended and the Public Buildings Act of 1959, as amended.
no prospectus
Despite GSA's claims to the contrary, the FDA Revitalization Act of
November 28, 1990 does not authorize GSA to appropriate funds for the
FDA consolidation. In adding Section 710 to Chapter 7 of the Federal
Food, Drug and Cosmetics Act, this act clearly states (paragraph a) the
``Secretary, in consultation with the Administrator of the General
Services Administration, shall enter into contracts for the design,
construction and operation of a consolidated Food and Drug
administration administrative and laboratory facility'' (italics
added). In other words the FDA revitalization act authorizes the
Secretary of Health and Human Services to appropriate the necessary
funds, not the Administrator of GSA.
The Administrator of GSA is bound by the Public Buildings Act of
1959, as amended. Section 7 of this act requires the GSA to transmit a
prospectus to Congress for all proposed public buildings whose costs
exceed $1,500,000. Section 7 also provides that no appropriation shall
be made until the Committee on Public Works and the Environment of the
Senate and the Committee on Transportation and Infrastructure of the
House of Representatives have approved the buildings prospectus.
Indeed, the proposed language in last year's budget expressly made the
appropriation conditional on the approval of a prospectus. GSA has
never transmitted such a prospectus for this project to Congress.
gsa was not directed to locate the fda in montgomery county, md
The GSA has repeatedly claimed that it was directed by Congress to
consolidate the FDA in Montgomery County. This appears to be patently
false. First, the reference to Montgomery County that does appear is
non-binding and appears in the Conference Report for the 1992
appropriation for FDA consolidation. Second, the appropriation itself
was rescinded in 1995.
alternative sites were improperly excluded
Since, GSA was not directed to locate the FDA in Montgomery County,
MD their failure to consider sites throughout the National Capital
Region is in violation of the National Environmental Policy Act of 1969
(NEPA), as amended. In fact, EPA Region III sent a letter to GSA in
1999 informing the Administration that it had failed to adequately
compare alternative public and private lands in the region. According
to a report to the District of Columbia Council that accompanied
District of Columbia City Council Resolution 12-834, the ``Location of
Federal Facilities in the District of Columbia Sense of the Council
Resolution of 1998,'' city officials were never consulted about the
project or asked to suggest suitable sites within the District in
further violation of the act.
inequitable distribution of federal facilities
The Public Buildings Act of 1959, as amended, also states in
Section 12 that the GSA Administrator ``shall provide for the equitable
distribution of public buildings throughout the United States with due
regard for the comparative urgency of need for each particular
building.'' Clearly, the District's need outweighs that of Montgomery
County, MD Maryland. From 1969 to 1997, the Districts share of federal
employment fell from 83 percent to 55 percent. The National Capital
Planning Commission estimates that between 1993 and 1997, the District
of Columbia lost 27,000 federal jobs. Over 70 percent of the jobs lost
in the District economy in this decade were federal jobs. At the same
time over 60 percent of the District's land is Federal land, untaxed
and largely undevelopable without federal participation. Furthermore in
not considering sites in the District, the GSA further went against the
policies set forth in Executive Orders 12072 and 13006, which direct
federal facilities to serve and to strengthen our nation's cities.
conclusion
To recapitulate, the GSA has failed to follow proper procedure in
appropriating funds for consolidating the FDA in White Oak, MD. It has
failed to provide a prospectus and no prospectus for the project has
been approved. It has misrepresented or deliberately misled Congress
and the public about its being directed to locate the consolidated FDA
in Montgomery County, MD. No such direction exists. The GSA has failed
to comply NEPA, by restricting its search to Montgomery County and not
considering sites throughout the National Capital Region. Finally, the
Administrator of the GSA has failed in our estimation to ensure the
equitable distribution of federal facilities in the region and has not
considered need contradicting both its own mission and various
executive orders. Even today the GSA resists meeting the necessary
requirements and has not officially consulted with District officials
on the project. The extreme costs for the region and the United States
taxpayer, necessitate that this project proceed in a manner that is
correct and equitable. This is not the case today and the proposed
appropriation for this project should not go forward.
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
Baity, William F., Deputy Director, Financial Crimes Enforcement
Network, Department of the Treasury............................ 155
Basham, W. Ralph, Director, Federal Law Enforcement Training
Center, Department of the Treasury............................. 148
Prepared statement........................................... 149
Berne, Bernard H., prepared statement............................ 295
Buckles, Bradley A., Director, Bureau of Alcohol, Tobacco and
Firearms, Department of the Treasury........................... 115
Prepared statement........................................... 116
Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado,
questions submitted by.....26, 167, 171, 180, 188, 194, 196, 221, 261
Collins, Hon. Susan M., U.S. Senator from Maine, questions
submitted by................................................... 178
Dorgan, Hon. Byron L., U.S. Senator from North Dakota:
Prepared statements.................................3, 87, 208, 249
Questions submitted by........74, 170, 174, 186, 192, 197, 221, 266
Erdreich, Ben L., Chairman, Merit Systems Protection Board,
prepared statement............................................. 285
Johnson, James E., Under Secretary of Treasury (Enforcement),
Department of the Treasury..................................... 85
Prepared statement........................................... 90
Kelly, Raymond W., Commissioner, U.S. Customs Service, Department
of the Treasury................................................ 100
Prepared statement........................................... 102
Kyl, Hon. Jon, U.S. Senator from Arizona, questions submitted by. 265
LaChance, Hon. Janice R., Director, Office of Personnel
Management, prepared statement................................. 289
McCaffrey, Barry R., Director, Office of National Drug Control
Policy, Executive Office of the President...................... 231
Prepared statement........................................... 238
National Treasury Employees Union, prepared statement............ 297
Ross, Lisa G., Acting Assistant Secretary for Management and
Chief Financial Officer, Office of the Secretary, Department of
the Treasury................................................... 199
Rossotti, Charles O., Commissioner, Internal Revenue Service,
Department of the Treasury..................................... 1
Prepared statement........................................... 6
Sierra Club, prepared statement.................................. 300
Sloan, James F., Director, Financial Crimes Enforcement Network,
Department of the Treasury, prepared statement................. 157
Stafford, Brian L., Director, U.S. Secret Service, Department of
the Treas-
ury............................................................ 126
Prepared statement........................................... 127
Stevens, Hon. Ted, U.S. Senator from Alaska, statement of........ 15
Summers, Hon. Lawrence H., Secretary, Office of the Secretary,
Department of the Treasury..................................... 199
Prepared statement........................................... 202
SUBJECT INDEX
----------
DEPARTMENT OF THE TREASURY
Page
Arson............................................................ 99
Ballistics imaging............................................... 167
Counter-narcotics................................................ 95
Counter-terrorism and protection................................. 99
Customs:
Resource allocation.......................................... 171
Staffing..................................................... 171
Departmental oversight........................................... 90
Export enforcement............................................... 98
Firearms......................................................... 167
Violence..................................................... 93
GS-11 journeyman levels (Customs, INS parity).................... 171
Law enforcement hiring and attrition............................. 170
Money laundering:
And financial crimes......................................... 92
Strategy..................................................... 170
NIBIN Field Restructuring........................................ 167
Questions submitted to........................................... 167
Trade enforcement and facilitation............................... 96
U.S. Customs Service, Office of Investigations/Air and Marine
Interdiction Division President's Decision Directive 62........ 168
Bureau of Alcohol, Tobacco and Firearms
Alcoholic beverage labeling...................................... 186
Arson and explosives enforcement................................. 121
Budget request, justification of................................. 115
Comprehensive crime gun tracing.................................. 184
Customer service standards....................................... 180
Explosives....................................................... 183
Federal firearms licensees....................................... 185
Field operations................................................. 183
Firearms enforcement............................................. 119
Fiscal year:
1999 ATF accomplishments..................................... 119
2001 budget request.......................................... 117
Import permit.................................................... 181
Licensing center................................................. 182
National instant criminal background checks (NICS)............... 187
Questions Submitted to........................................... 180
Revenue collection............................................... 123
School bomb detection/threat awareness training................185, 186
Tobacco compliance............................................... 184
Youth crime gun interdiction initiative (TCGII)................183, 187
Federal Law Enforcement Training Center
Basic training workload increase, mandatory...................... 154
Facilities master plan/construction.............................. 152
Operations, overview of.......................................... 150
Questions submitted to........................................... 194
Renovations...................................................... 154
Training building support, new................................... 154
Workload......................................................... 151
Financial Crimes Enforcement Network
Casino gaming.................................................... 166
Charleston site closure.......................................... 164
Core programs, maintaining....................................... 155
Export training programs......................................... 163
FLETC's interactive video training............................... 163
Information, effective collection of............................. 159
Money:
Laundering................................................... 162
Scope of................................................. 197
Services businesses (MSBS).................................156, 196
Projections, impact of failure to meet........................... 165
Questions submitted to........................................... 196
Regularity....................................................... 164
Restructuring FinCEN............................................. 162
Stabilize existing programs...................................... 155
Suspicious activity reporting (SAR) funds........................ 198
The National Money Laundering Strategy.........................161, 197
Training site scheduling......................................... 165
U.S. border patrol training projections.......................... 164
``Value added'' information, efficient delivery of............... 157
Internal Revenue Service
Assisting taxpayers.............................................. 18
Balanced performance measures.................................... 10
Electronic tax administration.................................... 79
Fiscal year:
1999 financial statement audit by GAO, results of the........ 77
2001 budget request.......................................... 10
Information technology investment account (ITIA)................. 82
IRS:
Computer Systems............................................. 6
Performance.................................................. 18
Workload, trends in.......................................... 5
Maintaining current operations................................... 11
Modernization.................................................... 12
Money laundering strategy........................................ 78
New information technology....................................... 9
New organization and management.................................. 9
One-stop tax shop................................................ 82
Paperless tax filing.............................................20, 21
Questions submitted to........................................... 26
Restructuring and Reform Act, implementation of the.............. 17
Revised business practices and strategies........................ 8
RRA 98's mandates, how to deliver most efficiently and
economically on................................................ 7
Strategic direction: ``standing up'' the new IRS................. 8
Tax:
Exempt organizations......................................... 83
Return information on the internet........................... 23
Shelter regulations.......................................... 77
Shelters..................................................... 21
Taxmobile........................................................ 81
Taxpayer rights.................................................. 19
Technology investments.......................................23, 24, 25
Telephone assistance............................................. 19
Training......................................................... 80
Office of the Secretary
Air security initiative/national special security events (NSSEs213, 226
Bureau of Engraving and Printing/added authority................. 228
Community adjustment and investment program...................... 207
Counterterrorism................................................. 211
Customs Service funding request.................................. 217
Customs study.................................................... 218
Dakota Certified Development Corporation......................... 223
Dollar coin...................................................... 220
Fight drugs, violence, and other crimes, strengthening our
ability to..................................................... 204
Financial management, enhancing.................................. 206
GREAT program.................................................... 217
IRS, continuing to modernize the................................. 203
Management operations, maintaining............................... 206
National money laundering strategy.............................211, 212
Public key infrastructure........................................ 210
Questions submitted to........................................... 221
Secret Service hiring............................................ 216
Tax shelters...................................................213, 214
Regulations.................................................. 227
Taxpayers' advocate office....................................... 218
Trade systems, modernizing our................................... 205
Transfer pricing, return-free filing, and overtime............... 214
Treasury agency financial audits................................. 227
Wireless communications.......................................... 210
U.S. Customs Service
Air security initiative.......................................... 176
Automated commercial environment (ACE)........................... 102
Columbian supplemental........................................... 175
Core mission activities.......................................... 104
Fiscal year 2001 budget request.................................. 112
Human resources management, improved............................. 103
Northern border resources........................................ 174
Questions submitted to........................................... 171
Recent accomplishments........................................... 110
Forced child labor, regional offices for......................... 177
Training and development......................................... 103
User fees........................................................ 114
U.S. Secret Service
Acquisition, construction, improvements, and related expenses
(ACIRE)........................................................ 128
FTEs vs overtime, additional..................................... 142
Air security initiative.......................................... 194
Biological detector technology report............................ 191
Cuba, cooperation with........................................... 140
Customs' infrastructure study.................................... 146
Cyber-crime...................................................... 191
Exceptional case study........................................... 192
Existing gun laws, enforcement of................................ 139
Fiscal year 2001:
Appropriation request........................................ 127
Budget....................................................... 136
Gang resistance education and training program................... 137
Hiring enforcement personnel..................................... 140
Information technology........................................... 133
Investigative program..........................................126, 130
Kyl amendment, allocation of funds association with the.......... 144
Max out.......................................................... 189
National Center for Missing and Exploited Children............... 190
National special security events (NSSES).......................189, 193
National Threat Assessment Center..............................127, 135
Northern border security......................................... 138
Overtime......................................................... 141
Personnel retention.............................................. 141
Protective program.............................................126, 129
Questions submitted to........................................... 188
Resource allocation model........................................ 145
Results Act...................................................... 129
Salaries and expenses (S&E)...................................... 128
Secret Service headquarters consolidation........................ 135
Southwest border, allocation of funds and personnel for.......... 143
Special event security........................................... 136
Training......................................................... 134
Treasury law enforcement overtime................................ 141
2002 Salt Lake City Winter Olympics.............................. 190
Uniformed division pay........................................... 191
Workforce:
Recruitment.................................................. 134
Retention and workload balance........................126, 138, 188
Study.................................................... 188
EXECUTIVE OFFICE OF THE PRESIDENT
Office of National Drug Control Policy
Audience recognition............................................. 249
Chronic drug use rates/treatment................................. 254
Counter-drug technology assessment center......................236, 273
CTAC technology transfer......................................... 261
Doping in sport................................................237, 250
Drug courts...................................................... 253
Drug trafficking areas (HIDTAs), high intensity................235, 269
Drug treatment and the criminal justice system................... 257
Drug-free communities............................................ 236
Program...................................................... 274
Federal prison drug addiction treatment programs................. 266
Fiscal year 2001 Federal drug control budget, the supporting..... 240
General counter drug intelligence plan........................... 237
HIDTA:
And CTAC..................................................... 252
Evaluation of................................................ 264
MISTIC....................................................... 265
METH lab cleanups................................................ 265
National criminal justice treatment demonstration................ 236
National drug control strategy, overview of the.................. 238
National youth anti-drug media campaign........................234, 254
ONDCP:
Coordinating role............................................ 244
Drug budget.................................................. 265
Fiscal year 2001 budget request.............................. 244
2000 annual report, highlights of............................ 239
Salon:
Continuing pattern of factual errors......................... 260
Has an obligation to correct the record about openness....... 259
Staffing......................................................... 262
Youth Anti-Drug Media Campaign:
Effectiveness of Network Programming in Achieving Campaign
Goals--Performance/Evaluation.............................. 276
Nuts and Bolts of the Programming ``Match''.................. 281
Youth drug use rates............................................. 250
-